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, 1997
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
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(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 Securi ties 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 2,154,543 shares
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Class Outstanding at July 10, 1997
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MOORE-HANDLEY, INC.
INDEX
Item No. Page No.
PART I. FINANCIAL INFORMATION
1. Financial Statements - Unaudited
Balance Sheets -
June 30, 1997 and 1996
and December 31, 1996............................................................................ 3
Statements of Operations -
Three Months and Six Months Ended
June 30, 1997 and 1996........................................................................... 4
Statements of Cash Flows -
Six Months Ended June 30, 1997
and 1996......................................................................................... 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................................................................................. 11-12
6. Exhibits and Reports on Form 8-K..................................................................... 12
Signature.................................................................................................... 12
Exhibit 10 (ii).............................................................................................. 14-40
Financial Data Schedule (for SEC purposes only).............................................................. 41
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MOORE-HANDLEY, INC.
BALANCE SHEETS
JUNE 30, 1997 AND 1996 AND DECEMBER 31, 1996
(UNAUDITED)
JUNE 30, DECEMBER 31,
-------------------------------- ------------
1997 1996 1996
------------ ------------ ------------
(unaudited) (unaudited)
ASSETS:
Current assets:
Cash and cash equivalents .................. $ 647,000 $ 351,000 $ 596,000
Trade receivables, net ..................... 21,683,000 20,031,000 21,995,000
Other receivables .......................... 1,672,000 2,068,000 1,969,000
Merchandise inventory ...................... 14,695,000 15,338,000 17,693,000
Prepaid expenses ........................... 476,000 344,000 243,000
Refundable income tax ...................... 1,037,000 221,000 870,000
Deferred income taxes ...................... 510,000 470,000 510,000
------------ ------------ ------------
Total current assets .................. 40,720,000 38,823,000 43,876,000
Prepaid pension cost .......................... 853,000 719,000 789,000
Property and equipment ........................ 19,666,000 18,349,000 19,019,000
Less accumulated depreciation .............. (10,878,000) (9,671,000) (10,248,000)
------------ ------------ ------------
Net property and equipment ............ 8,788,000 8,678,000 8,771,000
Deferred charges, net ......................... 32,000 40,000 36,000
------------ ------------ ------------
$ 50,393,000 $ 48,260,000 $ 53,472,000
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank loans ................................. $ 9,800,000 $ 6,000,000 $ 10,450,000
Accounts payable ........................... 16,803,000 16,766,000 18,134,000
Accrued payroll ............................ 529,000 535,000 453,000
Other accrued liabilities .................. 2,012,000 1,813,000 1,690,000
Long-term debt due in one year ............. 1,151,000 1,189,000 1,133,000
------------ ------------ ------------
Total current liabilities ............. 30,295,000 26,303,000 31,860,000
Long-term debt ................................ 4,539,000 4,775,000 5,111,000
Deferred income taxes ......................... 1,129,000 1,059,000 1,129,000
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 ................. 14,179,000 15,872,000 15,121,000
------------ ------------ ------------
Total stockholders' equity ............ 14,430,000 16,123,000 15,372,000
------------ ------------ ------------
$ 50,393,000 $ 48,260,000 $ 53,472,000
============ ============ ============
See accompanying notes.
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MOORE-HANDLEY, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1997 1996 1997 1996
----------- ----------- ------------ -----------
Net sales .................. $ 35,424,000 $ 35,843,000 $ 73,266,000 $ 74,523,000
Cost of merchandise sold ... 30,030,000 30,028,000 62,361,000 62,795,000
Warehouse and delivery
expense ................. 2,470,000 2,595,000 4,764,000 4,798,000
------------ ------------ ------------ ------------
Cost of sales .............. 32,500,000 32,623,000 67,125,000 67,593,000
------------ ------------ ------------ ------------
Gross profit ............... 2,924,000 3,220,000 6,141,000 6,930,000
Selling and administrative
expense ................. 3,528,000 3,732,000 7,025,000 7,071,000
------------ ------------ ------------ ------------
Operating loss ............. (604,000) (512,000) (884,000) (141,000)
Interest expense, net ...... 217,000 176,000 498,000 375,000
------------ ------------ ------------ ------------
Loss before provision
for income tax (benefit). (821,000) (688,000) (1,382,000) (516,000)
Income tax (benefit) ....... (260,000) (259,000) (440,000) (195,000)
------------ ------------ ------------ ------------
Net loss ................... $ (561,000) $ (429,000) $ (942,000) (321,000)
============ ============ ============ ============
Net loss per
common share ............ $ (.26) $ (.20) $ (.44) $ (.15)
============ ============ ============ ============
Weighted average common
shares outstanding ...... 2,154,000 2,165,000 2,154,000 2,165,000
============ ============ ============ ============
See accompanying notes.
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MOORE-HANDLEY, INC.
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
1997 1996
--------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................................................ $ (942,000) $ (321,000)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization.................................................. 630,000 592,000
Provision for doubtful accounts................................................ 60,000 60,000
Gain on sale of equipment...................................................... (20,000) ---
Change in assets and liabilities:
Trade and other receivables............................................... 549,000 906,000
Merchandise inventory..................................................... 2,998,000 (7,000
Accounts payable and accrued expenses..................................... (933,000) 1,516,000
Other assets.............................................................. (460,000 7,000
---------- ----------
Total adjustments......................................................... 2,824,000 3,074,000
---------- ---------
NET CASH PROVIDED BY
OPERATING ACTIVITIES................................................... 1,882,000 2,753,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................................................................... (647,000) (1,849,000)
Proceeds from sale of equipment......................................................... 20,000 ---
---------- ----------
NET CASH USED IN
INVESTING ACTIVITIES........................................................... (627,000) (1,849,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments of bank loans.............................................................. (650,000) (1,750,000)
Principal (payments) borrowings
of long-term debt...................................................................... (554,000) (1,000,000)
---------- ----------
NET CASH USED IN
FINANCING ACTIVITIES........................................................... (1,204,000) (750,000)
---------- ----------
Net increase in cash and
cash equivalents........................................................................ 51,000 154,000
Cash and cash equivalents
at beginning of period.................................................................. 596,000 197,000
---------- ----------
Cash and cash equivalents
at end of period........................................................................ $ 647,000 $ 351,000
========== ==========
See accompanying notes.
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MOORE-HANDLEY, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION PERTAINING TO THE SIX MONTHS
ENDED JUNE 30, 1997 AND 1996 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, 1997.
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.
The Financial Accounting Standards Board has issued Statement No. 128,
Earnings per Share. This must be adopted by the Company on December 31, 1997 at
which time it must restate all prior periods. The impact, if any, of Statement
128 on the calculation of earings per share for the first quarter of 1997 and
1996 is not expected to be material.
2. LINES OF CREDIT
On August 7, 1997 the Company entered into a credit agreement under
which it may borrow up to 85% of eligible receivables up to a maximum of
$15,000,000. The borrowings bear interest at the prime interest rate or, at the
Company's option, 2 1/2 % over LIBOR, and are secured by the Company's trade
receivables. This credit facility replaces the Company's lines of credit with
banks totaling $10,000,000 of which $9,800,000 was outstanding as of June 30,
1997 and one of which was amended in the second quarter to avoid a violation of
a debt covenant.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
NET SALES
Net sales for the quarter ended June 30, 1997 were down 1% compared to
the same quarter in the prior year. Warehouse shipments were down $1,725,000, or
7%, which was largely offset by a 13% increase in factory direct shipments. The
increase in factory direct shipments was due to increased sales of lumber and
building materials.
The following table sets forth the major elements of net sales:
Three Months Ended June 30,
---------------------------------------------
1997 1996
------------------ -------------------
(dollars in thousands)
Net Sales:
Warehouse shipments............................................... $23,871 67.4% $25,596 71.4%
Factory direct shipments.......................................... 11,553 32.6 10,247 28.6
------- ----- ------- -----
Net Sales..................................................... $35,424 100.0% $35,843 100.0%
======= ===== ======= =====
Six Months Ended June 30,
---------------------------------------------
1997 1996
------------------ -------------------
(dollars in thousands)
Net Sales:
Warehouse shipments............................................... $48,193 65.8% $51,582 69.2%
Factory direct shipments.......................................... 25,073 34.2 22,941 30.8
------- ----- ------- -----
Net Sales..................................................... $73,266 100.0% $74,523 100.0%
======= ===== ======= =====
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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 Six Months Ended
June 30, June 30,
--------------------- --------------------
1997 1996 1997 1996
----- ------ ------ -----
Net sales............................................................ 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
Gross margin......................................................... 15.2 16.2 14.9 15.7
Warehouse and delivery expense....................................... 6.9 7.2 6.5 6.4
----- ----- ----- -----
Gross profit......................................................... 8.3 9.0 8.4 9.3
Selling and administrative expenses.................................. 10.0 10.4 9.6 9.5
----- ----- ----- -----
Operating income (loss).............................................. (1.7) (1.4) (1.2) (.2)
Interest expense, net................................................ .6 .5 .7 .5
----- ----- ----- -----
Income (loss) before provision
for income tax (benefit).......................................... (2.3)% (1.9)% (1.9)% (.7)%
===== ===== ===== =====
GROSS MARGIN
The gross margin percentage for the quarter ended June 30, 1997 was down
1.0% compared to the same quarter last year and for the six months decreased by
.8% compared to the prior year. About half of the decrease was due to the
increase in factory direct shipments as a percent of total sales and the balance
of the decrease is due to more competitive pricing.
The following table shows the gross margin trend in 1996 and the first
and second quarters of 1997:
Increase (Decrease)
vs. Same Quarter
Gross Margin in Previous Year
- ---------------------------------------------------------------------- -------------------------------------
Amount Percentage Amount Percentage
Quarter (in thousands) of Sales (in thousands) Points
- ---------------- -------------- ----------- --------------- ------------
1996 - 1st $5,913 15.3 $ 84 (1.0)
2nd 5,815 16.2 (109) --
3rd 5,955 15.2 148 (.3)
4th 5,681 17.8 293 1.0
1997 - 1st 5,511 14.6 $ (402) (.7)
2nd 5,394 15.2 (421) (1.0)
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WAREHOUSE AND DELIVERY EXPENSES
The aftereffects of the major warehouse construction project of last
year continued to be felt through the second quarters. Warehouse and delivery
expenses were down $125,000 compared to the same period last year. However, as a
percentage of warehouse shipments, these expenses increased to 10.3% compared to
10.1% for the same quarter last year.
The following table shows the trend in warehouse and delivery expenses
in 1996 and the first and second quarters of 1997:
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
- ---------------- -------------------- ------------- -------------- ----------
1996 - 1st $2,203 8.5 $ 221 .5
2nd 2,595 10.1 576 2.1
3rd 2,703 10.3 668 2.2
4th 2,407 10.5 576 2.8
1997 - 1st 2,294 9.4 $ 91 .9
2nd 2,470 10.3 (125) .2
SELLING AND ADMINISTRATIVE EXPENSES
During the quarter the Company undertook further reductions in selling
and administrative personnel and, as a result, accrued $175,000 for severance
pay and expenses. These personnel and other expense reductions made during the
first half of the year will reduce expenses by about $1,000,000 annually. Some
of these cost reductions began to be recognized in the second quarter and the
remainder will begin to be recognized in the balance of the current calendar
year. Excluding severance pay in both quarters, selling and administrative
expense is down $139,000 for the second quarter of 1997 compared to the same
quarter last year.
The following table shows the trend in selling and administrative
expenses in 1996 and the first and second quarters of 1997.
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Increase (Decrease)
Selling and Administrative vs. Same Quarter
Expenses in Previous Year
- -------------------------------------------------------------- ----------------------------------------
Amount Percentage Amount Percentage
Quarter (in thousands) of Sales (in thousands) Points
- --------- ------------ ---------- --------------- ----------------
1996 - 1st $3,339 8.6 $ 194 (.2)
2nd 3,732 10.4 332 1.1
3rd 3,593 9.1 211 .1
4th 3,476 10.9 309 1.0
1997 - 1st $3,497 9.2 $ 159 .7
2nd 3,528 10.0 (204) (.3)
LIQUIDITY AND CAPITAL RESOURCES
Capital expenditures of $647,000 were made during the six months ended
June 30, 1997. Largely due to the elimination of excess stock,inventories were
down $2,998,000 from December, 1996.
On August 7, 1997 the Company entered into a credit agreement under
which it may borrow up to 85% of eligible receivables up to a maximum of
$15,000,000. The borrowings bear interest at the prime interest rate or, at the
Company's option, 2 1/2 % over LIBOR, and are secured by the Company's trade
receivables. This credit facility replaces the Company's lines of credit with
banks totaling $10,000,000 of which $9,800,000 was outstanding as of June 30,
1997 and one of which was amended in the second quarter to avoid a violation of
a debt covenant. The Company believes this new credit facility will be adequate
to finance its working capital needs.
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
Certain of the statements contained in this report (other than the finan
cial statements and other statements of historical fact) are forward-looking
statements. There can be no assurance that future developments will be in
accordance with management's expectations or that the affect of future develop
ments 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;
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- 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.
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 21,
1997 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.
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 2,106,657 16,005
----------- ---------
Pierce E. Marks, Jr. 2,106,657 16,005
----------- ---------
L. Ward Edwards 2,106,657 16,005
----------- ---------
Michael B. Stubbs 2,106,657 16,005
----------- ---------
Ronald J. Juvonen 2,106,657 16,005
----------- ---------
Also at the meeting, the proposal to increase the number of shares autho
rized for issuance under the Corporation's 1991 Incentive Compensation Plan was
approved. The following table sets forth the distribution of votes cast with
regard to the proposal:
Number of Votes
---------------
For 1,172,823
------------
Against 36,005
------------
Abstain 10,450
------------
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits --
10 (ii) Financing Agreement, dated August 7, 1997, between the
Company and The CIT Group/Business Credit, Inc.
27 Financial Data Schedule (FOR SEC USE ONLY)
(b) There were no reports on Form 8-K filed by the Company during the
six month period ended June 30, 1997.
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: August 14, 1997 /S/ L. Ward Edwards
-------------------- -------------------------------
Vice President, Treasurer
and Secretary
(Principal Accounting and
Financial Officer)
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