-----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, rNPrpnq9LxFIrgwC4qTprZHcJOik8JeskmMZchXoQQpFbkmh2TwmitSpI9YcH4aJ 5N9sC4a7OrHU/Cj0gyzq9w== 0000049029-95-000008.txt : 19950427 0000049029-95-000008.hdr.sgml : 19950427 ACCESSION NUMBER: 0000049029-95-000008 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19950127 FILED AS OF DATE: 19950426 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUGHES SUPPLY INC CENTRAL INDEX KEY: 0000049029 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRICAL APPARATUS & EQUIPMENT, WIRING SUPPLIES [5063] IRS NUMBER: 590559446 STATE OF INCORPORATION: FL FISCAL YEAR END: 0125 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08772 FILM NUMBER: 95531475 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-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended January 27, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ________________to_________________ Commission File No. 001-08772 HUGHES SUPPLY, INC. (Exact name of registrant as specified in its charter) Incorporated in the State I.R.S. Employer I.D. of Florida Number 59-0559446 Post Office Box 2273 20 North Orange Avenue, Suite 200 Orlando, Florida 32802 (Address of principal executive office) Registrant's Telephone Number, including area code: 407/841-4755 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered Common Stock ($1.00 Par Value) New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: Common Stock ($1.00 Par Value) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] State the aggregate market value of the voting stock held by nonaffiliates of the Registrant: $99,952,538 as of March 24, 1995. Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date: 6,153,424 shares of common stock ($1.00 par value) as of March 24, 1995. DOCUMENTS INCORPORATED BY REFERENCE List hereunder the following documents if incorporated by reference and the Part of the Form 10-K into which the document is incorporated: Part I - Annual Report to shareholders for fiscal year ended January 27, 1995 (designated portions). Part II - Annual Report to shareholders for fiscal year ended January 27, 1995 (designated portions). Part III- Proxy Statement for the 1995 Annual Meeting of Shareholders (designated portions). Part IV - Annual Report to shareholders for fiscal year ended January 27, 1995 (designated portions). PART I ITEM 1. BUSINESS (a) General Development of Business Hughes Supply, Inc. (the "Registrant") was founded as a general partnership in Orlando, Florida in 1928. The Registrant was incorporated as a Florida corporation in 1947. As used throughout this Report, the term "Registrant" shall be deemed to mean the Registrant and its subsidiaries, except where the context otherwise indicates. The Registrant is primarily engaged in the wholesale distribution of a broad range of materials, equipment and supplies to the construction industry. Major product lines distributed by the Registrant include electrical, plumbing and electric utility equipment; building materials; pool equipment and supplies; water and sewer products; air conditioning and heating equipment and supplies; water systems and industrial pipe, valves and fittings. The Registrant distributes its product lines through 179 wholesale outlets located in Florida and 12 other states. The following table presents the distribution of the Registrant's wholesale outlets by state. State Number of Locations Florida 62 Georgia 29 North Carolina 21 Ohio 13 South Carolina 13 Mississippi 11 Tennessee 9 Alabama 8 Indiana 4 Pennsylvania 3 Virginia 3 Kentucky 2 Maryland 1 A current listing of the locations of the wholesale outlets and distribution centers of the Registrant is set forth as Exhibit 99.1 to this report. The principal executive offices of the Registrant are located at 20 North Orange Avenue, Suite 200, Orlando, Florida 32801 (telephone 407-841- 4755). (b) Financial Information About Industry Segments The Registrant does not engage in significant operations in more than one industry segment as defined in Statement of Financial Standards No. 14. I-1 (c) Narrative Description of Business Products Distributed The products sold by the Registrant may be classified into the following major product lines: Electrical - electrical supplies, including wire, cable, cords, boxes, covers, wiring devices, conduit, raceway duct, safety switches, motor controls, breakers, panels, fuses and related supplies and accessories, residential, commercial and industrial electrical fixtures and other special use fixtures. Plumbing - plumbing fixtures and related fittings, residential, commercial and industrial water heaters, pumps, irrigation equipment and plumbing accessories and supplies. Electric utility - transformers, conductor cable, insulators, prestressed concrete transmission and distribution poles, and other electric utility supplies and related hardware, accessories and tools. Building materials - reinforcing wire, reinforcing steel, plyform, lumber, concrete chemicals, concrete forming accessories, road and bridge products, masonry accessories and other building materials, hand tools, power tools and equipment for all mechanical and building trades. Pool equipment and supplies - pumps, filters, heaters, lights, skimmers, drains, chemicals, solar equipment, deck products and cleaning equipment. Water and sewer - water works and industrial supplies, including large diameter plastic (PVC) and ductile iron pipe, fire hydrants, water meters, backflow prevention devices, valves and related hardware and accessories. Air conditioning and heating - air conditioning and heating equipment, furnaces, heaters, heat pumps, condensing units, duct, pipe, fittings, registers, grills, freon, insulation and other refrigeration equipment, supplies and service parts. Water systems - pumps and water well, residential and commercial water treatment, and environmental products. Industrial pipe, valves and fittings - mechanical and weld pipe, valves and related fittings, fire protection systems and supplies, high performance valves and specialty pipe. I-2 Marketing In recent years the Registrant's marketing plan has led to the expansion of the geographic markets served by the Registrant. The following table illustrates the expansion achieved through acquisitions over the last five fiscal years.
Method of Date of Number of State(s) of Company's Major Acquired Company Acquisition Acquisition Locations Operation Product Lines Virginia branch (1) Purchase June, 1993 1 Virginia Plumbing Georgia and Florida Purchase June, 1993 3 Georgia Electrical and electric branches (2) 1 Florida utility Electrical Pooling June, 1993 1 Georgia Electrical Distributors, Inc. Alabama Water Works Purchase July, 1993 2 Alabama Water and sewer Supply, Inc. Florida branches(3) Purchase December, 1993 2 Florida Building materials Swaim Supply Pooling January, 1994 6 North Carolina Plumbing, air conditioning Company, Inc. and heating 2 Virginia Florida and Georgia Purchases February- 2 Florida Water and sewer, plumbing and branches (4) September, 1994 2 Georgia electrical Treaty Distribution Purchase January, 1995 12 Ohio Plumbing, water and sewer and Group branches (5) 4 Indiana heating and air conditioning Olander & Brophy, Inc. Purchase March, 1995 3 Pennsylvania Pool equipment and water 1 Ohio systems Port City Electrical Purchase March, 1995 2 Georgia Electrical Supply, Inc. 1 South Carolina Elec-Tel Supply Purchase April, 1995 1 Georgia Electric utility Company (1) Facility in Falls Church, Virginia acquired in purchase of assets from Capitol Hydronic Supply Company, Inc. Sales outlet relocated to Arlington, Virginia. (2) Facilities acquired in Macon, Georgia and Tallahassee, Florida in purchase of assets from Causey Electrical Supply Company, Causey Utility Supply Co. and Macon Lighting Center, Inc. (3) Facilities acquired in purchase of assets from Hausman Corporation. (4) Facilities acquired in purchases of assets from four entities. (5) Facilities acquired in purchase from The Treaty Company of the assets of its operating division, The Treaty Distribution Group.
In addition to expansion through acquisition, the Registrant has increased its geographic market area by opening new sales outlets in Jacksonville, Kissimmee, Lady Lake, Ft. Myers, West Palm Beach, Naples, Auburndale, Tampa and Perry, Florida, in Tifton, Hartsfield, Alpharetta LaGrange and McDonough, Georgia, in Greensboro, North Carolina, in Dothan and Mobile, Alabama, and in Anderson and Bluffton, South Carolina during the past five years. I-3 Each of the Registrant's sales outlets handles one or more of the Registrant's product lines. Sales are made primarily to contractors, subcontractors, electric utilities, municipalities and industrial accounts. The Registrant employs approximately 350 outside sales representatives who call on customers and who also work with architects, engineers and manufacturers' representatives when major construction projects are involved. For each outside sales representative, there are generally two inside account executives who expedite orders, deliveries, quotations, and requests for pricing. Most orders are taken by telephone, and materials are delivered by Registrant-owned trucks to the customer's office or job site. The Registrant's wholesale outlets are sales and distribution points for the products sold by the Registrant. Each sales outlet operates as a separate profit center with its own sales force. Each is managed by its own manager, who is directly responsible for customer relations, the hiring and promotion of personnel, purchasing, sales, the maintenance of adequate inventory levels and cost control for the particular sales outlet. Day to day operations of the sales outlets are the responsibility of the respective managers, but major decisions affecting Registrant policy, facilities or capital outlay are reviewed by the Registrant's executive officers. Purchasing agents generally make use of a computerized perpetual inventory system to monitor stock levels, while central distribution centers in Orlando, Florida, College Park, Georgia and Monroe, North Carolina provide purchasing and distribution assistance. The Registrant's general accounting, customer billing, inventory, and accounts payable systems are for the most part processed at the Registrant's central computer facility in Orlando, Florida. More than 45,000 wholesale customers are presently served by the Registrant, and no single customer accounts for more than 1% of total sales annually. Orders for larger construction projects normally require long- term delivery schedules throughout the period of construction, which in some cases may continue for several years. The substantial majority of customer orders are shipped out of inventory on hand. Some items are manufactured to customer specifications and require special ordering. Additionally, some large volume orders are shipped directly to the customer from the manufacturer. Sources of Supply All products sold by the Registrant are purchased from other manufacturers and suppliers. The Registrant regularly purchases from over 5,000 manufacturers and suppliers, no single one of which accounted for more than 7% of the Registrant's total purchases during the fiscal year ended January 27, 1995. I-4 Inventories The Registrant is a wholesale distributor of construction materials, which maintains significant inventories to meet rapid delivery requirements and to assure itself of a continuous allotment of goods from suppliers. As of January 27, 1995, inventories constituted approximately 36% of the Registrant's total assets. Competition There is strong competition throughout the marketing areas served by the Registrant in each product line the Registrant distributes. The main sources of competition are other wholesalers, manufacturers who sell certain lines directly to contractors and, to a limited extent, retailers in the markets for plumbing, electrical fixtures and supplies, building materials, pool supplies and contractor's tools. Management believes that the Registrant, on the basis of its total sales, is the largest wholesale distributor of its range of products in the Southeast. The principal competitive factors in the Registrant's business are availability of material, technical product knowledge as to application and usage, advisory and other service capabilities and pricing of products. Compliance with Environmental Protection Provisions In fiscal year ended January 31, 1992, the Registrant accrued approximately $675,000 as an operating expense for estimated future costs of removing underground fuel storage tanks and environmental clean-up costs to comply with federal, state and local laws and regulations for the protection of the environment. There have been no significant expenses since fiscal year ended January 31, 1992 and the Registrant does not expect any additional material expenses in future years associated with fuel storage tanks. Information with respect to this matter is also included in Management's Discussion and Analysis of Financial Condition and Results of Operations of the Annual Report to shareholders for the fiscal year ended January 27, 1995, a copy of which is filed as an exhibit to this report and the cited portion of which is incorporated herein by reference. Employees The Registrant had a total of approximately 2,800 employees as of January 27, 1995, consisting of approximately 20 executives, 450 managers, 800 sales personnel and 1,530 other employees, including truck drivers, warehouse personnel, office and clerical workers. The Registrant's work force has increased by approximately 19% compared to the prior year in response to increased sales volume as well as the result of business acquisitions during the current year. (d) Financial Information about Foreign and Domestic Operations and Export Sales The Registrant does not engage in material operations or derive a material portion of its sales or revenues from customers in foreign countries. I-5 ITEM 2. PROPERTIES The Registrant leases approximately 27,000 square feet of an office building in Orlando, Florida for its headquarters. In addition, the Registrant owns or leases 179 sales outlets in 13 states. The typical sales outlet consists of a combined office and warehouse facility ranging in size from 3,000 to 40,000 square feet, with a paved parking and storage area. The Registrant also operates a computer center, three central distribution warehouses, and a garage and trucking terminal. Additional information regarding owned and leased properties of the Registrant is set forth as Exhibit 99.1 to this report and in Note 5 of the Notes to Consolidated Financial Statements of the Annual Report to shareholders for the fiscal year ended January 27, 1995, a copy of which is filed as an exhibit to this report and the cited portion of which is incorporated herein by reference. ITEM 3. LEGAL PROCEEDINGS There are no material pending legal proceedings to which the Registrant or its subsidiaries is a party or of which the property of either the Registrant or its subsidiaries is the subject which are required to be reported in response to this item. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of the Registrant's security holders during the fourth quarter of the fiscal year ended January 27, 1995. I-6 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Information with respect to the principal market for the Registrant's common stock, stock prices and dividend information is set forth under the captions "Shareholder Information" and "Market Price and Dividend Data" of the Annual Report to shareholders for the fiscal year ended January 27, 1995, a copy of which is filed as an exhibit to this report and the cited portion of which is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA Information with respect to selected financial data of the Registrant is set forth under the caption "Selected Financial Data" of the Registrant's Annual Report to shareholders for the fiscal year ended January 27, 1995, a copy of which is filed as an exhibit to this report and the cited portion of which is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Information with respect to the Registrant's financial condition, changes in financial condition and results of operations is set forth under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" of the Registrant's Annual Report to shareholders for fiscal year ended January 27, 1995, a copy of which is filed as an exhibit to this report and the cited portion of which is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (a) Financial Statements The financial statements filed with this report are set forth in the "Index to Consolidated Financial Statements and Schedules" following Part IV hereof. (b) Selected Quarterly Financial Data Information with respect to selected quarterly financial data of the Registrant is set forth under the caption "Selected Quarterly Financial Data" of the Registrant's Annual Report to shareholders for fiscal year ended January 27, 1995, a copy of which is filed as an exhibit to this report and the cited portion of which is incorporated herein by reference. II-1 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE On May 24, 1994, the Board of Directors of the Registrant appointed Price Waterhouse LLP as auditors for the three fiscal year period commencing with the Registrant's fiscal year ending January 27, 1995. The term of engagement of the Registrant's previous auditors, the firm of Coopers & Lybrand, expired at the conclusion of the fiscal year ended January 28, 1994. Price Waterhouse LLP was selected by the Board upon the recommendation of the Audit Committee following consideration of proposals submitted at the Committee's request by a number of independent accounting firms including, among others, Coopers & Lybrand and Price Waterhouse LLP. (a) Previous independent accountants. (i) The former accountants, Coopers & Lybrand, were not reappointed by the Registrant following the expiration of their term of engagement. (ii) The reports of Coopers & Lybrand on the financial statements for the prior two fiscal years contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principle, except for the change in accounting for income taxes in fiscal year ended January 31, 1992 referred to in the reports of Coopers & Lybrand. (iii) The Registrant's Board of Directors approved the change of independent accountants upon the recommendation of the Audit Committee. (iv) In connection with its audits for the two prior fiscal years and through May 24, 1994, there have been no disagreements with Coopers & Lybrand on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements if not resolved to the satisfaction of Coopers & Lybrand would have caused them to make reference thereto in their report on the financial statements for such years. (v) During the two prior fiscal years and through May 24, 1994, there have been no reportable events as defined in Regulation S-K Item 304(a)(1)(v). (vi) The Registrant requested and received a letter from Coopers & Lybrand addressed to the Securities and Exchange Commission stating that it agrees with the above statements. A copy of such letter, dated May 31, 1994, is filed as Exhibit 16.1 to Form 8-K dated May 24, 1994. II-2 (b) New independent accountants. (i) The Registrant engaged Price Waterhouse LLP as its new independent accountants as of May 24, 1994. During the two prior fiscal years and through May 24, 1994, the Registrant has not consulted with Price Waterhouse LLP on items which (1) were or should have been subject to SAS 50 or (2) concerned the subject matter of a disagreement or reportable event with the former auditor (as described in Regulation S-K Item 304(a)(2)). II-3 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (a) Identification of Directors Information with respect to Directors of the Registrant is set forth under the captions "Directors and Nominees for Election as Directors of the Company" and "Family Relationships Between Certain Directors" of the Registrant's Proxy Statement for the 1995 Annual Meeting of Shareholders (the "1995 Proxy Statement"), which has been filed with the Commission by the Registrant under Regulation 14A and the cited portion of which is incorporated herein by reference. (b) Identification of Executive Officers Information with respect to Executive Officers of the Registrant is set forth under the caption "Executive Officers" and, with respect to Executive Officers who are also Directors is also set forth under the captions referred to in paragraph (a) above of this Item 10 of the Registrant's 1995 Proxy Statement, which has been filed with the Commission by the Registrant under Regulation 14A and the cited portions of which are incorporated herein by reference. (c) Compliance with Section 16(a) of the Securities Exchange Act of 1934 The information required by Item 405 of Regulation S-K is furnished under the caption "Compliance with Section 16(a) of the Securities Exchange Act of 1934" of the Registrant's 1995 Proxy Statement, which has been filed with the Commission under Regulation 14A and the cited portion of which is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION Information with respect to executive compensation is set forth under the caption "Executive Compensation and Other Information" of the Registrant's 1995 Proxy Statement. Except as hereinafter set forth, such information is deemed to have been filed with the Commission as a part of such Proxy Statement and is incorporated by reference herein. Notwithstanding anything to the contrary set forth in the Company's previous filings under the Securities Act of 1933, as amended (the "33 Act"), or the Securities Exchange Act of 1934, as amended (the "34 Act"), that might incorporate future filings including the Proxy Statement or this Report on Form 10-K, the "Compensation Committee Report on Executive Compensation" and the section captioned "Shareholder Return" of the 1995 Proxy Statement are specifically excluded from the portions of the 1995 Proxy Statement incorporated by reference herein or into any other filing under the 33 Act or the 34 Act. III-1 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information as of March 24, 1995 with respect to persons known to management of the Registrant to be the beneficial owners of more than 5% of the outstanding common stock of the Registrant and information with respect to the security ownership of management of the Registrant is set forth under the captions "Ownership of Securities by Certain Beneficial Owners" and "Ownership of Securities by Officers and Directors" of the Registrant's 1995 Proxy Statement, filed with the Commission pursuant to Regulation 14A, and such information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information with respect to certain relationships and related transactions is set forth under the caption "Certain Transactions with Management" of the Registrant's 1995 Proxy Statement, which has been filed with the Commission pursuant to Regulation 14A and the cited portion of which is incorporated herein by reference. III-2 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Financial Statements and Financial Statement Schedules Financial statements and financial statement schedules required to be filed by item 8 of this Form 10-K are listed in a separately designated section submitted below, except for the report of predecessor independent accountants which is included at the end of Part IV. Exhibits are listed in subparagraph (c) below. (b) Reports on Form 8-K During the quarter ended January 27, 1995, the Registrant filed a Current Report on Form 8-K dated January 3, 1995, which reported under Item 5 (Other Events) that the Registrant, pursuant to an Asset Purchase Agreement dated October 20, 1994 with The Treaty Company ("Treaty"), acquired all of those assets operated by Treaty through its operating division known as the Treaty Distribution Group. (c) Exhibits Filed A substantial number of the exhibits referred to below are indicated as having been previously filed as exhibits to other reports under the Securities and Exchange Act of 1934 or as exhibits to registration statements under the Securities Act of 1933. Such previously filed exhibits are incorporated by reference in this Form 10-K. Exhibits not incorporated by reference herein are filed with this report. (2) Plan of acquisition, reorganization, arrangement, liquidation or succession. Not applicable. (3) Articles of incorporation and by-laws. 3.1 Articles of incorporation, as amended, filed as Exhibit 3.1 to Form 10-Q for the quarter ended July 31, 1994. 3.2 Composite By-Laws, as amended, filed as Exhibit 3.2 to Form 10-Q for the quarter ended July 31, 1994. (4) Instruments defining the rights of security holders, including indentures. 4.1 Specimen Stock Certificate representing shares of the Registrant's common stock, $1.00 par value, filed as Exhibit 4.2 to Form 10-Q for the quarter ended October 31, 1984. IV-1 4.2 Trust Indenture dated May 1, 1986 between the Registrant and J. Henry Schroder Bank & Trust Company, as Trustee for the holders of the 7% Convertible Subordinated Debentures, filed as Exhibit 4(b) to Registration No. 33-4714. 4.3 Specimen Copy of Certificate representing 7% Convertible Subordinated Debenture, filed as Exhibit 4(c) to Registration No. 33-4714. 4.4 Resolution Approving and Implementing Shareholder Rights Plan filed as Exhibit 4.4 to Form 8-K dated May 17, 1988. (9) Voting trust agreement. Not applicable. (10) Material contracts. 10.1 Lease Agreements with Hughes, Inc. (a) Orlando Trucking, Garage and Maintenance Operations dated December 1, 1971, filed as Exhibit 13(n) to Registration No. 2-43900. Letter dated April 15, 1992 extending lease from month to month, filed as Exhibit 10.1(a) to Form 10-K for the fiscal year ended January 31, 1992. (b) Leases effective March 31, 1988, filed as Exhibit 10.1(c) to Form 10-K for the fiscal year ended January 27, 1989. Sub-Item Property (1) Clearwater (2) Daytona Beach (3) Fort Pierce (4) Lakeland (5) Lakeland - Lightstyle (6) Leesburg (7) Orlando Electrical Operation (8) Orlando Plumbing Operation (9) Orlando Utility Warehouse (10) St. Petersburg (11) Sarasota (12) Venice (13) Winter Haven (c) Lease amendment letter between Hughes, Inc. and the Registrant, dated December 1, 1986, amending Orlando Truck Operations Center and Maintenance Garage lease, filed as Exhibit 10.1(i) to Form 10-K for the fiscal year ended January 30, 1987. IV-2 (d) Lease agreement dated June 1, 1987, between Hughes, Inc. and the Registrant, for additional Sarasota property, filed as Exhibit 10.1(j) to Form 10-K for the fiscal year ended January 29, 1988. (e) Leases dated March 11, 1992, filed as Exhibit 10.1(e) to Form 10-K for the fiscal year ended January 31, 1992. Sub-Item Property (1) Tallahassee Electrical Operation (2) Gainesville Electrical Operation (3) Valdosta Electrical Operation 10.2 Hughes Supply, Inc. 1988 Stock Option Plan filed as Exhibit A to Prospectus included in Registration No. 33-26468. 10.3 Form of Supplemental Executive Retirement Plan Agreement entered into between the Registrant and eight of its executive officers, filed as Exhibit 10.6 to Form 10-K for fiscal year ended January 30, 1987. 10.4 Directors' Stock Option Plan, as amended, filed as Exhibit 10.4 to Form 10-Q for the quarter ended July 31, 1994. 10.5 Asset Purchase Agreement with Accord Industries Company, dated October 9, 1990, for sale of Registrant's manufacturing operations, filed as Exhibit 10.7 to Form 10-K for fiscal year ended January 25, 1991. 10.6 Lease Agreement dated June 30, 1993 between Donald C. Martin and Electrical Distributors, Inc., filed as Exhibit 10.6 to Form 10-K for fiscal year ended January 28, 1994. 10.7 Consulting Agreement dated June 30, 1993 between Hughes Supply, Inc. and Donald C. Martin, filed as Exhibit 10.7 to Form 10-K for fiscal year ended January 28, 1994. 10.8 Written description of senior executives' long-term incentive bonus plan for fiscal year 1996 incorporated by reference to the description of the bonus plan set forth under the caption "Approval of the Stock Award Provisions of the Senior Executives' Long-Term Incentive Bonus Plan for Fiscal Year 1996" on pages 26 and 27 of the Registrant's Proxy Statement Annual Meeting of Shareholders To Be Held May 24, 1994. IV-3 10.9 Senior Executives' Long-Term Incentive Bonus Plan, including the senior executives' long-term incentive bonus plan for fiscal year 1997 (the "1997 Performance Plan") and the senior executives' long-term incentive bonus plan for fiscal year 1998 (the "1998 Performance Plan") incorporated by reference therein. 10.10 Lease Agreement dated June 30, 1994 between Donald C. Martin and Electrical Distributors, Inc. (11) Statement re computation of per share earnings. 11.1 Summary schedule of earnings per share calculations. (12) Statement re computation of ratios. Not applicable. (13) Annual report to security holders, Form 10-Q or quarterly report to security holders. 13.1 Information incorporated by reference into Form 10-K from the Annual Report to shareholders for the fiscal year ended January 27, 1995. (16) Letter re change in certifying accountant. 16.1 Letter from Coopers & Lybrand, filed as Exhibit 16.1 to Form 8-K dated May 24, 1994. (18) Letter re change in accounting principles. Not applicable. (21) Subsidiaries of the Registrant. 21.1 Subsidiaries of the Registrant. (22) Published report regarding matters submitted to vote of security holders. Not applicable. (23) Consents of experts and counsel. 23.1 Consent of Price Waterhouse LLP. 23.2 Consent of Coopers & Lybrand L.L.P. (24) Power of attorney. Not applicable. (27) Financial data schedule. 27.1 Financial Data Schedule (filed electronically only). (99) Additional exhibits. 99.1 Location of facilities. IV-4 (d) Financial Statement Schedules Financial statements and financial statement schedules required by Regulation S-X which are excluded from the annual report to shareholders by Rule 14a-3(b). Not applicable. IV-5 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. HUGHES SUPPLY, INC. By: /s/ David H. Hughes David H. Hughes, Chairman of the Board and Chief Executive Officer /s/ J. Stephen Zepf J. Stephen Zepf, Treasurer, Chief Financial Officer, Chief Accounting Officer Date: April 21, 1995 Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ David H. Hughes /s/ Clifford M. Hames David H. Hughes Clifford M. Hames April 21, 1995 April 21, 1995 (Director) (Director) /s/ John D. Baker, II /s/ Russell V. Hughes John D. Baker, II Russell V. Hughes April 21, 1995 April 21, 1995 (Director) (Director) /s/ Robert N. Blackford /s/ Vincent S. Hughes Robert N. Blackford Vincent S. Hughes April 21, 1995 April 21, 1995 (Director) (Director) /s/ John B. Ellis /s/ Herman B. McManaway John B. Ellis Herman B. McManaway April 21, 1995 April 21, 1995 (Director) (Director) /s/ A. Stewart Hall, Jr. /s/ Donald C. Martin A. Stewart Hall, Jr. Donald C. Martin April 21, 1995 April 21, 1995 (Director) (Director) IV-6 REPORT OF INDEPENDENT ACCOUNTANTS Shareholders and Board of Directors Hughes Supply, Inc. We have audited the accompanying consolidated balance sheet of Hughes Supply, Inc. and subsidiaries as of January 28, 1994, and the related consolidated statements of income, shareholders' equity, and cash flows for the fiscal years ended January 28, 1994 and January 29, 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Hughes Supply, Inc. and subsidiaries as of January 28, 1994, and the consolidated results of their operations and their cash flows for the fiscal years ended January 28, 1994 and January 29, 1993, in conformity with generally accepted accounting principles. /s/ Coopers & Lybrand Orlando, Florida March 17, 1994 HUGHES SUPPLY, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES The following consolidated financial statements of the Registrant and its subsidiaries included in the Annual Report of the Registrant to its shareholders for the year ended January 27, 1995, are incorporated by reference: Annual Report Page Report of Independent Certified Public Accountants 12 Consolidated Statements of Income for the years ended January 27, 1995, January 28, 1994 and January 29, 1993 13 Consolidated Balance Sheets as of January 27, 1995 and January 28, 1994 14 Consolidated Statements of Shareholders' Equity for the years ended January 27, 1995, January 28, 1994 and January 29, 1993 16 Consolidated Statements of Cash Flows for the years ended January 27, 1995, January 28, 1994 and January 29, 1993 17 Notes to Consolidated Financial Statements 18 Except for the report of predecessor independent accountants which is included in Part IV above, all other financial statements and schedules have been omitted as they are either not applicable, not required or the information is given in the financial statements or related notes. INDEX OF EXHIBITS FILED WITH THIS REPORT 10.9 Senior Executives' Long-Term Incentive Bonus Plan. 10.10 Lease Agreement dated June 30, 1994 between Donald C. Martin and Electrical Distributors, Inc. 11.1 Summary schedule of earnings per share calculations. 13.1 Information incorporated by reference into Form 10-K from the Annual Report to shareholders for fiscal year ended January 27, 1995. 21.1 Subsidiaries of the Registrant. 23.1 Consent of Price Waterhouse LLP. 23.2 Consent of Coopers & Lybrand L.L.P. 27.1 Financial data schedule (filed electronically only). 99.1 Location of facilities. EX-10 2 HUGHES SUPPLY, INC. SENIOR EXECUTIVES' LONG-TERM INCENTIVE BONUS PLAN Adopted by the Board of Directors March 15, 1995 Purpose. The Hughes Supply, Inc. Senior Executives' Long-Term Incentive Bonus Plan (the "Long-Term Plan") was adopted by the Board of Directors on March 15, 1995 as an on-going performance based incentive bonus plan to permit the Board to provide for incentive compensation to reward key senior executives for achieving specified Company performance goals adopted by the Board. Operation of the Plan. Under the Long-Term Plan the Board, in its sole discretion, may establish separate performance plans for separate performance periods, establish performance goals for such performance periods, designate the participants to participate in such performance plans, and establish the performance plan bonus payments to be made to such participants if the required performance goals are achieved. Performance Periods. The Board may establish a performance plan under the Long-Term Plan for any performance period consisting of one or more fiscal years of the Company. Any such performance plan shall be designated by reference to the final Company fiscal year included in the applicable performance period so that, for example, the performance plan for the performance period including the Company's three fiscal years up to and including the 1997 fiscal year is designated under the Long-Term Plan as the "1997 Performance Plan." Performance Goals. With respect to any performance plan adopted under the Long-Term Plan, the Board shall determine Company performance goals which must be met during the performance period of that performance plan to entitle a participant in that performance plan to the payment of a performance plan bonus payment. Such performance goals may be defined with respect to earnings criteria, return on investment, or any other measure of Company performance deemed by the Board to be relevant to the Board's long- term goals for the overall operation of the Company. Plan Participants. The Board shall designate the participants under each performance plan from among the Company's senior executive management employees which the it considers most instrumental in achieving the required performance goals. Bonus Payments. In establishing a performance plan the Board shall also establish the amount of, or method for determining the amount of, and form of payment of, any performance plan bonus payment which would become payable to each participant under that performance plan if the required performance goals are met. Form of Bonus Payments. Under the Long-Term Plan, as approved by the Board, the Board may specify that all or any portion of a performance plan bonus payment may be in shares of common stock of the Company. The provision of the Long-Term Plan that permits such payment in shares of common stock (the "Stock Award Provision") is subject to the approval of the shareholders at the 1995 Annual Meeting. In the event that the shareholders do not approve the Stock Award Provision, the Long-Term Plan will be deemed to be amended to permit the payment of a performance plan bonus payment only in cash. Bonus Payment Shares; Value. Subject to the requirement of shareholder approval of the Stock Award Provision, the maximum aggregate number of shares of common stock which may be paid to participants as performance plan bonus payments under performance plans adopted under the Long-Term Plan shall be 100,000 shares. For any payment of a performance plan bonus payment in shares of common stock, such common stock shall be valued at fair market value determined as the closing price of the common stock on the New York Stock Exchange on the last trading day of the performance period for the subject performance plan. Anticipated Tax Treatment. Under federal income tax laws the payment of any amount as a performance plan bonus payment will result in ordinary employment earned income taxable to the recipient and deductible by the Company. Prior to any such payment, the designation of a participant under a performance plan will not be taxable to the recipient nor deductible to the Company. During the performance period of any performance plan the then contingent cost, if any, to the Company, determined from the application of the performance criteria of the performance plan to the Company's performance to date, is accrued as a liability of the Company. Term of Plan. The term of the Long-Term Plan shall be deemed to have commenced with its adoption by the Board on March 15, 1995 and shall end on the final day of the Company's 2003 fiscal year unless terminated earlier by action of the Board. No performance plan may be adopted under the Long- Term Plan which shall extend beyond the stated term of the Long-Term Plan. The Board may terminate the Long-Term Plan at any time provided that any performance plan adopted prior to such termination shall continue in effect until the end of the applicable performance period and the payment of any performance plan bonus payment required thereunder. Comparable Prior Plans; Incorporation. The Long-Term has been adopted by the Board based, in large measure, upon its favorable experience with similar ad hoc plans adopted in prior years. Because it is anticipated by the Board, although not required, that additional performance plans adopted under the Long-Term Plan will be comparable to these prior plans, the Board hereby expressly incorporates herein the existing 1997 and 1998 Performance Plans referred to below. By incorporating these existing plans into the Long-Term Plan the Board it is the intention of the Board that approval by the shareholders of the Stock Award Provision of the Long-Term Plan will also constitute shareholders' approval of the stock award provisions of these existing plans and that the aggregate limitation of 100,000 shares of common stock for bonus payments under the Long-Term Plan shall include bonus payments of shares under these existing plans. 1997 and 1998 Performance Plans On May 24, 1994 and March 15, 1995, respectively, the Board established senior executives' long-term incentive bonus plans for the three fiscal year performance period ending on the last day of the fiscal year to be ended January 24, 1997 (the "1997 Performance Plan") and for the three fiscal year performance period ending on the last day of the fiscal year to be ended January 30, 1998 (the "1998 Performance Plan") (collectively, the "existing plans"). Each of these existing plans is incorporated into the Long-Term Plan. Each of the existing plans has been established with performance goals which require continuing growth in the Company's earnings per share during the applicable performance period. The Board has designated the Chief Executive Officer, the President, and the Chief Financial Officer as participants under each of the existing plans. Under each of the existing plans the plan participants would receive a performance plan bonus payment, depending upon the Company's earnings for the applicable performance period, of from 25% to 100% of base salary for the final year of such performance period. Such performance plan bonus payment, if any, would be paid 50% in cash and 50% in common stock following the end of the final year of the performance period. The number of shares of common stock applicable to such possible aggregate performance plan bonus payments would be the number of shares, at the then current fair market value, represented by 50% of the maximum estimated aggregate amount of such performance plan bonus payments. Registration of Plan Bonus Shares. Subject to approval by the shareholders of the Stock Award Provisions of the Long-Term Plan, the shares for issuance as bonus shares under the Long-Term Plan will be registered under the Securities Act of 1933 if such registration is determined, in the opinion of management of the Company and its legal counsel, to be required or advisable. It is also the intention of the Company to register the shares on the New York Stock Exchange. Cash Plan in the Absence of Shareholder Approval. In the event the shareholders do not approve the Stock Award Provision of the Long-Term Plan, the Plan will be deemed to be amended to require that any bonus payment under the existing performance plans or any future performance plans adopted under the Long-Term Plan will be paid entirely in cash. EX-10 3 Exhibit 10.10 LEASE AGREEMENT THIS LEASE AGREEMENT made and entered into as of the 30 day of June, 1994, by and between DONALD C. MARTIN (hereinafter referred to as the "Lessor"), and ELECTRICAL DISTRIBUTORS, INC. (hereinafter referred to as the "Lessee"). W I T N E S S E T H : WHEREAS, Lessor desires to lease certain property to Lessee; and WHEREAS, Lessee desires to lease such property; NOW, THEREFORE, in consideration of the premises and the mutual promises and agreements hereinafter contained, the parties do hereby agree as follows: ARTICLE I PROPERTY. Lessor agrees to lease and demise unto Lessee certain property, known as 5200 Peachtree Road, Atlanta, Georgia 30341, as described on Exhibit "A" hereto (hereinafter referred to as the "Property"). ARTICLE II LEASE TERM. The term of this Lease Agreement shall be for a period of two (2) years commencing on July 1, 1994, and ending on June 30, 1996, both dates inclusive, unless sooner terminated as herein provided. In no event shall there be any renewal of this Lease by operation of law, and if Lessee remains in possession of the Property after the termination of this Lease and without a new lease executed by Lessor and Lessee, but with the acquiescence of Lessor, Lessee shall be deemed to be occupying the Property under a month-to-month periodic tenancy at an amount to be agreed upon by the parties hereto, and in no event less than the then-current Rent as hereinafter provided, and otherwise subject to all the covenants and provisions of this Lease insofar as the same are applicable to a month-to- month periodic tenancy. Lessor and Lessee agree that any such periodic tenancy may be terminated by thirty (30) days prior written notice by either party to this Lease to the other party. If Lessee remains in possession after termination of this Lease without Lessor's acquiescence or consent, Lessee thereupon shall be deemed a tenant-at-sufferance and may be evicted at once without notice. ARTICLE III 3.1 RENT. From July 1, 1994 through and including June 30, 1996, Lessee agrees to pay Lessor without demand, deduction or setoff as rental SIX THOUSAND FIVE HUNDRED ($6,500.00) DOLLARS per month in advance, on the first (1st) day of each calendar month during the Lease Term. Lessee shall pay to Lessor all rent and all other charges due and owing by Lessee under this Lease without deduction or set-off, in legal tender, and at Lessor's address specified in Section 14.7 or as otherwise directed from time to time by Lessor's notice. 3.2 ADDITIONAL RENT. Lessee shall pay to Lessor in addition to all rent as herein provided, on or before the dates the same shall become due and payable, and as additional rent, all taxes, insurance and general maintenance of the Property, which Lessee assumes or agrees to pay hereunder, together with all interest and penalties that may accrue thereon. In the event of non-payment, Lessor shall have the rights and remedies herein provided for in the case of non-payment of rent or a breach of condition. 3.3 TAXES AND OTHER CHARGES. Lessee shall, without notice or demand, as additional rent, pay and discharge, on or before the last day on which the same may be paid without penalty, all taxes, rates and charges, sanitary assessments, and other governmental impositions and charges of every kind and nature whatsoever, and each and every installment thereof together with all interest and penalties thereon, which shall or may during the Lease Term be levied, assessed or imposed on or become a lien upon or become due or payable out of or for or by reason of the Property or any part thereof, the Lessee's or the Lessor's interest in the Property and the improvements located thereon, or any buildings, appurtenances, or equipment now or hereafter erected or placed thereon or therein or any part thereof, or the sidewalks or streets in front of or adjoining the Property including further any rent tax which may now or hereafter be imposed in addition to or in lieu of real property ad valorem taxes. All taxes levied, assessed or imposed in addition to the foregoing shall be paid by Lessee together with all interest and penalties thereon, under or by virtue of all present or future laws, ordinances, requirements, orders, directives, rules or regulations of the federal, state, county and city or local governments and of all other governmental authorities whatsoever, Lessee shall pay all taxes and assessments which shall prior to or during the Lease Term be levied, assessed or imposed on or become a lien upon the personal property of Lessee located upon the Property. Lessee shall be deemed to have complied with the covenants of this Lease if payment of such rents, taxes, sanitary assessments, and other governmental impositions and charges, shall have been made within any grace period allowed by law or by the governmental authority imposing the same during which payment is permitted without penalty or interest, and either before the same shall become a lien upon the Property or shall become delinquent. Lessee shall within ten (10) days after receipt of written request therefor by Lessor produce and deliver to Lessor reasonably satisfactory evidence of such payment. Lessor shall be responsible for the payment of all special assessments imposed upon the Property. All such rents, taxes, rates and charges, sanitary assessments, and other governmental impositions and charges which become due and are payable in the calendar year in which the Lease Term expires, shall be apportioned pro rata between Lessor and Lessee in accordance with the respective portions of such period during which the Lease Term shall be in effect. Lessee shall have the right to contest or review by legal proceedings, or in such other manner as it may deem suitable (which, if instituted, Lessee shall conduct promptly at its own expense, and free of any expense to Lessor, and, if necessary, in the name of Lessor), any tax, assessment, rate or charge, sanitary assessment, or other governmental imposition or charge aforementioned. Nothing herein contained shall be construed to require Lessee to pay any inheritance estate, succession, transfer, gift, franchise, income, income profit or excess profit, capital stock, capital levy, corporate or unincorporated business tax or other similar tax, that is or may be imposed upon Lessor, its successors or assigns, or upon the rent payable by Lessee. In the event any sales tax shall be due on rent for the Property, then Lessee shall be responsible for paying and shall pay, when due, any such sales tax. ARTICLE IV COSTS AND EXPENSES OF LESSEE. All costs, expenses and obligations of every kind, including but not limited to utilities, repairs and maintenance relating to the Property which may arise or become due during the term of this Lease, shall be paid by Lessee, except as designated herein. Lessor shall be responsible for the payment of major repairs to the roof, the foundation and the structural walls. ARTICLE V COVENANTS OF LESSOR. Lessor covenants and agrees as follows: A. The Lessor owns the Property in fee simple and has full right, power and authority to enter into this Lease for the terms herein granted and that the Property may be used by Lessee during the entire term of this Lease for the purposes for which it is currently being used by Lessee. B. That Lessee, upon the payment of the Rent herein provided and upon the performance of all the terms of this Lease, shall at all times during the Lease Term and during any extension or renewal term, peaceably and quietly enjoy the property without any disturbance from Lessor or from any other person claiming through Lessor. C. That the Property currently conforms and complies with any and all applicable laws or private restrictions. D. That Lessor has no knowledge or notice of any pending or threatened law suits or insolvencies with respect to either Lessor or the Property. ARTICLE VI COVENANTS OF LESSEE. Lessee covenants and agrees as follows: A. To pay Lessor the Rent herein stipulated at the time and in the manner herein provided. B. To take good care of the Property and suffer no waste or damage and at the end or other expiration of the term of this Lease, to return the Property in its current condition, normal wear and tear excepted. C. To observe and comply with all presently existing State, City and County ordinances and regulations applicable to the Property, and all orders and requirements presently imposed by any other duly constituted governmental authority having jurisdiction over the Property. ARTICLE VII USE. 7.1 LAWFUL PURPOSE. Lessee may use the Property for any lawful purpose, Lessee shall not use or permit any of the Property to be used for any unlawful purpose, Lessee shall comply, at its own expense, with all statutes, regulations, rules, ordinances, and orders of any governmental body, department, or agency thereof which apply to or result from Lessee's use or occupancy of the Property. 7.2 LESSOR'S RIGHT TO PROPERTY. Lessor and its agents, employees, and contractors shall have the right to enter the Property during normal business hours, without undue interference with the conduct of Lessee's business therein, to inspect and examine the Property and to exhibit the Property to prospective purchasers, tenants and lenders. In the event of emergency, or if otherwise necessary to prevent injury to persons or damage to property, such entry to the Property may be made by force without any liability whatsoever on the part of Lessor for damage resulting from such forcible entry. ARTICLE VIII ASSIGNMENT AND SUBLETTING. 8.1 Lessee shall not, without Lessor's prior written consent, which shall not be unreasonably withheld or delayed: (i) assign, convey, mortgage, pledge, encumber, or otherwise transfer (whether voluntarily, by operation of law, or otherwise) this Lease or any interest under it; (ii) allow any transfer thereof or any lien upon Lessee's interest by operation of law; (iii) sublet the Property or any part thereof; or (iv) permit the use or occupancy of the Property or any part thereof by any one other than Lessee; and any attempt to consummate any of the foregoing without Lessor's consent shall be void. 8.2 Notwithstanding anything herein to the contrary, if at any time or from time to time during the Lease Term, Lessee desires to sublet all or a part of the Property or assign, convey, mortgage, pledge, encumber, or otherwise transfer the Lease or any interest under it, Lessee shall notify Lessor in writing (hereinafter referred to in this Article VIII as the "Notice") of the terms of the proposed subletting or assignment, the identity of the proposed assignee or sublessee, the area proposed to be sublet (if a sublease is proposed), and such other information as Lessor may request to evaluate Lessee's request to assign or sublet. Notwithstanding the provisions of this Article VIII, Lessee may sublet or assign, convey, mortgage, pledge, encumber, or otherwise transfer the Lease or any interest under it, to its parent corporation or to an affiliate or subsidiary corporation of which such parent corporation owns the majority of the shares of common and preferred stock without Lessor's prior written consent or approval. In such event, Lessee shall notify Lessor, in writing, of such an assignment or sublease, conveyance, mortgage, pledge, encumbrance, or other transfer prior to the commencement of the term of such assignment or sublease. 8.3 Within twenty (20) days of Lessor's receipt of the proposed assignment or sublease, conveyance, mortgage, pledge, encumbrance, or other transfer, and such requested additional information, Lessor shall approve or disapprove in writing the terms of the proposed assignment or sublease, conveyance, mortgage, pledge, encumbrance, or other transfer, and the proposed assignee or sublessee or other party thereto. Failure to so approve or disapprove shall be deemed approval by Lessor. If a fully executed counterpart of such assignment or sublease, conveyance, mortgage, pledge, encumbrance, or other transfer is not delivered to Lessor within forty-five (45) days after the date of Lessor's written approval, then Lessor's approval of same shall be deemed null and void and Lessee shall again comply with all the conditions of this Section 8.3 as if the Notice and options hereinabove referred to had not been given and received. 8.4 Lessee agrees to pay, as additional rental, to Lessor, on demand, reasonable costs incurred by Lessor in connection with any request by Lessee for Lessor to consent to any of the transactions contemplated by this Article VIII by Lessee. 8.5 If, with the consent of Lessor, this Lease is assigned or the Property or any part thereof is sublet or occupied by anybody other than Lessee, Lessor may, after default by Lessee, collect rent from the assignee, subtenant or occupant, and apply the net amount collected to the Rent, but no such assignment, subletting, occupancy, or collection shall be deemed (i) a waiver of any of Lessee's covenants contained in this Lease, (ii) the acceptance by Lessor of the assignee, subtenant, or occupant as Lessee, or (iii) the release of Lessee from further performance by Lessee of its covenants under this Lease. ARTICLE IX EMINENT DOMAIN. 9.1 If all or any substantial part of the Property, including but not limited to ten (10) percent of the parking, access, building or signage, should be taken for any public or quasi-public use under governmental law, ordinance, or regulation, or by right of eminent domain, or by private purchase in lieu thereof, and the taking would prevent or materially interfere with the use of the Property for the purpose for which it is then being used, this Lease shall terminate effective when the physical taking shall occur in the same manner as if the date of such taking were the date originally fixed in this Lease for the expiration of the Lease Term. 9.2 If part of the Property is taken for any public or quasipublic use under any governmental law, ordinance, or regulation, or by right of eminent domain, or by Private Purchase in lieu thereof, and this Lease is not terminated as provided in subsection (a) above, this Lease shall not terminate but the Rent payable hereunder during the unexpired portion of this Lease shall be reduced to such extent, if any, as may be fair and reasonable under all of the circumstances and Lessor shall undertake to restore the Property to a condition suitable for Lessee's use, as near to the condition thereof immediately prior to such taking as is reasonably feasible under all circumstances. 9.3 Lessee shall not share in any condemnation award or payment in lieu thereof or in any award for damages resulting from any grade change of adjacent streets, the same being hereby assigned to Lessor by Lessee; provided, however, that Lessee may separately claim and receive from the condemning authority, if legally payable, compensation for Lessee's removal and relocation costs and for Lessee's loss of business and/or business interruption. 9.4 Notwithstanding anything to the contrary contained in this Article 9, if during the Lease Term the use or occupancy of any part of the Property shall be taken or appropriated temporarily for any public or quasi-public use under any governmental law, ordinance, or regulation, or by right of eminent domain, this Lease shall be and remain unaffected by such taking or appropriation and Lessee shall continue to pay in full all rental payable hereunder by Lessee during the Lease Term. In the event of any such temporary appropriation or taking, Lessee shall be entitled to receive that portion of any award which represents compensation for the loss of use or occupancy of the Property during the Lease Term, and Lessor shall be entitled to receive that portion of any award which represents the cost of restoration and compensation for the loss of use or occupancy of the Property after the end of the term of this Term Lease. ARTICLE X INSURANCE. 10.1 Lessee shall carry fire and extended coverage insurance insuring Lessee's interest in its improvements and betterments to the Property, and any and all furniture, equipment, supplies, and other property owned, leased, held, or possessed by it and contained therein, such insurance coverage to be in an amount equal to the full insurable value of such improvements and property. Lessee may, in the alternative, elect to self- insure the Property in whole or in part, provided such self-insurance, along with any and all additional third-party insurance shall equal the full insurable value of the Property. 10.2 Lessee also agrees to carry a policy or policies of comprehensive general liability insurance, including personal injury and property damage, with contractual liability endorsement, in the amount of One Million Dollars ($1,000,000.00) for property damage and one Million Dollars ($1,000,000.00) per occurrence for personal injuries or deaths of persons occurring in or about the Property. Said policies shall: (i) name Lessor as an additional insured and insure Lessor's contingent liability under this Lease, (ii) be issued by an insurance company which is acceptable to Lessor and licensed to do business in the State of Georgia, and (iii) provide that said insurance shall not be canceled unless thirty (30) days prior written notice shall have been given to Lessor, Certificates of insurance shall be delivered to Lessor by Lessee upon commencement of the term of the Lease and upon each renewal of said insurance. Lessee may, in the alternative, elect to self-insure the Property, in whole or in part, provided such self-insurance, along with any and all additional third-party insurance shall equal One Million Dollars ($1,000,000,00). 10.3 Lessee shall obtain from its insurers under all policies of fire, theft, public liability, worker's compensation, and other insurance maintained by it at any time during the Lease Term insuring or covering the Property or any portion thereof or operations therein, and shall in good faith endeavor to obtain a waiver of all rights of subrogation which the insurer might have against Lessor, if obtainable. ARTICLE XI INDEMNITY. Lessee agrees to indemnify and hold Lessor harmless from and defend Lessor against any and all claims or liability for any injury or death to any person or damage to any property whatsoever: A. occurring in, on or about the Property, to the extent such injury, death or damage shall be caused in part or in whole by the act, neglect or fault of, or omission of any duty with respect to the same, by Lessee, its agents, employees, contractors, invitees, licensees or tenants; B. arising from any work or thing whatsoever done by or benefiting the Lessee in or about the Property or from transactions of the Lessee concerning the Property; C. arising from any breach or event of default on the part of the Lessee in the performance of any covenant or agreement on the part of the Lessee to be performed pursuant to the terms of this Lease; or D. otherwise arising from any act or neglect of the Lessee, or any of its agents, employees, contractors, invitees, licensees or tenants. ARTICLE XII 12.1 LIABILITY OF LESSOR. Lessor shall not be liable to Lessee or to any person, firm, corporation, or other business association claiming by, through or under Lessee, for any defects known to Lessee in the Property; nor for the theft, mysterious disappearance, or loss of any property of Lessee from the Property. Lessor shall not be liable for any interference, disturbance, or act caused by any person other than Lessor, nor shall Lessee be relieved from any obligation herein because of such interference, disturbance, or act of any person other than Lessor. 12.2 LIMITATION OF LIABILITY. Lessor's obligations and liability with respect to this Lease shall be limited solely to Lessor's interest in the Property, as such interest is constituted from time to time, and Lessor shall not have any personal liability whatsoever with respect to this Lease. In any action or proceeding brought to enforce the obligation of Lessor to Lessee under this Lease, Lessor and Lessee agree that any final judgment or decree shall be enforceable against Lessor only to the extent of Lessor's interest in the Property, as aforesaid, and any such judgment or decree shall not be capable of execution against, nor be a lien on, any assets of Lessor other than its interest in the Property, as aforesaid. Lessor shall maintain a minimum of one million dollars ($1,000,000.00) equity in the Property. ARTICLE XIII EVENTS OF DEFAULT AND REMEDIES. 13.1 The occurrence of any of the following shall constitute an event of default: (a) The Rent or any other sum of money payable under this Lease is not paid when due; (b) Lessee's interest in the Lease or the Property shall be subjected to any attachment, levy, or sale pursuant to any order or decree entered against Lessee in any legal proceeding and such order or decree shall not be vacated within ninety (90) days of entry thereof; or (c) Lessee breaches or fails to comply with any term, provision, condition, or covenant of this Lease, other than the payment of Rent and any other sum due and payable hereunder. 13.2 Upon the occurrence of an event of default and, in the case of an event of default under subsection (a) above, if such event of default is not cured within five (5) days of receipt of written demand, and, in the case of an event of default under subsections (b) or (c) above, if such event of default is not cured within thirty (30) days after written notice of such event of default is given by Lessor to Lessee, or such longer period of time as is reasonably necessary under the circumstances. Lessor shall have the option to do and perform any one or more of the following in addition to, and not in limitation of, any other remedy or right permitted it by law or in equity or by this Lease: (a) Lessor, with or without terminating this Lease, may reenter the Property and perform, correct or repair any condition which shall constitute a failure on Lessee's part to keep, observe, perform, satisfy, or abide by any term, condition, covenant, agreement, or obligation of this Lease, and Lessee shall fully reimburse and compensate Lessor on demand for all costs and expenses reasonably incurred by Lessor in such performance, correction or repairing, including accrued interest as provided in the next sentence. All sums so expended to cure Lessee's default shall accrue interest from the date of demand until date of payment at a rate of interest per annum equal to the lesser of (i) sixteen percent (16%) per annum; or (ii) the highest rate permitted by law. (b) Lessor, with or without terminating this Lease, may immediately, or at any time thereafter, demand in writing that Lessee vacate the Property and thereupon Lessee shall vacate the Property and remove therefrom all property thereon belonging to or placed on the Property by, the direction of, or with consent of Lessor within ten (10) days of receipt by Lessee of such notice from Lessor, whereupon Lessor shall have the right to reenter and take possession of the Property. Any such demand, reentry and taking possession of the Property by Lessor shall not of itself constitute an acceptance by Lessor of a surrender of this Lease or of the Property by Lessee and shall not of itself constitute a termination of this Lease by Lessor. (c) Lessor, with or without terminating this Lease, may immediately or at any time thereafter relet the Property or any part thereof for such time or times, at such rental or rentals and upon such other terms and conditions as Lessor in its commercially reasonable discretion may deem advisable, and Lessor may make any alterations or repairs to the Property which it may deem necessary or proper to facilitate such reletting; and Lessee shall pay all costs of such reletting including but not limited to the cost of any such alterations and repairs to the Property, attorneys' fees, and brokerage commissions; and if this Lease shall not have been terminated, Lessee shall continue to pay all rent and all other charges due under this Lease up to and including the date of beginning of payment of rent by any subsequent tenant of part or all of the Property, and thereafter Lessee shall pay monthly during the remainder of the term of this Lease the difference, if any, between the rent and other charges collected from any such subsequent tenant or tenants and the rent and other charges reserved in this Lease, but Lessee shall not be entitled to receive any excess of any such rents collected over the rents reserved herein. (d) Lessor may immediately or at any time thereafter terminate this Lease, and this Lease shall be deemed to have been terminated upon receipt by Lessee of written notice of such termination; upon such termination Lessor shall recover from Lessee all damages Lessor may suffer by reason of such termination including, without limitation, all arrearages in rentals, costs, charges, additional rentals, and reimbursements, the cost (including court costs and attorneys' fees) of recovering possession of the Property, the cost of any alteration of or repair to the Property which is necessary or proper to prepare the same for re-letting and, in addition thereto, Lessor shall have and recover from Lessee an amount equal to the excess if any, of the total amount of all rents and other charges to be paid by Lessee for the remainder of the term of this Lease over the then reasonable rental value of the Property for the remainder of the term of this Lease, such excess discounted to present value using a discount rate equal to six percent (6%). (e) Lessor shall have a good faith duty to mitigate his losses hereunder. 13.3 If Lessor re-enters the Property or terminates this Lease pursuant to any of the provisions of this Lease, Lessee hereby waives all claims for damages which may be caused by such re-entry or termination by Lessor, Lessee shall and does hereby agree to indemnify and hold Lessor harmless from any loss, cost including court costs and attorneys' fees), or damages suffered by Lessor by reason of such re-entry or termination. No such re-entry or termination shall be considered or construed to be a forcible entry. 13.4 No course of dealing between Lessor and Lessee or any failure or delay on the part of Lessor in exercising any rights of Lessor under this Section 13 or under any other provisions of this Lease shall operate as a waiver of any rights of Lessor hereunder or under any other provisions of this Lease, nor shall any waiver of any event of default on one occasion operate as a waiver of any subsequent event of default or of any other event of default. No express waiver shall affect any condition, covenant, rule, or regulation other than the one specified in such waiver and that one only for the time and in the manner specifically stated. 13.5 The exercise by Lessor of any one or more of the rights and remedies provided in this Lease shall not prevent the subsequent exercise by Lessor of any one or more of the other rights and remedies herein provided. All remedies provided for in this Lease are cumulative and may, at the election of Lessor, be exercised alternatively, successively, or in any other manner and are in addition to any other rights provided for or allowed by law or in equity. ARTICLE XIV MISCELLANEOUS. 14.1 PRONOUNS. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the entity, person or persons may require. 14.2 INSOLVENCY OR BANKRUPTCY. The appointment of a receiver to take possession of all or substantially all of the assets of Lessee, or an assignment of Lessee for the benefit of creditors, or any action taken or suffered by Lessee under any insolvency, bankruptcy, or reorganization act, unless terminated or dismissed within eighty-five (85) days, shall at Lessor's sole option constitute a breach of this Lease by Lessee. Upon the happening of any such event or at any time thereafter, this Lease shall terminate. in no event shall this Lease be assigned or assignable by operation of law or by voluntary or involuntary bankruptcy proceedings or otherwise and in no event shall this Lease or any rights or privileges hereunder be an asset of Lessee under any bankruptcy, insolvency, or reorganization proceedings. 14.3 LATE PAYMENTS. Lessee shall pay, in the event Rent or other charge to be paid by Lessee hereunder is not paid when due, (A) a late fee of five percent (5.0%) of the amount past due, which late fee Lessee acknowledges is an agreed upon reimbursement to Lessor for the administrative expense incurred by Lessor as a result of Lessee's late payment and not a penalty and is reasonable in light of the difficulty to estimate costs; and (B) interest on the amount past due (excluding late fees) at a rate per annum equal to the lesser of (ii) twelve percent (12%) per annum; or (iii) the highest rate permitted by law, from due date until paid. Should Lessee make a martial payment of past due amounts, the amount of such partial percent shall be applied first, to late fees, second, to accrued but unpaid interest, and third, to past due amounts, in inverse order of their due date. 14.4 ATTORNEYS' FEES. In the event of any litigation arising out of this Lease or the relationships evidenced hereby, the prevailing party shall be entitled to receive from the other party, an amount equal to the prevailing party's actual attorneys fees, reasonably incurred. 14.5 INTENTIONALLY LEFT BLANK 14.6 NO WAIVER OF RIGHTS. No failure or delay of Lessor to exercise any right or power given it herein or to insist upon strict compliance by Lessee of any obligation imposed on it herein and no custom or practice of either party hereto at variance with any term hereof shall constitute a waiver or a modification of the terms hereof by Lessor or any right it has herein to demand strict compliance with the terms hereof by Lessee. No person has or shall have any authority to waive any provision of this Lease unless such waiver is expressly made in writing and signed by Lessor. 14.7 ADDRESSES AND NOTICES. (a) Except for legal process which may also be served as by law provided or as provided in subsection (b) below, all notices required or desired to be given with respect to this Lease in order to be effective shall be in writing and shall be deemed to be given to and received by the party intended to receive such notice when hand delivered or three (3) days after such notice shall have been deposited, postage prepaid, to the United States mail, certified, return receipt requested, properly addressed to the addresses specified in item (c) of this Section. In the event of a change of address by either party, such party shall give written notice thereof in accordance with the foregoing. (b) To the extent permitted by law, Lessee hereby: (i) appoints and designates the Property as a proper place for service of process upon Lessee (provided, however, Lessor does not hereby waive the right to serve Lessee with process by any other lawful means); and (ii) expressly waives the service of any notice under any existing or future law of the state of Florida applicable to Lessors and tenants. (c) Lessor: Donald C. Martin 4570 Henderson Mill Road Mansfield, Georgia 30255 Lessee: Electrical Distributors, Inc. 5180 Peachtree Road Atlanta, Georgia 30341 14.8 ENTIRE AGREEMENT AND EXHIBITS. This Lease constitutes and contains the sole and entire agreement of Lessor and Lessee and no prior or contemporaneous oral or written representation or agreement between the parties and affecting the Property shall have legal effect. No modification or amendment of this Lease shall be binding upon the parties unless such modification or amendment is in writing and signed by Lessor and Lessee. The content of each and every exhibit which is referenced in this Lease as being attached hereto is incorporated into this Lease as fully as if set forth in the body of this Lease. 14.9 SUBORDINATION NON-DISTURBANCE AND ATTORNMENT. (a) Except as provided in subsections (d) and (e) below, this Lease and all rights of Lessee hereunder are and shall be subject and subordinate to the lien of any mortgage, deed to secure debt, deed of trust, or other instrument in the nature thereof which may now or hereafter affect Lessor's estate or interest in and to the Property and to any other instrument encumbering the fee title of the Property and to any modifications, renewals, consolidations, extensions, or replacements thereof. (b) Subsection (a) above shall be self-operative, and no further instrument of subordination shall be required by the holder of any such instrument affecting or encumbering the Property. In confirmation of such subordination, Lessee shall, upon demand, at any time or times, execute, acknowledge, and deliver to Lessor or the holder of any such mortgage, deed to secure debt, deed of trust, or other instrument, without expense, any and all instruments that may be requested by Lessor or such holder to evidence the subordination of this Lease and all rights hereunder to the lien of any such mortgage, deed to secure debt, deed of trust, or other instrument, and each such renewal, modification, consolidation, replacement, and extension thereof, and if Lessee shall fail at any time, within ten (10) days following the giving of a written request therefor, to execute, acknowledge, and deliver any such instrument, Lessor or such holder or such lessor, in addition to any other remedies available to it in consequence thereof, may execute, acknowledge, and deliver the same as the attorney-in-fact of Lessee and in Lessee's name, place, and stead, and Lessee hereby irrevocably makes, constitutes, and appoints Lessor or such holder or such lessor, in their respective successors and assigns, such attorney-in-fact for that purpose. (c) Lessee shall, upon demand, at any time or times, execute, acknowledge, and deliver to Lessor or to the holder of any mortgage, deed to secure debt, deed of trust, or other instrument affecting or encumbering the Property, without expense, any and all instruments that may be necessary to make this Lease superior to the lien of any such mortgage, deed to secure debt, deed of trust or other instrument or the grant of any such ground lease, and each renewal, modification, consolidation, replacement, and extension thereof'. and, if Lessee shall fail at any time, within ten (10) days following the giving of a written request therefor, to execute, acknowledge, and deliver any such instrument, Lessor or such holder or such lessor, in addition to any other remedies available to it in consequence thereof, may execute, acknowledge, and deliver the same as the attorney-in-fact of Lessee and in Lessee's name, place, and stead, and Lessee hereby irrevocably makes, constitutes, and appoints Lessor or such holder or such lessor, and their respective successors and assigns, such attorneyin-fact for that purpose. (d) If the holder of any mortgage, deed to secure debt, deed of trust or other instrument affecting or encumbering the Property shall hereafter succeed to the rights of Lessor under this Lease whether through possession or foreclosure action or exercise of private power of sale or delivery of a new lease, Lessee shall, at the option of such holder or lessor, attorn to and recognize such successor as Lessee's Lessor under this Lease as of the date of such succession to Lessor's interest and shall promptly execute and deliver any instrument that may be necessary to evidence such attornment, and Lessee hereby irrevocably appoints Lessor or such holder or such lessor the attorney-in-fact of Lessee to execute and deliver such instrument on behalf of Lessee should Lessee refuse and fail to do so within ten (10) days after Lessor or such holder or such lessor shall have given notice to Lessee requesting the execution and delivery of such instrument. Upon such attornment, this Lease shall continue in full force and effect as a direct lease between such successor Lessor and Lessee, subject to all of the terms, covenants, and conditions of this Lease. (e) Lessor shall obtain from any future holder of any deed to secure debt encumbering the Property, or from the current holder in the event of any refinancing or future advance, a non-disturbance agreement which shall provide that as long as Lessee remains not in default under this Lease, such holder shall not disturb Lessee's tenancy. 14.10 ESTOPPEL CERTIFICATE. At any time and from time to time, Lessee, on or before the date specified in a request therefor made by Lessor, which date shall not be earlier than ten (10) days from the making of such request, shall execute, acknowledge, and deliver to Lessor a certificate evidencing whether or not (i) this Lease is in full force and effect, (ii) this Lease has been amended in any way, (iii) there are any existing events of default on the part of Lessor hereunder to the knowledge of Lessee and specifying the nature such events of default, if any, and (iv) the date to which rent, and other amounts due hereunder, if any have been paid. Each certificate delivered pursuant to this Section may be relied on by any prospective purchaser or transferee of Lessor's interest hereunder or of any part of Lessor's property or by any mortgagee of Lessor's interest hereunder or of any part of Lessor's property or by an assignee of any such mortgagee. 14.11 SEVERABILITY. If any clause or provision of this Lease is or becomes illegal, invalid, or unenforceable because of present or future laws or any rule or regulation of any governmental body or entity, effective during its term, the intention of the parties hereto is that the remaining parts of this Lease shall not be affected thereby, unless such invalidity is essential to the rights of either party hereto in which event this Lease shall terminate. 14.12 CAPTIONS. The captions used in this Lease are for convenience only and do not in any way limit or amplify the terms and provisions hereof. 14.13 SUCCESSORS AND ASSIGNS. The words "Lessor" and "Lessee" as used herein shall include the respective contracting party, whether singular or plural, and whether an individual, masculine or feminine, or a partnership, joint venture, business trust, or corporation. The provisions of this Lease shall inure to the benefit of and be binding upon Lessor and Lessee, and their respective successors, heirs, legal representatives, and assigns, subject, however, in the case of Lessee, to the provisions of Article VIII hereof. 14.14 FORCE MAJEURE. A party to this Lease shall be excused from the performance of its duties and obligations under this Lease except obligations for the payment of money such as Rent, for the period of delay, but in no event longer than 90 days caused by labor disputes, governmental regulations, riots, war, insurrection, acts of God or other causes beyond the control of the party whose performance is being excused (but such causes shall not include insufficiency of funds). 14.15 LESSOR'S REPRESENTATIONS. Lessor hereby represents and warrants that: Lessor is the owner of the Property; Lessor is in undisputed and peaceful possession of the Property and has a perfect right to convey good, fee simple, merchantable title to the Property; there currently exists adequate access, parking and utility service to the Property for the purposes anticipated by the parties hereto; there is no outstanding indebtedness unpaid bill or lien against the Property for equipment, appliances, other fixtures attached to the Property, sewerage, water main, sidewalk or other street improvements; there are no retention title contracts, bills of sale or other encumbrances, of record or otherwise, affecting the title to any personal property installed on the Property; the lines and corners of the Property are clearly marked, and that there are no disputes concerning the location of the lines and corners; there are no pending suits, proceedings, judgments, bankruptcies, liens or executions against the Lessor, either in the county where the Property is located or in any other county in the State of Georgia; no improvements or repairs have been made on the Property during the ninety-five (95) days immediately preceding this date; and there are no outstanding bills incurred for labor or materials used in making improvements or repairs on the Property, for services of architects, surveyors, engineers, or registered foresters incurred in connection therewith. 14.16 HAZARDOUS SUBSTANCES. (a) Lessee hereby covenants that Lessee shall not cause or permit any "Hazardous Substances" (as hereinafter defined) to be placed, held, located or disposed of in, on or at the Property or any part thereof except in full compliance with all applicable laws, rules, ordinances and similar provisions, and neither the Property nor any part thereof shall ever be used as a dump site or storage site (whether permanent or temporary) for any Hazardous Substances during the Lease Term. (b) Lessee hereby agrees to indemnify Lessor and hold Lessor harmless from and against any and all losses, liabilities, including strict liability, damages, injuries, expenses, including reasonable attorneys' fees, costs of any settlement or judgment and claims of any and every kind whatsoever paid, incurred or suffered by, or asserted against, Lessor by any person or entity or governmental agency for, with respect to, or as a direct or indirect result of, the presence on or under, or the escape, seepage, leakage, spillage, discharge, emission, discharging or release from, the Property of any Hazardous Substance (including, without limitation, any losses, liabilities, including strict liability, damages, injuries, expenses, including reasonable attorneys' fees, costs of any settlement or judgment or claims asserted or arising under the Comprehensive Environmental Response, Compensation and Liability Act, any so-called federal, state or local "Superfund" or "Superlien" laws, statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to or imposing liability, including strict liability, substances or standards of conduct concerning any Hazardous Substance), provided, however, that the foregoing indemnity is limited to matters arising solely from Lessee's violation of the covenant contained in subsection (a) above. (c) For purposes of this Lease, "Hazardous Substances" shall mean and include those elements or compounds which are contained in the list of hazardous substances adopted by the United States Environmental Protection Agency (the "EPA") or the list of toxic pollutants designated by Congress or the EPA or which are defined as hazardous, toxic, pollutant, infectious or radioactive by any other Federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of conduct concerning, any hazardous, toxic or dangerous waste, substance or material, as now or at any time hereafter in effect. (d) Lessor shall have the right but not the obligation, and without limitation of Lessor's rights under this Lease, to enter onto the Property or to take such other actions as it deems necessary or advisable to cleanup, remove, resolve or minimize the impact of, or otherwise deal with, any Hazardous Substance following receipt of any notice from any person or entity (including without limitation the EPA) asserting the existence of any Hazardous Substance in, on or at the Property or any part thereof which, if true, could result in an order, suit or other action against Lessee and/or Lessor. All reasonable costs and expenses incurred by Lessor in the exercise of any such rights, which costs and expenses result from Lessee's violation of the covenant contained in subsection (a) above, shall be deemed additional rental under this Lease and shall be payable by Lessee upon demand. (e) Notwithstanding the foregoing, Lessor hereby warrants that there is no Hazardous Substance affecting the Property and indemnities Lessee and holds Lessee harmless from and against any and all losses, liabilities, including strict liability, damages, injuries, expenses, including reasonable attorneys' fees, costs of any settlement or judgment and claims of any and every kind whatsoever paid, incurred or suffered by, or asserted against, Lessee by any person or entity or governmental agency for, with respect to, or as a direct or indirect result of, the presence on or under, or the escape, seepage, leakage, spillage, discharge, emission, discharging or release from, the Property of any Hazardous Substance (including, without limitation, any losses, liabilities, including strict liability, damages, injuries, expenses, including reasonable attorneys' fees, costs of any settlement or judgment or claims asserted or arising under the Comprehensive Environmental Response, compensation and Liability Act, any so-called federal, state or local "Superfund" or "Superlien" laws, statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to or imposing liability, including strict liability, substances or standards of conduct concerning any Hazardous Substance) prior to the date hereof. (f) This Section 14.16 shall survive cancellation, termination or expiration of this Lease. 14.17 APPLICABLE LAW. This Lease shall be construed in accordance with the laws of the State of Georgia. ARTICLE XV RIGHT OF FIRST REFUSAL. (a) If Lessor makes a bona fide written offer to sell or lease the Property or any part thereof to any prospective purchaser or tenant during the term of this Lease or for an additional period of ninety (90) days thereafter, or should Lessor receive an acceptable offer to do so, Lessor shall notify Lessee in writing (such notice being hereinafter called the "Offer Notice") of Lessor's intention to sell or lease the Property. The Offer Notice shall specifically describe the terms and the prospective purchaser or tenant with whom such purchase and sale or lease would be entered into (unless confidentiality of such prospective purchaser or tenant is required by such prospective purchaser or tenant). The Offer Notice shall also constitute an offer by Lessor to sell or lease the Property to Lessee in accordance with the terms of this Article XV. Lessee shall have twenty (20) days after its receipt of such Offer Notice to accept such offer pursuant to this First Refusal Right and to purchase or lease the Property from Lessor in accordance with the terms of this Article XV. (b) Acceptance by Lessee of the offer set forth in the Offer Notice shall be deemed effective only if such acceptance is given to Lessor in a written notice of acceptance (the "Acceptance Notice") specifically referring to the offer Notice to which it relates, received by Lessor within the twenty (20) day period prescribed above for such acceptance. If Lessee duly and timely delivers to Lessor its Acceptance Notice in accordance with this Article XV, then Lessor and Lessee shall, within thirty (30) days of Lessor's receipt of such Acceptance Notice, execute a contract to purchase and sell or an amendment to this Lease which conforms to the terms set forth in the Offer Notice. (c) If Lessee elects not to exercise this First Refusal Right, Lessor shall be entitled to sell or lease the Property to the prospective purchaser or tenant that prompted the Offer Notice, or an affiliate thereof. (d) Notwithstanding anything in this Article XV the contrary, Lessee shall have no right to exercise any right or option under this Article XV, nor shall Lessor have any obligation to submit an Offer Notice to Lessee with respect to the Property before entering into a third party contract or lease with respect thereto, or to enter into any sale or lease of the Property with Lessee, at any time during which either (i) Lessee is in default, or an event of default exists with respect to Lessee, under this Lease, or (ii) this Lease is not in full force and effect. (e) Nothing in this Article XV shall be deemed to cause an early termination of this Lease. ARTICLE XVI USUFRUCT. This Lease gives Lessee a usufruct only and does not create an estate in the Lessee subject to lien or to levy and sale. IN WITNESS WHEREOF, the undersigned parties have caused this Lease to be signed and sealed on the day and year first above written. LESSOR: /s/ Donald C. Martin (SEAL) DONALD C. MARTIN LESSEE: ELECTRICAL DISTRIBUTORS, INC. By: W. Stanley Martin Title: Executive Vice President [CORPORATE SEAL] GUARANTY OF LEASE For Value received, including One ($1.00) Dollar cash in hand together with additional consideration, and to induce Donald C. Martin (hereinafter referred to as "Lessor"), to enter into a Lease Agreement dated the 30th day of June, 1994 with Electrical Distributors, Inc. (hereinafter referred to as "Lessee"), the undersigned (hereinafter referred to as "Guarantor"), does hereby unconditionally guarantee to Lessor the full and prompt payment when due of all rent under said Lease, and the prompt and full performance of all the terms, covenants, and conditions of said Lease required to be performed by Lessee, or Lessee's subleasees or assignees, during the term of said Lease Agreement, which is attached hereto as Exhibit "A." This Guaranty shall remain in full force and effect notwithstanding any assignment or subletting by Lessee or its interest in the demised premises, and notwithstanding any assignment by Lessor of his interest in the demised premises, and said Guarantor further waives notice of any such assignment or subletting and consents to the same and agree to be fully bound by the terms and conditions of this Guaranty notwithstanding such assignment or subletting. This Guaranty shall be deemed to be a continuing Guaranty. This instrument covers all obligations under said Lease Agreement. The Guarantor hereby waives notice of acceptance of this instrument and of the creation, extension or renewal of the Lease Agreement and any obligation of Lessee under said Lease Agreement. In the event of any litigation arising out of this Lease or the relationships evidenced hereby, the prevailing party shall be entitled to receive from the other party, an amount equal to the prevailing party's actual attorneys fees, reasonably incurred. No delay on the part of Lessor in the exercise of any right, power or privilege under the Lease Agreement or under this Guaranty shall operate as a waiver of any such privilege, power or right. This Guaranty shall bind and inure to the benefit of Lessor, and Lessee's successors and assigns, and likewise shall bind and inure to the benefit of the undersigned Guarantor, their successors, heirs, administrators and assigns. Guarantor agrees that the terms, conditions and stipulations of said Lease Agreement shall become a part of this Guaranty, and hereby ratify, adopt, and confirm all such terms, conditions, agreements and stipulations. Guarantor acknowledges that this Guaranty contains the entire agreement of the undersigned and no representations or agreements, or otherwise, of Lessor or the Undersigned shall be of any force or effect unless embodied herein or expressly ratified herein. In the event that any provision or requirement of this Guaranty shalt be unenforceable or illegal under applicable law, such provision or requirement shall be eliminated hereunder or changed to conform to said applicable law and the remaining provisions and requirements shall continue to be effective and binding. Duly executed and sealed by the undersigned this 5th day of July, 1994. HUGHES SUPPLY, INC. By: /s/ A.S. Hall, Jr. A.S. Hall, Jr. President Hughes Supply, Inc. By: Witnesses: /s/ Marjorie H. Fitton /s/ Sandra Duncan EXHIBIT "A" All that tract or parcel of land lying and being in Land Lot 299 of the 18th District of DeKalb County, Georgia, and being more particularly described as follows: BEGINNING at a point marked by an iron pin found on the northwesterly side of Peachtree Road at the intersection thereof with the southwesterly side of Malone Drive; running thence south 58 degrees 30 minutes west along the northwesterly side of Peachtree Road a distance of 150 feet to an iron pin; running thence north 31 degrees 30 minutes west for a distance of 385 feet to an iron pin; running thence south 80 degrees 18 minutes west a distance of 53.85 feet to an iron pin; running thence north 58 degrees 30 minutes east a distance of 150 feet to an iron pin; running thence north 80 degrees 18 minutes east a distance of 53.85 feet to an iron pin on the southwesterly side of Malone Drive; running thence south 31 degrees 30 minutes east along the southwesterly side of Malone Drive a distance of 385 feet to the northwesterly side of Peachtree Road, the intersection above- referred to and the iron pin at the POINT OF BEGINNING; being improved property known as 5200 Peachtree Road, Chamblee, Georgia. LESS & EXCEPT: All that tract or parcel of land lying and being in Land Lot 299 of the 18th District, DeKalb County, Georgia, and being more particularly described as follows: BEGINNING at a point located at the intersection formed by the northwesterly right-of-way line of Peachtree Road and the southwesterly right-of-way line of Malone Drive; thence running southwesterly along said northwesterly right-of-way line of Peachtree Road a distance of 26.51 feet to a point; thence running along the arc of a curve to the left, a distance of 29.08 feet to a point (said curve having a chord distance of 27.70 feet on a bearing of north 42 degrees 09 minutes 31 seconds east and a radius of 27.00 feet), which point is located on said southwesterly right-of-way line of Malone drive; thence running southeasterly along said southwesterly right-of-way line of Malone Drive a distance of 8.04 feet to the POINT OF BEGINNING. Said tract or parcel of land contains 35 square feet. EX-11 4 Exhibit 11.1 HUGHES SUPPLY, INC. SUMMARY SCHEDULE OF EARNINGS PER SHARE CALCULATIONS (in thousands, except per share amounts) Potentially dilutive securities: a) Options for common stock, issued under stock option plan. b) 7% Convertible subordinated debentures, due May 1, 2011.
Fiscal Year Ended 1/27/95 1/28/94 1/29/93 Line - ---- SHARES ------ 1 Average shares outstanding 5,623 4,553 4,552 2 Incremental shares (options) - Assuming options outstanding at end of period were exercised at beginning of period (or time of issuance, if later) and proceeds were used to purchase shares at average market price during the period 142 96 12 --------- ---------- --------- 3 Shares used in calculating Earnings Per Common and Common Equivalent Share 5,765 4,649 4,564 4 Incremental shares (options) - Assuming options outstanding at end of period were exercised at beginning of period (or time of issuance, if later) and proceeds were used to purchase shares at the higher of the average market price during the period or the market price at the end of the period; and that options exercised during the period were exercised at the beginning of the period(or time of issuance, if later) and the proceeds were used to purchase shares at the market price at the date of exercise 4 85 28 5 Incremental shares (debentures) - Assuming debentures were converted at beginning of period (or time of issuance, if later) at most advantageous (for security holder) conversion rate that becomes effective within 10 years * 180 1,085 0 --------- --------- --------- 6 Shares used in calculating Earnings Per Common Share - Assuming Full Dilution 5,949 5,819 4,592 ========= ========= =========
HUGHES SUPPLY, INC.
Fiscal Year Ended 1/27/95 1/28/94 1/29/93 Line - ---- EARNINGS -------- 7 Net income per financial statements, used in calculating Earnings Per Common Share and Earnings Per Common and Common Equivalent Share $ 10,328 $ 6,286 $ 2,478 8 Incremental earnings (debentures) - Assuming interest charges applicable to convertible debentures (and nondiscretionary adjustments that would have been made based on net income) are taken into account in determining balance of income applicable to common stock * 166 996 0 --------- --------- --------- 9 Earnings used in calculating Earnings Per Common Share - Assuming Full Dilution $ 10,494 $ 7,282 $ 2,478 ========= ========= ========= RESULTING PER SHARE DATA ------------------------ 10 Earnings per common share (Line 7/Line 1) $ 1.84 $ 1.38 $ .54 ========= ========= ========= 11 Earnings per common share and common equivalent share (Line 7/Line 3) $ 1.79 $ 1.35 $ .54 ========= ========= ========= 12 Dilution 2.7% 2.2% 0.0% ========= ========= ========= 13 Earnings per common share - assuming full dilution (Line 9/Line 6) $ 1.76 $ 1.25 $ .54 ========= ========= ========= 14 Dilution 4.3% 9.4% 0.0% ========= ========= ========= 15 Used in statements of income: [ ] Line 10, if dilution less than 3%, or antidilution, exists for all periods. [ X ] Lines 11 and 13, if dilution >= 3% for any period. * Convertible debentures are antidilutive for fiscal year ending January 29, 1993, and, consequently, are not used in the calculation of fully diluted earnings per share for that year.
EX-13 5 - ---------------------------------------------------------------------- 1995 ANNUAL REPORT - PAGE 3 MARKET PRICE AND DIVIDEND DATA
Market Price Dividends Per Share (1) Fiscal Years (2) Fiscal Years (2) 1995 1994 1995 1994 HIGH LOW HIGH LOW First quarter $ 32 1/4 $ 24 $ 15 3/8 $ 13 1/4 $ .05 $ .03 Second quarter $ 28 3/4 $ 17 $ 17 1/4 $ 13 1/2 $ .05 $ .04 Third quarter $ 21 $ 17 $ 19 1/2 $ 15 3/4 $ .06 $ .04 Fourth quarter $ 19 3/8 $ 15 7/8 $ 24 $ 17 3/8 $ .06 $ .05 -------- -------- Year's high and low $ 32 1/4 $ 15 7/8 $ 24 $ 13 1/4 Total dividends $ .22 $ .16 ======== ======== (1) See Note 2 of Notes to Consolidated Financial Statements for dividend restrictions. (2) The Company's fiscal year ends on the last Friday in January.
SELECTED QUARTERLY FINANCIAL DATA (in thousands, except per share data)
Earnings Per Share (1) Average Shares (1) Net Gross Net Sales Profit Income Primary Fully Diluted Primary Fully Diluted Fiscal Quarter 1995 First $ 183,901 $ 36,401 $ 1,670 $ .32 $ .31 5,245 5,984 Second 202,619 40,956 3,008 .51 .51 5,943 5,943 Third 210,584 41,422 2,778 .47 .47 5,898 5,899 Fourth 205,341 43,496 2,872 .48 .48 5,962 5,965 --------- --------- --------- Year $ 802,445 $ 162,275 $ 10,328 $ 1.79 $ 1.76 5,765 5,949 ========= ========= ========= Fiscal Quarter 1994 First $ 148,514 $ 28,893 $ 699 $ .15 $ .15 4,605 4,605 Second 163,950 32,746 1,718 .37 .34 4,619 5,718 Third 178,993 34,580 1,843 .40 .36 4,665 5,751 Fourth 169,481 35,001 2,026 .43 .39 4,694 5,820 --------- --------- --------- Year $ 660,938 $ 131,220 $ 6,286 $ 1.35 $ 1.25 4,649 5,819 ========= ========= ========= (1) Calculated independently for each period and, consequently, the sum of the quarters may differ from the annual amount.
- --------------------------------------------------------------------- 1995 ANNUAL REPORT - PAGE 12 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Shareholders and Board of Directors of Hughes Supply, Inc. In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, share- holders' equity and of cash flows present fairly, in all material respects, the financial position of Hughes Supply, Inc. and its subsidiaries at January 27, 1995, and the results of their operations and their cash flows for the year then ended in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. The financial statements of Hughes Supply, Inc. and its subsidiaries for the years ended January 28, 1994 and January 29, 1993 were audited by other independent accountants whose report dated March 17, 1994 expressed an unqualified opinion on those statements. /s/ Price Waterhouse LLP Orlando, Florida March 15, 1995 - ---------------------------------------------------------------------- 1995 ANNUAL REPORT - PAGE 13 CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data)
Fiscal Years Ended January 27, January 28, January 29, 1995 1994 1993 Net Sales $ 802,445 $ 660,938 $ 555,796 Cost of Sales 640,170 529,718 447,373 ---------- ---------- ---------- Gross Profit 162,275 131,220 108,423 ---------- ---------- ---------- Operating Expenses: Selling, general and administrative 132,856 109,760 94,810 Depreciation and amortization 8,773 7,465 6,636 Provision for doubtful accounts 1,185 1,671 1,775 ---------- ---------- ---------- Total operating expenses 142,814 118,896 103,221 ---------- ---------- ---------- Operating Income 19,461 12,324 5,202 ---------- ---------- ---------- Non-Operating Income and (Expenses): Interest income 2,284 1,856 1,865 Interest expense (4,875) (4,610) (4,760) Other, net 553 988 1,709 ---------- ---------- ---------- (2,038) (1,766) (1,186) ---------- ---------- ---------- Income Before Income Taxes 17,423 10,558 4,016 Income Taxes 7,095 4,272 1,538 ---------- ---------- ---------- Net Income $ 10,328 $ 6,286 $ 2,478 ========== ========== ========== Earnings Per Share: Primary $ 1.79 $ 1.35 $ .54 ========== ========== ========== Fully diluted $ 1.76 $ 1.25 $ .54 ========== ========== ========== Average Shares Outstanding: Primary 5,765 4,649 4,564 ========== ========== ========== Fully diluted 5,949 5,819 4,592 ========== ========== ========== The accompanying notes are an integral part of these consolidated financial statements.
- --------------------------------------------------------------------- 1995 ANNUAL REPORT - PAGE 14 CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
January 27, January 28, 1995 1994 ASSETS Current Assets: Cash and cash equivalents $ 3,192 $ 1,078 Accounts receivable, less allowance for losses of $4,787 and $3,914 122,143 97,765 Inventories 119,686 94,223 Deferred income taxes 8,921 4,972 Other current assets 6,479 5,532 ---------- ---------- Total current assets 260,421 203,570 ---------- ---------- Property, Plant and Equipment, at cost: Land 13,360 12,353 Buildings and improvements 41,776 37,097 Transportation equipment 19,409 19,674 Furniture, fixtures and equipment 19,738 14,843 Property under capital leases 10,794 10,794 ---------- ---------- Total 105,077 94,761 Less accumulated depreciation and amortization (51,846) (45,439) ---------- ---------- Net property, plant and equipment 53,231 49,322 ---------- ---------- Deferred Income Taxes 1,999 2,210 Other Assets 13,242 8,303 ---------- ---------- $ 328,893 $ 263,405 ========== ==========
- --------------------------------------------------------------------- 1995 ANNUAL REPORT - PAGE 15
January 27, January 28, 1995 1994 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $ 1,019 $ 898 Accounts payable 71,563 52,053 Accrued compensation and benefits 9,723 7,257 Other current liabilities 12,795 8,401 ---------- ---------- Total current liabilities 95,100 68,609 ---------- ---------- Long-Term Debt, less current portion: Notes and subordinated debentures 97,857 95,367 Capital lease obligations 3,061 3,859 ---------- ---------- Total long-term debt 100,918 99,226 ---------- ---------- Other Noncurrent Liabilities 1,540 1,143 ---------- ---------- Total liabilities 197,558 168,978 ---------- ---------- Commitments and Contingencies Shareholders' Equity: Preferred stock, no par value; 10,000,000 shares authorized; none issued; preferences, limitations and relative rights to be established by the Board of Directors - - Common stock, par value $1 per share; 20,000,000 and 10,000,000 shares authorized; 6,148,599 and 5,075,670 shares issued 6,149 5,076 Capital in excess of par value 37,722 15,410 Retained earnings 89,152 80,425 ---------- ---------- 133,023 100,911 Less treasury stock, 108,988 shares and 418,566 shares, at cost (1,688) (6,484) ---------- ---------- Total shareholders' equity 131,335 94,427 ---------- ---------- $ 328,893 $ 263,405 ========== ========== The accompanying notes are an integral part of these consolidated financial statements.
- --------------------------------------------------------------------- 1995 ANNUAL REPORT - PAGE 16 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (dollars in thousands, except per share data)
Capital in Common Stock Excess of Retained Treasury Stock Shares Amount Par Value Earnings Shares Amount Balance, January 31, 1992 5,453,249 $ 5,453 $ 22,410 $ 70,785 901,155 $(13,960) Net income - - - 2,478 - - Cash dividends - $.12 per share - - - (502) - - Treasury shares issued - - - - (100) 2 --------- ------- --------- -------- -------- -------- Balance, January 29, 1993 5,453,249 5,453 22,410 72,761 901,055 (13,958) Net income - - - 6,286 - - Cash dividends - $.16 per share - - - (724) - - Issuance of treasury shares for EDI merger (374,998) (375) (5,434) - (374,998) 5,809 Other acquisition - - (1,557) 2,158 (101,368) 1,570 Treasury shares issued under stock option plans - - - (18) (6,123) 95 Purchase and retirement of common shares (2,581) (2) (9) (38) - - --------- ------- --------- -------- -------- -------- Balance, January 28, 1994 5,075,670 5,076 15,410 80,425 418,566 (6,484) Net income - - - 10,328 - - Cash dividends - $.22 per share - - - (1,290) - - Treasury shares contributed to employee benefit plan - - 243 - (16,597) 257 Conversion of subordinated convertible debentures into common stock 1,081,146 1,081 21,670 - - - Treasury shares issued under stock option plans - - - (141) (44,341) 687 Purchase and retirement of common shares (8,217) (8) (35) (170) - - Acquisitions - - 434 - (248,640) 3,852 --------- ------- -------- -------- -------- -------- Balance, January 27, 1995 6,148,599 $ 6,149 $ 37,722 $ 89,152 108,988 $ (1,688) ========= ======= ======== ======== ======== ======== The accompanying notes are an integral part of these financial statements.
- --------------------------------------------------------------------- 1995 ANNUAL REPORT - PAGE 17 CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Fiscal Years Ended January 27, January 28, January 29, 1995 1994 1993 Increase (Decrease) in Cash and Cash Equivalents: Cash flows from operating activities: Cash received from customers $ 789,446 $ 644,667 $ 546,848 Cash paid to suppliers and employees (776,441) (638,724) (535,645) Interest received 2,284 1,856 1,865 Interest paid (4,441) (4,693) (4,875) Income taxes paid (8,631) (5,361) (1,677) Net cash provided by (used in) ---------- ---------- ---------- operating activities 2,217 (2,255) 6,516 ---------- ---------- ---------- Cash flows from investing activities: Proceeds from sale of property, plant and equipment 734 704 1,810 Capital expenditures (11,841) (8,257) (8,702) Business acquisitions, net of cash (11,099) (3,934) - ---------- ---------- ---------- Net cash used in investing activities (22,206) (11,487) (6,892) ---------- ---------- ---------- Cash flows from financing activities: Net borrowings (payments) under short-term debt arrangements 23,953 16,733 (2,267) Proceeds from long-term debt - - 1,444 Principal payments on: Long-term notes (297) (2,918) (1,678) Capital lease obligations (725) (660) (602) Proceeds from issuance of common shares under stock option plans 546 77 - Purchase of common shares (213) (49) - Dividends paid (1,161) (616) (502) Net cash provided by (used in) ---------- ---------- ---------- financing activities 22,103 12,567 (3,605) ---------- ---------- ---------- Net Increase (Decrease) in Cash and Cash Equivalents 2,114 (1,175) (3,981) Cash and Cash Equivalents, beginning of year 1,078 2,253 6,234 ---------- ---------- ---------- Cash and Cash Equivalents, end of year $ 3,192 $ 1,078 $ 2,253 ========== ========== ========== The accompanying notes are an integral part of these consolidated financial statements.
- ---------------------------------------------------------------------- 1995 ANNUAL REPORT - PAGE 18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share data) Note 1 - Summary of Significant Accounting Policies Industry Hughes Supply, Inc. and its subsidiaries (the "Company") are engaged in the wholesale distribution of a broad range of materials, equipment and supplies to the construction industry. Major product lines distributed by the Company include electrical, plumbing and electric utility equipment, building materials, water and sewer prod- ucts, heating and air conditioning equipment, and pipe, valves and fittings. The Company's principal customers are electrical, plumbing and mechanical contractors, electric utility companies, and munici- pal and industrial accounts. Principles of Consolidation The consolidated financial statements include the Company and its wholly-owned subsidiaries. All significant intercompany transactions and accounts have been eliminated. The Company's minority invest- ment in affiliate is accounted for by the equity method. Fiscal Year The Company's fiscal year ends on the last Friday in January. Fiscal years 1995, 1994 and 1993 each contained 52 weeks. Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Inventories Inventories are carried at the lower of cost or market. The cost of substantially all inventories is determined by the average cost method. Property, Plant and Equipment Buildings and equipment are depreciated using both straight-line and declining-balance methods based on the following estimated useful lives: Buildings and improvements 5-40 years Transportation equipment 2-7 years Furniture, fixtures and equipment 3-15 years Property under capital leases 20-40 years Maintenance and repairs are charged to expense as incurred and major renewals and betterments are capitalized. Gains or losses are credited or charged to earnings upon disposition. Other Assets The excess of cost over the fair value of net assets of purchased companies is being amortized by the straight-line method over 15 to 25 years. Income Taxes Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes resulting from temporary differences. Such temporary differences result from differences in the carrying value of assets and liabilities for tax and financial reporting purposes. The deferred tax assets and liabilities represent the future tax consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes are also recognized for operating losses that are available to offset future taxable income. Valuation allowances are established to reduce deferred tax assets to the amount expected to be realized. Earnings Per Common Share Primary earnings per share are based on the weighted average number of shares outstanding during each year plus the common stock equivalents issuable upon the exercise of stock options. Unless the results are antidilutive, fully diluted earnings per share assumes the conversion of the 7% convertible subordinated deben- tures (after elimination of related interest expense, net of income tax effect) and exercise of stock options. Deferred Employee Benefits The present value of amounts estimated to be payable under unfunded supplemental retirement agreements with certain officers is being accrued over the remaining years of active employment of the officers and is included in other noncurrent liabilities. - ---------------------------------------------------------------------- 1995 ANNUAL REPORT - PAGE 19 Note 2 - Notes and Debentures Payable Consolidated notes and debentures payable consist of the following: January 27, January 28, 1995 1994 7% Convertible subordinated debentures, due 2011 $ - $ 22,960 Unsecured revolving bank notes under $130,000 credit agreement, payable June 30, 1997, fluctuating interest (6.0% to 6.1% at January 27, 1995) 61,025 45,375 Short-term instruments classified as long-term debt 34,803 26,500 Other notes payable 2,251 705 --------- --------- 98,079 95,540 Less current portion (222) (173) --------- --------- $ 97,857 $ 95,367 ========= ========= On March 8, 1994, the Company issued a call for redemption of its outstanding 7% convertible subordinated debentures to take place on April 7, 1994. Of the $22,960 debentures outstanding at January 28, 1994, $22,889, or 99.7%, were converted into the Company's common stock at $21.17 per share or 47.2 common shares for each $1 face amount of debentures. This conversion resulted in the issuance of 1,081,146 common shares. At January 27, 1995, the Company has a revolving credit and line of credit agreement with a group of banks which permits the Company to borrow up to $130,000 (subject to borrowing limita- tions discussed below) - $95,000 long-term, expiring June 30, 1997, and $35,000 line of credit convertible to a term note due two years from conversion date. The $35,000 line of credit backs commercial paper. Under the credit facility, interest is payable at market rates plus applicable margins. Commitment fees of .25% and .125% are paid on the unused portions of the revolving and line of credit facilities, respectively. Loan covenants require the Company to maintain consolidated working capital of not less than $75,000 and a maximum ratio of senior funded debt to total capital, as defined, of .50 to 1.0. The covenants also restrict the Company's activities regarding investments, liens, borrowing and leasing, and payment of dividends other than stock. Under the dividend covenant, approximately $8,360 is available at January 27, 1995 for payment of dividends. The Company has a bank line of credit for short-term borrowing aggregating $6,000 at January 27, 1995 and $2,000 at January 28, 1994 (subject to borrowing limitations under the long-term debt covenants) under which $1,500 was outstanding at January 28, 1994. There were no amounts outstanding at January 27, 1995. The line provides for interest at market rates. The interest rate on short-term borrowing as of January 28, 1994 was 3.5%. In addition, the Company has a commercial paper program backed by its revolving credit facility. The weighted average interest rate on outstanding commercial paper borrowings of $34,803 and $25,000 as of January 27, 1995 and January 28, 1994 was 6.0% and 3.2%, respectively. The Company's credit facility enables the Company to refinance short-term borrowings on a long-term basis to the extent that the credit facility is unused. Accordingly, $34,803 and $26,500 of short-term borrowings at January 27, 1995 and January 28, 1994, respectively, have been classified as long-term debt. The carrying value of notes payable is a reasonable estimate of fair value since interest rates are based on prevailing market rates. Maturities of long-term debt for each of the five years subsequent to January 27, 1995 and in the aggregate are as follows: Fiscal Years Ending 1996 $ 222 1997 1,620 1998 96,162 1999 67 2000 8 Later years - --------- $ 98,079 ========= - ---------------------------------------------------------------------- 1995 ANNUAL REPORT - PAGE 20 Note 3 - Income Taxes The components of deferred tax assets and liabilities are as follows: January 27, January 28, 1995 1994 Deferred tax assets: Allowance for doubtful accounts $ 1,854 $ 1,529 Inventories 2,866 1,435 Capital leases 590 646 Property, plant and equipment 744 374 Accrued vacation 667 471 Deferred compensation 597 447 Environmental clean-up costs 216 183 Other accrued liabilities 3,222 2,179 Other 214 250 -------- -------- Total deferred assets 10,970 7,514 -------- -------- Deferred tax liabilities: Operating leases 42 - Intangible assets 8 - Other - 188 -------- -------- Total deferred liabilities 50 188 -------- -------- Net deferred tax asset before valuation allowance 10,920 7,326 Valuation allowance - (144) -------- -------- Net deferred tax asset $ 10,920 $ 7,182 ======== ======== The net change in the valuation allowance was a decrease of $144, related to recognition of tax benefits arising from operating loss carryforwards. The consolidated provision for income taxes consists of the following: Fiscal Years Ended January 27, January 28, January 29, 1995 1994 1993 Currently payable: Federal $ 9,302 $ 4,433 $ 2,998 State 1,531 626 436 -------- -------- -------- 10,833 5,059 3,434 -------- -------- -------- Deferred: Federal (3,545) (978) (1,415) State (193) 191 (481) -------- -------- -------- (3,738) (787) (1,896) -------- -------- -------- $ 7,095 $ 4,272 $ 1,538 ======== ======== ======== The following is a reconciliation of tax computed at the statutory Federal rate to the income tax expense in the consolidated statements of income: Fiscal Years Ended January 27, 1995 January 28, 1994 January 29, 1993 Amount % Amount % Amount % Tax computed at statutory Federal rate $ 6,098 35.0 $ 3,695 35.0 $ 1,365 34.0 Effect of: State income tax, net of Federal benefit 870 5.0 531 5.0 (30) (.7) Nondeductible purchase adjustments 38 .2 24 .2 14 .3 Nondeductible expenses 330 1.9 117 1.1 103 2.6 Other, net (241) (1.4) (95) (.8) 86 2.1 ------- ---- ------- ---- ------- ---- Income tax expense $ 7,095 40.7 $ 4,272 40.5 $ 1,538 38.3 ======= ==== ======= ==== ======= ==== Note 4 - Employee Benefit Plans Profit Sharing and Employee Stock Ownership Plans The Company has a 401(k) profit sharing plan which provides benefits for substantially all employees of the Company who meet minimum age and length of service requirements. Under the plan, employee contributions of not less than 2% to not more than 3% of each eligible employee's compensation are matched (in cash or stock) 50% by the Company. Additional annual contributions may be made at the discretion of the Board of Directors. The Company has an employee stock ownership plan (ESOP) covering substantially all employees of the Company who meet minimum age and length of service requirements. The plan is designed to enable eligible employees to acquire a proprietary interest in the Company. Company contributions (whether in cash or stock) are determined annually by the Board of Directors in an amount not to exceed the maximum allowable as an income tax deduction. At January 27, 1995 and January 28, 1994, the plan owned approximately 172,000 and 157,000 shares, respectively, of the Company's common stock, all of which were allocated to participants. Amounts charged to expense for these plans during the fiscal years ended in 1995, 1994 and 1993 were $1,157, $1,000 and $405, respectively. Bonus Plans The Company has bonus plans, based on profitability formulas, which provide incentive compensation for key employees. Amounts charged to expense for bonuses to executive officers were $935, $533 and $263 for the fiscal years ended in 1995, 1994 and 1993, respectively. - ---------------------------------------------------------------------- 1995 ANNUAL REPORT - PAGE 21 Stock Option Plans The Company's stock option plans authorize the granting of both incentive and non-incentive stock options for an aggregate of 1,635,000 shares of common stock to key executive, management, and sales employees, and, with respect to 135,000 shares, to direc- tors. Under the plans, options are granted at prices not less than market value on the date of grant, and the maximum term of an option may not exceed ten years. Prices for incentive stock options granted to employees who own 10% or more of the Company's stock are at least 110% of market value at date of grant. Options may be granted from time to time to May 1998, or May 2003 with regard to directors. An option becomes exercisable at such times and in such installments as set by the Board of Directors. The employee plan also permits the granting of stock appreciation rights (SARs) to holders of options. Such rights permit the optionee to surrender an exercisable option, in whole or in part, on any date that the fair market value of the Company's common stock exceeds the option price for the stock and receive payment in common stock, or, if the Board of Directors approves, in cash or any combi- nation of cash and common stock. Such payment would be equal to the excess of the fair market value of the shares under the surren- dered option over the option price for such shares. The change in value of SARs would be reflected in income based upon the market value of the stock. No SARs have been granted or issued through January 27, 1995. A summary of option transactions during each of the three fiscal years in the period ended January 27, 1995 is shown below: Number of Option Price Shares Range Under option, January 31, 1992 (194,736 shares exercisable) 422,736 $12.25-$19.33 Granted 20,000 $12.00-$12.87 Exercised - - Cancelled (36,294) $12.25-$19.33 ------- Under option, January 29, 1993 (253,442 shares exercisable) 406,442 $12.00-$17.63 Granted 12,000 $16.25 Exercised (6,023) $12.25-$12.87 Cancelled (12,835) $12.00-$12.63 ------- Under option, January 28, 1994 (297,584 shares exercisable) 399,584 $12.00-$17.63 Granted 115,000 $18.13-$25.37 Exercised (44,241) $12.25-$12.63 Cancelled - - ------- Under option, January 27, 1995 (339,343 shares exercisable) 470,343 $12.00-$25.37 ======= There were 640,658 and 755,658 shares available for the granting of options at January 27, 1995 and January 28, 1994, respectively. Supplemental Executive Retirement Plan The Company has entered into agreements with certain key execu- tive officers, providing for supplemental payments, generally for periods up to 15 years, upon retirement, disability or death. The obligations are not funded apart from the Company's general assets. Amounts charged to expense under the agreements were $390, $166 and $158 in fiscal 1995, 1994 and 1993, respectively. Note 5 - Commitments and Contingencies Lease Commitments A portion of the Company's operations are conducted from locations leased under capital leases from a corporation which is owned by three of the directors of Hughes Supply, Inc. The leases generally provide that all expenses related to the properties are to be paid by the lessee. The leases also generally provide for rental increases at specified intervals. The leases all expire within ten years; however, it is expected that they will be renewed. Rents under these agreements amounted to $1,165 for each of the three years in the period ended January 27, 1995. Property under capital leases is included in the consolidated balance sheets as follows: January 27, January 28, 1995 1994 Property under capital leases (consisting of land and buildings) $ 10,794 $ 10,794 Accumulated amortization (8,458) (7,864) -------- -------- $ 2,336 $ 2,930 ======== ======== In addition, rents under operating leases paid to this related corpora- tion were $400, $396 and $399 in 1995, 1994 and 1993, respectively. - ---------------------------------------------------------------------- 1995 ANNUAL REPORT - PAGE 22 Future minimum payments, by year and in the aggregate, under the aforementioned leases and other noncancelable operating leases with initial or remaining terms in excess of one year as of January 27, 1995, are as follows: Capital Operating Fiscal Years Ending Leases Leases 1996 $ 1,165 $ 6,372 1997 1,165 5,165 1998 1,165 4,774 1999 562 3,749 2000 361 2,458 Later years 584 5,512 -------- -------- Total minimum lease payments 5,002 $ 28,030 ======== Less amount representing interest (1,144) -------- Present value of net minimum lease payments 3,858 Less current portion (797) -------- $ 3,061 ======== Lease-related expenses are as follows: Fiscal Years Ended January 27, January 28, January 29, 1995 1994 1993 Capital lease amortization $ 594 $ 594 $ 594 Capital lease interest expense 440 505 564 Operating lease rentals 6,843 5,872 5,210 Guarantees of Affiliate Debt A wholly-owned subsidiary of the Company owns a 20% interest in Accord Industries Company ("Accord"), a joint venture formed from the Company's sale of its manufacturing operations in 1990. As partial consideration for the sale, the Company received $2,750 in notes receivable, part of which is convertible into an additional partnership interest in Accord of up to 29%. In connection with the investment in Accord, the Company guaran- teed $500 of Accord's indebtedness to a bank and the Company's subsidiary as a joint venturer is contingently liable for the remaining bank debt of approximately $1,840 as of January 27, 1995. Legal Matters The Company is involved in various legal proceedings incident to the conduct of its business. In the opinion of management, none of the proceedings are material in relation to the Company's consolidated operations or financial position. Note 6 - Common Stock On May 24, 1994, the shareholders approved an amendment to the articles of incorporation of the Company increasing the number of authorized shares of common stock to 20,000,000 shares, $1.00 par value per share. Note 7 - Preferred Stock The Company's Board of Directors established Series A Junior Participating Preferred Stock (Series A Stock) consisting of 300,000 shares. Each share of Series A Stock will be entitled to one vote on all matters submitted to a vote of shareholders. Series A Stock is not redeemable or convertible into any other security. Each share of Series A Stock shall have a minimum cumulative preferential quarterly divi- dend rate equal to the greater of $1.25 per share or 100 times the aggregate per share amount of the dividend declared on common stock. In the event of liquidation, shares of Series A Stock will be enti- tled to the greater of $100 per share plus any accrued and unpaid div- idend or 100 times the payment to be made per share of common stock. No shares of Series A Stock are presently outstanding, and no shares are expected to be issued except in connection with the share- holder rights plan referred to below. The Company has a shareholder rights plan. Under the plan, the Company distributed to shareholders a dividend of one right per share of the Company's common stock. When exercisable, each right will permit the holder to purchase from the Company a unit consisting of one one-hundredth of a share of Series A Stock at a purchase price of $65 per unit. The rights generally become exercisable if a person or group acquires 20% or more of the Company's common stock or commences a tender offer that could result in such person or group owning 30% or more of the Company's common stock. If certain sub- sequent events occur after the rights first become exercisable, the rights may become exercisable for the purchase of shares of common stock of the Company, or of an acquiring company, having a value equal to two times the exercise price of the right. The rights may be redeemed by the Company at $.01 per right at any time prior to ten days after 20% or more of the Company's stock is acquired by a per- son or group. The rights expire on June 2, 1998 unless sooner termi- nated in accordance with the rights plan. Note 8 - Concentration of Credit Risk The Company sells its products in the major areas of construction markets in certain states of the southeast and midwest United States. Approximately 90% of the Company's sales are credit sales which are primarily to customers whose ability to pay is dependent upon the construction industry economics prevailing in the Southeast; however, concentration of credit risk with respect to trade accounts - ---------------------------------------------------------------------- 1995 ANNUAL REPORT - PAGE 23 receivable is limited due to the large number of customers comprising the Company's customer base and no one customer comprises more than 2% of annual sales. The Company performs ongoing credit evalu- ations of its customers and in certain situations obtains collateral sufficient to protect its credit position. The Company maintains reserves for potential credit losses, and such losses have been within management's expectations. Note 9 - Business Combinations During fiscal years 1995 and 1994, the Company acquired several wholesale distributors of materials to the construction industry that were accounted for as purchases. These acquisitions, individually or in the aggregate, did not have a material effect on the consolidated financial statements. Results of operations of these companies from their respective dates of acquisition have been included in the consolidated financial statements. The net assets acquired and consideration for acquisitions accounted for as purchases are summarized below: Fiscal Years Ended January 27, January 28, 1995 1994 Fair value of: Assets acquired $ 28,396 $ 8,421 Liabilities assumed (7,269) (4,487) ---------- ---------- Purchase price $ 21,127 $ 3,934 ========== ========== Consideration in fiscal 1995 included 248,640 shares of common stock (fair value $4,286) issued, a note for $1,525 and amounts payable of $4,217. The following table reflects the unaudited pro forma combined results of operations, assuming the fiscal 1995 acquisitions had occurred at the beginning of each year presented: Fiscal Years Ended January 27, January 28, 1995 1994 Net sales $ 886,466 $ 724,148 Net income 12,086 6,916 Earnings per share: Primary 2.02 1.41 Fully diluted 1.98 1.30 The pro forma information does not purport to be indicative of the results which actually would have occurred had the acquisitions been in effect during the periods presented, or of results which may occur in the future. Note 10 - Supplemental Cash Flows Information The following is a reconciliation of net income to net cash provided by (used in) operating activities:
Fiscal Years Ended January 27, 1995 January 28, 1994 January 29, 1993 Net income $ 10,328 $ 6,286 $ 2,478 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 7,934 6,703 5,863 Amortization 839 762 773 Provision for doubtful accounts 1,185 1,671 1,775 Gain on sale of property, plant and equipment (284) (264) (1,012) Undistributed earnings of affiliate (139) (171) (135) Treasury shares contributed to employee benefit plan 500 - - Changes in assets and liabilities, net of effects of business acquisitions: (Increase) decrease in: Accounts receivable (13,129) (16,824) (9,499) Inventories (16,057) (4,209) 60 Refundable income taxes - - 530 Other current assets (813) (97) 1,195 Other assets (218) 178 31 Increase (decrease) in: Accounts payable and accrued expenses 12,776 4,704 7,473 Accrued interest and income taxes 2,636 (461) 1,112 Other noncurrent liabilities 397 178 158 Increase in deferred income taxes (3,738) (711) (1,896) -------- -------- -------- Net cash provided by (used in) operating activities $ 2,217 $ (2,255) $ 6,516 ======== ======== ========
- ---------------------------------------------------------------------- 1995 ANNUAL REPORT - PAGE 24 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Sales Net sales were $802.4 million, a 21% increase over fiscal 1994 sales of $660.9 million. Fiscal 1993 net sales totaled $555.8 million. Newly- opened and acquired wholesale outlets accounted for approximately 40% of the increase in fiscal 1995 and 16% of the increase in fiscal 1994. The number of wholesale outlets has grown to 170 from 117 at the beginning of fiscal 1993. During fiscal 1995, construction activity in our markets remained strong despite rising interest rates. Commercial and industrial construction activity rebounded in fiscal 1995 while residential con- struction slowed after a strong fiscal 1994. In fiscal 1994 the markets were positively impacted by a favorable interest rate environment. Construction activity is expected to remain strong during fiscal 1996. Sales for the Company should continue to climb with increased commercial and industrial construction and the continuation of the Company's acquisition program. Gross Margin Gross margins (gross profit expressed as a percent of sales) for fiscal years 1995, 1994 and 1993 were 20.2%, 19.9% and 19.5%, respectively. The improvement in gross margins reflects more efficient purchasing which is attributable to increased volume and a greater concentration of supply sources resulting from the Company's preferred vendor program. Operating Expenses Control over operating expenses has continued to improve. As a percentage of sales, the Company has lowered these expenses to 17.8% in fiscal 1995 from 18.0% and 18.6% in fiscal 1994 and 1993, respectively. This trend should continue as recent acquisitions are more completely integrated into our distribution system and with anticipated sales growth. As a result of adherence to strict credit standards, charge-offs of uncollectible accounts has declined. In addition, collection efforts have produced increased recoveries. Consequently, the provision for doubtful accounts has decreased to $1.2 million in fiscal 1995 compared to $1.7 million and $1.8 million in fiscal 1994 and 1993, respectively. Operating expenses in fiscal 1995 were $142.8 million, a 20% increase over the prior year. Newly-opened wholesale outlets and recent acquisitions accounted for approximately 45% of the increase. Most of the remainder of the increase is due to personnel and other costs, such as transportation and insurance, associated with the growth in sales. The fiscal 1994 operating expense increase of $15.7 million over fiscal 1993 is attributable to personnel costs supporting the growth in the Company's operations and newly-opened and acquired wholesale outlets. Federal, state and local laws and regulations govern the Company's operation of underground fuel storage tanks. Rather than incur additional costs to restore and upgrade tanks as required by regulations, the Company opted to remove the existing tanks. Over the past several years the Company has removed these underground fuel tanks and, in the process, identified certain tanks with leaks which required remedial cleanups. When the liability for these costs was determined in a prior year, the Company accrued as an operating expense the estimated future costs of removing the fuel tanks and environmental cleanup. During fiscal 1995, 1994 and 1993, there were no significant expenses associated with the cleanup. Non-Operating Income and Expenses Interest income increased to $2.3 million in fiscal 1995 from $1.9 million in fiscal 1994 primarily as a result of sales growth and recent acquisitions. The majority of interest income is generated by the collection of service charge income on delinquent accounts receivable. Interest expense has fluctuated only moderately over the last three fiscal years. The increase of $.3 million in fiscal 1995 over 1994 was attributable to higher interest rates partially offset by lower borrowing levels (due primarily to the conversion of $23 million of subordinated debentures). The annual interest savings from the conversion amount to approximately $1.6 million. Interest expense in fiscal 1994 was lower by $.2 million compared to the prior year due to lower borrowing rates even though borrowing levels were higher. Income Taxes The effective tax rates were 40.7%, 40.5% and 38.3% in fiscal years 1995, 1994 and 1993, respectively. The increase over the fiscal 1993 rate is primarily due to Federal tax law changes which increased the statutory Federal tax rate from 34% to 35% in fiscal 1994. Liquidity and Capital Resources Working capital has continued to grow, reaching $165.3 million in fiscal 1995. Fiscal 1994 and 1993 working capital was $135.0 million - --------------------------------------------------------------------- 1995 ANNUAL REPORT - PAGE 25 and $113.6 million, respectively. Current assets continue to comprise more than 75% of total assets. The working capital ratio was 2.74 to 1, 2.97 to 1 and 2.84 to 1 for fiscal years 1995, 1994 and 1993, respectively. The Company typically becomes less liquid in expansionary periods when sales volumes are increasing requiring higher levels of inven- tories and receivables to support the growth. However, days cost of sales in average inventory in fiscal 1995 improved to 60.15 compared to 60.86 and 68.26 in fiscal 1994 and 1993, respectively. Days sales in average receivables was 51.28, 49.85 and 50.05 in fiscal years 1995, 1994 and 1993, respectively. The Company generated $2.2 million in cash from operations in fiscal 1995 compared to cash used of $2.3 million in fiscal 1994 and $6.5 million generated in fiscal 1993. The changes are due primarily to fluctuations in accounts receivable, inventories and accounts payable. In fiscal 1995, the Company invested $11.8 million for property and equipment and $11.1 million for business acquisitions, which added 20 wholesale outlets to the Company's operations and expanded its geographic markets to the midwest United States. Capital expendi- tures for fiscal 1996 are expected to be approximately $12 million. To finance increases in working capital, capital expenditures and recent acquisitions, net borrowing under short-term debt arrange- ments amounted to $24.0 million and $16.7 million in fiscal years 1995 and 1994, respectively, compared to $2.3 million payments in fiscal year 1993. The Company used $1.2 million to fund dividend payments during fiscal year 1995. Over the past three years, the Company's annual dividend has grown from $.12 to $.22 per share. In March 1994, the Company issued a call for redemption of its 7% convertible subordinated debentures. Substantially all of the outstanding debentures were converted into common stock, which resulted in an increase of approximately $23 million in shareholders' equity and a corresponding decrease of long-term debt. As a result of the conversion, approximately 1 million new shares of common stock were issued. The Company currently maintains sufficient borrowing capacity to take advantage of growth and business acquisition opportunities. The Company's bank financing was amended in fiscal 1995 to increase the Company's borrowing capacity. It now consists of a $130 million unsecured credit facility, which includes a $95 million long-term revolving credit facility and a $35 million line of credit convertible to a term note, as well as a short-term line of credit totaling $6 million. The Company's financial condition remains strong. The Company believes that it has the resources necessary, with approximately $40 million of unused debt capacity (subject to borrowing limitations under long-term debt covenants), to fund ongoing operating requirements. Future expansion will be financed on a project-by-project basis through additional borrowing or, if circum- stances are more favorable, through the issuance of common stock. Inflation and Changing Prices The Company is cognizant of the potentially adverse effects inflationary pressures may create through higher asset replacement costs and related depreciation, higher interest rates and higher material costs. The Company attempts to minimize these effects through cost reductions and productivity improvements as well as price increases to maintain reasonable profit margins. Management believes, however, that inflation (which has been moderate over the past three years) and changing prices have not significantly affected the Company's operating results or markets in the three most recent fiscal years. - --------------------------------------------------------------------- 1995 ANNUAL REPORT - PAGE 26 SELECTED FINANCIAL DATA (in thousands, except per share data and ratios)
Fiscal Years Ended (1)(2) 1995 1994 1993 1992 Net sales $ 802,445 $ 660,938 $ 555,796 $ 509,192 Cost of sales $ 640,170 $ 529,718 $ 447,373 $ 410,132 Gross margin 20.2% 19.9% 19.5% 19.5% Selling, general and administrative expenses $ 132,856 $ 109,760 $ 94,810 $ 91,114 % of sales 16.6% 16.6% 17.1% 17.9% Depreciation and amortization $ 8,773 $ 7,465 $ 6,636 $ 7,149 Provision for doubtful accounts $ 1,185 $ 1,671 $ 1,775 $ 2,542 Operating income (loss) $ 19,461 $ 12,324 $ 5,202 $ (1,745) Operating margin 2.4% 1.9% .9% (.3%) Interest and other income $ 2,837 $ 2,844 $ 3,574 $ 1,913 Interest expense $ 4,875 $ 4,610 $ 4,760 $ 5,991 Income (loss) before income taxes $ 17,423 $ 10,558 $ 4,016 $ (5,823) % of sales 2.2% 1.6% .7% (1.1%) Income taxes (benefits) $ 7,095 $ 4,272 $ 1,538 $ (1,964) Net income (loss) $ 10,328 $ 6,286 $ 2,478 $ (3,859) % of sales 1.3% 1.0% .4% (.8%) Net income (loss) per share Primary $ 1.79 $ 1.35 $ .54 $ (.85) Fully diluted $ 1.76 $ 1.25 $ .54 $ (.85) Average number of shares outstanding Primary 5,765 4,649 4,564 4,552 Fully diluted 5,949 5,819 4,592 4,552 Cash dividends per share $ .22 $ .16 $ .12 $ .24 Long-term debt, less current portion $ 100,918 $ 99,226 $ 81,320 $ 76,342 Shareholders' equity $ 131,335 $ 94,427 $ 86,666 $ 84,688 Total assets $ 328,893 $ 263,405 $ 230,738 $ 223,721 Return on equity (3) 10.9% 7.3% 2.9% (4.3%) Leverage(total assets/shareholders' equity) 2.50 2.79 2.66 2.64 Return on assets (3) 3.9% 2.7% 1.1% (1.7%) Capital expenditures (4) $ 11,841 $ 8,257 $ 8,702 $ 4,992 (1) The Company's fiscal year ends on the last Friday in January. (2) All data adjusted for fiscal 1986 and fiscal 1994 poolings of interest and three-for-two stock split declared May 17, 1988. - ---------------------------------------------------------------------- 1995 ANNUAL REPORT - PAGE 27 Fiscal Years Ended (1)(2) 1991 1990 1989 1988 1987 1986 1985 $ 576,388 $ 557,769 $ 529,306 $ 458,079 $ 372,687 $ 351,832 $ 336,466 $ 463,027 $ 443,914 $ 419,890 $ 362,355 $ 300,141 $ 284,259 $ 271,449 19.7% 20.4% 20.7% 20.9% 19.5% 19.2% 19.3% $ 93,538 $ 86,403 $ 79,538 $ 69,097 $ 52,070 $ 48,385 $ 44,915 16.2% 15.5% 15.0% 15.1% 14.0% 13.8% 13.3% $ 9,199 $ 9,127 $ 8,759 $ 6,742 $ 5,407 $ 4,793 $ 4,278 $ 2,606 $ 2,529 $ 1,370 $ 1,602 $ 541 $ 1,239 $ 1,139 $ 8,018 $ 15,796 $ 19,749 $ 18,283 $ 14,528 $ 13,156 $ 14,685 1.4% 2.8% 3.7% 4.0% 3.9% 3.7% 4.4% $ 4,078 $ 2,800 $ 3,615 $ 2,575 $ 2,548 $ 1,761 $ 1,589 $ 8,026 $ 7,360 $ 6,628 $ 4,203 $ 3,447 $ 2,623 $ 3,362 $ 4,070 $ 11,236 $ 16,736 $ 16,655 $ 13,629 $ 12,294 $ 12,912 .7% 2.0% 3.2% 3.6% 3.7% 3.5% 3.8% $ 1,654 $ 4,443 $ 6,456 $ 7,211 $ 6,701 $ 5,589 $ 5,847 $ 2,416 $ 6,793 $ 10,280 $ 9,444 $ 6,928 $ 6,705 $ 7,065 .4% 1.2% 1.9% 2.1% 1.9% 1.9% 2.1% $ .51 $ 1.31 $ 1.95 $ 1.76 $ 1.32 $ 1.25 $ 1.34 $ .51 $ 1.24 $ 1.77 $ 1.61 $ 1.24 $ 1.25 $ 1.34 4,731 5,181 5,262 5,376 5,247 5,358 5,268 4,731 6,276 6,372 6,467 6,090 5,358 5,268 $ .36 $ .35 $ .31 $ .27 $ .25 $ .21 $ .21 $ 85,626 $ 82,855 $ 76,122 $ 63,069 $ 36,954 $ 20,908 $ 21,853 $ 89,548 $ 95,411 $ 93,656 $ 85,565 $ 78,826 $ 73,879 $ 68,117 $ 226,019 $ 242,626 $ 230,064 $ 207,618 $ 167,494 $ 139,918 $ 127,671 2.5% 7.3% 12.0% 12.0% 9.4% 9.8% 11.6% 2.52 2.54 2.46 2.43 2.12 1.89 1.87 1.0% 3.0% 5.0% 5.6% 5.0% 5.3% 5.8% $ 7,172 $ 10,749 $ 9,856 $ 15,234 $ 11,318 $ 5,635 $ 7,866 (3) Ratios based on balance sheet at beginning of year. (4) Excludes capital leases.
- ---------------------------------------------------------------------- 1995 ANNUAL REPORT - INSIDE BACK COVER SHAREHOLDER INFORMATION The shares of Hughes Supply, Inc. common stock are traded on the New York Stock Exchange under the symbol "HUG." The approximate number of shareholders of record as of March 1, 1995 was 1,116. A COPY OF THE HUGHES SUPPLY, INC. ANNUAL REPORT ON FORM 10-K AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WILL BE MADE AVAILABLE WITHOUT CHARGE, UPON WRITTEN REQUEST. REQUESTS SHOULD BE DIRECTED TO: J. Stephen Zepf Treasurer and Chief Financial Officer Hughes Supply, Inc. Post Office Box 2273 Orlando, Florida 32802 TRANSFER AGENT AND REGISTRAR American Stock Transfer & Trust Company 40 Wall Street New York, New York 10005 ANNUAL MEETING Tuesday, May 23, 1995, at 10:00 AM 3rd floor of Park Building Sun Bank Center 200 South Orange Avenue Orlando, Florida 32801 GENERAL COUNSEL Maguire, Voorhis & Wells, P.A. Orlando, Florida AUDITORS Price Waterhouse LLP Orlando, Florida DIRECTORS David H. Hughes Chairman of the Board John D. Baker, II President, Florida Rock Industries, Inc. Robert N. Blackford Attorney, Maguire, Voorhis & Wells, P.A. John B. Ellis Retired, formerly Senior Vice President-Finance and Treasurer, Genuine Parts Company. A. Stewart Hall, Jr. Clifford M. Hames Retired, formerly Vice Chairman of the Board, Sun Bank, N.A. Russell V. Hughes Vincent S. Hughes Herman B. McManaway Retired, formerly Vice President, Ruddick Corporation and President, Ruddick Investment Co. Donald C. Martin Retired, formerly President, Electrical Distributors, Inc. CORPORATE HEADQUARTERS Hughes Supply, Inc. 20 North Orange Avenue Orlando, Florida 32801 Telephone: 407-841-4755 EXECUTIVE OFFICERS AND MANAGEMENT David H. Hughes Chairman of the Board and Chief Executive Officer A. Stewart Hall, Jr. President and Chief Operating Officer Robert N. Blackford Secretary Jacquel K. Clark Assistant Secretary & Assistant Treasurer Jasper L. Holland, Jr. Regional Vice President Clyde E. Hughes Regional Vice President Russell V. Hughes Vice President Vincent S. Hughes Vice President Kenneth H. Stephens Regional Vice President Sidney J. Strickland, Jr. Vice President, Purchasing and Administration Gradie E. Winstead, Jr. Regional Vice President Peter J. Zabaski Regional Vice President J. Stephen Zepf Treasurer & Chief Financial Officer EX-21 6 Exhibit 21.1 Subsidiaries of the Registrant Set forth below is a listing, by name and state of incorporation, of each corporation which is, as of the date of this Report, or was, at any time since the first day of the fiscal year ended January 27, 1995, a subsidiary of the Registrant. Unless otherwise indicated, each such corporation was a 100% owned subsidiary during such fiscal year and continues in existence as a 100% owned subsidiary of the Registrant as of the date of this Report. 1) XSMC, Inc., a Florida corporation, merged into the Registrant January 27, 1995 2) Carolina Pump & Supply Corp., a Rhode Island corporation 3) USCO Incorporated, a North Carolina corporation 4) Paine Supply of Jackson, Inc., a Mississippi corporation 5) Hughes Aviation, Inc., a Florida Corporation 6) One Stop Supply, Inc., a Tennessee corporation 7) Mills & Lupton Supply Company, a Tennessee corporation 8) Twin-T of the Carolinas, Inc., a North Carolina corporation, merged into Carolina Pump & Supply Corp. February 20, 1995 9) H Venture Corp., a Florida corporation 10) HHH, Inc., a Delaware corporation 11) HSI Corp., a Delaware corporation 12) Electrical Distributors, Inc., a Georgia corporation, merged into the Registrant January 27, 1995 13) Alabama Water Works Supply, Inc., an Alabama corporation, merged into the Registrant January 27, 1995 14) Swaim Supply Company, Inc., a North Carolina corporation, merged into USCO Incorporated February 7, 1995 15) Olander & Brophy, Inc., a Pennsylvania corporation, acquired by the Registrant March 3, 1995 16) Port City Electrical Supply, Inc., a Georgia corporation, acquired by the Registrant March 30, 1995 17) Elec-Tel Supply Company, a Georgia corporation, acquired by the Registrant April 3, 1995 EX-23 7 Exhibit 23.1 Consent of Independent Certified Public Accountants We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statements on Form S-3 (Nos. 33-70112, 33-56489 and 33-56837) and the Registration Statements on Form S-8 (Nos. 2-78323, 33-9082, 33- 26468 and 33-33701) of Hughes Supply, Inc. of our report dated March 15, 1995 appearing on page 12 of the Annual Report to the Shareholders which is incorporated in this Annual Report on Form 10-K. /s/ Price Waterhouse LLP Price Waterhouse LLP Orlando, Florida April 25, 1995 EX-23 8 Exhibit 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the Registration Statements of Hughes Supply, Inc. on Forms S-8 (File Nos. 2-78323, 33-9082, 33-26468 and 33-33701) and on Forms S-3 (File Nos. 33- 70112, 33-56837 and 33-56489), of our report dated March 17, 1994, on our audits of the consolidated financial statements of Hughes Supply, Inc. and subsidiaries as of January 28, 1994 and for the fiscal years ended January 28, 1994 and January 29, 1993, which report is included in this Annual Report on Form 10-K. /s/ Coopers & Lybrand L.L.P. Orlando, Florida April 5, 1995 EX-27 9
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET OF HUGHES SUPPLY, INC. AS OF JANUARY 27, 1995, AND THE RELATED STATEMENT OF INCOME FOR THE YEAR THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000049029 HUGHES SUPPLY, INC. 1,000 YEAR JAN-27-1995 JAN-27-1995 3,192 0 126,930 4,787 119,686 260,421 105,077 51,846 328,893 95,100 100,918 6,149 0 0 125,186 328,893 802,445 802,445 640,170 640,170 141,629 1,185 4,875 17,423 7,095 10,328 0 0 0 10,328 1.79 1.76
EX-99 10 LOCATION OF FACILITIES Exhibit 99.1 As of April 5, 1995 HUGHES SUPPLY, INC. FLORIDA - WHOLESALE Auburndale Orlando Bradenton Bathstyle Showroom Cape Coral Building Materials Clearwater Electrical Clermont Lightstyle Showroom Daytona Plumbing Eaton Park Water & Sewer Ft. Lauderdale Palm Beach Building Materials Panama City Plumbing Electrical Ft. Myers Plumbing Electrical Perry Plumbing Pompano Beach Water & Sewer Port Richey Ft. Pierce St. Petersburg Gainesville Sarasota Electrical Building Materials & Electrical Plumbing Plumbing Inverness Sebring Jacksonville Tallahassee Electrical Building Materials Building Materials Electrical Plumbing & PVF Utility Water & Sewer Tampa Kissimmee Building Materials Lady Lake Bathstyle Showroom Lakeland Plumbing Electrical Water & Sewer Lightstyle Showroom Tavares Leesburg Venice Longwood Electrical & Plumbing Marianna Lightstyle Showroom Melbourne West Palm Beach Miami Winter Haven Naples Electrical & Plumbing Bathstyle Showroom Ocala Orange City ALABAMA - WHOLESALE OHIO - WHOLESALE Birmingham Batavia Dothan Brimfield HVAC Cleveland Utility Columbus Huntsville Dayton Plumbing & HVAC Elyria Water & Sewer Greenville Mobile Hartville Montgomery Lima HVAC Marion Water & Sewer Monroe Toledo GEORGIA - WHOLESALE Van Wert Albany Alpharetta Athens INDIANA - WHOLESALE Atlanta Fort Wayne Building Materials Indianapolis Electrical Water & Sewer Plumbing & HVAC Plumbing & HVAC Brunswick Muncie Columbus Conyers Hartsfield PENNSYLVANIA - WHOLESALE LaGrange Bedford Macon Monroeville Electrical Shippenville Lightstyle Showroom Plumbing & HVAC Marietta SOUTH CAROLINA - WHOLESALE Electric Utility Anderson Plumbing & HVAC Bluffton McDonough Hilton Head Island Moultrie Savannah Electrical FLORIDA - DISTRIBUTION CENTER Plumbing & HVAC Orlando Water & Sewer Statesboro Thomasville GEORGIA - DISTRIBUTION CENTER Tifton College Park Electrical Plumbing & HVAC Valdosta Electrical Plumbing PAINE SUPPLY OF JACKSON, INC. USCO INCORPORATED MISSISSIPPI - WHOLESALE NORTH CAROLINA - WHOLESALE Biloxi Charlotte Greenville Crown Point Showroom Greenwood Durham Gulfport Goldsboro Plumbing Henderson Refrigeration High Point Hattiesburg Monroe Jackson Pinehurst Laurel Rocky Mount Meridian Salisbury Pascagoula Statesville Tupelo Zebulon MARYLAND - WHOLESALE CAROLINA PUMP & SUPPLY CORP. Capitol Heights (d/b/a Pump & Lighting Co.) SOUTH CAROLINA - WHOLESALE NORTH CAROLINA - WHOLESALE Aiken Charlotte Cheraw Charlotte Water & Sewer Columbia Fayetteville Greenville Greensboro Lancaster Hickory Kinston VIRGINIA - WHOLESALE Raleigh Arlington Wilmington La Crosse Winston Salem Lynchburg SOUTH CAROLINA - WHOLESALE NORTH CAROLINA - DISTRIBUTION Charleston CENTER Florence Monroe Greer Surfside Beach West Columbia TENNESSEE - WHOLESALE Knoxville ONE STOP SUPPLY, INC. TENNESSEE - WHOLESALE Clarksville Cookeville Jackson Memphis Nashville KENTUCKY - WHOLESALE Bowling Green Glasgow MILLS & LUPTON SUPPLY COMPANY TENNESSEE - WHOLESALE Chattanooga Cleveland Memphis GEORGIA - WHOLESALE Dalton Macon FLORIDA - WHOLESALE Tallahassee -----END PRIVACY-ENHANCED MESSAGE-----