-----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, EWkGNnmop4p/0XT0B/lF157WbLNvj53h0NG89K43b32VuzkC20YPg4jHu7PJZxUO p+6tW6X+zsUfBT2LY8RXxA== 0001077604-99-000107.txt : 19990503 0001077604-99-000107.hdr.sgml : 19990503 ACCESSION NUMBER: 0001077604-99-000107 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990403 FILED AS OF DATE: 19990430 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: 99606638 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 FIRST QUARTER Ended April 3, 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 Perferred 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 _____ ____ 2,939,221 Number of shares of Common Stock outstanding as of April 23, 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 first quarter of 1999 and at the end of the year 1998............ 3 Statements of Operations for the first quarters of 1999 and 1998.............................. 4 Statements of Cash Flows for the first quarters of 1999 and 1998.............................. 5 Notes to Financial Statements.................. 6-7 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition......... 8-11 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 First Quarter 1999 Year 1998 (Unaudited) - -------------------------------------------------------------------------------- ASSETS Current Assets Cash $ 530 $ 3,520 Accounts receivable, less allowances of $403 and $372......................... 10,680 9,385 Inventories................................. 15,645 13,684 Prepaid expenses and other current assets... 2,739 1,992 Deferred income taxes....................... 2,500 2,500 ------- ------- Total Current Assets.................. 32,094 31,081 ------- ------- Noncurrent Assets Equipment and leasehold improvements, net... 8,235 7,038 Other assets................................ 496 362 ------- ------- Total Noncurrent Assets............... 8,731 7,400 ------- ------- $40,825 $38,481 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable............................ $ 8,086 $ 5,421 Accrued expenses............................ 6,324 7,139 ------- ------- Total Current Liabilities............. 14,410 12,560 ------- ------- Deferred Income Taxes.......................... 368 368 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.............. 21,672 21,667 Retained earnings........................... 7,074 6,597 ------- ------- 28,779 28,297 Less treasury shares, at cost, 307 and 308 shares................................... (2,732) (2,744) ------- ------- Total Shareholders' Equity............ 26,047 25,553 ------- ------- $40,825 $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 First Quarter ----------------------- 1999 1998 (Unaudited) - -------------------------------------------------------------------------- Net sales....................................... $29,055 $30,939 Cost of products sold........................... 19,546 21,601 ------- ------- Gross profit.................................... 9,509 9,338 Selling, general & administrative expenses...... 8,803 8,701 ------- ------- Operating income................................ 706 637 Interest (income), net.......................... (45) (6) ------- ------- Income before income taxes...................... 751 643 Income tax provision............................ 274 238 ------- ------- Net income...................................... $ 477 $ 405 ======= ======= Basic and diluted net income per share.................................... $ .16 $ .14 ======= ======= - -------------------------------------------------------------------------- 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 ------------------ 1999 1998 (Unaudited) - -------------------------------------------------------------------------------- Cash Flows From Operating Activities Net income....................................... $ 477 $ 405 Adjustments to reconcile net income to net cash flows provided by operating activities: Depreciation and amortization.................. 337 331 Deferred income taxes.......................... - - Changes in operating assets and liabilities: Accounts receivable.......................... (1,295) 4,987 Inventories.................................. (1,961) (571) Other current assets......................... (747) (435) Accounts payable............................. 2,665 960 Other current liabilities.................... (945) 973 ------ ------ Net cash flows (used in) provided by operating activities........................... (1,469) 6,650 ------ ------ Cash Flows From Investing Activities Equipment & leasehold improvements acquired...... (1,534) (461) ------ ------ Net cash flows used in investing activities.... (1,534) (461) ------ ------ Cash Flows From Financing Activities Revolving credit financing (decrease), net....... - (1,512) Other, net....................................... 13 54 ------ ------ Net cash flows provided by (used in) financing activities................................... 13 (1,458) ------ ------ (Decrease) increase in cash........................ (2,990) 4,731 Cash at beginning of period........................ 3,520 54 ------ ------ Cash at end of period.............................. $ 530 $ 4,785 ======= ======= - -------------------------------------------------------------------------------- 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 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 first quarter are not necessarily indicative of the results to be expected for the full year. The fiscal quarters ended April 3, 1999 and April 4, 1998. 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 first 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 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. 6 Note 2 - Contingencies (continued) 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 first quarter end of 1999, approximately $1.0 million and $0.9 million, respectively, remained. 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 1999 and 1998. The table also shows, for each line item, the percentage change of the amount in the 1999 period from the comparable 1998 period. First Quarter ------------------------------- % of Sales % Change ----------------- ------------ 1999 1998 ---- ----- Net sales............................... 100.0% 100.0% (6)% Cost of products sold................... 67.3 69.8 (10) ----- ----- Gross profit............................ 32.7 30.2 2 Selling, general & administrative 30.3 28.1 1 expenses............................... ----- ----- Operating income........................ 2.4 2.1 11 Interest (income) expense, net.......... (.1) 0 650 ----- ----- Income before income taxes.............. 2.5 2.1 17 Income tax provision.................... .9 .8 15 ----- ----- Net income.............................. 1.6% 1.3% 18% ===== ===== RESULTS OF OPERATIONS - --------------------- First Quarter 1999 Compared with 1998 - ----------------------- Net sales of $29.1 million for the first quarter of 1999 decreased 6% from the same quarter of 1998 primarily due to the liquidation of inventory in 1998 and the Company's completion of the transition out of the wholesale drug distribution business. The Company decided to exit the wholesale drug distribution business in order to concentrate on the more profitable healthcare practitioner market. For the first quarter of 1999, gross profit dollars increased 2% to $9.5 million. The gross profit margin rate in the 1999 quarter increased to 32.7% of sales from 30.2% in the same quarter a year earlier. The improvement in gross profit margin and rate are attributable to a favorable product mix of sales in 1999, and to the liquidation of inventory at low or no margins in 1998 related to the Company's exit from the wholesale drug distribution market. Selling, general and administrative expenses in the first quarter of 1999 increased 1% from the quarter a year ago. The increase is primarily due to the establishment of a 8 small field sales force and intensified direct marketing efforts, which were partially offset by lower total staffing and freight expenses. Net income for the 1999 quarter increased 18%. The increase in selling, general and administrative expenses were more than offset by the increase in gross profit. FINANCIAL CONDITION - ------------------- During the first quarter of 1999, the Company's operating and investing activities used $3.0 million of funds. Operating activites used $5.0 million of cash from a $2.0 million increase in inventories, a $1.3 million increase in accounts receivable, and a $1.7 net change in other assets and liabilities. Operating activities generated $3.5 million in cash from a $0.3 million increase in amortization and depreciation, $2.7 million from increased accounts payable, and $0.5 million from net income. Investing activities used $1.5 million in funds for capital expenditures. 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 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. YEAR 2000 ISSUES - ---------------- 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. 9 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 integrated enterprise 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 enterprise system, of which Year 2000 compliance is a by- product, is $6.3 million, of which $5.3 million has been incurred to date, funded through operating cash flow. The Company is in the implementation phase for this system, with substantial implementation scheduled for mid-1999. Based on this schedule, the Company plans its internal information technology systems to be in substantial compliance before the year 2000. However, if due to unforeseen circumstances the implementation is not completed in a timely manner, Year 2000 issues could have a material adverse impact on the Company's operations. 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 plans to assess 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 by mid-1999. Since the Company is in the information gathering phase, it does not have sufficient data to estimate the scheduling or costs of achieving Year 2000 compliance for such systems or have a contingency plan in place therefore. External Vendor Compliance - -------------------------- The Company is in the process of identifying and contacting its major suppliers, service providers and contractors ("vendors") to determine the extent of their Year 2000 compliance. It plans that the process will be substantially completed by mid-1999. To the extent that responses are unsatisfactory, the Company intends to consider changing its major 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 major vendors are not Year 2000 compliant and the Company does not replace them with new vendors, its business could be materially adversely affected. The Company plans to consider formulating a contingency plan for major vendors' Year 2000 non-compliance in mid-1999, after it receives responses from vendors. 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 10 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," 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 be aware of factors that could have an impact on the Company's business, financial position or performance. These include possible: pressures on the Company's revenues resulting, for example, from customer consolidations or changes in customer buying patterns; reductions in healthcare funding affecting its customers' services or revenues, resulting, for example, from changes in legislation or regulations or in HMO, managed care or other insurance programs; 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 computer systems or Year 2000 issues (including regarding costs, scheduling, implementation, vendor compliance, and the Company's plans and expectations regarding such); pending adjustments of pricing under exited government contracts or unfavorable outcomes of litigation; the effects of vesting chief executive officer responsibilities directly with the Company's chief financial, marketing and operations officers rather than with a single individual; 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 the Company's Annual Report Form 10-K for its fiscal year ended January 2, 1999, and to other parts of this Quarterly Report on Form 10-Q, which 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. 11 PART II. OTHER INFORMATION ----------------- Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits -------- 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/ David V. Harper By: /s/ Susan G. D'Amato ---------------------------------- ---------------------------------- David V. Harper, Executive Susan G. D'Amato, Controller Vice President - Finance and and Chief Accounting Officer Chief Financial Officer April 30, 1999 April 30, 1999 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS JAN-01-2000 JAN-03-1999 APR-03-1999 530 0 11,083 403 15,645 32,094 19,419 (11,184) 40,825 14,410 0 0 0 33 26,014 40,825 29,055 29,055 19,546 19,546 8,803 0 (45) 751 274 477 0 0 0 477 0.16 0.16
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