-----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, Av5mO1GcCGQqzJW9J4reA1ThTBtBoTUEosXUXX/sAm0v29TRpHL4xj0Ijbq+FF9/ DgcttrpXauYhR+x5Lo3uKw== 0000950109-97-005232.txt : 19970808 0000950109-97-005232.hdr.sgml : 19970808 ACCESSION NUMBER: 0000950109-97-005232 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970628 FILED AS OF DATE: 19970807 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: 97653237 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 QUARTERLY REPORT ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------- 1997 FORM 10 - Q For the Fiscal SECOND QUARTER Ended June 28, 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 ----- ----- 2,924,454 Number of shares of Common Stock outstanding as of August 5, 1997. Total number of pages in the numbered original is 12 This is page 1 of 12 pages. ================================================================================ 1 MOORE MEDICAL CORP. Index Page No. -------- Part I. Financial Information Item 1. Financial Statements Balance Sheets at the end of the second quarter of 1997 and at the end of the year 1996............... 3 Statements of Operations for the second quarters of 1997 and 1996................................... 4 Statements of Operations for the first two quarters of 1997 and 1996................................... 5 Statements of Cash Flows for the first two quarters of 1997 and 1996................................... 6 Notes to Financial Statements......................... 7-8 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition.............. 9-11 Part II. Other Information Item 4. Submission of Matters to a Vote of Security Holders... 12 Item 6. Exhibits and Reports on Form 8-K...................... 12 Signatures.................................................... 12 2 MOORE MEDICAL CORP.
Balance Sheets at end of - -------------------------------------------------------------------------------- Amounts in thousands Second Quarter 1997 Year 1996 (Unaudited) - -------------------------------------------------------------------------------- ASSETS Current Assets Cash $ 5 $ 16 Accounts receivable, less allowances of $328 and $626......................... 27,521 25,761 Inventories................................. 34,034 43,828 Prepaid expenses and other current assets... 4,337 4,117 Deferred income taxes....................... 2,177 2,356 ------- ------- Total Current Assets................... 68,074 76,078 ------- ------- Noncurrent Assets Equipment and leasehold improvements, net... 4,201 4,411 Other assets................................ 1,301 1,052 ------- ------- Total Noncurrent Assets................ 5,502 5,463 ------- ------- $73,576 $81,541 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable............................ $21,275 $27,071 Accrued expenses............................ 5,604 6,022 ------- ------- Total Current Liabilities.............. 26,879 33,093 ------- ------- Deferred Income Taxes........................ 394 346 Revolving Credit Financing................... 20,190 22,726 Shareholders' Equity Preferred stock - no shares outstanding..... -- -- Common stock - $.01 par value; 5,000 shares authorized; 3,246 shares issued...................... 33 32 Capital in excess of par value.............. 21,737 21,692 Retained earnings........................... 7,305 6,709 ------- ------- 29,075 28,433 Less treasury shares, at cost, 323 and 343 shares................................... (2,962) (3,057) ------- ------- Total Shareholders' Equity............. 26,113 25,376 ------- ------- $73,576 $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 Second Quarter ------------------------------- 1997 1996 (Unaudited) - -------------------------------------------------------------------------------- Net sales................................... $77,038 $72,840 Cost of products sold....................... 65,687 62,058 ------- ------- Gross profit................................ 11,351 10,782 Selling, general & administrative expenses.. 9,833 9,284 Unusual item................................ 580 - ------- ------- Operating income............................ 938 1,498 Interest expense, net....................... 522 513 ------- ------- Income before income taxes.................. 416 985 Income tax provision........................ 150 344 ------- ------- Net income.................................. $ 266 $ 641 ======= ======= Net income per share........................ $ .09 $ .22 ======= ======= - --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 4 MOORE MEDICAL CORP.
Statements of Operations for the - -------------------------------------------------------------------------------- Amounts in thousands, except per share data First Two Quarters ---------------------------- 1997 1996 (Unaudited) - -------------------------------------------------------------------------------- Net sales................................... $158,080 $148,673 Cost of products sold....................... 135,513 127,294 -------- -------- Gross profit................................ 22,567 21,379 Selling, general & administrative expenses.. 19,797 18,442 Unusual item................................ 800 - -------- -------- Operating income............................ 1,970 2,937 Interest expense, net....................... 1,039 979 -------- -------- Income before income taxes.................. 931 1,958 Income tax provision........................ 335 684 -------- -------- Net income.................................. $ 596 $ 1,274 ======== ======== Net income per share........................ $ .20 $ .44 ======== ======== - --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 5 MOORE MEDICAL CORP.
Statements of Cash Flows for the - -------------------------------------------------------------------------------- Amounts in thousands First Two Quarters ------------------------------ 1997 1996 (Unaudited) - -------------------------------------------------------------------------------- Cash Flows From Operating Activities Net income................................ $ 596 $ 1,274 Adjustments to reconcile net income to net cash flows provided by operating activities Depreciation and amortization.......... 755 881 Deferred income taxes.................. 227 (120) Changes in operating assets and liabilities Accounts receivable.................. (1,760) (1,615) Inventories.......................... 9,794 1,197 Other current assets................. (220) (944) Accounts payable..................... (5,795) (2,713) Other current liabilities............ (617) 361 ------- ------- Net cash flows provided by (used in) operating activities................. 2,980 (1,679) ------- ------- Cash Flows From Investing Activities Equipment and leasehold improvements...... (545) (550) ------- ------- Net cash flows used in investing activities........................... (545) (550) ------- ------- Cash Flows From Financing Activities Revolving credit financing (decrease) increase, net........................... (2,536) 2,232 Other, net................................ 90 36 ------- ------ Net cash flows (used in) provided by financing activities.................. (2,446) 2,268 ------- ------ Increase (decrease) in cash................... (11) 39 Cash at beginning of period................... 16 39 ------- ------ Cash At End Of Period......................... $ 5 $ 78 ======= ====== - --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 6 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 second quarter and first two quarters are not necessarily indicative of the results to be expected for the full year. The fiscal quarters ended June 28, 1997 and June 29, 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. 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 7 MOORE MEDICAL CORP. NOTES TO FINANCIAL STATEMENTS Note 3 - Contingencies (cont'd) 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 - Unusual Item The "unusual item" consists of charges to earnings of $580,000 in the second quarter of 1997 and $800,000 in the first half of 1997 in connection with exiting supply contracts with the U.S. government. These charges are primarily for write-offs and write-downs of product returns and for severance pay to terminated employees. Without these charges, earnings per share would have been $.22 for the second quarter of 1997 and $.38 for the first half. Note 5 - 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), which was 2,931,000 shares and 2,918,000 shares in the second quarters of 1997 and 1996, respectively, and 2,925,000 shares and 2,914,000 shares in the first two quarters of 1997 and 1996, respectively. 8 MOORE MEDICAL CORP. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION OVERVIEW - -------- The following table sets forth items included in the Statements of Operations as a percentage of sales for the second quarter and first two quarters of 1997 and 1996, respectively. The table also shows, for each line item, the percentage change in the 1997 periods from the comparable 1996 periods.
Second Quarter First Two Quarters -------------------------------------------------- % of Sales % % of Sales % ---------------- -------- --------------- ------- 1997 1996 Change 1997 1996 Change -------- ------- -------- ------ ------- ------- Net sales..................... 100.0% 100.0% 6% 100.0% 100.0% 6% Cost of products sold......... 85.3 85.2 6 85.7 85.6 6 ----- ----- ----- ----- Gross profit.................. 14.7 14.8 5 14.3 14.4 5 Selling, general & admin exp.. 12.8 12.7 6 12.5 12.4 7 Unusual item 0.7 - - 0.5 - - ----- ----- ----- ----- Operating income.............. 1.2 2.1 (37) 1.3 2.0 (33) Interest expense, net......... 0.7 0.7 2 0.7 0.6 6 ----- ----- ----- ----- Income before income taxes.... 0.5 1.4 (58) 0.6 1.4 (52) Income tax provision.......... 0.2 0.5 - 0.2 0.5 - ----- ----- ----- ----- Net income.................... 0.3% 0.9% (59)% 0.4% 0.9% (53)% ===== ===== ==== ===== ===== =====
RESULTS OF OPERATIONS - --------------------- Second Quarter 1997 Compared with 1996 - ----------------------- Net sales for the second quarter of 1997 increased 6% to $77,038,000, compared to $72,840,000 in the quarter a year ago. Sales of brand-name pharmaceuticals increased approximately 20%, sales of generic pharmaceuticals decreased approximately 30% and sales of medical/surgical supplies increased over 15%. The decrease in sales of generic pharmaceuticals was due to significant industry-wide deflation that resulted in lower prices in the 1997 quarter compared with the 1996 quarter and due to exiting the government supply contract business. Growth in sales to health-care practitioner customers accounted for the sales increase in medical/surgical supplies. 9 The gross margin rate of 14.7% in the second quarter of 1997 was slightly lower than the 14.8% in the same quarter a year earlier. Gross profit dollars increased in the second quarter of 1997 by 5% to $11.4 million. The increased gross profit resulted from greater gross profits on increased sales of medical/surgical supplies and brand-name pharmaceuticals, which more than offset decreased gross profits on lower sales of generic pharmaceuticals. Selling, general and administrative expenses during the second quarter of 1997 increased 6% from the comparable quarter of 1996. The increased expenses resulted primarily from enlarging the sales staff. In addition, freight expenses increased in the 1997 quarter. Interest expense for the 1997 quarter increased slightly from the 1996 quarter. The effect on interest expense of higher interest rates for the 1997 quarter was mostly offset by decreased debt levels in the 1997 quarter. The "unusual item" consists of charges to earnings of $580,000 in the second quarter of 1997 in connection with exiting supply contracts with the U.S. government. These charges are primarily for write-offs and write-downs of product returns and for severance pay to terminated employees. Net income and earnings per share for the 1997 quarter decreased 59% from the same quarter of 1996 due to the charges associated with the decision to exit the government supply contract business. Without these charges, earnings per share for the second quarter of 1997 would have been equal to the $.22 per share earned in the second quarter of 1996. First Two Quarters 1997 Compared with 1996 - ----------------------- Net sales for the first half of 1997 increased 6% to $158,080,000 from $148,673,000 in the comparable 1996 period. Sales of brand-name pharmaceuticals increased approximately 20%, sales of generic pharmaceuticals decreased approximately 30% and sales of medical/surgical supplies increased over 15%. The decrease in sales of generic pharmaceuticals was due to significant industry-wide deflation that resulted in lower prices in the 1997 half compared with the 1996 half and due to exiting the government supply contract business. Growth in sales to health-care practitioner customers accounted for the sales increase in medical/surgical supplies. For the 1997 first half, the gross margin rate of 14.3% was slightly lower than the 14.4% in the same period a year earlier. Gross profit dollars increased by 5% to $22.6 million. The increased gross profit resulted from greater gross profits on increased sales of medical/surgical supplies and brand-name pharmaceuticals, which more than offset decreased gross profits on lower sales of generic pharmaceuticals. 10 Selling, general and administrative expenses during the first half of 1997 increased 7% compared with the first half of 1996. The increased expenses resulted primarily from enlarging the sales staff. In addition, freight expenses increased in the 1997 first half. Interest expense during the first half of 1997 increased 6% compared with the first half of 1996 due to higher interest rates. The "unusual item" consists of previously announced charges to earnings of $800,000 in the first half of 1997 in connection with exiting supply contracts with the U.S. government. These charges are primarily for write-offs and write- downs of product returns and for severance pay to terminated employees. Net income and earnings per share for the first half of 1997 as compared to the same 1996 period decreased over 50% due primarily to the charges associated with the decision to exit the government supply contract business. Without these charges, earnings per share would have been $.38 for the first half of 1997. FINANCIAL CONDITION - ------------------- During the first half of 1997, net cash flow from operating activities of $3.0 million was used to fund $0.5 million of equipment purchases and to reduce revolving credit financing by $2.5 million. Cash sources from operating activities were $0.6 million in net income, $1.0 million in non-cash items included in net income and a $9.8 million reduction in inventories. Somewhat offsetting these cash sources were uses for operations of a $1.8 million increase in accounts receivable, a $5.8 million decrease in accounts payable and a $0.8 million change in prepaid/accrued expenses and other current assets. The increase in accounts receivable was due to higher sales in the second quarter of 1997 than in the fourth quarter of 1996. The decrease in inventories and the related decrease in accounts payable were attributable to a decrease in inventory position buying of brand-name pharmaceuticals from the end of 1996 to June of 1997 and to inventory management. 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. 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. 11 PART II. OTHER INFORMATION ----------------- Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- (a) The 1997 Annual Meeting of Shareholders of the Company was held May 21, 1997. (b) At the Annual Meeting, the following persons were elected directors, with the following number of shares voted for and withheld: For Withheld --------- --------------- Mark E. Karp 2,450,026 14,136 Steven Kotler 2,450,026 14,136 Robert H. Steele 2,450,026 14,136 Peter C. Sutro 2,449,526 14,636 Wilmer J. Thomas, Jr. 2,450,026 14,136 Dan K. Wassong 2,450,026 14,136 Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits -------- None. (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 August 7, 1997 August 7, 1997 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS 3-MOS JAN-03-1998 JAN-03-1998 MAR-30-1997 DEC-30-1996 JUN-28-1997 MAR-29-1997 5 7 0 0 27,849 29,098 328 333 34,034 43,703 68,074 79,258 14,630 14,430 (10,429) (10,086) 73,576 84,772 26,879 29,518 0 0 0 0 0 0 33 32 26,112 25,814 73,576 84,772 77,038 81,042 77,038 81,042 65,687 69,826 65,687 69,826 10,413 10,184 0 0 522 517 416 515 150 185 266 330 0 0 0 0 0 0 266 330 0.09 0.11 0.09 0.11
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