FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1999
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
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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock Outstanding as of September 1, 1999
$1 Par Value 23,356,539
Page 1
HUGHES SUPPLY, INC.
FORM 10-Q
Index
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of
July 31, 1999 and January 29, 1999 ............ 3 - 4
Consolidated Statements of Income for the
Three Months Ended July 31, 1999 and 1998 ..... 5
Consolidated Statements of Income for the
Six Months Ended July 31, 1999 and 1998 ....... 6
Consolidated Statements of Cash Flows for the
Six Months Ended July 31, 1999 and 1998 ....... 7
Notes to Consolidated Financial Statements .... 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results
of Operations ................................. 9 - 15
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security
Holders ....................................... 16
Item 6. Exhibits and Reports on Form 8-K ............. 17 - 21
Signatures .................................... 22
Index of Exhibits Filed with This Report ...... 23
Page 2
HUGHES SUPPLY, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (unaudited)
(in thousands, except share data)
July 31, January 29,
1999 1999
---------- ----------
ASSETS
Current Assets:
Cash and cash equivalents $ 8,540 $ 6,010
Accounts receivable, less allowance for
losses of $7,340 and $2,809 411,825 341,109
Inventories 437,594 409,734
Deferred income taxes 10,936 8,520
Other current assets 29,104 31,346
---------- ----------
Total current assets 897,999 796,719
Property and Equipment, Net 138,083 127,632
Excess of Cost over Net Assets Acquired 224,954 181,622
Other Assets 20,701 17,540
---------- ----------
$1,281,737 $1,123,513
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
Page 3
HUGHES SUPPLY, INC.
Consolidated Balance Sheets (unaudited) - continued
(in thousands, except share data)
July 31, January 29,
1999 1999
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 146 $ 39
Accounts payable 213,003 176,234
Accrued compensation and benefits 24,073 25,029
Other current liabilities 39,648 27,982
---------- ----------
Total current liabilities 276,870 229,284
Long-Term Debt 500,852 402,203
Deferred Income Taxes 4,382 4,711
Other Noncurrent Liabilities 5,184 3,359
---------- ----------
Total liabilities 787,288 639,557
---------- ----------
Commitments and Contingencies
Shareholders' Equity:
Preferred stock - -
Common stock-24,252,489 and
24,183,834 shares issued 24,252 24,184
Capital in excess of par value 220,824 219,558
Retained earnings 272,785 242,730
Treasury stock, 883,750 and
no shares, at cost (20,400) -
Unearned compensation related to
outstanding restricted stock (3,012) (2,516)
---------- ----------
Total shareholders' equity 494,449 483,956
---------- ----------
$1,281,737 $1,123,513
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
Page 4
HUGHES SUPPLY, INC.
Consolidated Statements of Income (unaudited)
(in thousands, except per share data)
Three months ended July 31,
1999 1998
---------- ----------
Net Sales $ 774,888 $ 674,550
Cost of Sales 598,715 525,709
---------- ----------
Gross Profit 176,173 148,841
---------- ----------
Operating Expenses:
Selling, general and administrative 127,822 106,015
Depreciation and amortization 7,295 5,396
Provision for doubtful accounts 883 756
---------- ----------
Total operating expenses 136,000 112,167
---------- ----------
Operating Income 40,173 36,674
---------- ----------
Non-Operating Income and (Expenses):
Interest and other income 2,488 1,703
Interest expense (7,528) (6,353)
---------- ----------
(5,040) (4,650)
---------- ----------
Income Before Income Taxes 35,133 32,024
Income Taxes 14,228 12,251
---------- ----------
Net Income $ 20,905 $ 19,773
========== ==========
Earnings Per Share:
Basic $ .90 $ .83
========== ==========
Diluted $ .88 $ .82
========== ==========
Average Shares Outstanding:
Basic 23,300 23,925
========== ==========
Diluted 23,686 24,180
========== ==========
Dividends Per Share $ .085 $ .080
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
Page 5
HUGHES SUPPLY, INC.
Consolidated Statements of Income (unaudited)
(in thousands, except per share data)
Six months ended July 31,
1999 1998
---------- ----------
Net Sales $1,486,184 $1,276,581
Cost of Sales 1,153,653 998,463
---------- ----------
Gross Profit 332,531 278,118
---------- ----------
Operating Expenses:
Selling, general and administrative 249,157 205,604
Depreciation and amortization 13,951 11,109
Provision for doubtful accounts 2,270 1,326
---------- ----------
Total operating expenses 265,378 218,039
---------- ----------
Operating Income 67,153 60,079
---------- ----------
Non-Operating Income and (Expenses):
Interest and other income 4,728 3,229
Interest expense (14,302) (12,609)
---------- ----------
(9,574) (9,380)
---------- ----------
Income Before Income Taxes 57,579 50,699
Income Taxes 23,319 19,323
---------- ----------
Net Income $ 34,260 $ 31,376
========== ==========
Earnings Per Share:
Basic $ 1.45 $ 1.32
========== ==========
Diluted $ 1.43 $ 1.31
========== ==========
Average Shares Outstanding:
Basic 23,580 23,765
========== ==========
Diluted 23,954 24,028
========== ==========
Dividends Per Share $ .17 $ .16
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
Page 6
HUGHES SUPPLY, INC.
Consolidated Statements of Cash Flows (unaudited)
(in thousands)
Six months ended July 31,
1999 1998
---------- ----------
Cash Flows from Operating Activities:
Net income $ 34,260 $ 31,376
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 13,951 11,109
Provision for doubtful accounts 2,270 1,326
Other, net (692) (275)
Changes in assets and liabilities, net
of effects of business acquisitions:
(Increase) in accounts receivable (53,851) (70,953)
(Increase) in inventories (11,783) (11,215)
(Increase) decrease in other
current assets 2,859 (4,380)
(Increase) in other assets (3,503) (4,415)
Increase in accounts payable and
accrued liabilities 30,659 24,345
Increase in accrued interest and
income taxes 5,266 3,440
Increase in other noncurrent
liabilities 87 719
(Increase) decrease in net deferred
income taxes (2,042) 2,014
---------- ----------
Net cash provided by (used in)
operating activities 17,481 (16,909)
---------- ----------
Cash Flows from Investing Activities:
Capital expenditures (15,088) (11,985)
Proceeds from sale of
property and equipment 3,168 5,782
Business acquisitions, net of cash (63,560) (627)
---------- ----------
Net cash used in investing
activities (75,480) (6,830)
---------- ----------
Cash Flows from Financing Activities:
Net borrowings (payments) under
short-term debt arrangements 98,574 (10,051)
Principal payments on debt of acquired entities(13,455) (9,038)
Proceeds from issuance of long-term debt - 50,000
Dividends paid (4,057) (4,865)
Purchase of treasury stock (20,955) -
Other 422 (636)
---------- ----------
Net cash provided by financing
activities 60,529 25,410
---------- ----------
Net Increase in Cash and Cash Equivalents 2,530 1,671
Cash and Cash Equivalents:
Beginning of period 6,010 8,204
---------- ----------
End of period $ 8,540 $ 9,875
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
Page 7
HUGHES SUPPLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) (dollars in thousands, except per share data)
1. In the opinion of Hughes Supply, Inc. (the "Company"), the
accompanying unaudited consolidated financial statements contain
all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the financial position as of July 31,
1999, the results of operations for the three and six months ended
July 31, 1999 and 1998, and cash flows for the six months then
ended. The results of operations for the three and six months
ended July 31, 1999 are not necessarily indicative of the results
that may be expected for the full year.
The fiscal year of the Company is a 52-week period ending on the
last Friday in January. The three and six months ended July 31,
1999 and 1998 each contained 13 weeks and 26 weeks, respectively.
Basic earnings per share is calculated by dividing net income by
the weighted-average number of shares outstanding. Diluted
earnings per share is calculated by dividing net income by the
weighted-average number of shares outstanding, adjusted for
dilutive potential common shares. The weighted-average number of
shares used in calculating basic earnings per share were 23,300,000
and 23,925,000 for the three months ended July 31, 1999 and 1998,
respectively, and 23,580,000 and 23,765,000 for the six months
ended July 31, 1999 and 1998, respectively. In calculating diluted
earnings per share, these amounts were adjusted to include dilutive
potential common shares of 386,000 and 255,000 for the three months
ended July 31, 1999 and 1998, respectively, and 374,000 and 263,000
for the six months ended July 31, 1999 and 1998, respectively.
2. During the six months ended July 31, 1999, the Company acquired
five wholesale distributors of materials to the construction
industry that were accounted for as purchases. Cash payments for
these acquisitions totaled $63.6 million, which resulted in $47.3
million being recorded as the excess of cost over the fair value of
net assets acquired. This excess of cost over net assets acquired
is being amortized by the straight-line method over 15 to 40 years.
These acquisitions, individually and in the aggregate, did not have
a material effect on the consolidated financial statements of the
Company. Results of operations of these companies from their
respective dates of acquisition have been included in the
consolidated financial statements.
3. On March 15, 1999, the Board of Directors authorized the Company to
repurchase up to 2.5 million of its outstanding shares of common
stock. During the six months ended July 31, 1999, the Company
repurchased 908,900 shares of its common stock for a total cost of
$21.0 million at an average purchase price of $23.06 per share.
These shares are to be used for general corporate purposes.
Page 8
HUGHES SUPPLY, INC.
PART I. FINANCIAL INFORMATION - Continued
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following is management's discussion and analysis of certain
significant factors which affected the financial condition of the
Company as of July 31, 1999, and the results of operations for the three
and six months then ended.
Certain statements set forth in Management's Discussion and Analysis of
Financial Condition and Results of Operations, including but not limited
to certain statements made regarding the Year 2000 Issue (as
subsequently defined), 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,"
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. This
Management's Discussion and Analysis of Financial Condition and Results
of Operations should be read in conjunction with the Company's
consolidated financial statements and the notes thereto contained herein
and in the Company's Form 10-K for the fiscal year ended January 29,
1999.
Material Changes in Results of Operations
Net Sales
Net sales were $775 million for the quarter ended July 31, 1999, a 15%
increase over the prior year's second quarter. Net sales for the six
months ended July 31, 1999 were $1.49 billion, a 16% increase over the
first six months of the prior fiscal year. The majority of the increase
in net sales for the three and six month periods was attributable to
branches acquired and opened after January 31, 1998. The remainder of
the increase was attributable to same-store sales, which were up 3% and
6% for the three and six months ended July 31, 1999, respectively.
The increase in same-store sales was attributable to the (i) continued
overall strength of the construction market, (ii) increases in pool and
spa product sales and (iii) growth in electric utility product sales
resulting from improved market share. These increases were partially
Page 9
offset by declines in industrial product demand and continued
deflationary pricing within certain of the Company's commodity-based
products.
Gross Profit
Gross profit and gross margin for the three and six months ended July
31, 1999 and 1998 were as follows (dollars in thousands):
1999 1998
------------------- ------------------- Variance
Gross Gross Gross Gross ----------------
Profit Margin Profit Margin Amount %
--------- ------ --------- ------ -------- -----
Three months ended $ 176,173 22.7% $ 148,841 22.1% $ 27,332 18.4%
Six months ended $ 332,531 22.4% $ 278,118 21.8% $ 54,413 19.6%
The improvement in gross margins resulted from several factors,
including the Company's expansion of higher-margin product groups
through acquisitions, efficiencies created with central distribution
centers and enhanced purchasing power. The enhanced purchasing power
was attributable to increased volume and concentration of supply sources
as part of the Company's preferred vendor program.
Although the gross margin percentage increased for the three and six
months ended July 31, 1999, total gross profit dollars for the periods
were negatively impacted by declines in pricing of certain commodity-
based products. The lower pricing was the result of continued
deflationary pressure over the past year on the pricing of certain of
the Company's products whose manufacture is reliant on certain
commodities, including stainless steel, nickel alloys, copper, aluminum
and plastic.
Operating Expenses
Operating expenses for the three and six months ended July 31, 1999 and
1998 were as follows (dollars in thousands):
1999 1998
-------------------- -------------------- Variance
% of % of ----------------
Amount Net Sales Amount Net Sales Amount %
--------- --------- --------- --------- -------- -----
Three months ended $ 136,000 17.6% $ 112,167 16.6% $ 23,833 21.2%
Six months ended $ 265,378 17.9% $ 218,039 17.1% $ 47,339 21.7%
The increase in operating expenses as a percent of net sales for the
three and six month periods ended July 31, 1999 was primarily due to (i)
higher personnel costs in connection with increased personnel headcount
resulting from higher volume levels of activity, wage increases, and the
Company's employee retention activities and (ii) increased information
technology spending and conversion costs as the Company continues its
program of upgrading information technology systems. The Company
believes its investment in these initiatives will provide a platform for
future growth and enable it to realize more administrative synergies
from past and future acquisitions.
Page 10
Interest Expense
Interest expense was $7.5 million and $14.3 million for the three and
six month periods ended July 31, 1999, respectively, compared to $6.4
million and $12.6 million for the same periods in the prior year,
respectively. The increases were primarily the result of higher
borrowing levels, partially offset by lower interest rates. The higher
borrowing levels were primarily due to the Company's (i) expansion
through business acquisitions, which has been partially funded by debt
financing, and (ii) share repurchases.
Income Taxes
The effective income tax rates for the three and six month periods ended
July 31, 1999 and 1998 were as follows:
1999 1998
Three months ended 40.5% 38.3%
Six months ended 40.5% 38.1%
Prior to the merger with Winn-Lange Electric, Inc. ("Winn-Lange") on
June 30, 1998, Winn-Lange was a Subchapter S corporation and therefore,
not subject to corporate income tax. Winn-Lange's Subchapter S
corporation status terminated upon the merger with the Company. As a
result, the Company's effective tax rate was higher for the three and
six months ended July 31, 1999 compared to the prior year periods.
Net Income
Net income for the second quarter increased 6% to $20.9 million.
Diluted earnings per share for the quarter were $.88 compared to $.82,
a 7% increase over the prior year period.
For the six months ended July 31, 1999, net income was $34.3 million, a
9% increase over the prior year's comparable period. Diluted earnings
per share for the six months ended July 31, 1999 increased 9% to $1.43,
up from $1.31 in the prior year's comparable period.
Liquidity and Capital Resources
Net cash provided by operations was $17.5 million for the six months
ended July 31, 1999 compared to $16.9 million of net cash used in
operations for the six months ended July 31, 1998. This change was
primarily the result of (i) an improvement in accounts receivable
turnover from same-store branches and (ii) an increase in accounts
payable and accrued liabilities resulting from the Company's cash
management efforts.
The Company's expenditures for property and equipment were $15.1 million
for the six months ended July 31, 1999 compared to $12.0 million for the
six months ended July 31, 1998. Of these expenditures, $2.6 million and
$2.4 million, respectively, were related to information technology
Page 11
outlays. Capital expenditures for property and equipment, excluding
amounts for business acquisitions, are expected to be approximately $30
million for fiscal 2000.
Proceeds from the sale of property and equipment decreased from $5.8
million for the six months ended July 31, 1998 to $3.2 million for the
six months ended July 31, 1999. This decrease was primarily due to the
$5.4 million in proceeds received from the sale and subsequent lease-
back of certain computer hardware during the six months ended July 31,
1998, as compared to the $2.5 million in proceeds received during the
six months ended July 31, 1999 from the sale and subsequent lease-back
of certain computer hardware.
Cash payments for business acquisitions accounted for as purchases
totaled $63.6 million for the six months ended July 31, 1999 compared to
$0.6 million in the prior year period.
Principal reductions on debt of acquired entities were $13.5 million for
the six months ended July 31, 1999 compared to $9.0 million for the same
period in the prior year. Dividend payments were $4.1 million and $4.9
million during the six months ended July 31, 1999 and 1998,
respectively. Dividend payments of $4.9 million during the six months
ended July 31, 1998 included cash dividends of pooled companies totaling
$1.2 million.
On March 15, 1999, the Board of Directors authorized the Company to
repurchase up to 2.5 million of its outstanding shares of common stock.
During the six months ended July 31, 1999, the Company repurchased
908,900 shares of its common stock for a total cost of $21.0 million at
an average purchase price of $23.06 per share. These share are to be
used for general corporate purposes.
As of July 31, 1999, the Company had approximately $58 million of unused
borrowing capacity (subject to borrowing limitations under long-term
debt covenants) to fund ongoing operating requirements and anticipated
capital expenditures. The Company also believes it has sufficient
borrowing capacity to take advantage of growth and business acquisition
opportunities and to fund share repurchases in the near term. The
Company expects to continue to finance future expansion on a project-by-
project basis through additional borrowing or through the issuance of
common stock.
Year 2000 Issue
Many existing computer programs use only two digits to identify a year
in the date field. As the century date change occurs, these programs
may recognize the year 2000 as 1900, or not at all. If not corrected,
many computer systems and applications could fail or create erroneous
results by or at the year 2000 (the "Year 2000 Issue").
The Company has developed plans to address its possible exposures
related to the impact of the Year 2000 Issue on each of its internal
Page 12
systems and those of third parties. These plans are expected to be
implemented primarily with the use of internal personnel.
The Company's internal systems consist of its main operating and
accounting systems, which handle the majority of its business
transactions, and other remote operating systems, which have resulted
from the Company's acquisition program. Plans to address the Year 2000
Issue with respect to the Company's internal systems include an
assessment phase, a remediation phase and a testing phase.
All required modifications to the Company's main operating system were
completed in December 1998. This system was thoroughly tested and the
modifications were implemented into the production environment. The
Company has installed an upgraded, vendor-certified year 2000 compliant
version of its accounting system. The Company's own internal
verification and validation testing for year 2000 compliance of the
accounting system was completed in May 1999. With respect to these two
systems, the Company does not anticipate that the Year 2000 Issue will
materially impact its operations or operating results.
As of August 23, 1999, the Company had 13 remote operating systems in
place. One of these systems utilizes a customized business software
application that the Company is testing for year 2000 compliance. The
remaining 12 systems utilize commercially available business software
applications. Of these 12 systems, nine are certified year 2000
compliant by their vendors. The remaining three systems are expected to
be converted by October 31, 1999 to one of the nine vendor-certified
year 2000 compliant systems that are expected to be in use on January 1,
2000.
The Company has successfully completed its own internal verification and
validation testing for year 2000 compliance on six of the nine vendor-
certified year 2000 compliant systems that are expected to be in use on
January 1, 2000. The tested systems support approximately 90% of the
Company's business volume. Testing of the remaining three systems is
currently underway and is expected to be completed by October 31, 1999.
All additional remote operating systems added after August 23, 1999 as
a result of the Company's acquisition program will be assessed,
remediated and tested to the extent that is necessary to ensure year
2000 compliance, or converted to one of the Company's systems that is
expected to be year 2000 compliant.
Management estimates total pretax costs relating to the Year 2000 Issue
to be approximately $2 million. Approximately 50% of these costs were
incurred through July 31, 1999 and the remaining costs are expected to
be incurred through March 2000. The estimate of $2 million excludes
certain costs of converting remote operating systems to the Company's
other year 2000 compliant systems, because such costs are not expected
to be material or the conversion is scheduled to be performed as part of
the Company's normal integration activities. Approximately $1 million
of the estimated total pretax costs of $2 million are personnel and
other expenses related to the Company's Year 2000 Project Team, which is
Page 13
expected to remain intact through the turn of the century. The
remaining estimated cost of $1 million is expected to be incurred
primarily in connection with the remediation and testing of the
Company's remote operating systems.
The Company has contacted its major suppliers, customers and service
providers regarding their Year 2000 Issues to assess the risk of these
entities not being able to continue to provide goods and services to the
Company. Through July 31, 1999, approximately 44% of the entities
contacted have responded. Of those entities who have responded,
approximately 50% have indicated that their systems are year 2000
compliant, and the remaining entities have indicated that they have
programs in place to address their respective organization's Year 2000
Issues. The Company plans to continue to evaluate the year 2000
readiness of its major suppliers, customers and service providers.
The Company believes its planning efforts are adequate to address the
Year 2000 Issue. There are, however, certain risks that the Company
cannot directly control, including the readiness of its major suppliers,
customers and service providers. Failure on the part of any of these
entities to timely remediate their Year 2000 Issues could result in
disruptions in the Company's supply of materials, disruptions in its
customers' ability to conduct business and interruptions to the
Company's daily operations. There can be no guarantee that the systems
of other third parties on which the Company's systems and operations
rely will be corrected on a timely basis and will not have a material
adverse effect on the Company.
As the Company receives and evaluates additional information provided by
third parties regarding their year 2000 readiness, the Company intends
to develop contingency plans, as deemed necessary, to safeguard its
ongoing operations. Such contingency plans may include identifying
alternative suppliers or service providers, stockpiling certain
inventories if alternative sources of supply are not available,
evaluating the impact and creditworthiness of non-compliant customers
and the addition of borrowing capacity if deemed necessary to finance
higher levels of inventory or working capital on an interim basis.
Page 14
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to market risk from changes in (i) interest rates
on outstanding variable-rate debt and (ii) the prices of certain of the
Company's products whose manufacture is reliant on certain commodities.
Interest Rate Risk
At July 31, 1999, the Company had approximately $272.9 million of
outstanding variable-rate debt. Based upon an assumed 10% increase or
decrease in interest rates from their July 31, 1999 levels, the market
risk with respect to the Company's variable-rate debt would not be
material. The Company manages its interest rate risk by maintaining a
combination of fixed-rate and variable-rate debt.
Commodity Price Risk
The Company is affected by price fluctuations in stainless steel, nickel
alloys, copper, aluminum, plastic and other commodities. Such commodity
price fluctuations have from time to time created cyclicality in the
financial performance of the Company and could continue to do so in the
future. The Company seeks to minimize the effects of commodity price
fluctuations through (i) economies of purchasing and inventory
management resulting in cost reductions, maintenance of minimum economic
reorder points, and productivity improvements and (ii) price increases
to maintain reasonable profit margins. Additional information with
respect to the Company's commodity price risk is set forth under the
caption "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in Part I, Item 2 of this report.
Page 15
HUGHES SUPPLY, INC.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The 1999 Annual Meeting of Shareholders (the "Annual Meeting") was held
on May 19, 1999. At the Annual Meeting, holders of 19,901,950 shares of
the Company's common stock were present in person or by proxy. At the
Annual Meeting, Messrs. William P. Kennedy, David H. Hughes and Vincent
S. Hughes were elected directors of the Company to hold office until the
2002 Annual Meeting and until the election and qualification of their
respective successors or until the earlier of their death, resignation
or removal. The tabulation of the votes present in person or by proxy
at the Annual Meeting with respect to each nominee for office was as
follows:
Authority
For Withheld
William P. Kennedy 18,375,998 1,525,952
David H. Hughes 18,366,498 1,535,452
Vincent S. Hughes 18,366,993 1,534,957
Messrs. John D. Baker II, A. Stewart Hall, Jr., Robert N. Blackford and
H. Corbin Day each continued their term of office as a director of the
Company after the Annual Meeting.
The shareholders of the Company also voted on a proposal to amend the
Directors' Stock Option Plan ("Proposal Two") to increase by 100,000 the
number of shares with respect to which options may be granted under the
plan and to provide for the grant of options to non-employee directors
under the plan following each annual meeting of the shareholders. The
tabulation of votes with respect to this proposal was as follows:
Authority
For Withheld Abstain
Proposal Two 18,586,428 1,206,646 108,876
Page 16
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits Filed
(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-K for the fiscal year ended
January 30, 1998 (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).
(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).
Page 17
(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
(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).
Page 18
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.
10.5 Written description of senior executives' long-term
incentive bonus plan for fiscal year 1996 incorporated by
reference to the description of the bonus plan set forth
under the caption "Approval of the Stock Award Provisions
of the Senior Executives' Long-Term Incentive Bonus Plan
for Fiscal Year 1996" on pages 26 and 27 of the
Registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held May 24, 1994 (Commission File No.
001-08772).
10.6 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).
10.7 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).
10.8 Hughes Supply, Inc. 1997 Executive Stock Plan (the
"Plan") incorporated by reference to the description of
the Plan set forth under Exhibit A of the Registrant's
Proxy Statement for the Annual Meeting of Shareholders to
be held May 20, 1997 (Commission File No. 001-08772).
10.9 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).
Page 19
10.10 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).
10.11 Revolving Credit Agreement, dated as of January 26, 1999,
by and among the Company and a group of banks,
incorporated by reference to Exhibit 10.11 to Form 10-K
for the fiscal year ended January 29, 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.
10.12 Line of Credit Agreement, dated as of January 26, 1999,
by and among the Company and a group of banks,
incorporated by reference to Exhibit 10.12 to Form 10-K
for the fiscal year ended January 29, 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.
(11) Statement re computation of per share earnings. Not
applicable.
(15) Letter re unaudited interim financial information. Not
applicable.
(18) Letter re change in accounting principles. Not applicable.
(19) Report furnished to security holders. Not applicable.
(22) Published report regarding matters submitted to vote of
security holders. Not applicable.
(23) Consents of experts and counsel. Not applicable.
(24) Power of attorney. Not applicable.
(27) Financial data schedule.
27.1 Financial Data Schedule (filed electronically only).
Page 20
(99) Additional exhibits. Not applicable.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter
ended July 31, 1999.
Page 21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HUGHES SUPPLY, INC.
Date: September 14, 1999 By: /s/ David H. Hughes
David H. Hughes, Chairman of
the Board and Chief Executive
Officer
Date: September 14, 1999 By: /s/ J. Stephen Zepf
J. Stephen Zepf, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
Page 22
INDEX OF EXHIBITS FILED WITH THIS REPORT
10.4 Directors' Stock Option Plan, as amended.
27.1 Financial Data Schedule (filed electronically only).
Page 23