FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended January 27, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________________to_________________
Commission File No. 001-08772
HUGHES SUPPLY, INC.
(Exact name of registrant as specified in its charter)
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
(Address of principal executive office)
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)
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. [X]
State the aggregate market value of the voting stock held by nonaffiliates
of the Registrant: $99,952,538 as of March 24, 1995.
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date: 6,153,424
shares of common stock ($1.00 par value) as of March 24, 1995.
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 fiscal
year ended January 27, 1995 (designated portions).
Part II - Annual Report to shareholders for fiscal
year ended January 27, 1995 (designated portions).
Part III- Proxy Statement for the 1995 Annual
Meeting of Shareholders (designated
portions).
Part IV - Annual Report to shareholders for fiscal
year ended January 27, 1995 (designated portions).
PART I
ITEM 1. BUSINESS
(a) General Development of Business
Hughes Supply, Inc. (the "Registrant") was founded as a general
partnership in Orlando, Florida in 1928. The Registrant was incorporated
as a Florida corporation in 1947. As used throughout this Report, the term
"Registrant" shall be deemed to mean the Registrant and its subsidiaries,
except where the context otherwise indicates.
The Registrant is primarily engaged in the wholesale distribution of a
broad range of materials, equipment and supplies to the construction
industry. Major product lines distributed by the Registrant include
electrical, plumbing and electric utility equipment; building materials;
pool equipment and supplies; water and sewer products; air conditioning and
heating equipment and supplies; water systems and industrial pipe, valves
and fittings.
The Registrant distributes its product lines through 179 wholesale
outlets located in Florida and 12 other states. The following table
presents the distribution of the Registrant's wholesale outlets by state.
State Number of Locations
Florida 62
Georgia 29
North Carolina 21
Ohio 13
South Carolina 13
Mississippi 11
Tennessee 9
Alabama 8
Indiana 4
Pennsylvania 3
Virginia 3
Kentucky 2
Maryland 1
A current listing of the locations of the wholesale outlets and
distribution centers of the Registrant is set forth as Exhibit 99.1 to this
report.
The principal executive offices of the Registrant are located at 20
North Orange Avenue, Suite 200, Orlando, Florida 32801 (telephone 407-841-
4755).
(b) Financial Information About Industry Segments
The Registrant does not engage in significant operations in more than
one industry segment as defined in Statement of Financial Standards No. 14.
I-1
(c) Narrative Description of Business
Products Distributed
The products sold by the Registrant may be classified into the
following major product lines:
Electrical - electrical supplies, including wire, cable, cords, boxes,
covers, wiring devices, conduit, raceway duct, safety switches, motor
controls, breakers, panels, fuses and related supplies and accessories,
residential, commercial and industrial electrical fixtures and other
special use fixtures.
Plumbing - plumbing fixtures and related fittings, residential,
commercial and industrial water heaters, pumps, irrigation equipment and
plumbing accessories and supplies.
Electric utility - transformers, conductor cable, insulators,
prestressed concrete transmission and distribution poles, and other
electric utility supplies and related hardware, accessories and tools.
Building materials - reinforcing wire, reinforcing steel, plyform,
lumber, concrete chemicals, concrete forming accessories, road and bridge
products, masonry accessories and other building materials, hand tools,
power tools and equipment for all mechanical and building trades.
Pool equipment and supplies - pumps, filters, heaters, lights,
skimmers, drains, chemicals, solar equipment, deck products and cleaning
equipment.
Water and sewer - water works and industrial supplies, including large
diameter plastic (PVC) and ductile iron pipe, fire hydrants, water meters,
backflow prevention devices, valves and related hardware and accessories.
Air conditioning and heating - air conditioning and heating equipment,
furnaces, heaters, heat pumps, condensing units, duct, pipe, fittings,
registers, grills, freon, insulation and other refrigeration equipment,
supplies and service parts.
Water systems - pumps and water well, residential and commercial water
treatment, and environmental products.
Industrial pipe, valves and fittings - mechanical and weld pipe,
valves and related fittings, fire protection systems and supplies, high
performance valves and specialty pipe.
I-2
Marketing
In recent years the Registrant's marketing plan has led to the
expansion of the geographic markets served by the Registrant. The
following table illustrates the expansion achieved through acquisitions
over the last five fiscal years.
<TABLE>
<CAPTION>
Method of Date of Number of State(s) of Company's Major
Acquired Company Acquisition Acquisition Locations Operation Product Lines
<S> <C> <C> <C> <C> <C>
Virginia branch (1) Purchase June, 1993 1 Virginia Plumbing
Georgia and Florida Purchase June, 1993 3 Georgia Electrical and electric
branches (2) 1 Florida utility
Electrical Pooling June, 1993 1 Georgia Electrical
Distributors, Inc.
Alabama Water Works Purchase July, 1993 2 Alabama Water and sewer
Supply, Inc.
Florida branches(3) Purchase December, 1993 2 Florida Building materials
Swaim Supply Pooling January, 1994 6 North Carolina Plumbing, air conditioning
Company, Inc. and heating
2 Virginia
Florida and Georgia Purchases February- 2 Florida Water and sewer, plumbing and
branches (4) September, 1994 2 Georgia electrical
Treaty Distribution Purchase January, 1995 12 Ohio Plumbing, water and sewer and
Group branches (5) 4 Indiana heating and air conditioning
Olander & Brophy, Inc. Purchase March, 1995 3 Pennsylvania Pool equipment and water
1 Ohio systems
Port City Electrical Purchase March, 1995 2 Georgia Electrical
Supply, Inc. 1 South Carolina
Elec-Tel Supply Purchase April, 1995 1 Georgia Electric utility
Company
(1) Facility in Falls Church, Virginia acquired in purchase of assets from
Capitol Hydronic Supply Company, Inc. Sales outlet relocated to
Arlington, Virginia.
(2) Facilities acquired in Macon, Georgia and Tallahassee, Florida in
purchase of assets from Causey Electrical Supply Company, Causey
Utility Supply Co. and Macon Lighting Center, Inc.
(3) Facilities acquired in purchase of assets from Hausman Corporation.
(4) Facilities acquired in purchases of assets from four entities.
(5) Facilities acquired in purchase from The Treaty Company of the
assets of its operating division, The Treaty Distribution Group.
</TABLE>
In addition to expansion through acquisition, the Registrant has
increased its geographic market area by opening new sales outlets in
Jacksonville, Kissimmee, Lady Lake, Ft. Myers, West Palm Beach, Naples,
Auburndale, Tampa and Perry, Florida, in Tifton, Hartsfield, Alpharetta
LaGrange and McDonough, Georgia, in Greensboro, North Carolina, in Dothan
and Mobile, Alabama, and in Anderson and Bluffton, South Carolina during
the past five years.
I-3
Each of the Registrant's sales outlets handles one or more of the
Registrant's product lines. Sales are made primarily to contractors,
subcontractors, electric utilities, municipalities and industrial accounts.
The Registrant employs approximately 350 outside sales representatives who
call on customers and who also work with architects, engineers and
manufacturers' representatives when major construction projects are
involved. For each outside sales representative, there are generally two
inside account executives who expedite orders, deliveries, quotations, and
requests for pricing. Most orders are taken by telephone, and materials
are delivered by Registrant-owned trucks to the customer's office or job
site.
The Registrant's wholesale outlets are sales and distribution points
for the products sold by the Registrant. Each sales outlet operates as a
separate profit center with its own sales force. Each is managed by its
own manager, who is directly responsible for customer relations, the hiring
and promotion of personnel, purchasing, sales, the maintenance of adequate
inventory levels and cost control for the particular sales outlet.
Day to day operations of the sales outlets are the responsibility of
the respective managers, but major decisions affecting Registrant policy,
facilities or capital outlay are reviewed by the Registrant's executive
officers. Purchasing agents generally make use of a computerized perpetual
inventory system to monitor stock levels, while central distribution
centers in Orlando, Florida, College Park, Georgia and Monroe, North
Carolina provide purchasing and distribution assistance. The Registrant's
general accounting, customer billing, inventory, and accounts payable
systems are for the most part processed at the Registrant's central
computer facility in Orlando, Florida.
More than 45,000 wholesale customers are presently served by the
Registrant, and no single customer accounts for more than 1% of total sales
annually. 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 out of inventory on hand. Some items are
manufactured to customer specifications and require special ordering.
Additionally, some large volume orders are shipped directly to the customer
from the manufacturer.
Sources of Supply
All products sold by the Registrant are purchased from other
manufacturers and suppliers. The Registrant regularly purchases from over
5,000 manufacturers and suppliers, no single one of which accounted for
more than 7% of the Registrant's total purchases during the fiscal year
ended January 27, 1995.
I-4
Inventories
The Registrant is a wholesale distributor of construction materials,
which maintains significant inventories to meet rapid delivery requirements
and to assure itself of a continuous allotment of goods from suppliers. As
of January 27, 1995, inventories constituted approximately 36% of the
Registrant's total assets.
Competition
There is strong competition throughout the marketing areas served by
the Registrant in each product line the Registrant distributes. 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 supplies and contractor's tools. Management believes that
the Registrant, on the basis of its total sales, is the largest wholesale
distributor of its range of products in the Southeast. The principal
competitive factors in the Registrant's business are availability of
material, technical product knowledge as to application and usage, advisory
and other service capabilities and pricing of products.
Compliance with Environmental Protection Provisions
In fiscal year ended January 31, 1992, the Registrant accrued
approximately $675,000 as an operating expense for estimated future costs
of removing underground fuel storage tanks and environmental clean-up costs
to comply with federal, state and local laws and regulations for the
protection of the environment. There have been no significant expenses
since fiscal year ended January 31, 1992 and the Registrant does not expect
any additional material expenses in future years associated with fuel
storage tanks. Information with respect to this matter is also included in
Management's Discussion and Analysis of Financial Condition and Results of
Operations of the Annual Report to shareholders for the fiscal year ended
January 27, 1995, a copy of which is filed as an exhibit to this report and
the cited portion of which is incorporated herein by reference.
Employees
The Registrant had a total of approximately 2,800 employees as of
January 27, 1995, consisting of approximately 20 executives, 450 managers,
800 sales personnel and 1,530 other employees, including truck drivers,
warehouse personnel, office and clerical workers. The Registrant's work
force has increased by approximately 19% compared to the prior year in
response to increased sales volume as well as the result of business
acquisitions during the current year.
(d) Financial Information about Foreign and Domestic Operations and
Export Sales
The Registrant does not engage in material operations or derive a
material portion of its sales or revenues from customers in foreign
countries.
I-5
ITEM 2. PROPERTIES
The Registrant leases approximately 27,000 square feet of an office
building in Orlando, Florida for its headquarters. In addition, the
Registrant owns or leases 179 sales outlets in 13 states. The typical
sales outlet consists of a combined office and warehouse facility ranging
in size from 3,000 to 40,000 square feet, with a paved parking and storage
area. The Registrant also operates a computer center, three central
distribution warehouses, and a garage and trucking terminal.
Additional information regarding owned and leased properties of the
Registrant is set forth as Exhibit 99.1 to this report and in Note 5 of the
Notes to Consolidated Financial Statements of the Annual Report to
shareholders for the fiscal year ended January 27, 1995, a copy of which is
filed as an exhibit to this report and the cited portion of which is
incorporated herein by reference.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the
Registrant or its subsidiaries is a party or of which the property of
either the Registrant or its subsidiaries is the subject which are required
to be reported in response to this item.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the Registrant's security holders
during the fourth quarter of the fiscal year ended January 27, 1995.
I-6
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Information with respect to the principal market for the Registrant's
common stock, stock prices and dividend information is set forth under the
captions "Shareholder Information" and "Market Price and Dividend Data" of
the Annual Report to shareholders for the fiscal year ended January 27,
1995, 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 Registrant
is set forth under the caption "Selected Financial Data" of the
Registrant's Annual Report to shareholders for the fiscal year ended
January 27, 1995, 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 Registrant'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 Registrant's Annual Report to
shareholders for fiscal year ended January 27, 1995, a copy of which is
filed as an exhibit to this report and the cited portion of which is
incorporated herein by reference.
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
Registrant is set forth under the caption "Selected Quarterly Financial
Data" of the Registrant's Annual Report to shareholders for fiscal year
ended January 27, 1995, a copy of which is filed as an exhibit to this
report and the cited portion of which is incorporated herein by reference.
II-1
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
On May 24, 1994, the Board of Directors of the Registrant appointed
Price Waterhouse LLP as auditors for the three fiscal year period
commencing with the Registrant's fiscal year ending January 27, 1995.
The term of engagement of the Registrant's previous auditors, the firm
of Coopers & Lybrand, expired at the conclusion of the fiscal year
ended January 28, 1994. Price Waterhouse LLP was selected by the
Board upon the recommendation of the Audit Committee following
consideration of proposals submitted at the Committee's request by a
number of independent accounting firms including, among others,
Coopers & Lybrand and Price Waterhouse LLP.
(a) Previous independent accountants.
(i) The former accountants, Coopers & Lybrand, were not
reappointed by the Registrant following the expiration
of their term of engagement.
(ii) The reports of Coopers & Lybrand on the financial
statements for the prior two fiscal years contained no
adverse opinion or disclaimer of opinion and were not
qualified or modified as to uncertainty, audit scope or
accounting principle, except for the change in
accounting for income taxes in fiscal year ended
January 31, 1992 referred to in the reports of Coopers
& Lybrand.
(iii) The Registrant's Board of Directors approved the change
of independent accountants upon the recommendation of
the Audit Committee.
(iv) In connection with its audits for the two prior fiscal
years and through May 24, 1994, there have been no
disagreements with Coopers & Lybrand on any matter of
accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which
disagreements if not resolved to the satisfaction of
Coopers & Lybrand would have caused them to make
reference thereto in their report on the financial
statements for such years.
(v) During the two prior fiscal years and through May 24,
1994, there have been no reportable events as defined
in Regulation S-K Item 304(a)(1)(v).
(vi) The Registrant requested and received a letter from
Coopers & Lybrand addressed to the Securities and
Exchange Commission stating that it agrees with the
above statements. A copy of such letter, dated May 31,
1994, is filed as Exhibit 16.1 to Form 8-K dated May
24, 1994.
II-2
(b) New independent accountants.
(i) The Registrant engaged Price Waterhouse LLP as its new
independent accountants as of May 24, 1994. During the
two prior fiscal years and through May 24, 1994, the
Registrant has not consulted with Price Waterhouse LLP
on items which (1) were or should have been subject to
SAS 50 or (2) concerned the subject matter of a
disagreement or reportable event with the former
auditor (as described in Regulation S-K Item
304(a)(2)).
II-3
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Identification of Directors
Information with respect to Directors of the Registrant is set forth
under the captions "Directors and Nominees for Election as Directors of the
Company" and "Family Relationships Between Certain Directors" of the
Registrant's Proxy Statement for the 1995 Annual Meeting of Shareholders
(the "1995 Proxy Statement"), which has been filed with the Commission by
the Registrant under Regulation 14A and the cited portion of which is
incorporated herein by reference.
(b) Identification of Executive Officers
Information with respect to Executive Officers of the Registrant is
set forth under the caption "Executive Officers" and, with respect to
Executive Officers who are also Directors is also set forth under the
captions referred to in paragraph (a) above of this Item 10 of the
Registrant's 1995 Proxy Statement, which has been filed with the Commission
by the Registrant under Regulation 14A and the cited portions of which are
incorporated herein by reference.
(c) Compliance with Section 16(a) of the Securities
Exchange Act of 1934
The information required by Item 405 of Regulation S-K is furnished
under the caption "Compliance with Section 16(a) of the Securities Exchange
Act of 1934" of the Registrant's 1995 Proxy Statement, which has been filed
with the Commission under Regulation 14A and the cited portion of which is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to executive compensation is set forth under
the caption "Executive Compensation and Other Information" of the
Registrant's 1995 Proxy Statement. Except as hereinafter set forth, such
information is deemed to have been filed with the Commission as a part of
such Proxy Statement and is incorporated by reference herein.
Notwithstanding anything to the contrary set forth in the Company's
previous filings under the Securities Act of 1933, as amended (the "33
Act"), or the Securities Exchange Act of 1934, as amended (the "34 Act"),
that might incorporate future filings including the Proxy Statement or this
Report on Form 10-K, the "Compensation Committee Report on Executive
Compensation" and the section captioned "Shareholder Return" of the 1995
Proxy Statement are specifically excluded from the portions of the 1995
Proxy Statement incorporated by reference herein or into any other filing
under the 33 Act or the 34 Act.
III-1
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information as of March 24, 1995 with respect to persons known to
management of the Registrant to be the beneficial owners of more than 5% of
the outstanding common stock of the Registrant and information with respect
to the security ownership of management of the Registrant is set forth
under the captions "Ownership of Securities by Certain Beneficial Owners"
and "Ownership of Securities by Officers and Directors" of the Registrant's
1995 Proxy Statement, filed with the Commission pursuant to Regulation 14A,
and such information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to certain relationships and related
transactions is set forth under the caption "Certain Transactions with
Management" of the Registrant's 1995 Proxy Statement, which has been filed
with the Commission pursuant to Regulation 14A and the cited portion of
which is incorporated herein by reference.
III-2
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 Form 10-K are listed in a separately designated
section submitted below, except for the report of predecessor independent
accountants which is included at the end of Part IV. Exhibits are listed
in subparagraph (c) below.
(b) Reports on Form 8-K
During the quarter ended January 27, 1995, the Registrant filed a
Current Report on Form 8-K dated January 3, 1995, which reported under Item
5 (Other Events) that the Registrant, pursuant to an Asset Purchase
Agreement dated October 20, 1994 with The Treaty Company ("Treaty"),
acquired all of those assets operated by Treaty through its operating
division known as the Treaty Distribution Group.
(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 and Exchange Act of 1934 or as exhibits to registration
statements under the Securities Act of 1933. 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 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
Registrant's common stock, $1.00 par value, filed as Exhibit
4.2 to Form 10-Q for the quarter ended October 31, 1984.
IV-1
4.2 Trust Indenture dated May 1, 1986 between the Registrant and
J. Henry Schroder Bank & Trust Company, as Trustee for the
holders of the 7% Convertible Subordinated Debentures, filed
as Exhibit 4(b) to Registration No. 33-4714.
4.3 Specimen Copy of Certificate representing 7% Convertible
Subordinated Debenture, 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.
(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, 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
(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.
IV-2
(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.
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 of
the Senior Executives' Long-Term Incentive Bonus Plan 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.
IV-3
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.
10.10 Lease Agreement dated June 30, 1994 between
Donald C. Martin and Electrical Distributors, Inc.
(11) Statement re computation of per share earnings.
11.1 Summary schedule of earnings per share calculations.
(12) Statement 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 27, 1995.
(16) Letter re change in certifying accountant.
16.1 Letter from Coopers & Lybrand, filed as Exhibit 16.1 to Form
8-K dated May 24, 1994.
(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 Price Waterhouse LLP.
23.2 Consent of Coopers & Lybrand L.L.P.
(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.
IV-4
(d) Financial Statement Schedules
Financial statements and financial statement schedules required by
Regulation S-X which are excluded from the annual report to shareholders by
Rule 14a-3(b). Not applicable.
IV-5
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,
Chief Accounting Officer
Date: April 21, 1995
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/ Clifford M. Hames
David H. Hughes Clifford M. Hames
April 21, 1995 April 21, 1995
(Director) (Director)
/s/ John D. Baker, II /s/ Russell V. Hughes
John D. Baker, II Russell V. Hughes
April 21, 1995 April 21, 1995
(Director) (Director)
/s/ Robert N. Blackford /s/ Vincent S. Hughes
Robert N. Blackford Vincent S. Hughes
April 21, 1995 April 21, 1995
(Director) (Director)
/s/ John B. Ellis /s/ Herman B. McManaway
John B. Ellis Herman B. McManaway
April 21, 1995 April 21, 1995
(Director) (Director)
/s/ A. Stewart Hall, Jr. /s/ Donald C. Martin
A. Stewart Hall, Jr. Donald C. Martin
April 21, 1995 April 21, 1995
(Director) (Director)
IV-6
REPORT OF INDEPENDENT ACCOUNTANTS
Shareholders and Board of Directors
Hughes Supply, Inc.
We have audited the accompanying consolidated balance sheet of Hughes
Supply, Inc. and subsidiaries as of January 28, 1994, and the related
consolidated statements of income, shareholders' equity, and cash flows for
the fiscal years ended January 28, 1994 and January 29, 1993. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Hughes
Supply, Inc. and subsidiaries as of January 28, 1994, and the consolidated
results of their operations and their cash flows for the fiscal years ended
January 28, 1994 and January 29, 1993, in conformity with generally
accepted accounting principles.
/s/ Coopers & Lybrand
Orlando, Florida
March 17, 1994
HUGHES SUPPLY, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
The following consolidated financial statements of the Registrant and its
subsidiaries included in the Annual Report of the Registrant to its
shareholders for the year ended January 27, 1995, are incorporated by
reference:
Annual
Report
Page
Report of Independent Certified
Public Accountants 12
Consolidated Statements of Income
for the years ended January 27, 1995,
January 28, 1994 and January 29, 1993 13
Consolidated Balance Sheets as of
January 27, 1995 and January 28, 1994 14
Consolidated Statements of Shareholders'
Equity for the years ended January 27,
1995, January 28, 1994 and January 29, 1993 16
Consolidated Statements of Cash Flows for
the years ended January 27, 1995,
January 28, 1994 and January 29, 1993 17
Notes to Consolidated Financial Statements 18
Except for the report of predecessor independent accountants which is
included in Part IV above, all other financial statements and schedules
have been omitted as they are either not applicable, not required or the
information is given in the financial statements or related notes.
INDEX OF EXHIBITS FILED WITH THIS REPORT
10.9 Senior Executives' Long-Term Incentive Bonus Plan.
10.10 Lease Agreement dated June 30, 1994 between Donald C. Martin and
Electrical Distributors, Inc.
11.1 Summary schedule of earnings per share calculations.
13.1 Information incorporated by reference into Form 10-K from the
Annual Report to shareholders for fiscal year ended January 27,
1995.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Coopers & Lybrand L.L.P.
27.1 Financial data schedule (filed electronically only).
99.1 Location of facilities.
HUGHES SUPPLY, INC.
SENIOR EXECUTIVES' LONG-TERM INCENTIVE BONUS PLAN
Adopted by the Board of Directors
March 15, 1995
Purpose. The Hughes Supply, Inc. Senior Executives' Long-Term Incentive
Bonus Plan (the "Long-Term Plan") was adopted by the Board of Directors on
March 15, 1995 as an on-going performance based incentive bonus plan to
permit the Board to provide for incentive compensation to reward key senior
executives for achieving specified Company performance goals adopted by the
Board.
Operation of the Plan. Under the Long-Term Plan the Board, in its sole
discretion, may establish separate performance plans for separate
performance periods, establish performance goals for such performance
periods, designate the participants to participate in such performance
plans, and establish the performance plan bonus payments to be made to such
participants if the required performance goals are achieved.
Performance Periods. The Board may establish a performance plan under
the Long-Term Plan for any performance period consisting of one or more
fiscal years of the Company. Any such performance plan shall be designated
by reference to the final Company fiscal year included in the applicable
performance period so that, for example, the performance plan for the
performance period including the Company's three fiscal years up to and
including the 1997 fiscal year is designated under the Long-Term Plan as
the "1997 Performance Plan."
Performance Goals. With respect to any performance plan adopted under the
Long-Term Plan, the Board shall determine Company performance goals which
must be met during the performance period of that performance plan to
entitle a participant in that performance plan to the payment of a
performance plan bonus payment. Such performance goals may be defined with
respect to earnings criteria, return on investment, or any other measure of
Company performance deemed by the Board to be relevant to the Board's long-
term goals for the overall operation of the Company.
Plan Participants. The Board shall designate the participants under each
performance plan from among the Company's senior executive management
employees which the it considers most instrumental in achieving the
required performance goals.
Bonus Payments. In establishing a performance plan the Board shall also
establish the amount of, or method for determining the amount of, and form
of payment of, any performance plan bonus payment which would become
payable to each participant under that performance plan if the required
performance goals are met.
Form of Bonus Payments. Under the Long-Term Plan, as approved by the
Board, the Board may specify that all or any portion of a performance plan
bonus payment may be in shares of common stock of the Company. The
provision of the Long-Term Plan that permits such payment in shares of
common stock (the "Stock Award Provision") is subject to the approval of
the shareholders at the 1995 Annual Meeting. In the event that the
shareholders do not approve the Stock Award Provision, the Long-Term Plan
will be deemed to be amended to permit the payment of a performance plan
bonus payment only in cash.
Bonus Payment Shares; Value. Subject to the requirement of shareholder
approval of the Stock Award Provision, the maximum aggregate number of
shares of common stock which may be paid to participants as performance
plan bonus payments under performance plans adopted under the Long-Term
Plan shall be 100,000 shares. For any payment of a performance plan bonus
payment in shares of common stock, such common stock shall be valued at
fair market value determined as the closing price of the common stock on
the New York Stock Exchange on the last trading day of the performance
period for the subject performance plan.
Anticipated Tax Treatment. Under federal income tax laws the payment of
any amount as a performance plan bonus payment will result in ordinary
employment earned income taxable to the recipient and deductible by the
Company. Prior to any such payment, the designation of a participant under
a performance plan will not be taxable to the recipient nor deductible to
the Company. During the performance period of any performance plan the
then contingent cost, if any, to the Company, determined from the
application of the performance criteria of the performance plan to the
Company's performance to date, is accrued as a liability of the Company.
Term of Plan. The term of the Long-Term Plan shall be deemed to have
commenced with its adoption by the Board on March 15, 1995 and shall end on
the final day of the Company's 2003 fiscal year unless terminated earlier
by action of the Board. No performance plan may be adopted under the Long-
Term Plan which shall extend beyond the stated term of the Long-Term Plan.
The Board may terminate the Long-Term Plan at any time provided that any
performance plan adopted prior to such termination shall continue in effect
until the end of the applicable performance period and the payment of any
performance plan bonus payment required thereunder.
Comparable Prior Plans; Incorporation. The Long-Term has been adopted by
the Board based, in large measure, upon its favorable experience with
similar ad hoc plans adopted in prior years. Because it is anticipated by
the Board, although not required, that additional performance plans adopted
under the Long-Term Plan will be comparable to these prior plans, the Board
hereby expressly incorporates herein the existing 1997 and 1998 Performance
Plans referred to below. By incorporating these existing plans into the
Long-Term Plan the Board it is the intention of the Board that approval by
the shareholders of the Stock Award Provision of the Long-Term Plan will
also constitute shareholders' approval of the stock award provisions of
these existing plans and that the aggregate limitation of 100,000 shares of
common stock for bonus payments under the Long-Term Plan shall include
bonus payments of shares under these existing plans.
1997 and 1998 Performance Plans On May 24, 1994 and March 15, 1995,
respectively, the Board established senior executives' long-term incentive
bonus plans for the three fiscal year performance period ending on the last
day of the fiscal year to be ended January 24, 1997 (the "1997 Performance
Plan") and for the three fiscal year performance period ending on the last
day of the fiscal year to be ended January 30, 1998 (the "1998 Performance
Plan") (collectively, the "existing plans"). Each of these existing plans
is incorporated into the Long-Term Plan.
Each of the existing plans has been established with performance goals
which require continuing growth in the Company's earnings per share during
the applicable performance period. The Board has designated the Chief
Executive Officer, the President, and the Chief Financial Officer as
participants under each of the existing plans.
Under each of the existing plans the plan participants would receive a
performance plan bonus payment, depending upon the Company's earnings for
the applicable performance period, of from 25% to 100% of base salary for
the final year of such performance period. Such performance plan bonus
payment, if any, would be paid 50% in cash and 50% in common stock
following the end of the final year of the performance period. The number
of shares of common stock applicable to such possible aggregate performance
plan bonus payments would be the number of shares, at the then current fair
market value, represented by 50% of the maximum estimated aggregate amount
of such performance plan bonus payments.
Registration of Plan Bonus Shares. Subject to approval by the shareholders
of the Stock Award Provisions of the Long-Term Plan, the shares for
issuance as bonus shares under the Long-Term Plan will be registered under
the Securities Act of 1933 if such registration is determined, in the
opinion of management of the Company and its legal counsel, to be required
or advisable. It is also the intention of the Company to register the
shares on the New York Stock Exchange.
Cash Plan in the Absence of Shareholder Approval. In the event the
shareholders do not approve the Stock Award Provision of the Long-Term
Plan, the Plan will be deemed to be amended to require that any bonus
payment under the existing performance plans or any future performance
plans adopted under the Long-Term Plan will be paid entirely in cash.
Exhibit 10.10
LEASE AGREEMENT
THIS LEASE AGREEMENT made and entered into as of the 30 day of
June, 1994, by and between DONALD C. MARTIN (hereinafter referred to as the
"Lessor"), and ELECTRICAL DISTRIBUTORS, INC. (hereinafter referred to as
the "Lessee").
W I T N E S S E T H :
WHEREAS, Lessor desires to lease certain property to Lessee;
and
WHEREAS, Lessee desires to lease such property;
NOW, THEREFORE, in consideration of the premises and the mutual
promises and agreements hereinafter contained, the parties do hereby agree
as follows:
ARTICLE I
PROPERTY. Lessor agrees to lease and demise unto Lessee certain
property, known as 5200 Peachtree Road, Atlanta, Georgia 30341, as
described on Exhibit "A" hereto (hereinafter referred to as the
"Property").
ARTICLE II
LEASE TERM. The term of this Lease Agreement shall be for a period of
two (2) years commencing on July 1, 1994, and ending on June 30, 1996, both
dates inclusive, unless sooner terminated as herein provided. In no event
shall there be any renewal of this Lease by operation of law, and if Lessee
remains in possession of the Property after the termination of this Lease
and without a new lease executed by Lessor and Lessee, but with the
acquiescence of Lessor, Lessee shall be deemed to be occupying the Property
under a month-to-month periodic tenancy at an amount to be agreed upon by
the parties hereto, and in no event less than the then-current Rent as
hereinafter provided, and otherwise subject to all the covenants and
provisions of this Lease insofar as the same are applicable to a month-to-
month periodic tenancy. Lessor and Lessee agree that any such periodic
tenancy may be terminated by thirty (30) days prior written notice by
either party to this Lease to the other party. If Lessee remains in
possession after termination of this Lease without Lessor's acquiescence or
consent, Lessee thereupon shall be deemed a tenant-at-sufferance and may be
evicted at once without notice.
ARTICLE III
3.1 RENT. From July 1, 1994 through and including June 30, 1996,
Lessee agrees to pay Lessor without demand, deduction or setoff as rental
SIX THOUSAND FIVE HUNDRED ($6,500.00) DOLLARS per month in advance, on the
first (1st) day of each calendar month during the Lease Term. Lessee shall
pay to Lessor all rent and all other charges due and owing by Lessee under
this Lease without deduction or set-off, in legal tender, and at Lessor's
address specified in Section 14.7 or as otherwise directed from time to
time by Lessor's notice.
3.2 ADDITIONAL RENT. Lessee shall pay to Lessor in addition to all
rent as herein provided, on or before the dates the same shall become due
and payable, and as additional rent, all taxes, insurance and general
maintenance of the Property, which Lessee assumes or agrees to pay
hereunder, together with all interest and penalties that may accrue
thereon. In the event of non-payment, Lessor shall have the rights and
remedies herein provided for in the case of non-payment of rent or a breach
of condition.
3.3 TAXES AND OTHER CHARGES. Lessee shall, without notice or demand,
as additional rent, pay and discharge, on or before the last day on which
the same may be paid without penalty, all taxes, rates and charges,
sanitary assessments, and other governmental impositions and charges of
every kind and nature whatsoever, and each and every installment thereof
together with all interest and penalties thereon, which shall or may during
the Lease Term be levied, assessed or imposed on or become a lien upon or
become due or payable out of or for or by reason of the Property or any
part thereof, the Lessee's or the Lessor's interest in the Property and the
improvements located thereon, or any buildings, appurtenances, or equipment
now or hereafter erected or placed thereon or therein or any part thereof,
or the sidewalks or streets in front of or adjoining the Property including
further any rent tax which may now or hereafter be imposed in addition to
or in lieu of real property ad valorem taxes. All taxes levied, assessed
or imposed in addition to the foregoing shall be paid by Lessee together
with all interest and penalties thereon, under or by virtue of all present
or future laws, ordinances, requirements, orders, directives, rules or
regulations of the federal, state, county and city or local governments and
of all other governmental authorities whatsoever, Lessee shall pay all
taxes and assessments which shall prior to or during the Lease Term be
levied, assessed or imposed on or become a lien upon the personal property
of Lessee located upon the Property. Lessee shall be deemed to have
complied with the covenants of this Lease if payment of such rents, taxes,
sanitary assessments, and other governmental impositions and charges, shall
have been made within any grace period allowed by law or by the
governmental authority imposing the same during which payment is permitted
without penalty or interest, and either before the same shall become a lien
upon the Property or shall become delinquent. Lessee shall within ten (10)
days after receipt of written request therefor by Lessor produce and
deliver to Lessor reasonably satisfactory evidence of such payment.
Lessor shall be responsible for the payment of all special
assessments imposed upon the Property.
All such rents, taxes, rates and charges, sanitary assessments, and
other governmental impositions and charges which become due and are payable
in the calendar year in which the Lease Term expires, shall be apportioned
pro rata between Lessor and Lessee in accordance with the respective
portions of such period during which the Lease Term shall be in effect.
Lessee shall have the right to contest or review by legal proceedings,
or in such other manner as it may deem suitable (which, if instituted,
Lessee shall conduct promptly at its own expense, and free of any expense
to Lessor, and, if necessary, in the name of Lessor), any tax, assessment,
rate or charge, sanitary assessment, or other governmental imposition or
charge aforementioned.
Nothing herein contained shall be construed to require Lessee to pay
any inheritance estate, succession, transfer, gift, franchise, income,
income profit or excess profit, capital stock, capital levy, corporate or
unincorporated business tax or other similar tax, that is or may be imposed
upon Lessor, its successors or assigns, or upon the rent payable by Lessee.
In the event any sales tax shall be due on rent for the Property, then
Lessee shall be responsible for paying and shall pay, when due, any such
sales tax.
ARTICLE IV
COSTS AND EXPENSES OF LESSEE. All costs, expenses and obligations of
every kind, including but not limited to utilities, repairs and maintenance
relating to the Property which may arise or become due during the term of
this Lease, shall be paid by Lessee,
except as designated herein. Lessor shall be responsible for the payment
of major repairs to the roof, the foundation and the structural walls.
ARTICLE V
COVENANTS OF LESSOR. Lessor covenants and agrees as follows:
A. The Lessor owns the Property in fee simple and has full right,
power and authority to enter into this Lease for the terms herein granted
and that the Property may be used by Lessee during the entire term of this
Lease for the purposes for which it is currently being used by Lessee.
B. That Lessee, upon the payment of the Rent herein provided and
upon the performance of all the terms of this Lease, shall at all times
during the Lease Term and during any extension or renewal term, peaceably
and quietly enjoy the property without any disturbance from Lessor or from
any other person claiming through Lessor.
C. That the Property currently conforms and complies with any and
all applicable laws or private restrictions.
D. That Lessor has no knowledge or notice of any pending or
threatened law suits or insolvencies with respect to either Lessor or the
Property.
ARTICLE VI
COVENANTS OF LESSEE. Lessee covenants and agrees as follows:
A. To pay Lessor the Rent herein stipulated at the time and in the
manner herein provided.
B. To take good care of the Property and suffer no waste or damage
and at the end or other expiration of the term of this Lease, to return the
Property in its current condition, normal wear and tear excepted.
C. To observe and comply with all presently existing State, City and
County ordinances and regulations applicable to the Property, and all
orders and requirements presently imposed by any other duly constituted
governmental authority having jurisdiction over the Property.
ARTICLE VII
USE.
7.1 LAWFUL PURPOSE. Lessee may use the Property for any lawful
purpose, Lessee shall not use or permit any of the Property to be used for
any unlawful purpose, Lessee shall comply, at its own expense, with all
statutes, regulations, rules, ordinances, and orders of any governmental
body, department, or agency thereof which apply to or result from Lessee's
use or occupancy of the Property.
7.2 LESSOR'S RIGHT TO PROPERTY. Lessor and its agents, employees,
and contractors shall have the right to enter the Property during normal
business hours, without undue interference with the conduct of Lessee's
business therein, to inspect and examine the Property and to exhibit the
Property to prospective purchasers, tenants and lenders. In the event of
emergency, or if otherwise necessary to prevent injury to persons or damage
to property, such entry to the Property may be made by force without any
liability whatsoever on the part of Lessor for damage resulting from such
forcible entry.
ARTICLE VIII
ASSIGNMENT AND SUBLETTING.
8.1 Lessee shall not, without Lessor's prior written consent, which
shall not be unreasonably withheld or delayed: (i) assign, convey,
mortgage, pledge, encumber, or otherwise transfer (whether voluntarily, by
operation of law, or otherwise) this Lease or any interest under it; (ii)
allow any transfer thereof or any lien upon Lessee's interest by operation
of law; (iii) sublet the Property or any part thereof; or (iv) permit the
use or occupancy of the Property or any part thereof by any one other than
Lessee; and any attempt to consummate any of the foregoing without Lessor's
consent shall be void.
8.2 Notwithstanding anything herein to the contrary, if at any time
or from time to time during the Lease Term, Lessee desires to sublet all or
a part of the Property or assign, convey, mortgage, pledge, encumber, or
otherwise transfer the Lease or any interest under it, Lessee shall notify
Lessor in writing (hereinafter referred to in this Article VIII as the
"Notice") of the terms of the proposed subletting or assignment, the
identity of the proposed assignee or sublessee, the area proposed to be
sublet (if a sublease is proposed), and such other information as Lessor
may request to evaluate Lessee's request to assign or sublet.
Notwithstanding the provisions of this Article VIII, Lessee may sublet or
assign, convey, mortgage, pledge, encumber, or otherwise transfer the Lease
or any interest under it, to its parent corporation or to an affiliate or
subsidiary corporation of which such parent corporation owns the majority
of the shares of common and preferred stock without Lessor's prior written
consent or approval. In such event, Lessee shall notify Lessor, in
writing, of such an assignment or sublease, conveyance, mortgage, pledge,
encumbrance, or other transfer prior to the commencement of the term of
such assignment or sublease.
8.3 Within twenty (20) days of Lessor's receipt of the proposed
assignment or sublease, conveyance, mortgage, pledge, encumbrance, or other
transfer, and such requested additional information, Lessor shall approve
or disapprove in writing the terms of the proposed assignment or sublease,
conveyance, mortgage, pledge, encumbrance, or other transfer, and the
proposed assignee or sublessee or other party thereto. Failure to so
approve or disapprove shall be deemed approval by Lessor. If a fully
executed counterpart of such assignment or sublease, conveyance, mortgage,
pledge, encumbrance, or other transfer is not delivered to Lessor within
forty-five (45) days after the date of Lessor's written approval, then
Lessor's approval of same shall be deemed null and void and Lessee shall
again comply with all the conditions of this Section 8.3 as if the Notice
and options hereinabove referred to had not been given and received.
8.4 Lessee agrees to pay, as additional rental, to Lessor, on demand,
reasonable costs incurred by Lessor in connection with any request by
Lessee for Lessor to consent to any of the transactions contemplated by
this Article VIII by Lessee.
8.5 If, with the consent of Lessor, this Lease is assigned or the
Property or any part thereof is sublet or occupied by anybody other than
Lessee, Lessor may, after default by Lessee, collect rent from the
assignee, subtenant or occupant, and apply the net amount collected to the
Rent, but no such assignment, subletting, occupancy, or collection shall be
deemed (i) a waiver of any of Lessee's covenants contained in this Lease,
(ii) the acceptance by Lessor of the assignee, subtenant, or occupant as
Lessee, or (iii) the release of Lessee from further performance by Lessee
of its covenants under this Lease.
ARTICLE IX
EMINENT DOMAIN.
9.1 If all or any substantial part of the Property, including but not
limited to ten (10) percent of the parking, access, building or signage,
should be taken for any public or quasi-public use under governmental law,
ordinance, or regulation, or by right of eminent domain, or by private
purchase in lieu thereof, and the taking would prevent or materially
interfere with the use of the Property for the purpose for which it is then
being used, this Lease shall terminate effective when the physical taking
shall occur in the same manner as if the date of such taking were the date
originally fixed in this Lease for the expiration of the Lease Term.
9.2 If part of the Property is taken for any public or quasipublic
use under any governmental law, ordinance, or regulation, or by right of
eminent domain, or by Private Purchase in lieu thereof, and this Lease is
not terminated as provided in subsection (a) above, this Lease shall not
terminate but the Rent payable hereunder during the unexpired portion of
this Lease shall be reduced to such extent, if any, as may be fair and
reasonable under all of the circumstances and Lessor shall undertake to
restore the Property to a condition suitable for Lessee's use, as near to
the condition thereof immediately prior to such taking as is reasonably
feasible under all circumstances.
9.3 Lessee shall not share in any condemnation award or payment in
lieu thereof or in any award for damages resulting from any grade change of
adjacent streets, the same being hereby assigned to Lessor by Lessee;
provided, however, that Lessee may separately claim and receive from the
condemning authority, if legally payable, compensation for Lessee's removal
and relocation costs and for Lessee's loss of business and/or business
interruption.
9.4 Notwithstanding anything to the contrary contained in this
Article 9, if during the Lease Term the use or occupancy of any part of the
Property shall be taken or appropriated temporarily for any public or
quasi-public use under any governmental law, ordinance, or regulation, or
by right of eminent domain, this Lease shall be and remain unaffected by
such taking or appropriation and Lessee shall continue to pay in full all
rental payable hereunder by Lessee during the Lease Term. In the event of
any such temporary appropriation or taking, Lessee shall be entitled to
receive that portion of any award which represents compensation for the
loss of use or occupancy of the Property during the Lease Term, and Lessor
shall be entitled to receive that portion of any award which represents the
cost of restoration and compensation for the loss of use or occupancy of
the Property after the end of the term of this Term Lease.
ARTICLE X
INSURANCE.
10.1 Lessee shall carry fire and extended coverage insurance insuring
Lessee's interest in its improvements and betterments to the Property, and
any and all furniture, equipment, supplies, and other property owned,
leased, held, or possessed by it and contained therein, such insurance
coverage to be in an amount equal to the full insurable value of such
improvements and property. Lessee may, in the alternative, elect to self-
insure the Property in whole or in part, provided such self-insurance,
along with any and all additional third-party insurance shall equal the
full insurable value of the Property.
10.2 Lessee also agrees to carry a policy or policies of comprehensive
general liability insurance, including personal injury and property
damage, with contractual liability endorsement, in the amount of One
Million Dollars ($1,000,000.00) for property damage and one Million Dollars
($1,000,000.00) per occurrence for personal injuries or deaths of persons
occurring in or about the Property. Said policies shall: (i) name Lessor
as an additional insured and insure Lessor's contingent liability under
this Lease, (ii) be issued by an insurance company which is acceptable to
Lessor and licensed to do business in the State of Georgia, and (iii)
provide that said insurance shall not be canceled unless thirty (30) days
prior written notice shall have been given to Lessor, Certificates of
insurance shall be delivered to Lessor by Lessee upon commencement of the
term of the Lease and upon each renewal of said insurance. Lessee may, in
the alternative, elect to self-insure the Property, in whole or in part,
provided such self-insurance, along with any and all additional third-party
insurance shall equal One Million Dollars ($1,000,000,00).
10.3 Lessee shall obtain from its insurers under all policies of fire,
theft, public liability, worker's compensation, and other insurance
maintained by it at any time during the Lease Term insuring or covering the
Property or any portion thereof or operations therein, and shall in good
faith endeavor to obtain a waiver of all rights of subrogation which the
insurer might have against Lessor, if obtainable.
ARTICLE XI
INDEMNITY. Lessee agrees to indemnify and hold Lessor harmless from
and defend Lessor against any and all claims or liability for any injury or
death to any person or damage to any property whatsoever:
A. occurring in, on or about the Property, to the extent such
injury, death or damage shall be caused in part or in whole by the act,
neglect or fault of, or omission of any duty with respect to the same, by
Lessee, its agents, employees, contractors, invitees, licensees or tenants;
B. arising from any work or thing whatsoever done by or benefiting
the Lessee in or about the Property or from transactions
of the Lessee concerning the Property;
C. arising from any breach or event of default on the part of the
Lessee in the performance of any covenant or agreement on the part of the
Lessee to be performed pursuant to the terms of this Lease; or
D. otherwise arising from any act or neglect of the Lessee, or any
of its agents, employees, contractors, invitees, licensees or tenants.
ARTICLE XII
12.1 LIABILITY OF LESSOR. Lessor shall not be liable to Lessee or to
any person, firm, corporation, or other business association claiming by,
through or under Lessee, for any defects known to Lessee in the Property;
nor for the theft, mysterious disappearance, or loss of any property of
Lessee from the Property. Lessor shall not be liable for any interference,
disturbance, or act caused by any person other than Lessor, nor shall
Lessee be relieved from any obligation herein because of such interference,
disturbance, or act of any person other than Lessor.
12.2 LIMITATION OF LIABILITY. Lessor's obligations and liability with
respect to this Lease shall be limited solely to Lessor's interest in the
Property, as such interest is constituted from time to time, and Lessor
shall not have any personal liability whatsoever with respect to this
Lease. In any action or proceeding brought to enforce the obligation of
Lessor to Lessee under this Lease, Lessor and Lessee agree that any final
judgment or decree shall be enforceable against Lessor only to the extent
of Lessor's interest in the Property, as aforesaid, and any such judgment
or decree shall not be capable of execution against, nor be a lien on, any
assets of Lessor other than its interest in the Property, as aforesaid.
Lessor shall maintain a minimum of one million dollars ($1,000,000.00)
equity in the Property.
ARTICLE XIII
EVENTS OF DEFAULT AND REMEDIES.
13.1 The occurrence of any of the following shall constitute an event
of default:
(a) The Rent or any other sum of money payable under this Lease
is not paid when due;
(b) Lessee's interest in the Lease or the Property shall be
subjected to any attachment, levy, or sale pursuant to any order
or decree entered against Lessee in any legal proceeding and such
order or decree shall not be vacated within ninety (90) days of
entry thereof; or
(c) Lessee breaches or fails to comply with any term, provision,
condition, or covenant of this Lease, other than the payment of
Rent and any other sum due and payable hereunder.
13.2 Upon the occurrence of an event of default and, in the case of an
event of default under subsection (a) above, if such event of default is
not cured within five (5) days of receipt of written demand, and, in the
case of an event of default under subsections (b) or (c) above, if such
event of default is not cured within thirty (30) days after written notice
of such event of default is given by Lessor to Lessee, or such longer
period of time as is reasonably necessary under the circumstances. Lessor
shall have the option to do and perform any one or more of the following in
addition to, and not in limitation of, any other remedy or right permitted
it by law or in equity or by this Lease:
(a) Lessor, with or without terminating this Lease, may reenter
the Property and perform, correct or repair any condition which
shall constitute a failure on Lessee's part to keep, observe,
perform, satisfy, or abide by any term, condition, covenant,
agreement, or obligation of this Lease, and Lessee shall fully
reimburse and compensate Lessor on demand for all costs and
expenses reasonably incurred by Lessor in such performance,
correction or repairing, including accrued interest as provided
in the next sentence. All sums so expended to cure Lessee's
default shall accrue interest from the date of demand until date
of payment at a rate of interest per annum equal to the lesser of
(i) sixteen percent (16%) per annum; or (ii) the highest rate
permitted by law.
(b) Lessor, with or without terminating this Lease, may
immediately, or at any time thereafter, demand in writing that
Lessee vacate the Property and thereupon Lessee shall vacate the
Property and remove therefrom all property thereon belonging to
or placed on the Property by, the direction of, or with consent
of Lessor within ten (10) days of receipt by Lessee of such
notice from Lessor, whereupon Lessor shall have the right to
reenter and take possession of the Property. Any such demand,
reentry and taking possession of the Property by Lessor shall not
of itself constitute an acceptance by Lessor of a surrender of
this Lease or of the Property by Lessee and shall not of itself
constitute a termination of this Lease by Lessor.
(c) Lessor, with or without terminating this Lease, may
immediately or at any time thereafter relet the Property or any
part thereof for such time or times, at such rental or rentals
and upon such other terms and conditions as Lessor in its
commercially reasonable discretion may deem advisable, and Lessor
may make any alterations or repairs to the Property which it may
deem necessary or proper to facilitate such reletting; and Lessee
shall pay all costs of such reletting including but not limited
to the cost of any such alterations and repairs to the Property,
attorneys' fees, and brokerage commissions; and if this Lease
shall not have been terminated, Lessee shall continue to pay all
rent and all other charges due under this Lease up to and
including the date of beginning of payment of rent by any
subsequent tenant of part or all of the Property, and thereafter
Lessee shall pay monthly during the remainder of the term of this
Lease the difference, if any, between the rent and other charges
collected from any such subsequent tenant or tenants and the rent
and other charges reserved in this Lease, but Lessee shall not be
entitled to receive any excess of any such rents collected over
the rents reserved herein.
(d) Lessor may immediately or at any time thereafter terminate
this Lease, and this Lease shall be deemed to have been
terminated upon receipt by Lessee of written notice of such
termination; upon such termination Lessor shall recover from
Lessee all damages Lessor may suffer by reason of such
termination including, without limitation, all arrearages in
rentals, costs, charges, additional rentals, and reimbursements,
the cost (including court costs and attorneys' fees) of
recovering possession of the Property, the cost of any alteration
of or repair to the Property which is necessary or proper to
prepare the same for re-letting and, in addition thereto, Lessor
shall have and recover from Lessee an amount equal to the excess
if any, of the total amount of all rents and other charges to be
paid by Lessee for the remainder of the term of this Lease over
the then reasonable rental value of the Property for the
remainder of the term of this Lease, such excess discounted to
present value using a discount rate equal to six percent (6%).
(e) Lessor shall have a good faith duty to mitigate his losses
hereunder.
13.3 If Lessor re-enters the Property or terminates this Lease
pursuant to any of the provisions of this Lease, Lessee hereby waives all
claims for damages which may be caused by such re-entry or termination by
Lessor, Lessee shall and does hereby agree to indemnify and hold Lessor
harmless from any loss, cost including court costs and attorneys' fees), or
damages suffered by Lessor by reason of such re-entry or termination. No
such re-entry or termination shall be considered or construed to be a
forcible entry.
13.4 No course of dealing between Lessor and Lessee or any failure or
delay on the part of Lessor in exercising any rights of Lessor under this
Section 13 or under any other provisions of this Lease shall operate as a
waiver of any rights of Lessor hereunder or under any other provisions of
this Lease, nor shall any waiver of any event of default on one occasion
operate as a waiver of any subsequent event of default or of any other
event of default. No express waiver shall affect any condition, covenant,
rule, or regulation other than the one specified in such waiver and that
one only for the time and in the manner specifically stated.
13.5 The exercise by Lessor of any one or more of the rights and
remedies provided in this Lease shall not prevent the subsequent exercise
by Lessor of any one or more of the other rights and remedies herein
provided. All remedies provided for in this Lease are cumulative and may,
at the election of Lessor, be exercised alternatively, successively, or in
any other manner and are in addition to any other rights provided for or
allowed by law or in equity.
ARTICLE XIV
MISCELLANEOUS.
14.1 PRONOUNS. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine or neuter, singular or plural,
as the identity of the entity, person or persons may require.
14.2 INSOLVENCY OR BANKRUPTCY. The appointment of a receiver to take
possession of all or substantially all of the assets of Lessee, or an
assignment of Lessee for the benefit of creditors, or any action taken or
suffered by Lessee under any insolvency, bankruptcy, or reorganization act,
unless terminated or dismissed within eighty-five (85) days, shall at
Lessor's sole option constitute a breach of this Lease by Lessee. Upon the
happening of any such event or at any time thereafter, this Lease shall
terminate. in no event shall this Lease be assigned or assignable by
operation of law or by voluntary or involuntary bankruptcy proceedings or
otherwise and in no event shall this Lease or any rights or privileges
hereunder be an asset of Lessee under any bankruptcy, insolvency, or
reorganization proceedings.
14.3 LATE PAYMENTS. Lessee shall pay, in the event Rent or other
charge to be paid by Lessee hereunder is not paid when due, (A) a late fee
of five percent (5.0%) of the amount past due, which late fee Lessee
acknowledges is an agreed upon reimbursement to Lessor for the
administrative expense incurred by Lessor as a result of Lessee's late
payment and not a penalty and is reasonable in light of the difficulty to
estimate costs; and (B) interest on the amount past due (excluding late
fees) at a rate per annum equal to the lesser of (ii) twelve percent (12%)
per annum; or (iii) the highest rate permitted by law, from due date until
paid. Should Lessee make a martial payment of past due amounts, the amount
of such partial percent shall be applied first, to late fees, second, to
accrued but unpaid interest, and third, to past due amounts, in inverse
order of their due date.
14.4 ATTORNEYS' FEES. In the event of any litigation arising out of
this Lease or the relationships evidenced hereby, the prevailing party
shall be entitled to receive from the other party, an amount equal to the
prevailing party's actual attorneys fees, reasonably incurred.
14.5 INTENTIONALLY LEFT BLANK
14.6 NO WAIVER OF RIGHTS. No failure or delay of Lessor to exercise
any right or power given it herein or to insist upon strict compliance by
Lessee of any obligation imposed on it herein and no custom or practice of
either party hereto at variance with any term hereof shall constitute a
waiver or a modification of the terms hereof by Lessor or any right it has
herein to demand strict compliance with the terms hereof by Lessee. No
person has or shall have any authority to waive any provision of this Lease
unless such waiver is expressly made in writing and signed by Lessor.
14.7 ADDRESSES AND NOTICES.
(a) Except for legal process which may also be served as by law
provided or as provided in subsection (b) below, all notices required or
desired to be given with respect to this Lease in order to be effective
shall be in writing and shall be deemed to be given to and received by the
party intended to receive such notice when hand delivered or three (3) days
after such notice shall have been deposited, postage prepaid, to the United
States mail, certified, return receipt requested, properly addressed to the
addresses specified in item (c) of this Section. In the event of a change
of address by either party, such party shall give written notice thereof in
accordance with the foregoing.
(b) To the extent permitted by law, Lessee hereby: (i) appoints and
designates the Property as a proper place for service of process upon
Lessee (provided, however, Lessor does not hereby waive the right to serve
Lessee with process by any other lawful means); and (ii) expressly waives
the service of any notice under any existing or future law of the state of
Florida applicable to Lessors and tenants.
(c) Lessor: Donald C. Martin
4570 Henderson Mill Road
Mansfield, Georgia 30255
Lessee: Electrical Distributors, Inc.
5180 Peachtree Road
Atlanta, Georgia 30341
14.8 ENTIRE AGREEMENT AND EXHIBITS. This Lease constitutes and
contains the sole and entire agreement of Lessor and Lessee and no prior or
contemporaneous oral or written representation or agreement between the
parties and affecting the Property shall have legal effect. No
modification or amendment of this Lease shall be binding upon the parties
unless such modification or amendment is in writing and signed by Lessor
and Lessee. The content of each and every exhibit which is referenced in
this Lease as being attached hereto is incorporated into this Lease as
fully as if set forth in the body of this Lease.
14.9 SUBORDINATION NON-DISTURBANCE AND ATTORNMENT.
(a) Except as provided in subsections (d) and (e) below, this Lease
and all rights of Lessee hereunder are and shall be subject and subordinate
to the lien of any mortgage, deed to secure debt, deed of trust, or other
instrument in the nature thereof which may now or hereafter affect Lessor's
estate or interest in and to the Property and to any other instrument
encumbering the fee title of the Property and to any modifications,
renewals, consolidations, extensions, or replacements thereof.
(b) Subsection (a) above shall be self-operative, and no further
instrument of subordination shall be required by the holder of any such
instrument affecting or encumbering the Property. In confirmation of such
subordination, Lessee shall, upon demand, at any time or times, execute,
acknowledge, and deliver to Lessor or the holder of any such mortgage, deed
to secure debt, deed of trust, or other instrument, without expense, any
and all instruments that may be requested by Lessor or such holder to
evidence the subordination of this Lease and all rights hereunder to the
lien of any such mortgage, deed to secure debt, deed of trust, or other
instrument, and each such renewal, modification, consolidation,
replacement, and extension thereof, and if Lessee shall fail at any time,
within ten (10) days following the giving of a written request therefor, to
execute, acknowledge, and deliver any such instrument, Lessor or such
holder or such lessor, in addition to any other remedies available to it in
consequence thereof, may execute, acknowledge, and deliver the same as the
attorney-in-fact of Lessee and in Lessee's name, place, and stead, and
Lessee hereby irrevocably makes, constitutes, and appoints Lessor or such
holder or such lessor, in their respective successors and assigns, such
attorney-in-fact for that purpose.
(c) Lessee shall, upon demand, at any time or times, execute,
acknowledge, and deliver to Lessor or to the holder of any mortgage, deed
to secure debt, deed of trust, or other instrument affecting or encumbering
the Property, without expense, any and all instruments that may be
necessary to make this Lease superior to the lien of any such mortgage,
deed to secure debt, deed of trust or other instrument or the grant of any
such ground lease, and each renewal, modification, consolidation,
replacement, and extension thereof'. and, if Lessee shall fail at any time,
within ten (10) days following the giving of a written request therefor, to
execute, acknowledge, and deliver any such instrument, Lessor or such
holder or such lessor, in addition to any other remedies available to it in
consequence thereof, may execute, acknowledge, and deliver the same as the
attorney-in-fact of Lessee and in Lessee's name, place, and stead, and
Lessee hereby irrevocably makes, constitutes, and appoints Lessor or such
holder or such lessor, and their respective successors and assigns, such
attorneyin-fact for that purpose.
(d) If the holder of any mortgage, deed to secure debt, deed of trust
or other instrument affecting or encumbering the Property shall hereafter
succeed to the rights of Lessor under this Lease whether through possession
or foreclosure action or exercise of private power of sale or delivery of a
new lease, Lessee shall, at the option of such holder or lessor, attorn to
and recognize such successor as Lessee's Lessor under this Lease as of the
date of such succession to Lessor's interest and shall promptly execute and
deliver any instrument that may be necessary to evidence such attornment,
and Lessee hereby irrevocably appoints Lessor or such holder or such lessor
the attorney-in-fact of Lessee to execute and deliver such instrument on
behalf of Lessee should Lessee refuse and fail to do so within ten (10)
days after Lessor or such holder or such lessor shall have given notice to
Lessee requesting the execution and delivery of such instrument. Upon such
attornment, this Lease shall continue in full force and effect as a direct
lease between such successor Lessor and Lessee, subject to all of the
terms, covenants, and conditions of this Lease.
(e) Lessor shall obtain from any future holder of any deed to secure
debt encumbering the Property, or from the current holder in the event of
any refinancing or future advance, a non-disturbance agreement which shall
provide that as long as Lessee remains not in default under this Lease,
such holder shall not disturb Lessee's tenancy.
14.10 ESTOPPEL CERTIFICATE. At any time and from time to time,
Lessee, on or before the date specified in a request therefor made by
Lessor, which date shall not be earlier than ten (10) days from the making
of such request, shall execute, acknowledge, and deliver to Lessor a
certificate evidencing whether or not (i) this Lease is in full force and
effect, (ii) this Lease has been amended in any way, (iii) there are any
existing events of default on the part of Lessor hereunder to the knowledge
of Lessee and specifying the nature such events of default, if any, and
(iv) the date to which rent, and other amounts due hereunder, if any have
been paid. Each certificate delivered pursuant to this Section may be
relied on by any prospective purchaser or transferee of Lessor's interest
hereunder or of any part of Lessor's property or by any mortgagee of
Lessor's interest hereunder or of any part of Lessor's property or by an
assignee of any such mortgagee.
14.11 SEVERABILITY. If any clause or provision of this Lease is
or becomes illegal, invalid, or unenforceable because of present or future
laws or any rule or regulation of any governmental body or entity,
effective during its term, the intention of the parties hereto is that the
remaining parts of this Lease shall not be affected thereby, unless such
invalidity is essential to the rights of either party hereto in which event
this Lease shall terminate.
14.12 CAPTIONS. The captions used in this Lease are for
convenience only and do not in any way limit or amplify the terms and
provisions hereof.
14.13 SUCCESSORS AND ASSIGNS. The words "Lessor" and "Lessee" as
used herein shall include the respective contracting party, whether
singular or plural, and whether an individual, masculine or feminine, or a
partnership, joint venture, business trust, or corporation. The provisions
of this Lease shall inure to the benefit of and be binding upon Lessor and
Lessee, and their respective successors, heirs, legal representatives, and
assigns, subject, however, in the case of Lessee, to the provisions of
Article VIII hereof.
14.14 FORCE MAJEURE. A party to this Lease shall be excused from
the performance of its duties and obligations under this Lease except
obligations for the payment of money such as Rent, for the period of delay,
but in no event longer than 90 days caused by labor disputes, governmental
regulations, riots, war, insurrection, acts of God or other causes beyond
the control of the
party whose performance is being excused (but such causes shall not include
insufficiency of funds).
14.15 LESSOR'S REPRESENTATIONS. Lessor hereby represents and
warrants that: Lessor is the owner of the Property; Lessor is in undisputed
and peaceful possession of the Property and has a perfect right to convey
good, fee simple, merchantable title to the Property; there currently
exists adequate access, parking and utility service to the Property for the
purposes anticipated by the parties hereto; there is no outstanding
indebtedness unpaid bill or lien against the Property for equipment,
appliances, other fixtures attached to the Property, sewerage, water main,
sidewalk or other street improvements; there are no retention title
contracts, bills of sale or other encumbrances, of record or otherwise,
affecting the title to any personal property installed on the Property; the
lines and corners of the Property are clearly marked, and that there are no
disputes concerning the location of the lines and corners; there are no
pending suits, proceedings, judgments, bankruptcies, liens or executions
against the Lessor, either in the county where the Property is located or
in any other county in the State of Georgia; no improvements or repairs
have been made on the Property during the ninety-five (95) days immediately
preceding this date; and there are no outstanding bills incurred for labor
or materials used in making improvements or repairs on the Property, for
services of architects, surveyors, engineers, or registered foresters
incurred in connection therewith.
14.16 HAZARDOUS SUBSTANCES.
(a) Lessee hereby covenants that Lessee shall not cause or permit any
"Hazardous Substances" (as hereinafter defined) to be placed, held, located
or disposed of in, on or at the Property or any part thereof except in full
compliance with all applicable laws, rules, ordinances and similar
provisions, and neither the Property nor any part thereof shall ever be
used as a dump site or storage site (whether permanent or temporary) for
any Hazardous Substances during the Lease Term.
(b) Lessee hereby agrees to indemnify Lessor and hold Lessor harmless
from and against any and all losses, liabilities, including strict
liability, damages, injuries, expenses, including reasonable attorneys'
fees, costs of any settlement or judgment and claims of any and every kind
whatsoever paid, incurred or suffered by, or asserted against, Lessor by
any person or entity or governmental agency for, with respect to, or as a
direct or indirect result of, the presence on or under, or the escape,
seepage, leakage, spillage, discharge, emission, discharging or release
from, the Property of any Hazardous Substance (including, without
limitation, any losses, liabilities, including strict liability, damages,
injuries, expenses, including reasonable attorneys' fees, costs of any
settlement or judgment or claims asserted or arising under the
Comprehensive Environmental Response, Compensation and Liability Act, any
so-called federal, state or local "Superfund" or "Superlien" laws, statute,
law, ordinance, code, rule, regulation, order or decree regulating,
relating to or imposing liability, including strict liability, substances
or standards of conduct concerning any Hazardous Substance), provided,
however, that the foregoing indemnity is limited to matters arising solely
from Lessee's violation of the covenant contained in subsection (a) above.
(c) For purposes of this Lease, "Hazardous Substances" shall mean and
include those elements or compounds which are contained in the list of
hazardous substances adopted by the United States Environmental Protection
Agency (the "EPA") or the list of toxic pollutants designated by Congress
or the EPA or which are defined as hazardous, toxic, pollutant, infectious
or radioactive by any other Federal, state or local statute, law,
ordinance, code, rule, regulation, order or decree regulating, relating to,
or imposing liability or standards of conduct concerning, any hazardous,
toxic or dangerous waste, substance or material, as now or at any time
hereafter in effect.
(d) Lessor shall have the right but not the obligation, and without
limitation of Lessor's rights under this Lease, to enter onto the Property
or to take such other actions as it deems necessary or advisable to
cleanup, remove, resolve or minimize the impact of, or otherwise deal with,
any Hazardous Substance following receipt of any notice from any person or
entity (including without limitation the EPA) asserting the existence of
any Hazardous Substance in, on or at the Property or any part thereof
which, if true, could result in an order, suit or other action against
Lessee and/or Lessor. All reasonable costs and expenses incurred by Lessor
in the exercise of any such rights, which costs and expenses result from
Lessee's violation of the covenant contained in subsection (a) above, shall
be deemed additional rental under this Lease and shall be payable by Lessee
upon demand.
(e) Notwithstanding the foregoing, Lessor hereby warrants that there
is no Hazardous Substance affecting the Property and indemnities Lessee and
holds Lessee harmless from and against any and all losses, liabilities,
including strict liability, damages, injuries, expenses, including
reasonable attorneys' fees, costs of any settlement or judgment and claims
of any and every kind whatsoever paid, incurred or suffered by, or asserted
against, Lessee by any person or entity or governmental agency for, with
respect to, or as a direct or indirect result of, the presence on or under,
or the escape, seepage, leakage, spillage, discharge, emission, discharging
or release from, the Property of any Hazardous Substance (including,
without limitation, any losses, liabilities, including strict liability,
damages, injuries, expenses, including reasonable attorneys' fees, costs of
any settlement or judgment or claims asserted or arising under the
Comprehensive Environmental Response, compensation and Liability Act, any
so-called federal, state or local "Superfund" or "Superlien" laws, statute,
law, ordinance, code, rule, regulation, order or decree regulating,
relating to or imposing liability, including strict liability, substances
or standards of conduct concerning any Hazardous Substance) prior to the
date hereof.
(f) This Section 14.16 shall survive cancellation, termination or
expiration of this Lease.
14.17 APPLICABLE LAW. This Lease shall be construed in accordance
with the laws of the State of Georgia.
ARTICLE XV
RIGHT OF FIRST REFUSAL.
(a) If Lessor makes a bona fide written offer to sell or lease the
Property or any part thereof to any prospective purchaser or tenant during
the term of this Lease or for an additional period of ninety (90) days
thereafter, or should Lessor receive an acceptable offer to do so, Lessor
shall notify Lessee in writing (such notice being hereinafter called the
"Offer Notice") of Lessor's intention to sell or lease the Property. The
Offer Notice shall specifically describe the terms and the prospective
purchaser or tenant with whom such purchase and sale or lease would be
entered into (unless confidentiality of such prospective purchaser or
tenant is required by such prospective purchaser or tenant). The Offer
Notice shall also constitute an offer by Lessor to sell or lease the
Property to Lessee in accordance with the terms of this Article XV. Lessee
shall have twenty (20) days after its receipt of such Offer Notice to
accept such offer pursuant to this First Refusal Right and to purchase or
lease the Property from Lessor in accordance with the terms of this Article
XV.
(b) Acceptance by Lessee of the offer set forth in the Offer Notice
shall be deemed effective only if such acceptance is given to Lessor in a
written notice of acceptance (the "Acceptance Notice") specifically
referring to the offer Notice to which it relates, received by Lessor
within the twenty (20) day period prescribed above for such acceptance. If
Lessee duly and timely delivers to Lessor its Acceptance Notice in
accordance with this Article XV, then Lessor and Lessee shall, within
thirty (30) days of Lessor's receipt of such Acceptance Notice, execute a
contract to purchase and sell or an amendment to this Lease which conforms
to the terms set forth in the Offer Notice.
(c) If Lessee elects not to exercise this First Refusal Right, Lessor
shall be entitled to sell or lease the Property to the prospective
purchaser or tenant that prompted the Offer Notice, or an affiliate
thereof.
(d) Notwithstanding anything in this Article XV the contrary, Lessee
shall have no right to exercise any right or option under this Article XV,
nor shall Lessor have any obligation to submit an Offer Notice to Lessee
with respect to the Property before entering into a third party contract or
lease with respect thereto, or to enter into any sale or lease of the
Property with Lessee, at any time during which either (i) Lessee is in
default, or an event of default exists with respect to Lessee, under this
Lease, or (ii) this Lease is not in full force and effect.
(e) Nothing in this Article XV shall be deemed to cause an
early termination of this Lease.
ARTICLE XVI
USUFRUCT. This Lease gives Lessee a usufruct only and does not create
an estate in the Lessee subject to lien or to levy and sale.
IN WITNESS WHEREOF, the undersigned parties have caused this Lease to
be signed and sealed on the day and year first above written.
LESSOR:
/s/ Donald C. Martin
(SEAL)
DONALD C. MARTIN
LESSEE:
ELECTRICAL DISTRIBUTORS, INC.
By: W. Stanley Martin
Title: Executive Vice President
[CORPORATE SEAL]
GUARANTY OF LEASE
For Value received, including One ($1.00) Dollar cash in hand together
with additional consideration, and to induce Donald C. Martin (hereinafter
referred to as "Lessor"), to enter into a Lease Agreement dated the 30th
day of June, 1994 with Electrical Distributors, Inc. (hereinafter referred
to as "Lessee"), the undersigned (hereinafter referred to as "Guarantor"),
does hereby unconditionally guarantee to Lessor the full and prompt payment
when due of all rent under said Lease, and the prompt and full performance
of all the terms, covenants, and conditions of said Lease required to be
performed by Lessee, or Lessee's subleasees or assignees, during the term
of said Lease Agreement, which is attached hereto as Exhibit "A."
This Guaranty shall remain in full force and effect notwithstanding
any assignment or subletting by Lessee or its interest in the demised
premises, and notwithstanding any assignment by Lessor of his interest in
the demised premises, and said Guarantor further waives notice of any such
assignment or subletting and consents to the same and agree to be fully
bound by the terms and conditions of this Guaranty notwithstanding such
assignment or subletting.
This Guaranty shall be deemed to be a continuing Guaranty.
This instrument covers all obligations under said Lease Agreement.
The Guarantor hereby waives notice of acceptance of this instrument
and of the creation, extension or renewal of the Lease Agreement and any
obligation of Lessee under said Lease Agreement.
In the event of any litigation arising out of this Lease or the
relationships evidenced hereby, the prevailing party shall be entitled to
receive from the other party, an amount equal to the prevailing party's
actual attorneys fees, reasonably incurred.
No delay on the part of Lessor in the exercise of any right, power or
privilege under the Lease Agreement or under this Guaranty shall operate as
a waiver of any such privilege, power or right.
This Guaranty shall bind and inure to the benefit of Lessor, and
Lessee's successors and assigns, and likewise shall bind and inure to the
benefit of the undersigned Guarantor, their successors, heirs,
administrators and assigns.
Guarantor agrees that the terms, conditions and stipulations of said
Lease Agreement shall become a part of this Guaranty, and hereby ratify,
adopt, and confirm all such terms, conditions, agreements and stipulations.
Guarantor acknowledges that this Guaranty contains the entire
agreement of the undersigned and no representations or agreements, or
otherwise, of Lessor or the Undersigned shall be of any force or effect
unless embodied herein or expressly ratified herein.
In the event that any provision or requirement of this Guaranty shalt
be unenforceable or illegal under applicable law, such provision or
requirement shall be eliminated hereunder or changed to conform to said
applicable law and the remaining provisions and requirements shall continue
to be effective and binding.
Duly executed and sealed by the undersigned this 5th day of July,
1994.
HUGHES SUPPLY, INC.
By: /s/ A.S. Hall, Jr.
A.S. Hall, Jr.
President
Hughes Supply, Inc.
By:
Witnesses:
/s/ Marjorie H. Fitton
/s/ Sandra Duncan
EXHIBIT "A"
All that tract or parcel of land lying and being in Land Lot 299 of the
18th District of DeKalb County, Georgia, and being more particularly
described as follows:
BEGINNING at a point marked by an iron pin found on the northwesterly side
of Peachtree Road at the intersection thereof with the southwesterly side
of Malone Drive; running thence south 58 degrees 30 minutes west along the
northwesterly side of Peachtree Road a distance of 150 feet to an iron pin;
running thence north 31 degrees 30 minutes west for a distance of 385 feet
to an iron pin; running thence south 80 degrees 18 minutes west a distance
of 53.85 feet to an iron pin; running thence north 58 degrees 30 minutes
east a distance of 150 feet to an iron pin; running thence north 80 degrees
18 minutes east a distance of 53.85 feet to an iron pin on the
southwesterly side of Malone Drive; running thence south 31 degrees 30
minutes east along the southwesterly side of Malone Drive a distance of 385
feet to the northwesterly side of Peachtree Road, the intersection above-
referred to and the iron pin at the POINT OF BEGINNING; being improved
property known as 5200 Peachtree Road, Chamblee, Georgia.
LESS & EXCEPT:
All that tract or parcel of land lying and being in Land Lot 299 of the
18th District, DeKalb County, Georgia, and being more particularly
described as follows:
BEGINNING at a point located at the intersection formed by the
northwesterly right-of-way line of Peachtree Road and the southwesterly
right-of-way line of Malone Drive; thence running southwesterly along said
northwesterly right-of-way line of Peachtree Road a distance of 26.51 feet
to a point; thence running along the arc of a curve to the left, a distance
of 29.08 feet to a point (said curve having a chord distance of 27.70 feet
on a bearing of north 42 degrees 09 minutes 31 seconds east and a radius of
27.00 feet), which point is located on said southwesterly right-of-way line
of Malone drive; thence running southeasterly along said southwesterly
right-of-way line of Malone Drive a distance of 8.04 feet to the POINT OF
BEGINNING. Said tract or parcel of land contains 35 square feet.<PAGE>
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>
Fiscal Year Ended
1/27/95 1/28/94 1/29/93
Line
- ----
SHARES
------
<S> <C> <C> <C> <C>
1 Average shares outstanding 5,623 4,553 4,552
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 142 96 12
--------- ---------- ---------
3 Shares used in calculating Earnings Per
Common and Common Equivalent Share 5,765 4,649 4,564
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 4 85 28
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 * 180 1,085 0
--------- --------- ---------
6 Shares used in calculating Earnings Per
Common Share - Assuming Full Dilution 5,949 5,819 4,592
========= ========= =========
</TABLE>
<TABLE>
HUGHES SUPPLY, INC.
<CAPTION>
Fiscal Year Ended
1/27/95 1/28/94 1/29/93
Line
- ----
EARNINGS
--------
<S> <C> <C> <C> <C>
7 Net income per financial statements, used in
calculating Earnings Per Common Share and
Earnings Per Common and Common Equivalent
Share $ 10,328 $ 6,286 $ 2,478
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 * 166 996 0
--------- --------- ---------
9 Earnings used in calculating Earnings Per
Common Share - Assuming Full Dilution $ 10,494 $ 7,282 $ 2,478
========= ========= =========
RESULTING PER SHARE DATA
------------------------
10 Earnings per common share (Line 7/Line 1) $ 1.84 $ 1.38 $ .54
========= ========= =========
11 Earnings per common share and common
equivalent share (Line 7/Line 3) $ 1.79 $ 1.35 $ .54
========= ========= =========
12 Dilution 2.7% 2.2% 0.0%
========= ========= =========
13 Earnings per common share - assuming full
dilution (Line 9/Line 6) $ 1.76 $ 1.25 $ .54
========= ========= =========
14 Dilution 4.3% 9.4% 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 fiscal year ending January 29, 1993,
and, consequently, are not used in the calculation of fully diluted earnings per
share for that year.
</TABLE>
- ----------------------------------------------------------------------
1995 ANNUAL REPORT - PAGE 3
<TABLE>
MARKET PRICE AND DIVIDEND DATA
<CAPTION>
Market Price Dividends Per Share (1)
Fiscal Years (2) Fiscal Years (2)
1995 1994 1995 1994
HIGH LOW HIGH LOW
<S> <C> <C> <C> <C> <C> <C>
First quarter $ 32 1/4 $ 24 $ 15 3/8 $ 13 1/4 $ .05 $ .03
Second quarter $ 28 3/4 $ 17 $ 17 1/4 $ 13 1/2 $ .05 $ .04
Third quarter $ 21 $ 17 $ 19 1/2 $ 15 3/4 $ .06 $ .04
Fourth quarter $ 19 3/8 $ 15 7/8 $ 24 $ 17 3/8 $ .06 $ .05
-------- --------
Year's high and low $ 32 1/4 $ 15 7/8 $ 24 $ 13 1/4
Total dividends $ .22 $ .16
======== ========
(1) See Note 2 of Notes to Consolidated Financial Statements for dividend restrictions.
(2) The Company's fiscal year ends on the last Friday in January.
</TABLE>
<TABLE>
SELECTED QUARTERLY FINANCIAL DATA
(in thousands, except per share data)
<CAPTION>
Earnings Per Share (1) Average Shares (1)
Net Gross Net
Sales Profit Income Primary Fully Diluted Primary Fully Diluted
Fiscal Quarter
1995
<S> <C> <C> <C> <C> <C> <C> <C>
First $ 183,901 $ 36,401 $ 1,670 $ .32 $ .31 5,245 5,984
Second 202,619 40,956 3,008 .51 .51 5,943 5,943
Third 210,584 41,422 2,778 .47 .47 5,898 5,899
Fourth 205,341 43,496 2,872 .48 .48 5,962 5,965
--------- --------- ---------
Year $ 802,445 $ 162,275 $ 10,328 $ 1.79 $ 1.76 5,765 5,949
========= ========= =========
Fiscal Quarter
1994
First $ 148,514 $ 28,893 $ 699 $ .15 $ .15 4,605 4,605
Second 163,950 32,746 1,718 .37 .34 4,619 5,718
Third 178,993 34,580 1,843 .40 .36 4,665 5,751
Fourth 169,481 35,001 2,026 .43 .39 4,694 5,820
--------- --------- ---------
Year $ 660,938 $ 131,220 $ 6,286 $ 1.35 $ 1.25 4,649 5,819
========= ========= =========
(1) Calculated independently for each period and, consequently, the sum of the quarters may differ from
the annual amount.
</TABLE>
- ---------------------------------------------------------------------
1995 ANNUAL REPORT - PAGE 12
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
of Hughes Supply, Inc.
In our opinion, the accompanying consolidated balance sheet
and the related consolidated statements of income, share-
holders' equity and of cash flows present fairly, in all material
respects, the financial position of Hughes Supply, Inc. and
its subsidiaries at January 27, 1995, and the results of their
operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
These financial statements are the responsibility of the
Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We
conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for the opinion
expressed above.
The financial statements of Hughes Supply, Inc. and its
subsidiaries for the years ended January 28, 1994 and
January 29, 1993 were audited by other independent
accountants whose report dated March 17, 1994
expressed an unqualified opinion on those statements.
/s/ Price Waterhouse LLP
Orlando, Florida
March 15, 1995
- ----------------------------------------------------------------------
1995 ANNUAL REPORT - PAGE 13
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
<CAPTION>
Fiscal Years Ended
January 27, January 28, January 29,
1995 1994 1993
<S> <C> <C> <C>
Net Sales $ 802,445 $ 660,938 $ 555,796
Cost of Sales 640,170 529,718 447,373
---------- ---------- ----------
Gross Profit 162,275 131,220 108,423
---------- ---------- ----------
Operating Expenses:
Selling, general and administrative 132,856 109,760 94,810
Depreciation and amortization 8,773 7,465 6,636
Provision for doubtful accounts 1,185 1,671 1,775
---------- ---------- ----------
Total operating expenses 142,814 118,896 103,221
---------- ---------- ----------
Operating Income 19,461 12,324 5,202
---------- ---------- ----------
Non-Operating Income and (Expenses):
Interest income 2,284 1,856 1,865
Interest expense (4,875) (4,610) (4,760)
Other, net 553 988 1,709
---------- ---------- ----------
(2,038) (1,766) (1,186)
---------- ---------- ----------
Income Before Income Taxes 17,423 10,558 4,016
Income Taxes 7,095 4,272 1,538
---------- ---------- ----------
Net Income $ 10,328 $ 6,286 $ 2,478
========== ========== ==========
Earnings Per Share:
Primary $ 1.79 $ 1.35 $ .54
========== ========== ==========
Fully diluted $ 1.76 $ 1.25 $ .54
========== ========== ==========
Average Shares Outstanding:
Primary 5,765 4,649 4,564
========== ========== ==========
Fully diluted 5,949 5,819 4,592
========== ========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
- ---------------------------------------------------------------------
1995 ANNUAL REPORT - PAGE 14
<TABLE>
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<CAPTION>
January 27, January 28,
1995 1994
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 3,192 $ 1,078
Accounts receivable, less allowance for
losses of $4,787 and $3,914 122,143 97,765
Inventories 119,686 94,223
Deferred income taxes 8,921 4,972
Other current assets 6,479 5,532
---------- ----------
Total current assets 260,421 203,570
---------- ----------
Property, Plant and Equipment, at cost:
Land 13,360 12,353
Buildings and improvements 41,776 37,097
Transportation equipment 19,409 19,674
Furniture, fixtures and equipment 19,738 14,843
Property under capital leases 10,794 10,794
---------- ----------
Total 105,077 94,761
Less accumulated depreciation and amortization (51,846) (45,439)
---------- ----------
Net property, plant and equipment 53,231 49,322
---------- ----------
Deferred Income Taxes 1,999 2,210
Other Assets 13,242 8,303
---------- ----------
$ 328,893 $ 263,405
========== ==========
</TABLE>
- ---------------------------------------------------------------------
1995 ANNUAL REPORT - PAGE 15
<TABLE>
<CAPTION>
January 27, January 28,
1995 1994
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 1,019 $ 898
Accounts payable 71,563 52,053
Accrued compensation and benefits 9,723 7,257
Other current liabilities 12,795 8,401
---------- ----------
Total current liabilities 95,100 68,609
---------- ----------
Long-Term Debt, less current portion:
Notes and subordinated debentures 97,857 95,367
Capital lease obligations 3,061 3,859
---------- ----------
Total long-term debt 100,918 99,226
---------- ----------
Other Noncurrent Liabilities 1,540 1,143
---------- ----------
Total liabilities 197,558 168,978
---------- ----------
Commitments and Contingencies
Shareholders' Equity:
Preferred stock, no par value; 10,000,000 shares authorized;
none issued; preferences, limitations and relative rights
to be established by the Board of Directors - -
Common stock, par value $1 per share; 20,000,000
and 10,000,000 shares authorized; 6,148,599
and 5,075,670 shares issued 6,149 5,076
Capital in excess of par value 37,722 15,410
Retained earnings 89,152 80,425
---------- ----------
133,023 100,911
Less treasury stock, 108,988 shares and
418,566 shares, at cost (1,688) (6,484)
---------- ----------
Total shareholders' equity 131,335 94,427
---------- ----------
$ 328,893 $ 263,405
========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
- ---------------------------------------------------------------------
1995 ANNUAL REPORT - PAGE 16
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(dollars in thousands, except per share data)
<CAPTION>
Capital in
Common Stock Excess of Retained Treasury Stock
Shares Amount Par Value Earnings Shares Amount
<S> <C> <C> <C> <C> <C> <C>
Balance, January 31, 1992 5,453,249 $ 5,453 $ 22,410 $ 70,785 901,155 $(13,960)
Net income - - - 2,478 - -
Cash dividends -
$.12 per share - - - (502) - -
Treasury shares issued - - - - (100) 2
--------- ------- --------- -------- -------- --------
Balance, January 29, 1993 5,453,249 5,453 22,410 72,761 901,055 (13,958)
Net income - - - 6,286 - -
Cash dividends -
$.16 per share - - - (724) - -
Issuance of treasury
shares for EDI merger (374,998) (375) (5,434) - (374,998) 5,809
Other acquisition - - (1,557) 2,158 (101,368) 1,570
Treasury shares issued
under stock option plans - - - (18) (6,123) 95
Purchase and retirement
of common shares (2,581) (2) (9) (38) - -
--------- ------- --------- -------- -------- --------
Balance, January 28, 1994 5,075,670 5,076 15,410 80,425 418,566 (6,484)
Net income - - - 10,328 - -
Cash dividends -
$.22 per share - - - (1,290) - -
Treasury shares contributed
to employee benefit plan - - 243 - (16,597) 257
Conversion of subordinated
convertible debentures
into common stock 1,081,146 1,081 21,670 - - -
Treasury shares issued
under stock option plans - - - (141) (44,341) 687
Purchase and retirement
of common shares (8,217) (8) (35) (170) - -
Acquisitions - - 434 - (248,640) 3,852
--------- ------- -------- -------- -------- --------
Balance, January 27, 1995 6,148,599 $ 6,149 $ 37,722 $ 89,152 108,988 $ (1,688)
========= ======= ======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
- ---------------------------------------------------------------------
1995 ANNUAL REPORT - PAGE 17
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<CAPTION>
Fiscal Years Ended
January 27, January 28, January 29,
1995 1994 1993
<S> <C> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents:
Cash flows from operating activities:
Cash received from customers $ 789,446 $ 644,667 $ 546,848
Cash paid to suppliers and employees (776,441) (638,724) (535,645)
Interest received 2,284 1,856 1,865
Interest paid (4,441) (4,693) (4,875)
Income taxes paid (8,631) (5,361) (1,677)
Net cash provided by (used in) ---------- ---------- ----------
operating activities 2,217 (2,255) 6,516
---------- ---------- ----------
Cash flows from investing activities:
Proceeds from sale of property, plant
and equipment 734 704 1,810
Capital expenditures (11,841) (8,257) (8,702)
Business acquisitions, net of cash (11,099) (3,934) -
---------- ---------- ----------
Net cash used in investing activities (22,206) (11,487) (6,892)
---------- ---------- ----------
Cash flows from financing activities:
Net borrowings (payments) under short-term
debt arrangements 23,953 16,733 (2,267)
Proceeds from long-term debt - - 1,444
Principal payments on:
Long-term notes (297) (2,918) (1,678)
Capital lease obligations (725) (660) (602)
Proceeds from issuance of common shares
under stock option plans 546 77 -
Purchase of common shares (213) (49) -
Dividends paid (1,161) (616) (502)
Net cash provided by (used in) ---------- ---------- ----------
financing activities 22,103 12,567 (3,605)
---------- ---------- ----------
Net Increase (Decrease) in Cash and
Cash Equivalents 2,114 (1,175) (3,981)
Cash and Cash Equivalents, beginning of year 1,078 2,253 6,234
---------- ---------- ----------
Cash and Cash Equivalents, end of year $ 3,192 $ 1,078 $ 2,253
========== ========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
- ----------------------------------------------------------------------
1995 ANNUAL REPORT - PAGE 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)
Note 1 - Summary of Significant Accounting Policies
Industry
Hughes Supply, Inc. and its subsidiaries (the "Company") are
engaged in the wholesale distribution of a broad range of materials,
equipment and supplies to the construction industry. Major product
lines distributed by the Company include electrical, plumbing and
electric utility equipment, building materials, water and sewer prod-
ucts, heating and air conditioning equipment, and pipe, valves and
fittings. The Company's principal customers are electrical, plumbing
and mechanical contractors, electric utility companies, and munici-
pal and industrial accounts.
Principles of Consolidation
The consolidated financial statements include the Company and its
wholly-owned subsidiaries. All significant intercompany transactions
and accounts have been eliminated. The Company's minority invest-
ment in affiliate is accounted for by the equity method.
Fiscal Year
The Company's fiscal year ends on the last Friday in January. Fiscal
years 1995, 1994 and 1993 each contained 52 weeks.
Cash Equivalents
The Company considers all highly liquid investments with a maturity
of three months or less when purchased to be cash equivalents.
Inventories
Inventories are carried at the lower of cost or market. The cost of
substantially all inventories is determined by the average cost method.
Property, Plant and Equipment
Buildings and equipment are depreciated using both straight-line
and declining-balance methods based on the following estimated
useful lives:
Buildings and improvements 5-40 years
Transportation equipment 2-7 years
Furniture, fixtures and equipment 3-15 years
Property under capital leases 20-40 years
Maintenance and repairs are charged to expense as incurred and
major renewals and betterments are capitalized. Gains or losses are
credited or charged to earnings upon disposition.
Other Assets
The excess of cost over the fair value of net assets of purchased
companies is being amortized by the straight-line method over
15 to 25 years.
Income Taxes
Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes currently
due plus deferred taxes resulting from temporary differences.
Such temporary differences result from differences in the carrying
value of assets and liabilities for tax and financial reporting purposes.
The deferred tax assets and liabilities represent the future tax
consequences of those differences, which will either be taxable or
deductible when the assets and liabilities are recovered or settled.
Deferred taxes are also recognized for operating losses that are
available to offset future taxable income. Valuation allowances are
established to reduce deferred tax assets to the amount expected
to be realized.
Earnings Per Common Share
Primary earnings per share are based on the weighted average
number of shares outstanding during each year plus the common
stock equivalents issuable upon the exercise of stock options.
Unless the results are antidilutive, fully diluted earnings per share
assumes the conversion of the 7% convertible subordinated deben-
tures (after elimination of related interest expense, net of income
tax effect) and exercise of stock options.
Deferred Employee Benefits
The present value of amounts estimated to be payable under
unfunded supplemental retirement agreements with certain officers
is being accrued over the remaining years of active employment of
the officers and is included in other noncurrent liabilities.
- ----------------------------------------------------------------------
1995 ANNUAL REPORT - PAGE 19
Note 2 - Notes and Debentures Payable
Consolidated notes and debentures payable consist of the following:
January 27, January 28,
1995 1994
7% Convertible subordinated debentures,
due 2011 $ - $ 22,960
Unsecured revolving bank notes under
$130,000 credit agreement, payable
June 30, 1997, fluctuating interest
(6.0% to 6.1% at January 27, 1995) 61,025 45,375
Short-term instruments classified as
long-term debt 34,803 26,500
Other notes payable 2,251 705
--------- ---------
98,079 95,540
Less current portion (222) (173)
--------- ---------
$ 97,857 $ 95,367
========= =========
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 debentures outstanding at January
28, 1994, $22,889, or 99.7%, were converted into the Company's
common stock at $21.17 per share or 47.2 common shares for
each $1 face amount of debentures. This conversion resulted in the
issuance of 1,081,146 common shares.
At January 27, 1995, the Company has a revolving credit and line
of credit agreement with a group of banks which permits the
Company to borrow up to $130,000 (subject to borrowing limita-
tions discussed below) - $95,000 long-term, expiring June 30,
1997, and $35,000 line of credit convertible to a term note due
two years from conversion date. The $35,000 line of credit backs
commercial paper. Under the credit facility, interest is payable at
market rates plus applicable margins. Commitment fees of .25%
and .125% are paid on the unused portions of the revolving and
line of credit facilities, respectively.
Loan covenants require the Company to maintain consolidated
working capital of not less than $75,000 and a maximum ratio
of senior funded debt to total capital, as defined, of .50 to 1.0.
The covenants also restrict the Company's activities regarding
investments, liens, borrowing and leasing, and payment of dividends
other than stock. Under the dividend covenant, approximately
$8,360 is available at January 27, 1995 for payment of dividends.
The Company has a bank line of credit for short-term borrowing
aggregating $6,000 at January 27, 1995 and $2,000 at January 28,
1994 (subject to borrowing limitations under the long-term debt
covenants) under which $1,500 was outstanding at January 28,
1994. There were no amounts outstanding at January 27, 1995.
The line provides for interest at market rates. The interest rate
on short-term borrowing as of January 28, 1994 was 3.5%. In
addition, the Company has a commercial paper program backed
by its revolving credit facility. The weighted average interest rate
on outstanding commercial paper borrowings of $34,803 and
$25,000 as of January 27, 1995 and January 28, 1994 was 6.0%
and 3.2%, respectively.
The Company's credit facility enables the Company to refinance
short-term borrowings on a long-term basis to the extent that the
credit facility is unused. Accordingly, $34,803 and $26,500 of
short-term borrowings at January 27, 1995 and January 28, 1994,
respectively, have been classified as long-term debt.
The carrying value of notes payable is a reasonable estimate of fair
value since interest rates are based on prevailing market rates.
Maturities of long-term debt for each of the five years subsequent to
January 27, 1995 and in the aggregate are as follows:
Fiscal Years Ending
1996 $ 222
1997 1,620
1998 96,162
1999 67
2000 8
Later years -
---------
$ 98,079
=========
- ----------------------------------------------------------------------
1995 ANNUAL REPORT - PAGE 20
Note 3 - Income Taxes
The components of deferred tax assets and liabilities are as follows:
January 27, January 28,
1995 1994
Deferred tax assets:
Allowance for doubtful accounts $ 1,854 $ 1,529
Inventories 2,866 1,435
Capital leases 590 646
Property, plant and equipment 744 374
Accrued vacation 667 471
Deferred compensation 597 447
Environmental clean-up costs 216 183
Other accrued liabilities 3,222 2,179
Other 214 250
-------- --------
Total deferred assets 10,970 7,514
-------- --------
Deferred tax liabilities:
Operating leases 42 -
Intangible assets 8 -
Other - 188
-------- --------
Total deferred liabilities 50 188
-------- --------
Net deferred tax asset before
valuation allowance 10,920 7,326
Valuation allowance - (144)
-------- --------
Net deferred tax asset $ 10,920 $ 7,182
======== ========
The net change in the valuation allowance was a decrease of $144, related
to recognition of tax benefits arising from operating loss carryforwards.
The consolidated provision for income taxes consists of the following:
Fiscal Years Ended
January 27, January 28, January 29,
1995 1994 1993
Currently payable:
Federal $ 9,302 $ 4,433 $ 2,998
State 1,531 626 436
-------- -------- --------
10,833 5,059 3,434
-------- -------- --------
Deferred:
Federal (3,545) (978) (1,415)
State (193) 191 (481)
-------- -------- --------
(3,738) (787) (1,896)
-------- -------- --------
$ 7,095 $ 4,272 $ 1,538
======== ======== ========
The following is a reconciliation of tax computed at the statutory
Federal rate to the income tax expense in the consolidated
statements of income:
Fiscal Years Ended
January 27, 1995 January 28, 1994 January 29, 1993
Amount % Amount % Amount %
Tax computed
at statutory
Federal rate $ 6,098 35.0 $ 3,695 35.0 $ 1,365 34.0
Effect of:
State income tax,
net of Federal
benefit 870 5.0 531 5.0 (30) (.7)
Nondeductible
purchase
adjustments 38 .2 24 .2 14 .3
Nondeductible
expenses 330 1.9 117 1.1 103 2.6
Other, net (241) (1.4) (95) (.8) 86 2.1
------- ---- ------- ---- ------- ----
Income tax
expense $ 7,095 40.7 $ 4,272 40.5 $ 1,538 38.3
======= ==== ======= ==== ======= ====
Note 4 - Employee Benefit Plans
Profit Sharing and Employee Stock
Ownership Plans
The Company has a 401(k) profit sharing plan which provides
benefits for substantially all employees of the Company who meet
minimum age and length of service requirements. Under the plan,
employee contributions of not less than 2% to not more than 3% of
each eligible employee's compensation are matched (in cash or
stock) 50% by the Company. Additional annual contributions may be
made at the discretion of the Board of Directors.
The Company has an employee stock ownership plan (ESOP) covering
substantially all employees of the Company who meet minimum age
and length of service requirements. The plan is designed to enable
eligible employees to acquire a proprietary interest in the Company.
Company contributions (whether in cash or stock) are determined
annually by the Board of Directors in an amount not to exceed the
maximum allowable as an income tax deduction. At January 27,
1995 and January 28, 1994, the plan owned approximately 172,000
and 157,000 shares, respectively, of the Company's common stock,
all of which were allocated to participants.
Amounts charged to expense for these plans during the fiscal years
ended in 1995, 1994 and 1993 were $1,157, $1,000 and $405,
respectively.
Bonus Plans
The Company has bonus plans, based on profitability formulas, which
provide incentive compensation for key employees. Amounts charged
to expense for bonuses to executive officers were $935, $533 and
$263 for the fiscal years ended in 1995, 1994 and 1993, respectively.
- ----------------------------------------------------------------------
1995 ANNUAL REPORT - PAGE 21
Stock Option Plans
The Company's stock option plans authorize the granting of both
incentive and non-incentive stock options for an aggregate of
1,635,000 shares of common stock to key executive, management,
and sales employees, and, with respect to 135,000 shares, to direc-
tors. Under the plans, options are granted at prices not less than
market value on the date of grant, and the maximum term of an
option may not exceed ten years. Prices for incentive stock options
granted to employees who own 10% or more of the Company's stock
are at least 110% of market value at date of grant. Options may be
granted from time to time to May 1998, or May 2003 with regard to
directors. An option becomes exercisable at such times and in such
installments as set by the Board of Directors.
The employee plan also permits the granting of stock appreciation
rights (SARs) to holders of options. Such rights permit the optionee
to surrender an exercisable option, in whole or in part, on any date
that the fair market value of the Company's common stock exceeds
the option price for the stock and receive payment in common
stock, or, if the Board of Directors approves, in cash or any combi-
nation of cash and common stock. Such payment would be equal to
the excess of the fair market value of the shares under the surren-
dered option over the option price for such shares. The change in
value of SARs would be reflected in income based upon the market
value of the stock. No SARs have been granted or issued through
January 27, 1995.
A summary of option transactions during each of the three fiscal
years in the period ended January 27, 1995 is shown below:
Number of Option Price
Shares Range
Under option, January 31, 1992
(194,736 shares exercisable) 422,736 $12.25-$19.33
Granted 20,000 $12.00-$12.87
Exercised - -
Cancelled (36,294) $12.25-$19.33
-------
Under option, January 29, 1993
(253,442 shares exercisable) 406,442 $12.00-$17.63
Granted 12,000 $16.25
Exercised (6,023) $12.25-$12.87
Cancelled (12,835) $12.00-$12.63
-------
Under option, January 28, 1994
(297,584 shares exercisable) 399,584 $12.00-$17.63
Granted 115,000 $18.13-$25.37
Exercised (44,241) $12.25-$12.63
Cancelled - -
-------
Under option, January 27, 1995
(339,343 shares exercisable) 470,343 $12.00-$25.37
=======
There were 640,658 and 755,658 shares available for the granting
of options at January 27, 1995 and January 28, 1994, respectively.
Supplemental Executive
Retirement Plan
The Company has entered into agreements with certain key execu-
tive officers, providing for supplemental payments, generally for
periods up to 15 years, upon retirement, disability or death. The
obligations are not funded apart from the Company's general assets.
Amounts charged to expense under the agreements were $390,
$166 and $158 in fiscal 1995, 1994 and 1993, respectively.
Note 5 - Commitments and
Contingencies
Lease Commitments
A portion of the Company's operations are conducted from locations
leased under capital leases from a corporation which is owned by
three of the directors of Hughes Supply, Inc. The leases generally
provide that all expenses related to the properties are to be paid by
the lessee. The leases also generally provide for rental increases at
specified intervals. The leases all expire within ten years; however, it
is expected that they will be renewed. Rents under these agreements
amounted to $1,165 for each of the three years in the period ended
January 27, 1995. Property under capital leases is included in the
consolidated balance sheets as follows:
January 27, January 28,
1995 1994
Property under capital leases
(consisting of land and buildings) $ 10,794 $ 10,794
Accumulated amortization (8,458) (7,864)
-------- --------
$ 2,336 $ 2,930
======== ========
In addition, rents under operating leases paid to this related corpora-
tion were $400, $396 and $399 in 1995, 1994 and 1993, respectively.
- ----------------------------------------------------------------------
1995 ANNUAL REPORT - PAGE 22
Future minimum payments, by year and in the aggregate, under the
aforementioned leases and other noncancelable operating leases with
initial or remaining terms in excess of one year as of January 27,
1995, are as follows:
Capital Operating
Fiscal Years Ending Leases Leases
1996 $ 1,165 $ 6,372
1997 1,165 5,165
1998 1,165 4,774
1999 562 3,749
2000 361 2,458
Later years 584 5,512
-------- --------
Total minimum lease payments 5,002 $ 28,030
========
Less amount representing interest (1,144)
--------
Present value of net minimum
lease payments 3,858
Less current portion (797)
--------
$ 3,061
========
Lease-related expenses are as follows:
Fiscal Years Ended
January 27, January 28, January 29,
1995 1994 1993
Capital lease amortization $ 594 $ 594 $ 594
Capital lease interest expense 440 505 564
Operating lease rentals 6,843 5,872 5,210
Guarantees of Affiliate Debt
A wholly-owned subsidiary of the Company owns a 20% interest in
Accord Industries Company ("Accord"), a joint venture formed
from the Company's sale of its manufacturing operations in 1990.
As partial consideration for the sale, the Company received $2,750
in notes receivable, part of which is convertible into an additional
partnership interest in Accord of up to 29%.
In connection with the investment in Accord, the Company guaran-
teed $500 of Accord's indebtedness to a bank and the Company's
subsidiary as a joint venturer is contingently liable for the remaining
bank debt of approximately $1,840 as of January 27, 1995.
Legal Matters
The Company is involved in various legal proceedings incident to
the conduct of its business. In the opinion of management, none
of the proceedings are material in relation to the Company's
consolidated operations or financial position.
Note 6 - Common Stock
On May 24, 1994, the shareholders approved an amendment to the
articles of incorporation of the Company increasing the number of
authorized shares of common stock to 20,000,000 shares, $1.00
par value per share.
Note 7 - Preferred Stock
The Company's Board of Directors established Series A Junior
Participating Preferred Stock (Series A Stock) consisting of 300,000
shares. Each share of Series A Stock will be entitled to one vote on all
matters submitted to a vote of shareholders. Series A Stock is not
redeemable or convertible into any other security. Each share of Series
A Stock shall have a minimum cumulative preferential quarterly divi-
dend rate equal to the greater of $1.25 per share or 100 times the
aggregate per share amount of the dividend declared on common
stock. In the event of liquidation, shares of Series A Stock will be enti-
tled to the greater of $100 per share plus any accrued and unpaid div-
idend or 100 times the payment to be made per share of common
stock. No shares of Series A Stock are presently outstanding, and no
shares are expected to be issued except in connection with the share-
holder rights plan referred to below.
The Company has a shareholder rights plan. Under the plan, the
Company distributed to shareholders a dividend of one right per share
of the Company's common stock. When exercisable, each right will
permit the holder to purchase from the Company a unit consisting of
one one-hundredth of a share of Series A Stock at a purchase price of
$65 per unit. The rights generally become exercisable if a person or
group acquires 20% or more of the Company's common stock or
commences a tender offer that could result in such person or group
owning 30% or more of the Company's common stock. If certain sub-
sequent events occur after the rights first become exercisable, the
rights may become exercisable for the purchase of shares of common
stock of the Company, or of an acquiring company, having a value
equal to two times the exercise price of the right. The rights may be
redeemed by the Company at $.01 per right at any time prior to ten
days after 20% or more of the Company's stock is acquired by a per-
son or group. The rights expire on June 2, 1998 unless sooner termi-
nated in accordance with the rights plan.
Note 8 - Concentration of Credit Risk
The Company sells its products in the major areas of construction
markets in certain states of the southeast and midwest United States.
Approximately 90% of the Company's sales are credit sales which
are primarily to customers whose ability to pay is dependent upon
the construction industry economics prevailing in the Southeast;
however, concentration of credit risk with respect to trade accounts
- ----------------------------------------------------------------------
1995 ANNUAL REPORT - PAGE 23
receivable is limited due to the large number of customers comprising
the Company's customer base and no one customer comprises more
than 2% of annual sales. The Company performs ongoing credit evalu-
ations of its customers and in certain situations obtains collateral
sufficient to protect its credit position. The Company maintains
reserves for potential credit losses, and such losses have been within
management's expectations.
Note 9 - Business Combinations
During fiscal years 1995 and 1994, the Company acquired several
wholesale distributors of materials to the construction industry that
were accounted for as purchases. These acquisitions, individually or
in the aggregate, 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.
The net assets acquired and consideration for acquisitions accounted
for as purchases are summarized below:
Fiscal Years Ended
January 27, January 28,
1995 1994
Fair value of:
Assets acquired $ 28,396 $ 8,421
Liabilities assumed (7,269) (4,487)
---------- ----------
Purchase price $ 21,127 $ 3,934
========== ==========
Consideration in fiscal 1995 included 248,640 shares of common
stock (fair value $4,286) issued, a note for $1,525 and amounts
payable of $4,217.
The following table reflects the unaudited pro forma combined results
of operations, assuming the fiscal 1995 acquisitions had occurred at
the beginning of each year presented:
Fiscal Years Ended
January 27, January 28,
1995 1994
Net sales $ 886,466 $ 724,148
Net income 12,086 6,916
Earnings per share:
Primary 2.02 1.41
Fully diluted 1.98 1.30
The pro forma information does not purport to be indicative of the
results which actually would have occurred had the acquisitions been
in effect during the periods presented, or of results which may occur
in the future.
Note 10 - Supplemental Cash Flows Information
<TABLE>
The following is a reconciliation of net income to
net cash provided by (used in) operating activities:
<CAPTION>
Fiscal Years Ended
January 27, 1995 January 28, 1994 January 29, 1993
<S> <C> <C> <C>
Net income $ 10,328 $ 6,286 $ 2,478
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation 7,934 6,703 5,863
Amortization 839 762 773
Provision for doubtful accounts 1,185 1,671 1,775
Gain on sale of property, plant and equipment (284) (264) (1,012)
Undistributed earnings of affiliate (139) (171) (135)
Treasury shares contributed to employee benefit plan 500 - -
Changes in assets and liabilities, net of effects of business acquisitions:
(Increase) decrease in:
Accounts receivable (13,129) (16,824) (9,499)
Inventories (16,057) (4,209) 60
Refundable income taxes - - 530
Other current assets (813) (97) 1,195
Other assets (218) 178 31
Increase (decrease) in:
Accounts payable and accrued expenses 12,776 4,704 7,473
Accrued interest and income taxes 2,636 (461) 1,112
Other noncurrent liabilities 397 178 158
Increase in deferred income taxes (3,738) (711) (1,896)
-------- -------- --------
Net cash provided by (used in) operating activities $ 2,217 $ (2,255) $ 6,516
======== ======== ========
</TABLE>
- ----------------------------------------------------------------------
1995 ANNUAL REPORT - PAGE 24
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Sales
Net sales were $802.4 million, a 21% increase over fiscal 1994 sales
of $660.9 million. Fiscal 1993 net sales totaled $555.8 million. Newly-
opened and acquired wholesale outlets accounted for approximately
40% of the increase in fiscal 1995 and 16% of the increase in fiscal
1994. The number of wholesale outlets has grown to 170 from 117
at the beginning of fiscal 1993.
During fiscal 1995, construction activity in our markets remained
strong despite rising interest rates. Commercial and industrial
construction activity rebounded in fiscal 1995 while residential con-
struction slowed after a strong fiscal 1994. In fiscal 1994 the markets
were positively impacted by a favorable interest rate environment.
Construction activity is expected to remain strong during fiscal 1996.
Sales for the Company should continue to climb with increased
commercial and industrial construction and the continuation of the
Company's acquisition program.
Gross Margin
Gross margins (gross profit expressed as a percent of sales) for
fiscal years 1995, 1994 and 1993 were 20.2%, 19.9% and 19.5%,
respectively. The improvement in gross margins reflects more
efficient purchasing which is attributable to increased volume and a
greater concentration of supply sources resulting from the Company's
preferred vendor program.
Operating Expenses
Control over operating expenses has continued to improve. As a
percentage of sales, the Company has lowered these expenses to
17.8% in fiscal 1995 from 18.0% and 18.6% in fiscal 1994 and 1993,
respectively. This trend should continue as recent acquisitions are
more completely integrated into our distribution system and with
anticipated sales growth.
As a result of adherence to strict credit standards, charge-offs of
uncollectible accounts has declined. In addition, collection efforts
have produced increased recoveries. Consequently, the provision
for doubtful accounts has decreased to $1.2 million in fiscal 1995
compared to $1.7 million and $1.8 million in fiscal 1994 and
1993, respectively.
Operating expenses in fiscal 1995 were $142.8 million, a 20%
increase over the prior year. Newly-opened wholesale outlets and
recent acquisitions accounted for approximately 45% of the increase.
Most of the remainder of the increase is due to personnel and other
costs, such as transportation and insurance, associated with the
growth in sales. The fiscal 1994 operating expense increase of $15.7
million over fiscal 1993 is attributable to personnel costs supporting
the growth in the Company's operations and newly-opened and
acquired wholesale outlets.
Federal, state and local laws and regulations govern the Company's
operation of underground fuel storage tanks. Rather than incur
additional costs to restore and upgrade tanks as required by
regulations, the Company opted to remove the existing tanks. Over
the past several years the Company has removed these underground
fuel tanks and, in the process, identified certain tanks with leaks
which required remedial cleanups. When the liability for these costs
was determined in a prior year, the Company accrued as an operating
expense the estimated future costs of removing the fuel tanks and
environmental cleanup. During fiscal 1995, 1994 and 1993, there
were no significant expenses associated with the cleanup.
Non-Operating Income and Expenses
Interest income increased to $2.3 million in fiscal 1995 from
$1.9 million in fiscal 1994 primarily as a result of sales growth and
recent acquisitions. The majority of interest income is generated by the
collection of service charge income on delinquent accounts receivable.
Interest expense has fluctuated only moderately over the last three
fiscal years. The increase of $.3 million in fiscal 1995 over 1994 was
attributable to higher interest rates partially offset by lower borrowing
levels (due primarily to the conversion of $23 million of subordinated
debentures). The annual interest savings from the conversion amount
to approximately $1.6 million. Interest expense in fiscal 1994 was
lower by $.2 million compared to the prior year due to lower
borrowing rates even though borrowing levels were higher.
Income Taxes
The effective tax rates were 40.7%, 40.5% and 38.3% in fiscal years
1995, 1994 and 1993, respectively. The increase over the fiscal 1993
rate is primarily due to Federal tax law changes which increased the
statutory Federal tax rate from 34% to 35% in fiscal 1994.
Liquidity and Capital Resources
Working capital has continued to grow, reaching $165.3 million in
fiscal 1995. Fiscal 1994 and 1993 working capital was $135.0 million
- ---------------------------------------------------------------------
1995 ANNUAL REPORT - PAGE 25
and $113.6 million, respectively. Current assets continue to
comprise more than 75% of total assets. The working capital ratio
was 2.74 to 1, 2.97 to 1 and 2.84 to 1 for fiscal years 1995, 1994
and 1993, respectively.
The Company typically becomes less liquid in expansionary periods
when sales volumes are increasing requiring higher levels of inven-
tories and receivables to support the growth. However, days cost
of sales in average inventory in fiscal 1995 improved to 60.15
compared to 60.86 and 68.26 in fiscal 1994 and 1993, respectively.
Days sales in average receivables was 51.28, 49.85 and 50.05 in
fiscal years 1995, 1994 and 1993, respectively.
The Company generated $2.2 million in cash from operations in
fiscal 1995 compared to cash used of $2.3 million in fiscal 1994
and $6.5 million generated in fiscal 1993. The changes are due
primarily to fluctuations in accounts receivable, inventories and
accounts payable.
In fiscal 1995, the Company invested $11.8 million for property and
equipment and $11.1 million for business acquisitions, which added
20 wholesale outlets to the Company's operations and expanded its
geographic markets to the midwest United States. Capital expendi-
tures for fiscal 1996 are expected to be approximately $12 million.
To finance increases in working capital, capital expenditures and
recent acquisitions, net borrowing under short-term debt arrange-
ments amounted to $24.0 million and $16.7 million in fiscal years
1995 and 1994, respectively, compared to $2.3 million payments in
fiscal year 1993. The Company used $1.2 million to fund dividend
payments during fiscal year 1995. Over the past three years,
the Company's annual dividend has grown from $.12 to $.22 per share.
In March 1994, the Company issued a call for redemption of its
7% convertible subordinated debentures. Substantially all of the
outstanding debentures were converted into common stock,
which resulted in an increase of approximately $23 million in
shareholders' equity and a corresponding decrease of long-term
debt. As a result of the conversion, approximately 1 million new
shares of common stock were issued.
The Company currently maintains sufficient borrowing capacity to
take advantage of growth and business acquisition opportunities.
The Company's bank financing was amended in fiscal 1995 to
increase the Company's borrowing capacity. It now consists of a
$130 million unsecured credit facility, which includes a $95 million
long-term revolving credit facility and a $35 million line of credit
convertible to a term note, as well as a short-term line of credit
totaling $6 million.
The Company's financial condition remains strong. The Company
believes that it has the resources necessary, with approximately
$40 million of unused debt capacity (subject to borrowing
limitations under long-term debt covenants), to fund ongoing
operating requirements. Future expansion will be financed on a
project-by-project basis through additional borrowing or, if circum-
stances are more favorable, through the issuance of common stock.
Inflation and Changing Prices
The Company is cognizant of the potentially adverse effects inflationary
pressures may create through higher asset replacement costs and
related depreciation, higher interest rates and higher material costs.
The Company attempts to minimize these effects through cost
reductions and productivity improvements as well as price increases
to maintain reasonable profit margins. Management believes, however,
that inflation (which has been moderate over the past three years)
and changing prices have not significantly affected the Company's
operating results or markets in the three most recent fiscal years.
- ---------------------------------------------------------------------
1995 ANNUAL REPORT - PAGE 26
<TABLE>
SELECTED FINANCIAL DATA
(in thousands, except per share data and ratios)
<CAPTION>
Fiscal Years Ended (1)(2)
1995 1994 1993 1992
<S> <C> <C> <C> <C>
Net sales $ 802,445 $ 660,938 $ 555,796 $ 509,192
Cost of sales $ 640,170 $ 529,718 $ 447,373 $ 410,132
Gross margin 20.2% 19.9% 19.5% 19.5%
Selling, general and administrative expenses $ 132,856 $ 109,760 $ 94,810 $ 91,114
% of sales 16.6% 16.6% 17.1% 17.9%
Depreciation and amortization $ 8,773 $ 7,465 $ 6,636 $ 7,149
Provision for doubtful accounts $ 1,185 $ 1,671 $ 1,775 $ 2,542
Operating income (loss) $ 19,461 $ 12,324 $ 5,202 $ (1,745)
Operating margin 2.4% 1.9% .9% (.3%)
Interest and other income $ 2,837 $ 2,844 $ 3,574 $ 1,913
Interest expense $ 4,875 $ 4,610 $ 4,760 $ 5,991
Income (loss) before income taxes $ 17,423 $ 10,558 $ 4,016 $ (5,823)
% of sales 2.2% 1.6% .7% (1.1%)
Income taxes (benefits) $ 7,095 $ 4,272 $ 1,538 $ (1,964)
Net income (loss) $ 10,328 $ 6,286 $ 2,478 $ (3,859)
% of sales 1.3% 1.0% .4% (.8%)
Net income (loss) per share
Primary $ 1.79 $ 1.35 $ .54 $ (.85)
Fully diluted $ 1.76 $ 1.25 $ .54 $ (.85)
Average number of shares outstanding
Primary 5,765 4,649 4,564 4,552
Fully diluted 5,949 5,819 4,592 4,552
Cash dividends per share $ .22 $ .16 $ .12 $ .24
Long-term debt, less current portion $ 100,918 $ 99,226 $ 81,320 $ 76,342
Shareholders' equity $ 131,335 $ 94,427 $ 86,666 $ 84,688
Total assets $ 328,893 $ 263,405 $ 230,738 $ 223,721
Return on equity (3) 10.9% 7.3% 2.9% (4.3%)
Leverage(total assets/shareholders' equity) 2.50 2.79 2.66 2.64
Return on assets (3) 3.9% 2.7% 1.1% (1.7%)
Capital expenditures (4) $ 11,841 $ 8,257 $ 8,702 $ 4,992
(1) The Company's fiscal year ends on the last Friday in January.
(2) All data adjusted for fiscal 1986 and fiscal 1994 poolings of interest and three-for-two stock split declared May 17, 1988.
- ----------------------------------------------------------------------
1995 ANNUAL REPORT - PAGE 27
<CAPTION>
Fiscal Years Ended (1)(2)
1991 1990 1989 1988 1987 1986 1985
<S> <C> <C> <C> <C> <C> <C>
$ 576,388 $ 557,769 $ 529,306 $ 458,079 $ 372,687 $ 351,832 $ 336,466
$ 463,027 $ 443,914 $ 419,890 $ 362,355 $ 300,141 $ 284,259 $ 271,449
19.7% 20.4% 20.7% 20.9% 19.5% 19.2% 19.3%
$ 93,538 $ 86,403 $ 79,538 $ 69,097 $ 52,070 $ 48,385 $ 44,915
16.2% 15.5% 15.0% 15.1% 14.0% 13.8% 13.3%
$ 9,199 $ 9,127 $ 8,759 $ 6,742 $ 5,407 $ 4,793 $ 4,278
$ 2,606 $ 2,529 $ 1,370 $ 1,602 $ 541 $ 1,239 $ 1,139
$ 8,018 $ 15,796 $ 19,749 $ 18,283 $ 14,528 $ 13,156 $ 14,685
1.4% 2.8% 3.7% 4.0% 3.9% 3.7% 4.4%
$ 4,078 $ 2,800 $ 3,615 $ 2,575 $ 2,548 $ 1,761 $ 1,589
$ 8,026 $ 7,360 $ 6,628 $ 4,203 $ 3,447 $ 2,623 $ 3,362
$ 4,070 $ 11,236 $ 16,736 $ 16,655 $ 13,629 $ 12,294 $ 12,912
.7% 2.0% 3.2% 3.6% 3.7% 3.5% 3.8%
$ 1,654 $ 4,443 $ 6,456 $ 7,211 $ 6,701 $ 5,589 $ 5,847
$ 2,416 $ 6,793 $ 10,280 $ 9,444 $ 6,928 $ 6,705 $ 7,065
.4% 1.2% 1.9% 2.1% 1.9% 1.9% 2.1%
$ .51 $ 1.31 $ 1.95 $ 1.76 $ 1.32 $ 1.25 $ 1.34
$ .51 $ 1.24 $ 1.77 $ 1.61 $ 1.24 $ 1.25 $ 1.34
4,731 5,181 5,262 5,376 5,247 5,358 5,268
4,731 6,276 6,372 6,467 6,090 5,358 5,268
$ .36 $ .35 $ .31 $ .27 $ .25 $ .21 $ .21
$ 85,626 $ 82,855 $ 76,122 $ 63,069 $ 36,954 $ 20,908 $ 21,853
$ 89,548 $ 95,411 $ 93,656 $ 85,565 $ 78,826 $ 73,879 $ 68,117
$ 226,019 $ 242,626 $ 230,064 $ 207,618 $ 167,494 $ 139,918 $ 127,671
2.5% 7.3% 12.0% 12.0% 9.4% 9.8% 11.6%
2.52 2.54 2.46 2.43 2.12 1.89 1.87
1.0% 3.0% 5.0% 5.6% 5.0% 5.3% 5.8%
$ 7,172 $ 10,749 $ 9,856 $ 15,234 $ 11,318 $ 5,635 $ 7,866
(3) Ratios based on balance sheet at beginning of year.
(4) Excludes capital leases.
</TABLE>
- ----------------------------------------------------------------------
1995 ANNUAL REPORT - INSIDE BACK COVER
SHAREHOLDER INFORMATION
The shares of Hughes Supply, Inc. common stock are traded on the
New York Stock Exchange under the symbol "HUG." The approximate
number of shareholders of record as of March 1, 1995 was 1,116. A
COPY OF THE HUGHES SUPPLY, INC. ANNUAL REPORT ON FORM 10-K
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WILL
BE MADE AVAILABLE WITHOUT CHARGE, UPON WRITTEN REQUEST.
REQUESTS SHOULD BE DIRECTED TO:
J. Stephen Zepf
Treasurer and Chief Financial Officer
Hughes Supply, Inc.
Post Office Box 2273
Orlando, Florida 32802
TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
ANNUAL MEETING
Tuesday, May 23, 1995, at 10:00 AM
3rd floor of Park Building
Sun Bank Center
200 South Orange Avenue
Orlando, Florida 32801
GENERAL COUNSEL
Maguire, Voorhis & Wells, P.A.
Orlando, Florida
AUDITORS
Price Waterhouse LLP
Orlando, Florida
DIRECTORS
David H. Hughes
Chairman of the Board
John D. Baker, II
President, Florida Rock Industries, Inc.
Robert N. Blackford
Attorney, Maguire, Voorhis & Wells, P.A.
John B. Ellis
Retired, formerly Senior Vice President-Finance and
Treasurer, Genuine Parts Company.
A. Stewart Hall, Jr.
Clifford M. Hames
Retired, formerly Vice Chairman of the Board, Sun Bank, N.A.
Russell V. Hughes
Vincent S. Hughes
Herman B. McManaway
Retired, formerly Vice President, Ruddick Corporation and
President, Ruddick Investment Co.
Donald C. Martin
Retired, formerly President, Electrical Distributors, Inc.
CORPORATE HEADQUARTERS
Hughes Supply, Inc.
20 North Orange Avenue
Orlando, Florida 32801
Telephone: 407-841-4755
EXECUTIVE OFFICERS
AND MANAGEMENT
David H. Hughes
Chairman of the Board and
Chief Executive Officer
A. Stewart Hall, Jr.
President and Chief Operating Officer
Robert N. Blackford
Secretary
Jacquel K. Clark
Assistant Secretary & Assistant Treasurer
Jasper L. Holland, Jr.
Regional Vice President
Clyde E. Hughes
Regional Vice President
Russell V. Hughes
Vice President
Vincent S. Hughes
Vice President
Kenneth H. Stephens
Regional Vice President
Sidney J. Strickland, Jr.
Vice President, Purchasing and Administration
Gradie E. Winstead, Jr.
Regional Vice President
Peter J. Zabaski
Regional Vice President
J. Stephen Zepf
Treasurer & Chief Financial Officer
Exhibit
21.1
Subsidiaries of the Registrant
Set forth below is a listing, by name and state of
incorporation, of each corporation which is, as of the date of
this Report, or was, at any time since the first day of the
fiscal year ended January 27, 1995, a subsidiary of the
Registrant. Unless otherwise indicated, each such corporation
was a 100% owned subsidiary during such fiscal year and continues
in existence as a 100% owned subsidiary of the Registrant as of
the date of this Report.
1) XSMC, Inc., a Florida corporation, merged into the
Registrant January 27, 1995
2) Carolina Pump & Supply Corp., a Rhode Island
corporation
3) USCO Incorporated, a North Carolina corporation
4) Paine Supply of Jackson, Inc., a Mississippi
corporation
5) Hughes Aviation, Inc., a Florida Corporation
6) One Stop Supply, Inc., a Tennessee corporation
7) Mills & Lupton Supply Company, a Tennessee corporation
8) Twin-T of the Carolinas, Inc., a North Carolina
corporation, merged into Carolina Pump & Supply Corp.
February 20, 1995
9) H Venture Corp., a Florida corporation
10) HHH, Inc., a Delaware corporation
11) HSI Corp., a Delaware corporation
12) Electrical Distributors, Inc., a Georgia corporation,
merged into the Registrant January 27, 1995
13) Alabama Water Works Supply, Inc., an Alabama
corporation, merged into the Registrant January 27,
1995
14) Swaim Supply Company, Inc., a North Carolina
corporation, merged into USCO Incorporated February 7,
1995
15) Olander & Brophy, Inc., a Pennsylvania corporation,
acquired by the Registrant March 3, 1995
16) Port City Electrical Supply, Inc., a Georgia
corporation, acquired by the Registrant March 30, 1995
17) Elec-Tel Supply Company, a Georgia corporation,
acquired by the Registrant April 3, 1995
Exhibit 23.1
Consent of Independent Certified Public Accountants
We hereby consent to the incorporation by reference in the
Prospectus constituting part of the Registration Statements on
Form S-3 (Nos. 33-70112, 33-56489 and 33-56837) and the
Registration Statements on Form S-8 (Nos. 2-78323, 33-9082, 33-
26468 and 33-33701) of Hughes Supply, Inc. of our report dated
March 15, 1995 appearing on page 12 of the Annual Report to the
Shareholders which is incorporated in this Annual Report on Form
10-K.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Orlando, Florida
April 25, 1995
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration
Statements of Hughes Supply, Inc. on Forms S-8 (File Nos. 2-78323,
33-9082, 33-26468 and 33-33701) and on Forms S-3 (File Nos. 33-
70112, 33-56837 and 33-56489), of our report dated March 17, 1994,
on our audits of the consolidated financial statements of Hughes
Supply, Inc. and subsidiaries as of January 28, 1994 and for the
fiscal years ended January 28, 1994 and January 29, 1993, which
report is included in this Annual Report on Form 10-K.
/s/ Coopers & Lybrand L.L.P.
Orlando, Florida
April 5, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONSOLIDATED BALANCE SHEET OF HUGHES SUPPLY, INC. AS OF
JANUARY 27, 1995, AND THE RELATED STATEMENT OF INCOME FOR THE YEAR
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> YEAR
<FISCAL-YEAR-END> JAN-27-1995
<PERIOD-END> JAN-27-1995
<CASH> 3,192
<SECURITIES> 0
<RECEIVABLES> 126,930
<ALLOWANCES> 4,787
<INVENTORY> 119,686
<CURRENT-ASSETS> 260,421
<PP&E> 105,077
<DEPRECIATION> 51,846
<TOTAL-ASSETS> 328,893
<CURRENT-LIABILITIES> 95,100
<BONDS> 100,918
<COMMON> 6,149
0
0
<OTHER-SE> 125,186
<TOTAL-LIABILITY-AND-EQUITY> 328,893
<SALES> 802,445
<TOTAL-REVENUES> 802,445
<CGS> 640,170
<TOTAL-COSTS> 640,170
<OTHER-EXPENSES> 141,629
<LOSS-PROVISION> 1,185
<INTEREST-EXPENSE> 4,875
<INCOME-PRETAX> 17,423
<INCOME-TAX> 7,095
<INCOME-CONTINUING> 10,328
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,328
<EPS-PRIMARY> 1.79
<EPS-DILUTED> 1.76
</TABLE>
LOCATION OF FACILITIES Exhibit 99.1
As of April 5, 1995
HUGHES SUPPLY, INC.
FLORIDA - WHOLESALE
Auburndale Orlando
Bradenton Bathstyle Showroom
Cape Coral Building Materials
Clearwater Electrical
Clermont Lightstyle Showroom
Daytona Plumbing
Eaton Park Water & Sewer
Ft. Lauderdale Palm Beach
Building Materials Panama City
Plumbing Electrical
Ft. Myers Plumbing
Electrical Perry
Plumbing Pompano Beach
Water & Sewer Port Richey
Ft. Pierce St. Petersburg
Gainesville Sarasota
Electrical Building Materials & Electrical
Plumbing Plumbing
Inverness Sebring
Jacksonville Tallahassee
Electrical Building Materials
Building Materials Electrical
Plumbing & PVF Utility
Water & Sewer Tampa
Kissimmee Building Materials
Lady Lake Bathstyle Showroom
Lakeland Plumbing
Electrical Water & Sewer
Lightstyle Showroom Tavares
Leesburg Venice
Longwood Electrical & Plumbing
Marianna Lightstyle Showroom
Melbourne West Palm Beach
Miami Winter Haven
Naples
Electrical & Plumbing
Bathstyle Showroom
Ocala
Orange City
ALABAMA - WHOLESALE OHIO - WHOLESALE
Birmingham Batavia
Dothan Brimfield
HVAC Cleveland
Utility Columbus
Huntsville Dayton
Plumbing & HVAC Elyria
Water & Sewer Greenville
Mobile Hartville
Montgomery Lima
HVAC Marion
Water & Sewer Monroe
Toledo
GEORGIA - WHOLESALE Van Wert
Albany
Alpharetta
Athens INDIANA - WHOLESALE
Atlanta Fort Wayne
Building Materials Indianapolis
Electrical Water & Sewer
Plumbing & HVAC Plumbing & HVAC
Brunswick Muncie
Columbus
Conyers
Hartsfield PENNSYLVANIA - WHOLESALE
LaGrange Bedford
Macon Monroeville
Electrical Shippenville
Lightstyle Showroom
Plumbing & HVAC
Marietta SOUTH CAROLINA - WHOLESALE
Electric Utility Anderson
Plumbing & HVAC Bluffton
McDonough Hilton Head Island
Moultrie
Savannah
Electrical FLORIDA - DISTRIBUTION CENTER
Plumbing & HVAC Orlando
Water & Sewer
Statesboro
Thomasville GEORGIA - DISTRIBUTION CENTER
Tifton College Park
Electrical
Plumbing & HVAC
Valdosta
Electrical
Plumbing
PAINE SUPPLY OF JACKSON, INC. USCO INCORPORATED
MISSISSIPPI - WHOLESALE NORTH CAROLINA - WHOLESALE
Biloxi Charlotte
Greenville Crown Point Showroom
Greenwood Durham
Gulfport Goldsboro
Plumbing Henderson
Refrigeration High Point
Hattiesburg Monroe
Jackson Pinehurst
Laurel Rocky Mount
Meridian Salisbury
Pascagoula Statesville
Tupelo Zebulon
MARYLAND - WHOLESALE
CAROLINA PUMP & SUPPLY CORP. Capitol Heights
(d/b/a Pump & Lighting Co.)
SOUTH CAROLINA - WHOLESALE
NORTH CAROLINA - WHOLESALE Aiken
Charlotte Cheraw
Charlotte Water & Sewer Columbia
Fayetteville Greenville
Greensboro Lancaster
Hickory
Kinston VIRGINIA - WHOLESALE
Raleigh Arlington
Wilmington La Crosse
Winston Salem Lynchburg
SOUTH CAROLINA - WHOLESALE NORTH CAROLINA - DISTRIBUTION
Charleston CENTER
Florence Monroe
Greer
Surfside Beach
West Columbia
TENNESSEE - WHOLESALE
Knoxville
ONE STOP SUPPLY, INC.
TENNESSEE - WHOLESALE
Clarksville
Cookeville
Jackson
Memphis
Nashville
KENTUCKY - WHOLESALE
Bowling Green
Glasgow
MILLS & LUPTON SUPPLY COMPANY
TENNESSEE - WHOLESALE
Chattanooga
Cleveland
Memphis
GEORGIA - WHOLESALE
Dalton
Macon
FLORIDA - WHOLESALE
Tallahassee
