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, 1997
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.
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(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 2,154,543 shares
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Class Outstanding at October 13, 1997
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MOORE-HANDLEY, INC.
INDEX
Item No. Page No.
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PART I. FINANCIAL INFORMATION
1. Financial Statements - Unaudited
Balance Sheets -
September 30, 1997 and 1996
and December 31, 1996.................................... 3
Statements of Operations -
Three Months and Nine Months Ended
September 30, 1997 and 1996.............................. 4
Statements of Cash Flows -
Nine Months Ended September 30, 1997
and 1996................................................. 5
Notes to Financial Statements................................ 6
2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations............................................ 7-10
PART II. OTHER INFORMATION
6. Exhibits and Reports on Form 8-K.................................. 11
Signature............................................................ 12
Exhibit Index........................................................ 12
Financial Data Schedule (for SEC purposes only)...................... 13
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MOORE-HANDLEY, INC.
BALANCE SHEETS
SEPTEMBER 30, 1997 AND 1996 AND DECEMBER 31, 1996
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
---------------------------------- ------------
1997 1996 1996
------------ ------------- ------------
ASSETS:
Current assets: (unaudited) (unaudited)
Cash and cash equivalents................................ $ 809,000 $ 331,000 $ 596,000
Trade receivables, net................................... 25,254,000 23,469,000 21,995,000
Other receivables........................................ 2,219,000 2,383,000 1,969,000
Merchandise inventory.................................... 14,927,000 16,820,000 17,693,000
Prepaid expenses......................................... 426,000 62,000 243,000
Refundable income taxes.................................. 408,000 435,000 870,000
Deferred income taxes.................................... 510,000 470,000 510,000
----------- ----------- -----------
Total current assets................................ 44,553,000 43,970,000 43,876,000
Prepaid pension cost........................................ 863,000 727,000 789,000
Property and equipment...................................... 19,629,000 18,765,000 19,019,000
Less accumulated depreciation............................ (11,020,000) (9,986,000) (10,248,000)
----------- ----------- -----------
Net property and equipment.......................... 8,609,000 8,779,000 8,771,000
Deferred charges, net....................................... 31,000 38,000 36,000
----------- ----------- -----------
$54,056,000 $53,514,000 $53,472,000
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank loans............................................... $ --- $ 8,000,000 $10,450,000
Accounts payable......................................... 22,711,000 20,386,000 18,134,000
Accrued payroll.......................................... 646,000 543,000 453,000
Other accrued liabilities................................ 1,884,000 1,901,000 1,690,000
Long-term debt due in one year........................... 1,181,000 831,000 1,133,000
----------- ----------- -----------
Total current liabilities........................... 26,422,000 31,661,000 31,860,000
Long-term debt.............................................. 12,030,000 5,043,000 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............................... 14,224,000 15,500,000 15,121,000
----------- ----------- -----------
Total stockholders' equity.......................... 14,475,000 15,751,000 15,372,000
----------- ----------- -----------
$54,056,000 $53,514,000 $53,472,000
=========== =========== ===========
See accompanying notes.
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MOORE-HANDLEY, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1997 1996 1997 1996
----------- ----------- ------------ ------------
Net sales.................................. $40,000,000 $39,280,000 $113,266,000 $113,803,000
Cost of merchandise sold................... 34,157,000 33,325,000 96,518,000 96,120,000
Warehouse and delivery
expense................................. 2,329,000 2,703,000 7,093,000 7,501,000
----------- ----------- ------------ ------------
Cost of sales.............................. 36,486,000 36,028,000 103,611,000 103,621,000
----------- ----------- ------------ ------------
Gross profit............................... 3,514,000 3,252,000 9,655,000 10,182,000
Selling and administrative
expense................................. 3,212,000 3,593,000 10,237,000 10,664,000
----------- ----------- ------------ ------------
Operating income (loss).................... 302,000 (341,000) (582,000) (482,000)
Interest expense, net...................... 236,000 246,000 734,000 621,000
----------- ----------- ------------ ------------
Income (loss) before provision
for income tax (benefit)................ 66,000 (587,000) (1,316,000) (1,103,000)
Income tax (benefit)....................... 21,000 (215,000) (419,000) (410,000)
----------- ----------- ------------ ------------
Net income (loss).......................... $ 45,000 $ (372,000) $ (897,000) $ (693,000)
=========== =========== ============ ============
Net income (loss) per
common share............................ $ .02 $ (.17) $ (.42) $ (.32)
=========== =========== ============ ============
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
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................................... $ (897,000) $ (693,000)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization..................... 947,000 907,000
Provision for doubtful accounts................... 180,000 180,000
Gain on sale of equipment......................... (84,000) ---
Change in assets and liabilities:
Trade and other receivables..................... (3,689,000) (2,967,000)
Merchandise inventory........................... 2,766,000 (1,489,000)
Accounts payable and accrued expenses........... 4,964,000 5,232,000
Other assets.................................... 226,000 69,000
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Total adjustments............................... 5,310,000 1,932,000
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NET CASH PROVIDED BY
OPERATING ACTIVITIES....................... 4,413,000 1,239,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................................... (819,000) (2,265,000)
Proceeds from sale of equipment........................ 102,000 ---
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NET CASH USED IN
INVESTING ACTIVITIES.............................. (717,000) (2,265,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments) borrowings of bank loans................ (10,450,000) 250,000
Principal (payments) borrowings
of long-term debt................................... 6,967,000 910,000
----------- ----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES.............................. (3,483,000) 1,160,000
----------- ----------
Net increase (decrease) in cash and
cash equivalents....................................... 213,000 134,000
Cash and cash equivalents
at beginning of period................................. 596,000 197,000
----------- ----------
Cash and cash equivalents
at end of period....................................... $ 809,000 $ 331,000
=========== ==========
See accompanying notes.
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MOORE-HANDLEY, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION PERTAINING TO THE NINE MONTHS
ENDED SEPTEMBER 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 earnings per share for all prior periods. The impact,
if any, of Statement 128 on the calculation of earnings per share for the third
quarter of 1997 and 1996 is not expected to be material.
2. REVENUE RECOGNITION
The Company recognizes revenues when goods are shipped.
3. 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
Total sales increased 1.8% for the quarter compared to the same quarter
last year as an increase of 14.6% in factory direct shipments more than offset a
decline of 4.6% in warehouse shipments for the quarter compared to the prior
year's quarter. For the nine months ended September 30, 1997, net sales were
down slightly compared to the prior year period, as a 5.9% decrease in warehouse
shipments more than offset an increase of 11.2% in factory direct shipments. The
increase in factory direct shipments for the quarter and nine months is due to
the Company's expanded efforts to increase sales of lumber and building
materials.
Gross margins on direct shipments are lower than gross margins on warehouse
shipments; however, expenses related to direct shipments are also lower. While
the trend toward factory direct shipments has resulted in decreased gross
margins, the Company believes that 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,
-------------------------------------
1997 1996
----------------- ----------------
(dollars in thousands)
Net Sales:
Warehouse shipments......... $24,931 62.3% $26,126 66.5%
Factory direct shipments.... 15,069 37.7 13,154 33.5
------- ----- ------- -----
Net Sales............... $40,000 100.0% $39,280 100.0%
======= ===== ======= =====
Nine Months Ended September 30,
-------------------------------------
1997 1996
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(dollars in thousands)
Net Sales:
Warehouse shipments......... $73,124 64.6% $ 77,708 68.3%
Factory direct shipments.... 40,142 35.4 36,095 31.7
-------- ----- -------- -----
Net Sales............... $113,266 100.0% $113,803 100.0%
======== ===== ======== =====
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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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1997 1996 1997 1996
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Net sales.............................. 100.0% 100.0% 100.0% 100.0 %
===== ===== ===== =====
Gross margin........................... 14.6 15.2 14.8 15.5
Warehouse and delivery expense......... 5.8 6.9 6.3 6.6
----- ----- ----- ----
Gross profit........................... 8.8 8.3 8.5 8.9
Selling and administrative expenses.... 8.0 9.1 9.0 9.4
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Operating income (loss)................ .8 ( .9) ( .5) ( .4)
Interest expense, net.................. .6 .6 .6 .5
----- ----- ----- ----
Income (loss) before provision
for income tax (benefit)............ .2% (1.5)% (1.2)% (1.0)%
===== ===== ===== ====
GROSS MARGIN
The gross margin percentage for the quarter and nine months ended September
30, 1997 was down 0.6% and 0.7%, respectively, compared to the same periods last
year. The decreases were due to the increase in factory direct shipments as a
percent of total sales. For the quarter this was offset in part by an increase
in the gross margin percentage on warehouse shipments.
Although total gross margin dollars in the 1st and 3rd quarters are higher
than in other quarters, the gross margin percentages for the first and third
quarters are typically lower than in other quarters. This is because of
increased sales generated at Dealers' Marts held during the 1st and 3rd quarters
which include a higher proportion of factory direct shipments at lower gross
margins.
The following table shows the gross margin trend in 1996 and the first
three 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)
3rd 5,843 14.6 (112) ( .6)
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WAREHOUSE AND DELIVERY EXPENSES
Warehouse and delivery expenses were down $374,000 or 13.8% for the quarter
compared to the same period last year, partially as a result of an $84,000 gain
on sale of equipment. As a percentage of warehouse shipments, these expenses
decreased to 9.3% compared to 10.3% for the same quarter last year. For the nine
months these expenses were down $408,000 or 5.4% compared to the same period
last year but flat as a percent of warehouse shipments.
The Company is taking several steps to improve service level, increase
warehouse efficiency, and reduce error rates. These steps thus far have
significantly improved service level and somewhat improved error rates. Ongoing
efforts to reduce expenses include resetting the mezzanine and partial
resetting of the main warehouse, both of which are about one-third complete. The
resetting and related expenses began in the second quarter of 1997 and the
Company expects these efforts will be completed sometime in the 1st quarter of
1998.
In 1996 the Company expanded and modernized its warehouse. This project
disrupted warehouse operations and increased warehouse expense. The following
table shows the trend in warehouse and delivery expenses in 1995, before the
warehouse expansion and disruption, in 1996, during it, and during the first
three 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
- ------------------------------ ------------ -------------- ----------
1995 - 1st $1,982 8.0 $ 62 .1
2nd 2,019 8.0 28 (.1)
3rd 2,035 8.1 41 .2
4th 1,831 7.7 (182) (.7)
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
3rd 2,329 9.3 (374) (1.0)
SELLING AND ADMINISTRATIVE EXPENSES
As a result of personnel and other expense reductions made during the first
half of the year, selling and administrative expenses for the
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quarter decreased $381,000 or 10.6% compared to the same quarter last year.
These expenses decreased $316,000 or 9.0% compared to the prior quarter which
included an accrual of $175,000 for severance pay and expenses. For the nine
months selling and administrative expenses decreased $427,000 or 4.0% compared
to the same period last year. Included in expenses for the nine months this year
is $400,000 of severance pay and expenses. Severance pay and expenses in the
first nine months last year was $240,000.
The following table shows the trend in selling and administrative expenses
in 1996 and the first three quarters of 1997.
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)
3rd 3,212 8.0 (381) (1.1)
LIQUIDITY AND CAPITAL RESOURCES
Capital expenditures of $819,000 were made during the nine months ended
September 30, 1997 which were financed from working capital.
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. At
September 30, 1997 the Company had unused availability under the new credit
facility of $7,256,000 and believes the new facility will be adequate to finance
its working capital needs.
Trade receivables at September 30, 1997 were up $3,259,000 or 14.8% from
December 1996 and $1,785,000 or 7.6% from September 30, 1996. The increase was
due to the higher level of sales in September 1997 (which included sales arising
from orders taken at a Dealers' Mart in August) compared to December 1996 and
September 1996 (which also included sales arising from orders taken a Dealers'
Mart in August 1996). Because of extended payment terms received from suppliers
in connection with the mart, the increase in receivables is offset by an
increase in trade payables.
Largely due to a reduction of excess stock, inventories at September
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30, 1997 are down $2,766,000 or 15.6% from December 31, 1996 and $1,893,000 or
11.3% from September 30, 1996.
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. 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 implement and 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;
- changes in the mix of merchandise sold including the relative purcentage
of sales consisting of factory direct shipments compared to warehouse
shipments;
- uncertainties associated with any acquisition the Company may seek to
implement; and
- changes in general economic conditions.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - 27 Financial Data Schedule (for SEC purposes only).
(b) There were no reports on Form 8-K filed by the Company during the nine
month period ended September 30, 1997.
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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 there unto duly authorized.
MOORE-HANDLEY, INC.
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(Registrant)
Date: October 29, 1997 /s/ L. Ward Edwards
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L. Ward Edwards
Vice President, Treasurer
and Secretary
(Principal Accounting and
Financial Officer)
EXHIBIT INDEX
Exhibit No. Page No.
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27 Financial Data Schedule (for SEC purposes only).... 13
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