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 SEPTEMBER 30, 2000
OR
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the transition period from to
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COMMISSION FILE NUMBER 0-14324
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MOORE-HANDLEY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 63-0819773
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(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification
No.)
3140 PELHAM PARKWAY, PELHAM, ALABAMA 35124
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(Address of principal executive offices) (Zip Code)
(205) 663-8011
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(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 1,935,743 shares
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Class Outstanding at October 25, 2000
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MOORE-HANDLEY, INC.
INDEX
Item No. Page No.
- -------- --------
PART I. FINANCIAL INFORMATION - UNAUDITED
1. Condensed Balance Sheets -
September 30, 2000 and 1999 and December 31, 1999 ................................ 3
Statements of Operations -
Three Months and Nine Months Ended September 30, 2000 and 1999 ................... 4
Statements of Cash Flows -
Nine Months Ended September 30, 2000 and 1999 .................................... 5
Notes to Financial Statements ....................................................... 6
2. Management's Discussion and Analysis
of Financial Condition and Results of Operations ................................. 7-10
3. Quantitative and Qualitative Disclosures Of Market Risk ............................. 11
PART II. OTHER INFORMATION
6. Exhibits and Reports on Form 8-K .................................................... 11
Signatures .......................................................................... 11
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MOORE-HANDLEY, INC.
CONDENSED BALANCE SHEETS
SEPTEMBER 30, 2000 AND 1999 AND DECEMBER 31, 1999
SEPTEMBER 30, DECEMBER 31,
----------------------------- ------------
2000 1999 1999
------------ ------------ ------------
(unaudited) (unaudited) (Note 1)
ASSETS:
Current assets:
Cash and cash equivalents ........... $ 114,000 $ 257,000 $ 46,000
Trade receivables, net .............. 24,951,000 27,214,000 23,119,000
Other receivables ................... 4,495,000 3,631,000 3,661,000
Merchandise inventory ............... 16,871,000 17,594,000 18,309,000
Prepaid expenses .................... 346,000 770,000 539,000
Refundable income tax ............... 88,000 103,000 --
Deferred income taxes ............... 456,000 590,000 455,000
Total current assets .............. 47,321,000 50,159,000 46,129,000
Prepaid pension cost ................... 1,098,000 996,000 1,101,000
Property and equipment ................. 22,225,000 20,349,000 20,964,000
Less accumulated depreciation ..... (13,681,000) (12,404,000) (12,716,000)
Net property and equipment ...... 8,544,000 7,945,000 8,248,000
Deferred charges, net .................. 8,000 13,000 12,000
------------ ------------ ------------
$ 56,971,000 $ 59,113,000 $ 55,490,000
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Account payable ..................... $ 19,088,000 $ 20,730,000 $ 19,407,000
Accrued payroll ..................... 328,000 680,000 451,000
Other accrued liabilities ........... 2,166,000 2,341,000 1,589,000
Long-term debt due in one year ...... 1,253,000 1,200,000 1,254,000
Total current liabilities ......... 22,835,000 24,951,000 22,701,000
Long-term debt ......................... 19,445,000 19,854,000 17,963,000
Deferred income taxes .................. 1,076,000 1,085,000 1,076,000
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 .......... 13,364,000 12,972,000 13,499,000
Total stockholders' equity ..... 13,615,000 13,223,000 13,750,000
------------ ------------ ------------
$ 56,971,000 $ 59,113,000 $ 55,490,000
============ ============ ============
See accompanying notes.
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MOORE-HANDLEY, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
----------------------------- ---------------------------------
2000 1999 2000 1999
------------ ------------ -------------- --------------
Net Sales ........................................ $ 38,903,000 $ 43,566,000 $ 121,300,000 $ 130,933,000
============ ============ ============== ==============
Cost of merchandise sold ......................... 32,802,000 36,634,000 101,778,000 110,718,000
Warehouse and delivery expense ................... 2,450,000 2,802,000 7,652,000 8,350,000
Cost of sales .................................... 35,252,000 39,436,000 109,430,000 119,068,000
Gross profit ..................................... 3,651,000 4,130,000 11,870,000 11,865,000
Selling and administrative expense ............... 3,309,000 3,821,000 10,894,000 11,021,000
Operating income ................................. 342,000 309,000 976,000 844,000
Interest expense, net ............................ 437,000 378,000 1,195,000 1,014,000
Loss before provision for income tax benefit ..... (95,000) (69,000) (219,000) (170,000)
Income tax (benefit) ............................. (37,000) (27,000) (84,000) (64,000)
------------ ------------ -------------- --------------
Net (loss) ....................................... $ (58,000) $ (42,000) $ (135,000) $ (106,000)
============ ============ ============== ==============
Net (loss) per common share-basic and diluted .... $ (.03) $ (.02) $ (.07) $ (.06)
============ ============ ============== ==============
Weighted average common shares outstanding ....... 1,929,000 1,876,000 1,923,000 1,876,000
See accompanying notes.
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MOORE-HANDLEY, INC.
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) .................................................... $ (135,000) $ (106,000)
Adjustments to reconcile net (loss)
to net cash (used in) provided by operating activities:
Depreciation and amortization ............................ 965,000 917,000
Provision for doubtful accounts .......................... 407,000 225,000
Gain on sale of equipment ................................ -- --
Change in assets and liabilities:
Trade and other receivables ............................ (3,073,000) (3,769,000)
Merchandise inventory .................................. 1,438,000 113,000
Accounts payable and accrued expenses .................. 135,000 1,589,000
Other assets ........................................... 111,000 (338,000)
Total adjustments ..................................... (17,000) (1,263,000)
------------ ------------
NET CASH (USED IN) OPERATING ACTIVITIES ................ (152,000) (1,369,000)
============ ============
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures .......................................... (1,261,000) (851,000)
Proceeds from sale of equipment ............................... --
------------ ------------
NET CASH (USED IN) INVESTING ACTIVITIES ................... (1,261,000) (851,000)
============ ============
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings of long-term debt .............................. 1,481,000 2,355,000
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES ................. 1,481,000 2,355,000
============ ============
Net increase in cash and cash equivalents ...................... 68,000 135,000
============ ============
Cash and cash equivalents at beginning of period ................ 46,000 122,000
Cash and cash equivalents at end of period ...................... $ 114,000 $ 257,000
See accompanying notes.
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MOORE-HANDLEY, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION PERTAINING TO THE NINE MONTHS
ENDED SEPTEMBER 30, 2000 AND 1999 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 30, 2000.
As noted in the June 2000 Form 10-Q, the Company receives vendor
allowances for certain promotional activities that it performs for its
customers. These allowances partially offset selling and administrative expense.
In the past, the Company recognized vendor allowances during the specific
expected benefit period of the related activity. However, the Company has
determined that these promotional activities benefited the overall sales of the
Company. In the first quarter 2000, the Company elected to change its estimate
of the benefit period of these vendor allowances and began recognizing the
vendor allowances during the interim period in relation to estimated annual
sales. The impact of the change was to increase selling and administrative
expense for the first six months of 2000 compared to the same period in 1999 by
$265,000 and to reduce selling and administration expenses for the third quarter
by $244,000 compared to the third quarter of 1999. This change has no impact on
annual reporting.
The financial information presented herein reflects all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair statement of the results of the interim
periods. The results of interim periods are not necessarily indicative of
results to be expected for the year.
2. EARNINGS PER COMMON SHARE
Basic earnings per share is based on the weighted average number of
common shares outstanding and net income/(loss). Diluted earnings per share is
based on the weighted average number of common shares outstanding plus the
effect of dilutive employee stock options and net income/(loss). Basic and
diluted earnings per share were the same for the first three quarters of 2000
and 1999.
3. REVENUE RECOGNITION
The Company recognizes revenues when goods are shipped.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
SUMMARY
Net sales for the quarter ended September 30, 2000 decreased $4,663,000
or 10.7% from the same quarter in 1999. We attribute the decline mainly to
higher interest rates, tighter credit, lower housing sales and lumber prices,
and the decision to discontinue selling to about 300 unprofitable dealers
earlier in the year. Lower gross profit associated with lower sales was more
than offset by lower operating expense, so that operating profit for the quarter
increased from $309,000 to $342,000. However, higher interest rates, due to
prime rate increases, resulted in a net loss of $58,000 or three cents per share
in the 2000 third quarter, compared to a net loss of $42,000 or two cents per
share in the same quarter last year.
As noted in June 2000 Form 10-Q, the Company receives vendor allowances
for certain promotional activities that it performs for its customers. These
allowances partially offset selling and administrative expense. In the past, the
Company recognized vendor allowances during the specific expected benefit period
of the related activity. However, the Company has determined that these
promotional activities benefited the overall sales of the Company. In the first
quarter 2000, the Company elected to change its estimate of the benefit period
of these vendor allowances and began recognizing the vendor allowances during
the interim period in relation to estimated annual sales. The impact of the
change was to increase selling and administrative expense for the first six
months of 2000 compared to the same period in 1999 by $265,000 and to reduce
selling and administration expenses for the third quarter by $244,000 compared
to the third quarter of 1999. This change has no impact on annual reporting.
NET SALES
Warehouse shipments decreased $2,821,000 or 10.0% and factory direct
shipments decreased $1,842,000 or 12.0% during the quarter ended September 30,
2000 compared to the same quarter in 1999. For the nine months, warehouse
shipments decreased 4.4% and factory direct shipments decreased 12.7%. About 1/3
of such decline in factory direct shipments is attributable to a decline in
lumber sales.
Gross margins on factory direct shipments are lower than gross margins
on warehouse shipments; however, expenses related to factory direct shipments
are also lower. Although factory direct shipments result in lower over all gross
margin percentages, the Company believes that factory direct shipments are an
important part of its business as a full-service wholesale distributor.
The following table sets forth the major elements of net sales:
Three Months Ended September 30,
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2000 1999
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(dollars in thousands)
Net Sales:
Warehouse shipments ..................... $ 25,395 65.3% $ 28,216 64.8%
Factory direct shipments ................ 13,508 34.7% 15,350 35.2%
Net Sales .......................... $ 38,903 100.0% $ 43,566 100.0%
Nine Months Ended September 30,
-------------------------------------------
2000 1999
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(dollars in thousands)
Net Sales:
Warehouse shipments ..................... $ 80,931 66.7% $ 84,703 64.7%
Factory direct shipments ................ 40,369 33.3% 46,230 35.3%
Net Sales .......................... $121,300 100.0% $130,933 100.0%
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OPERATIONS
The following table sets forth certain financial data as a percentage
of net sales for the periods indicated:
Three Months Ended Nine Months Ended
September 30, September 30,
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2000 1999 2000 1999
----- ----- ----- -----
Net Sales ........................................ 100.0% 100.0% 100.0% 100.0%
Gross Margin ..................................... 15.7% 15.9% 16.1% 15.5%
Warehouse and delivery expense ................... 6.3% 6.4% 6.3% 6.4%
Gross profit ..................................... 9.4% 9.5% 9.8% 9.1%
Selling and Administrative expense ............... 8.5% 8.8% 9.0% 8.4%
Operating income ................................. 0.9% 0.7% 0.8% 0.7%
Interest expense, net ............................ 1.1% 0.9% 1.0% 0.8%
Loss before provision for income tax benefit ..... (0.2)% (0.2)% (0.2)% (0.1)%
GROSS MARGIN
The gross margin percentage for the quarter ended September 30, 2000
was 15.7%, compared to 15.9% for the third quarter of 1999, and for the nine
months ended September 30, 2000 was 16.1% which was up from 15.4% for the first
nine months of 1999. The increase for the nine months is due to a greater
percentage of warehouse shipments.
The following table sets forth the gross margin dollars, gross margin
percentages and year-over-year changes from 1999 and the first, second and third
quarter of 2000:
Increase (Decrease)
vs. Same Quarter
Gross Margin in Previous Year
----------------------------- ---------------------------
Percentage
Amount of Total Net Amount Percentage
Quarter (in thousands) Sales (in thousands) Points
- ---------- -------------- ------------ -------------- ----------
1999 - 1st 6,456 14.5 390 (0.5)
2nd 6,826 16.0 789 0.1
3rd 6,932 15.9 972 0.5
4th 6,692 18.4 432 3.4
2000 - 1st 6,916 15.8 460 1.3
2nd 6,505 16.8 (321) .8
3rd 6,101 15.7 (831) (.2)
WAREHOUSE AND DELIVERY EXPENSE
As a percentage of warehouse shipments, warehouse and delivery expenses
decreased to 9.6% in the third quarter of 2000 from 9.9% in the same quarter of
1999 and decreased to 9.5% for the nine months ended September 30, 2000 from
9.8% for the first nine months of 1999. The Company continues to benefit from
the warehouse modernization program and ongoing cost reduction efforts.
The following table sets forth the trend in warehouse and delivery
expenses in 1999 and the first, second and third quarter of 2000:
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
- ---------- -------------- ------------ -------------- ----------
1999 - 1st 2,693 9.6 439 0.6
2nd 2,855 10.0 635 1.3
3rd 2,802 9.9 380 0.4
4th 2,472 9.9 (6) .6
2000 - 1st 2,656 9.2 (37) (0.4)
2nd 2,546 9.6 (309) (0.4)
3rd 2,450 9.6 (352) (0.3)
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SELLING AND ADMINISTRATIVE EXPENSE
Selling and administrative expenses decreased $127,000 in 2000 for the
first nine months when compared to the same period in 1999. The decrease was
magnified in the third quarter due to the reduction in the accruals for sales
bonuses, travel and computer supplies as a result of the reduction in sales
volume during the second and third quarter of 2000. Selling and administrative
expenses as a percent to sales increased during the first nine months of 2000 to
8.9% from 8.4% for the same period of 1999 due partially to the start up cost
for two new initiatives, M/R Warehouse and National Wholesale Hardware formerly
National Telesales.
The following table sets forth the quarterly trend in selling and
administrative expenses in 1999 and the first, second and third quarter of 2000:
Increase (Decrease)
Selling and Administrative Vs. Same Quarter
Expense In Previous Year
------------------------------------- ----------------------------
Amount Percentage Amount Percentage
Quarter (in thousands) of Total Net Sales (in thousands) Points
- ---------- -------------- ------------------ -------------- ----------
1999 - 1st 3,580 8.0 206 (0.3)
2nd 3,620 8.5 253 (0.4)
3rd 3,821 8.8 463 0.2
4th 3,213 8.9 (3) 1.2
2000 - 1st 3,773 8.6 192 0.6
2nd 3,812 9.8 192 1.3
3nd 3,309 8.5 (512) (0.3)
INTEREST EXPENSE
Interest expense increased $59,000 or 15.6% during the third quarter of
2000 compared to the same period during 1999 and increased $181,000 or 17.8% for
the nine months of 2000 compared to the same period in 1999. Interest on the
Company's working capital line of credit is charged at the prime rate which
averaged 7.85% during the first nine months of 1999 and averaged 9.05% for the
same period in 2000.
LIQUIDITY AND CAPITAL RESOURCES
From December 31, 1999 to September 30, 2000, the Company's net trade
receivables increased by $1,832,000 or 7.9%. The increase was due to extended
terms given to customers as a part of the sales promotion in conjunction with
the third quarter 2000 Dealers' Mart.
Inventories decreased by $1,438,000 or 7.9% in the nine months ended
September 30, 2000, compared to December 31, 1999. Additionally, inventories
decreased $723,000 or 4.1% compared to September 30, 1999, as the Company
continues its efforts to reduce inventory levels while maintaining its high
"fill rate" (the percentage of items shipped within 48 hours of the receipt of
an order) on customer orders.
At September 30, 2000, the Company had unused lines of credit of
$5,414,000, which it believes are adequate to finance its working capital
requirements. In March 2000, the Company executed a working capital line
increase and extension. This new line allows for a maximum borrowing of
$24,000,000 and, in addition to 85% of eligible receivables, it is secured with
50% of eligible inventory up to $6,000,000. This new line has a term of 3 years.
The Company believes this credit facility is adequate to finance its working
capital needs.
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INTEREST RATE RISK
The following discussion about the Company's interest rate risk
includes "forward looking statements" that involve risks and uncertainties.
Actual results could differ materially from those projected in the forward
looking statements.
The Company's principal credit agreement and the Company's lease with
respect to industrial development bonds issued to finance the Company's
principal warehouse distribution facility both bear a floating interest rate
based on, in the case of the credit agreement, the prime rate or at the
Company's option 2 1/2% over LIBOR, and in the case of the industrial
development lease, based on 92% of the prime rate. Accordingly, the Company is
subject to market risk associated with changes in interest rates. At September
30, 2000, $18,586,000 was outstanding under the credit agreement and $1,088,000
was outstanding under the industrial development lease agreement. For 1999, the
average principal amount outstanding under the credit agreement was $15,818,000.
Assuming the average amount outstanding under the credit agreement during 2000
is equal to such average amount outstanding during 1999 and assuming the Company
makes its scheduled amortization payments on its industrial development lease of
$769,000 in 2000, a 1% increase in the applicable interest rate during 2000
would result in additional interest expense of approximately $170,000, which
would reduce cash flow and pre-tax earnings dollar for dollar.
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. Words such as "expects", "believes", "estimates",
"anticipates", "in the process", "could", "target" and "objective" 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 forward-looking 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, and
- - changes in general economic conditions, including interest rates.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information called for by this item is provided under the caption
"Interest Rate Risk" under Item 2 - Management's Discussion and
Analysis of Financial Condition and Results of Operations.
Part II. OTHER INFORMATION (UNAUDITED)
ITEM 5. OTHER INFORMATION
(a) At properly noticed Board Meetings during the quarter ended
September 30, 2000, the Board took the following actions:
1. Elected Michael Palmer Director;
2. Authorized the Executive Committee to repurchase up
to 250,000 of the Company's shares of common stock
from time to time based on market conditions;
3. Elected Michael J. Gaines, the company's President,
to the Board;
4. Accepted the resignation of Ronald Juvonen from the
company's Board.
(b) During the quarter ended September 30, 2000, Director L. Ward
Edwards passed away.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBIT 3(A) -- Restated Certificate of Incorporation of
Company, filed as Exhibit 3(a) to the Company's Annual Report
on Form 10-K for the year ended December 31, 1987 and
incorporated herein by reference,
EXHIBIT 3(A)-1 -- Amendment to Restated Certificate of
Incorporation dated May 7, 1987, filed as Exhibit 3(a)-1 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1987 and incorporated herein by reference,
EXHIBIT 3(B) -- By-Laws of the Company, filed as Exhibit 3(d)
to the Company's Registration Statement on Form S-1 (Reg. No.
33-3032) and incorporated herein by reference,
EXHIBIT 3(B)-1 -- Article VII of By-Laws of the Company, as
amended May 7, 1987 filed as Exhibit 3(b)-1 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1987 and incorporated herein by reference,
EXHIBIT 27 -- Financial Data Schedule (For SEC Purposes Only).
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: October 25, 2000 /s/ Michael J. Gaines
---------------- ---------------------
Michael J. Gaines
President and
Chief Operating Officer
/s/Judi Watson
--------------
Judi Watson
Treasurer
(Principal Accounting and
Financial Officer)
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3(a) Restated Certificate of Incorporation of Company, filed as
Exhibit 3(a) to the Company's Annual Report on Form 10-K for
the year ended December 31, 1987 and incorporated herein by
reference.
3(a)-1 Amendment to Restated Certificate of Incorporation dated
May 7, 1987, filed as Exhibit 3(a)-1 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1987 and
Incorporated herein by reference.
3(b) By-laws of the Company, filed as Exhibit 3(d) to the
Company's Registration Statement on Form S-1 (Reg. No.
33-3032) and incorporated herein by reference.
3(b)-1 Article VII of By-laws of the Company, as amended May 7,
1987 filed as Exhibit 3(b)-1 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1987 and
Incorporated herein by reference.
27 Financial Data Schedule (For SEC purposes only).
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