-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, LxGnrzcdMCPdmB2n5kCE1uNBe1Rr3T/2e6zh2wU/NLeN27b80CgQtDtPF1YH2eZJ b3JAOfpzJifgQ3AfYBucRQ== 0000049029-94-000010.txt : 19940527 0000049029-94-000010.hdr.sgml : 19940527 ACCESSION NUMBER: 0000049029-94-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940430 FILED AS OF DATE: 19940526 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUGHES SUPPLY INC CENTRAL INDEX KEY: 0000049029 STANDARD INDUSTRIAL CLASSIFICATION: 5070 IRS NUMBER: 590559446 STATE OF INCORPORATION: FL FISCAL YEAR END: 0125 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08772 FILM NUMBER: 94530662 BUSINESS ADDRESS: STREET 1: 20 N ORANGE AVE, STE 200 STREET 2: P O BOX 2273 CITY: ORLANDO STATE: FL ZIP: 32802-2273 BUSINESS PHONE: 4078414755 10-Q 1 FORM 10-Q 4/30/94 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 30, 1994 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from .........to........ Commission File No. 0-5235 HUGHES SUPPLY, INC. Incorporated in the State I.R.S. Employer I.D. of Florida Number 59-0559446 Post Office Box 2273 20 North Orange Avenue, Suite 200 Orlando, Florida 32802 Registrant's Telephone Number, including area code: 407/841-4755 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock Outstanding as of May 14, 1994 $1 Par Value 5,789,594 Page 1 of 15 HUGHES SUPPLY, INC. FORM 10-Q Index Page No. Part I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets as of April 30, 1994 and January 28, 1994 3 - 4 Consolidated Statements of Income for the Three Months Ended April 30, 1994 and 1993 5 Consolidated Statements of Cash Flows for the Three Months Ended April 30, 1994 and 1993 6 Notes to Consolidated Financial Statements 7 - 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 - 11 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 12 - 14 Signatures 15 Page 2 of 15 HUGHES SUPPLY, INC. PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets (dollars in thousands) April 30, January 28, 1994 1994 ----------- ------------ (unaudited) ASSETS Current Assets: Cash and cash equivalents $ 970 $ 1,078 Accounts receivable, less allowance for losses of $4,955 and $3,914 99,792 97,765 Inventories 103,944 94,223 Deferred income taxes 5,240 4,972 Other current assets 4,058 5,532 ---------- ---------- Total current assets 214,004 203,570 ---------- ---------- Property, Plant and Equipment, at cost: Land 12,333 12,353 Buildings and improvements 37,691 37,097 Transportation equipment 20,376 19,674 Furniture, fixtures and equipment 16,020 14,843 Leased property under capital leases 10,794 10,794 ---------- ---------- Total 97,214 94,761 Less accumulated depreciation and amortization (46,970) (45,439) ---------- ---------- Net property, plant and equipment 50,244 49,322 ---------- ---------- Deferred Income Taxes 2,078 2,210 Other Assets 7,321 8,303 ---------- ---------- $ 273,647 $ 263,405 ========== ========== See accompanying notes to consolidated financial statements. Page 3 of 15 HUGHES SUPPLY, INC. Item 1. Financial Statements - continued Consolidated Balance Sheets (dollars in thousands) April 30, January 28, 1994 1994 ----------- ----------- (unaudited) LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $ 934 $ 898 Accounts payable 62,011 52,053 Accrued compensation and benefits 5,073 7,257 Other current liabilities 10,515 8,401 ---------- ---------- Total current liabilities 78,533 68,609 ---------- ---------- Long-Term Debt, less current portion: Notes and subordinated debentures 70,894 95,367 Capital lease obligations 3,605 3,859 ---------- ---------- Total long-term debt 74,499 99,226 ---------- ---------- Other Noncurrent Liabilities 1,207 1,143 ---------- ---------- Total liabilities 154,239 168,978 ---------- ---------- Shareholders' Equity: Preferred stock - - Common stock-6,148,944 and 5,075,670 shares issued 6,149 5,076 Capital in excess of par value 37,290 15,410 Retained earnings 81,549 80,425 ---------- ---------- 124,988 100,911 Less treasury stock-360,233 and 418,566 shares, at cost (5,580) (6,484) ---------- ---------- Total shareholders' equity 119,408 94,427 ---------- ---------- $ 273,647 $ 263,405 ========== ========== See accompanying notes to consolidated financial statements. Page 4 of 15 HUGHES SUPPLY, INC. Item 1. Financial Statements - continued Consolidated Statements of Income (unaudited) (in thousands, except per share amounts) Three months ended April 30, 1994 1993 ----------- ----------- Net Sales $ 183,901 $ 148,514 Cost of Sales 147,500 119,621 ---------- ---------- Gross profit 36,401 28,893 ---------- ---------- Operating Expenses: Selling, general and administrative 30,371 25,116 Depreciation and amortization 2,049 1,629 Provision for doubtful accounts 685 582 ---------- ---------- Total operating expenses 33,105 27,327 ---------- ---------- Operating Income 3,296 1,566 ---------- ---------- Non-Operating Income and (Expenses): Interest and other investment income 556 419 Interest expense (1,135) (1,123) Other, net 187 267 ---------- ---------- (392) (437) ---------- ---------- Income Before Income Taxes 2,904 1,129 Income Taxes 1,234 430 ---------- ---------- Net Income $ 1,670 $ 699 ========== ========== Earnings Per Share: Primary $ .32 $ .15 ========== ========== Fully Diluted $ .31 $ .15 ========== ========== Average Number of Shares Outstanding: Primary 5,245 4,605 ========== ========== Fully Diluted 5,984 4,605 ========== ========== Dividends Per Share $ .05 $ .03 ========== ========== See accompanying notes to consolidated financial statements. Page 5 of 15 HUGHES SUPPLY, INC. Item 1. Financial Statements - continued Consolidated Statements of Cash Flows (unaudited) (in thousands) Three months ended April 30, 1994 1993 ----------- -------- Increase (Decrease) in Cash and Cash Equivalents: Cash flows from operating activities: Cash received from customers $ 181,245 $ 141,569 Cash paid to suppliers and employees (175,732) (141,919) Interest income received 556 424 Interest paid (872) (530) Income taxes paid (784) (1,100) ---------- ---------- Net cash provided by (used in) operating activities 4,413 (1,556) ---------- ---------- Cash flows from investing activities: Capital expenditures (2,966) (1,946) Proceeds from sale of property, plant and equipment 173 168 ---------- ---------- Net cash used in investing activities (2,793) (1,778) ---------- ---------- Cash flows from financing activities: Net borrowings (payments) under short-term debt arrangements (1,566) 3,966 Principal payments on: Long-term notes (55) (48) Capital lease obligations (181) (165) Issuance of common shares under stock option plans 517 - Purchase of common shares (210) - Dividends paid (233) (125) ---------- ---------- Net cash provided by (used in) financing activities (1,728) 3,628 ---------- ---------- Net Increase (Decrease) in Cash and Cash Equivalents (108) 294 Cash and Cash Equivalents: Beginning of period 1,078 2,253 ---------- ---------- End of period $ 970 $ 2,547 ========== ========== See accompanying notes to consolidated financial statements. Page 6 of 15 HUGHES SUPPLY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position as of April 30, 1994 and January 28, 1994, the results of operations and cash flows for the three months ended April 30, 1994 and 1993. The statements of income and cash flows for the three months ended April 30, 1993 have been restated for a June, 1993 business combination accounted for as a pooling of interests. 2. On March 8, 1994, the Company issued a call for redemption of its outstanding 7% convertible subordinated debentures to take place on April 7, 1994. Of the $22,960,000 debentures outstanding at January 28, 1994, $22,889,000, or 99.7%, were converted into the Company's common stock at $21.17 per share or 47.2 common shares for each $1,000 face amount of debentures. This conversion resulted in the issuance of 1,081,146 common shares. If the conversion had occurred at the beginning of fiscal year 1995, primary earnings per share for the three months ended April 30, 1994 would have been $.31. Fully diluted earnings per share for the three months ended April 30, 1994 of $.31 already assumes the conversion of the debentures. Page 7 of 15 HUGHES SUPPLY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (unaudited) 3. The following is a reconciliation of net income to net cash provided by (used in) operating activities(in thousands): Three months ended April 30, 1994 1993 ---------- ---------- Net income $ 1,670 $ 699 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 1,839 1,450 Amortization 210 179 Provision for doubtful accounts 685 582 (Gain) on sale of property, plant and equipment (116) (125) Undistributed (earnings) of affiliate (15) (63) Changes in assets and liabilities: (Increase) decrease in: Accounts receivable (2,712) (7,020) Inventories (9,721) 429 Other current assets 1,475 1,481 Other assets 386 (37) Increase (decrease) in: Accounts payable and accrued expenses 9,935 904 Accrued interest and income taxes 1,101 117 Other noncurrent liabilities 64 41 Decrease (increase) in deferred income taxes (388) (193) ---------- ---------- Net cash provided by (used in) operating activities $ 4,413 $ (1,556) ========== ========== Noncash Activities: As discussed in Note 2, the Company issued approximately 1,081,000 shares of common stock for the conversion of $22,889,000 debentures during the three months ended April 30, 1994. Page 8 of 15 HUGHES SUPPLY, INC. PART I. FINANCIAL INFORMATION - continued Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations On March 8, 1994, the Company called for redemption of its 7% convertible subordinated debentures as of April 7, 1994. Substantially all of the outstanding debentures were converted into common stock by April 7, 1994, which resulted in an increase of approximately $23,000,000 in shareholders' equity and a corresponding decrease of long-term debt of $23,000,000. As a result of the conversion, 1,081,000 new shares of common stock were issued. Results of Operations for the Three Months Ended April 30, 1994 as Compared to the Three Months Ended April 30, 1993 Net sales increased 24% to $183.9 million for the first quarter ended April 30, 1994 from $148.5 million in the prior year's first quarter. The increase in sales is primarily due to the improvement in the residential and commercial construction activity. In addition, newly- opened and acquired wholesale outlets accounted for approximately $10.0 million of the increase in sales. The Company anticipates residential construction to continue to outpace commercial construction although the commercial construction markets the Company serve are currently expanding. Gross profit increased 26.0% to $36.4 million in the first quarter from $28.9 million in last year's first quarter. The gross profit margin for the three months ended April 30, 1994 was 19.8%, compared to 19.5% last year. The increase in gross profit and gross margin was due to more efficient purchasing which was attributable to increased volume and a greater concentration of supply sources resulting from the Company's preferred vendor program. In addition, the Company achieved more favorable pricing of its products as a result of greater utilization of its computerized inventory management systems during the first quarter of fiscal 1995 versus first quarter of fiscal 1994. Management anticipates the competitive conditions in its marketplace will continue which may impact future gross profit and gross margin. Operating expenses as a percentage of net sales were 18.0% and 18.4% for the three months ended April 30, 1994 and 1993, respectively. This decrease is primarily the result of the Company's ongoing cost control program combined with operating leverage associated with the Company's aggressive marketing efforts. Operating expenses increased to $33.1 million for the first quarter ended April 30, 1994 from $27.3 million in the prior year's first quarter. The majority of the increase in operating expenses is in personnel costs necessary to support the Company's growth. Page 9 of 15 Interest expense remained constant at $1.1 million for the quarter ended April 30, 1994 and April 30, 1993. The conversion of the subordinated debentures during the first quarter of fiscal 1995 will result in a decrease in interest expense of approximately $1.6 million. The effective tax rates for the three months ended April 30, 1994 and 1993 were 42.5% and 38.1%, respectively. The change in rates is due to fluctuations of nondeductible expenses and a 1% increase in the Federal tax rate. Net income was $1.7 million for the three months ended April 30, 1994 versus $700,000 for the three months ended April 30, 1993. Primary earnings per share were $.32 and $.15 for the quarters ended April 30, 1994 and 1993, respectively. Fully diluted earnings per share were $.31 and $.15 for the first quarters ended April 30, 1994 and 1993, respectively. Liquidity and Capital Resources Working capital at April 30, 1994 amounted to $135.5 million compared to $135.0 million at January 28, 1994. The Company continues to maintain greater than 75% of total assets as current assets. The working capital ratio was 2.73 to 1 and 2.97 to 1 as of April 30, 1994 and January 28, 1994, respectively. Net cash flow provided by operations was $4.4 million for the three months ended April 30, 1994 versus net cash flow used in operations of $1.6 million in last year's first quarter. The primary reason for the $6.0 increase was that cash received from customers increased $39.7 million while cash paid to suppliers only increased $33.8 million. Net cash used in investing activities was $2.8 million for the three months ended April 30, 1994 compared to $1.8 million for the three months ended April 30, 1993. Capital expenditures for the first quarter ended April 30, 1994 were $3.0 million compared to $2.0 million in the first quarter of last year. Capital expenditures for fiscal 1995 are expected to be approximately $10 million, exclusive of acquisitions. Net cash used by financing activities was $1.7 million for the three months ended April 30, 1994 while net cash provided by financing activities was $3.6 million for the three months ended April 30, 1993. For the first quarter ended April 30, 1994, cash flow from operations improved $6.0 million when compared to the prior year's first quarter. This improved cash flow allowed the Company to reduce its short-term debt by $1.6 million and internally fund its capital expenditures. This is in contrast to the first quarter of fiscal 1994 when the Company borrowed $4.0 million under its short-term debt arrangements to fund its operations and capital expenditures. Page 10 of 15 The Company's bank financing consists primarily of a $100 million unsecured credit facility which includes a $75 million long-term revolving credit facility and a $25 million line of credit convertible to a term note. The Company's financial condition remains strong and the Company has the resources necessary, with approximately $32 million in unused debt capacity (subject to borrowing limitations under long-term debt covenants), to meet future anticipated funding requirements. Page 11 of 15 HUGHES SUPPLY, INC. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Filed. (2) Plan of acquisition, reorganization, arrangement, liquidation or succession - not applicable. (4) Instruments defining the rights of security holders, including indentures. 4.1 Specimen Stock Certificate representing shares of the Company's common stock, $1.00 par value, filed as Exhibit 4.2 to form 10-Q for the quarter ended October 31, 1984. 4.2 Trust Indenture dated May 1, 1986 between the Company and J. Henry Schroder Bank & Trust Company, as Trustee for the holders of the Company's 7% Convertible Subordinated Debentures, filed as Exhibit 4(b) to Registration No. 33-4714. 4.3 Specimen Copy of Certificate representing 7% Convertible Debentures, filed as Exhibit 4(c) to Registration No. 33-4714. 4.4 Resolution Approving and Implementing Shareholder Rights Plan filed as Exhibit 4.4 to Form 8-K dated May 17, 1988. (10) Material contracts. 10.1 Lease Agreements with Hughes, Inc. (a) Orlando Trucking, Garage and Maintenance Operations dated December 1, 1971, filed as Exhibit 13(n) to Registration No. 2-43900. Letter dated April 15, 1992 extending lease from month to month, filed as exhibit 10.1(a) to Form 10-K for the fiscal year ended January 31, 1992. (b) Leases effective March 31, 1988, filed as exhibit 10.1(c) to Form 10-K for the fiscal year ended January 27, 1989; Page 12 of 15 HUGHES SUPPLY, INC. PART II. OTHER INFORMATION - continued Sub-items Property (1) Clearwater (2) Daytona Beach (3) Fort Pierce (4) Lakeland (5) Lakeland - Lightstyle (6) Leesburg (7) Orlando Electrical Operation (8) Orlando Plumbing Operation (9) Orlando Utility Warehouse (10) St. Petersburg (11) Sarasota (12) Venice (13) Winter Haven (c) Lease amendment letter between Hughes, Inc. and the Registrant, dated December 1, 1986, amending Orlando Truck Operations Center and Maintenance Garage lease, filed as Exhibit 10.1(i) to Form 10-K for the fiscal year ended January 30, 1987. (d) Lease agreement dated June 1, 1987, between Hughes, Inc. and the Registrant, for additional Sarasota property, filed as Exhibit 10.1(j) to Form 10-K for the fiscal year ended January 29, 1988. (e) Leases dated March 11, 1992, filed as Exhibit 10.1(e) to Form 10-K for the fiscal year ended January 31, 1992. Sub-item Property (1) Tallahassee Electrical Operation (2) Gainesville Electrical Operation (3) Valdosta Electrical Operation 10.2 Hughes Supply, Inc. 1988 Stock Option Plan filed as Exhibit A to Prospectus included in Registration No. 33-26468. 10.3 Form of Supplemental Executive Retirement Plan Agreement entered into between the Registrant and eight of its executive officers, filed as Exhibit 10.6 to Form 10-K for fiscal year ended January 30, 1987. Page 13 of 15 HUGHES SUPPLY, INC. PART II. OTHER INFORMATION - continued 10.4 Directors' Stock Option Plan filed as Exhibit A to Prospectus included in Registration No. 33-33701. 10.5 Asset Purchase Agreement with Accord Industries Company, dated October 9, 1990, for sale of Registrant's manufacturing operations, filed as Exhibit 10.7 to Form 10-K for fiscal year ended January 25, 1991. 10.6 Lease Agreement dated June 30, 1993 between Donald C. Martin and Electrical Distributors, Inc., filed as Exhibit 10.6 to Form 10-K for fiscal year ended January 28, 1994. 10.7 Consulting Agreement dated June 30, 1993 between Hughes Supply, Inc. and Donald C. Martin, filed as Exhibit 10.7 to Form 10-K for fiscal year ended January 28, 1994. (11) Statement re computation of per share earnings. 11.1 Summary schedule of earnings per share calculation. (15) Letter re unaudited interim financial information - not applicable. (18) Letter re change in accounting principles - not applicable. (19) Report furnished to security holders - not applicable. (22) Published report regarding matters submitted to vote of security holders - not applicable. (23) Consents of experts and counsel - not applicable. (24) Power of attorney - not applicable. (27) Financial Data Schedule - not applicable. (99) Additional exhibits - not applicable. (b) Reports on Form 8-K. There were no reports on Form 8-K filed during the quarter ended April 30, 1994. Page 14 of 15 HUGHES SUPPLY, INC. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HUGHES SUPPLY, INC. Date: May 26, 1994 By: /s/ J. Stephen Zepf J. Stephen Zepf, Treasurer, Chief Financial Officer and Chief Accounting Officer Page 15 of 15 INDEX OF EXHIBITS FILED WITH THIS REPORT 11.1 Computation of per share earnings. EX-11 2 EXHIBIT 11.1 4/30/94 Exhibit 11.1 HUGHES SUPPLY, INC. SUMMARY SCHEDULE OF EARNINGS PER SHARE CALCULATIONS Potentially dilutive securities: a) Options for common stock, issued under stock option plan. b) 7% Convertible subordinated debentures, due May 1, 2011. Three Months Ended April 30, 1994 1993 Line - ---- SHARES ------ 1 Average shares outstanding 5,057,609 4,604,545 2 Incremental shares (options) - Assuming options outstanding at end of period were exercised at beginning of period (or time of issuance, if later) and proceeds were used to purchase shares at average market price during the period 187,862 0 ---------- ---------- 3 Shares used in calculating Earnings Per Common and Common Equivalent Share 5,245,471 4,604,545 4 Incremental shares (options) - Assuming options outstanding at end of period were exercised at beginning of period (or time of issuance, if later) and proceeds were used to purchase shares at the higher of the average market price during the period or the market price at the end of the period; and that options exercised during the period were exercised at the beginning of the period(or time of issuance, if later) and the proceeds were used to, purchase shares at the market price at the date of exercise 17,498 0 5 Incremental shares (debentures) - Assuming debentures were converted at beginning of period (or time of issuance, if later) at most advantageous (for security holder) conversion rate that becomes effective within 10 years * 720,902 0 ---------- ---------- 6 Shares used in calculating Earnings Per Common Share - Assuming Full Dilution 5,983,871 4,604,545 ========== ========== EARNINGS -------- 7 Net income per financial statements, used in calculating Earnings Per Common Share and Earnings Per Common and Common Equivalent Share $ 1,669,613 $ 698,210 8 Incremental earnings (debentures) - Assuming interest charges applicable to convertible debentures (and nondiscretionary adjustments that would have been made based on net income) are taken into account in determining balance of income applicable to common stock * 166,402 0 ---------- ---------- 9 Earnings used in calculating Earnings Per Common Share - Assuming Full Dilution $ 1,836,015 $ 698,210 ========== ========== Three Months Ended April 30, 1994 1993 Line - ---- RESULTING PER SHARE DATA ------------------------ 10 Earnings per common share (Line 7/Line 1) $ .33 $ .15 =========== =========== 11 Earnings per common share and common equivalent share (Line 7/Line 3) $ .32 $ .15 =========== =========== 12 Dilution 3.0% 0.0% =========== =========== 13 Earnings per common share - assuming full dilution (Line 9/Line 6) $ .31 $ .15 =========== =========== 14 Dilution (antidilution) 6.1% 0.0% =========== =========== 15 Used in statements of income: [ ] Line 10, if dilution less than 3%, or antidilution, exists for all periods. [ X ] Lines 11 and 13, if dilution >= 3% for any period. * Convertible debentures are antidilutive for the three months ended April 30, 1993, and, consequently, are not used in the calculation of fully diluted earnings per share for that period. -----END PRIVACY-ENHANCED MESSAGE-----