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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
1996
FORM 10 - Q
For the Fiscal
SECOND QUARTER
Ended June 29, 1996
Quarterly Report Pursuant To Section 13 or 15(d)
of the Securities Exchange Act of 1934
MOORE MEDICAL CORP.
(Exact name of registrant as specified in its charter)
- --------------------------------------------------------------------------------
DELAWARE 1-8903
(State of incorporation) (Commission File Number)
P.O. BOX 1500, NEW BRITAIN, CT 06050 22-1897821
(Address of principal executive offices) (I.R.S. Employer
Identification Number)
860-826-3600
(Registrant's telephone number)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
COMMON STOCK ($.01 PAR VALUE) AMERICAN STOCK EXCHANGE
(Title of Each Class) (Name of each exchange on which registered)
- --------------------------------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _____
--------
2,909,001
Number of shares of Common Stock outstanding as of July 24, 1996.
Total number of pages in the numbered original is 12
This is page 1 of 12 pages.
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1
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MOORE MEDICAL CORP.
INDEX
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
Item I. Financial Statements
Balance Sheets at the end of the second quarter of
1996 and at the end of the year 1995............ 3
Statements of Operations for the second quarters
of 1996 and 1995................................ 4
Statements of Operations for the first two quarters
of 1996 and 1995................................ 5
Statements of Cash Flows for the first two quarters
of 1996 and 1995................................ 6
Notes to Financial Statements...................... 7
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition........... 8-10
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K................... 11
Signatures.................................................. 12
2
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<TABLE>
<CAPTION>
MOORE MEDICAL CORP.
Balance Sheets at end of
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Amounts in thousands SECOND QUARTER 1996 YEAR 1995
(Unaudited)
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<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 78 $ 39
Accounts receivable, less allowances
of $696 and $734......................... 24,505 22,890
Inventories................................. 39,700 40,897
Prepaid expenses and other current assets... 5,731 4,759
Deferred taxes.............................. 690 619
------- -------
Total Current Assets................... 70,704 69,204
------- -------
NONCURRENT ASSETS
Equipment and leasehold improvements, net... 4,606 4,937
Other assets................................ 1,194 1,222
------- -------
Total Noncurrent Assets................ 5,800 6,159
------- -------
$76,504 $75,363
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable............................ $21,986 $24,699
Accrued expenses............................ 3,002 2,689
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Total Current Liabilities.............. 24,988 27,388
------- -------
DEFERRED TAXES............................... 398 447
REVOLVING CREDIT FINANCING................... 23,904 21,672
SHAREHOLDERS' EQUITY
Preferred stock - no shares outstanding..... -- --
Common stock - $.01 par value;
5,000 shares authorized;
3,246 shares issued...................... 33 32
Capital in excess of par value.............. 21,690 21,680
Retained earnings........................... 8,548 7,274
------- -------
30,271 28,986
Less treasury shares, at cost, 343 and 352
shares................................... (3,057) (3,130)
------- -------
Total Shareholders' Equity............. 27,214 25,856
------- -------
$76,504 $75,363
======= =======
</TABLE>
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The accompanying notes are an integral part of the financial statements.
3
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MOORE MEDICAL CORP.
<TABLE>
<CAPTION>
Statements of Operations for the
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Amounts in thousands, except per share data SECOND QUARTER
----------------------------
1996 1995
(Unaudited)
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<S> <C> <C>
Net sales................................... $72,840 $72,271
Cost of products sold....................... 62,058 62,034
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Gross profit................................ 10,782 10,237
Selling, general & administrative expenses.. 9,284 8,843
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Operating income............................ 1,498 1,394
Interest expense, net....................... 513 702
------- -------
Income before income taxes.................. 985 692
Income tax provision........................ 344 260
------- -------
Net income.................................. $ 641 $ 432
======= =======
Net income per share........................ $ .22 $ .15
======= =======
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</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
MOORE MEDICAL CORP.
<TABLE>
<CAPTION>
Statements of Operations for the
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Amounts in thousands, except per share data FIRST TWO QUARTERS
---------------------------
1996 1995
(Unaudited)
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<S> <C> <C>
Net sales................................... $148,673 $150,049
Cost of products sold....................... 127,294 129,446
-------- --------
Gross profit................................ 21,379 20,603
Selling, general & administrative expenses.. 18,442 17,896
-------- --------
Operating income............................ 2,937 2,707
Interest expense, net....................... 979 1,238
-------- --------
Income before income taxes.................. 1,958 1,469
Income tax provision........................ 684 552
-------- --------
Net income.................................. $ 1,274 $ 917
======== ========
Net income per share........................ $ .44 $ .32
======== ========
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</TABLE>
The accompanying notes are an integral part of the financial statements.
5
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<TABLE>
<CAPTION>
MOORE MEDICAL CORP.
Statements of Cash Flows for the
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Amounts in thousands FIRST TWO QUARTERS
------------------------
1996 1995
(Unaudited)
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income............................. $ 1,274 $ 917
Adjustments to reconcile net income to
net cash flows provided by operating
activities
Depreciation and amortization......... 881 816
Deferred income taxes................. (120) 132
Other................................. -- 193
Changes in operating assets and
liabilities
Accounts receivable.................. (1,615) (3,812)
Inventories.......................... 1,197 (4,354)
Other current assets................. (944) (1,232)
Accounts payable..................... (2,713) 2,462
Other current liabilities............ 361 (570)
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Net cash flows used in operating (1,679) (5,448)
activities........................... ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Equipment and leasehold improvements... (550) (1,883)
------- -------
Net cash flows used in investing
activities.......................... (550) (1,883)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Revolving credit financing increase, net.. 2,232 7,266
Other, net................................ 36 59
------ ------
Net cash flows provided by financing
activities.......................... 2,268 7,325
------ ------
Increase (decrease) in cash................ 39 (6)
Cash at beginning of period................ 39 59
------ ------
CASH AT END OF PERIOD...................... $ 78 $ 53
====== ======
</TABLE>
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The accompanying notes are an integral part of the financial statements.
6
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MOORE MEDICAL CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION OF FINANCIAL STATEMENTS
The accompanying financial statements should be read in conjunction
with the Notes to Financial Statements and Management's Discussion and
Analysis of Results of Operations and Financial Condition included in
the Company's 1995 Annual Report filed on Form 10-K and in this Form
10-Q Report.
In the opinion of management, all adjustments necessary for a fair
presentation of the results for the interim periods have been made. The
results of operations for the second quarter are not necessarily
indicative of the results to be expected for the full year. The fiscal
quarters ended June 29, 1996 and July 1, 1995.
Certain prior year amounts have been reclassified to conform with the
current year presentation.
NOTE 2 - NET INCOME PER SHARE
Net income per share of common stock is based on the weighted average
number of common shares outstanding (adjusted for dilutive common stock
options), which was 2,918,000 shares and 2,902,000 shares in the second
quarters of 1996 and 1995, respectively, and 2,914,000 shares and
2,895,000 shares in the first two quarters of 1996 and 1995,
respectively.
7
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MOORE MEDICAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
OVERVIEW
- --------
The following table sets forth items included in the Statements of Operations as
a percentage of sales for the second quarter and first two quarters of 1996 and
1995, respectively. The table also shows, for each line item, the percentage
change in the 1996 periods from the comparable 1995 periods.
<TABLE>
<CAPTION>
SECOND QUARTER FIRST TWO QUARTERS
------------------------- -----------------------
% of Sales % % of Sales %
---------------- -------- -------------- --------
1996 1995 Change 1996 1995 Change
-------- ------ -------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
Net sales..................... 100.0% 100.0% 1% 100.0% 100.0% (1)%
Cost of products sold......... 85.2 85.8 - 85.6 86.3 (2)
----- ----- ----- -----
Gross profit.................. 14.8 14.2 5 14.4 13.7 4
Selling, general & admin exp.. 12.7 12.2 5 12.4 11.9 3
----- ----- ----- -----
Operating income.............. 2.1 2.0 7 2.0 1.8 8
Interest expense, net......... 0.7 1.0 (27) 0.6 0.8 (21)
----- ----- ----- -----
Income before income taxes.... 1.4 1.0 42 1.4 1.0 33
Income tax provision.......... 0.5 0.4 - 0.5 0.4 -
----- ----- ----- -----
Net income.................... 0.9% 0.6% 48% 0.9% 0.6% 39%
===== ===== ==== ===== ===== ====
</TABLE>
RESULTS OF OPERATIONS
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SECOND QUARTER
1996 COMPARED WITH 1995
- -----------------------
Net sales of $72.8 million for the second quarter of 1996 increased slightly
from the $72.3 million in the same quarter of 1995. Sales of pharmaceuticals
decreased and sales of medical/surgical supplies increased. The decreased sales
of pharmaceuticals was due both to deflation in prices of generic
pharmaceuticals and to competitive pressures in the Company's wholesale markets.
Growth in sales to health-care practitioner customers accounted for most of the
sales increase in medical/surgical supplies.
8
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The gross margin rate of 14.8% in the second quarter of 1996 was higher than the
14.2% in the same quarter a year earlier. Gross profit dollars increased in the
second quarter of 1996 over 5% to $10.8 million. These improvements resulted
primarily from the change in sales mix toward medical/surgical supplies, which
have a higher gross margin rates than pharmaceuticals.
Selling, general and administrative expenses during the second quarter of 1996
increased 5% from the comparable quarter of 1995. Employee bonuses and employee
benefits accounted for a majority of the expense increase.
Interest expense decreases of 27% for the second quarter of 1996 significantly
contributed to the earnings improvement. More than half of the interest expense
decrease resulted from lower debt levels, achieved primarily through inventory
reductions. Lower interest rates, resulting from the Company's new line of
credit negotiated in early 1996, also produced a reduction in interest expense.
Net income increased 48% for the second quarter of 1996. The increase in net
income was due primarily to lower interest expense and higher operating income.
FIRST TWO QUARTERS
1996 COMPARED WITH 1995
- -----------------------
Net sales of $148.7 million for the first two quarters of 1996 decreased
slightly in comparison to the same 1995 period. Sales of pharmaceuticals
decreased and sales of medical/surgical supplies increased. The decreased sales
of pharmaceuticals was due both to deflation in prices of generic
pharmaceuticals and to competitive pressures in the Company's wholesale markets.
Growth in sales to health-care practitioner customers accounted for most of the
sales increase in medical/surgical supplies.
For the 1996 first half, the gross margin rate of 14.4% was higher than the
13.7% rate in the same period a year earlier. Gross profit dollars increased 4%
to $21.4 million. These improvements resulted primarily from the change in
sales mix toward medical/surgical supplies, which have higher gross margin rates
than pharmaceuticals.
Selling, general and administrative expenses for the first half of 1996
increased 3% compared with the first half of 1995. In the first half of 1995,
the Company incurred $330,000 ($.07 per share after taxes) for pre-opening
start-up costs in connection with a new distribution center. After eliminating
these costs from the 1995 first half for comparability, the 1996 selling,
general and administrative expenses increased 5%. Employee bonuses and employee
benefits accounted for a majority of the expense increase.
9
<PAGE>
Interest expense in the first half of 1996 decreased 21% from the same period a
year ago. Half of the interest expense decrease resulted from lower debt
levels, achieved primarily through inventory reductions. Lower interest rates,
resulting from the Company's new line of credit negotiated in early 1996,
accounted for the remaining reduction in interest expense.
Net income increased 39% for the first half of 1996. The increase in net income
was most directly attributable to the one-time expenses in 1995 associated with
starting up a new distribution center and the 1996 reduction in interest
expense.
FINANCIAL CONDITION
- -------------------
During the first half of 1996, the Company increased its borrowings under its
line of credit by $2.2 million to fund $1.7 million of net cash used for
operations and $0.5 million of equipment purchases. Uses of cash for operations
comprised an accounts receivable increase of $1.6 million due to higher sales in
the second quarter of 1996 than for the fourth quarter of 1995; an accounts
payable decrease of $2.7 million; and a net increase in prepaid/accrued expenses
and other current assets of $0.6 million. Somewhat offsetting these uses of
cash were sources of cash from operations consisting of a $1.2 million reduction
in inventories, net income of $1.3 million and non-cash items included in net
income of $0.7 million.
In January, 1996, the Company entered into a new revolving line of credit
financing agreement with a bank. This $45 million secured line of credit extends
through December 31, 1998. The facility provides for funding limited by a
formula using accounts receivable balances and inventory levels as the primary
variables. Interest on loans is charged at the prime rate or, at the option of
the Company, at the Eurodollar rate plus a rate in a range of 1% to 2% depending
on the financial leverage of the Company. In addition the Company pays a 1/4%
commitment fee on the unused line of credit. Substantially all assets of the
Company have been pledged as collateral and the agreement contains covenants and
restrictions relating to asset protection, financial condition, dividends,
investments, acquisitions and certain other matters. Under the prior financing
facility that was in effect for 1995, interest on loans was charged at the prime
rate plus a 1/4% premium or, at the option of the Company, at LIBOR plus 2 1/2%.
As of June 29, 1996, borrowings under the line of credit were $23.9 million and
the effective average interest rate for the first half of 1996 was 7.8%.
Management believes that the funding needs of the Company for operating working
capital and equipment will continue to be met through income from operations and
financing under it's line of credit.
10
<PAGE>
PART II. OTHER INFORMATION
-----------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
(a) The 1996 Annual Meeting of Shareholders of the Company was held
May 15, 1996.
(b) At the Annual Meeting, the following persons were elected
directors, with the following number of shares voted for and
withheld:
<TABLE>
<CAPTION>
For Withheld
--------- ----------
<S> <C> <C>
Mark E. Karp 2,736,310 36,461
Steven Kotler 2,737,310 35,461
Robert H. Steele 2,737,385 35,386
Peter C. Sutro 2,737,385 35,386
Wilmer J. Thomas, Jr. 2,736,085 36,686
Dan K. Wassong 2,732,753 40,018
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
--------
None.
(b) Reports on Form 8-K
-------------------
No report on Form 8-K was filed during the quarter.
11
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SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MOORE MEDICAL CORP.
(REGISTRANT)
By: /s/ John A. Murray By: /s/ Victor H. Emerson, Jr.
------------------------------- ----------------------------
John A. Murray Victor H. Emerson, Jr.
Vice President - Finance and Controller and Chief
Chief Financial Officer Accounting Officer
August 9, 1996 August 9, 1996
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-28-1996 DEC-28-1996
<PERIOD-START> APR-01-1996 DEC-31-1995
<PERIOD-END> JUN-29-1996 MAR-30-1996
<CASH> 78 77
<SECURITIES> 0 0
<RECEIVABLES> 25,201 26,845
<ALLOWANCES> 696 879
<INVENTORY> 39,700 42,408
<CURRENT-ASSETS> 6,421 7,303
<PP&E> 14,439 14,108
<DEPRECIATION> 9,833 9,400
<TOTAL-ASSETS> 76,504 81,683
<CURRENT-LIABILITIES> 24,987 30,059
<BONDS> 0 0
0 0
0 0
<COMMON> 32 32
<OTHER-SE> 27,214 26,526
<TOTAL-LIABILITY-AND-EQUITY> 76,504 81,683
<SALES> 72,840 75,833
<TOTAL-REVENUES> 72,840 75,833
<CGS> 62,058 65,236
<TOTAL-COSTS> 62,058 65,236
<OTHER-EXPENSES> 9,284 9,158
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 513 466
<INCOME-PRETAX> 985 973
<INCOME-TAX> 344 340
<INCOME-CONTINUING> 641 633
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 641 633
<EPS-PRIMARY> 0.22 0.22
<EPS-DILUTED> 0.22 0.22
</TABLE>
