FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 001-08772
HUGHES SUPPLY, INC.
(Exact name of registrant as specified in its charter)
Florida 59-0559446
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
20 North Orange Avenue, Suite 200, Orlando, Florida 32801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 407/841-4755
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock Outstanding as of September 1, 1999
$1 Par Value 23,356,539
Page 1
HUGHES SUPPLY, INC.
FORM 10-Q
Index
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of
July 31, 1999 and January 29, 1999 ............ 3 - 4
Consolidated Statements of Income for the
Three Months Ended July 31, 1999 and 1998 ..... 5
Consolidated Statements of Income for the
Six Months Ended July 31, 1999 and 1998 ....... 6
Consolidated Statements of Cash Flows for the
Six Months Ended July 31, 1999 and 1998 ....... 7
Notes to Consolidated Financial Statements .... 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results
of Operations ................................. 9 - 15
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security
Holders ....................................... 16
Item 6. Exhibits and Reports on Form 8-K ............. 17 - 21
Signatures .................................... 22
Index of Exhibits Filed with This Report ...... 23
Page 2
HUGHES SUPPLY, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (unaudited)
(in thousands, except share data)
July 31, January 29,
1999 1999
---------- ----------
ASSETS
Current Assets:
Cash and cash equivalents $ 8,540 $ 6,010
Accounts receivable, less allowance for
losses of $7,340 and $2,809 411,825 341,109
Inventories 437,594 409,734
Deferred income taxes 10,936 8,520
Other current assets 29,104 31,346
---------- ----------
Total current assets 897,999 796,719
Property and Equipment, Net 138,083 127,632
Excess of Cost over Net Assets Acquired 224,954 181,622
Other Assets 20,701 17,540
---------- ----------
$1,281,737 $1,123,513
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
Page 3
HUGHES SUPPLY, INC.
Consolidated Balance Sheets (unaudited) - continued
(in thousands, except share data)
July 31, January 29,
1999 1999
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 146 $ 39
Accounts payable 213,003 176,234
Accrued compensation and benefits 24,073 25,029
Other current liabilities 39,648 27,982
---------- ----------
Total current liabilities 276,870 229,284
Long-Term Debt 500,852 402,203
Deferred Income Taxes 4,382 4,711
Other Noncurrent Liabilities 5,184 3,359
---------- ----------
Total liabilities 787,288 639,557
---------- ----------
Commitments and Contingencies
Shareholders' Equity:
Preferred stock - -
Common stock-24,252,489 and
24,183,834 shares issued 24,252 24,184
Capital in excess of par value 220,824 219,558
Retained earnings 272,785 242,730
Treasury stock, 883,750 and
no shares, at cost (20,400) -
Unearned compensation related to
outstanding restricted stock (3,012) (2,516)
---------- ----------
Total shareholders' equity 494,449 483,956
---------- ----------
$1,281,737 $1,123,513
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
Page 4
HUGHES SUPPLY, INC.
Consolidated Statements of Income (unaudited)
(in thousands, except per share data)
Three months ended July 31,
1999 1998
---------- ----------
Net Sales $ 774,888 $ 674,550
Cost of Sales 598,715 525,709
---------- ----------
Gross Profit 176,173 148,841
---------- ----------
Operating Expenses:
Selling, general and administrative 127,822 106,015
Depreciation and amortization 7,295 5,396
Provision for doubtful accounts 883 756
---------- ----------
Total operating expenses 136,000 112,167
---------- ----------
Operating Income 40,173 36,674
---------- ----------
Non-Operating Income and (Expenses):
Interest and other income 2,488 1,703
Interest expense (7,528) (6,353)
---------- ----------
(5,040) (4,650)
---------- ----------
Income Before Income Taxes 35,133 32,024
Income Taxes 14,228 12,251
---------- ----------
Net Income $ 20,905 $ 19,773
========== ==========
Earnings Per Share:
Basic $ .90 $ .83
========== ==========
Diluted $ .88 $ .82
========== ==========
Average Shares Outstanding:
Basic 23,300 23,925
========== ==========
Diluted 23,686 24,180
========== ==========
Dividends Per Share $ .085 $ .080
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
Page 5
HUGHES SUPPLY, INC.
Consolidated Statements of Income (unaudited)
(in thousands, except per share data)
Six months ended July 31,
1999 1998
---------- ----------
Net Sales $1,486,184 $1,276,581
Cost of Sales 1,153,653 998,463
---------- ----------
Gross Profit 332,531 278,118
---------- ----------
Operating Expenses:
Selling, general and administrative 249,157 205,604
Depreciation and amortization 13,951 11,109
Provision for doubtful accounts 2,270 1,326
---------- ----------
Total operating expenses 265,378 218,039
---------- ----------
Operating Income 67,153 60,079
---------- ----------
Non-Operating Income and (Expenses):
Interest and other income 4,728 3,229
Interest expense (14,302) (12,609)
---------- ----------
(9,574) (9,380)
---------- ----------
Income Before Income Taxes 57,579 50,699
Income Taxes 23,319 19,323
---------- ----------
Net Income $ 34,260 $ 31,376
========== ==========
Earnings Per Share:
Basic $ 1.45 $ 1.32
========== ==========
Diluted $ 1.43 $ 1.31
========== ==========
Average Shares Outstanding:
Basic 23,580 23,765
========== ==========
Diluted 23,954 24,028
========== ==========
Dividends Per Share $ .17 $ .16
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
Page 6
HUGHES SUPPLY, INC.
Consolidated Statements of Cash Flows (unaudited)
(in thousands)
Six months ended July 31,
1999 1998
---------- ----------
Cash Flows from Operating Activities:
Net income $ 34,260 $ 31,376
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 13,951 11,109
Provision for doubtful accounts 2,270 1,326
Other, net (692) (275)
Changes in assets and liabilities, net
of effects of business acquisitions:
(Increase) in accounts receivable (53,851) (70,953)
(Increase) in inventories (11,783) (11,215)
(Increase) decrease in other
current assets 2,859 (4,380)
(Increase) in other assets (3,503) (4,415)
Increase in accounts payable and
accrued liabilities 30,659 24,345
Increase in accrued interest and
income taxes 5,266 3,440
Increase in other noncurrent
liabilities 87 719
(Increase) decrease in net deferred
income taxes (2,042) 2,014
---------- ----------
Net cash provided by (used in)
operating activities 17,481 (16,909)
---------- ----------
Cash Flows from Investing Activities:
Capital expenditures (15,088) (11,985)
Proceeds from sale of
property and equipment 3,168 5,782
Business acquisitions, net of cash (63,560) (627)
---------- ----------
Net cash used in investing
activities (75,480) (6,830)
---------- ----------
Cash Flows from Financing Activities:
Net borrowings (payments) under
short-term debt arrangements 98,574 (10,051)
Principal payments on debt of acquired entities(13,455) (9,038)
Proceeds from issuance of long-term debt - 50,000
Dividends paid (4,057) (4,865)
Purchase of treasury stock (20,955) -
Other 422 (636)
---------- ----------
Net cash provided by financing
activities 60,529 25,410
---------- ----------
Net Increase in Cash and Cash Equivalents 2,530 1,671
Cash and Cash Equivalents:
Beginning of period 6,010 8,204
---------- ----------
End of period $ 8,540 $ 9,875
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
Page 7
HUGHES SUPPLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) (dollars in thousands, except per share data)
1. In the opinion of Hughes Supply, Inc. (the "Company"), the
accompanying unaudited consolidated financial statements contain
all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the financial position as of July 31,
1999, the results of operations for the three and six months ended
July 31, 1999 and 1998, and cash flows for the six months then
ended. The results of operations for the three and six months
ended July 31, 1999 are not necessarily indicative of the results
that may be expected for the full year.
The fiscal year of the Company is a 52-week period ending on the
last Friday in January. The three and six months ended July 31,
1999 and 1998 each contained 13 weeks and 26 weeks, respectively.
Basic earnings per share is calculated by dividing net income by
the weighted-average number of shares outstanding. Diluted
earnings per share is calculated by dividing net income by the
weighted-average number of shares outstanding, adjusted for
dilutive potential common shares. The weighted-average number of
shares used in calculating basic earnings per share were 23,300,000
and 23,925,000 for the three months ended July 31, 1999 and 1998,
respectively, and 23,580,000 and 23,765,000 for the six months
ended July 31, 1999 and 1998, respectively. In calculating diluted
earnings per share, these amounts were adjusted to include dilutive
potential common shares of 386,000 and 255,000 for the three months
ended July 31, 1999 and 1998, respectively, and 374,000 and 263,000
for the six months ended July 31, 1999 and 1998, respectively.
2. During the six months ended July 31, 1999, the Company acquired
five wholesale distributors of materials to the construction
industry that were accounted for as purchases. Cash payments for
these acquisitions totaled $63.6 million, which resulted in $47.3
million being recorded as the excess of cost over the fair value of
net assets acquired. This excess of cost over net assets acquired
is being amortized by the straight-line method over 15 to 40 years.
These acquisitions, individually and in the aggregate, did not have
a material effect on the consolidated financial statements of the
Company. Results of operations of these companies from their
respective dates of acquisition have been included in the
consolidated financial statements.
3. On March 15, 1999, the Board of Directors authorized the Company to
repurchase up to 2.5 million of its outstanding shares of common
stock. During the six months ended July 31, 1999, the Company
repurchased 908,900 shares of its common stock for a total cost of
$21.0 million at an average purchase price of $23.06 per share.
These shares are to be used for general corporate purposes.
Page 8
HUGHES SUPPLY, INC.
PART I. FINANCIAL INFORMATION - Continued
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following is management's discussion and analysis of certain
significant factors which affected the financial condition of the
Company as of July 31, 1999, and the results of operations for the three
and six months then ended.
Certain statements set forth in Management's Discussion and Analysis of
Financial Condition and Results of Operations, including but not limited
to certain statements made regarding the Year 2000 Issue (as
subsequently defined), constitute "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended, and
are subject to the safe harbor created by such sections. When used in
this report, the words "believe," "anticipate," "estimate," "expect,"
and similar expressions are intended to identify forward-looking
statements. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, it can give
no assurance that such expectations will prove to be correct. The
Company's actual results may differ significantly from the results
discussed in such forward-looking statements. When appropriate, certain
factors that could cause results to differ materially from those
projected in the forward-looking statements are enumerated. This
Management's Discussion and Analysis of Financial Condition and Results
of Operations should be read in conjunction with the Company's
consolidated financial statements and the notes thereto contained herein
and in the Company's Form 10-K for the fiscal year ended January 29,
1999.
Material Changes in Results of Operations
Net Sales
Net sales were $775 million for the quarter ended July 31, 1999, a 15%
increase over the prior year's second quarter. Net sales for the six
months ended July 31, 1999 were $1.49 billion, a 16% increase over the
first six months of the prior fiscal year. The majority of the increase
in net sales for the three and six month periods was attributable to
branches acquired and opened after January 31, 1998. The remainder of
the increase was attributable to same-store sales, which were up 3% and
6% for the three and six months ended July 31, 1999, respectively.
The increase in same-store sales was attributable to the (i) continued
overall strength of the construction market, (ii) increases in pool and
spa product sales and (iii) growth in electric utility product sales
resulting from improved market share. These increases were partially
Page 9
offset by declines in industrial product demand and continued
deflationary pricing within certain of the Company's commodity-based
products.
Gross Profit
Gross profit and gross margin for the three and six months ended July
31, 1999 and 1998 were as follows (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998
------------------- ------------------- Variance
Gross Gross Gross Gross ----------------
Profit Margin Profit Margin Amount %
--------- ------ --------- ------ -------- -----
<S> <C> <C> <C> <C> <C> <C>
Three months ended $ 176,173 22.7% $ 148,841 22.1% $ 27,332 18.4%
Six months ended $ 332,531 22.4% $ 278,118 21.8% $ 54,413 19.6%
</TABLE>
The improvement in gross margins resulted from several factors,
including the Company's expansion of higher-margin product groups
through acquisitions, efficiencies created with central distribution
centers and enhanced purchasing power. The enhanced purchasing power
was attributable to increased volume and concentration of supply sources
as part of the Company's preferred vendor program.
Although the gross margin percentage increased for the three and six
months ended July 31, 1999, total gross profit dollars for the periods
were negatively impacted by declines in pricing of certain commodity-
based products. The lower pricing was the result of continued
deflationary pressure over the past year on the pricing of certain of
the Company's products whose manufacture is reliant on certain
commodities, including stainless steel, nickel alloys, copper, aluminum
and plastic.
Operating Expenses
Operating expenses for the three and six months ended July 31, 1999 and
1998 were as follows (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998
-------------------- -------------------- Variance
% of % of ----------------
Amount Net Sales Amount Net Sales Amount %
--------- --------- --------- --------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Three months ended $ 136,000 17.6% $ 112,167 16.6% $ 23,833 21.2%
Six months ended $ 265,378 17.9% $ 218,039 17.1% $ 47,339 21.7%
</TABLE>
The increase in operating expenses as a percent of net sales for the
three and six month periods ended July 31, 1999 was primarily due to (i)
higher personnel costs in connection with increased personnel headcount
resulting from higher volume levels of activity, wage increases, and the
Company's employee retention activities and (ii) increased information
technology spending and conversion costs as the Company continues its
program of upgrading information technology systems. The Company
believes its investment in these initiatives will provide a platform for
future growth and enable it to realize more administrative synergies
from past and future acquisitions.
Page 10
Interest Expense
Interest expense was $7.5 million and $14.3 million for the three and
six month periods ended July 31, 1999, respectively, compared to $6.4
million and $12.6 million for the same periods in the prior year,
respectively. The increases were primarily the result of higher
borrowing levels, partially offset by lower interest rates. The higher
borrowing levels were primarily due to the Company's (i) expansion
through business acquisitions, which has been partially funded by debt
financing, and (ii) share repurchases.
Income Taxes
The effective income tax rates for the three and six month periods ended
July 31, 1999 and 1998 were as follows:
1999 1998
Three months ended 40.5% 38.3%
Six months ended 40.5% 38.1%
Prior to the merger with Winn-Lange Electric, Inc. ("Winn-Lange") on
June 30, 1998, Winn-Lange was a Subchapter S corporation and therefore,
not subject to corporate income tax. Winn-Lange's Subchapter S
corporation status terminated upon the merger with the Company. As a
result, the Company's effective tax rate was higher for the three and
six months ended July 31, 1999 compared to the prior year periods.
Net Income
Net income for the second quarter increased 6% to $20.9 million.
Diluted earnings per share for the quarter were $.88 compared to $.82,
a 7% increase over the prior year period.
For the six months ended July 31, 1999, net income was $34.3 million, a
9% increase over the prior year's comparable period. Diluted earnings
per share for the six months ended July 31, 1999 increased 9% to $1.43,
up from $1.31 in the prior year's comparable period.
Liquidity and Capital Resources
Net cash provided by operations was $17.5 million for the six months
ended July 31, 1999 compared to $16.9 million of net cash used in
operations for the six months ended July 31, 1998. This change was
primarily the result of (i) an improvement in accounts receivable
turnover from same-store branches and (ii) an increase in accounts
payable and accrued liabilities resulting from the Company's cash
management efforts.
The Company's expenditures for property and equipment were $15.1 million
for the six months ended July 31, 1999 compared to $12.0 million for the
six months ended July 31, 1998. Of these expenditures, $2.6 million and
$2.4 million, respectively, were related to information technology
Page 11
outlays. Capital expenditures for property and equipment, excluding
amounts for business acquisitions, are expected to be approximately $30
million for fiscal 2000.
Proceeds from the sale of property and equipment decreased from $5.8
million for the six months ended July 31, 1998 to $3.2 million for the
six months ended July 31, 1999. This decrease was primarily due to the
$5.4 million in proceeds received from the sale and subsequent lease-
back of certain computer hardware during the six months ended July 31,
1998, as compared to the $2.5 million in proceeds received during the
six months ended July 31, 1999 from the sale and subsequent lease-back
of certain computer hardware.
Cash payments for business acquisitions accounted for as purchases
totaled $63.6 million for the six months ended July 31, 1999 compared to
$0.6 million in the prior year period.
Principal reductions on debt of acquired entities were $13.5 million for
the six months ended July 31, 1999 compared to $9.0 million for the same
period in the prior year. Dividend payments were $4.1 million and $4.9
million during the six months ended July 31, 1999 and 1998,
respectively. Dividend payments of $4.9 million during the six months
ended July 31, 1998 included cash dividends of pooled companies totaling
$1.2 million.
On March 15, 1999, the Board of Directors authorized the Company to
repurchase up to 2.5 million of its outstanding shares of common stock.
During the six months ended July 31, 1999, the Company repurchased
908,900 shares of its common stock for a total cost of $21.0 million at
an average purchase price of $23.06 per share. These share are to be
used for general corporate purposes.
As of July 31, 1999, the Company had approximately $58 million of unused
borrowing capacity (subject to borrowing limitations under long-term
debt covenants) to fund ongoing operating requirements and anticipated
capital expenditures. The Company also believes it has sufficient
borrowing capacity to take advantage of growth and business acquisition
opportunities and to fund share repurchases in the near term. The
Company expects to continue to finance future expansion on a project-by-
project basis through additional borrowing or through the issuance of
common stock.
Year 2000 Issue
Many existing computer programs use only two digits to identify a year
in the date field. As the century date change occurs, these programs
may recognize the year 2000 as 1900, or not at all. If not corrected,
many computer systems and applications could fail or create erroneous
results by or at the year 2000 (the "Year 2000 Issue").
The Company has developed plans to address its possible exposures
related to the impact of the Year 2000 Issue on each of its internal
Page 12
systems and those of third parties. These plans are expected to be
implemented primarily with the use of internal personnel.
The Company's internal systems consist of its main operating and
accounting systems, which handle the majority of its business
transactions, and other remote operating systems, which have resulted
from the Company's acquisition program. Plans to address the Year 2000
Issue with respect to the Company's internal systems include an
assessment phase, a remediation phase and a testing phase.
All required modifications to the Company's main operating system were
completed in December 1998. This system was thoroughly tested and the
modifications were implemented into the production environment. The
Company has installed an upgraded, vendor-certified year 2000 compliant
version of its accounting system. The Company's own internal
verification and validation testing for year 2000 compliance of the
accounting system was completed in May 1999. With respect to these two
systems, the Company does not anticipate that the Year 2000 Issue will
materially impact its operations or operating results.
As of August 23, 1999, the Company had 13 remote operating systems in
place. One of these systems utilizes a customized business software
application that the Company is testing for year 2000 compliance. The
remaining 12 systems utilize commercially available business software
applications. Of these 12 systems, nine are certified year 2000
compliant by their vendors. The remaining three systems are expected to
be converted by October 31, 1999 to one of the nine vendor-certified
year 2000 compliant systems that are expected to be in use on January 1,
2000.
The Company has successfully completed its own internal verification and
validation testing for year 2000 compliance on six of the nine vendor-
certified year 2000 compliant systems that are expected to be in use on
January 1, 2000. The tested systems support approximately 90% of the
Company's business volume. Testing of the remaining three systems is
currently underway and is expected to be completed by October 31, 1999.
All additional remote operating systems added after August 23, 1999 as
a result of the Company's acquisition program will be assessed,
remediated and tested to the extent that is necessary to ensure year
2000 compliance, or converted to one of the Company's systems that is
expected to be year 2000 compliant.
Management estimates total pretax costs relating to the Year 2000 Issue
to be approximately $2 million. Approximately 50% of these costs were
incurred through July 31, 1999 and the remaining costs are expected to
be incurred through March 2000. The estimate of $2 million excludes
certain costs of converting remote operating systems to the Company's
other year 2000 compliant systems, because such costs are not expected
to be material or the conversion is scheduled to be performed as part of
the Company's normal integration activities. Approximately $1 million
of the estimated total pretax costs of $2 million are personnel and
other expenses related to the Company's Year 2000 Project Team, which is
Page 13
expected to remain intact through the turn of the century. The
remaining estimated cost of $1 million is expected to be incurred
primarily in connection with the remediation and testing of the
Company's remote operating systems.
The Company has contacted its major suppliers, customers and service
providers regarding their Year 2000 Issues to assess the risk of these
entities not being able to continue to provide goods and services to the
Company. Through July 31, 1999, approximately 44% of the entities
contacted have responded. Of those entities who have responded,
approximately 50% have indicated that their systems are year 2000
compliant, and the remaining entities have indicated that they have
programs in place to address their respective organization's Year 2000
Issues. The Company plans to continue to evaluate the year 2000
readiness of its major suppliers, customers and service providers.
The Company believes its planning efforts are adequate to address the
Year 2000 Issue. There are, however, certain risks that the Company
cannot directly control, including the readiness of its major suppliers,
customers and service providers. Failure on the part of any of these
entities to timely remediate their Year 2000 Issues could result in
disruptions in the Company's supply of materials, disruptions in its
customers' ability to conduct business and interruptions to the
Company's daily operations. There can be no guarantee that the systems
of other third parties on which the Company's systems and operations
rely will be corrected on a timely basis and will not have a material
adverse effect on the Company.
As the Company receives and evaluates additional information provided by
third parties regarding their year 2000 readiness, the Company intends
to develop contingency plans, as deemed necessary, to safeguard its
ongoing operations. Such contingency plans may include identifying
alternative suppliers or service providers, stockpiling certain
inventories if alternative sources of supply are not available,
evaluating the impact and creditworthiness of non-compliant customers
and the addition of borrowing capacity if deemed necessary to finance
higher levels of inventory or working capital on an interim basis.
Page 14
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to market risk from changes in (i) interest rates
on outstanding variable-rate debt and (ii) the prices of certain of the
Company's products whose manufacture is reliant on certain commodities.
Interest Rate Risk
At July 31, 1999, the Company had approximately $272.9 million of
outstanding variable-rate debt. Based upon an assumed 10% increase or
decrease in interest rates from their July 31, 1999 levels, the market
risk with respect to the Company's variable-rate debt would not be
material. The Company manages its interest rate risk by maintaining a
combination of fixed-rate and variable-rate debt.
Commodity Price Risk
The Company is affected by price fluctuations in stainless steel, nickel
alloys, copper, aluminum, plastic and other commodities. Such commodity
price fluctuations have from time to time created cyclicality in the
financial performance of the Company and could continue to do so in the
future. The Company seeks to minimize the effects of commodity price
fluctuations through (i) economies of purchasing and inventory
management resulting in cost reductions, maintenance of minimum economic
reorder points, and productivity improvements and (ii) price increases
to maintain reasonable profit margins. Additional information with
respect to the Company's commodity price risk is set forth under the
caption "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in Part I, Item 2 of this report.
Page 15
HUGHES SUPPLY, INC.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The 1999 Annual Meeting of Shareholders (the "Annual Meeting") was held
on May 19, 1999. At the Annual Meeting, holders of 19,901,950 shares of
the Company's common stock were present in person or by proxy. At the
Annual Meeting, Messrs. William P. Kennedy, David H. Hughes and Vincent
S. Hughes were elected directors of the Company to hold office until the
2002 Annual Meeting and until the election and qualification of their
respective successors or until the earlier of their death, resignation
or removal. The tabulation of the votes present in person or by proxy
at the Annual Meeting with respect to each nominee for office was as
follows:
Authority
For Withheld
William P. Kennedy 18,375,998 1,525,952
David H. Hughes 18,366,498 1,535,452
Vincent S. Hughes 18,366,993 1,534,957
Messrs. John D. Baker II, A. Stewart Hall, Jr., Robert N. Blackford and
H. Corbin Day each continued their term of office as a director of the
Company after the Annual Meeting.
The shareholders of the Company also voted on a proposal to amend the
Directors' Stock Option Plan ("Proposal Two") to increase by 100,000 the
number of shares with respect to which options may be granted under the
plan and to provide for the grant of options to non-employee directors
under the plan following each annual meeting of the shareholders. The
tabulation of votes with respect to this proposal was as follows:
Authority
For Withheld Abstain
Proposal Two 18,586,428 1,206,646 108,876
Page 16
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits Filed
(2) Plan of acquisition, reorganization, arrangement, liquidation
or succession. Not applicable.
(3) Articles of incorporation and by-laws.
3.1 Restated Articles of Incorporation, as amended,
incorporated by reference to Exhibit 3.1 to Form 10-Q for
the quarter ended April 30, 1997 (Commission File No.
001-08772).
3.2 Composite By-Laws, as amended, incorporated by reference
to Exhibit 3.2 to Form 10-K for the fiscal year ended
January 30, 1998 (Commission File No. 001-08772).
3.3 Form of Articles of Amendment to Restated Articles of
Incorporation of the Company, incorporated by reference
to Exhibit 99.2 to Form 8-A dated May 22, 1998
(Commission File No. 001-08772).
(4) Instruments defining the rights of security holders, including
indentures.
4.1 Form of Common Stock Certificate representing shares of
the Registrant's common stock, $1.00 par value,
incorporated by reference to Exhibit 4.1 to Form 10-Q for
the quarter ended July 31, 1997 (Commission File No. 001-
08772).
4.2 Rights Agreement dated as of May 20, 1998 between Hughes
Supply, Inc. and American Stock Transfer & Trust Company,
incorporated by reference to Exhibit 99.2 to Form 8-A
dated May 22, 1998 (Commission File No. 001-08772).
(10) Material contracts.
10.1 Lease Agreements with Hughes, Inc.
(a) Orlando Trucking, Garage and Maintenance Operations
dated December 1, 1971, incorporated by reference
to Exhibit 13(n) to Registration No. 2-43900
(Commission File No. 0-5235). Letter dated April
15, 1992 extending lease from month to month, filed
as Exhibit 10.1(a) to Form 10-K for the fiscal year
ended January 31, 1992 (Commission File No. 0-
5235).
Page 17
(b) Leases effective March 31, 1988, incorporated by
reference to Exhibit 10.1(c) to Form 10-K for the
fiscal year ended January 27, 1989 (Commission File
No. 0-5235).
Sub-Item Property
(1) Clearwater
(2) Daytona Beach
(3) Fort Pierce
(4) Lakeland
(6) Leesburg
(7) Orlando Electrical Operation
(8) Orlando Plumbing Operation
(9) Orlando Utility Warehouse
(11) Sarasota
(12) Venice
(13) Winter Haven
(c) Lease amendment letter between Hughes, Inc. and the
Registrant, dated December 1, 1986, amending
Orlando Truck Operations Center and Maintenance
Garage lease, incorporated by reference to Exhibit
10.1(i) to Form 10-K for the fiscal year ended
January 30, 1987 (Commission File No. 0-5235).
(d) Lease agreement dated June 1, 1987, between Hughes,
Inc. and the Registrant, for additional Sarasota
property, incorporated by reference to Exhibit
10.1(j) to Form 10-K for the fiscal year ended
January 29, 1988 (Commission File No. 0-5235).
(e) Lease dated March 11, 1992, incorporated by
reference to Exhibit 10.1(e) to Form 10-K for the
fiscal year ended January 31, 1992 (Commission File
No. 0-5235).
Sub-Item Property
(2) Gainesville Electrical Operation
(f) Amendments to leases between Hughes, Inc. and the
Registrant, dated April 1, 1998, amending the
leases for the thirteen properties listed in
Exhibit 10.1(b), (d) and (e), incorporated by
reference to Exhibit 10.1 to Form 10-K for the
fiscal year ended January 30, 1998 (Commission File
No. 001-08772).
Page 18
10.2 Hughes Supply, Inc. 1988 Stock Option Plan as amended
March 12, 1996 incorporated by reference to Exhibit 10.2
to Form 10-K for the fiscal year ended January 26, 1996
(Commission File No. 001-08772).
10.3 Form of Supplemental Executive Retirement Plan Agreement
entered into between the Registrant and eight of its
executive officers, incorporated by reference to Exhibit
10.6 to Form 10-K for the fiscal year ended January 30,
1987 (Commission File No. 0-5235).
10.4 Directors' Stock Option Plan, as amended.
10.5 Written description of senior executives' long-term
incentive bonus plan for fiscal year 1996 incorporated by
reference to the description of the bonus plan set forth
under the caption "Approval of the Stock Award Provisions
of the Senior Executives' Long-Term Incentive Bonus Plan
for Fiscal Year 1996" on pages 26 and 27 of the
Registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held May 24, 1994 (Commission File No.
001-08772).
10.6 Hughes Supply, Inc. Amended Senior Executives' Long-Term
Incentive Bonus Plan, adopted January 25, 1996,
incorporated by reference to Exhibit 10.9 to Form 10-K
for the fiscal year ended January 26, 1996 (Commission
File No. 001-08772).
10.7 Note Purchase Agreement, dated as of August 28, 1997, by
and among the Company and certain purchasers identified
in Schedule A of the Note Purchase Agreement,
incorporated by reference to Exhibit 10.15 to Form 10-Q
for the quarter ended July 31, 1997 (Commission File No.
001-08772).
10.8 Hughes Supply, Inc. 1997 Executive Stock Plan (the
"Plan") incorporated by reference to the description of
the Plan set forth under Exhibit A of the Registrant's
Proxy Statement for the Annual Meeting of Shareholders to
be held May 20, 1997 (Commission File No. 001-08772).
10.9 Note Purchase Agreement, dated as of May 29, 1996, by and
among the Company and certain purchasers identified in
Schedule A of the Note Purchase Agreement, incorporated
by reference to Exhibit 10.13 to Form 10-K for the fiscal
year ended January 30, 1998 (Commission File No. 001-
08772).
Page 19
10.10 Note Purchase Agreement, dated as of May 5, 1998, by and
among the Company and certain purchasers identified in
Schedule A of the Note Purchase Agreement, incorporated
by reference to Exhibit 10.11 to Form 10-Q for the
quarter ended April 30, 1998 (Commission File No. 001-
08772).
10.11 Revolving Credit Agreement, dated as of January 26, 1999,
by and among the Company and a group of banks,
incorporated by reference to Exhibit 10.11 to Form 10-K
for the fiscal year ended January 29, 1999 (Commission
File No. 001-08772). The Revolving Credit Agreement
contains a table of contents identifying the contents of
Schedules and Exhibits, all of which have been omitted.
The Company agrees to furnish a supplemental copy of any
omitted Schedule or Exhibit to the Commission upon
request.
10.12 Line of Credit Agreement, dated as of January 26, 1999,
by and among the Company and a group of banks,
incorporated by reference to Exhibit 10.12 to Form 10-K
for the fiscal year ended January 29, 1999 (Commission
File No. 001-08772). The Line of Credit Agreement
contains a table of contents identifying the contents of
Schedules and Exhibits, all of which have been omitted.
The Company agrees to furnish a supplemental copy of any
omitted Schedule or Exhibit to the Commission upon
request.
(11) Statement re computation of per share earnings. Not
applicable.
(15) Letter re unaudited interim financial information. Not
applicable.
(18) Letter re change in accounting principles. Not applicable.
(19) Report furnished to security holders. Not applicable.
(22) Published report regarding matters submitted to vote of
security holders. Not applicable.
(23) Consents of experts and counsel. Not applicable.
(24) Power of attorney. Not applicable.
(27) Financial data schedule.
27.1 Financial Data Schedule (filed electronically only).
Page 20
(99) Additional exhibits. Not applicable.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter
ended July 31, 1999.
Page 21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HUGHES SUPPLY, INC.
Date: September 14, 1999 By: /s/ David H. Hughes
David H. Hughes, Chairman of
the Board and Chief Executive
Officer
Date: September 14, 1999 By: /s/ J. Stephen Zepf
J. Stephen Zepf, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
Page 22
INDEX OF EXHIBITS FILED WITH THIS REPORT
10.4 Directors' Stock Option Plan, as amended.
27.1 Financial Data Schedule (filed electronically only).
Page 23
Exhibit 10.4
RESOLUTIONS ADOPTED
BY THE
BOARD OF DIRECTORS
OF
HUGHES SUPPLY, INC.
On March 18, 1998
WHEREAS, the Hughes Supply, Inc. Directors' Stock Option Plan
(the "Directors' Stock Option Plan") provides that in the event
that an optionee ceases to be a Director for any reason other than
death or disability, such optionee may exercise any option at any
time within three months after the date on which the optionee
ceases to be a Director; and
WHEREAS, the Company's Board of Directors deems it to be in
the best interest of the Company to extend the three month period
referenced above to one year.
NOW, THEREFORE, BE IT HEREBY RESOLVED, that the time period
within which an optionee who ceases to be a Director, for any
reason other than death or disability, may exercise his options
under the Directors' Stock Option Plan shall be extended from three
months to one year.
AMENDMENT NO. 1 TO
HUGHES SUPPLY, INC.
DIRECTORS' STOCK OPTION PLAN
WHEREAS, the Board of Directors of Hughes Supply, Inc. (the
"Corporation") approved the Directors' Stock Option Plan (the
"Plan") on January 24, 1989 in the form attached hereto as Appendix
"A";
WHEREAS, the letter from the staff of the Securities and
Exchange Commission referred to in Section 14 of the Plan was
issued by the Commission Staff on April 6, 1989 satisfying the
conditions of Section 14;
WHEREAS, the shareholders of the Corporation approved the Plan
at the Annual Meeting of Shareholders held on May 30, 1989;
WHEREAS, in accordance with the terms of Sections 3 and 4 of
the Plan, options with respect to all of the stock authorized for
options under the Plan have been granted and no additional options
under the Plan may be granted in the absence of the expiration or
termination of presently outstanding options or an amendment to the
Plan increasing a number of shares as to which options may be
granted; and
WHEREAS, the Board of Directors of the Corporation on March
24, 1994 approved and recommended shareholder approval of an
amendment to the Plan to increase by 75,000 the number of shares as
to which options may be granted under the Plan; and
WHEREAS, the shareholders approved the recommended amendment
at Annual Meeting of Shareholders held on May 24, 1994 increasing
from 60,000 to 135,000 the number of shares with respect to which
options may be granted under the Plan from 60,000 shares to 135,000
shares;
NOW, THEREFORE, IN WITNESS THEREOF, the following provisions
of the Plan are hereby amended and modified as follows:
Section 3.
Section 3. Participants and Options is hereby amended and
modified to amend and modify subparagraph (ii) thereof and to add
a new subparagraph (iii) as follows:
3. PARTICIPANTS AND OPTIONS
(ii) In addition to the options referred to in
subparagraph (i) above, during the term of the Plan
until, but not including, the date of the 1994 annual
meeting of shareholders a subsequent grant of options for
an aggregate of 12,000 shares, or such lesser number of
shares as shall then constitute all of the remaining
shares which are authorized for options under the Plan
but which are not then subject to options under the Plan,
within the limitation set forth in Section 4 hereof,
divided equally (rounded, if necessary, down to the
nearest whole number of shares) among the Participants
under the Plan, will be made at the meeting of the Board
of Directors of the Corporation immediately following the
1990 annual meeting of stockholders of the Corporation
and at each Board meeting immediately following each
annual meeting of stockholders thereafter during the term
of the Plan and prior to the 1994 annual meeting of
shareholders.
(iii) In addition to the options referred to in
subparagraphs (i) and (ii) above, during the term of the
Plan beginning with the date of the 1994 annual meeting
of shareholders a subsequent grant of options for an
aggregate of 15,000 shares or such lesser number of
shares as shall then constitute all of the remaining
shares which are authorized for options under the Plan
but which are not then subject to options under the Plan,
within the limitations set forth in Section 4 hereof,
divided equally (rounded, if necessary, down to the
nearest whole number of shares) among the Participants
under the Plan, will be made at the meeting of the Board
of Directors of the Corporation immediately following the
1994 annual meeting of stockholders of the Corporation at
each Board meeting immediately following each annual
meeting of stockholders thereafter during the term of the
Plan.
Section 4.
Section 4. Stock is hereby amended and modified to read in its
entirety as follows:
4. STOCK
The stock which may be subject to options under the
Plan shall be 135,000 shares of the Corporation's
authorized but unissued or reacquired $1.00 par value
common stock hereafter sometimes called capital stock.
The aggregate number of shares of capital stock which are
subject to outstanding options and which will be subject
to options to be granted under the Plan shall be subject
to adjustment in accordance with the provisions of
subsection (h) of Section 5 hereof.
In the event that any outstanding option under the
Plan for any reason expires or is terminated, the shares
of capital stock allocable to the unexercised portion of
such option may again be subject to an option under the
Plan.
Of the stock which may be subject to options under
the Plan, 75,000 of such shares have been added by an
amendment to the Plan approved by the stockholders on May
24, 1994 and such additional shares constitute shares as
to which "Amendment Options" within the meaning of
Section 6 hereof may be granted and approval by the
stockholders of such amendment extends the term of the
Plan in accordance with Section 6 hereof.
Except as hereinbefore set forth, the Plan shall remain
unchanged and in full force and effect.
The amendments and modifications set forth in this Amendment
No. 1 to Hughes Supply, Inc. Directors' Stock Option Plan were
approved and adopted by the Board of Directors and the stockholders
on the dates hereinabove set forth.
Witness my hand and the seal of the Corporation this 24th day
of May, 1994.
/s/Robert N. Blackford
Robert N. Blackford, Secretary
Hughes Supply, Inc.
AMENDMENT NO. 5 TO
HUGHES SUPPLY, INC.
DIRECTORS' STOCK OPTION PLAN
WHEREAS, the Board of Directors of Hughes Supply, Inc. (the
"Corporation") approved the Directors' Stock Option Plan (the "Plan") on
January 24, 1989;
WHEREAS, the shareholders of the Corporation approved the Plan at the
Annual Meeting of Shareholders held on May 25, 1989;
WHEREAS, the Plan was first amended on May 24, 1994 to increase the
number of shares with respect to which options may be granted under the
Plan from 60,000 shares to 135,000 shares;
WHEREAS, the Corporation had a three-for-two stock split that became
effective on July 10, 1997 (the "1997 Stock Split");
WHEREAS, in accordance with Section 8 of the Plan, the Board of
Directors of the Corporation desired to amend the Plan to increase the
number of shares as to which options may be granted from 202,500 shares
(adjusted to reflect the 1997 Stock Split) by 100,000 shares to 302,500
shares, and the shareholders approved such amendment on May 19, 1999; and
WHEREAS, under the terms of the Plan, the approval by the shareholders
of the Corporation of this increase in the number of shares as to which
options may be granted will extend the term of the Plan as to those options
until May 19, 2009.
NOW, THEREFORE, the Plan is hereby amended as follows, effective as of
May 19, 1999:
1. By adding the following Section 3(iv):
"In addition to the options referred to in subparagraphs (i),
(ii), and (iii) above, during the term of the Plan beginning with the
date of the 1999 annual meeting of shareholders a subsequent grant of
options for an aggregate of 20,000 shares or such lesser number of
shares as shall then constitute all of the remaining shares which are
authorized for options under the Plan but which are not subject to
options under the Plan, within the limitations set forth in Section 4
hereof, divided equally (rounded, if necessary, down to the nearest
whole number of shares) among the Participants under the Plan, will be
made at the meeting of the Board of Directors of the Corporation
immediately following the 1999 annual meeting of shareholders of the
Corporation and at each Board meeting immediately following each
annual meeting of shareholders thereafter during the term of the
Plan."
2. By replacing Section 4 with the following:
"The stock which may be subject to options under the Plan shall
be 302,500 shares of the Corporation's authorized but unissued or
reacquired $1.00 par value common stock hereafter sometimes called
capital stock. The aggregate number of shares of capital stock which
are subject to outstanding options and which will be subject to
options to be granted under the Plan shall be subject to adjustment in
accordance with the provisions of subsection (h) of Section 5 hereof.
In the event that any outstanding option under the Plan for any
reason expires or is terminated, the shares of capital stock allocable
to the unexercised portion of such option may again be subject to an
option under the Plan.
Of the stock which may be subject to options under the Plan,
90,000 of such shares (adjusted to reflect the three-for-two stock
split which became effective on July 7, 1997) have been added by an
amendment to the Plan approved by the shareholders on May 24, 1994 and
100,000 of such shares have been added by an amendment to the Plan
approved by the shareholders on May 19, 1999. Such additional shares
constitute shares to which "Amendment Options" within the meaning of
Section 6 hereof may be granted. Approval by the shareholders of such
amendments of May 24, 1994 and May 19, 1999 amends the term of the
Plan in accordance with Section 6 hereof."
Except as set forth above, the Plan shall remain unchanged and in full
force and effect.
This Amendment is executed by the Corporation this ___ day of
_________, 1999.
HUGHES SUPPLY, INC.
By:
Title:
HUGHES SUPPLY, INC.
Directors' Stock Option Plan
1. PURPOSE
This Directors Stock Option Plan (the "Plan") is intended
as an incentive and to encourage Directors of Hughes Supply, Inc.
(the "Corporation") who are not, and for the previous twelve (12)
months have not been, employees of the Corporation eligible to
participate in the Hughes Supply, Inc. 1988 Stock Option Plan (the
"Employee Plan") to increase their stock ownership and proprietary
interest in the success of the Corporation, to encourage them to
continue as Directors of the Corporation and as an incentive to
work to increase the value of the stock of the Corporation. The
options to be issued pursuant to this Plan shall not constitute
incentive stock options within the meaning of Sec. 422A of the 1986
Internal Revenue Code, as amended (the "Code").
2. ADMINISTRATION
The Plan shall be administered by a Directors' Stock
Option Plan committee appointed by the Board of Directors of the
Corporation (the "Committee"). The Committee shall consist of not
less than three (3) members of the Corporation's Board of Directors
who are not,,employees of the Corporation and who are
"disinterested persons as that term is defined in Rule 16b-3(d)
under the Securities Exchange Act of 1934 (the "Exchange Act") or
any successor statute or regulation regarding the same subject
matter. The Board of Directors may from time to time remove
members from, or add members to, the Committee. Vacancies on the
Committee, howsoever caused, shall be filled by the Board of
Directors. The Committee shall elect one of its members as
Chairman, and shall hold meetings at such times and places as it
may determine. Acts of the Committee taken by a majority of the
Committee at a meeting at which a quorum is present, or acts
reduced to or approved in writing by a majority of the members of
the Committee, shall be the valid acts of the Committee. A
nonemployee Director shall receive options under the Plan whether
or not such Director also serves as a member of the Committee.
Subject to the provisions of the Plan the Committee may from time
to time adopt such rules for administration of the Plan as it deems
appropriate.
The interpretation and construction by the Committee of
any provisions of the Plan or of any option granted under it shall
be final unless otherwise determined by the Board of Directors. No
member of the Board of Directors or the Committee shall be liable
for any action or determination made in good faith with respect to
the Plan or any option granted under it.
3. PARTICIPANTS AND OPTIONS
The persons who shall be participants under the Plan (the
"Participants") shall be all such Directors of the Corporation as
are not on the date of the grant of an option under the Plan, and
for a period of at least twelve (12) months prior to the grant of
such option have not been, employees of the Corporation. Options
are granted and shall be granted to Participants under the Plan as
follows:
(i) Subject to approval of the Plan by the
stockholders in accordance with Section 13 hereof and to the
receipt by the Corporation of the letter from the staff of the
Securities and Exchange Commission referred to in Section 14
hereof, an initial grant of an aggregate of 12,000 shares divided
equally (rounded, if necessary, down to the nearest whole number of
shares) among the Participants is made effective as of January 24,
1989 to the Participants on that date.
(ii) In addition to the options referred to in
subparagraph (i) above, during the term of the Plan a subsequent
grant of options for an aggregate of 12,000 shares or such lesser
number of shares as shall then constitute all of the remaining
shares which are not then, but which may be subject to options
under the Plan within the limitation set forth in Section 4 hereof,
divided equally (rounded, if necessary, down to the nearest whole
number of shares) among the then Participants under the Plan, will
be made at the meeting of the Board of Directors of the Corporation
immediately following the 1990 annual meeting of stockholders of
the Corporation and at each Board meeting immediately following
each annual meeting of stockholders of the Corporation thereafter
during the term of the Plan.
4. STOCK
The stock which may be subject to the options under the
Plan shall be 60,000 shares of the Corporations authorized but
unissued or reacquired $1.00 par value common stock hereafter
sometimes called capital stock. The aggregate number of shares of
capital stock which are subject to outstanding options and which
will be subject to options to be granted under the Plan shall be
subject to adjustment in accordance with the provisions of
subsection (h) of Section 5 hereof.
In the event that any outstanding option under the Plan
for any reason expires or is terminated, the shares of capital
stock allocable to the unexercised portion of such option may again
be subjected to an option under the Plan.
5. TERMS AND CONDITIONS OF OPTIONS: STOCK OPTION AGREEMENTS
Stock options granted pursuant to the Plan shall be
evidenced by stock option agreements in such form as the Committee
shall from time to time recommend and the Board of Directors shall
from time to time approve, which agreements shall comply with and
be subject to the following terms and conditions:
(a) Optionee's Agreement
Each optionee shall agree to remain as a Director of
the Corporation but such agreement shall not impose upon the
Corporation any obligation to retain the optionee as a Director for
any period.
(b) Number of Shares
Each option shall state the number of shares to
which it pertains.
(c) Option Price
Each option shall state the option price, which
shall be not less than one hundred percent (100%) of the fair
market value of the shares of capital stock of the Corporation on
the date of the granting of the option. During such time as such
stock is not listed upon an established stock exchange the fair
market value per share shall be the mean between dealer "bid" and
"ask" prices of the capital stock in over-the-counter market
applicable to transactions effected in Orlando, Florida on the day
the option is granted, as reported by the National Association of
Securities Dealers, Inc. If the stock is listed upon an
established stock exchange or exchanges such fair market value
shall be deemed to be the highest closing price of the capital
stock on such stock exchange or exchanges on the day the option is
granted or if no sale of the Corporation's capital stock shall have
been made on any stock exchange on that day, on the next preceding
day on which there was a sale of such stock. Subject to the
foregoing, the Board of Directors and the Committee in fixing the
option price shall have full authority and discretion and be fully
protected in doing so.
(d) Medium and Time of Payment
The option price shall be payable in United States
dollars upon the exercise of the option and may be paid in cash, by
check or with shares of capital stock of the Corporation valued at
their fair market value, as that term is defined in the preceding
paragraph.
(e) Term and Exercise of Options
An option shall be exercisable either in whole or in
part at any time after the date on which it is granted and prior to
its expiration date which, unless sooner terminated under
subsections (f) or (g) of this Section 5 hereof, shall be ten (10)
years from the date on which it is granted. The procedure for
exercise of an option shall be as set forth in the Plan and in the
stock option agreement evidencing the grant of the option. In the
event of any conflict between the language of the stock option
agreement and the language of the Plan, the language of the Plan
shall govern. No option shall be exercisable after its expiration
date. Not less than ten (10) shares may be purchased at any one
time unless the number purchased is the total number at the time
purchasable under the option. During the lifetime of the optionee,
the option shall be exercisable only by him and shall not be
assignable or transferable by him and no other person shall acquire
any rights therein.
(f) Termination of Service as a Director Except Death
In the event that an optionee shall cease to be a
Director of the Corporation for any reason other than his death,
subject to the condition that no option shall be exercisable after
its expiration date, such optionee shall have the right to exercise
the option at any time within three (3) months after such
termination as a Director to the extent his right to exercise such
option has not previously been exercised at the date of such
termination. For purposes of this paragraph, in the case of an
optionee who becomes disabled within the meaning of Sec. 22(3)(e) of
the Code, the words "three months" shall be replaced by the words
"one year".
(g) Death of Optionee and Transfer of Option
If the optionee shall die while a Director of the
Corporation or within a period of three (3) months after the
termination of his service as a Director of the Corporation and
shall not have fully exercised the option, an option may be
exercised at any time within one (1) year after the optionee's
death, subject to the condition that no option shall be exercisable
after its expiration date, to the extent that the optionee's right
to exercise such option at the time of his death had not been
previously exercised, by the executors or administrators of the
optionee or by any person or persons who shall have acquired the
option directly from the optionee by bequest or inheritance or by
reason of the death of the decedent.
No option shall be transferable by the optionee
otherwise than by Will or the laws of descent and distribution.
(h) Recapitalization
Subject to any required action by the stockholders,
the number of shares of capital stock which are subject to each
outstanding option or which will be subject to each option to be
granted under the Plan, and the price per share thereof in each
such option, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of capital stock of the
Corporation resulting from a subdivision or consolidation of shares
or the payment of a stock dividend (but only on the capital stock)
or any other increase or decrease in the number of such shares
effected without receipt of consideration by the Corporation.
Subject to any required action by the stockholders
if the Corporation shall be the surviving corporation in any
merger or consolidation, each outstanding option shall pertain to
and apply to the securities to which a holder of the number of
shares of capital stock subject to the option would have been
entitled. A dissolution or liquidation of the Corporation or a
merger or consolidation in which the Corporation is not the
surviving corporation, shall cause each outstanding option to
terminate provided that each optionee shall, in such event, have
the right immediately prior to such dissolution or liquidation, or
merger or consolidation in which the Corporation is not the
surviving corporation, to exercise his option in whole or in part.
In the event of a change in the capital stock of the
Corporation as presently constituted, which is limited to a change
of all of its authorized shares with par value into the same number
of shares with a different par value or without par value, the
shares resulting from any such change shall be deemed to be the
capital stock within the meaning of the Plan.
To the extent that the foregoing adjustments relate
to stock or securities of the Corporation, such adjustments shall
be made by the Committee, whose determination in that respect shall
be final, binding and conclusive.
Except as hereinbefore expressly provided in this
subsection 5(h), the optionee shall have no rights by reason of any
subdivision or consolidation of shares of stock of any class or the
payment of any stock dividend or any other increase or decrease in
the number of shares of stock of any class or by reason of any
dissolution, liquidation, merger, or consolidation or spin-off of
assets or stock of another corporation, and any issue by the
Corporation of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect,
and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of capital stock subject to the
option.
The grant of an option pursuant to the Plan shall
not affect in any way the right or power of the Corporation to make
adjustments, reclassifications, reorganizations or changes of its
capital or business structure or to merge or to consolidate or to
dissolve, liquidate or sell, or transfer all or any part of its
business or assets.
(i) Rights as a Stockholder
An optionee or a transferee of an option shall have
no rights as a stockholder with respect to any shares covered by
his option until the date of the issuance of a stock certificate to
him for such shares. No adjustments shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record
date is prior to the date such stock certificate is issued, except
as provided in subsection 5(h) hereof.
(j) Modification, Extension and Renewal of Options
Subject to the terms and conditions and within the
limitations of the Plan, the Board of Directors may modify, extend
or renew outstanding options granted under the Plan, or accept the
surrender of outstanding options (to the extent not theretofore
exercised) and authorize the granting of new options in
substitution therefor (to the extent not theretofore exercised).
Notwithstanding the foregoing, however, no modification of an
option shall, without consent of the optionee, alter or impair any
rights of obligations under any option theretofore granted under
the Plan.
(k) Investment Purpose
Each option under the Plan shall be granted on the
condition that the purchases of stock thereunder shall be for
investment purposes, and not with a view to resale or distribution
except that in the event the stock subject to such option is
registered under the Securities Act of 1933, as amended (the
"Securities Act"), or in the event a resale of such stock without
such registration would otherwise be permissible, such condition
shall be inoperative if in the opinion of counsel for the
Corporation such condition is not required under the Securities
Act, or any other applicable law, regulation, or rule of any
governmental agency.
(I) Other Provisions
The option agreements authorized under the Plan
shall contain such other provisions, including, without limitation,
restrictions upon the exercise of the option, as the Committee and
the Board of Directors of the Corporation shall deem advisable.
6. EFFECTIVE DATE AND TERM OF PLAN
Subject to approval by the stockholders as required by
Section 13 hereof and to the receipt by the Corporation of the
letter from the staff of the Securities and Exchange Commission
referred to in Section 14 hereof, the Plan shall become effective
as of January 24, 1989, the date of its adoption by the Board of
Directors of the Corporation and, subject to such stockholder
approval and the receipt of such letter, the initial grant of
options hereunder as provided in subsection 3(i) shall be effective
as of the effective date of the Plan. This Plan shall remain in
effect and options shall be granted hereunder from time to time
until ten (10) years from the date the Plan is approved by the
stockholders or until terminated by the Board of Directors in
accordance with Section 8 hereof, whichever is earlier.
Notwithstanding the foregoing part of this Section 6, with respect
to any amendment to this Plan adopted for the purpose of increasing
the number of shares as to which options ("Amendment Options") may
be granted hereunder, the Plan shall remain in effect as to
Amendment Options and Amendment Options may be granted hereunder
from time to time until ten (10) years from the date such amendment
is adopted or the date such amendment is approved by the
stockholders if such approval is required or until the Plan, as
amended, is terminated by the Board of Directors in accordance with
Section 8 hereof, whichever is earlier. For purposes of options
outstanding under the Plan the Plan shall continue in effect until
all outstanding options have been exercised in full or are no
longer exercisable.
7. INDEMNIFICATION OF COMMITTEE
In addition to such other rights of indemnification as
they may have as Directors or as members of the Committee, the
members of the Committee shall be indemnified by the Corporation
against the reasonable expenses, including attorneys fees, actually
and necessarily incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of
any action taken or failure to act under or in connection with the
Plan or any option granted thereunder, and against all amounts paid
by them in settlement thereof, not to exceed, in the judgment of
the Board of Directors, the estimated expense of litigating the
proceeding to conclusion (provided such settlement is approved by
independent legal counsel selected by the Corporation) or paid by
them in satisfaction of a judgment in any such action, suit or
proceeding, except in relation to matters as to which it shall be
adjudged in such action, suit or proceeding that the member of the
Committee is liable. A Committee member shall in writing offer the
Corporation the opportunity, at its own expense, to handle and
defend the same.
8. AMENDMENT OF THE PLAN
The Board of Directors of the Corporation may, insofar as
permitted by law, from time to time, with respect to any shares at
the time not subject to options, suspend or discontinue the Plan or
revise or amend it in any respect whatsoever except that, without
approval of the stockholders, no such revision or amendment shall
change the number of shares subject to the Plan, extend the term of
the Plan or the term of any option which may be granted under the
Plan, change the designation of the Participants or the manner in
which options are granted under the Plan or materially increase the
benefits accruing under the Plan (materially, within the meaning of
Rule 16b-3 implementing the Exchange Act), decrease the price at
which options may be granted or remove the administration of the
Plan from the Committee (except as may be required by the staff of
the Commission to provide the letter described in Section 13
hereof).
9. APPLICATION OF FUNDS
The proceeds received by the Corporation from the sale of
capital stock pursuant to options will be used for general
corporate purposes.
10. NO OBLIGATION TO EXERCISE OPTION
The granting of an option shall impose no obligation upon
the optionee to exercise such option.
11. WITHHOLDING
The exercise of any option granted under the Plan shall
constitute an optionee's full and complete consent to whatever
action the Committee directs to satisfy the federal and state
withholding requirements, if any, which the Committee in its
discretion deems applicable to such exercise or surrender.
12. CONSTRUCTION
The Plan shall be construed under the laws of the State
of Florida.
13. APPROVAL OF STOCKHOLDERS
The Plan shall be submitted for approval by the
stockholders of the Corporation within twelve (12) months from the
date the Plan is adopted by the Board of Directors. Any amendment
to the Plan requiring approval by the stockholders of the
Corporation shall be submitted for approval by the stockholders
within twelve (12) months from the date the amendment is adopted by
the Board of Directors.
The initial options granted under the Plan, as set forth
in subsection 3(i) hereof are granted as of the date set forth
therein; provided, however, that such options shall not be
exercisable until after the date on which the Plan shall have
approved by a vote of the stockholders. Options may be granted
pursuant to any amendment to this Plan adopted for the purpose of
increasing the number of shares as to which options may be granted,
the types of options which may be granted or the rights applicable
to options which may be granted hereunder, commencing with the date
of adoption of such amendment by the Board of Directors of the
Corporation; provided, however, that options granted in reliance
upon any such amendment shall not be exercisable until the date on
which such amendment shall have been submitted for approval of the
stockholders.
14. LETTER FROM COMMISSION STAFF
The Corporation will request a letter from the staff of
the Securities and Exchange Commission (the "Commission")
concurring with the opinion of legal counsel to the Corporation
that the Plan complies with the requirements set forth in Rule 16b-
3 promulgated by the Commission to provide exemptive relief from
certain aspects of Section 16(b) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). If, as a condition of
providing its concurring letter, the staff of the Commission
requires modifications to the Plan which are not material and such
modifications are approved by the Board of Directors, the Plan
shall be so modified and amended under the provisions of Section 8
hereof. In the event the Corporation is unable to obtain the
aforementioned concurring letter from the staff of the Commission
as required by this Section 14 or the Plan is not approved by the
stockholders as required by Section 13 hereof, the Plan shall be
deemed null and void ab initio.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF HUGHES SUPPLY, INC. AS OF JULY 31, 1999, AND THE
RELATED STATEMENT OF INCOME FOR THE SIX MONTHS THEN ENDED AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000049029
<NAME> HUGHES SUPPLY, INC.
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-28-2000
<PERIOD-END> JUL-31-1999
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<RECEIVABLES> 419,165
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0
0
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<OTHER-EXPENSES> 263,108
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