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, 1995
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.
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 16, 1995
$1 Par Value 6,251,920
Page 1
HUGHES SUPPLY, INC.
FORM 10-Q
Index
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of
April 30, 1995 and January 27, 1995 3 - 4
Consolidated Statements of Income for
the Three Months Ended April 30, 1995
and 1994 5
Consolidated Statements of Cash Flows for the
Three Months Ended April 30, 1995 and 1994 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results
of Operations 8 - 9
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 10 - 13
Signatures 14
Index of Exhibits Filed with This Report 15
Page 2
HUGHES SUPPLY, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
(dollars in thousands)
April 30, January 27,
1995 1995
----------- ------------
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 1,447 $ 3,192
Accounts receivable, less allowance for
losses of $5,362 and $4,787 139,471 122,143
Inventories 123,774 119,686
Deferred income taxes 9,437 8,921
Other current assets 4,966 6,479
--------- ---------
Total current assets 279,095 260,421
--------- ---------
Property, Plant and Equipment, at cost:
Land 13,491 13,360
Buildings and improvements 43,737 41,776
Transportation equipment 19,368 19,409
Furniture, fixtures and equipment 20,312 19,738
Property under capital leases 10,794 10,794
--------- ---------
Total 107,702 105,077
Less accumulated depreciation and
amortization (53,144) (51,846)
--------- ---------
Net property, plant and equipment 54,558 53,231
--------- ---------
Deferred Income Taxes 2,096 1,999
Other Assets 21,060 13,242
--------- ---------
$ 356,809 $ 328,893
========= =========
The accompanying notes are an integral part of these consolidated
financial statements.
Page 3
HUGHES SUPPLY, INC.
Consolidated Balance Sheets - continued
(dollars in thousands)
April 30, January 27,
1995 1995
----------- -----------
(unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 1,063 $ 1,019
Accounts payable 85,211 71,563
Accrued compensation and benefits 7,364 9,723
Other current liabilities 17,552 12,795
--------- ---------
Total current liabilities 111,190 95,100
--------- ---------
Long-Term Debt, less current portion:
Notes and subordinated debentures 103,637 97,857
Capital lease obligations 2,782 3,061
--------- ---------
Total long-term debt 106,419 100,918
--------- ---------
Other Noncurrent Liabilities 1,640 1,540
--------- ---------
Total liabilities 219,249 197,558
--------- ---------
Shareholders' Equity:
Preferred stock - -
Common stock-6,320,196 and
6,148,599 shares issued 6,320 6,149
Capital in excess of par value 41,166 37,722
Retained earnings 91,132 89,152
--------- ---------
138,618 133,023
Less treasury stock-68,276 and
108,988 shares, at cost (1,058) (1,688)
--------- ---------
Total shareholders' equity 137,560 131,335
--------- ---------
$ 356,809 $ 328,893
========= =========
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 April 30,
1995 1994
----------- -----------
Net Sales $ 233,765 $ 183,901
Cost of Sales 186,188 147,500
--------- ---------
Gross Profit 47,577 36,401
--------- ---------
Operating Expenses:
Selling, general and administrative 39,888 30,371
Depreciation and amortization 2,238 2,049
Provision for doubtful accounts 463 685
--------- ---------
Total operating expenses 42,589 33,105
--------- ---------
Operating Income 4,988 3,296
--------- ---------
Non-Operating Income and (Expenses):
Interest income 677 556
Interest expense (1,735) (1,135)
Other, net 190 187
--------- ---------
(868) (392)
--------- ---------
Income Before Income Taxes 4,120 2,904
Income Taxes 1,669 1,234
--------- ---------
Net Income $ 2,451 $ 1,670
========= =========
Earnings Per Share:
Primary $ .39 $ .32
========= =========
Fully Diluted $ .39 $ .31
========= =========
Average Shares Outstanding:
Primary 6,217 5,245
========= =========
Fully Diluted 6,223 5,984
========= =========
Dividends Per Share $ .07 $ .05
========= =========
The accompanying notes are an integral part of these consolidated
financial statements.
Page 5
HUGHES SUPPLY, INC.
Consolidated Statements of Cash Flows (unaudited)
(in thousands)
Three months ended April 30,
1995 1994
----------- --------
Increase (Decrease) in Cash and Cash
Equivalents:
Cash flows from operating activities:
Cash received from customers $ 219,176 $ 181,245
Cash paid to suppliers and employees (216,625) (175,732)
Interest received 677 556
Interest paid (1,713) (872)
Income taxes paid (627) (784)
--------- ---------
Net cash provided by
operating activities 888 4,413
--------- ---------
Cash flows from investing activities:
Proceeds from sale of property,
plant and equipment 209 173
Capital expenditures (2,829) (2,966)
Business acquisitions, net of cash (4,532) -
--------- ---------
Net cash used in
investing activities (7,152) (2,793)
--------- ---------
Cash flows from financing activities:
Net borrowing (payments) under
short-term debt arrangements 5,075 (1,566)
Principal payments on:
Long-term notes (60) (55)
Capital lease obligations (199) (181)
Proceeds from issuance of common
shares under stock option plans 84 517
Purchase of common shares (19) (210)
Dividends paid (362) (233)
--------- ---------
Net cash provided by (used in)
financing activities 4,519 (1,728)
--------- ---------
Net Increase (Decrease) in Cash and
Cash Equivalents (1,745) (108)
Cash and Cash Equivalents:
Beginning of period 3,192 1,078
--------- ---------
End of period $ 1,447 $ 970
========= =========
The accompanying notes are an integral part of these consolidated
financial statements.
Page 6
HUGHES SUPPLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) (dollars in thousands)
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, 1995 and January 27,
1995, the results of operations and cash flows for the three months
ended April 30, 1995 and 1994.
2. During the three months ended April 30, 1995, the Company acquired
three wholesale distributors of materials to the construction
industry for cash and common stock. These acquisitions have been
accounted for as purchases and did not have a material effect on
the consolidated financial statements. Results of operations of
these companies from their respective dates of acquisition have
been included in the consolidated financial statements.
3. The following is a reconciliation of net income to net cash
provided by (used in) operating activities:
Three months ended April 30,
1995 1994
---------- ----------
Net income $ 2,451 $ 1,670
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation 1,901 1,839
Amortization 337 210
Provision for doubtful accounts 463 685
Gain on sale of property,
plant and equipment (134) (116)
Undistributed (earnings) losses
of affiliate 37 (15)
Changes in assets and liabilities,
net of effects of acquisitions:
(Increase) decrease in:
Accounts receivable (14,682) (2,712)
Inventories 470 (9,721)
Other current assets 1,541 1,475
Other assets (1,074) 386
Increase (decrease) in:
Accounts payable and accrued
expenses 8,414 9,935
Accrued interest and income
taxes 1,677 1,101
Other noncurrent liabilities 100 64
Increase in deferred income taxes (613) (388)
---------- ----------
Net cash provided by
operating activities $ 888 $ 4,413
========== ==========
Page 7
HUGHES SUPPLY, INC.
PART I. FINANCIAL INFORMATION - continued
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations for the Three Months Ended April 30, 1995 as
Compared to the Three Months Ended April 30, 1994
Net sales reached a record $233.8 million for the first quarter ended
April 30, 1995, a 27% increase over the prior year. Newly-opened and
acquired wholesale outlets accounted for approximately $26 million of
the increase in sales. Same store sales were up 13%. Construction
markets in the Southeast were strong during the quarter, while mild
winter weather conditions in the Midwest favorably impacted sales from
that area. The Company continues to expect that construction activity
will remain strong during all of fiscal 1996 and its sales will
increase.
Gross margins for the three months ended April 30, 1995 and 1994 were
20.4% and 19.8%, respectively. The improvement in gross margins is due
to heightened construction activity as well as purchasing economies from
increased volume. Higher sales and improved gross margin resulted in a
31% increase in gross profit to $47.6 million.
Operating expenses as a percentage of net sales were 18.2% and 18.0% for
the three months ended April 30, 1995 and 1994, respectively.
Operating expenses increased to $42.6 million for the first quarter
ended April 30, 1995 from $33.1 million in the prior year's first
quarter. Approximately 47% of the increase in operating expenses is
attributable to recent acquisitions and newly-opened wholesale outlets.
Higher insurance and transportation costs were primarily responsible for
operating expenses increasing over expected amounts (due to sales
growth) in existing operations. Labor costs associated with new product
offerings (i.e. primarily pool supplies) and the seasonality of newly-
acquired companies have also contributed to higher operating expenses as
a percentage of net sales. As sales of the new products develop and as
the newly-acquired companies enter their peak season (second and third
quarter), the percentage of operating expenses to net sales should
decline.
Interest expense increased $.6 million to $1.7 million for the quarter
ended April 30, 1995. Higher interest rates were responsible for
approximately 85% of the increase.
Net income reached a first-quarter record $2.5 million compared to $1.7
million for the prior year first quarter. Fully-diluted earnings per
share for the quarter increased to $.39 compared to $.31 in the prior
year.
Page 8
Liquidity and Capital Resources
Working capital at April 30, 1995 amounted to $167.9 million compared to
$165.3 million at January 27, 1995. The working capital ratio was 2.51
to 1 and 2.74 to 1 as of April 30, 1995 and January 27, 1995,
respectively. Annualized inventory turnover was 6.1 and 6.0 times for
the three months ended April 30, 1995 and 1994, respectively.
Annualized accounts receivable turnover for these periods was 6.9 and
7.1 times, respectively. The Company typically becomes more leveraged
in expansionary periods. Consequently, higher levels of inventories and
receivables, trade payables and debt are required to support the growth.
Net cash flow provided by operations was $.9 million for the three
months ended April 30, 1995 versus $4.4 million in last year's first
quarter. The change is primarily due to fluctuations in accounts
receivable and inventories, which has resulted from the Company's
growth.
Cash payments for business acquisitions totaled $4.5 million for the
three months ended April 30, 1995. Funding was provided by borrowing
under existing credit arrangements. Additionally, approximately
207,000 shares of common stock valued at $4.1 million were issued for
the acquisitions. The acquisitions were for wholesale distributors of
construction materials, pool equipment and supplies, and water systems
with facilities in Pennsylvania, Ohio, Georgia, Alabama and South
Carolina. These operations are expected to positively impact results of
operations over the remainder of the fiscal year.
Expenditures for property and equipment were $2.8 million for the
quarter ended April 30, 1995 compared to $3.0 million for the prior year
first quarter. It is now estimated that these expenditures will be
approximately $10 million for fiscal year 1996.
The Company continues to maintain sufficient borrowing capacity to take
advantage of growth and business acquisition opportunities. As of April
30, 1995, approximately $34 million is available under its existing
credit facilities (subject to borrowing limitations under long-term debt
covenants). These resources are sufficient to fund ongoing operating
requirements. Future expansion will continue to be financed on a
project-by-project basis through additional borrowing or, as
circumstances allow, through the issuance of common stock.
Page 9
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.
(3) Articles of incorporation and by-laws.
3.1 Articles of incorporation, as amended, filed as
Exhibit 3.1 to Form 10-Q for the quarter ended July
31, 1994.
3.2 Composite By-Laws, as amended, filed as Exhibit 3.2
to Form 10-Q for the quarter ended July 31, 1994.
(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 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;
Sub-Item Property
(1) Clearwater
(2) Daytona Beach
(3) Fort Pierce
Page 10
(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.
10.4 Directors' Stock Option Plan, as amended,
filed as Exhibit 10.4 to Form 10-Q for the
quarter ended July 31, 1994.
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.
Page 11
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.
10.8 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 for Fiscal Year 1996" on pages 26
and 27 of the Registrant's Proxy Statement
Annual Meeting of Shareholders To Be Held May
24, 1994.
10.9 Senior Executives' Long-Term Incentive Bonus
Plan, including the senior executives' long-
term incentive bonus plan for fiscal year 1997
(the "1997 Performance Plan") and the senior
executives' long-term incentive bonus plan for
fiscal year 1998 (the "1998 Performance Plan")
incorporated by reference therein, filed as
Exhibit 10.9 to Form 10-K for the fiscal year
ended January 27, 1995.
10.10 Lease Agreement dated June 30, 1994 between
Donald C. Martin and Electrical Distributors,
Inc., filed as Exhibit 10.10 to Form 10-K for
the fiscal year ended January 27, 1995.
(11) Statement re computation of per share earnings.
11.1 Summary schedule of earnings per share calculations.
(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.
Page 12
(27) Financial data schedule.
27.1 Financial Data Schedule (filed electronically
only).
(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, 1995.
Page 13
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 31, 1995 By: /s/ J. Stephen Zepf
J. Stephen Zepf, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
Page 14
INDEX OF EXHIBITS FILED WITH THIS REPORT
11.1 Summary schedule of earnings per share calculations.
27.1 Financial Data Schedule (filed electronically only).
Page 15
Exhibit 11.1
<TABLE>
HUGHES SUPPLY, INC.
SUMMARY SCHEDULE OF EARNINGS PER SHARE CALCULATIONS
(in thousands, except per share amounts)
Potentially dilutive securities:
a) Options for common stock, issued under stock option plan.
b) 7% Convertible subordinated debentures, due May 1, 2011.
<CAPTION>
Three Months
Ended April 30,
1995 1994
Line
- ----
SHARES
------
<C> <S> <C> <C>
1 Average shares outstanding 6,104 5,057
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 113 188
---------- ----------
3 Shares used in calculating Earnings Per
Common and Common Equivalent Share 6,217 5,245
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 6 18
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 - 721
---------- ----------
6 Shares used in calculating Earnings Per
Common Share - Assuming Full Dilution 6,223 5,984
========== ==========
EARNINGS
--------
7 Net income per financial statements, used in
calculating Earnings Per Common Share and
Earnings Per Common and Common Equivalent
Share $ 2,451 $ 1,670
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
---------- ----------
9 Earnings used in calculating Earnings Per
Common Share - Assuming Full Dilution $ 2,451 $ 1,836
========== ==========
<CAPTION>
Three Months
Ended April 30,
1995 1994
Line
- ----
RESULTING PER SHARE DATA
------------------------
<S> <C> <C> <C>
10 Earnings per common share (Line 7/Line 1) $ .40 $ .33
=========== ===========
11 Earnings per common share and common
equivalent share (Line 7/Line 3) $ .39 $ .32
=========== ===========
12 Dilution 2.5% 3.0%
=========== ===========
13 Earnings per common share - assuming full
dilution (Line 9/Line 6) $ .39 $ .31
=========== ===========
14 Dilution (antidilution) 2.5% 6.1%
=========== ===========
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.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONSOLIDATED BALANCE SHEET OF HUGHES SUPPLY, INC. AS OF
APRIL 30, 1995, AND THE RELATED STATEMENT OF INCOME FOR THE THREE
MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000049029
<NAME> HUGHES SUPPLY, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-26-1996
<PERIOD-END> APR-30-1995
<CASH> 1,447
<SECURITIES> 0
<RECEIVABLES> 144,833
<ALLOWANCES> 5,362
<INVENTORY> 123,774
<CURRENT-ASSETS> 279,095
<PP&E> 108,752
<DEPRECIATION> 54,194
<TOTAL-ASSETS> 356,809
<CURRENT-LIABILITIES> 111,190
<BONDS> 106,419
<COMMON> 6,320
0
0
<OTHER-SE> 131,240
<TOTAL-LIABILITY-AND-EQUITY> 356,809
<SALES> 233,765
<TOTAL-REVENUES> 233,765
<CGS> 186,188
<TOTAL-COSTS> 186,188
<OTHER-EXPENSES> 42,126
<LOSS-PROVISION> 463
<INTEREST-EXPENSE> 1,735
<INCOME-PRETAX> 4,120
<INCOME-TAX> 1,669
<INCOME-CONTINUING> 2,451
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,451
<EPS-PRIMARY> .39
<EPS-DILUTED> .39
</TABLE>
