-----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, NjAsof+wCvvDzE0qVOu4ocUMTKT//1IvX0/GHK7dieY2NSSsXhRA5Q3ER5UThVmr u66WFDKzV013H/3FjajOSw== 0000950109-97-003962.txt : 19970514 0000950109-97-003962.hdr.sgml : 19970514 ACCESSION NUMBER: 0000950109-97-003962 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970329 FILED AS OF DATE: 19970513 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: MOORE MEDICAL CORP CENTRAL INDEX KEY: 0000074691 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-DRUGS PROPRIETARIES & DRUGGISTS' SUNDRIES [5122] IRS NUMBER: 221897821 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08903 FILM NUMBER: 97602253 BUSINESS ADDRESS: STREET 1: PO BOX 1500 STREET 2: 389 JOHN DOWNEY DR CITY: NEW BRITAIN STATE: CT ZIP: 06050 BUSINESS PHONE: 2038263600 MAIL ADDRESS: STREET 1: 389 JOHN DOWNEY DRIVE STREET 2: 389 JOHN DOWNEY DRIVE CITY: NEW BRITAIN STATE: CT ZIP: 06050 FORMER COMPANY: FORMER CONFORMED NAME: OPTEL CORP DATE OF NAME CHANGE: 19850611 10-Q 1 FORM 10-Q QTRLY REPORT ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ________________ 1997 FORM 10 - Q For the Fiscal FIRST QUARTER Ended March 29, 1997 Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934 MOORE MEDICAL CORP. (Exact name of registrant as specified in its charter) - -------------------------------------------------------------------------------- DELAWARE 1-8903 (State of incorporation) (Commission File Number) P.O. BOX 1500, NEW BRITAIN, CT 06050 22-1897821 (Address of principal executive offices) (I.R.S. Employer Identification Number) 860-826-3600 (Registrant's telephone number) SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: COMMON STOCK ($.01 PAR VALUE) AMERICAN STOCK EXCHANGE (Title of Each Class) (Name of each exchange on which registered) - -------------------------------------------------------------------------------- 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 twelve months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No _____ --- 2,930,194 Number of shares of Common Stock outstanding as of May 7,1997. Total number of pages in the numbered original is 14 This is page 1 of 14 pages. ================================================================================ 1 MOORE MEDICAL CORP. INDEX
PAGE NO. -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets at the end of the first quarter of 1997 and at the end of the year 1996.................. 3 Statements of Operations for the first quarters of 1997 and 1996...................................... 4 Statements of Cash Flows for the first quarters of 1997 and 1996...................................... 5 Notes to Financial Statements........................... 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition................. 7-8 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K........................ 9 Signatures...................................................... 9
2
MOORE MEDICAL CORP. Balance Sheets at end of - -------------------------------------------------------------------------------- Amounts in thousands FIRST QUARTER 1997 YEAR 1996 (Unaudited) - -------------------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash $ 7 $ 16 Accounts receivable, less allowances of $333 and $626......................... 28,765 25,761 Inventories................................. 43,703 43,828 Prepaid expenses and other current assets... 4,446 4,117 Deferred income taxes....................... 2,337 2,356 ------- ------- Total Current Assets.................. 79,258 76,078 ------- ------- NONCURRENT ASSETS Equipment and leasehold improvements, net... 4,344 4,411 Other assets................................ 1,170 1,052 ------- ------- Total Noncurrent Assets............... 5,514 5,463 ------- ------- $84,772 $81,541 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable............................ $23,598 $27,071 Accrued expenses............................ 5,920 6,022 ------- ------- Total Current Liabilities............. 29,518 33,093 ------- ------- DEFERRED INCOME TAXES......................... 354 346 REVOLVING CREDIT FINANCING..................... 29,054 22,726 SHAREHOLDERS' EQUITY Preferred stock - no shares outstanding..... -- -- Common stock - $.01 par value; 5,000 shares authorized; 3,246 shares issued...................... 32 32 Capital in excess of par value.............. 21,738 21,692 Retained earnings........................... 7,037 6,709 ------- ------- 28,807 28,433 Less treasury shares, at cost, 321 and 343 shares................................... (2,961) (3,057) ------- ------- Total Shareholders' Equity............ 25,846 25,376 ------- ------- $84,772 $81,541 ======= =======
________________________________________________________________________________ The accompanying notes are an integral part of the financial statements. 3 MOORE MEDICAL CORP.
Statements of Operations for the - ---------------------------------------------------------------------------- Amounts in thousands, except per share data FIRST QUARTER ---------------------- 1997 1996 (Unaudited) - ---------------------------------------------------------------------------- Net sales................................... $81,042 $75,833 Cost of products sold....................... 69,826 65,236 ------- ------- Gross profit................................ 11,216 10,597 Selling, general & administrative expenses.. 10,184 9,158 ------- ------- Operating income............................ 1,032 1,439 Interest expense, net....................... 517 466 ------- ------- Income before income taxes.................. 515 973 Income tax provision........................ 185 340 ------- ------- Net income.................................. $ 330 $ 633 ======= ======= Net income per share........................ $ .11 $ .22 ======= =======
____________________________________________________________________________ The accompanying notes are an integral part of the financial statements. 4 MOORE MEDICAL CORP.
Statements of Cash Flows for the - --------------------------------------------------------------------------------------------- Amounts in thousands FIRST QUARTER ------------------------- 1997 1996 (Unaudited) - --------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income........................... $ 330 $ 633 Adjustments to reconcile net income to net cash flows provided by operating activities Depreciation and amortization..... 412 448 Deferred income taxes............. 27 6 Changes in operating assets and liabilities Accounts receivable............ (3,004) (3,076) Inventories.................... 125 (1,511) Other current assets........... (329) (1,950) Accounts payable............... (3,473) 2,556 Other current liabilities...... (170) 163 ------- ------- Net cash flows used in operating (6,082) (2,731) activities....................... ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Equipment & leasehold improvements acquired... (345) (218) ------- ------- Net cash flows used in investing activities. (345) (218) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Revolving credit financing increase, net.. 6,328 2,966 Other, net................................ 90 21 ------- ------- Net cash flows provided by financing activities.......................... 6,418 2,987 ------- ------- Increase (decrease) in cash.................. (9) 38 Cash at beginning of period.................. 16 39 ------- ------- CASH AT END OF PERIOD........................ $ 7 $ 77 ======= =======
________________________________________________________________________________ The accompanying notes are an integral part of the financial statements. 5 MOORE MEDICAL CORP. NOTES TO FINANCIAL STATEMENTS NOTE 1 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS The accompanying financial statements should be read in conjunction with the Notes to Financial Statements and Management's Discussion and Analysis of Results of Operations and Financial Condition included in the Company's 1996 Annual Report filed on Form 10-K and in this Form 10-Q Report. In the opinion of management, all adjustments necessary for a fair presentation of the results for the interim periods have been made. The results of operations for the first quarter are not necessarily indicative of the results to be expected for the full year. The fiscal quarters ended March 29, 1997 and March 30, 1996. NOTE 2 - BUSINESS DEVELOPMENTS On April 2,1997, the Company announced that its Board of Directors had initiated a process to explore alternatives for enhancing shareholder value, including joint ventures or a possible sale of all or part of the Company, giving due consideration to the interests of the Company's shareholders, employees, customers and other constituencies. The Board of Directors authorized the engagement of the investment banking firm of Schroder Wertheim & Co. Incorporated to act as advisor to the Company regarding the process. The President and CEO of this investment banking firm is a director of the Company. NOTE 3 - CONTINGENCIES Beginning in 1991, the Company entered into various supply contracts with the U.S. Department of Veterans Affairs and the Defense Department. In April 1997, the Company completed a review of its compliance with various pricing provisions of these contracts and, with the assistance of special legal counsel, has concluded that adjustments may be due to the federal agencies for potential unasserted claims against the Company relating to pricing deficiencies under product supply contracts subject to General Services Administration and Department of Defense regulations. Management has assessed its estimated liability, and anticipates discussion of the identified pricing issues with the contracting officers responsible for the Company's contracts. The ultimate resolution of this matter potentially could involve purchase price adjustments and associated legal costs of approximately $3.8 million. The Company established a reserve for this amount in December, 1996. The Company also took a charge of $220,000 in the quarter ended March 29, 1997 for potential contract price adjustments on sales during the quarter under the federal government supply contracts. In management's opinion, the ultimate resolution of this matter will not have a material adverse effect on the Company's financial position. Although management believes that the reserve is sufficient, it is possible the final resolution could exceed such reserve and could have a material impact on the statement of operations and cash flow in such period. NOTE 4 - NET INCOME PER SHARE Net income per share of common stock is based on the weighted average number of common shares outstanding, adjusted for dilutive common stock options (2,919,000 shares and 2,909,000 shares in the first quarters of 1997 and 1996, respectively.) 6 MOORE MEDICAL CORP. MANAGEMENT'S DISCUSSION AND ANALYSIS OVERVIEW - -------- The following table sets forth items included in the Statements of Operations as a percentage of sales for the first quarters of 1997 and 1996. The table also shows, for each line item, the percentage change in the 1997 period from the comparable 1996 period.
FIRST QUARTER ----------------------------------------- % OF SALES % CHANGE -------------------- ------------- 1997 1996 ---- ---- Net sales............................... 100.0% 100.0% 7% Cost of products sold................... 86.2 86.0 7 ----- ----- Gross profit............................ 13.8 14.0 6 Selling, general & administrative 12.6 12.1 11 expenses............................... ----- ----- Operating income........................ 1.2 1.9 (28) Interest expense, net................... .6 .6 11 ----- ----- Income before income taxes.............. .6 1.3 (47) Income tax provision.................... .2 .5 -- ----- ----- Net income.............................. .4% .8% (48)% ===== =====
RESULTS OF OPERATIONS - --------------------- FIRST QUARTER 1997 COMPARED WITH 1996 - ----------------------- Net sales of $81.0 million for the first quarter of 1997 increased 7% from the same quarter of 1996. In the first quarter of 1997, sales of brand-name pharmaceuticals increased 23%. Sales of generic pharmaceuticals decreased 24%, primarily due to significant industry-wide deflation that resulted in lower prices in the first quarter of 1997 compared with the first quarter of 1996. Sales of medical/surgical supplies increased 14% during the 1997 quarter from the comparable 1996 quarter. Growth in sales to health-care practitioner customers accounted for most of the sales increase in medical/surgical supplies. For the 1997 quarter, gross profit dollars increased 6% to $11.2 million. The gross margin rate of 13.8% was slightly lower than the 14.0% in the same quarter a year earlier due to a 1997 sales mix with more brand-name pharmaceuticals, which have lower gross profit margin rates than the other products. 7 Selling, general and administrative expenses in the first quarter of 1997 increase 11% from the same quarter of 1996. A significant factor accounting for the increase was the previously announced, added costs of enlarging the sales staff. In addition, freight expenses increased in the 1997 quarter. Also, a charge of $220,000 ($.05 per share) was taken in the quarter for previously announced estimated liabilities for contract price deficiencies on sales during the quarter under federal government supply contracts. Interest expense increased 11% in the 1997 quarter. Approximately two thirds of the increase resulted from higher debt levels. Higher interest rates accounted for the remainder of the increase. Net income for the 1997 quarter decreased 48%. An increase in gross profit was more than offset by increases in selling, general and administrative expenses and interest expense. Approximately half of the net income reduction was directly attributable to the charge in the 1997 quarter related to government supply contracts. FINANCIAL CONDITION - ------------------- During the first quarter of 1997, funds from additional borrowings of $6.3 million and of $0.1 million from exercised stock options were used to finance $6.1 million of net cash uses for operations and $0.3 million of equipment purchases. The large uses of cash for operations were $3.0 million for increases in accounts receivable and $3.5 million for decreases in accounts payable. The increase in accounts receivable was due to higher sales in the first quarter than for the fourth quarter of 1996. The decrease in accounts payable was attributable to payments in the first quarter of 1997 for the inventory position buying of brand-name pharmaceuticals at the end of 1996. The Company's bank financing agreement provides a $35 million revolving line of credit through December, 1999. The facility provides for funding limited by a formula using accounts receivable balances and inventory levels as the primary variables. Interest on loans is charged at the prime rate or, at the option of the Company, at the Eurodollar rate plus a rate in a range of 1% to 2% depending on the financial leverage of the Company. In addition, the Company pays a 1/4% commitment fee on the unused line of credit. Substantially all assets of the Company have been pledged as collateral and the agreement contains covenants and restrictions relating to asset protection, financial condition, dividends, investments, acquisitions and certain other matters. At March 29, 1997, the Company was not in compliance with various financial covenants under the agreement. The Company has received waivers from the bank regarding these financial covenants. Management believes that the funding needs of the Company for operating working capital and equipment purchases will continue to be met through income from operations and financing under its line of credit. 8 PART II. OTHER INFORMATION ----------------- ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -------------------------------- (a) Exhibit 1 --------- Third Amendment and Waiver Agreement to Revolving Credit Agreement by and among the Company and Bank of Boston Connecticut, dated April 14, 1997. (b) Reports on Form 8-K ------------------- No report on Form 8-K was filed during the quarter. 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. MOORE MEDICAL CORP. (REGISTRANT) By: /s/ John A. Murray By: /s/ Victor H. Emerson, Jr. ------------------------------ ----------------------------------- John A. Murray Victor H. Emerson, Jr. Vice President - Finance and Controller and Chief Chief Financial Officer Accounting Officer May 12, 1997 May 12, 1997 9 EX-1 2 WAIVER AGREEMENT THIRD AMENDMENT --------------- AND --- WAIVER AGREEMENT ---------------- THIRD AMENDMENT AND WAIVER AGREEMENT (this "WAIVER AGREEMENT") dated as of April 14, 1997 by and among Moore Medical Corp. (the "BORROWER"), Bank of Boston Connecticut and certain other lending institutions (collectively, the "BANKS"), and Bank of Boston Connecticut, as agent for the Banks (in such capacity, the "AGENT"), amending a certain Revolving Credit Agreement dated as of January 9, 1996, as amended by the First Amendment Agreement dated as of March 1, 1996 and the Second Amendment Agreement dated December 27, 1996 (as amended, the "CREDIT AGREEMENT"). WITNESSETH ---------- WHEREAS, the Borrower has requested that the Banks amend certain terms and conditions of the Credit Agreement and waive certain Events of Default which exist under the Credit Agreement; and WHEREAS, the Banks are willing to amend such terms and conditions and waive such Events of Default on the terms and conditions set forth herein. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: S1. DEFINITIONS. Capitalized terms used herein without definition that ----------- are defined in the Credit Agreement shall have the same meanings herein as therein. S2. RATIFICATION OF EXISTING AGREEMENTS. All of the Borrower's ----------------------------------- obligations and liabilities to the Agent and the Banks, and all the Agent's and Banks' obligations and liabilities to the Borrower, as evidenced by or otherwise arising under the Credit Agreement, the Notes and the other Loan Documents, except as otherwise expressly modified in this Waiver Agreement upon the terms set forth herein, are, by the Borrower's, the Agent's and Banks', execution of this Waiver Agreement ratified and confirmed in all respects. In addition, by the Borrower's execution of this Waiver Agreement, the Borrower represents and warrants that, subject to the provided and provided, however, clauses of Section -------- -------- ------- 5.4 of the Credit Agreement, no counterclaim, right of set-off or defense of any kind exists or is outstanding with respect to such obligations and liabilities. S3. REPRESENTATIONS AND WARRANTIES. All of the representations and ------------------------------ warranties made by the Borrower in the Credit Agreement, the Notes and the other Loan Documents are true and correct on the date hereof as if made on and as of the date hereof, except for the Events of Default described in S5 hereof and except to the extent that any of such representations and warranties relate by their terms to a prior 10 date and except to the extent of changes resulting from transactions contemplated or permitted by the Credit Agreement and changes occurring in the ordinary course of business that singly or in the aggregate do not have a Material Adverse Effect. S4. CONDITIONS PRECEDENT. The effectiveness of the amendments and waivers -------------------- contemplated hereby shall be subject to the satisfaction on or before the date hereof of each of the following conditions precedent: (a) Representations and Warranties. All of the representations and ------------------------------ warranties made by the Borrower herein, whether directly or incorporated by reference, shall be true and correct on the date hereof, except as provided in S3 hereof. (b) Performance; No Event of Default. The Borrower shall have -------------------------------- performed and complied in all material respects with all terms and conditions herein required to be performed or complied with by it prior to or at the time hereof, and there shall exist no Default or Event of Default except for the Events of Default described in S5 hereof. (c) Corporate Action. All requisite corporate action necessary for ---------------- the valid execution, delivery and performance by the Borrower of this Waiver Agreement and all other instruments and documents delivered by the Borrower in connection therewith shall have been duly and effectively taken. (d) Delivery. The parties hereto shall have executed and delivered -------- this Waiver Agreement. In addition, the Borrower shall have executed and delivered such further instruments, and take such further action as the Agent and the Banks may have reasonably requested, in each case further to effect the proposes of this Waiver Agreement, the Credit Agreement and the other Loan Documents. (e) Fees and Expenses. The Borrower shall have paid to the Agent and ----------------- the Banks all fees and expenses incurred by the Agent in connection with this Waiver Agreement, the Credit Agreement or the other Loan Documents on or prior to the date hereof. S5. WAIVERS. Subject to the satisfaction of the conditions set forth ------- below, the Banks waive those Events of Default that have occurred under the Credit Agreement as a result of the Borrower's failure on or before March 29, 1997 to comply with those sections of the Credit Agreement set forth on Schedule 1 attached hereto. The waiver set forth in this S5 shall be effective - ---------- only for those Events of Defaults contained in the Credit Agreement as specified in the preceding sentence occurring on or before March 29, 1997 and such waiver shall not entitle the Borrower to any future waiver in similar or other circumstances. Without limiting the foregoing, upon the occurrence of an Event of Default after March 29, 1997, or if an Event of Default has occurred and is continuing on the date hereof that is not set forth on Schedule 1, the Banks ---------- shall be free in their sole and absolute discretion to accelerate the payment in full of the Borrower's 11 indebtedness to the Agent and the Banks under the Loan Agreement and the other Loan Documents, and may, if the Banks so elect, proceed to enforce any or all of the Agent's and the Bank's rights under or in respect of the Credit Agreement, the Notes and the other Loan Documents and applicable law. S6. AMENDMENTS TO SS10.1 AND 10.2. Sections 10.1 and 10.2 of the Credit ------------------------------ Agreement are hereby amended in their entirety to read as follows: "S10.1. Earnings Before Interest and Taxes to Total Interest Expense. ------------------------------------------------------------ The Borrower will not permit the ratio of Earnings Before Interest and Taxes to Consolidated Total Interest Expense to be less than 1.5:1.0 for (i) the period of two consecutive fiscal quarters of the Borrower ending on June 28, 1997, (ii) the period of three consecutive fiscal quarters of the Borrower ending on September 27, 1997 and (iii) any period of four consecutive fiscal quarters of the Borrower ending on or after January 3, 1998." "S10.2. Cash Flow to Financial Obligations. The Borrower will not ---------------------------------- permit the ratio of Consolidated Operating Cash Flow to Consolidated Financial Obligations to be less than 1.25:1.0 for (i) the period of two consecutive fiscal quarters of the Borrower ending on June 28, 1997, (ii) the period of three consecutive fiscal quarters of the Borrower ending on September 27, 1997, (iii) any period of four consecutive fiscal quarters of the Borrower ending on or after January 3, 1998." S7. EXPENSES. The Borrower agrees to pay to the Agent upon demand an -------- amount equal to any and all out-of-pocket costs or expenses (including reasonable legal fees and disbursements and appraisal expenses) incurred or sustained by the Agent in connection with the preparation of this Waiver Agreement and any related matters. S8. MISCELLANEOUS. ------------- (a) This Waiver Agreement shall be governed by and construed in accordance with the laws of the State of Connecticut. 12 (b) Except as otherwise expressly provided by this Waiver Agreement, all of the respective terms, conditions and provisions of the Credit Agreement shall remain the same and in full force and effect. It is declared and agreed by each of the parties hereto that this Waiver Agreement and the Credit Agreement be read and construed as one instrument, and all referenced in the Loan Documents to the Credit Agreement shall hereafter refer to the Credit Agreement, as amended by this Waiver Agreement. IN WITNESS WHEREOF, each of the parties hereto have caused this Waiver Agreement to be executed in its name and behalf by its duly authorized officer as of the date first written above. MOORE MEDICAL CORP. By: /s/ John A. Murray ------------------ Title: Vice President BANK OF BOSTON CONNECTICUT, Individually and as Agent By: /s/ Donald W. Peters -------------------- Title: Vice President 13 SCHEDULE 1 ---------- Existing Events of Default under the Credit Agreement ----------------------------------------------------- Failure to comply with SS10.1, 10.2 and 10.4 of the Credit Agreement as of December 28, 1996 and SS10.1 and 10.2 as of March 29, 1997. 14 EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS JAN-3-1998 DEC-30-1997 MAR-29-1997 7 0 29,098 333 43,703 79,258 14,430 (10,086) 84,772 29,518 0 0 0 32 25,814 84,772 81,042 81,042 69,826 69,826 10,184 0 517 515 185 330 0 0 0 330 .11 .11
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