-----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, KBNbp562SDV0Oxfkj6q4olRM5YpaRhZBgATPchGuFrc7qG3KynxUeR2ZceKB6CfL WDnKxT0ClldSVlZvVVQbUQ== 0000950109-98-003361.txt : 19980520 0000950109-98-003361.hdr.sgml : 19980520 ACCESSION NUMBER: 0000950109-98-003361 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980405 FILED AS OF DATE: 19980519 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: SEC FILE NUMBER: 001-08903 FILM NUMBER: 98627922 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 10Q FOR MOORE MEDICAL ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________________ 1998 FORM 10 - Q For the Fiscal FIRST QUARTER Ended April 4, 1998 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 _____ ----- 2,933,096 Number of shares of Common Stock outstanding as of May 14, 1998 Total number of pages in the numbered original is 13 This is page 1 of 13 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 1998 and at the end of the year 1997............... 3 Statements of Operations for the first quarters of 1998 and 1997................................... 4 Statements of Cash Flows for the first quarters of 1998 and 1997................................... 5 Notes to Financial Statements........................ 6-7 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition.............. 8-10 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K.................... 11-13 Signatures................................................... 11
2 MOORE MEDICAL CORP.
Balance Sheets at end of - --------------------------------------------------------------------------------------- Amounts in thousands FIRST QUARTER 1998 YEAR 1997 (Unaudited) - --------------------------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash $ 4,785 $ 54 Accounts receivable, less allowances of $656 and $891......................... 10,225 15,212 Inventories................................. 13,987 13,416 Prepaid expenses and other current assets... 3,395 2,960 Deferred income taxes....................... 3,354 3,354 ------- ------- Total Current Assets.................. 35,746 34,996 ------- ------- NONCURRENT ASSETS Equipment and leasehold improvements, net... 3,641 3,511 Other assets................................ 722 696 ------- ------- Total Noncurrent Assets............... 4,363 4,207 ------- ------- $40,109 $39,203 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable............................ $10,013 $ 9,053 Accrued expenses............................ 6,794 5,801 ------- ------- Total Current Liabilities............. 16,807 14,854 ------- ------- DEFERRED INCOME TAXES.......................... 214 214 REVOLVING CREDIT FINANCING..................... -- 1,512 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.............. 21,656 21,644 Retained earnings........................... 4,192 3,788 ------- ------- 25,881 25,464 Less treasury shares, at cost, 314 and 319 shares................................... (2,793) (2,841) ------- ------- Total Shareholders' Equity............ 23,088 22,623 ------- ------- $40,109 $39,203 ======= ======= - ---------------------------------------------------------------------------------------
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 --------------------------- 1998 1997 (Unaudited) - -------------------------------------------------------------------------------- Net sales................................... $30,939 $81,042 Cost of products sold....................... 21,601 69,826 ------- ------- Gross profit................................ 9,338 11,216 Selling, general & administrative expenses.. 8,701 10,184 ------- ------- Operating income............................ 637 1,032 Interest (income) expense, net.............. (6) 517 ------- ------- Income before income taxes.................. 643 515 Income tax provision........................ 238 185 ------- ------- Net income.................................. $ 405 $ 330 ======= ======= Basic and diluted net income per share................................ $ .14 $ .11 ======= =======
- -------------------------------------------------------------------------------- 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 ----------------------- 1998 1997 (Unaudited) - -------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income............................................. $ 404 $ 330 Adjustments to reconcile net income to net cash flows provided by operating activities: Depreciation and amortization......................... 331 412 Deferred income taxes................................. - 27 Changes in operating assets and liabilities: Accounts receivable.................................. 4,987 (3,004) Inventories.......................................... (571) 125 Other current assets................................. (435) (329) Accounts payable..................................... 960 (3,473) Other current liabilities............................ 974 (170) ------- ------- Net cash flows provided by (used in) operating activities.................................. 6,650 (6,082) ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Equipment & leasehold improvements acquired.......... (461) (345) ------- -------- Net cash flows used in investing activities....... (461) (345) ------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Revolving credit financing (decrease) increase, net..................................... (1,512) 6,328 Other, net........................................... 54 90 ------- ------- Net cash flows (used in) provided by financing activities..................................... (1,458) 6,418 ------- ------- Increase (decrease) in cash............................. 4,731 (9) Cash at beginning of period............................. 54 16 ------- ------- CASH AT END OF PERIOD................................... $ 4,785 $ 7 ======= =======
- ------------------------------------------------------------------------------- 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 1997 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 April 4, 1998 and March 29, 1997. NOTE 2 - BASIC AND DILUTED NET INCOME PER SHARE In the fourth quarter of 1997, the Company adopted Statement of Financial Accounting Standards No. 128, "Earnings per Share," for all periods presented. Basic earnings per share computations are determined based on the weighted average number of shares outstanding during the period. The effect of the exercise and conversion of all securities, including stock options are included in the diluted earnings per share calculation. 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, 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. In the fourth quarter of 1996, the Company established a $3.8 million reserve for estimated pricing deficiency liabilities and associated legal costs. As of the end of 1997 and first quarter end of 1998, the reserve balance was $3.3 million. The final amount of the pricing deficiency adjustment is subject to the outcome of contract settlement 6 NOTE 3 - CONTINGENCIES (CONTINUED) discussions which the Company has requested with the governmental agencies or to an adjudicated disposition. 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. 7 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 1998 and 1997. The table also shows, for each line item, the percentage change in the 1998 period from the comparable 1997 period.
FIRST QUARTER ------------------------------- % OF SALES % CHANGE --------------- ----------- 1998 1997 ---- ---- Net sales............................... 100.0% 100.0% (62)% Cost of products sold................... 69.8 86.2 (69) ----- ----- Gross profit............................ 30.2 13.8 (17) Selling, general & administrative 28.1 12.6 (15) expenses............................... ----- ----- Operating income........................ 2.1 1.2 (38) Interest (income) expense, net.......... 0 .6 (101) ----- ----- Income before income taxes.............. 2.1 .6 25 Income tax provision.................... .8 .2 29 ----- ----- Net income.............................. 1.3% .4% 23% ===== =====
RESULTS OF OPERATIONS - --------------------- FIRST QUARTER 1998 COMPARED WITH 1997 - ----------------------- In the fourth quarter of 1997, the Company exited from its wholesale drug distribution business to concentrate on its remaining and more profitable healthcare practitioner business. The wholesale drug distribution business generated approximately 60% of the Company's 1997 sales, while the remaining healthcare practitioner business generated approximately 40% of its sales. Sales by quarter in 1997 of the healthcare practitioner business were $24.7 million, $27.5 million, $31.4 million and $29.3 million in the first, second, third and fourth quarters, respectively. Net sales of $30.9 million for the first quarter of 1998 decreased 62% from the same quarter of 1997 due to the withdrawal from the wholesale drug distribution business. Sales of pharmaceuticals decreased 87% and sales of medical/surgical supplies increased 13%. Sales of the healthcare practitioner business for the 1998 quarter were 23% higher than sales for this business in the comparable quarter of 1997. For the 1998 quarter, gross profit dollars decreased 17% to $9.3 million. The gross profit margin rate in the 1998 quarter increased to 30.2% of sales from 13.8% in the 8 same quarter a year earlier. Gross profit margins are higher on medical/surgical supplies than on pharmaceuticals, and they are higher in the healthcare practitioner market than in the drug wholesale market. Selling, general and administrative expenses in the first quarter of 1998 decreased 15% from the quarter a year ago. The decrease is wholly attributable to reductions in staff, freight expense and other variable expenses previously associated with the wholesale drug distribution business. In the 1997 first quarter, a pre-tax charge of $220,000 ($.05 per share) was taken in connection with exiting various federal government supply contracts. The 1998 quarter benefited significantly from a $523,000 change in interest charges, due to significant positive cash flows from exiting the wholesale drug distribution business which have left the Company with no debt and $4.8 million in cash and equivalents at the end of the first quarter. Net income for the 1998 quarter increased 23%. A decrease in gross profit was more than offset by decreases in selling, general and administrative expenses and interest expense. The 1997 charge related to exiting federal government supply contracts did not recur in the 1998 quarter, which more than accounts for the entire increase in net income between the two quarters. Net income in the 1998 first quarter was not significantly affected by any revenues or expenses of the former wholesale drug distribution business. FINANCIAL CONDITION - ------------------- During the first quarter of 1998, $6.7 million in funds provided by operating activities were used to pay off the remaining bank debt of $1.5 million, for capital expenditures of $0.5 million and accounted for an increase of $4.7 million in cash. Operating activities generated cash of $5.0 million from a decrease in accounts receivable, $1.0 million from an increase in accounts payable, $0.4 million from net income, $0.3 million from depreciation and amortization and $0.5 million from a net change in other assets and liabilities. Operating activities used cash of $0.6 million to increase inventories. The large decrease in accounts receivable was due primarily to the collection of accounts in connection with exiting from the wholesale drug distribution business. The Company's bank financing agreement provides a $10 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 commitment fee on the unused line of credit at a 1/4% annual rate. Substantially all assets of the Company have been pledged as collateral and the agreement contains covenants and restrictions relating to 9 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 capital expenditures will continue to be met through income from operations and financing available under its line of credit. FORWARD-LOOKING INFORMATION - --------------------------- From time to time, the Company or its representatives may have made or may make forward-looking statements, orally or in writing. Such forward-looking statements may be included in, but, not limited to, press releases, oral statements made by or with the approval of an authorized executive officer, or in this report or other filings made by the Company with the Securities and Exchange Commission. The words or phrases "trend," "expect," "grow," "will," "could," "likely result," "planned," "continued," "anticipated," "estimated," "projected" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The Company wishes to ensure that such statements are accompanied by meaningful cautionary statements, so as to maximize to the fullest extent possible the protections of the safe harbor established in the said Act. Accordingly, such statements are qualified in their entirety by reference to and are accompanied by the following discussion of certain important factors that could cause actual results to differ materially from such forward-looking statements. Investors should also be aware of factors that could have an impact on the Company's business or financial position or performance. These include possible: pressures on revenues resulting, for example, from customer consolidations or changes in customer buying patterns; intensified competition resulting, for example, from distributor consolidations or pricing pressures from distributors able to benefit from economies of scale or other operating efficiencies; disruptions in services on which the Company is dependent, such as by truckers in deliveries from its suppliers, by UPS or other common carriers in deliveries to its customers, by its catalog printers or in telecommunication services, or relating to its computer systems; unfavorable outcomes of litigation to which the Company may become a party; and other factors detailed from time to time in the Company's Securities and Exchange Commission filings or other readily available or generally disseminated writings. The risks identified here are not all inclusive. Reference is also made to other parts of this report that include additional information concerning factors that could adversely impact the Company's business or financial position or performance. Moreover, the Company operates in a changing and very competitive business environment. New risks may emerge from time to time, and it is not possible for management to predict all risk factors, nor can it necessarily identify or assess the impact of all such factors on the Company or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. Accordingly, forward- looking statements should not be relied upon as a prediction of actual results. 10 PART II. OTHER INFORMATION ----------------- ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -------------------------------- (a) Exhibits -------- 10.9(a). 1998 Corporate Vice Presidents' Bonus Plan (Revised). 27. Financial Data Schedule. (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/ Susan G. D'Amato ----------------------------- ---------------------------- John A. Murray Susan G. D'Amato Vice President - Finance and Controller and Chief Chief Financial Officer Accounting Officer May 18, 1998 May 18, 1998 11 EX-10.9 2 CORPORATE VP BONUS PLAN EXHIBIT 10.9(A) MOORE MEDICAL CORP. 1998 CORPORATE VICE PRESIDENTS' BONUS PLAN (REVISED) 1. Purpose; Eligibility; Etc. This plan is designed to offer the -------------------------- incentive of bonus compensation to the Company's corporate vice presidents. The Plan is for the Company's 1998 fiscal year. Only employees who are corporate vice presidents, elected to such position by the Company's Board of Directors, are participants in the Plan. (As of February 17, 1998, the corporate vice presidents are Richard A. Bucchi, Kenneth S. Kollmeyer and John A. Murray.) No bonus compensation will be payable if a participant breaches a material obligation to the Company. This Plan does not constitute an employment contract or confer a right to continued employment. An employee first elected a corporate vice president by the Board or its Executive Committee during the year is eligible from the date of election, on an elapsed day basis, pro rated from that date. If a participant should cease being continually employed by the Company on a full-time basis during 1998, his bonus compensation will be computed on an elapsed day basis, pro rated to the date of cessation. 2. Bonus As bonus compensation, the Company will pay each participant, ----- within 75 days after its 1998 fiscal year end: (a) a bonus of up to $20,000 based on the achievement of the specific individual participant's "hard goals" agreed to in writing between the Company's President and the participant; and (b) the percentage of his Salary (defined below) set forth in Column A if its pre-tax income for that fiscal year, as shown in its audited financial statements for the year (subject to adjustment as hereinafter provided for), exceeds the amount set forth opposite the percentage in Column B:
A B A B - - - - 50%........$5,735,000 25%........$4,485,000 45%........$5,485,000 20%........$4,235,000 40%........$5,235,000 15%........$3,985,000 35%........$4,985,000 10%........$3,735,000 30%........$4,735,000 5%........$3,485,000
A participant's Salary is his W-2 gross pay for 1998 plus any bonus earned under paragraph 2(a) of this Plan, but excluding any bonus under paragraph 2(b) of this Plan and excluding pay for periods during which he was not actively working for the Company, such as a period of disability or severance pay. No bonus compensation will be paid under paragraph 2(b) of this Plan if the Company's pre-tax income for the fiscal year does not exceed $3,485,000. If the pre-tax income is effected by any charge or associated cost or change in a prior year's reserve relating to a federal government contract pricing deficiency, for purposes of Column B the amount of the pre-tax income will be subject to such adjustments (if any) as the Compensation Committee of the Board of Directors of the Company may, in its sole and absolute discretion, determine. 12 EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS JAN-02-1999 JAN-05-1998 APR-04-1998 4,785 0 10,881 656 13,987 35,746 13,567 (9,927) 40,109 16,807 0 0 0 33 23,055 40,109 30,939 30,939 21,601 21,601 8,701 0 (6) 643 238 405 0 0 0 405 0.14 0.14
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