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 April 30, 1994
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. 0-5235
HUGHES SUPPLY, INC.
Incorporated in the State I.R.S. Employer I.D.
of Florida Number 59-0559446
Post Office Box 2273
20 North Orange Avenue, Suite 200
Orlando, Florida 32802
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 May 14, 1994
$1 Par Value 5,789,594
Page 1 of 15
HUGHES SUPPLY, INC.
FORM 10-Q
Index
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of
April 30, 1994 and January 28, 1994 3 - 4
Consolidated Statements of Income for
the Three Months Ended April 30, 1994
and 1993 5
Consolidated Statements of Cash Flows for the
Three Months Ended April 30, 1994 and 1993 6
Notes to Consolidated Financial Statements 7 - 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results
of Operations 9 - 11
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 12 - 14
Signatures 15
Page 2 of 15
HUGHES SUPPLY, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
(dollars in thousands)
April 30, January 28,
1994 1994
----------- ------------
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 970 $ 1,078
Accounts receivable, less allowance for
losses of $4,955 and $3,914 99,792 97,765
Inventories 103,944 94,223
Deferred income taxes 5,240 4,972
Other current assets 4,058 5,532
---------- ----------
Total current assets 214,004 203,570
---------- ----------
Property, Plant and Equipment, at cost:
Land 12,333 12,353
Buildings and improvements 37,691 37,097
Transportation equipment 20,376 19,674
Furniture, fixtures and equipment 16,020 14,843
Leased property under capital leases 10,794 10,794
---------- ----------
Total 97,214 94,761
Less accumulated depreciation and
amortization (46,970) (45,439)
---------- ----------
Net property, plant and equipment 50,244 49,322
---------- ----------
Deferred Income Taxes 2,078 2,210
Other Assets 7,321 8,303
---------- ----------
$ 273,647 $ 263,405
========== ==========
See accompanying notes to consolidated financial statements.
Page 3 of 15
HUGHES SUPPLY, INC.
Item 1. Financial Statements - continued
Consolidated Balance Sheets
(dollars in thousands)
April 30, January 28,
1994 1994
----------- -----------
(unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 934 $ 898
Accounts payable 62,011 52,053
Accrued compensation and benefits 5,073 7,257
Other current liabilities 10,515 8,401
---------- ----------
Total current liabilities 78,533 68,609
---------- ----------
Long-Term Debt, less current portion:
Notes and subordinated debentures 70,894 95,367
Capital lease obligations 3,605 3,859
---------- ----------
Total long-term debt 74,499 99,226
---------- ----------
Other Noncurrent Liabilities 1,207 1,143
---------- ----------
Total liabilities 154,239 168,978
---------- ----------
Shareholders' Equity:
Preferred stock - -
Common stock-6,148,944 and
5,075,670 shares issued 6,149 5,076
Capital in excess of par value 37,290 15,410
Retained earnings 81,549 80,425
---------- ----------
124,988 100,911
Less treasury stock-360,233 and
418,566 shares, at cost (5,580) (6,484)
---------- ----------
Total shareholders' equity 119,408 94,427
---------- ----------
$ 273,647 $ 263,405
========== ==========
See accompanying notes to consolidated financial statements.
Page 4 of 15
HUGHES SUPPLY, INC.
Item 1. Financial Statements - continued
Consolidated Statements of Income (unaudited)
(in thousands, except per share amounts)
Three months ended April 30,
1994 1993
----------- -----------
Net Sales $ 183,901 $ 148,514
Cost of Sales 147,500 119,621
---------- ----------
Gross profit 36,401 28,893
---------- ----------
Operating Expenses:
Selling, general and administrative 30,371 25,116
Depreciation and amortization 2,049 1,629
Provision for doubtful accounts 685 582
---------- ----------
Total operating expenses 33,105 27,327
---------- ----------
Operating Income 3,296 1,566
---------- ----------
Non-Operating Income and (Expenses):
Interest and other investment income 556 419
Interest expense (1,135) (1,123)
Other, net 187 267
---------- ----------
(392) (437)
---------- ----------
Income Before Income Taxes 2,904 1,129
Income Taxes 1,234 430
---------- ----------
Net Income $ 1,670 $ 699
========== ==========
Earnings Per Share:
Primary $ .32 $ .15
========== ==========
Fully Diluted $ .31 $ .15
========== ==========
Average Number of Shares Outstanding:
Primary 5,245 4,605
========== ==========
Fully Diluted 5,984 4,605
========== ==========
Dividends Per Share $ .05 $ .03
========== ==========
See accompanying notes to consolidated financial statements.
Page 5 of 15
HUGHES SUPPLY, INC.
Item 1. Financial Statements - continued
Consolidated Statements of Cash Flows (unaudited)
(in thousands)
Three months ended April 30,
1994 1993
----------- --------
Increase (Decrease) in Cash and Cash
Equivalents:
Cash flows from operating activities:
Cash received from customers $ 181,245 $ 141,569
Cash paid to suppliers and employees (175,732) (141,919)
Interest income received 556 424
Interest paid (872) (530)
Income taxes paid (784) (1,100)
---------- ----------
Net cash provided by (used in)
operating activities 4,413 (1,556)
---------- ----------
Cash flows from investing activities:
Capital expenditures (2,966) (1,946)
Proceeds from sale of property, plant
and equipment 173 168
---------- ----------
Net cash used in
investing activities (2,793) (1,778)
---------- ----------
Cash flows from financing activities:
Net borrowings (payments) under
short-term debt arrangements (1,566) 3,966
Principal payments on:
Long-term notes (55) (48)
Capital lease obligations (181) (165)
Issuance of common shares under
stock option plans 517 -
Purchase of common shares (210) -
Dividends paid (233) (125)
---------- ----------
Net cash provided by (used in)
financing activities (1,728) 3,628
---------- ----------
Net Increase (Decrease) in Cash and
Cash Equivalents (108) 294
Cash and Cash Equivalents:
Beginning of period 1,078 2,253
---------- ----------
End of period $ 970 $ 2,547
========== ==========
See accompanying notes to consolidated financial statements.
Page 6 of 15
HUGHES SUPPLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. In the opinion of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments
(consisting only of normal recurring accruals) necessary to present
fairly the financial position as of April 30, 1994 and January 28,
1994, the results of operations and cash flows for the three months
ended April 30, 1994 and 1993. The statements of income and cash
flows for the three months ended April 30, 1993 have been restated
for a June, 1993 business combination accounted for as a pooling of
interests.
2. On March 8, 1994, the Company issued a call for redemption of its
outstanding 7% convertible subordinated debentures to take place on
April 7, 1994. Of the $22,960,000 debentures outstanding at
January 28, 1994, $22,889,000, or 99.7%, were converted into the
Company's common stock at $21.17 per share or 47.2 common shares
for each $1,000 face amount of debentures. This conversion
resulted in the issuance of 1,081,146 common shares. If the
conversion had occurred at the beginning of fiscal year 1995,
primary earnings per share for the three months ended April 30,
1994 would have been $.31. Fully diluted earnings per share for
the three months ended April 30, 1994 of $.31 already assumes the
conversion of the debentures.
Page 7 of 15
HUGHES SUPPLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(unaudited)
3. The following is a reconciliation of net income to net cash
provided by (used in) operating activities(in thousands):
Three months ended April 30,
1994 1993
---------- ----------
Net income $ 1,670 $ 699
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation 1,839 1,450
Amortization 210 179
Provision for doubtful accounts 685 582
(Gain) on sale of property,
plant and equipment (116) (125)
Undistributed (earnings) of
affiliate (15) (63)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable (2,712) (7,020)
Inventories (9,721) 429
Other current assets 1,475 1,481
Other assets 386 (37)
Increase (decrease) in:
Accounts payable and accrued
expenses 9,935 904
Accrued interest and income
taxes 1,101 117
Other noncurrent liabilities 64 41
Decrease (increase) in deferred
income taxes (388) (193)
---------- ----------
Net cash provided by (used in)
operating activities $ 4,413 $ (1,556)
========== ==========
Noncash Activities:
As discussed in Note 2, the Company issued approximately 1,081,000
shares of common stock for the conversion of $22,889,000 debentures
during the three months ended April 30, 1994.
Page 8 of 15
HUGHES SUPPLY, INC.
PART I. FINANCIAL INFORMATION - continued
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
On March 8, 1994, the Company called for redemption of its 7%
convertible subordinated debentures as of April 7, 1994. Substantially
all of the outstanding debentures were converted into common stock by
April 7, 1994, which resulted in an increase of approximately
$23,000,000 in shareholders' equity and a corresponding decrease of
long-term debt of $23,000,000. As a result of the conversion, 1,081,000
new shares of common stock were issued.
Results of Operations for the Three Months Ended April 30, 1994 as
Compared to the Three Months Ended April 30, 1993
Net sales increased 24% to $183.9 million for the first quarter ended
April 30, 1994 from $148.5 million in the prior year's first quarter.
The increase in sales is primarily due to the improvement in the
residential and commercial construction activity. In addition, newly-
opened and acquired wholesale outlets accounted for approximately $10.0
million of the increase in sales. The Company anticipates residential
construction to continue to outpace commercial construction although the
commercial construction markets the Company serve are currently
expanding.
Gross profit increased 26.0% to $36.4 million in the first quarter from
$28.9 million in last year's first quarter. The gross profit margin for
the three months ended April 30, 1994 was 19.8%, compared to 19.5% last
year. The increase in gross profit and gross margin was due to more
efficient purchasing which was attributable to increased volume and a
greater concentration of supply sources resulting from the Company's
preferred vendor program. In addition, the Company achieved more
favorable pricing of its products as a result of greater utilization of
its computerized inventory management systems during the first quarter
of fiscal 1995 versus first quarter of fiscal 1994. Management
anticipates the competitive conditions in its marketplace will continue
which may impact future gross profit and gross margin.
Operating expenses as a percentage of net sales were 18.0% and 18.4% for
the three months ended April 30, 1994 and 1993, respectively. This
decrease is primarily the result of the Company's ongoing cost control
program combined with operating leverage associated with the Company's
aggressive marketing efforts. Operating expenses increased to $33.1
million for the first quarter ended April 30, 1994 from $27.3 million in
the prior year's first quarter. The majority of the increase in
operating expenses is in personnel costs necessary to support the
Company's growth.
Page 9 of 15
Interest expense remained constant at $1.1 million for the quarter ended
April 30, 1994 and April 30, 1993. The conversion of the subordinated
debentures during the first quarter of fiscal 1995 will result in a
decrease in interest expense of approximately $1.6 million.
The effective tax rates for the three months ended April 30, 1994 and
1993 were 42.5% and 38.1%, respectively. The change in rates is due to
fluctuations of nondeductible expenses and a 1% increase in the Federal
tax rate.
Net income was $1.7 million for the three months ended April 30, 1994
versus $700,000 for the three months ended April 30, 1993. Primary
earnings per share were $.32 and $.15 for the quarters ended April 30,
1994 and 1993, respectively. Fully diluted earnings per share were $.31
and $.15 for the first quarters ended April 30, 1994 and 1993,
respectively.
Liquidity and Capital Resources
Working capital at April 30, 1994 amounted to $135.5 million compared to
$135.0 million at January 28, 1994. The Company continues to maintain
greater than 75% of total assets as current assets. The working capital
ratio was 2.73 to 1 and 2.97 to 1 as of April 30, 1994 and January 28,
1994, respectively.
Net cash flow provided by operations was $4.4 million for the three
months ended April 30, 1994 versus net cash flow used in operations of
$1.6 million in last year's first quarter. The primary reason for the
$6.0 increase was that cash received from customers increased $39.7
million while cash paid to suppliers only increased $33.8 million.
Net cash used in investing activities was $2.8 million for the three
months ended April 30, 1994 compared to $1.8 million for the three
months ended April 30, 1993. Capital expenditures for the first quarter
ended April 30, 1994 were $3.0 million compared to $2.0 million in the
first quarter of last year. Capital expenditures for fiscal 1995 are
expected to be approximately $10 million, exclusive of acquisitions.
Net cash used by financing activities was $1.7 million for the three
months ended April 30, 1994 while net cash provided by financing
activities was $3.6 million for the three months ended April 30, 1993.
For the first quarter ended April 30, 1994, cash flow from operations
improved $6.0 million when compared to the prior year's first quarter.
This improved cash flow allowed the Company to reduce its short-term
debt by $1.6 million and internally fund its capital expenditures. This
is in contrast to the first quarter of fiscal 1994 when the Company
borrowed $4.0 million under its short-term debt arrangements to fund its
operations and capital expenditures.
Page 10 of 15
The Company's bank financing consists primarily of a $100 million
unsecured credit facility which includes a $75 million long-term
revolving credit facility and a $25 million line of credit convertible
to a term note. The Company's financial condition remains strong and the
Company has the resources necessary, with approximately $32 million in
unused debt capacity (subject to borrowing limitations under long-term
debt covenants), to meet future anticipated funding requirements.
Page 11 of 15
HUGHES SUPPLY, INC.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits Filed.
(2) Plan of acquisition, reorganization, arrangement,
liquidation or succession - not applicable.
(4) Instruments defining the rights of security holders,
including indentures.
4.1 Specimen Stock Certificate representing shares of
the Company's common stock, $1.00 par value, filed
as Exhibit 4.2 to form 10-Q for the quarter ended
October 31, 1984.
4.2 Trust Indenture dated May 1, 1986 between the
Company and J. Henry Schroder Bank & Trust Company,
as Trustee for the holders of the Company's 7%
Convertible Subordinated Debentures, filed as
Exhibit 4(b) to Registration No. 33-4714.
4.3 Specimen Copy of Certificate representing 7%
Convertible Debentures, filed as Exhibit 4(c) to
Registration No. 33-4714.
4.4 Resolution Approving and Implementing Shareholder
Rights Plan filed as Exhibit 4.4 to Form 8-K dated
May 17, 1988.
(10) Material contracts.
10.1 Lease Agreements with Hughes, Inc.
(a) Orlando Trucking, Garage and Maintenance
Operations dated December 1, 1971, filed as
Exhibit 13(n) to Registration No. 2-43900.
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.
(b) Leases effective March 31, 1988, filed as
exhibit 10.1(c) to Form 10-K for the fiscal
year ended January 27, 1989;
Page 12 of 15
HUGHES SUPPLY, INC.
PART II. OTHER INFORMATION - continued
Sub-items Property
(1) Clearwater
(2) Daytona Beach
(3) Fort Pierce
(4) Lakeland
(5) Lakeland - Lightstyle
(6) Leesburg
(7) Orlando Electrical Operation
(8) Orlando Plumbing Operation
(9) Orlando Utility Warehouse
(10) St. Petersburg
(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, filed as Exhibit 10.1(i) to Form
10-K for the fiscal year ended January
30, 1987.
(d) Lease agreement dated June 1, 1987,
between Hughes, Inc. and the Registrant,
for additional Sarasota property, filed
as Exhibit 10.1(j) to Form 10-K for the
fiscal year ended January 29, 1988.
(e) Leases dated March 11, 1992, filed as
Exhibit 10.1(e) to Form 10-K for the
fiscal year ended January 31, 1992.
Sub-item Property
(1) Tallahassee Electrical Operation
(2) Gainesville Electrical Operation
(3) Valdosta Electrical Operation
10.2 Hughes Supply, Inc. 1988 Stock Option Plan
filed as Exhibit A to Prospectus included in
Registration No. 33-26468.
10.3 Form of Supplemental Executive Retirement Plan
Agreement entered into between the Registrant
and eight of its executive officers, filed as
Exhibit 10.6 to Form 10-K for fiscal year
ended January 30, 1987.
Page 13 of 15
HUGHES SUPPLY, INC.
PART II. OTHER INFORMATION - continued
10.4 Directors' Stock Option Plan filed as Exhibit
A to Prospectus included in Registration No.
33-33701.
10.5 Asset Purchase Agreement with Accord
Industries Company, dated October 9, 1990, for
sale of Registrant's manufacturing operations,
filed as Exhibit 10.7 to Form 10-K for fiscal
year ended January 25, 1991.
10.6 Lease Agreement dated June 30, 1993 between
Donald C. Martin and Electrical Distributors,
Inc., filed as Exhibit 10.6 to Form 10-K for
fiscal year ended January 28, 1994.
10.7 Consulting Agreement dated June 30, 1993
between Hughes Supply, Inc. and Donald C.
Martin, filed as Exhibit 10.7 to Form 10-K for
fiscal year ended January 28, 1994.
(11) Statement re computation of per share earnings.
11.1 Summary schedule of earnings per share calculation.
(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 - not applicable.
(99) Additional exhibits - not applicable.
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the quarter
ended April 30, 1994.
Page 14 of 15
HUGHES SUPPLY, INC.
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: May 26, 1994 By: /s/ J. Stephen Zepf
J. Stephen Zepf, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
Page 15 of 15
INDEX OF EXHIBITS FILED WITH THIS REPORT
11.1 Computation of per share earnings.
Exhibit 11.1
HUGHES SUPPLY, INC.
SUMMARY SCHEDULE OF EARNINGS PER SHARE CALCULATIONS
Potentially dilutive securities:
a) Options for common stock, issued under stock option plan.
b) 7% Convertible subordinated debentures, due May 1, 2011.
Three Months
Ended April 30,
1994 1993
Line
- ----
SHARES
------
1 Average shares outstanding 5,057,609 4,604,545
2 Incremental shares (options) -
Assuming options outstanding at end of period
were exercised at beginning of period (or time
of issuance, if later) and proceeds were used
to purchase shares at average market price
during the period 187,862 0
---------- ----------
3 Shares used in calculating Earnings Per
Common and Common Equivalent Share 5,245,471 4,604,545
4 Incremental shares (options) -
Assuming options outstanding at end of period
were exercised at beginning of period (or time
of issuance, if later) and proceeds were used
to purchase shares at the higher of the
average market price during the period or the
market price at the end of the period; and
that options exercised during the period were
exercised at the beginning of the period(or
time of issuance, if later) and the proceeds
were used to, purchase shares at the market
price at the date of exercise 17,498 0
5 Incremental shares (debentures) -
Assuming debentures were converted at
beginning of period (or time of issuance, if
later) at most advantageous (for security
holder) conversion rate that becomes
effective within 10 years * 720,902 0
---------- ----------
6 Shares used in calculating Earnings Per
Common Share - Assuming Full Dilution 5,983,871 4,604,545
========== ==========
EARNINGS
--------
7 Net income per financial statements, used in
calculating Earnings Per Common Share and
Earnings Per Common and Common Equivalent
Share $ 1,669,613 $ 698,210
8 Incremental earnings (debentures) -
Assuming interest charges applicable to
convertible debentures (and nondiscretionary
adjustments that would have been made based
on net income) are taken into account in
determining balance of income applicable to
common stock * 166,402 0
---------- ----------
9 Earnings used in calculating Earnings Per
Common Share - Assuming Full Dilution $ 1,836,015 $ 698,210
========== ==========
Three Months
Ended April 30,
1994 1993
Line
- ----
RESULTING PER SHARE DATA
------------------------
10 Earnings per common share (Line 7/Line 1) $ .33 $ .15
=========== ===========
11 Earnings per common share and common
equivalent share (Line 7/Line 3) $ .32 $ .15
=========== ===========
12 Dilution 3.0% 0.0%
=========== ===========
13 Earnings per common share - assuming full
dilution (Line 9/Line 6) $ .31 $ .15
=========== ===========
14 Dilution (antidilution) 6.1% 0.0%
=========== ===========
15 Used in statements of income:
[ ] Line 10, if dilution less than 3%, or antidilution, exists for all
periods.
[ X ] Lines 11 and 13, if dilution >= 3% for any period.
* Convertible debentures are antidilutive for the three months ended
April 30, 1993, and, consequently, are not used in the calculation of
fully diluted earnings per share for that period.
