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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 26, 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 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
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------
Common Stock ($1.00 Par Value) New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Page 1
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the Registrant's voting stock held by
non-affiliates: $336,001,765 as of April 20, 2001.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date: 23,466,441 shares of Common
Stock ($1.00 par value) as of April 20, 2001.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the Part
of the Form 10-K into which the document is incorporated:
Part I - Annual Report to Shareholders for the fiscal year ended
January 26, 2001 (designated portions).
Part II - Annual Report to Shareholders for the fiscal year ended
January 26, 2001 (designated portions).
Part III - Definitive Proxy Statement for the 2001 Annual Meeting of
Shareholders (designated portions).
Part IV - Annual Report to Shareholders for the fiscal year ended
January 26, 2001 (designated portions).
Page 2
TABLE OF CONTENTS
Page
PART I
Item 1. Business ........................................................ 4
Item 2. Properties ...................................................... 14
Item 3. Legal Proceedings ............................................... 14
Item 4. Submission of Matters to a Vote of Security Holders.............. 14
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters ............................................ 15
Item 6. Selected Financial Data ........................................ 15
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................ 15
Item 7A. Quantitative and Qualitative Disclosures About Market Risk...... 15
Item 8. Financial Statements and Supplementary Data .................... 16
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ........................... 16
PART III
Item 10. Directors and Executive Officers of the Registrant............. 17
Item 11. Executive Compensation ........................................ 17
Item 12. Security Ownership of Certain Beneficial Owners and
Management .................................................... 17
Item 13. Certain Relationships and Related Transactions ................ 17
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K ...................................................... 18
Signatures .................................................... 24
Index of Exhibits Filed with this Report ...................... 25
Page 3
PART I
ITEM 1. BUSINESS
GENERAL
Hughes Supply, Inc. (as used throughout this report, "Hughes Supply," the
"Company" or the "Registrant" refers to Hughes Supply, Inc. and its
subsidiaries, except where the context otherwise requires) is one of the largest
diversified wholesale distributors of construction and industrial materials,
equipment and supplies to commercial construction, residential construction,
industrial and public infrastructure markets in North America. The Company,
founded in 1928, distributes over 240,000 products, built around five broad
product categories, through 447 branches and eight central distribution centers
located in 34 states and Mexico. The Company's principal customers are
electrical, plumbing, mechanical, fire protection and underground utility
contractors, electric utility customers, property management and property
development companies, municipalities and government agencies, industrial
companies and telecommunication companies. Industrial companies include
companies in the petrochemical, food and beverage, pulp and paper, mining,
pharmaceutical and marine industries.
Effective February 1, 2000, the Company's operations were reorganized into five
stand-alone strategic business units ("SBUs"), each of which is led by a group
president and includes a staff dedicated to the unit. A SBU is organized around
each of the following five broad product categories:
o Electrical & Electric Utility
o Plumbing & HVAC
o Industrial Pipe, Valves & Fittings ("Industrial PVF")
o Building Materials & Maintenance Supplies
o Water & Sewer
The SBUs represent the Company's reportable segments and constitute the basis
management uses for making operating decisions and assessing performance. This
product-driven organizational structure is designed to enhance the Company's
competitive position in the marketplace by intensifying the Company's focus on
satisfying customer needs, strengthening vendor relationships and streamlining
the decision-making processes of the Company. Financial information about the
Company's SBUs is set forth in Note 10 of the Notes to Consolidated Financial
Statements of the Company's Annual Report to Shareholders for the fiscal year
ended January 26, 2001, a copy of which is filed as an exhibit to this Report
and the cited portion of which is incorporated herein by reference.
The Company focuses on distributing construction and industrial products that
leverage its strengths in inventory management, specialized sales forces by
product group, distribution and logistics, credit management and information
technology. The Company has increasingly focused on value-added products and
services, including integrated supply arrangements, fabrication, facilities
management and the development of national accounts.
The Company employs a specialized and experienced sales force for each of its
SBUs to best serve its customers. Management believes that no other company
competes against Hughes Supply across all of its product groups.
Page 4
The Company's SBUs are impacted by seasonality. Generally, sales of the
Company's products are higher in the second and third quarters of each year due
to more favorable weather conditions during these periods.
DIVESTITURE
In January 2001, the Company completed the sale of the assets of its pool and
spa business. The pool and spa business engaged in the wholesale distribution of
swimming pool and spa equipment and supplies and was principally included in the
Building Materials & Maintenance Supplies SBU. The Company's decision to divest
its pool and spa business was based on the seasonality of its sales along with
the limited size of its marketplace. Additional information with respect to the
sale of the Company's pool and spa business is set forth in Note 2 of the Notes
to Consolidated Financial Statements of the Company's Annual Report to
Shareholders for the fiscal year ended January 26, 2001, a copy of which is
filed as an exhibit to this Report and the cited portion of which is
incorporated herein by reference. The Company continues to evaluate other
non-core businesses and their strategic fit with the Company's long-term goals.
E-COMMERCE
Hughes Supply's e-commerce strategy focuses upon: (i) expanding net sales
through greater customer reach, extended hours (i.e., 24/7/365) and broader
product offerings; and (ii) lowering costs through streamlined selling, general
and administrative costs, improved inventory management and lower product
procurement costs. In addition, e-commerce solutions in the wholesale
distribution business are ideally suited to national account programs and
integrated supply chain management, two important growth areas for the Company.
The Company's current e-commerce strategy includes the development of its web
site, hughessupply.com. This web site, when fully operational, will enable the
Company's customers to order products directly via electronic commerce, as well
as allow the Company to place direct electronic orders with vendors for the
majority of its products. Fulfillment will be done from the existing branch
network. The overall reduction in paper flow is expected to reduce procurement
costs. This site is currently being developed by the Company's Information
Technology ("IT") department.
As a result of continued operating losses in two of the Company's e-commerce
ventures, the Company recorded a write-off of goodwill and other assets during
the fourth quarter of fiscal 2001. Additional information with respect to these
write-offs is set forth in Notes 2 and 3 of the Notes to Consolidated Financial
Statements of the Company's Annual Report to Shareholders for the fiscal year
ended January 26, 2001, a copy of which is filed as an exhibit to this Report
and the cited portions of which are incorporated herein by reference.
INDUSTRY OVERVIEW
Based on estimates available to the Company, industry sales in the United States
of products sold by the Company exceeded $200 billion in 2000, and no wholesale
distributor of these products accounted for more than 5% of the total market.
Page 5
Many local and regional distributors are privately-owned, relationship-based
companies. Such distributors often have limited purchasing power, lack
sufficient resources to offer broad product lines and multiple brands, and lack
the sophisticated inventory management and control systems necessary to operate
multiple branches efficiently. As a result, such distributors target their
services to a particular type or size of customer and/or a particular product
group. To counter the limitations experienced by small distributors, certain
wholesale distributors, including the Company, have grown considerably through
acquisitions. This expansion has enabled Hughes Supply to service various sizes
and types of customers with multiple product groups and to diversify its sales
across various types of construction and users of its products.
Because of Hughes Supply's strong competitive position, its size and its
management infrastructure, management believes that the Company is well
positioned to continue to benefit from consolidation trends within the wholesale
distribution business.
Unlike do-it-yourself home center retailers, the Company does not market its
products to retail consumers. Consequently, the Company differentiates itself
with respect to its customer base, breadth of products offered and level of
service provided. Management believes that the Company's customers are typically
professionals who choose their suppliers primarily on the basis of product
availability, price, relationships with sales personnel, and the quality and
scope of services offered by such suppliers. Furthermore, professional customers
generally buy in large volumes, are repeat buyers because of their involvement
in longer-term projects, and require specialized services not typically provided
by do-it-yourself home center retailers. The Company provides its customers with
credit services, design assistance, material specifications, scheduled job site
delivery, job site visits to ensure satisfaction, technical product services
(including blueprint take-off and computerized order quotes), and assistance
with product returns. Accordingly, the Company has been able to serve customer
groups that do-it-yourself home center retailers generally do not emphasize.
OPERATING STRATEGY
The Company's operating strategy is based on decentralizing, at the branch
level, customer-related functions such as sales and local inventory management.
The administrative responsibilities for certain functions such as credit, human
resources, finance and accounting, legal and information technology are
centralized at the corporate level.
Effective February 1, 2000, all operating branches were assigned to one of the
Company's SBUs, each of which is led by a group president. Under the new
structure, the Company's branches are grouped into territories, territories into
districts, and districts into SBUs. Some of the larger districts are grouped
into regions. Territory managers generally have oversight responsibility for
branches within a territory as well as direct responsibility for a specific
branch within the territory. District managers have two or more territory
managers who report to them and regional managers have two or more district
managers who report to them. Prior to February 1, 2000, the Company was
organized into regions which were mixtures of geographic and product group
categories. This organizational structure also differed from the current
structure in that district and territory managers reported to the Company's
regional vice presidents who, in turn, reported to the Company's president.
Management believes its current structure provides improved support for the
Company's expected future growth through acquisitions, creates increased
customer focus and vendor recognition by product category and improves and
accelerates decision making while increasing overall administrative efficiency.
Page 6
Key elements of the Company's operating strategy include:
Local Market Focus
Hughes Supply has organized its branches as autonomous, decentralized branches
capable of meeting local market needs and offering competitive prices. Each
branch handles one or more of the Company's product groups and operates as a
separate profit center with its own experienced sales force which is specialized
by product group. Each branch manager has the authority and responsibility to
set pricing and tailor the inventory offering and mix (as well as the nature of
services offered) in order to meet the local market demand. In addition, each
branch manager is responsible for purchasing, maintaining adequate inventory
levels, cost controls and customer relations. A substantial portion of a branch
manager's compensation is dependent on their branch's financial performance. The
Company has been able to tailor its branch size and product offerings to meet
perceived market demand. As a result, the Company successfully operates branches
in secondary cities where management believes it has achieved significant market
share and in larger metropolitan areas where it has established a sound market
presence.
Superior Customer Service
Substantially all of Hughes Supply's sales are to professional customers with
whom the Company has developed long-term relationships. These relationships are
based on the Company's history of providing superior service, which creates
trust. Customer services provided by the Company include credit, design
assistance, material specifications, scheduled job site delivery, job site
visits to ensure satisfaction, technical product services (including blueprint
take-off and computerized order quotes) and assistance with product returns.
Comprehensive and Diversified Product Groups
As part of its emphasis on superior customer service, the Company offers more
than 240,000 products at competitive prices. Distribution of a wide variety of
products within each product category helps the Company's customers manage their
inventory, arrange for consolidated delivery requirements and provide a greater
portion of total job specifications. The depth and breadth of the Company's
product categories generally permits it to make add-on sales of higher margin,
non-commodity items. The Company is diversified across multiple product
categories, geographic regions and various sectors of the construction industry
(such as commercial, residential, public infrastructure and industrial), which
lessens its dependence upon market conditions applicable to any of its product
categories or any single sector of the construction industry. This product
diversification provides opportunities for the Company to participate in
multiple phases of construction projects, capturing more of the total
construction spending dollar and spanning the entire construction cycle.
Page 7
Well-Trained and Experienced Workforce
The Company has implemented extensive employee recruiting and training programs
to ensure that its employees have the skill levels necessary to compete
effectively in today's marketplace. The Company utilizes in-depth training
seminars covering basic and advanced product knowledge, as well as multiple
levels of selling, purchasing, negotiating and management skills workshops. The
Company has also developed a recruiting and training program to increase the
number of qualified applicants introduced into its management and sales ranks.
The Company generally has experienced a low rate of turnover within its
management and sales force ranks. As a result, the Company's corporate
management group, branch managers, outside sales representatives and inside
sales account executives have considerable experience with the Company.
Centralized Administrative Functions
The Company has centralized certain administrative functions such as credit,
human resources, finance and accounting, legal and management information
systems. Centralization of human resources, finance and accounting functions
ensure conformity in policy and lower costs of administration. The Company's
credit function is essential to its success. Each SBU has dedicated credit
managers. All credit decisions are researched, analyzed and approved by the SBU
credit managers to ensure conformity and quality of credit decisions across the
Company's operations.
Volume Purchasing Power
The Company established its Preferred Vendor Program in 1991 to more effectively
leverage its purchasing power. This program has reduced the number of vendors
and has resulted in stronger, more strategic relationships with a more
concentrated group of vendors. The concentration of vendors has also improved
the Company's ability to ensure more timely delivery, to reduce errors, and to
obtain better terms and greater financial incentives. Other programs currently
being employed with vendors include vendor-managed inventory systems, bar
coding, and electronic exchange of purchase orders and invoices.
The Company's operating strategy additionally focuses on six interrelated
initiatives that it believes will improve operating efficiencies, profitability
and customer service. These six initiatives include the following:
o inventory management
o supplier relations/margin improvement
o freight management
o same-store sales
o accounts receivable
o e-business development
Page 8
GROWTH STRATEGY
In recent years, the Company has centered its internal growth and growth through
acquisitions around customer groups and products which help it to diversify
geographically and product-wise, capturing more of the total construction dollar
while focusing more on products used in repair, maintenance, replacement and
renovation applications. These products generally offer higher margins and are
less dependent on new construction. Management believes that the Company's
product, market and geographic diversification helps reduce the impact of
economic cycles on its net sales and profitability. A summary of the Company's
internal growth and acquisition program follows.
Internal Growth
Hughes Supply has grown internally through increases in same-store sales and the
opening of new branches. Same-store sales increases have been attributable to
new product introductions within existing branches, such as fire protection
equipment and concrete fabrication products, fiber-optic products and the higher
value-added services such as integrated supply, national account business and
complete warehouse management contracts. Since January 26, 1996, Hughes Supply
has opened 87 new branches. New branches are generally opened to fill in
existing market areas or to accommodate the split out of multiple product group
branches. Since January 26, 1996, the Company has closed 67 branches, excluding
branches that were sold as part of the divestiture of its pool and spa business.
The Company closed these branches primarily because they did not strategically
fit into the Company's core businesses and/or they did not perform to
expectations.
Acquisitions
Historically, Hughes Supply has pursued an active acquisition strategy to
capitalize on the large, growing and highly-fragmented markets in which it
competes. The Company's acquisition strategy focuses on acquiring profitable,
private, wholesale distribution businesses with strong management teams and
well-developed market positions and customer relationships. Hughes Supply
identifies acquisition targets that present growth opportunities and complement
Hughes Supply's existing structure, allowing Hughes Supply to benefit from
synergies resulting from the integration of these targets' operations with its
own. Management believes that significant acquisition opportunities exist in
each of its product categories. Hughes Supply categorizes its acquisitions as
fill-in acquisitions or new market acquisitions:
o Fill-in acquisitions represent acquisitions of primarily small companies
that distribute some of the same product groups as the Company in
geographic areas already served by Hughes Supply. The Company's management
believes that significant additional fill-in acquisition opportunities are
available.
o New market acquisitions represent the addition of new product groups,
primarily within the Company's existing product categories, or the entry
into new geographic markets, or both. During this period, the Company's
principal acquisition criteria has been to:
o add products and product groups with higher gross margins;
o increase sales to the replacement and industrial markets (that tend to
be less cyclical than new construction markets);
o achieve greater geographical diversification;
o develop additional opportunities for future fill-in acquisitions and
new branch openings; and
o expand its current product offering from leading suppliers.
Page 9
Since January 26, 1996, the Company has completed 16 fill-in acquisitions
representing 34 branches and 34 new market acquisitions representing 178
branches.
RECENT ACQUISITIONS
Since January 28, 2000, the Company has acquired several wholesale distributors,
including:
(i) Western Utilities Supply Co., with seven branches in Alaska, Montana and
Washington, significantly expanded the Company's water and sewer
business in new geographic markets;
(ii) Kingston Pipe Industries, with four branches in Rhode Island, Delaware,
Maryland and Virginia, significantly increased the presence of the fire
protection part of the Company's water and sewer business in new
geographic markets; and
(iii) Associated Electric Supply, Inc., with one branch in Alabama, expanded
the Company's electrical and electric utility business in a new
geographic market.
PRODUCTS
The Company distributes products and offers services in the following five broad
product categories:
o Electrical & Electric Utility: Wire management products; distribution
equipment; wire and cable; automation products; tools and fasteners;
lamp/lighting controls; energy products; data/communications products;
meter repair and certification; pole line hardware; and storeroom/job
trailer management.
o Plumbing & HVAC: Residential and commercial water heaters, furnaces, heat
pumps and air conditioning units; copper, steel, cast iron, poly and PVC
pipe and fittings; plumbing fixtures; faucets and accessories; pumps and
sprinkler heads; commercial drains; mechanical valves; repair parts;and
procurement services.
o Industrial PVF: Gate valves; motor-operated valves; fittings; pressure
fittings; angle and check valves; actuated valves; flanges; plate; sheet;
ball valves; pipe; tubing and bar.
o Building Materials & Maintenance Supplies: Concrete and masonry supplies
and accessories; road and bridge products; tilt-up services; sealants,
waterproofing and fireproofing; commercial washroom specialties; tools and
fasteners; and multi-family housing maintenance supplies, including
plumbing, electrical, appliances/parts and janitorial supplies.
o Water & Sewer: All piping products (ductile iron, PVC, HDPE, and steel);
hydrants; valves; fittings; storm drains; backflow devices; meters; leak
detection; sewer concrete products; utility vaults; irrigation products;
pumps; tanks; manhole rehab services; and fire protection fabrication and
supplies.
Page 10
SALES AND MARKETING
The Company employs approximately 875 outside sales representatives who call on
and work with professional buyers such as architects, engineers, manufacturers'
representatives, purchasing agents, plant superintendents, foremen and job
specifiers for contractors and subcontractors. The Company's outside sales
representatives provide product specifications and usage data, design
alternatives, and job quotes to professional buyers in an effort to assist them
in fulfilling their material needs. This sales force also assists with custom
design projects for customers providing assistance through brainstorming, story
boarding, graphic design and photography. Approximately 675 inside account
executives expedite orders, deliveries, quotations, requests for pricing and the
release of products for delivery. Most orders and shipment releases are
delivered by the Company's trucks to the customers' offices, job sites or
plants.
DISTRIBUTION AND LOGISTICS
The Company's distribution network consists of 447 branches and eight central
distribution centers in the United States and two branches in Mexico. The
efficient operation of the Company's distribution network is critical in
providing quality service to its specialized customer base. The Company's
distribution centers and branches use technology in warehouse management to
optimize receiving, inventory control, picking, packing and shipping functions.
The Company's purchasing agents in its branches use a computerized inventory
system to monitor stock levels, while central distribution centers in Arizona,
Florida, Georgia, North Carolina and Texas provide purchasing assistance as well
as a broad stock of inventory which supplements the inventory of the branches.
In addition, the Company uses several of its larger branches in other parts of
the country as distribution points for certain product lines.
CUSTOMERS AND SUPPLIERS
The Company currently serves over 75,000 customers, and no single customer
accounts for more than 1% of total annual sales. Orders for larger construction
projects normally require long-term delivery schedules throughout the period of
construction, which in some cases may continue for several years. The
substantial majority of customer orders are shipped from inventory at the
Company's branches. The Company also accommodates special orders from its
customers and facilitates the shipment of certain large volume orders directly
from the manufacturer to the customer.
The Company regularly purchases from over 11,000 manufacturers and suppliers of
which approximately 700 are part of the Company's Preferred Vendor Program. The
Company instituted this Preferred Vendor Program to leverage its existing
relationships with a number of suppliers and to increase sales of their products
in local markets through various initiatives, including sales promotions,
cooperative marketing efforts, dedicated sales force and product exclusivity. In
return, many of these key suppliers offer lower prices and volume incentive
programs to the Company. The Company actively solicits volume-purchasing
discounts and rebates from its preferred vendors and is constantly working to
expand its Preferred Vendor Program. No single supplier accounted for more than
5% of the Company's total purchases during fiscal 2001.
Page 11
INFORMATION TECHNOLOGY
The Company's IT systems are capable of supporting numerous operational
functions including purchasing, receiving, order processing, shipping, inventory
management, sales analysis and accounting. The Company's customers and sales
representatives rely on these systems for real-time information on product
pricing, inventory availability and order status. The systems also provide
management with information relating to sales, inventory levels and customer
payments, and with other data that is essential for the Company to operate
efficiently and provide a high level of service to its customers. The Company
believes that its continued investment in upgrading and consolidating its IT
systems is necessary to provide a platform to implement its e-commerce
initiatives and to allow it to continue its strategic growth initiatives.
In fiscal 2001, the Company selected a new distribution/logistics software
provider. This integrated software is an e-commerce enabled, customer
fulfillment, inventory management, logistics and distribution management system.
It is designed specifically for MRO- and contractor-oriented distributors, such
as the Company. The Company expects the implementation of this software to be
staggered over a period of at least three years, beginning in September 2001.
The Company believes that this timeframe will enable it to reduce risk, minimize
customer disruption and spread implementation costs. Once implementation is
complete, the Company expects to be operating primarily under one platform,
compared to its 17 current operating systems. The Company believes that
consolidation of its operating systems allows for increased operational
efficiencies, particularly in the area of working capital management, provides a
means for decreasing transaction costs and provides the Company with the
infrastructure necessary to realize administrative synergies associated with
past and future acquisitions.
COMPETITION
Management believes that the Company is one of the largest wholesale
distributors of its range of products in the United States and that no other
company competes against it across all of its product groups. However, there is
strong competition in each product group distributed by the Company. The main
sources of competition are other wholesalers, manufacturers who sell certain
lines directly to contractors and, to a limited extent, retailers in the markets
for plumbing, electrical fixtures and supplies, building materials, and
contractors' tools. The principal competitive factors in the Company's business
are product availability, pricing, technical knowledge as to application and
usage, and advisory and other service capabilities which develop the trust
factor needed in successful customer relationships.
INVENTORIES
The Company is a wholesale distributor of construction and industrial materials
and maintains significant inventories to meet rapid delivery requirements and to
ensure a continuous allotment of goods from suppliers. As of January 26, 2001,
inventories constituted approximately 32% of the Company's total assets.
Page 12
EMPLOYEES
As of January 26, 2001, the Company had approximately 7,700 employees consisting
of approximately 14 executives, 1,630 managers, 1,550 sales personnel and 4,506
other employees, including truck drivers, warehouse personnel, office and
clerical workers. Over the last year, the Company's work force has decreased
approximately 2% compared to the prior year. This decrease was primarily the
result of (i) the divestiture of the Company's pool and spa business, (ii)
reductions to bring headcount more in line with current economic conditions, and
(iii) efforts to make the Company's operations more efficient. The decrease was
partially offset by increases resulting from acquired and newly-opened wholesale
branches. The Company considers its relationships with its employees to be good.
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. The foregoing should
be read in conjunction with the Company's consolidated financial statements and
the notes thereto incorporated herein by reference.
Page 13
ITEM 2. PROPERTIES
The Company leases approximately 60,000 square feet of an office building in
Orlando, Florida for its headquarters. In addition, the Company owns or leases
447 facilities in 34 states and Mexico. The typical sales branch consists of a
combined office and warehouse facility ranging in size from 3,000 to 50,000
square feet, with paved parking and storage areas. The Company also operates a
computer center and eight central distribution centers. The Company believes
that its properties are in good condition and are suitable and adequate to carry
on the Company's business.
Additional information regarding owned and leased properties of the Company is
set forth as Exhibit 99.1 to this Report.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings arising in the normal
course of its business. Management believes that none of these proceedings will
have a material adverse impact on its financial condition, results of operations
or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders during the
fourth quarter of the fiscal year ended January 26, 2001.
Page 14
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information with respect to the principal market for the Company's common stock,
stock prices and dividend information is set forth under the caption "Corporate
and Shareholder Information" and in Note 11 of the Notes to Consolidated
Financial Statements of the Company's Annual Report to Shareholders for the
fiscal year ended January 26, 2001, a copy of which is filed as an exhibit to
this Report and the cited portions of which are incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA
Information with respect to selected financial data of the Company is set forth
under the caption "Selected Financial Data" of the Company's Annual Report to
Shareholders for the fiscal year ended January 26, 2001, a copy of which is
filed as an exhibit to this Report and the cited portion of which is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Information with respect to the Company's financial condition, changes in
financial condition and results of operations is set forth under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" of the Company's Annual Report to Shareholders for the fiscal year
ended January 26, 2001, a copy of which is filed as an exhibit to this Report
and the cited portion of which is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information with respect to the Company's market risk is set forth under the
section "Quantitative and Qualitative Disclosure About Market Risk" under the
caption "Management's Discussion and Analysis of Financial Condition and Results
of Operations" of the Company's Annual Report to Shareholders for the fiscal
year ended January 26, 2001, a copy of which is filed as an exhibit to this
Report and the cited portion of which is incorporated herein by reference.
Page 15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(a) Financial Statements
The financial statements filed with this report are set forth in Item 14(a).
(b) Selected Quarterly Financial Data
Information with respect to selected quarterly financial data of the Company is
set forth in Note 11 of the Notes to Consolidated Financial Statements of the
Company's Annual Report to Shareholders for the fiscal year ended January 26,
2001, a copy of which is filed as an exhibit to this Report and the cited
portion of which is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company has not had any change in, or disagreement with, its accountants or
reportable event which is required to be reported in response to this item.
Page 16
PART III
All information required by Part III (Items 10, 11, 12 and 13) is incorporated
by reference to the Company's Definitive Proxy Statement for the 2001 Annual
Meeting of Shareholders.
Page 17
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
(1) All Financial Statements
The following consolidated financial statements of the Registrant and its
subsidiaries included in the Registrant's Annual Report to Shareholders for the
fiscal year ended January 26, 2001, are filed under Item 8 and are incorporated
by reference:
Annual
Report
Page(s)
Consolidated Statements of Income for the years ended
January 26, 2001, January 28, 2000 and January 29, 1999 26
Consolidated Balance Sheets as of January 26, 2001 and
January 28, 2000 27
Consolidated Statements of Shareholders' Equity for the years
ended January 26, 2001, January 28, 2000 and January 29, 1999 28
Consolidated Statements of Cash Flows for the years ended
January 26, 2001, January 28, 2000 and January 29, 1999 29
Notes to Consolidated Financial Statements 30-39
Report of Independent Certified Public Accountants 40
Page 18
(2) Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts for the fiscal years ended
January 26, 2001, January 28, 2000 and January 29, 1999.
Hughes Supply, Inc.
Schedule II - Valuation and Qualifying Accounts
(in thousands)
Fiscal Years Ended
----------------------------------------
January 26, January 28, January 29,
2001 2000 1999
------------ ----------- ------------
Allowance for doubtful accounts:
Balance at beginning of year $ 2,777 $ 2,809 $ 3,522
Additional charged to costs and expenses 10,273 3,608 1,882
Deductions (6,944) (3,640) (2,595)
-------- ------- -------
Balance at end of year $ 6,106 $ 2,777 $ 2,809
======== ======= =======
Deferred income taxes:
Beginning at beginning of year $ -- $ -- $ --
Additions charged to costs and expenses 698 -- --
-------- ------- -------
Balance at end of year $ 698 $ -- $ --
======== ======= =======
All other schedules have been omitted as they are either not applicable, not
required or the information is given in the financial statements or related
notes thereto.
Report of Independent Certified Public Accountants on
Financial Statement Schedule
To the Shareholders and Board of Directors
of Hughes Supply, Inc.
Our audits of the consolidated financial statements referred to in our report
dated March 23, 2001 appearing in the fiscal 2001 Annual Report to Shareholders
of Hughes Supply, Inc. (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also included an
audit of the financial statement schedule listed in Item 14(a)(2) of this Form
10-K. In our opinion, this financial statement schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Orlando, Florida
March 23, 2001
Page 19
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended January 26,
2001.
(c) Exhibits Filed
A substantial number of the exhibits referred to below are indicated as having
been previously filed as exhibits to other reports under the Securities Exchange
Act of 1934, as amended, or as exhibits to registration statements under the
Securities Act of 1933, as amended. Such previously filed exhibits are
incorporated by reference in this Form 10-K. Exhibits not incorporated by
reference herein are filed with this report.
(2) Plan of acquisition, reorganization, arrangement, liquidation or
succession. Not applicable.
(3) Articles of incorporation and by-laws.
3.1 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-Q for the quarter ended October 31, 1999
(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).
(9) Voting trust agreement. Not applicable.
Page 20
(10) Material contracts.
10.1 Lease Agreements with Hughes, Inc.
(a) 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
(b) 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).
(c) 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
(d) 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).
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).
Page 21
10.4 Directors' Stock Option Plan, as amended, incorporated by
reference to Exhibit 10.4 to Form 10-Q for the quarter ended
October 31, 1999 (Commission File No. 001-08772).
10.5 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).
10.6 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).
10.7 (a) Hughes Supply, Inc. 1997 Executive Stock Plan,
incorporated by reference to Exhibit 10.7 to Form 10-K
for the fiscal year ended January 28, 2000 (Commission
File No. 001-08772).
10.7 (b) Amendment No. 1 to the Hughes Supply, Inc. 1997
Executive Stock Plan, incorporated by reference to
Exhibit 10.7(b) to Form 10-Q for the quarter ended
April 30, 2000 (Commission File No. 001-08772).
10.8 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).
10.9 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).
10.10 Revolving Credit Agreement, dated as of January 26, 1999 and
amended on various dates through December 20, 2000, by and
among the Company and a group of banks. 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.
10.11 Line of Credit Agreement, dated as of January 26, 1999 and
amended on various dates through December 20, 2000, by and
among the Company and a group of banks. 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.
10.12 Note Purchase Agreement, dated as of December 21, 2000 and
amended January 19, 2001, by and among the Company and
certain purchasers identified in Schedule A of the Note
Purchase Agreement.
Page 22
10.13 Separation and Release Agreement, dated as of March 28,
2001, by and between the Company and A. Stewart Hall, Jr.
(11) Statement re computation of per share earnings. Not applicable.
(12) Statements re computation of ratios. Not applicable.
(13) Annual report to security holders, Form 10-Q or quarterly report to
security holders.
13.1 Information incorporated by reference into Form 10-K from
the Annual Report to Shareholders for the fiscal year ended
January 26, 2001.
(16) Letter re change in certifying accountant. Not applicable.
(18) Letter re change in accounting principles. Not applicable.
(21) Subsidiaries of the Registrant.
21.1 Subsidiaries of the Registrant.
(22) Published report regarding matters submitted to vote of security
holders. Not applicable.
(23) Consents of experts and counsel.
23.1 Consent of PricewaterhouseCoopers LLP.
(24) Power of attorney. Not applicable.
(99) Additional exhibits.
99.1 Location of Facilities.
Page 23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
HUGHES SUPPLY, INC.
By: /s/ David H. Hughes
--------------------------------
David H. Hughes, Chairman of
the Board and Chief Executive
Officer
/s/ J. Stephen Zepf
--------------------------------
J. Stephen Zepf, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
Date: April 23, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
/s/ David H. Hughes /s/ H. Corbin Day
- ---------------------------- --------------------------------
David H. Hughes H. Corbin Day
April 23, 2001 April 23, 2001
(Director) (Director)
/s/ John D. Baker II /s/ Vincent S. Hughes
- ---------------------------- --------------------------------
John D. Baker II Vincent S. Hughes
April 23, 2001 April 23, 2001
(Director) (Director)
/s/ Robert N. Blackford /s/ William P. Kennedy
- ---------------------------- --------------------------------
Robert N. Blackford William P. Kennedy
April 23, 2001 April 23, 2001
(Director) (Director)
Page 24
INDEX OF EXHIBITS FILED WITH THIS REPORT
10.10 Revolving Credit Agreement, dated as of January 26, 1999 and amended on
various dates through December 20, 2000, by and among the Company and a
group of banks. 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.
10.11 Line of Credit Agreement, dated as of January 26, 1999 and amended on
various dates through December 20, 2000, by and among the Company and a
group of banks. 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.
10.12 Note Purchase Agreement, dated as of December 21, 2000 and amended on
January 19, 2001, by and among the Company and certain purchasers
identified in Schedule A of the Note Purchase Agreement.
10.13 Separation and Release Agreement, dated as of March 28, 2001, by and
between the Company and A. Stewart Hall, Jr.
13.1 Information incorporated by reference into Form 10-K from the Annual
Report to Shareholders for the fiscal year ended January 26, 2001.
21.1 Subsidiaries of the Registrant.
23.1 Consent of PricewaterhouseCoopers LLP.
99.1 Location of Facilities.
Page 25