-----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, JSYU7rq5BEcWw7LIdSKqNQKWf1KiWQkaCaKtezKvehnU6x6kQgOU8sl1AIOqKjUl 8p46df+ncaeK0wmGDLE25w== 0000950109-99-003943.txt : 19991111 0000950109-99-003943.hdr.sgml : 19991111 ACCESSION NUMBER: 0000950109-99-003943 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991002 FILED AS OF DATE: 19991110 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MOORE MEDICAL CORP CENTRAL INDEX KEY: 0000074691 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MEDICAL, DENTAL & HOSPITAL EQUIPMENT & SUPPLIES [5047] IRS NUMBER: 221897821 STATE OF INCORPORATION: DE FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08903 FILM NUMBER: 99745924 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 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________________ 1999 FORM 10 - Q For the Fiscal THIRD QUARTER Ended October 2, 1999 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 Rights to Purchase Series I Junior Preferred Stock 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 _____ -------- 2,941,426 Number of shares of Common Stock outstanding as of October 29, 1999. Total number of pages in the numbered original is 13 This is page 1 of 13 pages. ================================================================================ MOORE MEDICAL CORP. Index
Page No. -------- Part I. Financial Information Item 1. Financial Statements Balance Sheets at the end of the third quarter of 1999 and at the end of the year 1998................ 3 Statements of Operations for the third quarter of 1999 and 1998.................................... 4 Statements of Operations for the first three quarters of 1999 and 1998.................................... 5 Statements of Cash Flows for the first three quarters of 1999 and 1998.................................... 6 Notes to Financial Statements......................... 7 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition............... 8-12 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K..................... 12-13 Signatures.................................................... 12
2 MOORE MEDICAL CORP.
Balance Sheets at end of - -------------------------------------------------------------------------------- Amounts in thousands Third Quarter 1999 Year 1998 (Unaudited) - -------------------------------------------------------------------------------- ASSETS Current Assets Cash $ -- $ 3,520 Accounts receivable, less allowances of $297 and $372......................... 14,280 9,385 Inventories................................. 15,807 13,684 Prepaid expenses and other current assets... 3,371 1,992 Deferred income taxes....................... 2,727 2,500 ------- ------- Total Current Assets.................. 36,185 31,081 ------- ------- Noncurrent Assets Equipment and leasehold improvements, net... 10,202 7,038 Other assets................................ 518 362 ------- ------- Total Noncurrent Assets............... 10,720 7,400 ------- ------- $46,905 $38,481 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable............................ $ 9,238 $ 5,421 Accrued expenses............................ 5,340 7,139 ------- ------- Total Current Liabilities............. 14,578 12,560 ------- ------- Deferred Income Taxes.......................... 2,360 368 Revolving Credit Financing..................... 2,661 -- Shareholders' Equity Preferred stock - no shares outstanding..... -- -- Common stock - $.01 par value; 5,000 shares authorized; 3,246 shares issued...................... 33 33 Capital in excess of par value.............. 21,675 21,667 Retained earnings........................... 8,305 6,597 ------- ------- 30,013 28,297 Less treasury shares, at cost, 305 and 308 shares................................... (2,707) (2,744) ------- ------- Total Shareholders' Equity............ 27,306 25,553 ------- ------- $46,905 $38,481 ======= =======
- -------------------------------------------------------------------------------- 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 Third Quarter --------------------------- 1999 1998 (Unaudited) - -------------------------------------------------------------------------------- Net sales................................... $31,077 $32,529 Cost of products sold....................... 21,631 22,322 ------- ------- Gross profit................................ 9,446 10,207 Selling, general & administrative expenses.. 8,654 8,550 ------- ------- Operating income............................ 792 1,657 Interest expense (income), net.............. 14 (19) ------- ------- Income before income taxes.................. 778 1,676 Income tax (benefit) provision.............. (25) 620 ------- ------- Net income.................................. $ 803 $ 1,056 ======= ======= Basic and diluted net income per share...... $ .27 $ .36 ======= =======
- -------------------------------------------------------------------------------- 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 Three Quarters ---------------------------- 1999 1998 (Unaudited) - -------------------------------------------------------------------------------------------- Net sales................................................ $89,499 $93,510 Cost of products sold.................................... 61,328 64,608 ------- ------- Gross profit............................................. 28,171 28,902 Selling, general & administrative expenses............... 26,009 25,501 ------- ------- Operating income......................................... 2,162 3,401 Interest income, net..................................... 38 43 ------- ------- Income before income taxes............................... 2,200 3,444 Income tax provision..................................... 492 1,274 ------- ------- Net income............................................... $ 1,708 $ 2,170 ======= ======= Basic and diluted net income per share................... $ .58 $ .74 ======= ======= - --------------------------------------------------------------------------------------------
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 Three Quarters ---------------------------- 1999 1998 (Unaudited) - ------------------------------------------------------------------------------------------ Cash Flows From Operating Activities Net income........................................ $ 1,708 $ 2,170 Adjustments to reconcile net income to net cash flows (used in) provided by operating activities: Depreciation and amortization.................. 1,299 989 Deferred income taxes.......................... 1,766 656 Changes in operating assets and liabilities: Accounts receivable......................... (4,895) 2,630 Inventories................................. (2,123) 214 Other current assets........................ (1,379) 403 Accounts payable............................ 3,816 (1,777) Other current liabilities................... (1,951) 1,330 -------- ------- Net cash flows (used in) provided by operating activities........................ (1,759) 6,615 -------- ------- Cash Flows From Investing Activities Equipment and leasehold improvements.............. (4,463) (2,792) -------- ------- Net cash flows used in investing activities (4,463) (2,792) -------- ------- Cash Flows From Financing Activities Revolving credit financing increase/(decrease), net............................................ 2,661 (1,512) Other, net........................................ 41 64 -------- ------- Net cash flows provided by (used in) financing activities......................... 2,702 (1,448) -------- ------- (Decrease)/increase in cash............................ (3,520) 2,375 Cash at beginning of period............................ 3,520 54 -------- ------- Cash At End Of Period.................................. $ -- $ 2,429 ======== ======= - ------------------------------------------------------------------------------------------
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 1998 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 third quarter and first three quarters ended 1999 are not necessarily indicative of the results to be expected for the full year. The fiscal quarters ended October 2, 1999 and October 3, 1998. Certain prior year amounts have been reclassified to conform with the current year presentation. Note 2 - 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 1998 and third quarter end of 1999, the reserve balance was $3.2 million. The final amount of the pricing deficiency adjustment is subject to the outcome of contract settlement discussions between the Company and 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. In 1997, the Company established a $4.5 million restructuring reserve relating to its exit from the wholesale drug distribution business. At the end of 1998, and the third quarter end of 1999, approximately $1.0 million and $0.8 million, respectively, remained. 7 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 third quarter and first three quarters of 1999 and 1998, respectively. The table also shows, for each line item, the percentage change in the 1999 periods from the comparable 1998 periods.
Third Quarter First Three Quarters --------------------------------------------- -------------------------------------------- % of Sales % % of Sales % ------------------------------ ------------ ----------------------------- ------------- 1999 1998 Change 1999 1998 Change -------------- -------------- ------------ ------------- -------------- ------------- Net sales.......................... 100.0% 100.0% (4)% 100.0% 100.0% (4)% Cost of products sold.............. 69.6 68.6 (3) 68.5 69.1 (5) ----- ----- ----- ----- Gross profit....................... 30.4 31.4 (7) 31.5 30.9 (3) Selling, general & admin. exp...... 27.9 26.3 1 29.1 27.3 2 ----- ----- ----- ----- Operating income................... 2.5 5.1 (52) 2.4 3.6 (36) Interest income, net............... - - (174) - 0.1 (12) ----- ----- ----- ----- Income before income taxes......... 2.5 5.1 (54) 2.4 3.7 (36) Income tax (benefit) provision..... ( 0.1) 1.9 (104) 0.5 1.4 (61) ----- ----- ----- ----- Net income......................... 2.6% 3.2% (24)% 1.9% 2.3% (21)% ===== ===== ==== ===== ===== ====
RESULTS OF OPERATIONS --------------------- Third Quarter 1999 Compared with 1998 ----------------------- Net sales for the third quarter of 1999 declined 4% to $31.1 million from a record $32.5 million of the comparable quarter in the prior year. Net income for the third quarter decreased to $0.8 million compared with $1.1 million in the third quarter of 1998. Earnings per share decreased to $.27 in the third quarter from $.36 a year ago. The third quarter 1999 comparison to the comparable quarter in 1998 reflects the contrast to record earnings in the prior year, and the result of current operational disruptions associated with the impact of the acclimation to the Enterprise Resource Planning (ERP) system. The third quarter of 1999 also reflects a net income tax benefit of approximately $0.3 million largely resulting from management's conclusion of prior year's tax return audits performed by the Internal Revenue Service. In management's opinion, adequate provisions for income taxes have been made for all years. 8 For the third quarter, gross profit dollars decreased 7% to $9.4 million. The gross profit margin in the 1999 quarter decreased to 30.4% of sales from 31.4% in the same quarter a year ago. This decrease is due to higher than anticipated sales returns and allowances attributable to the initial implementation of the ERP system partially offset by a favorable product mix of sales. Selling, general and administrative expenses during the third quarter of 1999 increased 1%. The increase was primarily attributable to expenses related to the implementation of the Company's ERP system and outside information technology consulting. First Three Quarters 1999 Compared with 1998 - ----------------------- Net sales for the first nine months of 1999 declined 4% to $89.5 million from $93.5 million in the prior year. Net income for the nine months of 1999 decreased to $1.7 million compared with $2.2 million in the same period of 1998. Earnings per share decreased to $.58 from $.74 a year ago. The comparisons to record third quarter 1998 earnings and the results for the first nine months of 1999 reflect the operating disruption associated with the impact of the implementation of the ERP system during the current year, as well as the continuing efforts to acclimate all business practices associated with the ERP system. The first three quarters of 1999 also reflects a net income tax benefit of approximately $0.3 million largely resulting from management's conclusion of prior year's tax return audits performed by the Internal Revenue Service. In management's opinion, adequate provisions for income taxes have been made for all years. For the first nine months of 1999, gross profit dollars decreased 3% to $28.2 million. The gross profit margin rate increased in the first nine months of 1999 to 31.5% from 30.9% in the same period in 1998. The improvement in margin rate is primarily attributable to a favorable product mix in sales. Selling, general and administrative expenses during the first nine months of 1999 increased 2% compared to the first nine months of 1998. The increase is primarily due to expenses related to implementation of the Company's ERP information technology system. FINANCIAL CONDITION - ------------------- During the first nine months of 1999, the Company utilized existing credit lines of $2.7 million and decreased cash by $3.5 million to fund $1.8 million of net cash used for operations and $4.4 million of capital expenditures. Accounts receivable increased $4.9 million due to higher sales at the end of the third quarter of 1999 than at year end of 1998. 9 The Company's bank financing agreement provides a $10 million revolving line of credit through December, 1999. 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. 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. YEAR 2000 COMPLIANCE - -------------------- Year 2000 issues are the result of computer programs that were written using two digits rather than four to define the applicable year. If the Company's computer programs with date sensitive functions are not year 2000 compliant, they may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, an inability to process transactions, send invoices or engage in other normal business activities. The Company has identified its Year 2000 risks in three categories: internal business software, internal non-information technology software, and external vendor compliance. Internal Information Technology - ------------------------------- During 1998, as part of a modernization program intended to improve productivity and increase profitability by upgrading data processing, integrating systems and enhancing internal reporting, the Company purchased an ERP system which includes software which the vendor has represented to be Year 2000 compliant. The total estimated hardware, software, installation and training cost of the integrated ERP system, of which Year 2000 compliance is a by-product, is $6.7 million, of which $6.6 million has been incurred through the third quarter, primarily funded through operating cash flow. The Company substantially completed the implementation of the system during the second quarter of 1999. With this implementation, the Company believes its internal information technology systems to be in substantial compliance. Contingency plans are being developed for areas where management considers there may be some risk to modify certain of the major existing internal information technology systems to be Year 2000 compliant. Internal Non-Information Technology - ----------------------------------- The Company has assessed the Year 2000 compliance of its internal non- information software and of the technology embedded in such systems as security, telecommunications and building systems by contacting the providers of such systems. Written assurance of Year 2000 compliance has been received from substantially all providers. 10 External Vendor Compliance - -------------------------- The Company has identified and contacted its major suppliers, service providers and contractors ("vendors") to determine the extent of their Year 2000 compliance. The process is substantially complete. To the extent that responses were unsatisfactory, the Company has contingency plans in place, which includes a number of measures such as, where necessary, changing the vendors to those who have represented Year 2000 readiness, but cannot be assured that it will be successful in finding alternative vendors. In the event that a major vendor's written assurance of Year 2000 compliance becomes questionable and the Company does not replace it with a new vendor, its business could be materially adversely affected. The Company is formulating a contingency plan for major vendors' Year 2000 non-compliance. 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," "scheduled," "could have," "intended," "believes," "continuing," "considers," "may be," "assessed," "contingency" 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 or systems 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 ERP or other computer systems or Year 2000 issues (including regarding costs, scheduling, implementation, vendor 11 compliance, and plans and expectations regarding such); 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 and the Company's most recent Annual Report on Form 10-K 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. PART II. OTHER INFORMATION ----------------- Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits -------- Financial Data Schedule - Exhibit 27 (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/ Linda M. Autore By: /s/ Susan G. D'Amato ------------------------------ ----------------------------- Linda M. Autore Susan G. D'Amato President and Chief Executive Vice President - Finance and Officer Controller November 10, 1999 November 10, 1999 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS JAN-02-2000 JUL-04-1999 OCT-02-1999 0 0 14,577 297 15,807 36,185 22,348 (12,146) 46,905 14,578 0 0 0 33 27,273 46,905 31,077 31,077 21,631 21,631 8,654 0 14 778 (25) 803 0 0 0 803 0.27 0.27
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