-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RZ/9m+iSba1LPIWgMEWEE3lYaGnIb3azp2OwGwSh0iBHjxXQuM9ybyOm1Oxs3h0m MQej+uD4fA1zx2c4xc+y3w== 0001016843-99-000941.txt : 19990915 0001016843-99-000941.hdr.sgml : 19990915 ACCESSION NUMBER: 0001016843-99-000941 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990731 FILED AS OF DATE: 19990914 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-Q SEC ACT: SEC FILE NUMBER: 001-08772 FILM NUMBER: 99711030 BUSINESS ADDRESS: STREET 1: 20 N ORANGE AVE, STE 200 STREET 2: P O BOX 2273 CITY: ORLANDO STATE: FL ZIP: 32802-2273 BUSINESS PHONE: 4078414755 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 001-08772 HUGHES SUPPLY, INC. (Exact name of registrant as specified in its charter) Florida 59-0559446 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 20 North Orange Avenue, Suite 200, Orlando, Florida 32801 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 407/841-4755 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock Outstanding as of September 1, 1999 $1 Par Value 23,356,539 Page 1 HUGHES SUPPLY, INC. FORM 10-Q Index Page No. Part I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets as of July 31, 1999 and January 29, 1999 ............ 3 - 4 Consolidated Statements of Income for the Three Months Ended July 31, 1999 and 1998 ..... 5 Consolidated Statements of Income for the Six Months Ended July 31, 1999 and 1998 ....... 6 Consolidated Statements of Cash Flows for the Six Months Ended July 31, 1999 and 1998 ....... 7 Notes to Consolidated Financial Statements .... 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ................................. 9 - 15 Part II. Other Information Item 4. Submission of Matters to a Vote of Security Holders ....................................... 16 Item 6. Exhibits and Reports on Form 8-K ............. 17 - 21 Signatures .................................... 22 Index of Exhibits Filed with This Report ...... 23 Page 2 HUGHES SUPPLY, INC. PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets (unaudited) (in thousands, except share data) July 31, January 29, 1999 1999 ---------- ---------- ASSETS Current Assets: Cash and cash equivalents $ 8,540 $ 6,010 Accounts receivable, less allowance for losses of $7,340 and $2,809 411,825 341,109 Inventories 437,594 409,734 Deferred income taxes 10,936 8,520 Other current assets 29,104 31,346 ---------- ---------- Total current assets 897,999 796,719 Property and Equipment, Net 138,083 127,632 Excess of Cost over Net Assets Acquired 224,954 181,622 Other Assets 20,701 17,540 ---------- ---------- $1,281,737 $1,123,513 ========== ========== The accompanying notes are an integral part of these consolidated financial statements. Page 3 HUGHES SUPPLY, INC. Consolidated Balance Sheets (unaudited) - continued (in thousands, except share data) July 31, January 29, 1999 1999 ---------- ---------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $ 146 $ 39 Accounts payable 213,003 176,234 Accrued compensation and benefits 24,073 25,029 Other current liabilities 39,648 27,982 ---------- ---------- Total current liabilities 276,870 229,284 Long-Term Debt 500,852 402,203 Deferred Income Taxes 4,382 4,711 Other Noncurrent Liabilities 5,184 3,359 ---------- ---------- Total liabilities 787,288 639,557 ---------- ---------- Commitments and Contingencies Shareholders' Equity: Preferred stock - - Common stock-24,252,489 and 24,183,834 shares issued 24,252 24,184 Capital in excess of par value 220,824 219,558 Retained earnings 272,785 242,730 Treasury stock, 883,750 and no shares, at cost (20,400) - Unearned compensation related to outstanding restricted stock (3,012) (2,516) ---------- ---------- Total shareholders' equity 494,449 483,956 ---------- ---------- $1,281,737 $1,123,513 ========== ========== The accompanying notes are an integral part of these consolidated financial statements. Page 4 HUGHES SUPPLY, INC. Consolidated Statements of Income (unaudited) (in thousands, except per share data) Three months ended July 31, 1999 1998 ---------- ---------- Net Sales $ 774,888 $ 674,550 Cost of Sales 598,715 525,709 ---------- ---------- Gross Profit 176,173 148,841 ---------- ---------- Operating Expenses: Selling, general and administrative 127,822 106,015 Depreciation and amortization 7,295 5,396 Provision for doubtful accounts 883 756 ---------- ---------- Total operating expenses 136,000 112,167 ---------- ---------- Operating Income 40,173 36,674 ---------- ---------- Non-Operating Income and (Expenses): Interest and other income 2,488 1,703 Interest expense (7,528) (6,353) ---------- ---------- (5,040) (4,650) ---------- ---------- Income Before Income Taxes 35,133 32,024 Income Taxes 14,228 12,251 ---------- ---------- Net Income $ 20,905 $ 19,773 ========== ========== Earnings Per Share: Basic $ .90 $ .83 ========== ========== Diluted $ .88 $ .82 ========== ========== Average Shares Outstanding: Basic 23,300 23,925 ========== ========== Diluted 23,686 24,180 ========== ========== Dividends Per Share $ .085 $ .080 ========== ========== The accompanying notes are an integral part of these consolidated financial statements. Page 5 HUGHES SUPPLY, INC. Consolidated Statements of Income (unaudited) (in thousands, except per share data) Six months ended July 31, 1999 1998 ---------- ---------- Net Sales $1,486,184 $1,276,581 Cost of Sales 1,153,653 998,463 ---------- ---------- Gross Profit 332,531 278,118 ---------- ---------- Operating Expenses: Selling, general and administrative 249,157 205,604 Depreciation and amortization 13,951 11,109 Provision for doubtful accounts 2,270 1,326 ---------- ---------- Total operating expenses 265,378 218,039 ---------- ---------- Operating Income 67,153 60,079 ---------- ---------- Non-Operating Income and (Expenses): Interest and other income 4,728 3,229 Interest expense (14,302) (12,609) ---------- ---------- (9,574) (9,380) ---------- ---------- Income Before Income Taxes 57,579 50,699 Income Taxes 23,319 19,323 ---------- ---------- Net Income $ 34,260 $ 31,376 ========== ========== Earnings Per Share: Basic $ 1.45 $ 1.32 ========== ========== Diluted $ 1.43 $ 1.31 ========== ========== Average Shares Outstanding: Basic 23,580 23,765 ========== ========== Diluted 23,954 24,028 ========== ========== Dividends Per Share $ .17 $ .16 ========== ========== The accompanying notes are an integral part of these consolidated financial statements. Page 6 HUGHES SUPPLY, INC. Consolidated Statements of Cash Flows (unaudited) (in thousands) Six months ended July 31, 1999 1998 ---------- ---------- Cash Flows from Operating Activities: Net income $ 34,260 $ 31,376 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 13,951 11,109 Provision for doubtful accounts 2,270 1,326 Other, net (692) (275) Changes in assets and liabilities, net of effects of business acquisitions: (Increase) in accounts receivable (53,851) (70,953) (Increase) in inventories (11,783) (11,215) (Increase) decrease in other current assets 2,859 (4,380) (Increase) in other assets (3,503) (4,415) Increase in accounts payable and accrued liabilities 30,659 24,345 Increase in accrued interest and income taxes 5,266 3,440 Increase in other noncurrent liabilities 87 719 (Increase) decrease in net deferred income taxes (2,042) 2,014 ---------- ---------- Net cash provided by (used in) operating activities 17,481 (16,909) ---------- ---------- Cash Flows from Investing Activities: Capital expenditures (15,088) (11,985) Proceeds from sale of property and equipment 3,168 5,782 Business acquisitions, net of cash (63,560) (627) ---------- ---------- Net cash used in investing activities (75,480) (6,830) ---------- ---------- Cash Flows from Financing Activities: Net borrowings (payments) under short-term debt arrangements 98,574 (10,051) Principal payments on debt of acquired entities(13,455) (9,038) Proceeds from issuance of long-term debt - 50,000 Dividends paid (4,057) (4,865) Purchase of treasury stock (20,955) - Other 422 (636) ---------- ---------- Net cash provided by financing activities 60,529 25,410 ---------- ---------- Net Increase in Cash and Cash Equivalents 2,530 1,671 Cash and Cash Equivalents: Beginning of period 6,010 8,204 ---------- ---------- End of period $ 8,540 $ 9,875 ========== ========== The accompanying notes are an integral part of these consolidated financial statements. Page 7 HUGHES SUPPLY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (dollars in thousands, except per share data) 1. In the opinion of Hughes Supply, Inc. (the "Company"), the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position as of July 31, 1999, the results of operations for the three and six months ended July 31, 1999 and 1998, and cash flows for the six months then ended. The results of operations for the three and six months ended July 31, 1999 are not necessarily indicative of the results that may be expected for the full year. The fiscal year of the Company is a 52-week period ending on the last Friday in January. The three and six months ended July 31, 1999 and 1998 each contained 13 weeks and 26 weeks, respectively. Basic earnings per share is calculated by dividing net income by the weighted-average number of shares outstanding. Diluted earnings per share is calculated by dividing net income by the weighted-average number of shares outstanding, adjusted for dilutive potential common shares. The weighted-average number of shares used in calculating basic earnings per share were 23,300,000 and 23,925,000 for the three months ended July 31, 1999 and 1998, respectively, and 23,580,000 and 23,765,000 for the six months ended July 31, 1999 and 1998, respectively. In calculating diluted earnings per share, these amounts were adjusted to include dilutive potential common shares of 386,000 and 255,000 for the three months ended July 31, 1999 and 1998, respectively, and 374,000 and 263,000 for the six months ended July 31, 1999 and 1998, respectively. 2. During the six months ended July 31, 1999, the Company acquired five wholesale distributors of materials to the construction industry that were accounted for as purchases. Cash payments for these acquisitions totaled $63.6 million, which resulted in $47.3 million being recorded as the excess of cost over the fair value of net assets acquired. This excess of cost over net assets acquired is being amortized by the straight-line method over 15 to 40 years. These acquisitions, individually and in the aggregate, did not have a material effect on the consolidated financial statements of the Company. Results of operations of these companies from their respective dates of acquisition have been included in the consolidated financial statements. 3. On March 15, 1999, the Board of Directors authorized the Company to repurchase up to 2.5 million of its outstanding shares of common stock. During the six months ended July 31, 1999, the Company repurchased 908,900 shares of its common stock for a total cost of $21.0 million at an average purchase price of $23.06 per share. These shares are to be used for general corporate purposes. Page 8 HUGHES SUPPLY, INC. PART I. FINANCIAL INFORMATION - Continued Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following is management's discussion and analysis of certain significant factors which affected the financial condition of the Company as of July 31, 1999, and the results of operations for the three and six months then ended. Certain statements set forth in Management's Discussion and Analysis of Financial Condition and Results of Operations, including but not limited to certain statements made regarding the Year 2000 Issue (as subsequently defined), constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created by such sections. When used in this report, the words "believe," "anticipate," "estimate," "expect," and similar expressions are intended to identify forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. The Company's actual results may differ significantly from the results discussed in such forward-looking statements. When appropriate, certain factors that could cause results to differ materially from those projected in the forward-looking statements are enumerated. This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Company's consolidated financial statements and the notes thereto contained herein and in the Company's Form 10-K for the fiscal year ended January 29, 1999. Material Changes in Results of Operations Net Sales Net sales were $775 million for the quarter ended July 31, 1999, a 15% increase over the prior year's second quarter. Net sales for the six months ended July 31, 1999 were $1.49 billion, a 16% increase over the first six months of the prior fiscal year. The majority of the increase in net sales for the three and six month periods was attributable to branches acquired and opened after January 31, 1998. The remainder of the increase was attributable to same-store sales, which were up 3% and 6% for the three and six months ended July 31, 1999, respectively. The increase in same-store sales was attributable to the (i) continued overall strength of the construction market, (ii) increases in pool and spa product sales and (iii) growth in electric utility product sales resulting from improved market share. These increases were partially Page 9 offset by declines in industrial product demand and continued deflationary pricing within certain of the Company's commodity-based products. Gross Profit Gross profit and gross margin for the three and six months ended July 31, 1999 and 1998 were as follows (dollars in thousands):
1999 1998 ------------------- ------------------- Variance Gross Gross Gross Gross ---------------- Profit Margin Profit Margin Amount % --------- ------ --------- ------ -------- ----- Three months ended $ 176,173 22.7% $ 148,841 22.1% $ 27,332 18.4% Six months ended $ 332,531 22.4% $ 278,118 21.8% $ 54,413 19.6%
The improvement in gross margins resulted from several factors, including the Company's expansion of higher-margin product groups through acquisitions, efficiencies created with central distribution centers and enhanced purchasing power. The enhanced purchasing power was attributable to increased volume and concentration of supply sources as part of the Company's preferred vendor program. Although the gross margin percentage increased for the three and six months ended July 31, 1999, total gross profit dollars for the periods were negatively impacted by declines in pricing of certain commodity- based products. The lower pricing was the result of continued deflationary pressure over the past year on the pricing of certain of the Company's products whose manufacture is reliant on certain commodities, including stainless steel, nickel alloys, copper, aluminum and plastic. Operating Expenses Operating expenses for the three and six months ended July 31, 1999 and 1998 were as follows (dollars in thousands):
1999 1998 -------------------- -------------------- Variance % of % of ---------------- Amount Net Sales Amount Net Sales Amount % --------- --------- --------- --------- -------- ----- Three months ended $ 136,000 17.6% $ 112,167 16.6% $ 23,833 21.2% Six months ended $ 265,378 17.9% $ 218,039 17.1% $ 47,339 21.7%
The increase in operating expenses as a percent of net sales for the three and six month periods ended July 31, 1999 was primarily due to (i) higher personnel costs in connection with increased personnel headcount resulting from higher volume levels of activity, wage increases, and the Company's employee retention activities and (ii) increased information technology spending and conversion costs as the Company continues its program of upgrading information technology systems. The Company believes its investment in these initiatives will provide a platform for future growth and enable it to realize more administrative synergies from past and future acquisitions. Page 10 Interest Expense Interest expense was $7.5 million and $14.3 million for the three and six month periods ended July 31, 1999, respectively, compared to $6.4 million and $12.6 million for the same periods in the prior year, respectively. The increases were primarily the result of higher borrowing levels, partially offset by lower interest rates. The higher borrowing levels were primarily due to the Company's (i) expansion through business acquisitions, which has been partially funded by debt financing, and (ii) share repurchases. Income Taxes The effective income tax rates for the three and six month periods ended July 31, 1999 and 1998 were as follows: 1999 1998 Three months ended 40.5% 38.3% Six months ended 40.5% 38.1% Prior to the merger with Winn-Lange Electric, Inc. ("Winn-Lange") on June 30, 1998, Winn-Lange was a Subchapter S corporation and therefore, not subject to corporate income tax. Winn-Lange's Subchapter S corporation status terminated upon the merger with the Company. As a result, the Company's effective tax rate was higher for the three and six months ended July 31, 1999 compared to the prior year periods. Net Income Net income for the second quarter increased 6% to $20.9 million. Diluted earnings per share for the quarter were $.88 compared to $.82, a 7% increase over the prior year period. For the six months ended July 31, 1999, net income was $34.3 million, a 9% increase over the prior year's comparable period. Diluted earnings per share for the six months ended July 31, 1999 increased 9% to $1.43, up from $1.31 in the prior year's comparable period. Liquidity and Capital Resources Net cash provided by operations was $17.5 million for the six months ended July 31, 1999 compared to $16.9 million of net cash used in operations for the six months ended July 31, 1998. This change was primarily the result of (i) an improvement in accounts receivable turnover from same-store branches and (ii) an increase in accounts payable and accrued liabilities resulting from the Company's cash management efforts. The Company's expenditures for property and equipment were $15.1 million for the six months ended July 31, 1999 compared to $12.0 million for the six months ended July 31, 1998. Of these expenditures, $2.6 million and $2.4 million, respectively, were related to information technology Page 11 outlays. Capital expenditures for property and equipment, excluding amounts for business acquisitions, are expected to be approximately $30 million for fiscal 2000. Proceeds from the sale of property and equipment decreased from $5.8 million for the six months ended July 31, 1998 to $3.2 million for the six months ended July 31, 1999. This decrease was primarily due to the $5.4 million in proceeds received from the sale and subsequent lease- back of certain computer hardware during the six months ended July 31, 1998, as compared to the $2.5 million in proceeds received during the six months ended July 31, 1999 from the sale and subsequent lease-back of certain computer hardware. Cash payments for business acquisitions accounted for as purchases totaled $63.6 million for the six months ended July 31, 1999 compared to $0.6 million in the prior year period. Principal reductions on debt of acquired entities were $13.5 million for the six months ended July 31, 1999 compared to $9.0 million for the same period in the prior year. Dividend payments were $4.1 million and $4.9 million during the six months ended July 31, 1999 and 1998, respectively. Dividend payments of $4.9 million during the six months ended July 31, 1998 included cash dividends of pooled companies totaling $1.2 million. On March 15, 1999, the Board of Directors authorized the Company to repurchase up to 2.5 million of its outstanding shares of common stock. During the six months ended July 31, 1999, the Company repurchased 908,900 shares of its common stock for a total cost of $21.0 million at an average purchase price of $23.06 per share. These share are to be used for general corporate purposes. As of July 31, 1999, the Company had approximately $58 million of unused borrowing capacity (subject to borrowing limitations under long-term debt covenants) to fund ongoing operating requirements and anticipated capital expenditures. The Company also believes it has sufficient borrowing capacity to take advantage of growth and business acquisition opportunities and to fund share repurchases in the near term. The Company expects to continue to finance future expansion on a project-by- project basis through additional borrowing or through the issuance of common stock. Year 2000 Issue Many existing computer programs use only two digits to identify a year in the date field. As the century date change occurs, these programs may recognize the year 2000 as 1900, or not at all. If not corrected, many computer systems and applications could fail or create erroneous results by or at the year 2000 (the "Year 2000 Issue"). The Company has developed plans to address its possible exposures related to the impact of the Year 2000 Issue on each of its internal Page 12 systems and those of third parties. These plans are expected to be implemented primarily with the use of internal personnel. The Company's internal systems consist of its main operating and accounting systems, which handle the majority of its business transactions, and other remote operating systems, which have resulted from the Company's acquisition program. Plans to address the Year 2000 Issue with respect to the Company's internal systems include an assessment phase, a remediation phase and a testing phase. All required modifications to the Company's main operating system were completed in December 1998. This system was thoroughly tested and the modifications were implemented into the production environment. The Company has installed an upgraded, vendor-certified year 2000 compliant version of its accounting system. The Company's own internal verification and validation testing for year 2000 compliance of the accounting system was completed in May 1999. With respect to these two systems, the Company does not anticipate that the Year 2000 Issue will materially impact its operations or operating results. As of August 23, 1999, the Company had 13 remote operating systems in place. One of these systems utilizes a customized business software application that the Company is testing for year 2000 compliance. The remaining 12 systems utilize commercially available business software applications. Of these 12 systems, nine are certified year 2000 compliant by their vendors. The remaining three systems are expected to be converted by October 31, 1999 to one of the nine vendor-certified year 2000 compliant systems that are expected to be in use on January 1, 2000. The Company has successfully completed its own internal verification and validation testing for year 2000 compliance on six of the nine vendor- certified year 2000 compliant systems that are expected to be in use on January 1, 2000. The tested systems support approximately 90% of the Company's business volume. Testing of the remaining three systems is currently underway and is expected to be completed by October 31, 1999. All additional remote operating systems added after August 23, 1999 as a result of the Company's acquisition program will be assessed, remediated and tested to the extent that is necessary to ensure year 2000 compliance, or converted to one of the Company's systems that is expected to be year 2000 compliant. Management estimates total pretax costs relating to the Year 2000 Issue to be approximately $2 million. Approximately 50% of these costs were incurred through July 31, 1999 and the remaining costs are expected to be incurred through March 2000. The estimate of $2 million excludes certain costs of converting remote operating systems to the Company's other year 2000 compliant systems, because such costs are not expected to be material or the conversion is scheduled to be performed as part of the Company's normal integration activities. Approximately $1 million of the estimated total pretax costs of $2 million are personnel and other expenses related to the Company's Year 2000 Project Team, which is Page 13 expected to remain intact through the turn of the century. The remaining estimated cost of $1 million is expected to be incurred primarily in connection with the remediation and testing of the Company's remote operating systems. The Company has contacted its major suppliers, customers and service providers regarding their Year 2000 Issues to assess the risk of these entities not being able to continue to provide goods and services to the Company. Through July 31, 1999, approximately 44% of the entities contacted have responded. Of those entities who have responded, approximately 50% have indicated that their systems are year 2000 compliant, and the remaining entities have indicated that they have programs in place to address their respective organization's Year 2000 Issues. The Company plans to continue to evaluate the year 2000 readiness of its major suppliers, customers and service providers. The Company believes its planning efforts are adequate to address the Year 2000 Issue. There are, however, certain risks that the Company cannot directly control, including the readiness of its major suppliers, customers and service providers. Failure on the part of any of these entities to timely remediate their Year 2000 Issues could result in disruptions in the Company's supply of materials, disruptions in its customers' ability to conduct business and interruptions to the Company's daily operations. There can be no guarantee that the systems of other third parties on which the Company's systems and operations rely will be corrected on a timely basis and will not have a material adverse effect on the Company. As the Company receives and evaluates additional information provided by third parties regarding their year 2000 readiness, the Company intends to develop contingency plans, as deemed necessary, to safeguard its ongoing operations. Such contingency plans may include identifying alternative suppliers or service providers, stockpiling certain inventories if alternative sources of supply are not available, evaluating the impact and creditworthiness of non-compliant customers and the addition of borrowing capacity if deemed necessary to finance higher levels of inventory or working capital on an interim basis. Page 14 Item 3. Quantitative and Qualitative Disclosures about Market Risk The Company is exposed to market risk from changes in (i) interest rates on outstanding variable-rate debt and (ii) the prices of certain of the Company's products whose manufacture is reliant on certain commodities. Interest Rate Risk At July 31, 1999, the Company had approximately $272.9 million of outstanding variable-rate debt. Based upon an assumed 10% increase or decrease in interest rates from their July 31, 1999 levels, the market risk with respect to the Company's variable-rate debt would not be material. The Company manages its interest rate risk by maintaining a combination of fixed-rate and variable-rate debt. Commodity Price Risk The Company is affected by price fluctuations in stainless steel, nickel alloys, copper, aluminum, plastic and other commodities. Such commodity price fluctuations have from time to time created cyclicality in the financial performance of the Company and could continue to do so in the future. The Company seeks to minimize the effects of commodity price fluctuations through (i) economies of purchasing and inventory management resulting in cost reductions, maintenance of minimum economic reorder points, and productivity improvements and (ii) price increases to maintain reasonable profit margins. Additional information with respect to the Company's commodity price risk is set forth under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part I, Item 2 of this report. Page 15 HUGHES SUPPLY, INC. PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders The 1999 Annual Meeting of Shareholders (the "Annual Meeting") was held on May 19, 1999. At the Annual Meeting, holders of 19,901,950 shares of the Company's common stock were present in person or by proxy. At the Annual Meeting, Messrs. William P. Kennedy, David H. Hughes and Vincent S. Hughes were elected directors of the Company to hold office until the 2002 Annual Meeting and until the election and qualification of their respective successors or until the earlier of their death, resignation or removal. The tabulation of the votes present in person or by proxy at the Annual Meeting with respect to each nominee for office was as follows: Authority For Withheld William P. Kennedy 18,375,998 1,525,952 David H. Hughes 18,366,498 1,535,452 Vincent S. Hughes 18,366,993 1,534,957 Messrs. John D. Baker II, A. Stewart Hall, Jr., Robert N. Blackford and H. Corbin Day each continued their term of office as a director of the Company after the Annual Meeting. The shareholders of the Company also voted on a proposal to amend the Directors' Stock Option Plan ("Proposal Two") to increase by 100,000 the number of shares with respect to which options may be granted under the plan and to provide for the grant of options to non-employee directors under the plan following each annual meeting of the shareholders. The tabulation of votes with respect to this proposal was as follows: Authority For Withheld Abstain Proposal Two 18,586,428 1,206,646 108,876 Page 16 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Filed (2) Plan of acquisition, reorganization, arrangement, liquidation or succession. Not applicable. (3) Articles of incorporation and by-laws. 3.1 Restated Articles of Incorporation, as amended, incorporated by reference to Exhibit 3.1 to Form 10-Q for the quarter ended April 30, 1997 (Commission File No. 001-08772). 3.2 Composite By-Laws, as amended, incorporated by reference to Exhibit 3.2 to Form 10-K for the fiscal year ended January 30, 1998 (Commission File No. 001-08772). 3.3 Form of Articles of Amendment to Restated Articles of Incorporation of the Company, incorporated by reference to Exhibit 99.2 to Form 8-A dated May 22, 1998 (Commission File No. 001-08772). (4) Instruments defining the rights of security holders, including indentures. 4.1 Form of Common Stock Certificate representing shares of the Registrant's common stock, $1.00 par value, incorporated by reference to Exhibit 4.1 to Form 10-Q for the quarter ended July 31, 1997 (Commission File No. 001- 08772). 4.2 Rights Agreement dated as of May 20, 1998 between Hughes Supply, Inc. and American Stock Transfer & Trust Company, incorporated by reference to Exhibit 99.2 to Form 8-A dated May 22, 1998 (Commission File No. 001-08772). (10) Material contracts. 10.1 Lease Agreements with Hughes, Inc. (a) Orlando Trucking, Garage and Maintenance Operations dated December 1, 1971, incorporated by reference to Exhibit 13(n) to Registration No. 2-43900 (Commission File No. 0-5235). Letter dated April 15, 1992 extending lease from month to month, filed as Exhibit 10.1(a) to Form 10-K for the fiscal year ended January 31, 1992 (Commission File No. 0- 5235). Page 17 (b) Leases effective March 31, 1988, incorporated by reference to Exhibit 10.1(c) to Form 10-K for the fiscal year ended January 27, 1989 (Commission File No. 0-5235). Sub-Item Property (1) Clearwater (2) Daytona Beach (3) Fort Pierce (4) Lakeland (6) Leesburg (7) Orlando Electrical Operation (8) Orlando Plumbing Operation (9) Orlando Utility Warehouse (11) Sarasota (12) Venice (13) Winter Haven (c) Lease amendment letter between Hughes, Inc. and the Registrant, dated December 1, 1986, amending Orlando Truck Operations Center and Maintenance Garage lease, incorporated by reference to Exhibit 10.1(i) to Form 10-K for the fiscal year ended January 30, 1987 (Commission File No. 0-5235). (d) Lease agreement dated June 1, 1987, between Hughes, Inc. and the Registrant, for additional Sarasota property, incorporated by reference to Exhibit 10.1(j) to Form 10-K for the fiscal year ended January 29, 1988 (Commission File No. 0-5235). (e) Lease dated March 11, 1992, incorporated by reference to Exhibit 10.1(e) to Form 10-K for the fiscal year ended January 31, 1992 (Commission File No. 0-5235). Sub-Item Property (2) Gainesville Electrical Operation (f) Amendments to leases between Hughes, Inc. and the Registrant, dated April 1, 1998, amending the leases for the thirteen properties listed in Exhibit 10.1(b), (d) and (e), incorporated by reference to Exhibit 10.1 to Form 10-K for the fiscal year ended January 30, 1998 (Commission File No. 001-08772). Page 18 10.2 Hughes Supply, Inc. 1988 Stock Option Plan as amended March 12, 1996 incorporated by reference to Exhibit 10.2 to Form 10-K for the fiscal year ended January 26, 1996 (Commission File No. 001-08772). 10.3 Form of Supplemental Executive Retirement Plan Agreement entered into between the Registrant and eight of its executive officers, incorporated by reference to Exhibit 10.6 to Form 10-K for the fiscal year ended January 30, 1987 (Commission File No. 0-5235). 10.4 Directors' Stock Option Plan, as amended. 10.5 Written description of senior executives' long-term incentive bonus plan for fiscal year 1996 incorporated by reference to the description of the bonus plan set forth under the caption "Approval of the Stock Award Provisions of the Senior Executives' Long-Term Incentive Bonus Plan for Fiscal Year 1996" on pages 26 and 27 of the Registrant's Proxy Statement for the Annual Meeting of Shareholders to be held May 24, 1994 (Commission File No. 001-08772). 10.6 Hughes Supply, Inc. Amended Senior Executives' Long-Term Incentive Bonus Plan, adopted January 25, 1996, incorporated by reference to Exhibit 10.9 to Form 10-K for the fiscal year ended January 26, 1996 (Commission File No. 001-08772). 10.7 Note Purchase Agreement, dated as of August 28, 1997, by and among the Company and certain purchasers identified in Schedule A of the Note Purchase Agreement, incorporated by reference to Exhibit 10.15 to Form 10-Q for the quarter ended July 31, 1997 (Commission File No. 001-08772). 10.8 Hughes Supply, Inc. 1997 Executive Stock Plan (the "Plan") incorporated by reference to the description of the Plan set forth under Exhibit A of the Registrant's Proxy Statement for the Annual Meeting of Shareholders to be held May 20, 1997 (Commission File No. 001-08772). 10.9 Note Purchase Agreement, dated as of May 29, 1996, by and among the Company and certain purchasers identified in Schedule A of the Note Purchase Agreement, incorporated by reference to Exhibit 10.13 to Form 10-K for the fiscal year ended January 30, 1998 (Commission File No. 001- 08772). Page 19 10.10 Note Purchase Agreement, dated as of May 5, 1998, by and among the Company and certain purchasers identified in Schedule A of the Note Purchase Agreement, incorporated by reference to Exhibit 10.11 to Form 10-Q for the quarter ended April 30, 1998 (Commission File No. 001- 08772). 10.11 Revolving Credit Agreement, dated as of January 26, 1999, by and among the Company and a group of banks, incorporated by reference to Exhibit 10.11 to Form 10-K for the fiscal year ended January 29, 1999 (Commission File No. 001-08772). The Revolving Credit Agreement contains a table of contents identifying the contents of Schedules and Exhibits, all of which have been omitted. The Company agrees to furnish a supplemental copy of any omitted Schedule or Exhibit to the Commission upon request. 10.12 Line of Credit Agreement, dated as of January 26, 1999, by and among the Company and a group of banks, incorporated by reference to Exhibit 10.12 to Form 10-K for the fiscal year ended January 29, 1999 (Commission File No. 001-08772). The Line of Credit Agreement contains a table of contents identifying the contents of Schedules and Exhibits, all of which have been omitted. The Company agrees to furnish a supplemental copy of any omitted Schedule or Exhibit to the Commission upon request. (11) Statement re computation of per share earnings. Not applicable. (15) Letter re unaudited interim financial information. Not applicable. (18) Letter re change in accounting principles. Not applicable. (19) Report furnished to security holders. Not applicable. (22) Published report regarding matters submitted to vote of security holders. Not applicable. (23) Consents of experts and counsel. Not applicable. (24) Power of attorney. Not applicable. (27) Financial data schedule. 27.1 Financial Data Schedule (filed electronically only). Page 20 (99) Additional exhibits. Not applicable. (b) Reports on Form 8-K There were no reports on Form 8-K filed during the quarter ended July 31, 1999. Page 21 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HUGHES SUPPLY, INC. Date: September 14, 1999 By: /s/ David H. Hughes David H. Hughes, Chairman of the Board and Chief Executive Officer Date: September 14, 1999 By: /s/ J. Stephen Zepf J. Stephen Zepf, Treasurer, Chief Financial Officer and Chief Accounting Officer Page 22 INDEX OF EXHIBITS FILED WITH THIS REPORT 10.4 Directors' Stock Option Plan, as amended. 27.1 Financial Data Schedule (filed electronically only). Page 23 EX-10 2 Exhibit 10.4 RESOLUTIONS ADOPTED BY THE BOARD OF DIRECTORS OF HUGHES SUPPLY, INC. On March 18, 1998 WHEREAS, the Hughes Supply, Inc. Directors' Stock Option Plan (the "Directors' Stock Option Plan") provides that in the event that an optionee ceases to be a Director for any reason other than death or disability, such optionee may exercise any option at any time within three months after the date on which the optionee ceases to be a Director; and WHEREAS, the Company's Board of Directors deems it to be in the best interest of the Company to extend the three month period referenced above to one year. NOW, THEREFORE, BE IT HEREBY RESOLVED, that the time period within which an optionee who ceases to be a Director, for any reason other than death or disability, may exercise his options under the Directors' Stock Option Plan shall be extended from three months to one year. AMENDMENT NO. 1 TO HUGHES SUPPLY, INC. DIRECTORS' STOCK OPTION PLAN WHEREAS, the Board of Directors of Hughes Supply, Inc. (the "Corporation") approved the Directors' Stock Option Plan (the "Plan") on January 24, 1989 in the form attached hereto as Appendix "A"; WHEREAS, the letter from the staff of the Securities and Exchange Commission referred to in Section 14 of the Plan was issued by the Commission Staff on April 6, 1989 satisfying the conditions of Section 14; WHEREAS, the shareholders of the Corporation approved the Plan at the Annual Meeting of Shareholders held on May 30, 1989; WHEREAS, in accordance with the terms of Sections 3 and 4 of the Plan, options with respect to all of the stock authorized for options under the Plan have been granted and no additional options under the Plan may be granted in the absence of the expiration or termination of presently outstanding options or an amendment to the Plan increasing a number of shares as to which options may be granted; and WHEREAS, the Board of Directors of the Corporation on March 24, 1994 approved and recommended shareholder approval of an amendment to the Plan to increase by 75,000 the number of shares as to which options may be granted under the Plan; and WHEREAS, the shareholders approved the recommended amendment at Annual Meeting of Shareholders held on May 24, 1994 increasing from 60,000 to 135,000 the number of shares with respect to which options may be granted under the Plan from 60,000 shares to 135,000 shares; NOW, THEREFORE, IN WITNESS THEREOF, the following provisions of the Plan are hereby amended and modified as follows: Section 3. Section 3. Participants and Options is hereby amended and modified to amend and modify subparagraph (ii) thereof and to add a new subparagraph (iii) as follows: 3. PARTICIPANTS AND OPTIONS (ii) In addition to the options referred to in subparagraph (i) above, during the term of the Plan until, but not including, the date of the 1994 annual meeting of shareholders a subsequent grant of options for an aggregate of 12,000 shares, or such lesser number of shares as shall then constitute all of the remaining shares which are authorized for options under the Plan but which are not then subject to options under the Plan, within the limitation set forth in Section 4 hereof, divided equally (rounded, if necessary, down to the nearest whole number of shares) among the Participants under the Plan, will be made at the meeting of the Board of Directors of the Corporation immediately following the 1990 annual meeting of stockholders of the Corporation and at each Board meeting immediately following each annual meeting of stockholders thereafter during the term of the Plan and prior to the 1994 annual meeting of shareholders. (iii) In addition to the options referred to in subparagraphs (i) and (ii) above, during the term of the Plan beginning with the date of the 1994 annual meeting of shareholders a subsequent grant of options for an aggregate of 15,000 shares or such lesser number of shares as shall then constitute all of the remaining shares which are authorized for options under the Plan but which are not then subject to options under the Plan, within the limitations set forth in Section 4 hereof, divided equally (rounded, if necessary, down to the nearest whole number of shares) among the Participants under the Plan, will be made at the meeting of the Board of Directors of the Corporation immediately following the 1994 annual meeting of stockholders of the Corporation at each Board meeting immediately following each annual meeting of stockholders thereafter during the term of the Plan. Section 4. Section 4. Stock is hereby amended and modified to read in its entirety as follows: 4. STOCK The stock which may be subject to options under the Plan shall be 135,000 shares of the Corporation's authorized but unissued or reacquired $1.00 par value common stock hereafter sometimes called capital stock. The aggregate number of shares of capital stock which are subject to outstanding options and which will be subject to options to be granted under the Plan shall be subject to adjustment in accordance with the provisions of subsection (h) of Section 5 hereof. In the event that any outstanding option under the Plan for any reason expires or is terminated, the shares of capital stock allocable to the unexercised portion of such option may again be subject to an option under the Plan. Of the stock which may be subject to options under the Plan, 75,000 of such shares have been added by an amendment to the Plan approved by the stockholders on May 24, 1994 and such additional shares constitute shares as to which "Amendment Options" within the meaning of Section 6 hereof may be granted and approval by the stockholders of such amendment extends the term of the Plan in accordance with Section 6 hereof. Except as hereinbefore set forth, the Plan shall remain unchanged and in full force and effect. The amendments and modifications set forth in this Amendment No. 1 to Hughes Supply, Inc. Directors' Stock Option Plan were approved and adopted by the Board of Directors and the stockholders on the dates hereinabove set forth. Witness my hand and the seal of the Corporation this 24th day of May, 1994. /s/Robert N. Blackford Robert N. Blackford, Secretary Hughes Supply, Inc. AMENDMENT NO. 5 TO HUGHES SUPPLY, INC. DIRECTORS' STOCK OPTION PLAN WHEREAS, the Board of Directors of Hughes Supply, Inc. (the "Corporation") approved the Directors' Stock Option Plan (the "Plan") on January 24, 1989; WHEREAS, the shareholders of the Corporation approved the Plan at the Annual Meeting of Shareholders held on May 25, 1989; WHEREAS, the Plan was first amended on May 24, 1994 to increase the number of shares with respect to which options may be granted under the Plan from 60,000 shares to 135,000 shares; WHEREAS, the Corporation had a three-for-two stock split that became effective on July 10, 1997 (the "1997 Stock Split"); WHEREAS, in accordance with Section 8 of the Plan, the Board of Directors of the Corporation desired to amend the Plan to increase the number of shares as to which options may be granted from 202,500 shares (adjusted to reflect the 1997 Stock Split) by 100,000 shares to 302,500 shares, and the shareholders approved such amendment on May 19, 1999; and WHEREAS, under the terms of the Plan, the approval by the shareholders of the Corporation of this increase in the number of shares as to which options may be granted will extend the term of the Plan as to those options until May 19, 2009. NOW, THEREFORE, the Plan is hereby amended as follows, effective as of May 19, 1999: 1. By adding the following Section 3(iv): "In addition to the options referred to in subparagraphs (i), (ii), and (iii) above, during the term of the Plan beginning with the date of the 1999 annual meeting of shareholders a subsequent grant of options for an aggregate of 20,000 shares or such lesser number of shares as shall then constitute all of the remaining shares which are authorized for options under the Plan but which are not subject to options under the Plan, within the limitations set forth in Section 4 hereof, divided equally (rounded, if necessary, down to the nearest whole number of shares) among the Participants under the Plan, will be made at the meeting of the Board of Directors of the Corporation immediately following the 1999 annual meeting of shareholders of the Corporation and at each Board meeting immediately following each annual meeting of shareholders thereafter during the term of the Plan." 2. By replacing Section 4 with the following: "The stock which may be subject to options under the Plan shall be 302,500 shares of the Corporation's authorized but unissued or reacquired $1.00 par value common stock hereafter sometimes called capital stock. The aggregate number of shares of capital stock which are subject to outstanding options and which will be subject to options to be granted under the Plan shall be subject to adjustment in accordance with the provisions of subsection (h) of Section 5 hereof. In the event that any outstanding option under the Plan for any reason expires or is terminated, the shares of capital stock allocable to the unexercised portion of such option may again be subject to an option under the Plan. Of the stock which may be subject to options under the Plan, 90,000 of such shares (adjusted to reflect the three-for-two stock split which became effective on July 7, 1997) have been added by an amendment to the Plan approved by the shareholders on May 24, 1994 and 100,000 of such shares have been added by an amendment to the Plan approved by the shareholders on May 19, 1999. Such additional shares constitute shares to which "Amendment Options" within the meaning of Section 6 hereof may be granted. Approval by the shareholders of such amendments of May 24, 1994 and May 19, 1999 amends the term of the Plan in accordance with Section 6 hereof." Except as set forth above, the Plan shall remain unchanged and in full force and effect. This Amendment is executed by the Corporation this ___ day of _________, 1999. HUGHES SUPPLY, INC. By: Title: HUGHES SUPPLY, INC. Directors' Stock Option Plan 1. PURPOSE This Directors Stock Option Plan (the "Plan") is intended as an incentive and to encourage Directors of Hughes Supply, Inc. (the "Corporation") who are not, and for the previous twelve (12) months have not been, employees of the Corporation eligible to participate in the Hughes Supply, Inc. 1988 Stock Option Plan (the "Employee Plan") to increase their stock ownership and proprietary interest in the success of the Corporation, to encourage them to continue as Directors of the Corporation and as an incentive to work to increase the value of the stock of the Corporation. The options to be issued pursuant to this Plan shall not constitute incentive stock options within the meaning of Sec. 422A of the 1986 Internal Revenue Code, as amended (the "Code"). 2. ADMINISTRATION The Plan shall be administered by a Directors' Stock Option Plan committee appointed by the Board of Directors of the Corporation (the "Committee"). The Committee shall consist of not less than three (3) members of the Corporation's Board of Directors who are not,,employees of the Corporation and who are "disinterested persons as that term is defined in Rule 16b-3(d) under the Securities Exchange Act of 1934 (the "Exchange Act") or any successor statute or regulation regarding the same subject matter. The Board of Directors may from time to time remove members from, or add members to, the Committee. Vacancies on the Committee, howsoever caused, shall be filled by the Board of Directors. The Committee shall elect one of its members as Chairman, and shall hold meetings at such times and places as it may determine. Acts of the Committee taken by a majority of the Committee at a meeting at which a quorum is present, or acts reduced to or approved in writing by a majority of the members of the Committee, shall be the valid acts of the Committee. A nonemployee Director shall receive options under the Plan whether or not such Director also serves as a member of the Committee. Subject to the provisions of the Plan the Committee may from time to time adopt such rules for administration of the Plan as it deems appropriate. The interpretation and construction by the Committee of any provisions of the Plan or of any option granted under it shall be final unless otherwise determined by the Board of Directors. No member of the Board of Directors or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any option granted under it. 3. PARTICIPANTS AND OPTIONS The persons who shall be participants under the Plan (the "Participants") shall be all such Directors of the Corporation as are not on the date of the grant of an option under the Plan, and for a period of at least twelve (12) months prior to the grant of such option have not been, employees of the Corporation. Options are granted and shall be granted to Participants under the Plan as follows: (i) Subject to approval of the Plan by the stockholders in accordance with Section 13 hereof and to the receipt by the Corporation of the letter from the staff of the Securities and Exchange Commission referred to in Section 14 hereof, an initial grant of an aggregate of 12,000 shares divided equally (rounded, if necessary, down to the nearest whole number of shares) among the Participants is made effective as of January 24, 1989 to the Participants on that date. (ii) In addition to the options referred to in subparagraph (i) above, during the term of the Plan a subsequent grant of options for an aggregate of 12,000 shares or such lesser number of shares as shall then constitute all of the remaining shares which are not then, but which may be subject to options under the Plan within the limitation set forth in Section 4 hereof, divided equally (rounded, if necessary, down to the nearest whole number of shares) among the then Participants under the Plan, will be made at the meeting of the Board of Directors of the Corporation immediately following the 1990 annual meeting of stockholders of the Corporation and at each Board meeting immediately following each annual meeting of stockholders of the Corporation thereafter during the term of the Plan. 4. STOCK The stock which may be subject to the options under the Plan shall be 60,000 shares of the Corporations authorized but unissued or reacquired $1.00 par value common stock hereafter sometimes called capital stock. The aggregate number of shares of capital stock which are subject to outstanding options and which will be subject to options to be granted under the Plan shall be subject to adjustment in accordance with the provisions of subsection (h) of Section 5 hereof. In the event that any outstanding option under the Plan for any reason expires or is terminated, the shares of capital stock allocable to the unexercised portion of such option may again be subjected to an option under the Plan. 5. TERMS AND CONDITIONS OF OPTIONS: STOCK OPTION AGREEMENTS Stock options granted pursuant to the Plan shall be evidenced by stock option agreements in such form as the Committee shall from time to time recommend and the Board of Directors shall from time to time approve, which agreements shall comply with and be subject to the following terms and conditions: (a) Optionee's Agreement Each optionee shall agree to remain as a Director of the Corporation but such agreement shall not impose upon the Corporation any obligation to retain the optionee as a Director for any period. (b) Number of Shares Each option shall state the number of shares to which it pertains. (c) Option Price Each option shall state the option price, which shall be not less than one hundred percent (100%) of the fair market value of the shares of capital stock of the Corporation on the date of the granting of the option. During such time as such stock is not listed upon an established stock exchange the fair market value per share shall be the mean between dealer "bid" and "ask" prices of the capital stock in over-the-counter market applicable to transactions effected in Orlando, Florida on the day the option is granted, as reported by the National Association of Securities Dealers, Inc. If the stock is listed upon an established stock exchange or exchanges such fair market value shall be deemed to be the highest closing price of the capital stock on such stock exchange or exchanges on the day the option is granted or if no sale of the Corporation's capital stock shall have been made on any stock exchange on that day, on the next preceding day on which there was a sale of such stock. Subject to the foregoing, the Board of Directors and the Committee in fixing the option price shall have full authority and discretion and be fully protected in doing so. (d) Medium and Time of Payment The option price shall be payable in United States dollars upon the exercise of the option and may be paid in cash, by check or with shares of capital stock of the Corporation valued at their fair market value, as that term is defined in the preceding paragraph. (e) Term and Exercise of Options An option shall be exercisable either in whole or in part at any time after the date on which it is granted and prior to its expiration date which, unless sooner terminated under subsections (f) or (g) of this Section 5 hereof, shall be ten (10) years from the date on which it is granted. The procedure for exercise of an option shall be as set forth in the Plan and in the stock option agreement evidencing the grant of the option. In the event of any conflict between the language of the stock option agreement and the language of the Plan, the language of the Plan shall govern. No option shall be exercisable after its expiration date. Not less than ten (10) shares may be purchased at any one time unless the number purchased is the total number at the time purchasable under the option. During the lifetime of the optionee, the option shall be exercisable only by him and shall not be assignable or transferable by him and no other person shall acquire any rights therein. (f) Termination of Service as a Director Except Death In the event that an optionee shall cease to be a Director of the Corporation for any reason other than his death, subject to the condition that no option shall be exercisable after its expiration date, such optionee shall have the right to exercise the option at any time within three (3) months after such termination as a Director to the extent his right to exercise such option has not previously been exercised at the date of such termination. For purposes of this paragraph, in the case of an optionee who becomes disabled within the meaning of Sec. 22(3)(e) of the Code, the words "three months" shall be replaced by the words "one year". (g) Death of Optionee and Transfer of Option If the optionee shall die while a Director of the Corporation or within a period of three (3) months after the termination of his service as a Director of the Corporation and shall not have fully exercised the option, an option may be exercised at any time within one (1) year after the optionee's death, subject to the condition that no option shall be exercisable after its expiration date, to the extent that the optionee's right to exercise such option at the time of his death had not been previously exercised, by the executors or administrators of the optionee or by any person or persons who shall have acquired the option directly from the optionee by bequest or inheritance or by reason of the death of the decedent. No option shall be transferable by the optionee otherwise than by Will or the laws of descent and distribution. (h) Recapitalization Subject to any required action by the stockholders, the number of shares of capital stock which are subject to each outstanding option or which will be subject to each option to be granted under the Plan, and the price per share thereof in each such option, shall be proportionately adjusted for any increase or decrease in the number of issued shares of capital stock of the Corporation resulting from a subdivision or consolidation of shares or the payment of a stock dividend (but only on the capital stock) or any other increase or decrease in the number of such shares effected without receipt of consideration by the Corporation. Subject to any required action by the stockholders if the Corporation shall be the surviving corporation in any merger or consolidation, each outstanding option shall pertain to and apply to the securities to which a holder of the number of shares of capital stock subject to the option would have been entitled. A dissolution or liquidation of the Corporation or a merger or consolidation in which the Corporation is not the surviving corporation, shall cause each outstanding option to terminate provided that each optionee shall, in such event, have the right immediately prior to such dissolution or liquidation, or merger or consolidation in which the Corporation is not the surviving corporation, to exercise his option in whole or in part. In the event of a change in the capital stock of the Corporation as presently constituted, which is limited to a change of all of its authorized shares with par value into the same number of shares with a different par value or without par value, the shares resulting from any such change shall be deemed to be the capital stock within the meaning of the Plan. To the extent that the foregoing adjustments relate to stock or securities of the Corporation, such adjustments shall be made by the Committee, whose determination in that respect shall be final, binding and conclusive. Except as hereinbefore expressly provided in this subsection 5(h), the optionee shall have no rights by reason of any subdivision or consolidation of shares of stock of any class or the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class or by reason of any dissolution, liquidation, merger, or consolidation or spin-off of assets or stock of another corporation, and any issue by the Corporation of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of capital stock subject to the option. The grant of an option pursuant to the Plan shall not affect in any way the right or power of the Corporation to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge or to consolidate or to dissolve, liquidate or sell, or transfer all or any part of its business or assets. (i) Rights as a Stockholder An optionee or a transferee of an option shall have no rights as a stockholder with respect to any shares covered by his option until the date of the issuance of a stock certificate to him for such shares. No adjustments shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights for which the record date is prior to the date such stock certificate is issued, except as provided in subsection 5(h) hereof. (j) Modification, Extension and Renewal of Options Subject to the terms and conditions and within the limitations of the Plan, the Board of Directors may modify, extend or renew outstanding options granted under the Plan, or accept the surrender of outstanding options (to the extent not theretofore exercised) and authorize the granting of new options in substitution therefor (to the extent not theretofore exercised). Notwithstanding the foregoing, however, no modification of an option shall, without consent of the optionee, alter or impair any rights of obligations under any option theretofore granted under the Plan. (k) Investment Purpose Each option under the Plan shall be granted on the condition that the purchases of stock thereunder shall be for investment purposes, and not with a view to resale or distribution except that in the event the stock subject to such option is registered under the Securities Act of 1933, as amended (the "Securities Act"), or in the event a resale of such stock without such registration would otherwise be permissible, such condition shall be inoperative if in the opinion of counsel for the Corporation such condition is not required under the Securities Act, or any other applicable law, regulation, or rule of any governmental agency. (I) Other Provisions The option agreements authorized under the Plan shall contain such other provisions, including, without limitation, restrictions upon the exercise of the option, as the Committee and the Board of Directors of the Corporation shall deem advisable. 6. EFFECTIVE DATE AND TERM OF PLAN Subject to approval by the stockholders as required by Section 13 hereof and to the receipt by the Corporation of the letter from the staff of the Securities and Exchange Commission referred to in Section 14 hereof, the Plan shall become effective as of January 24, 1989, the date of its adoption by the Board of Directors of the Corporation and, subject to such stockholder approval and the receipt of such letter, the initial grant of options hereunder as provided in subsection 3(i) shall be effective as of the effective date of the Plan. This Plan shall remain in effect and options shall be granted hereunder from time to time until ten (10) years from the date the Plan is approved by the stockholders or until terminated by the Board of Directors in accordance with Section 8 hereof, whichever is earlier. Notwithstanding the foregoing part of this Section 6, with respect to any amendment to this Plan adopted for the purpose of increasing the number of shares as to which options ("Amendment Options") may be granted hereunder, the Plan shall remain in effect as to Amendment Options and Amendment Options may be granted hereunder from time to time until ten (10) years from the date such amendment is adopted or the date such amendment is approved by the stockholders if such approval is required or until the Plan, as amended, is terminated by the Board of Directors in accordance with Section 8 hereof, whichever is earlier. For purposes of options outstanding under the Plan the Plan shall continue in effect until all outstanding options have been exercised in full or are no longer exercisable. 7. INDEMNIFICATION OF COMMITTEE In addition to such other rights of indemnification as they may have as Directors or as members of the Committee, the members of the Committee shall be indemnified by the Corporation against the reasonable expenses, including attorneys fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan or any option granted thereunder, and against all amounts paid by them in settlement thereof, not to exceed, in the judgment of the Board of Directors, the estimated expense of litigating the proceeding to conclusion (provided such settlement is approved by independent legal counsel selected by the Corporation) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that the member of the Committee is liable. A Committee member shall in writing offer the Corporation the opportunity, at its own expense, to handle and defend the same. 8. AMENDMENT OF THE PLAN The Board of Directors of the Corporation may, insofar as permitted by law, from time to time, with respect to any shares at the time not subject to options, suspend or discontinue the Plan or revise or amend it in any respect whatsoever except that, without approval of the stockholders, no such revision or amendment shall change the number of shares subject to the Plan, extend the term of the Plan or the term of any option which may be granted under the Plan, change the designation of the Participants or the manner in which options are granted under the Plan or materially increase the benefits accruing under the Plan (materially, within the meaning of Rule 16b-3 implementing the Exchange Act), decrease the price at which options may be granted or remove the administration of the Plan from the Committee (except as may be required by the staff of the Commission to provide the letter described in Section 13 hereof). 9. APPLICATION OF FUNDS The proceeds received by the Corporation from the sale of capital stock pursuant to options will be used for general corporate purposes. 10. NO OBLIGATION TO EXERCISE OPTION The granting of an option shall impose no obligation upon the optionee to exercise such option. 11. WITHHOLDING The exercise of any option granted under the Plan shall constitute an optionee's full and complete consent to whatever action the Committee directs to satisfy the federal and state withholding requirements, if any, which the Committee in its discretion deems applicable to such exercise or surrender. 12. CONSTRUCTION The Plan shall be construed under the laws of the State of Florida. 13. APPROVAL OF STOCKHOLDERS The Plan shall be submitted for approval by the stockholders of the Corporation within twelve (12) months from the date the Plan is adopted by the Board of Directors. Any amendment to the Plan requiring approval by the stockholders of the Corporation shall be submitted for approval by the stockholders within twelve (12) months from the date the amendment is adopted by the Board of Directors. The initial options granted under the Plan, as set forth in subsection 3(i) hereof are granted as of the date set forth therein; provided, however, that such options shall not be exercisable until after the date on which the Plan shall have approved by a vote of the stockholders. Options may be granted pursuant to any amendment to this Plan adopted for the purpose of increasing the number of shares as to which options may be granted, the types of options which may be granted or the rights applicable to options which may be granted hereunder, commencing with the date of adoption of such amendment by the Board of Directors of the Corporation; provided, however, that options granted in reliance upon any such amendment shall not be exercisable until the date on which such amendment shall have been submitted for approval of the stockholders. 14. LETTER FROM COMMISSION STAFF The Corporation will request a letter from the staff of the Securities and Exchange Commission (the "Commission") concurring with the opinion of legal counsel to the Corporation that the Plan complies with the requirements set forth in Rule 16b- 3 promulgated by the Commission to provide exemptive relief from certain aspects of Section 16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). If, as a condition of providing its concurring letter, the staff of the Commission requires modifications to the Plan which are not material and such modifications are approved by the Board of Directors, the Plan shall be so modified and amended under the provisions of Section 8 hereof. In the event the Corporation is unable to obtain the aforementioned concurring letter from the staff of the Commission as required by this Section 14 or the Plan is not approved by the stockholders as required by Section 13 hereof, the Plan shall be deemed null and void ab initio. EX-27 3
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET OF HUGHES SUPPLY, INC. AS OF JULY 31, 1999, AND THE RELATED STATEMENT OF INCOME FOR THE SIX MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000049029 HUGHES SUPPLY, INC. 1,000 6-MOS JAN-28-2000 JUL-31-1999 8,540 0 419,165 7,340 437,594 897,999 224,643 86,560 1,281,737 276,870 500,852 0 0 24,252 470,197 1,281,737 1,486,184 1,486,184 1,153,653 1,153,653 263,108 2,270 14,302 57,579 23,319 34,260 0 0 0 34,260 1.45 1.43
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