<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
1996
FORM 10-K
ANNUAL REPORT
For the fiscal year ended December 28, 1996
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates (i.e.
other than identified 10% holders, and holdings attributed to executive officers
and directors) of the Registrant as of April 10, 1997 was $16,374,000.
Number of shares of Common Stock outstanding (exclusive of 321,735 treasury
shares) as of April 10, 1997: 2,924,079.
- --------------------------------------------------------------------------------
Documents Incorporated By Reference
The portions of the registrant's proxy statement for its 1997 Annual Meeting of
Shareholders referred to in Part III of this report are incorporated by
reference. The exhibit index is located on pages 25-27. Total number of pages in
the numbered original (including exhibits) is xx.
This is page 1 of xx pages.
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<PAGE>
ITEM 1. Business
General
Moore Medical Corp. (the "Company") is a national distributor and marketer of
health-care products to almost 100,000 customers in more than twenty customer
groups serving health-care needs in diverse business settings. It markets
approximately 12,000 pharmaceutical and medical/surgical supply products through
direct mail, telesales, and a small field sales force. Most customer orders are
processed by telemarketing representatives. The Company fulfills orders from its
regional distribution centers in Connecticut, Florida, Illinois, and California
and ships orders nationwide by common carriers. Its business is in its
fifty-first year of operation.
Recent Developments
On April 2, 1997, the Company announced that it had decided to exit various
supply contracts with the U.S. Department of Veterans Affairs and the Defense
Department due to the highly competitive nature of the business, the complexity
of contractual price compliance regulations and related administrative burdens,
and to take a charge to earnings for certain estimated liabilities for contract
price deficiencies and associated costs and additional 1996 costs related to the
decision to exit the supply contracts. The total estimated charge is $4.0
million ($.90 per share) and has been recorded in the fourth quarter of 1996.
See Notes 2 and 9 to the financial statements. The ultimate adjustment may vary
from the estimated amount and is subject to negotiations with the government
agencies and in the opinion of management will not have a material adverse
effect on the financial position or liquidity of the Company, but could have a
material effect on the results of operations and cash flow in a given year. The
Company anticipates an additional charge to earnings, estimated at approximately
$800,000 in the first half of 1997 relating to these contracts.
The Company also announced on April 2,1997 that its Board of Directors had
initiated a process to explore alternatives for enhancing shareholder value,
including joint ventures or a possible sale of all or part of the Company,
giving due consideration to the interests of the Company's shareholders,
employees, customers and other constituencies. The Board of Directors authorized
the engagement of the investment banking firm of Schroder Wertheim & Co.
Incorporated to act as advisor to the Company regarding the process.
Revenues from sales of generic pharmaceuticals decreased significantly in 1996
from 1995 due to an industry-wide drop in prices. Management estimates that the
generic price deflation increased the 1996 loss by at least $1.2 million ($.41
per share).
The Company enlarged its sales staff in 1996, continuing management's strategy
to increase sales through more personal contact with customers in the more
profitable areas of its business. The hiring and training occurred mostly during
the fourth quarter.
In January 1996, the Company entered into a new revolving credit agreement that,
as amended, provides a $35 million revolving line of credit through December
1999.
Distribution of Health-care Products
Health-care product distributors, by selling a very wide range of products
purchased from many manufacturers, economically move products from the
manufacturers' large, but narrow, product inventories to the smaller volume, but
much more varied, product selections required by health-care providers.
Customers find it efficient and convenient to rely on the availability from
distributors of thousands of different products, manufactured by hundreds of
independent manufacturers, offered at competitive prices, with prompt delivery
and a variety of other services.
2
<PAGE>
Products
The Company distributes approximately 12,000 brand-name and generic
pharmaceutical and medical/surgical products. The Company's sales of generic
pharmaceuticals declined in 1996 due to the products' price deflation, after
increasing for several years, while sales of medical/surgical supplies have
increased for several years, including 1996. The Company purchases all its
products, primarily directly from manufacturers, and does not manufacture any
product. Although most of its products are consumables and disposables, the
Company also sells some small-dollar medical/surgical equipment. The brand-name
pharmaceuticals offered generally consist of a selection of the faster moving
items and sizes. The Company markets a full line of generic pharmaceuticals
under its H. L. Moore(TM) and Valumed(R) labels. It also carries an extensive
selection of medical/surgical supplies, including diagnostic tests, disposables,
instruments, and related equipment and supplies. Some of these products are sold
under the Moore(TM) brand name.
The following table shows net sales and the percentages of total sales for each
major product category for the past three years:
<TABLE>
<CAPTION>
Dollars in thousands 1996 1995 1994
- -------------------- ---- ---- ----
<S> <C> <C> <C>
Brand-name pharmaceuticals $128,549 $129,075 $130,067
44.9% 44.7% 47.9%
Generic pharmaceuticals $ 79,069 $ 91,010 $ 85,178
27.6% 31.5% 31.3%
Medical/surgical supplies $ 78,731 $ 68,977 $ 56,554
27.5% 23.9% 20.8%
</TABLE>
Customers
The Company's approximately 100,000 customers operate in over twenty health-care
business groupings, generally aligned into two broad categories: (1) health-care
practitioners, and (2) wholesale customers. Most of the Company's
medical/surgical supplies sales are to health-care practitioners, while most of
its pharmaceutical sales are to wholesale customers. Although sales to wholesale
customers are responsible for most of the Company's revenues, sales to
practitioners are responsible for most of its gross profit. Sales to health-care
practitioners have increased substantially during the past several years.
Health-care practitioners typically use the Company's products in non-hospital
settings. In this customer category, its most significant customer groups are
emergency medical services, medical/surgical dealers, occupational health
practitioners, physicians, podiatrists, school health-care staffs, and surgeons.
In the wholesale category, the Company's most significant customer groups are
re-sellers -- such as independent pharmacies, mail order prescription providers,
nursing home prescription providers, pharmaceutical wholesalers and pharmacy
chains -- and state and federal government facilities. Pharmacy businesses have
been undergoing consolidation for several years. The Company's ten largest
customers are wholesale customers, and they accounted for approximately 20% of
1996's total sales. No customer accounted for 10% or more of sales during the
year. While the Company is not dependent on any single customer, the loss of its
largest customer, or a few of its larger customers, could materially reduce its
future earnings.
3
<PAGE>
Marketing Methods and Distribution System
The Company markets nationally to existing and prospective customers on a
business-to-business basis through direct mail, telesales, and a small field
sales force. Catalogs and other product literature are designed by the Company's
in-house advertising department with different products featured for targeted
customer groups. They are regularly mailed to health-care practitioners and most
wholesale customers. Mailings to prospective customers use mailing lists and
those to current customers are based on buying patterns. In 1996, the Company
was the first in its industry to offer CD-ROM electronic catalogs.
The Company's telesales representatives specialize in one or more customer
groups, and they are trained on product features and sales techniques to
effectively promote sales, process orders, respond to customer inquiries, and
sell products. While most receive customer orders through customer-initiated
toll-free calls, some of the Company's telesales representatives make outbound
calls to solicit sales. An advanced phone system supports each telesales
representative, and each is equipped with a computer terminal. A small number of
field sales representatives build relationships and negotiate sales terms with
the Company's larger customers who place orders through telesales
representatives, facsimile terminals, and electronic data interchange (EDI).
The Company fulfills orders from its regional distribution centers in
Connecticut, Florida, Illinois, and California. Customer orders are directed by
its computer systems from telesales to the distribution center closest to the
customer. There, orders are picked, packed, and shipped to customers by common
carriers. The Company's marketing, sales, distribution, and purchasing processes
are information intensive, making its computer systems essential to efficient
operations.
Suppliers
The Company distributes the products of approximately 725 manufacturers,
including most brand-name pharmaceutical manufacturers and a representative
selection of manufacturers of generic drugs and medical/surgical products.
A comparatively small number of pharmaceutical manufacturers account for a large
share of the Company's purchases. Its largest suppliers of brand-name
pharmaceuticals in 1996 were Astra Merck, Bristol-Myers Squibb, Glaxo, JOM
Pharmaceuticals, Pfizer, and Schering Laboratories. The Company's largest
suppliers of generic pharmaceuticals in 1996 were Barr Laboratories, Sidmak
Laboratories, Watson Laboratories, and Zenith Laboratories. Management believes
the Company is a significant customer of many of its generic pharmaceutical
suppliers. It has several competing sources for generic pharmaceuticals and
medical/surgical supplies, and it is not dependent on any single supplier. The
Company does not have any significant long-term purchase commitments with its
suppliers, nor does it have any exclusive rights for a territorial area.
4
<PAGE>
Competition
Generally, the Company competes with other distributors on price, delivery
speed, breadth of product lines, order completion rates, and other customer
service factors.
In the Company's wholesale markets, the Company competes with national and
regional distributors, direct-selling manufacturers, specialty distributors, and
other mail order catalogers. Many of these competitors are larger and have
greater resources than the Company. Based on a National Wholesale Druggists'
Association report on the domestic wholesale drug distribution market, the
Company's sales volume accounts for less than 1% of the market, while the five
largest wholesale drug distributors account for more than 75% of the market.
Most of the Company's wholesale customers use one of the five large distributors
as their primary distributor or buy directly from manufacturers. The Company
serves these customers as a secondary supplier on selected brand-name
pharmaceuticals and medical/surgical supplies, principally by offering favorable
prices. For the Company's full line of generic pharmaceuticals, the Company also
offers favorable prices and it is a primary supplier of these products to some
of its customers. In the generic pharmaceuticals area, the Company also competes
by providing a single source of supply for a broad product line, product
consistency, and administrative efficiencies in tracking regulatory product drug
control numbers.
Competition in the Company's health-care practitioner markets is highly
fragmented. In most of these markets, competitors are largely regional and local
distributors and other mail order catalogers. The strongest competitors in each
market area generally compete with the Company in only one or a few of its
market areas. In most of these markets, the Company offers a broad selection of
products, including pharmaceuticals, which few competitors offer. The Company
also competes by offering favorable prices, particularly on Moore(TM) brand
medical/surgical products and on generic drugs. In addition, the Company
provides delivery within one or two days of order placement on an estimated 90%
of orders in the continental U.S., high order completion rates, technical
support, and easy-to-use catalogs and ordering procedures.
Regulation
Pharmaceutical distribution is subject to regulation by federal, state, and
local governmental agencies. The Company is licensed to distribute
pharmaceutical products and certain controlled substances. Its operating and
security practices must comply with statutes and regulations of the U. S. Food
and Drug Administration, the federal Drug Enforcement Agency, and state boards
of pharmacy and health. The Company believes that it is in material compliance
with the applicable statutes and regulations.
Employees
As of December 28, 1996, the Company had 424 full-time employees and 54
part-time employees. Of the full-time employees, 189 worked in its sales and
marketing operations.
5
<PAGE>
ITEM 2. Properties
The Company owns no real property and it leases all its operating facilities.
Its distribution centers are located in New Britain, Connecticut (92,000 square
feet), Jacksonville, Florida (60,000 square feet), Lemont, Illinois (44,000
square feet), and Visalia, California (51,000 square feet). The Jacksonville,
Visalia, and Lemont facilities have been constructed within the last seven years
and are well equipped and laid out for operating efficiencies. The older New
Britain facility is well equipped and maintained but less favorably arranged for
operating efficiencies. Management considers all of the distribution centers to
be in satisfactory condition.
The Company's main offices are located in an industrial park in New Britain,
Connecticut, where it occupies three buildings (44,000 square feet) adjacent to
its main distribution center in a campus-like setting. In these offices, the
business functions of telesales, marketing, purchasing, information services,
finance, and administration are performed. Office space is adequate for the
Company's present needs but is approaching full occupancy. Additional space is
planned for 1997.
ITEM 3. Legal Proceedings
None
ITEM 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of shareholders during the fiscal fourth
quarter of 1996.
PART II
ITEM 5. Market for Registrant's Common Equity and Related Shareholder Matters
The Company's common stock is listed on the American Stock Exchange (trading
symbol "MMD"). The following sets forth, for each quarter since the beginning of
1995, the high and low sale prices of the common stock on the American Stock
Exchange Composite Tape.
<TABLE>
<CAPTION>
1996 1995
------------------------------- ---------------------------------
Quarters: High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
First.................................. $ 12 1/2 $ 9 5/8 $ 13 1/8 $ 9 1/2
Second................................. 14 10 3/8 12 3/4 10 1/8
Third.................................. 12 3/8 9 5/8 13 3/8 9 3/4
Fourth................................. 11 1/8 9 1/8 12 8 1/2
</TABLE>
The high and low sale prices of the common stock on April 10, 1997 were $10 1/2
and $10 3/8 respectively. The estimated number of holders (including estimated
beneficial holders) of the Company's common stock as of April 10, 1997 was
approximately 2,500.
The Company has paid no cash dividends and has no plans to do so in the
foreseeable future. Its loan agreement contains restrictions on dividend
payments.
6
<PAGE>
ITEM 6. Selected Financial Data
<TABLE>
<CAPTION>
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Amounts in thousands, except per share data 1996 1995 1994 1993 1992
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<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net sales $286,349 $289,062 $271,799 $275,722 $278,450
Cost of products sold 243,949 247,556 232,795 239,501 243,857
-------- --------- -------- -------- --------
Gross profit 42,400 41,506 39,004 36,221 34,593
Selling, general and
administrative expenses 41,481 35,410 31,553 28,618 28,095
-------- --------- -------- -------- --------
Operating income 919 6,096 7,451 7,603 6,498
Interest expense, net 1,813 2,609 2,042 2,688 2,923
-------- --------- -------- -------- --------
Income (loss) before income taxes (894) 3,487 5,409 4,915 3,575
Income tax provision (benefit) (329) 1,168 1,896 1,796 1,282
-------- --------- -------- -------- --------
Net income (loss) $ (565) $ 2,319 $ 3,513 $ 3,119 $ 2,293
========= ========= ========= ========= =========
Net income (loss) per share $ (.19) $ 0.80 $ 1.21 $ 1.08 $ .80
========= ========= ========== ========== ===========
Weighted average shares outstanding 2,921 2,900 2,908 2,887 2,859
========= ========= ========== ========== ===========
BALANCE SHEET DATA
Working capital $ 42,985 $ 41,816 $ 42,029 $ 42,107 $ 12,223
======== ======== ======== ======== ========
Total assets $ 81,541 $ 75,363 $ 75,477 $ 73,483 $ 79,011
======== ======== ======== ======== ========
Debt $ 22,726 $ 21,672 $ 23,798 $ 27,183 $ 28,567
======== ======== ======== ======== ========
Shareholders' equity $ 25,376 $ 25,856 $ 23,309 $ 19,741 $ 16,594
======== ======== ======== ======== ========
</TABLE>
7
<PAGE>
ITEM 7. 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 net sales for the fiscal years indicated.
<TABLE>
<CAPTION>
% of Net Sales
----------------------------------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of products sold 85.2 85.6 85.7
------- ------- -------
Gross profit 14.8 14.4 14.3
Selling, general & administrative expenses 14.5 12.3 11.6
------- ------- -------
Operating income 0.3 2.1 2.7
Interest expense, net 0.6 0.9 0.7
-------- -------- --------
Income (loss) before income taxes (0.3) 1.2 2.0
Income tax provision (benefit) (0.1) 0.4 0.7
--------- -------- --------
Net income (loss) (0.2)% 0 .8% 1.3%
========== ========= ========
</TABLE>
Results of Operations
1996 Compared with 1995
Net sales of $286.3 million decreased 1% from 1995. Sales of medical/surgical
supplies increased 14% in 1996 to $78.7 million. Growth in sales to health-care
practitioner customers accounted for most of the sales increase in
medical/surgical supplies. Brand-name pharmaceutical sales were essentially the
same in both years. Dollar sales volume of generic pharmaceuticals decreased 13%
in 1996 due to a significant industry-wide deflation in prices.
Gross profit increased approximately 2% to $42.4 million in 1996. Gross profit
benefited significantly from the increased sales of medical/surgical supplies,
which have higher gross margin rates than pharmaceuticals. Management estimates
that gross profit was reduced by at least $2.0 million in 1996 versus 1995 as a
result of the significant drop in prices of generic pharmaceuticals from the
prior year. Overall, the gross margin rate for 1996 was 14.8%, an increase from
14.4% in 1995. The Company's sales prices generally reflect changes in product
acquisition costs, and, therefore, the effects of inflation and deflation on the
gross profit margin rate is not significant.
Selling, general and administrative expenses for the year 1996 increased $6.1
million, or 17%. In the fourth quarter of 1996, the Company recorded $4.0
million of charges related to various government supply contracts. (See Notes 2
and 9 to the financial statements.) Higher freight expense in 1996 also
contributed to the increase in selling, general and administrative expenses for
the year and fourth quarter. Selling, general and administrative expenses were
also higher for the fourth quarter of 1996 due to the hiring and training of
additional sales personnel.
Operating income in 1996 decreased from 1995, primarily due to the $4.0 million
of charges related to government contracts and the significant deflation in
prices of generic pharmaceuticals.
Interest expense decreased 31% in 1996. Approximately two thirds of the decrease
resulted from lower debt levels, achieved primarily through inventory
reductions. The inventory reductions were attributable, in part, to deflation of
generic pharmaceuticals and the planned shift in product mix from
pharmaceuticals toward medical/surgical supplies. Lower interest rates from the
new line of credit established in early 1996 also reduced interest expense.
8
<PAGE>
The effective income tax benefit rate was 36.8%, which varies from the federal
statutory rate due primarily to reductions of tax valuation allowances and to
minimum state income taxes. Management estimates the 1997 effective income tax
rate will be approximately 36%.
The net loss for 1996 was primarily attributable to the $4.0 million ($.90 per
share) of charges related to government supply contracts. The price deflation in
generic pharmaceuticals also negatively affected 1996 net income by at least an
estimated $1.2 million ($.41 per share).
1995 Compared with 1994
Net sales of $289.1 million increased 6% from 1994. Generic pharmaceutical sales
increased 7% in 1995 while sales of brand-name pharmaceuticals decreased 1%.
Sales of medical/surgical supplies increased 22% in 1995 to $69.0 million. The
Company's change in the product mix of sales continued, as planned, to be toward
medical/surgical supplies and generic pharmaceuticals and away from brand-name
pharmaceuticals.
Gross profit increased 6% to $41.5 million in 1995. Gross profit benefited
significantly from the increased sales of medical/surgical supplies, which have
higher gross margin rates than pharmaceuticals. Partially offsetting this
benefit were decreases in gross profit on both brand-name and generic
pharmaceuticals as a result of continuing competitive pressures on
pharmaceuticals throughout 1995. Overall, the Company ended 1995 with a gross
margin rate of 14.4%, which was comparable to the prior year's rate. The
Company's sales prices generally reflect changes in product acquisition cost,
and, therefore, the effects of inflation and deflation on the gross profit
margin rate is not significant.
Selling, general and administrative expenses for the year 1995 increased 12%.
The largest factor giving rise to the increase was added costs for marketing and
distribution, primarily associated with the increased sales of medical/surgical
supplies, especially to health-care practitioners. The Company estimates that
the number of health-care practitioner customers and sales to this customer
group grew over 20% in 1995, primarily as a result of additional catalog
advertising. The rate of increase in selling, general and administrative
expenses was lower in the last half of 1995 than in the first half of the year.
The higher rate of increase in the first half of the year was due primarily to
the $330,000 pre-opening start-up costs for the Company's Jacksonville, Florida,
distribution center, higher catalog advertising expense and increased
expenditures to enhance information systems in the first half.
Operating income in 1995 decreased from 1994, primarily attributable to a
decrease in gross profit on pharmaceuticals due to competitive pressures and, to
a lesser extent, to expenses related to opening the new distribution center. For
1995 the contribution to profits of medical/surgical supplies increased, but the
contribution to profits of pharmaceuticals decreased due to pharmaceutical
pricing pressures in the Company's wholesale markets.
Interest expense increased 28% in 1995. Higher interest rates accounted for most
of the increase. Interest rates, which had increased significantly during 1994
and into early 1995, remained relatively stable through the middle of 1995 and
decreased slightly during the last half of 1995.
The effective income tax rate of 33.5% was slightly lower than the federal
statutory tax rate due primarily to realization of tax carryforwards which
resulted in a reduction of the tax valuation allowance.
9
<PAGE>
The 34% decrease in net income in 1995 was primarily attributable to a decrease
in gross profit on pharmaceuticals due to competitive pressures, higher interest
expense and expenses related to opening the new distribution center.
Financial Condition
During 1996, the financial condition of the Company declined slightly from 1995
due primarily to the net loss for the year. Shareholders' equity decreased 2%.
Net additional borrowings of $1.1 million and net cash provided by operating
activities of $0.1 million were used for capital expenditures, mostly to enhance
information systems and to expand office space for sales personnel. Operating
activities generated cash sources of $2.4 million from an increase in accounts
payable, $3.3 million from an increase in other current liabilities, $0.6
million from a decrease in other current assets and $0.1 million from net
non-cash elements of earnings. The cash sources were used to fund a $2.9 million
increase in inventories, a $2.9 million increase in accounts receivable, and the
$0.6 million net loss from operations. The increase in inventories is
attributable to inventory position buying of brand-name pharmaceuticals at the
end of 1996. The increase in accounts receivable resulted from higher sales in
the fourth quarter of 1996 compared with the prior year, and an increase in the
number of day's sales outstanding represented by the accounts receivable
balance. The increase in other current liabilities resulted primarily from the
reserves relating to government supply contracts. (See Note 9 to the
financial statements.) In management's opinion, the ultimate resolution of this
matter will not have a material adverse effect on the Company's financial
position or its liquidty. Although management believes the reserve is
sufficient, it is possible the final resolution could exceed such reserve and
could have a material impact on the statement of operations and cash flow in a
future period.
In January, 1996, the Company entered into a new financing agreement with a
bank. As amended, this agreement provides a $35 million revolving line of credit
through December, 1999. 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. At December 28, 1996 and
March 29, 1997, the Company was not in compliance with various financial
covenants under the agreement. The Company has received waivers from the bank
regarding these financial covenants. Under a 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%. The Company has
purchased two interest rate caps, a form of derivative, which are used to reduce
the potential impact of increases in interest rates on floating-rate debt. The
Company does not use derivatives for trading purposes. (See also Note 5 to the
financial statements.)
Management believes that the funding needs of the Company for operating working
capital and equipment purchases will continue to be met through income from
operations and financing under its line of credit. Capital expenditures for 1997
are expected to be between $1.5 million and $2.0 million.
10
<PAGE>
ITEM 8. Financial Statements and Supplementary Data
MOORE MEDICAL CORP.
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Report of Independent Accountants 12
Balance Sheets at the end of years 1996 and 1995 13
Statements of Operations for the years 1996, 1995 and 1994 14
Statements of Cash Flows for the years 1996, 1995 and 1994 15
Notes to Financial Statements 16 - 23
Financial Statement Schedule VIII - Valuation and Qualifying Accounts
for the years ended 1996, 1995 and 1994. 29
</TABLE>
11
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Moore Medical Corp.
In our opinion, the financial statements listed in the accompanying index
present fairly, in all material respects, the financial position of Moore
Medical Corp. at December 28, 1996 and December 30, 1995, and the results of its
operations and its cash flows for each of the three years in the period ended
December 28, 1996, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
April 14, 1997
Hartford, Connecticut
12
<PAGE>
MOORE MEDICAL CORP.
<TABLE>
<CAPTION>
Balance Sheets at End of Years
- ----------------------------------------------------------------------------------------------------------------------
Amounts in thousands 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash............................................................. $ 16 $ 39
Accounts receivable, less allowances
of $626 and $734........................................... 25,761 22,890
Inventories...................................................... 43,828 40,897
Prepaid expenses and other current assets ....................... 4,117 4,759
Deferred income taxes ........................................... 2,356 619
--------- ---------
Total Current Assets........................................ 76,078 69,204
--------- ---------
Noncurrent Assets
Equipment and leasehold improvements, net ....................... 4,411 4,937
Other assets..................................................... 1,052 1,222
--------- ---------
Total Noncurrent Assets .................................... 5,463 6,159
--------- ---------
$ 81,541 $ 75,363
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable................................................. $ 27,071 $ 24,699
Accrued expenses................................................. 6,022 2,689
--------- ---------
Total Current Liabilities................................... 33,093 27,388
--------- ---------
Deferred Income Taxes ................................................. 346 447
Revolving Credit Financing ............................................ 22,726 21,672
Commitments and Contingencies
Shareholders' Equity
Preferred stock, no shares outstanding .......................... - -
Common stock-$.01 par value;
5,000 shares authorized; 3,246 shares issued .................. 32 32
Capital in excess of par value .................................. 21,692 21,680
Retained earnings................................................ 6,709 7,274
--------- ---------
28,433 28,986
Less treasury shares, at cost, 343 and 352 shares................ ( 3,057) ( 3,130)
--------- ---------
Total Shareholders' Equity ................................. 25,376 25,856
--------- ---------
$ 81,541 $ 75,363
========= =========
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
MOORE MEDICAL CORP.
<TABLE>
<CAPTION>
Statements of Operations for the Years
- ------------------------------------------------------------------------------------------------------------------------------------
Amounts in thousands, except per share data 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales.................................................................. $286,349 $289,062 $271,799
Cost of products sold...................................................... 243,949 247,556 232,795
--------- ---------- ---------
Gross profit............................................................... 42,400 41,506 39,004
Selling, general and administrative expenses............................... 41,481 35,410 31,553
--------- ---------- ---------
Operating income........................................................... 919 6,096 7,451
Interest expense, net...................................................... 1,813 2,609 2,042
--------- ---------- ---------
Income (loss) before income taxes......................................... (894) 3,487 5,409
Income tax provision (benefit) ............................................ (329) 1,168 1,896
--------- ---------- ---------
Net income (loss).......................................................... $ (565) $ 2,319 $ 3,513
========= ========== =========
Net income (loss) per share................................................ $ (.19) $ 0.80 $ 1.21
========= ========== =========
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
MOORE MEDICAL CORP.
Statements of Cash Flows for the Years
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Amounts in thousands 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net income (loss).............................................. $ (565) $ 2,319 $ 3,513
Adjustments to reconcile net income (loss) to net cash.........
flow provided by operating activities:
Depreciation and amortization ........................... 1,675 1,670 1,562
Deferred income taxes ................................... (1,838) 328 822
Other.................................................... 288 (54) (341)
Changes in operating assets and liabilities
Accounts receivable ................................ (2,871) (1,737) (117)
Inventories......................................... (2,931) 2,263 (1,216)
Other current assets ............................... 642 (50) (928)
Accounts payable ................................... 2,372 167 1,992
Other current liabilities .......................... 3,333 (625) (325)
--------- --------- ---------
Net cash flows provided by operating activities ......... 105 4,281 4,962
--------- --------- ---------
Cash Flows From Investing Activities
Equipment and leasehold improvements acquired.................. (1,182) (2,175) (1,571)
--------- --------- ---------
Cash Flows From Financing Activities
Revolving credit financing increase (decrease), net............ 1,054 (2,126) (3,385)
--------- --------- ---------
(Decrease) increase in cash.................................... (23) (20) 6
Cash at the beginning of year.................................. 39 59 53
--------- --------- ---------
Cash At End Of Year............................................ $ 16 $ 39 $ 59
========= ========= =========
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
MOORE MEDICAL CORP.
Notes to Financial Statements
Note 1 - Summary of Significant Accounting Policies
General - The Company is a national distributor and marketer of health-care
products. The Company sells and distributes health-care products to over twenty
targeted customer groups serving health-care needs in various business settings.
Its health-care products comprise approximately 12,000 items consisting of
pharmaceuticals and medical/surgical supplies. It sells to approximately 100,000
customers who are typically either professional health-care practitioners or
wholesale customers purchasing products for resale. The Company sells through
direct mail, telesales, and a small field sales force. Most customer orders are
processed by telesales representatives. The Company fulfills orders,
nation-wide, from four regional distribution centers located in Connecticut,
Florida, Illinois and California and ships orders by common carriers.
Fiscal Year - The Company's fiscal year ends on the Saturday closest to December
31. The fiscal years ended December 28, 1996, December 30, 1995 and December 31,
1994 and comprised 52 weeks each.
Inventories - Inventories, consisting of products purchased for resale, are
stated at the lower of average cost or market value. Market values are based on
estimated sales prices of products.
Equipment and Leasehold Improvements - Equipment is recorded at cost.
Depreciation is provided on the straight-line method over the estimated useful
lives (3-7 years) of the assets. Leasehold improvements are depreciated over the
useful life of the asset or the term of the lease, whichever is shorter.
Expenditures for maintenance and repairs are charged to expense as incurred.
Major improvements to equipment are capitalized. The cost of assets sold or
retired and the related amounts of accumulated depreciation are removed from the
accounts in the year of disposal, and any resulting gain or loss is included in
income.
Sales Recognition Policy and Customers - Sales are recorded upon shipment of
products to customers. While the Company is not dependent on any single
customer, the loss of its largest customer, or a few of its largest customers,
could materially reduce the Company's future earnings. Accounts receivable have
been reduced by estimated amounts for allowances related to future charges for
uncollected accounts, product returns and customer rebates.
Advertising - The cost of direct response catalog advertising is deferred and
amortized over the expected revenues. Direct response catalog advertising
consists primarily of catalog production expenses. Catalogs are effective for
varying time periods but the largest catalogs are generally effective for less
than a year. At December 28, 1996 and December 30, 1995, $460,000 and $534,000,
respectively, of direct response catalog advertising expenses were deferred.
Catalog advertising expense totaled $2,983,000, $3,150,000 and $2,676,000 in
1996, 1995 and 1994, respectively.
Income Taxes - The liability method is used to calculate deferred income taxes.
Under this method, deferred income tax assets and liabilities are recognized on
temporary differences between the financial statement and tax bases of assets
and liabilities, using applicable tax rates, and on tax carryforwards.
16
<PAGE>
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 (2,921,000 shares in 1996, 2,900,000 shares in 1995 and
2,908,000 shares in 1994).
Estimates - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Subsequent actual outcomes could differ from those estimated
and assumed.
Note 2 - Business Developments
On April 2, 1997, the Company announced that its Board of Directors had
initiated a process to explore alternatives for enhancing shareholder value,
including joint ventures or a possible sale of all or part of the Company,
giving due consideration to the interests of the Company's shareholders,
employees, customers and other constituencies. The Board of Directors authorized
the engagement of the investment banking firm of Schroder Wertheim & Co.
Incorporated to act as advisor to the Company regarding the process. The
President and CEO of this investment banking firm is a director of the Company.
Also on April 2, 1997, the Company announced that it had decided to exit various
supply contracts with the U.S. Department of Veterans Affairs and the Defense
Department due to the highly competitive nature of the business, the complexity
of contractual price compliance regulations and related administrative burdens.
In addition to the estimated liability relating to the supply contracts
discussed in Note 9 - Commitments and Contingencies, the Company recorded a
charge of $200,000 in 1996, relating to the impact of this decision on various
December 28, 1996 balance sheet amounts. The Company anticipates an additional
charge of approximately $500,000 to earnings in 1997 relating to the decision to
exit these contracts.
17
<PAGE>
Note 3 - Income Taxes
The income tax provision consists of the following:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Amounts in thousands 1996 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current
Federal $ 1,421 $ 797 $ 945
State 88 43 129
-------- -------- --------
Total current 1,509 840 1,074
-------- -------- --------
Deferred (1,838) 328 822
-------- -------- --------
Total provision (benefit) $ (329) $ 1,168 $ 1,896
======== ======== ========
</TABLE>
A reconciliation of the statutory federal income tax rate and the effective
income tax rate as a percentage of pretax income is as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
1996 1995 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory federal income tax rate (34.0)% 34.0 % 34.0 %
State income taxes, net of federal tax benefit 11.6 2.4 4.1
Valuation allowance (16.8) (2.2) (1.9)
Other - net 2.4 (0.7) (1.1)
--------- --------- ---------
Effective income tax rate (36.8)% 33.5 % 35.1 %
========= ========= =========
</TABLE>
Deferred income tax assets and liabilities at the end of each year consist of
the tax effects of temporary differences related to the following:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Amounts in thousands 1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Allowance for doubtful accounts $ 274 $ 190
Inventories 954 722
Accrued expenses 1,393 47
Tax carryforwards - 165
Other 56 -
---------- ----------
Deferred Tax Assets 2,677 1,124
---------- ----------
Accumulated depreciation (162) (187)
Prepaid pension expense (351) (298)
Catalog advertising (154) (182)
Other - (135)
---------- ----------
Deferred Tax Liabilities (667) (802)
---------- ----------
Valuation Allowance - (150)
---------- ----------
$ (2,010) $ 172
========== ==========
</TABLE>
Income tax payments totaled $1,762,000, $742,000 and $1,494,000 in 1996, 1995
and 1994, respectively.
Note 4 - Equipment and Leasehold Improvements
Equipment, leasehold improvements and accumulated depreciation are summarized as
follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Amounts in thousands 1996 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Equipment $ 11,112 $ 11,206
Leasehold improvements 3,098 2,736
---------- ----------
14,210 13,942
Less accumulated depreciation (9,799) (9,005)
---------- ----------
$ 4,411 $ 4,937
========== ==========
</TABLE>
18
<PAGE>
Note 5 - Revolving Credit Financing
The Company has a bank financing agreement which provides a $35 million
revolving line of credit through December 31, 1999. 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. At
December 28, 1996 and March 29, 1997, the Company was not in compliance with
various financial covenants under the agreement. The Company has received
waivers from the bank regarding these financial covenants. The fair value of the
revolving credit debt as of December 28, 1996 approximated its reported balance
because the debt agreement was cancelable and renegotiable at any time at the
sole option of the Company and interest rates were based on short-term variable
rates.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Amounts in thousands 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Borrowings
Average $23,798 $29,777 $28,455
Maximum $28,849 $38,415 $36,571
Weighted daily average interest rate
For the year 7.6% 8.8% 7.3%
At year end 7.6% 8.5% 8.6%
</TABLE>
Cash payments for interest on revolving credit financing totaled $1,893,000,
$2,634,000 and $2,022,000 in 1996, 1995 and 1994, respectively.
Interest rate caps, a form of derivatives, are used to reduce the potential
impact of increases in interest rates on floating-rate debt. The Company does
not use derivatives for trading purposes. In December, 1993, the Company
purchased a five-year, $10 million, 5.5% LIBOR cap and in January, 1996, it
purchased a three-year, $5 million, 7.0% LIBOR cap. Purchase prices are deferred
(included in "Other assets") and amortized to interest expense over the terms of
the caps and proceeds from these instruments, if any, are credited to interest
expense when earned. The unamortized cost of the interest rate caps approximates
fair value.
19
<PAGE>
Note 6 - Retirement Plans
All employees meeting eligibility requirements participate in the Company's
defined benefit pension plan under which pension benefits are based on the
employee's highest consecutive five year average annual compensation. The
Company's funding policy is to comply with the minimum funding requirements set
by the Employee Retirement Income Security Act of 1974 (ERISA).
The components of net pension expense are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Amounts in thousands 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned during the year $ 418 $ 395 $ 405
Interest cost on projected benefit obligation 284 250 273
Actual return on assets (501) (625) (77)
Net amortization and deferral 185 367 (96)
----- ------ ------
$ 386 $ 387 $ 505
===== ====== ======
</TABLE>
The funded status and balance sheet amounts at the end of each year are as
follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Amounts in thousands 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Actuarial present value of accumulated benefit obligation
including vested benefits of $2,228, $2,169 and $2,021 $2,420 $2,296 $ 2,125
====== ====== =======
Actuarial present value of projected benefit
obligation for services to date $3,326 $3,781 $ 3,327
Plan assets at fair value 4,370 3,700 3,063
------ ------ -------
Plan assets more (less) than projected benefit obligation 1,044 (81) (264)
Unrecognized prior service cost 50 54 59
Unamortized loss at transition 49 62 74
Unrecognized net (gain) loss (111) 840 793
------ ------ -------
Prepaid pension expense included in the balance sheet $1,032 $ 875 $ 662
====== ====== =======
</TABLE>
The present value of the projected benefit obligation was determined using a
discount rate of 7.5% in 1996 and 1995, and 8.0% in 1994. The present value of
the projected benefit obligation is based on actuarial assumptions and on
estimates, including an assumed discount rate which may change in the future and
significantly affect the amount of this obligation. The effect of changes in the
discount rate has been to increase(decrease) this obligation by $390,000 and
($780,000) in 1995 and 1994, respectively. In 1996, the employee turnover
assumption used to calculate the actuarial present value of the projected
benefit obligation, was changed to more accurately reflect actual employee
turnover. The effect of this change in assumption was to decrease the actuarial
present value of the projected benefit obligation by $671,000.
The compensation rate increase assumption for all years was 5%. The assumed
long-term rate of return on plan assets, which consist primarily of investments
in various marketable securities, was 9% for all years presented.
In addition to the pension plan, the Company has a 401(k) defined contribution
retirement plan available to employees meeting eligibility requirements. This
plan provides for Company contributions of up to 3% of employees' compensation
plus additional Company contributions to partially match employee contributions.
Plan expense for the years 1996, 1995 and 1994 amounted to $588,000, $537,000
and $437,000, respectively.
20
<PAGE>
Note 7 - Shareholders' Equity
At December 28, 1996, the Company had three classes of preferred stock: Class A
Cumulative Convertible, $5.00 par value, 200,000 shares authorized; Class B
Cumulative Convertible, $10.00 par value, 70,002 shares authorized; and Class C,
$1.00 par value, 1,000,000 shares authorized of which 35,000 shares have been
designated as a Series I Junior Participating Preferred Stock.
Changes in Shareholders' Equity for the three years ended December 28, 1996 are
as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Common Stock
$.01 par value Capital
--------------------- in Excess Treasury Stock
Shares Par of Par Retained -------------------------
Amounts in thousands Issued Value Value Earnings Shares Cost
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1994
Beginning Balance 3,246 $ 32 $21,769 $ 1,442 (395) $(3,502)
Net income 3,513
Stock options/stock
compensation 3 7 52
----- ------ ------- ------- --- -------
Ending balance 3,246 32 21,772 4,955 (388) (3,450)
1995
Net income 2,319
Stock options/stock
compensation (92) 36 320
----- ------ ------- ------- --- -------
Ending balance 3,246 32 21,680 7,274 (352) (3,130)
1996
Net income (loss) (565)
Stock options/stock
compensation 12 9 73
----- ------ ------- ------- --- -------
Ending Balance 3,246 $ 32 $21,692 $ 6,709 (343) $(3,057)
===== ====== ======= ======= === =======
</TABLE>
In 1989, the Company adopted a Shareholder Rights Plan and declared a dividend
distribution of one Preferred Stock Purchase Right (the "Rights") for each
outstanding share of common stock. The Rights will become exercisable, with
certain exceptions, only if a party acquires 15% or more of the Company's common
stock or announces an offer to acquire 30% or more. When exercisable, with some
exceptions, each Right will entitle its holder (other than the party acquiring
15% or more or offering to acquire 30% or more of the common stock) to buy one
one-hundredth of a share of a Series I Junior Participating Preferred Stock at a
purchase price of $75.00. Upon the occurrence of certain events, Rightsholders
(other than such party) will be entitled to purchase either preferred stock of
the Company or shares of the acquiring company at half of their market value.
The Company will generally be entitled to redeem the Rights at $.01 per Right at
any time prior to the earlier of the expiration of the Rights in March, 1999 or
ten days following the acquisition of 15% of the Company's common stock.
Note 8 - Stock Options
The 1992 Incentive Stock Option Plan authorizes stock option grants for ten
years. Stock option grants under a predecessor 1982 Incentive Stock Option Plan
were concluded in 1992. Features under both plans are substantially the same.
Under both plans, options may be granted at prices
21
<PAGE>
not less than 100% of the fair market value of the common stock on the date of
grant. The options are exercisable as determined by the Stock Option Committee
of the Board of Directors at the time of grant and are typically exercisable in
four or five cumulative annual installments beginning one year after the date of
grant and expiring five to ten years from the date of grant.
There were 200,000 shares authorized under each plan. Under the 1992 and 1982
plans, respectively, 126,475 shares and 18,125 shares were outstanding; and
59,088 shares and 18,125 shares were exercisable at the end of 1996.
The table below summarizes share activity and price per share under these plans.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Number of Shares Price Per Share
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at end of 1993 158,888 $ 3.88 - $ 14.13
Canceled ( 5,463) 3.88 - 10.63
Exercised ( 8,562) 3.88 - 12.00
--------
Outstanding at end of 1994 144,863 3.88 - 14.13
Canceled ( 10,200) 3.88 - 10.63
Exercised ( 26,963) 3.88 - 10.63
---------
Outstanding at end of 1995 107,700 5.75 - 14.13
Granted 50,000 12.25
Canceled ( 9,850) 5.75 - 14.13
Exercised ( 3,250) 5.75 - 10.63
--------
Outstanding at end of 1996 144,600 $ 5.75 $ 12.25
=======
</TABLE>
In November, 1992, the Company issued a non-qualified option to purchase 7,500
shares of common stock at a price of $11.75 per share. This option is
exercisable in five cumulative annual installments beginning one year after the
date of grant and expiring six years from the date of grant. There were 6,000
exercisable non-qualified options at the end of 1996.
If compensation expense had been recognized based on the fair value of options
at their grant date, as prescribed in Financial Accounting Standard No.123, the
Company's 1996 results of operations would not have been materially affected.
Note 9 - Commitments and Contingencies
Beginning in 1991, the Company entered into various supply contracts with the
U.S. Department of Veterans Affairs and the Defense Department. In April 1997,
the Company completed a review of its compliance with various pricing provisions
of these contracts and, with the assistance of special legal counsel, has
concluded that adjustments may be due to the federal agencies for potential
unasserted claims against the Company relating to pricing deficiencies under
product supply contracts subject to General Services Administration and
Department of Defense regulations. Management has assessed its estimated
liability, and anticipates discussion of the identified pricing issues with the
contracting officers responsible for the Company's contracts. The ultimate
resolution of this matter potentially could involve purchase price adjustments
and associated legal costs of approximately $3.8 million. The Company has
established a reserve for this amount in December 1996. In management's opinion,
the ultimate resolution of this matter will not have a material adverse effect
on the Company's financial position. Although management believes that the
reserve is sufficient, it is possible the final resolution could exceed such
reserve and could have a material impact on the statement of operations and cash
flow in such period.
22
<PAGE>
The Company leases its distribution centers, office facilities and certain
equipment. Lease commitments under these agreements expire at various dates
through 2001. Future minimum lease payments, as of December 28, 1996, under all
leases are as follows: 1997, $1,479,000; 1998 $1,396,000; 1999, $979,000; 2000,
$733,000; 2001, $557,000 and later years $251,000. Rental expense amounted to
$1,507,000, $1,426,000 and $1,258,000 in 1996, 1995 and 1994, respectively.
Note 10 - Selected Quarterly Information (Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Amounts in
thousands, except Net Income Per
per share data Net Sales Gross Profit Net Income Share
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994
First $ 72,988 $ 9,274 $ 727 $ .25
Second 67,080 9,751 1,011 .35
Third 65,306 10,383 1,040 .36
Fourth 66,425 9,596 735 .25
-------- -------- ------- ------
Year $271,799 $ 39,004 $ 3,513 $ 1.21
======== ======== ======= ======
1995
First $ 77,778 $ 10,366 $ 485 $ .17
Second 72,271 10,237 432 .15
Third 72,296 10,798 675 .23
Fourth 66,717 10,105 727 .25
-------- -------- ------- ------
Year $289,062 $ 41,506 $ 2,319 $ .80
======== ======== ======= ======
1996
First $ 75,833 $ 10,597 $ 633 $ .22
Second 72,840 10,782 641 .22
Third 67,610 10,765 580 .20
Fourth* 70,066 10,256 (2,419) (.83)
-------- -------- ------- ------
Year $286,349 $ 42,400 $ (565) $ (.19)
======== ======== ======= ======
</TABLE>
- --------------------------------------------------------------------------------
* Note: The fourth quarter of 1996 includes the following three charges: (1)
$3.8 million ($2.5 million after taxes or $.86 per share) relating to government
supply contracts. (See note 9 to financial statements.), (2) $200,000 ($132,000
after taxes, or $.04 per share) relating to existing governmental supply
contracts. (See Note 2 to financial statements.) and (3) increased freight
expense accruals.
23
<PAGE>
ITEM 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
None.
PART III
ITEM 10. Directors and Executive Officers of the Registrant
Incorporated by reference to information under the caption "Certain Information
Regarding Management's Nominees" and "Executive Officers" in the Company's
definitive proxy statement to be filed pursuant to Regulation 14A.
ITEM 11. Executive Compensation
Incorporated by reference to information under the caption "Executive
Compensation, " "Employment Agreement," "Defined Benefit Plans," "Stock
Options," "Compensation Committee Interlocks and Insider Participation,"
"Executive Committee's Compensation Report," "Performance Graph," and "Fees Paid
to Directors" in the Company's definitive proxy statement to be filed pursuant
to Regulation 14A.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
Incorporated by reference to information under the caption "Principal Holders of
Common Stock," "Certain Information Regarding Management's Nominees," and
"Executive Officers" in the Company's definitive proxy statement to be filed
pursuant to Regulation 14A.
ITEM 13. Certain Relationships and Related Transactions
Incorporated by reference to information under the captions "Fees Paid to
Directors," "Executive Compensation," "Employment Agreement ," and "Defined
Benefit Plans" in the Company's definitive proxy statement to be filed pursuant
to Regulation 14A.
24
<PAGE>
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Documents filed as part of this Form 10-K.
1. Financial Statements. The financial statements filed as part
of this Form 10-K are listed in the index on page 11.
2. Financial Statement Schedules. The financial statement
schedules filed as part of this Form 10-K are listed in the
index on page 11.
Financial statement schedules not included in this Form 10-K
Annual Report have been omitted because they are not applicable or
the required information is shown in the financial statements or
notes thereto.
<TABLE>
<CAPTION>
3. Exhibits Filed Under Item 601 of Regulation Filed Herewith or Incorporated by Reference To:
S-K -----------------------------------------------
<S> <C>
3. Articles of Incorporation and By-Laws
.1 Certificate of Incorporation, as Exhibit 3.1 to Form 10-K for the fiscal year
amended. ended January 3, 1981, Exhibit 1 to Form
10-Q for the quarter ended June 29, 1985, and Exhibit 3.1 to
Form 10-K for the fiscal year ended January 2, 1988.
.2 Certificate of Designation under Exhibit 3.2 to Form 10-K for the fiscal year
Delaware General Corporation Law ended January 3, 1981 and Exhibit 2 to Form
8-K dated March 8, 1989.
.3 By-Laws, as amended. Exhibit 3.3 to Form 10-K for the fiscal year
ended January 3, 1981 and Exhibit 3.3 to Form
10-K for the fiscal year ended December 30, 1989.
4. Instruments Defining the Rights of Security
Holders
.2 Rights Agreement, as amended, dated Exhibit 1 to Form 8-K dated March 8, 1989 and
March 8, 1989. Exhibit 1 to Form 8-K dated March 8, 1990.
10. Material Contracts
.1 Second Restated Amended Exhibit 10.1G to Form 10-K for the fiscal year ended January 2,
Employment Agreement dated as of 1993.
January 1, 1993 between the Company
and Mark E. Karp.
.2 Amendment to Second Restated Amended Exhibit 10.2 to Form 10-K for the fiscal year ended
Employment Agreement between December 28, 1996 filed herewith.
the Company and Mark E. Karp effective
December 31, 1996.
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
3. Exhibits Filed Under Item 601 of Regulation Filed Herewith or Incorporated by Reference To:
S-K -----------------------------------------------
<S> <C>
.3 Leases of property located in New Exhibit 10.3A to Form 10-K for the fiscal year ended
Britain, Connecticut, as amended. December 28, 1985 and Exhibit 10.3 to Form 10-K
for the fiscal year ended December 30, 1989.
.4A MetLife Savings Plan Program - Exhibit 10.4A to Form 10-K for the fiscal year ended
Defined Contribution Basic Plan December 31, 1994.
Document dated March 30, 1994.
.4B MetLife Savings Plan Program - Exhibit 10.4B to Form 10-K for the fiscal year ended
401(K) Plan Adoption Agreement dated December 31, 1994.
October 20, 1994.
.4C MetLife Savings Plan Program- Exhibit 10.4C to Form 10-K for the fiscal year ended
Prototype Plan Amended & Restated January 1, 1994.
Trust Agreement.
.4D MetLife Savings Plan Program - Exhibit 10.4D to Form 10-K for the fiscal year ended
Service Agreement. January 1, 1994.
.5 Defined Benefit Pension Plan and Trust Exhibits 10.5A, 10.5B and 10.5C to Form 10-K for
Agreement dated September 26, 1994, as the fiscal year ended December 31, 1994.
amended.
.6 Incentive Stock Option Plan and form of Exhibit A to the 1982 Proxy Statement, Exhibit 10.2
stock option to Form 10-K for the fiscal year ended January 1,
1983 and Exhibit 4(d) to a Registration statement on Form S-8
(commission file No. 33-20037) effective February 29, 1988 and
Exhibit A to the 1992 Proxy Statement.
.12 Revolving Credit Agreement by and among Exhibit 1 to Form 8-K dated January 9, 1996.
the Company, Bank of Boston Connecticut,
the other lenders which are or may become
parties thereto and Bank of Boston,
Connecticut, as agent, dated January 9,
1996.
.13 Security Agreement by and between the Exhibit 2 to Form 8-K dated January 9, 1996
Company and Bank of Boston Connecticut
dated January 9, 1996.
.14 First Amendment to Revolving Credit Exhibit 10.14 to Form 10-K for the fiscal year ended
Agreement by and among the Company, December 28, 1996 filed herewith.
Bank of Boston Connecticut and certain
other lending institutions,
dated March 1, 1996.
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
3. Exhibits Filed Under Item 601 of Regulation Filed Herewith or Incorporated by Reference To:
S-K -----------------------------------------------
<S> <C>
.15 Second Amendment to Revolving Credit Exhibit 10.15 to Form 10-K for the fiscal year ended
Agreement by and among the Company, December 28,1996 filed herewith.
Bank of Boston Connecticut and certain other
lending institutions, dated December 27, 1996
21. Subsidiaries Exhibit 22 to Form 10-K for the fiscal year ended
.1 Subsidiaries, identifiable pursuant to Item December 28, 1991.
601 (21) of Regulation S-K.
23. Consent of Expert Exhibit 23.1 filed herewith
.1 Consent of Price Waterhouse LLP.
</TABLE>
(b) Reports on Form 8-K: The Company did not file any Current Report on Form 8-K
during the quarter ended December 28, 1996.
27
<PAGE>
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.
BY: /s/ Mark E. Karp BY: /s/ John A. Murray
--------------------------------- -------------------------------
Mark E. Karp, President and John A. Murray, Vice President
Chief Executive Officer and Chief Financial Officer
April 14, 1997 April 14, 1997
BY: /s/ Victor H. Emerson, Jr.
--------------------------------
Victor H. Emerson, Jr., Controller
and Chief Accounting Officer
April 14, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
/s/ Mark E. Karp /s/ Peter C. Sutro
- -------------------------------------- --------------------------------
Mark E. Karp, Director Peter C. Sutro, Director
April 14, 1997 April 14, 1997
/s/ Steven Kotler /s/ Wilmer J. Thomas, Jr.
- -------------------------------------- --------------------------------
Steven Kotler, Director Wilmer J. Thomas, Jr., Director
April 14, 1997 April 14, 1997
- -------------------------------------- --------------------------------
Robert H. Steele, Director Dan K. Wassong, Director
April , 1997 April , 1997
28
<PAGE>
SCHEDULE VIII
MOORE MEDICAL CORP.
VALUATION AND QUALIFYING ACCOUNTS
ALLOWANCES FOR RETURNS AND UNCOLLECTIBLES AND CUSTOMER REBATES
<TABLE>
<CAPTION>
Additions
---------------------------------------
Charged
Balance at (credited) to Balance at
Beginning of Charged to Other End of
Period Expenses Accounts Deductions Period
------------- ------------------ ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Allowance for Returns and
Uncollectables
Fiscal Year End December 28, 1996 $ 188 $ 528 $ (396) $ 320
Fiscal Year End December 30, 1995 $ 225 $ 310 $ (347) $ 188
Fiscal Year End December 31, 1994 $ 503 $ (105) $ (47) $ (126) $ 225
Allowance for Customer Rebates
Fiscal Year End December 28, 1996 $ 546 $2 ,824 $ (3,064) $ 306
Fiscal Year End December 30, 1995 $ 160 $4 ,066 $ (3,680) $ 546
Fiscal Year End December 31, 1994 - $ 816 $ (656) $ 160
</TABLE>
29
<PAGE>
Exhibit 10.2
AMENDMENT TO
SECOND RESTATED AMENDED EMPLOYMENT AGREEMENT
AMENDMENT TO SECOND RESTATED AMENDED EMPLOYMENT AGREEMENT, dated November
11, 1992, as amended by a Corrective Amendment, dated November 18, 1994 (as so
amended, the "Employment Agreement"), between MOORE MEDICAL CORP., a Delaware
corporation (the "Employer"), and MARK E. KARP of 274 Wild Oak Drive,
Southington, Connecticut 06489 (the "Employee").
The Employer and Employee herewith agree that the Employment Agreement
is amended as follows:
1. Amended Term. The first sentence of Section 1 of the Employment
------------
Agreement is herewith deleted and replaced by the following:
Continuing from January 1, 1997 and for a period through December 31,
1997 (subject to the provisions of paragraphs 8 and 9, relating to
death and incapacity) (the "Term"), the Employer shall employ the
Employee, and the Employee shall serve the Employer and perform the
chief executive and administrative duties of President of the Employer,
subject at all times to the general supervision and direction of the
Board of Directors and the Executive Committee of the Board of
Directors of the Employer.
2. Amended Salary. Section 2 of the Employment Agreement is herewith
--------------
deleted and replaced by the following:
As compensation for such services, the Employer shall pay the Employee
a salary at the rate of $421,173 per annum. For purposes of this
Agreement, the term "Base Salary" shall mean said salary.
3. Amended Incentive Compensation. Section 3 (c) and 3 (d)
------------------------------
of the Employment Agreement are herewith deleted and replaced by the following:
(c) For purposes of this Agreement, the "Base Amount" shall
mean $5,228,677.
(d) [Intentionally omitted.]
4. Amended Change of Control Provision. Section 4 (a) of
-----------------------------------
the Employment Agreement is herewith deleted and replaced by the following:
(a) If during the Term there should be a Change of Control
(hereinafter defined), the Employer may, but shall not be required to, award the
Employee such
<PAGE>
amount (if any) as may be fixed, within its sole and absolute discretion, by the
Board of Directors of the Company.
5. No Signing Inducement for Amendment. Section 10 of the
-----------------------------------
Employment Agreement is herewith deleted.
IN WITNESS WHEREOF, the parties have executed this amendment to
the Employment Agreement on February 27, 1997, effective December 31, 1996.
MOORE MEDICAL CORP.
By: /s/ Steven Kotler
--------------------------
Steven Kotler, Chairman of
Executive Committee of the
Board of Directors
/s/ Mark E. Karp
--------------------------
MARK E. KARP
<PAGE>
Exhibit 10.14
FIRST AMENDMENT AGREEMENT
-------------------------
FIRST AMENDMENT AGREEMENT (this "Amendment Agreement") dated as of March 1,
1996 by and among Moore Medical Corp. (the "Borrower"), Bank of Boston
Connecticut and certain other lending institutions (collectively, the "Banks"),
and Bank of Boston Connecticut, as agent for the (Banks in such capacity, the
"Agent"), amending a certain Revolving Credit Agreement dated as of January 9,
1996 (as amended, the "Credit Agreement").
WITNESSETH
----------
WHEREAS, the Borrower has requested, among other things, that the Agent and
the Banks amend certain terms and conditions of the Credit Agreement; and
WHEREAS, the Agent and the Banks are willing to amend certain terms and
conditions of the Credit Agreement on the terms and conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
(S)1. Definitions. Capitalized terms used herein without definition that
-----------
are defined in the Credit Agreement shall have the same meanings herein as
therein.
(S)2. Ratification of Existing Agreements. All of the Borrower's
------------ -- -------- ----------
obligations and liabilities to the Agent and the Banks as evidenced by or
otherwise arising under the Credit Agreement, the Notes and the other Loan
Documents, except as otherwise expressly modified in this Amendment Agreement
upon the terms set forth herein, are, by the Borrower's execution of this
Amendment Agreement ratified and confirmed in all respects. In addition, by the
Borrower's execution of this Amendment Agreement, the Borrower represents and
warrants that no counterclaim, right of set-off or defense of any kind exists or
is outstanding with respect to such obligations and liabilities.
(S)3. Representations and Warranties. All of the representations and
--------------- --- ----------
warranties made by the Borrower in the Credit Agreement, the Notes and the other
Loan Documents are true and correct on the date hereof as if made on and as of
the date hereof, except to the extent that any of such representations and
warranties relate by their terms to a prior date.
(S)4. Conditions Precedent. The effectiveness of the amendments
--------------------
contemplated hereby shall be subject to the satisfaction on or before the date
hereof each of the following conditions precedent:
(a) Representations and Warranties. All of the representations and
------------------------------
warranties made by the Borrower herein, on the date hereof, except as provided
in (S)3 hereof.
(b) Performance; No Event of Default. The Borrower shall have
--------------------------------
performed and complied in all material respects with all terms and conditions
herein required to be performed or complied with by it prior to or at the time
hereof, and there shall exist no Default or Event of Default.
(c) Corporate Action. All requisite corporate action necessary for
----------------
the valid execution, delivery and performance by the Borrower of this Amendment
Agreement and all other instruments and documents delivered by the Borrower in
connection therewith shall have been duly and effectively taken.
<PAGE>
(d) Delivery. The parties hereto shall have executed and delivered
--------
this Amendment Agreement. In addition, the Borrower shall have executed and
delivered such further instruments, and take such further action as the Agent
and the Banks may have reasonably requested, in each case further to effect the
purposes of this Amendment Agreement, the Credit Agreement and the other Loan
Documents.
(e) Fees and Expenses. The Borrower shall have paid to the Banks all
-----------------
fees and expenses incurred by the Agent in connection with this Amendment
Agreement, the Credit Agreement or the other Loan Documents on or prior to the
date hereof.
(S)5. Amendments to the Credit Agreement.
----------------------------------
(S)5.1. Amendment to (S)2.5. Section 2.5 of the Credit Agreement is
-------------------
hereby amended by deleting the ratio "3.3:1.0" appearing in the first line of
the chart in Section 2.5 and substituting therefor the ratio "3.2:1.0."
(S)5.2. Amendment to (S)2.8. Section 2.8 of the credit Agreement is
-------------------
hereby amended by deleting the reference to "11:00 a.m." appearing in the first
line thereof and substituting therefor "1:00 p.m."
(S)5.3. Amendment to (S)10.3. Section 10.3 of the Credit Agreement
--------------------
is hereby amended by deleting the ratio "3.30:10" appearing in the last line
thereof and substituting therefor the ratio "3.2:1.0."
(S)5.4. Amendment to (S)10.4. Section 10.4 of the Credit Agreement
--------------------
is hereby amended by deleting the number "$23,000,000" appearing in the second
line thereof and substituting therefor the number "$24,000,000."
(S)5.5. Amendment to (S)15.5 (c). Section 15.5 (c) of the Credit
------------------------
Agreement is hereby amended by adding the following language to the end of the
second sentence thereof:
"until such Obligations to non-delinquent Banks have been paid in
full, provided, however, that nothing herein shall modify or reduce the
Obligations of the Borrower under this (S)15.5 (c)."
(S)5.6. Amendment to (S)26. Section 26 of the Credit Agreement is
------------------
hereby amended by adding the following new sentence thereto after the second
sentence of Section 26:
"In addition and without limiting the foregoing, the Agent will not
release any lien on or security interest in any Collateral (other than
Collateral disposed of by the Borrower in accordance with the terms hereof and
the other Loan Documents) without the written consent of all of the Banks."
(S)6. Expenses. The Borrower agrees to pay to the Agent upon demand an
--------
amount equal to any and all out-of-pocket costs or expenses (including
reasonable legal fees and disbursements and appraisal expense) incurred or
sustained by the Agent in connection with the preparation of this Amendment
Agreement and any related matters.
<PAGE>
(S)7. Miscellaneous.
-------------
(a) This Amendment Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut.
(b) Except as otherwise expressly provided by this Amendment
Agreement, all of the respective terms, conditions and provisions of the Credit
Agreement shall remain the same. It is declared and agreed by each of the
parties hereto that the Credit Agreement, as amended hereby, shall continue in
full force and effect, and that this Amendment Agreement and the Credit
Agreement be read and construed as one instrument, and all references in the
Loan Documents to the Credit Agreement shall hereafter refer to the Credit
Agreement, as amended by this Amendment Agreement.
IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement
to be executed in its name and behalf by its duly authorized officer as of the
date first written above.
BANK OF BOSTON CONNECTICUT,
Individually and as Agent
By: /s/ Donald W. Peters
------------------------------------------
Title Vice President
MOORE MEDICAL CORP.
By: /s/ John A. Murray
------------------------------------------
Title Vice President
<PAGE>
Exhibit 10.15
SECOND AMENDMENT AGREEMENT
--------------------------
SECOND AMENDMENT AGREEMENT (this "Amendment Agreement") dated as of
December 27, 1996 by and among Moore Medical Corp. (the "Borrower"), Bank of
Boston Connecticut and certain other lending institutions (collectively, the
Banks"), and Bank of Boston Connecticut, as agent for the Banks (in such
capacity, the "Agent"), amending a certain Revolving Credit Agreement dated as
of January 9, 1996, as amended by the First Amendment Agreement dated as of
March 1, 1996 (as amended, the "Credit Agreement").
WITNESSETH
----------
WHEREAS, the Borrower has requested, among other things, that the
Agent and the Banks amend certain terms and conditions of the Credit Agreement;
and
WHEREAS, the Agent and the Banks are willing to amend certain terms
and conditions of the Credit Agreement on the terms and conditions set forth
herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
(S)1. Definitions. Capitalized terms used herein without definition
-----------
that are defined in the Credit Agreement shall have the same meanings herein as
therein.
(S)2. Ratification of Existing Agreements. All of the Borrower's
------------ -- -------- ----------
obligations and liabilities to the Agent and the Banks, and all the Agent's and
Banks' obligations and liabilities to the Borrower, as evidenced by or otherwise
arising under the Credit Agreement, the Notes and the other Loan Documents
except as otherwise expressly modified in this Amendment Agreement upon the
terms set forth herein, are, by the Borrower's, the Agent's and Banks',
execution of this Amendment Agreement ratified and confirmed in all respects. In
addition, by the Borrower's execution of this Amendment Agreement, the Borrower
represents and warrants that, subject to provided and provided, however, clauses
-------- -------- -------
of Section 5.4 of the Credit Agreement, no counterclaim, right of set-off or
defense of any kind exists or is outstanding with respect to such obligations
and liabilities.
(S)3. Representations and Warranties. All of the representations
--------------- --- ----------
and warranties made by the Borrower in the Credit Agreement, the Notes and the
other Loan Documents are true and correct on the date hereof as if made on and
as of the date hereof, except to the extent that any of such representations and
warranties relate by their terms to a prior date and except to the extent of
changes resulting from transactions contemplated or permitted by the Credit
Agreement and changes occurring in the ordinary course of business that singly
or in the aggregate do not have a Material Adverse Effect.
<PAGE>
(S)4. Conditions Precedent. The effectiveness of the amendments contemplated
---------- ---------
hereby shall be subject to the satisfaction on or before the date hereof of each
of the following conditions precedent:
(a) Representations and Warranties. All of the
------------------------------
representations and warranties made by the Borrower herein, whether
directly or incorporated by reference, shall be true and correct on the
date hereof, except as provided in (S)3 hereof.
(b) Performance; No Event of Default. The Borrower
--------------------------------
shall have performed and complied in all material respects with all
terms and conditions herein required to be performed or complied with by
it prior to or at the time hereof, and there shall exist no Default or
Event of Default.
(c) Corporate Action. All requisite corporate action
----------------
necessary for the valid execution, delivery and performance by the
Borrower of this Amendment Agreement and all other instruments and
documents delivered by the Borrower in connection therewith shall have
been duly and effectively taken.
(d) Delivery. The parties hereto shall have executed
--------
and delivered this Amendment Agreement. In addition, the Borrower shall
have executed and delivered such further instruments, and take such
further action as the Agent and the Banks may have reasonably requested,
in each case further to effect the purposes of this Amendment Agreement,
the Credit Agreement and the other Loan Documents.
(e) Fees and Expenses. The Borrower shall have paid to
-----------------
the Banks all fees and expenses incurred by the Agent in connection with
this Amendment Agreement, the Credit Agreement or the other Loan
Documents on or prior to the date hereof.
(f) Assignments. Each of Bank of Scotland and Fleet
-----------
National Bank of Connecticut shall have assigned all of their right,
title and interest under the Credit Agreement and the other Loan
Documents pursuant to an Assignment and Acceptance executed and
delivered by each of Bank of Scotland and Fleet National Bank of
Connecticut and Bank of Boston Connecticut. In addition, each of Bank of
Scotland and Fleet National Bank of Connecticut shall have (i) returned
to the Agent their respective Revolving Credit Notes marked "canceled"
and (ii) received payment of all amounts due and payable to each of them
under the Credit Agreement as of the date hereof.
(S)5. Amendments to the Credit Agreement.
---------- ------ ------ ---------
(S)5.1. Amendment to (S)5.2. Section 5.2 of the Credit
--------- -- ------
Agreement is hereby amended in its entirety to read as follows:
"(S)5.2.[Intentionally Omitted]."
<PAGE>
(S)5.2. Amendment to (S)10.4. Section 10.4 of the Credit
--------- -- -------
Agreement is hereby amended in its entirety to read as follows:
"(S)10.4 The Borrower will not permit Consolidated
Tangible Net Worth to be less than the sum of
$25,500,000, plus on a cumulative basis, fifty
----
percent (50%) of positive Consolidated Net Income
for each fiscal year of the Borrower ending after
December 28, 1996."
(S)5.3. Amendment to (S)1. Schedule 1 to the Credit
--------- -- ---- -------- -
Agreement is hereby deleted in its entirety and Schedule 1 attached
-------- -
hereto is hereby substituted therefor.
(S)5.4. Amendment to Borrowing Base. The definition of
--------- -- --------- ----
"Borrowing Base" appearing in Schedule 2 to the Credit Amendment is
-------- -
hereby amended by deleting the number "$33,000,000" appearing in
subsection (b) (ii) of such definition and substituting therefor the
number "$25,000,000".
(S)5.5. Amendment to Revolving Credit Loan Maturity Date.
--------- -- --------- ------ ---- -------- ----
The definition of "Revolving Credit Loan Maturity Date" appearing in
Schedule 2 to the Credit Agreement is hereby amended by deleting the
-------- -
date "December 31, 1998" appearing therein and substituting therefor the
date "December 31, 1999".
(S)6. Expenses. The Borrower agrees to pay to the Agent upon
--------
demand an amount equal to any and all out-of-pocket costs or expenses (including
reasonable legal fees and disbursements and appraisal expenses) incurred or
sustained by the Agent in connection with the preparation of this Amendment
Agreement and any related matters.
(S)7. Miscellaneous.
-------------
(a) This Amendment Agreement shall be governed by and
construed in accordance with the laws of the State of Connecticut.
(b) Except as otherwise expressly provided by this
Amendment Agreement, all of the respective terms, conditions and
provisions of the Credit Agreement shall remain the same. It is declared
and agreed by each of the parties hereto that the Credit Agreement, as
amended hereby, shall continue in full force and effect, and that this
Amendment Agreement and the Credit Agreement be read and construed as
one instrument, and all references in the Loan Documents to the Credit
Agreement shall hereafter refer to the Credit Agreement, as amended by
this Amendment Agreement.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto have caused this
Agreement to be executed in its name and behalf by its duly authorized officer
as of the date first written above.
MOORE MEDICAL CORP.
By: /s/ John A. Murray
-----------------------------
Title: Vice President
BANK OF BOSTON CONNECTICUT,
Individually and as Agent
By: /s/ Donald W. Peters
-----------------------------
Title: Vice President
FLEET BANK, N.A.
By: /s/ Jeff J. White
-----------------------------
Title: Vice President
BANK OF SCOTLAND
By: /s/ Elizabeth Wilson
-----------------------------
Title: Vice President
and Branch Manager
<PAGE>
SCHEDULE 1
----------
TO
--
REVOLVING CREDIT AGREEMENT
--------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
BANK COMMITMENT COMMITMENT
---- ---------- ----------
PERCENTAGE
----------
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Bank of Boston Connecticut 100.00% $35,000,000
81 West Main Street
Waterbury, Connecticut 06702
Attn: Donald Peters,
Vice President
Telephone: (203) 575-3733
Telecopy: (203) 574-7599
- -----------------------------------------------------------------------------------------------
TOTAL COMMITMENT 100% $35,000,000
- ---------------- ----
- -----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-8 (Nos. 33-20037 and
33-68128) and in the Prospectuses on Form S-3 included therein of Moore Medical
Corp. of our report dated April 14, 1997, appearing on page 12 of this Form
10-K. We also consent to the reference to us under the heading "Experts" in such
Prospectuses.
Price Waterhouse LLP
Hartford, Connecticut
April 14, 1997
40
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-28-1996 DEC-30-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> DEC-28-1996 DEC-30-1995
<CASH> 16 39
<SECURITIES> 0 0
<RECEIVABLES> 26,387 23,624
<ALLOWANCES> 626 734
<INVENTORY> 43,828 40,897
<CURRENT-ASSETS> 6,473 5,378
<PP&E> 14,210 13,942
<DEPRECIATION> 9,799 9,005
<TOTAL-ASSETS> 81,541 75,363
<CURRENT-LIABILITIES> 33,093 27,388
<BONDS> 0 0
0 0
0 0
<COMMON> 32 32
<OTHER-SE> 25,344 25,824
<TOTAL-LIABILITY-AND-EQUITY> 81,541 75,363
<SALES> 286,349 289,062
<TOTAL-REVENUES> 286,349 289,062
<CGS> 243,949 247,556
<TOTAL-COSTS> 243,949 247,556
<OTHER-EXPENSES> 41,481 35,410
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,813 2,609
<INCOME-PRETAX> (894) 3,487
<INCOME-TAX> (329) 1,168
<INCOME-CONTINUING> (565) 2,319
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (565) 2,319
<EPS-PRIMARY> (.19) 0.80
<EPS-DILUTED> (.19) 0.80
</TABLE>
