UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended April 30, 2001
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 Number 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)
(407) 841-4755
(Registrant's telephone number, including area code)
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 June 6, 2001
------------ ------------------------------
$1 Par Value 23,429,295
HUGHES SUPPLY, INC.
FORM 10-Q
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of April 30, 2001 (unaudited) and January 26, 2001.. 3
Consolidated Statements of Income for the Three Months Ended
April 30, 2001 and 2000 (unaudited)................................................ 4
Consolidated Statements of Cash Flows for the Three Months Ended
April 30, 2001 and 2000 (unaudited)................................................ 5
Notes to Consolidated Financial Statements (unaudited)............................. 6 - 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................................. 8 - 11
Item 3. Quantitative and Qualitative Disclosures about Market Risk......................... 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K..................................................... 13
SIGNATURES....................................................................................... 14
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HUGHES SUPPLY, INC.
Consolidated Balance Sheets
(in thousands, except share and per share data)
April 30,
2001 January 26,
(unaudited) 2001
---------- ----------
Assets
Current Assets:
Cash and cash equivalents......................................................... $ 14,058 $ 22,449
Accounts receivable, less allowance for doubtful accounts of $8,347 and $6,106.... 447,482 431,998
Inventories....................................................................... 423,974 441,789
Deferred income taxes............................................................. 10,502 18,524
Other current assets.............................................................. 64,193 66,131
---------- ----------
Total current assets............................................................ 960,209 980,891
Property and Equipment, Net....................................................... 151,449 152,079
Excess of Cost Over Net Assets Acquired........................................... 247,792 249,826
Other Assets...................................................................... 18,400 17,481
---------- ----------
$1,377,850 $1,400,277
========== ==========
Liabilities and Shareholders' Equity
Current Liabilities:
Current portion of long-term debt................................................. $ 15,188 $ 15,274
Accounts payable.................................................................. 218,370 215,353
Accrued compensation and benefits................................................. 30,962 32,762
Other current liabilities......................................................... 47,456 38,372
---------- ----------
Total current liabilities....................................................... 311,976 301,761
Long-Term Debt.................................................................... 487,550 516,168
Deferred Income Taxes............................................................. 6,828 6,704
Other Noncurrent Liabilities...................................................... 6,360 5,609
---------- ----------
Total liabilities............................................................... 812,714 830,242
---------- ----------
Commitments and Contingencies -- --
Shareholders' Equity:
Preferred stock, no par value; 10,000,000 shares authorized; none issued.......... -- --
Common stock, par value $1 per share; 100,000,000 shares authorized; 24,161,171
and 24,211,485 shares issued................................................ 24,161 24,211
Capital in excess of par value.................................................... 219,732 228,103
Retained earnings................................................................. 341,573 337,149
Treasury stock, 706,230 and 576,783 shares, at cost............................... (15,071) (13,307)
Unearned compensation related to outstanding restricted stock..................... (5,259) (6,121)
---------- ----------
Total shareholders' equity...................................................... 565,136 570,035
---------- ----------
$1,377,850 $1,400,277
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
3
HUGHES SUPPLY, INC.
Consolidated Statements of Income (unaudited)
(in thousands, except per share data)
Three Months Ended April 30,
----------------------------
2001 2000
---- ----
Net Sales............................... $775,149 $831,171
Cost of Sales........................... 600,267 646,286
-------- --------
Gross Profit............................ 174,882 184,885
-------- --------
Operating Expenses:
Selling, general and administrative.... 147,649 142,515
Depreciation and amortization.......... 7,920 7,688
Provision for doubtful accounts........ 1,927 1,533
-------- --------
Total operating expenses............ 157,496 151,736
-------- --------
Operating Income........................ 17,386 33,149
-------- --------
Non-Operating Income (Expenses):
Interest and other income.............. 3,218 1,216
Interest expense....................... (9,727) (9,910)
-------- --------
(6,509) (8,694)
-------- --------
Income Before Income Taxes.............. 10,877 24,455
Income Taxes............................ 4,460 10,027
-------- --------
Net Income.............................. $ 6,417 $ 14,428
======== ========
Earnings Per Share:
Basic.................................. $ .28 $ .62
======== ========
Diluted................................ $ .27 $ .62
======== ========
Average Shares Outstanding:
Basic.................................. 23,297 23,223
======== ========
Diluted................................ 23,603 23,299
======== ========
Dividends Per Share..................... $ .085 $ .085
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
4
HUGHES SUPPLY, INC.
Consolidated Statements of Cash Flows (unaudited)
(in thousands)
Three Months Ended April 30,
-------------------------------
2001 2000
-------- --------
Cash Flows from Operating Activities:
Net income...................................................................... $ 6,417 $ 14,428
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization................................................. 7,920 7,688
Provision for doubtful accounts............................................... 1,927 1,533
Deferred income taxes......................................................... 8,146 6,482
Other......................................................................... (235) 2,252
Changes in assets and liabilities, net of businesses acquired:
Accounts receivable........................................................... (17,411) (66,442)
Inventories................................................................... 17,815 (21,086)
Other current assets.......................................................... 1,938 9,938
Other assets.................................................................. (505) (929)
Accounts payable.............................................................. 3,017 50,796
Accrued compensation and benefits............................................. (1,629) (2,209)
Other current liabilities..................................................... 8,695 7,148
Other noncurrent liabilities.................................................. 751 41
-------- --------
Net cash provided by operating activities.................................. 36,846 9,640
-------- --------
Cash Flows from Investing Activities:
Capital expenditures, net of disposals........................................ (5,466) (8,273)
Business acquisitions, net of cash............................................ -- (23,037)
Investments in affiliated entities............................................ -- (2,500)
Purchase of bestroute.com stock rights........................................ (6,806) --
-------- --------
Net cash used in investing activities...................................... (12,272) (33,810)
-------- --------
Cash Flows from Financing Activities:
Net (payments) borrowings under short-term debt arrangements.................. (28,618) 26,781
Principal payments on debt of acquired entities............................... (86) (216)
Purchase of treasury shares................................................... (2,016) --
Dividends paid................................................................ (2,009) (2,004)
Other......................................................................... (236) 159
-------- --------
Net cash (used in) provided by financing activities....................... (32,965) 24,720
-------- --------
Net (Decrease) Increase in Cash and Cash Equivalents............................ (8,391) 550
Cash and Cash Equivalents:
Beginning of period........................................................... 22,449 10,000
-------- --------
End of period................................................................. $ 14,058 $ 10,550
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
5
HUGHES SUPPLY, INC.
Notes to Consolidated Financial Statements
(unaudited) (in thousands, except share and per share data)
1. Basis of Presentation
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 April 30, 2001, the results of
operations for the three months ended April 30, 2001 and 2000, and cash
flows for the three months ended April 30, 2001 and 2000. The results of
operations for the three months ended April 30, 2001 are not necessarily
indicative of the trends or results that may be expected for the full year.
These interim financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended January 26, 2001,
as filed with the Securities and Exchange Commission.
The fiscal year of the Company is a 52-week period ending on the last
Friday in January. The three months ended April 30, 2001 and 2000 each
contained 13 weeks.
Effective in February 2001, the Company adopted Statement of Financial
Accounting Standards No. 133, Accounting for Derivative Instruments and
Hedging Activities ("FAS 133"). FAS 133 was amended by Statement of
Financial Accounting Standards No. 138, Accounting for Certain Derivative
Instruments and Hedging Activities ("FAS 138"). Both FAS 133 and FAS 138
require that an entity record all derivatives as either assets or
liabilities in the balance sheet and record those instruments at fair
value. The adoption of these standards did not have a material impact on
the Company's consolidated financial statements.
Certain prior year amounts in the consolidated financial statements have
been reclassified to conform to current year presentation. These
reclassifications had no impact on previously reported results of
operations.
2. Earnings Per Share
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 23,297,000 and 23,223,000 for the three months ended April 30,
2001 and 2000, respectively. In calculating diluted earnings per share,
these amounts were adjusted to include dilutive potential common shares of
306,000 and 76,000 for the three months ended April 30, 2001 and 2000,
respectively. The Company's dilutive potential common shares consist of
employee and director stock options, restricted stock and stock rights
issued in connection with the bestroute.com ("bestroute") acquisition in
fiscal 2001. Options to purchase 1,213,990 and 800,099 shares of common
stock at average exercise prices of approximately $23.16 and $26.99 were
not included in the computation of diluted earnings per share for the three
months ended April 30, 2001 and 2000, respectively, because their effect
would have been anti-dilutive.
3. Bestroute
On March 2, 2001, in connection with the closure of bestroute, one of the
Company's e-commerce ventures, the Company entered into an agreement with
the holders of 723,183 of the Company's stock rights originally issued as
consideration for the bestroute acquisition. This agreement canceled
347,541 of the stock rights and enabled the remaining stock rights to be
redeemed for $7,273 in cash, of which $6,806 was paid by the end of the
first quarter.
In the first quarter ended April 30, 2001, the Company recorded a loss
before income taxes of $2,676 for bestroute, including $1,442 in closure
costs primarily related to employee severance pay and termination fees on
certain agreements. The remaining $1,234 of the loss related to bestroute's
loss from operations through the date of its closure.
4. Capital Stock
On March 15, 1999, the Company's Board of Directors authorized the Company
to repurchase up to 2,500,000 shares of its outstanding common stock to be
used for general corporate purposes. Since March 15, 1999, the Company has
repurchased 1,061,500 shares at an average price of $21.90 per share, of
which 140,400 shares at an average price of $14.36 per share were
repurchased in the first quarter of fiscal 2002. No shares were repurchased
during the three months ended April 30, 2000.
6
5. Segment Information
The Company's operations are organized on a product basis into five stand-
alone Groups: Electrical; Plumbing/HVAC; Industrial; Building Materials;
and Water & Sewer. This is the basis management uses for making operating
decisions and assessing performance.
Segment information has been presented on a basis consistent with how
business activities are reported internally to management. The Electrical
Group includes the Company's electrical and electric utility products; the
Plumbing/HVAC Group includes the Company's plumbing/HVAC products and its
international business; the Industrial Group includes the Company's
industrial pipe, valves and fittings products; the Building Materials Group
includes the Company's building materials products and maintenance
supplies; and the Water & Sewer Group includes the Company's water and
sewer, fire protection and concrete products. The "Corporate & Other"
category includes corporate level operating expenses not allocated to the
Company's operating segments along with revenues and expenses for
bestroute.
Income before income tax amounts include certain corporate expense
allocations for employee benefits, interest expense, corporate capital
charges, and property/casualty insurance. These allocations are based on
consumption or at a standard rate determined by management.
The following table presents net sales and other financial information by
Group for the three months ended April 30, 2001 and 2000:
Plumbing/ Building Water & Corporate
Electrical HVAC/(1)/ Industrial Materials(1) Sewer & Other Total
---------- ---------- ---------- ------------ -------- ---------- --------
Net Sales
2001.................... $150,714 $234,460 $90,085 $ 74,664 $225,143 $ 83 $775,149
2000.................... 146,185 265,499 80,563 105,603 233,321 -- 831,171
Gross Profit
2001.................... 28,243 54,524 22,528 22,927 46,651 9 174,882
2000.................... 28,367 59,641 22,604 28,658 45,615 -- 184,885
Income Before Income Taxes
2001..................... 4,720 1,059 5,948 1,984 7,572 (10,406) 10,877
2000..................... 5,427 3,421 6,691 2,989 9,769 (3,842) 24,455
/(1)/ Results of operations for the pool and spa business, which was sold in
January 2001, were included in the Plumbing/HVAC and Building Materials
Groups for the three months ended April 30, 2000.
7
PART I. FINANCIAL INFORMATION -- Continued
HUGHES SUPPLY, INC.
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 have affected the financial condition of the Company as of April
30, 2001, and the results of operations for the three months then ended. This
information should be read in conjunction with the Company's consolidated
financial statements and the notes thereto contained herein and in the Company's
Annual Report on Form 10-K for the fiscal year ended January 26, 2001.
Forward-Looking Statements
Certain statements set forth in this report 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," "may," "will,"
"should," "plan," "intend," "potential," "predict," "forecast," 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.
Material Changes in Results of Operations
Net Sales
Net sales for the quarter ended April 30, 2001 decreased $56.0 million or 7%
compared to the prior year's first quarter. Approximately $39 million or 70% of
the decrease was attributable to the divestiture of the Company's pool and spa
business. Of the $39 million, approximately $8 million related to the
Plumbing/HVAC Group and approximately $31 million related to the Building
Materials Group. The remaining 30% of the net sales decrease was attributable
to a decline in same-store sales of 3% compared to the prior year's first
quarter.
Consolidated and same-store net sales by Group for the three months ended April
30, 2001 and 2000 were as follows (dollars in thousands):
Consolidated Net Sales Same-Store Net Sales
---------------------- --------------------
Three Months Ended April 30, Three Months Ended April 30,
---------------------------- Percent ------------------------------ Percent
2001 2000 Variance 2001 2000 Variance
-------- -------- -------- -------- --------- --------
Electrical............... $150,714 $146,185 3% $149,397 $144,581 3%
Plumbing/HVAC............ 234,460 265,499 (12%) 233,547 253,750 (8%)
Industrial............... 90,085 80,563 12% 90,085 80,563 12%
Building Materials....... 74,664 105,603 (29%) 71,539 74,405 (4%)
Water & Sewer............ 225,143 233,321 (4%) 218,607 233,321 (6%)
Corporate & Other........ 83 -- -- -- -- --
-------- -------- -------- --------
$775,149 $831,171 (7%) $763,175 $786,620 (3%)
======== ======== ======== ========
The following sets forth factors impacting same-store sales for the Company's
operating Groups:
Electrical
The same-store sales increase of $4.8 million or 3% was primarily attributable
to strong commercial activity in several large markets.
Plumbing/HVAC
The same-store sales decrease of $20.2 million or 8% was primarily attributable
to slower construction markets, continued aggressive price competition in
certain geographic markets and a slowdown in international business. Sales of
HVAC products
8
were adversely impacted in the first quarter due to mild weather conditions in
the Southeast.
Industrial
The same-store sales increase of $9.5 million or 12% was primarily attributable
to several large industrial rehabilitation projects. Additional sales related
to these projects are expected through the second quarter of fiscal 2002.
Building Materials
The same-store sales decrease of $2.9 million or 4% was primarily attributable
to sales of complementary building materials products that were lost as a result
of the divestiture of the pool and spa business.
Water & Sewer
The same-store sales decrease of $14.7 million or 6% was primarily due to less
favorable weather conditions in the Midwest and consequently less infrastructure
related projects during the quarter ended April 30, 2001 compared to the same
period in the prior year. The Company expects sales volumes for this Group to
improve in the second quarter as weather conditions become more favorable and
projects that were previously postponed are completed.
Gross Profit and Gross Margin
Gross profit and gross margin by Group for the three months ended April 30, 2001
and 2000 were as follows (dollars in thousands):
Gross Profit Gross Margin
----------------------------------------- -----------------------------------------------
Three Months Three Months Three Months Three Months Basis
Ended Ended Percent Ended Ended Point
April 30, 2001 April 30, 2000 Variance April 30, 2001 April 30, 2000 Variance
-------------- -------------- ---------- ---------------- --------------- ------------
Electrical............. $ 28,243 $ 28,367 (.4%) 18.7% 19.4% (70)
Plumbing/HVAC.......... 54,524 59,641 (8.6%) 23.3% 22.5% 80
Industrial............. 22,528 22,604 (.3%) 25.0% 28.1% (310)
Building Materials..... 22,927 28,658 (20.0%) 30.7% 27.1% 360
Water & Sewer.......... 46,651 45,615 2.3% 20.7% 19.6% 110
Corporate & Other...... 9 -- -- 10.8% -- --
-------- -------- ----- -----
$174,882 $184,885 (5.4%) 22.6% 22.2% 40
======== ======== ===== =====
Electrical
The 70 basis point decrease in gross margin was primarily attributable to (i) a
change in sales mix, with more direct shipment sales at lower margins, (ii)
lower commodity prices for PVC and copper products compared to the same period
in the prior year, and (iii) increased competition in the Florida, North
Carolina and South Carolina markets.
Plumbing/HVAC
The 80 basis point increase in gross margin was primarily attributable to the
Company's efforts to improve its margin on certain products.
Industrial
The 310 basis point decrease in gross margin was primarily attributable to (i)
declining prices for certain commodity based products, including stainless steel
and nickel alloys, (ii) a more competitive marketplace, and (iii) a slowing
demand for certain stainless steel industrial products. The Company anticipates
commodity prices to remain flat to slightly down throughout the remainder of
fiscal 2002 as compared to their current levels.
Building Materials
The 360 basis point increase in gross margin was primarily attributable to (i)
the divestiture of the pool and spa business, which generated a lower gross
margin in the first quarter of fiscal 2001 compared to gross margin as a whole
for this Group, and (ii) a broadened sales mix.
9
Water & Sewer
The 110 basis point increase in gross margin was primarily attributable to (i) a
change in sales mix that resulted from fewer large direct shipment orders, which
typically generate lower gross margins, and (ii) the Company's efforts to
improve its margin on certain products.
Operating Expenses
Operating expenses for the three months ended April 30, 2001 and 2000 were as
follows (dollars in thousands):
Three Months Ended April 30,
----------------------------
2001 2000 Variance
-------- -------- --------
Operating expenses................ $157,496 $151,736 $5,760
Percentage of net sales........... 20.3% 18.3% 2.0%
Operating expenses as a percentage of net sales increased to 20.3% for the first
quarter compared to 18.3% for the prior year's first quarter. This increase was
primarily attributable to lower sales volumes experienced by the Company during
the three months ended April 30, 2001. The increase in operating expenses of
$5.8 million was primarily due to (i) higher personnel costs, including $1.5
million related to the Company's separation agreement with its former president,
and (ii) expenses related to bestroute totaling $2.7 million, including $1.4
million in closure costs primarily related to employee severance pay and
termination fees on certain agreements.
The increase of $5.8 million was partially offset by decreases in operating
expenses of $2.5 million and $4.3 million for the Plumbing/HVAC and Building
Materials Groups, respectively. These decreases were primarily attributable to
lower personnel and other costs resulting from the divestiture of the pool and
spa business.
The Company continues to evaluate operations and balance its cost structure with
current economic conditions. As part of these efforts, in the first quarter of
fiscal 2002, the Company instituted a hiring freeze, eliminated certain
management and staff positions, and reduced capital spending. The Company will
continue to review its operational effectiveness over the next quarter.
Non-Operating Income
Interest and other income was $3.2 million and $1.2 million for the three months
ended April 30, 2001 and 2000, respectively. The increase of $2.0 million was
primarily due to (i) prior year losses of $1.4 million related to the Company's
equity investment in bestroute, and (ii) interest income of $.5 million from a
$25.0 short-term note receivable received in connection with the Company's sale
of its pool and spa business.
Net Income
Net income was $6.4 million for the first quarter compared to $14.4 million for
the prior year's first quarter, a 56% decrease. Diluted earnings per share for
the first quarter were $.27 compared to $.62 in the prior year's first quarter.
The factors impacting net income and diluted earnings per share have been
enumerated above.
Liquidity and Capital Resources
Working capital decreased $30.9 million to $648.2 million at April 30, 2001.
The current ratio was 3.1 to 1 and 3.3 to 1 as of April 30, 2001 and January 26,
2001, respectively. The decrease was driven by lower levels of cash and
inventories, a decrease in deferred income taxes, and an increase in accrued
interest. These changes were partially offset by an increase in accounts
receivable. The lower cash level reflects cash used to pay down the outstanding
balance on the Company's revolving line of credit and the decrease in
inventories reflects the Company's efforts to reduce inventory levels to be more
in line with current market demand. The decrease in deferred income taxes was
primarily attributable to the usage of bestroute's net operating losses.
Accrued interest increased as a result of the timing of payments on long-term
debt. The increase in accounts receivable reflects slower collection activity
resulting from an economic slowdown.
Net cash provided by operations was $36.8 million for the three months ended
April 30, 2001 compared to net cash provided
10
by operations of $9.6 million for the three months ended April 30, 2000. As
previously discussed, the Company experienced lower sales volumes during the
three months ended April 30, 2001 compared to the same period in the prior year.
As a result of the lower sales volumes, accounts receivable did not increase as
much compared to the prior year's first quarter and inventory levels were
reduced by $17.8 million during the three months ended April 30, 2001. Accounts
payable did not increase as much compared to the prior year's first quarter,
primarily due to the lower sales volumes and less seasonal purchasing as a
result of the divestiture of the pool and spa business.
The Company's expenditures for property and equipment were $5.5 million for the
three months ended April 30, 2001 compared to $8.3 million for the three months
ended April 30, 2000. Capital expenditures, excluding amounts for business
acquisitions, are expected to be approximately $17.0 million in fiscal 2002.
Dividend payments totaled $2.0 million during the three months ended April 30,
2001 and 2000.
As of April 30, 2001, the Company had approximately $14.1 million of cash and
$250.5 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 believes it has sufficient
borrowing capacity and cash on hand 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.
Long-term debt was $487.6 million and $516.2 million at April 30, 2001 and
January 26, 2001, respectively, a decrease of $28.6 million. As a percentage of
total capitalization, long-term debt was 46% at April 30, 2001 compared to 48%
at January 26, 2001. Proceeds received from the sale of the pool and spa
business and cash provided by operations were used to reduce the Company's long-
term debt in the first quarter.
On March 15, 1999, the Company's Board of Directors authorized the Company to
repurchase up to 2,500,000 shares of its outstanding common stock to be used for
general corporate purposes. Since March 15, 1999, the Company has repurchased
1,061,500 shares at an average price of $21.90 per share, of which 140,400
shares at an average price of $14.36 per share were repurchased in the first
quarter of fiscal 2002. No shares were repurchased during the three months
ended April 30, 2000.
On March 2, 2001, in connection with the closure of bestroute, one of the
Company's e-commerce ventures, the Company entered into an agreement with the
holders of 723,183 of the Company's stock rights originally issued as
consideration for the bestroute acquisition. This agreement canceled 347,541 of
the stock rights and enabled the remaining stock rights to be redeemed for $7.3
million in cash, of which $6.8 million was paid by the end of the first quarter.
The remaining $.5 million is expected to be paid in the second quarter.
11
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to market risk from changes in interest rates on
outstanding variable-rate debt and from changes in the prices of certain of its
products that result from commodity price fluctuations.
Interest Rate Risk
At April 30, 2001, the Company had approximately $124.5 million of outstanding
variable-rate debt. Based upon a hypothetical 10% increase or decrease in
interest rates from their April 30, 2001 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 alloy,
copper, aluminum, plastic, lumber 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
economies of purchasing and inventory management resulting in cost reductions
and productivity improvements as well as price increases to maintain reasonable
profit margins.
12
PART II. OTHER INFORMATION
HUGHES SUPPLY, INC.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.13 Separation and Release Agreement, dated as of March 28, 2001,
by and between the Company and A. Stewart Hall, Jr.,
incorporated by reference to Exhibit 10.13 to Form 10-K for the
fiscal year ended January 26, 2001 (Commission File No. 001-
08772).
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended April
30, 2001.
13
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: June 13, 2001 By: /s/ DAVID H. HUGHES
----------------------------------------
David H. Hughes,
Chairman of the Board
and Chief Executive Officer
Date: June 13, 2001 By: /s/ J. STEPHEN ZEPF
----------------------------------------
J. Stephen Zepf,
Treasurer, Chief Financial Officer
and Chief Accounting Officer
14