-----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, KQhMu50dI3bZUNOCIzf5nnx5dIMgQFq4KBUjRswoRYLwCpwVTqTdY4UZ4dTSmAH7 dQaU0bdG0OXD+xuMcD9bqQ== 0000950144-98-008892.txt : 19980803 0000950144-98-008892.hdr.sgml : 19980803 ACCESSION NUMBER: 0000950144-98-008892 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980729 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MOORE HANDLEY INC /DE/ CENTRAL INDEX KEY: 0000788951 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-HARDWARE [5072] IRS NUMBER: 630819773 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-14324 FILM NUMBER: 98673471 BUSINESS ADDRESS: STREET 1: 133 PEACHTREE STREET STREET 2: SUITE 4710 CITY: ATLANTA STATE: GA ZIP: 30303 BUSINESS PHONE: 2056638011 MAIL ADDRESS: STREET 2: 3140 PELHAM PKWY CITY: PELHAM STATE: AL ZIP: 35124 10-Q 1 MOORE-HANDLEY, INC. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998 OR [ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the transition period from _____ to _____ COMMISSION FILE NUMBER 0-14324 ------- - ------------------------------------------------------------------------------- MOORE-HANDLEY, INC. (Exact name of registrant as specified in its charter) DELAWARE 63-0819773 - ------------------------------- ------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation of organization) Identification No.) 3140 PELHAM PARKWAY, PELHAM, ALABAMA 35124 - ------------------------------------ --------------------- (Address of principal executive offices) (Zip Code) (205) 663-8011 --------------------------------------------------- (Registrant's telephone number, including area code) 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 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days. Yes X No ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common stock, $.10 par value 1,854,543 shares - ---------------------------- ---------------------------- Class Outstanding at July 17, 1998 2 MOORE-HANDLEY, INC. INDEX
Item No. Page No. - -------- -------- PART I. FINANCIAL INFORMATION - UNAUDITED 1. Balance Sheets - June 30, 1998 and 1997 and December 31, 1997.................................. 3 Statements of Operations - Three Months and Six Months Ended June 30, 1998 and 1997...................... 4 Statements of Cash Flows - Six Months Ended June 30, 1998 and 1997....................................... 5 Note to Financial Statements........................................................ 6 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.............................. 7-11 PART II. OTHER INFORMATION 4. Submission of Matters to a Vote of Security Holders................................. 11 6. Exhibits and Reports on Form 8-K 12 Exhibit Index ...................................................................... 12 Signatures ......................................................................... 13
- 2 - 3 MOORE-HANDLEY, INC. BALANCE SHEETS JUNE 30, 1998 AND 1997 AND DECEMBER 31, 1997 (UNAUDITED)
JUNE 30, DECEMBER 31, ------------------------------ ------------ 1998 1997 1997 ----------- ----------- ------------ ASSETS: Current assets: (unaudited) (unaudited) Cash and cash equivalents................... $ 248,000 $ 647,000 $ 1,155,000 Trade receivables, net...................... 27,974,000 21,683,000 23,252,000 Other receivables........................... 3,021,000 1,672,000 2,089,000 Merchandise inventory....................... 15,660,000 14,695,000 17,035,000 Prepaid expenses............................ 420,000 476,000 226,000 Refundable income tax....................... 40,000 1,037,000 632,000 Deferred income taxes....................... 551,000 510,000 551,000 ----------- ----------- ----------- Total current assets..................... 47,914,000 40,720,000 44,940,000 Prepaid pension cost........................... 975,000 853,000 955,000 Property and equipment......................... 18,749,000 19,666,000 19,609,000 Less accumulated depreciation............... (10,934,000) (10,878,000) (11,336,000) ------------ ----------- ----------- Net property and equipment............... 7,815,000 8,788,000 8,273,000 Deferred charges, net.......................... 25,000 32,000 29,000 ----------- ----------- ----------- $56,729,000 $50,393,000 $54,197,000 =========== =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Bank loans.................................. $ --- $ 9,800,000 $ --- Accounts payable............................ 21,720,000 16,803,000 17,840,000 Accrued payroll............................. 624,000 529,000 437,000 Other accrued liabilities................... 1,930,000 2,012,000 2,034,000 Long-term debt due in one year.............. 1,150,000 1,151,000 1,171,000 ----------- ----------- ----------- Total current liabilities................ 25,424,000 30,295,000 21,482,000 Long-term debt................................. 16,880,000 4,539,000 18,397,000 Deferred income taxes.......................... 1,150,000 1,129,000 1,150,000 Stockholders' equity: Common stock, $.10 par value; 10,000,000 shares authorized, 2,510,040 shares issued.................. 251,000 251,000 251,000 Other stockholders' equity.................. 13,024,000 14,179,000 12,917,000 ----------- ----------- ----------- Total stockholders' equity............... 13,275,000 14,430,000 13,168,000 ----------- ----------- ----------- $56,729,000 $50,393,000 $54,197,000 =========== =========== ===========
See accompanying notes. - 3 - 4 MOORE-HANDLEY, INC. STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, 1998 1997 1998 1997 ----------- ----------- ----------- ----------- Net sales................................... $38,012,000 $35,424,000 $78,484,000 $73,266,000 Cost of merchandise sold.................... 31,975,000 30,030,000 66,381,000 62,361,000 Warehouse and delivery expense.............. 2,220,000 2,470,000 4,473,000 4,764,000 ----------- ----------- ----------- ----------- Cost of sales............................... 34,195,000 32,500,000 70,854,000 67,125,000 ----------- ----------- ---------- ---------- Gross profit................................ 3,817,000 2,924,000 7,630,000 6,141,000 Selling and administrative expense.......... 3,367,000 3,528,000 6,742,000 7,025,000 ---------- ----------- ----------- ----------- Operating income (loss)..................... 450,000 (604,000) 888,000 (884,000) Interest expense, net....................... 354,000 217,000 719,000 498,000 ----------- ----------- ----------- ----------- Income (loss) before provision for income tax (benefit)....................... 96,000 (821,000) 169,000 (1,382,000) Income tax (benefit)........................ 38,000 (260,000) 62,000 (440,000) ----------- ----------- ----------- ----------- Net income (loss)........................... $ 58,000 $ (561,000) $ 107,000 $ (942,000) =========== =========== =========== =========== Net income (loss) per common share - basic and diluted ....................... $ .03 $ (.26) $ .06 $ (.44) =========== =========== =========== =========== Weighted average common shares outstanding......................... 1,855,000 2,154,000 1,855,000 2,154,000 =========== =========== =========== ===========
See accompanying notes. - 4 - 5 MOORE-HANDLEY, INC. STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED)
1998 1997 --------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss)....................................................... $ 107,000 $ (942,000) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 639,000 630,000 Provision for doubtful accounts.................................. 120,000 60,000 Gain on sale of equipment........................................ (177,000) (20,000) Change in assets and liabilities: Trade and other receivables................................... (5,774,000) 549,000 Merchandise inventory......................................... 1,375,000 2,998,000 Accounts payable and accrued expenses......................... 3,963,000 (933,000) Other assets.................................................. 382,000 (460,000) ----------- ---------- Total adjustments............................................. 528,000 2,824,000 ------------ ---------- NET CASH PROVIDED BY OPERATING ACTIVITIES 635,000 1,882,000 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures.................................................... ( 297,000) (647,000) Proceeds from sale of equipment ...................... 293,000 20,000 ----------- ---------- NET CASH USED IN INVESTING ACTIVITIES (4,000) (627,000) CASH FLOWS FROM FINANCING ACTIVITIES: Net payments of bank loans.............................................. --- (650,000) Principal payments of long-term debt.................................... (1,538,000) (554,000) ----------- ---------- NET CASH USED IN FINANCING ACTIVITIES................................ (1,538,000) (1,204,000) ----------- ---------- Net increase (decrease) in cash and cash equivalents....................... (907,000) 51,000 Cash and cash equivalents at beginning of period........................... 1,155,000 596,000 ----------- -------- Cash and cash equivalents at end of period................................. $ 248,000 $ 647,000 =========== ==========
See accompanying notes. - 5 - 6 MOORE-HANDLEY, INC. NOTES TO FINANCIAL STATEMENTS (INFORMATION PERTAINING TO THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997 IS UNAUDITED) 1. BASIS OF PRESENTATION The financial statements included herein have been prepared by Moore-Handley, Inc. (the "Company"), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's Annual Report on Form 10-K filed with the Commission on March 27, 1998. The financial information presented herein reflects all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary to a fair statement of the results of the interim periods. The results for interim periods are not necessarily indicative of results to be expected for the year. 2. INCOME PER COMMON SHARE Basic net income per share is based on the weighted average number of common shares outstanding and net income. Diluted net income per share is based on the weighted average of common shares outstanding plus the effect of dilutive employee stock options and net income. Basic and diluted earnings per share were the same for the first and second quarters of 1997 and 1998. 3. REVENUE RECOGNITION The Company recognizes revenues when goods are shipped. - 6 - 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS During the first six months of 1998 the Company has incurred special expenses of approximately $200,000 in connection with resetting the warehouse, programming expense related to the year 2000 and the start up of two new businesses: a commercial and industrial division to be operated in conjunction with the Company's hardware customers and a paint and paint sundries division. These expenses were largely offset by a special gain of $177,000 realized on the sale of equipment in the second quarter. These special expenses are expected to continue in the second half without any offsetting gains. NET SALES Net sales for the quarter ended June 30, 1998 were up 7.3% compared to the same quarter in the prior year. Warehouse shipments increased 6.5% and factory direct shipments increased 9.0%. For the six months warehouse shipments increased 4.9%, factory direct shipments increased 11.4% and net sales increased 7.1%. Much of the increase in warehouse shipments was due to a Dealers' Mart held in June. A similar mart was not held during the second quarter of 1997. The increase in factory direct shipments was due to the Company's expanded efforts to increase sales of lumber and building materials. Orders for factory direct shipments taken at the June mart will, for the most part, be shipped and recorded in the third quarter. However, the regular third quarter mart will be held later in the quarter than in 1997 and most of the orders for both warehouse and factory direct shipments which will be taken at this year's third quarter mart will not be shipped until the fourth quarter. The following table sets forth the major elements of net sales:
Three Months Ended June 30, --------------------------------------------- 1998 1997 ------------------ ------------------ (dollars in thousands) Net Sales: Warehouse shipments.............................. $25,423 66.9% $23,871 67.4% Factory direct shipments......................... 12,589 33.1 11,553 32.6 ------- ----- ------- ----- Net Sales................................. $38,012 100.0% $35,424 100.0% ======= ===== ======= =====
Six Months Ended June 30, --------------------------------------------- 1998 1997 ------------------ ------------------- (dollars in thousands) Net Sales: Warehouse shipments.............................. $50,554 64.4% $48,193 65.8% Factory direct shipments......................... 27,930 35.6 25,073 34.2 ------- ----- ------- ----- Net Sales................................. $78,484 100.0% $73,266 100.0% ======= ===== ======= =====
- 7 - 8 OPERATIONS The following table sets forth certain financial data as a percentage of net sales for the periods indicated:
Three Months Ended Six Months Ended June 30, June 30, -------------------- ------------------- 1998 1997 1998 1997 ------ ------ ----- ----- Net sales................................... 100.0% 100.0% 100.0% 100.0% ===== ===== ===== ===== Gross margin................................ 15.9 15.2 15.4 14.9 Warehouse and delivery expense.............. 5.8 6.9 5.7 6.5 ----- ----- ----- ----- Gross profit................................ 10.1 8.3 9.7 8.4 Selling and administrative expenses......... 8.9 10.0 8.6 9.6 ----- ----- ----- ----- Operating income (loss)..................... 1.2 (1.7) 1.1 (1.2) Interest expense, net....................... 0.9 0.6 0.9 0.7 ----- ----- ----- ----- Income (loss) before provision for income tax (benefit)................. 0.3 % (2.3)% 0.2 % (1.9)% ===== ===== ===== =====
GROSS MARGIN The gross margin percentage for the quarter ended June 30, 1998 was up 0.7% compared to the same quarter last year and for the six months increased by 0.5% compared to the prior year. The increase is due to a new pricing program begun late in 1997 and to lower cost of merchandise as the Company has taken increased advantage of special buying opportunities offered by suppliers. These factors were offset somewhat by the increase in factory direct shipments as a percentage of total sales. The following table sets forth the gross margin dollars, gross margin percentages and yearover-year changes for 1997 and the first and second quarters of 1998:
Increase (Decrease) vs. Same Quarter Gross Margin in Previous Year - ------------------------------------------------------- -------------------------------- Amount Percentage Amount Percentage Quarter (in thousands) of Sales (in thousands) Points - ----------- -------------- ---------- -------------- ---------- 1997 - 1st $5,511 14.6 $ (402) (0.7) 2nd 5,394 15.2 (421) (1.0) 3rd 5,843 14.6 (112) (0.6) 4th 5,354 16.5 (327) (1.3) 1998 - 1st 6,066 15.0 $ 555 0.4 2nd 6,037 15.9 643 0.7
- 8 - 9 WAREHOUSE AND DELIVERY EXPENSES Warehouse and delivery expense for the second quarter was reduced by the $177,000 gain on sale of delivery equipment. Excluding the gain, these expenses are down $73,000 for the quarter and $113,000 for the six months compared to the same periods last year. The 1998 quarter and six months included $60,000 and $100,000, respectively, of expense related to resetting the warehouse in order to further reduce warehouse expense. The Company expects the resetting to be largely completed by year-end. The following table sets forth the trend in warehouse and delivery expenses in 1997 and the first and second quarters of 1998:
Increase (Decrease) Warehouse and Delivery vs. Same Quarter Expenses in Previous Year - ---------------------------------------------------- ------------------------------ Percentage Amount of Warehouse Amount Percentage Quarter (in thousands) Sales (in thousands) Points - ----------- ------------ ------------ ------------ ---------- 1997 - 1st $2,294 9.4 $ 91 0.9 2nd 2,470 10.3 (125) 0.2 3rd 2,329 9.3 (374) (1.0) 4th 2,393 11.0 (14) 0.5 1998 - 1st 2,254 9.0 $(40) (0.4) 2nd 2,220 8.7 (250) (1.6)
SELLING AND ADMINISTRATIVE EXPENSE Selling and administrative expense for the quarter and six months is down $161,000 and $283,000, respectively, compared to the same periods of last year. In 1997, severance pay accruals of $140,000 and $365,000 were made in the second quarter and first six months, respectively. No similar expenses occurred in 1998, although expenses of $67,000 and $97,000, related to new business startups and year 2000 compliance were incurred in the 1998 second quarter and first six months, respectively. The following table sets forth the trend in selling and administrative expenses in 1997 and the first and second quarters of 1998.
Increase (Decrease) Selling and Administrative vs. Same Quarter Expense in Previous Year - ---------------------------------------------------- -------------------------------- Amount Percentage Amount Percentage Quarter (in thousands) of Sales (in thousands) Points - ----------- -------------- ---------- -------------- ---------- 1997 - 1st $3,497 9.2 $ 158 0.6 2nd 3,528 10.0 (204) (0.4) 3rd 3,212 8.0 (381) (1.1) 4th 3,468 10.7 (8) (0.2) 1998 - 1st $3,374 8.3 $(123) (0.9) 2nd 3,367 8.9 (161) (0.1)
- 9 - 10 INTEREST EXPENSE Average borrowings increased in 1998 in order to finance higher average receivables and inventories, (See Liquidity and Capital Resources). As a result, interest expense for the second quarter and first six months increased $137,000 and $221,000, respectively, compared to the same periods last year. LIQUIDITY AND CAPITAL RESOURCES From December 31, 1997 to June 30,1998 the Company's net trade receivables increased by $4,722,000 or 20.3%. The increase was due to the higher level of sales in the month of June as a result of the Dealers' Mart held in June 1998 and to additional extended dating terms given to customers as a part of sales promotions. Although inventories decreased $1,375,000 or 8.1% during the first six months of 1998 they were $965,000 higher at June 30, 1998 than at June 30, 1997 as the Company took advantage of special forward buying opportunities offered by suppliers. Trade payables increased $3,880,000, or 21.7% from December 31, 1997 to June 30, 1998 because of extended terms received from suppliers. At June 30, 1998 the Company had unused lines of credit of $1,556,000. The Company has begun discussions with its working capital lender to increase the line of credit to be assured of adequate working capital to finance future growth. IMPACT OF YEAR 2000 Some of the Company's older computer programs were written using two digits rather than four to define the applicable year. As a result, those computer programs have time-sensitive software that recognize a date using "00" as the year 1900 rather than the year 2000. This could cause a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities. The Company is in the process of modifying or replacing portions of its software so that its computer systems will function properly with respect to dates in the year 2000 and thereafter. Based on its current assessment of which portions of the software must be modified, the Company estimates the total cost of the year 2000 project will be approximately $100,000, of which about $10,000 has been expended through the end of the second quarter. The Company anticipates that the required modifications will be completed by December 31, 1998 and that there will be no interruption of its business. Even though the Company is in the process of converting its computer system so that it will be year 2000 compliant, it is possible that third parties with whom the Company does business will encounter problems with their computer systems that may have an adverse impact on the Company. - 10 - 11 INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS Certain of the statements contained in this report (other than the financial statements and other statements of historical fact) are forward-looking statements. The use of words such as "expects" and "believes" indicate the presence of forward-looking statements. There can be no assurance that future developments will be in accordance with management's expectations or that the effect of future developments on the Company will be those anticipated by management. Among the factors that could cause actual results to differ materially from estimates reflected in such forwardlooking statements are the following: - competitive pressures on sales and pricing, including those from other wholesale distributors and those from retailers in competition with the Company's customers; - the Company's ability to achieve projected cost savings from its warehouse modernization program and ongoing cost reduction efforts; - changes in cost of goods and the effect of differential terms and conditions available to larger competitors of the Company; - uncertainties associated with any acquisition the Company may seek to implement; - changes in general economic conditions; and - impact of year 2000 on the Company's information systems and those of its customers and suppliers. While the Company periodically reassesses material trends and uncertainties affecting the Company's results of operations and financial condition in connection with its preparation of management's discussion and analysis of results of operations and financial condition contained in its quarterly and annual reports, the Company does not intend to review or revise any particular forward-looking statement referenced in light of future events. PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The annual meeting of the Registrant was held on Thursday, April 23, 1998 at 10:00 a.m. At the meeting, each of Messrs. William Riley, Pierce E. Marks, Jr., L. Ward Edwards, Michael B. Stubbs and Ronald J. Juvonen was re-elected as a director of the Registrant. - 11 - 12 The following table sets forth the distribution of votes cast with regard to each of the nominees:
Votes Cast Votes Nominee for Nominee Withheld ------- ----------- -------- William Riley 1,123,396 2,205 ----------- ------- Pierce E. Marks, Jr. 1,123,396 2,205 ----------- ------- L. Ward Edwards 1,123,396 2,205 ----------- ------- Michael B. Stubbs 1,123,396 2,205 ----------- ------- Ronald J. Juvonen 1,123,396 2,205 ----------- -------
Also at the meeting, the proposed Moore-Handley, Inc. Employee Stock Purchase Plan was approved. The following table sets forth the distribution of votes cast with regard to the proposal:
Number of Votes --------------- For 1,113,965 ------------ Against 22,836 ------------ Abstain 800 ------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 10(a)-- The Moore Handley, Inc. Employee Stock Purchase Plan, incorporated by reference to Annex A to the Company's proxy statement for its 1998 annual meeting. 27 -- Financial Data Schedule (For SEC Purposes Only). (b) There were no reports on Form 8-K filed by the Company during the three month period ended June 30,1998.
EXHIBIT INDEX ------------- EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE - ----------- ---------------------- ---- 10(a). . . . . . . . . . . .The Moore-Handley, Inc. Employee Stock Purchase Plan, incorporated by reference to Annex A to the Company's proxy statement for its 1998 annual meeting. 27. . . . . . . . . . . . . Financial Data Schedule (for SEC Purposes Only) 14
- 12 - 13 SIGNATURE Pursuant to the requirements 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-HANDLEY, INC. ------------------- (Registrant) Date: July 28, 1998 /s/ L. Ward Edwards -------------------- -------------------- L. Ward Edwards Vice President, Treasurer and Secretary (Principal Accounting and Financial Officer) - 13 - EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 248 0 27,974 0 15,660 47,914 18,749 (10,934) 56,729 25,424 16,880 251 0 0 13,024 56,729 78,484 78,484 66,381 70,854 6,742 0 719 169 62 107 0 0 0 107 .06 .06
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