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[LOGO]
MOORE-HANDLEY, INC.
ANNUAL REPORT
YEAR ENDED DECEMBER 31, 1995
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[XX] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-14324
MOORE-HANDLEY, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 63-0819773
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OF ORGANIZATION) IDENTIFICATION NO.)
3140 Pelham Parkway, Pelham, Alabama 35124
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
Registrant's telephone number, including area code (205) 663-8011
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 Par Value
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) 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
As of March 8, 1996, 2,154,543 shares of the Registrant's Common Stock were
outstanding, and the aggregate market value of such shares held by
non-affiliates was approximately $3,251,126. For this computation, the
Registrant has excluded the market value of all common stock beneficially owned
by officers and directors of the Registrant and their associates. Such exclusion
does not constitute an admission that any such person is an "affiliate" of the
Registrant.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the following document are incorporated by reference into
Part III of this Annual Report on Form 10-K: the Registrant's definitive Proxy
Statement to be filed with the Commission not later than 120 days after the end
of the fiscal year covered hereby.
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MOORE-HANDLEY, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM NO. PAGE NO.
---------- --------
<C> <S> <C> <C> <C>
Part I.
1. Business....................................................... 3
2. Properties..................................................... 5
3. Legal Proceedings.............................................. None
4. Submission of Matters to a Vote of Security Holders
(none during the fourth quarter of 1995)..................... None
Part II.
5. Market for Registrant's Common Equity and Related
Stockholder Matters.......................................... 6
6. Selected Financial Data........................................ 7
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................ 9
8. Financial Statements and Supplementary Data.................... 13
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure......................................... None
Part III.
Part III (other than Item 401(b) of Regulation S-K, which is
included in Item 1 of this Form 10-K) is incorporated by
reference to the Registrant's definitive Proxy Statement to
be filed with the Commission not later than 120 days after
the end of the fiscal year covered hereby.
Part IV.
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Financial Statements...................................... 13
(b) Reports on Form 8-K....................................... None
(c) Exhibits Filed............................................ 22
(d) Financial Statement Schedules filed (financial statement
schedules have been omitted because they are not
required, not applicable or the required information is
set forth in the Financial Statements or Notes thereto
or in the discussion of Liquidity and Capital Resources
in Item 7 of this Form 10-K.)........................... None
</TABLE>
NOTE: Copies of the exhibits may be obtained by stockholders upon
written request directed to the Secretary, Moore-Handley, Inc., P. O. Box
2607, Birmingham, Alabama 35202, and payment of processing and mailing
costs.
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BUSINESS
Moore-Handley, Inc. (the "Company") is a full-service, wholesale distributor
of plumbing and electrical supplies, power and hand tools, lawn and garden
equipment and other hardware and building materials products. The Company's
customers include retail home centers, hardware stores, building materials
dealers, combination stores and a limited number of mass merchandisers. These
customers are located mainly in the Southeast. The Company has approximately
1,100 active customers located throughout the Southeast which it services from a
430,000 square foot distribution center located in Pelham, Alabama, a suburb of
Birmingham, and 20,000 square foot redistribution centers located in
Winston-Salem, North Carolina and Ocala, Florida.
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DESCRIPTION OF BUSINESS
In connection with its wholesale distribution activities, the Company offers a
wide range of marketing, advertising and other support services which are
designed to assist customers in maintaining and improving their market
positions. These support services include computer-generated systems for the
control of inventory, pricing and gross margin, as well as advertising and store
installation and design services.
Home centers and hardware and building supply retailers have a continuing need
for a wide variety of items produced by a number of different manufacturers.
Purchasing from a distributor rather than directly from manufacturers allows
independent retailers to simplify the purchasing process and to place smaller
orders on an as-needed basis, thereby reducing their inventory carrying costs
and excess stock risks. Moreover, wholesale distributors purchase products in
quantities that enable them to obtain favorable prices and payment terms, which
are reflected in prices and payment terms to independent retailers. Finally, the
support services the Company offers to customers (in most instances at or near
the Company's cost) are generally not available from manufacturers, nor can most
customers afford to develop them independently. The Company believes that its
ability to provide a broad range of merchandise from a single source on a timely
basis and at competitive prices, together with support services, offers its
customers a substantial advantage over purchasing directly from manufacturers.
In recent years there has been a trend towards consolidation in many wholesale
industries, including the grocery, drug and hard goods distribution businesses.
This trend also is apparent in the building supply and hardware wholesale
business.
The Company believes that this consolidating trend is attributable to, among
other things, the inability of small distributors to provide a full range of
advertising, store layout and computer-generated pricing and inventory control
services offered by larger entities. The Company has benefitted from this
consolidating trend by recruiting experienced territory managers from
competitors who have been acquired, gone out of business or reduced market area,
thereby increasing the Company's customer base and sales.
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PRODUCTS
The Company closely monitors its items in stock, maintaining a full range of
products while concentrating its efforts on carrying quantities of stock
designed to achieve high inventory turns. The following table indicates the
percentage of net sales by class of merchandise sold by the Company in the past
three years:
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
---------------------------------
CLASS OF MERCHANDISE 1995 1994 1993
- ---------------------------------------------------------------------------- ----- ----- -----
<S> <C> <C> <C>
Electrical and plumbing supplies............................................ 23.1% 23.5% 22.4%
Home center products (including lawn and garden equipment, paint and
accessories, sporting goods and appliances)............................... 18.3 18.9 19.9
Building supplies (including aluminum windows and doors, roofing products
and lumber)............................................................... 26.4 25.7 25.1
General and shelf hardware (including power and hand tools, lock sets and
wire products)............................................................ 32.2 31.9 32.6
----- ----- -----
100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
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3
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MARKETING PROGRAMS AND CUSTOMER SERVICES
Sales Force. The Company's marketing program is implemented primarily by its
sales force of territory managers, each of whom is responsible for specific
customers within a particular geographic area. Territory managers generally call
on customers weekly to check inventories, take orders and perform various
in-store services. In addition, the territory managers act as liaison between
the customer and the Company to promote the Company's support services.
In the second quarter of 1994 the Company began a program of hiring sales
assistants to work with certain of the more senior territory managers. At
December 31, 1995 there were 82 territory managers and assistants employed by
the Company.
At December 31, 1995, the Company also employed two district managers, each
responsible for supervising and monitoring the activities of territory managers
located in his assigned area. To supplement its primary sales force, the Company
maintains a telemarketing group which solicits and accepts orders from customers
between regular visits by territory managers.
Customer Services. An important component of the Company's marketing strategy
is the range of support services it offers to its customers. These services,
which the Company believes not only strengthen its relationships with existing
customers but also attract new customers, are designed to enable customers to
improve their marketing efforts and compete more effectively, thereby increasing
the Company's sales.
The Company's support services include advertising and promotional services,
store installation and design services, and computer-generated systems for
control of inventory, pricing and gross margin. The Company also provides a
store identification program, as well as additional promotional services, to
selected customers under the name "Hardware House", a registered trade name
owned and developed by the Company, and similar programs under the national
trade name of "Pro".
Operations. The Company's ability to fill and deliver small quantity orders
for many different items enables customers to place orders on an as-needed
basis, and in turn, to reduce inventory investment, storage and control costs.
The Company's "fill-rate" -- the percentage of items shipped within 48 hours of
receipt of an order -- is a measure of the efficiency of its order processing,
inventory control and warehouse operations. In 1995 the Company's fill-rate
generally exceeded 95%.
Deliveries are made on a regular basis primarily by the Company's fleet of
approximately 46 owned and leased trucks and vans. The Company's sales personnel
generally call on customers weekly, and deliveries of merchandise are normally
made within two or three business days after placement of an order.
Direct Shipment Program. As an additional service to its customers, the
Company maintains a direct shipment program under which customers order and
receive shipments of some products directly from suppliers but are invoiced
through the Company. These programs enable the Company to distribute products
that would be inconvenient or expensive to stock at its warehouse, such as
commodity building materials, and allow customers to receive discounts that
otherwise might not be available to them. In 1995, approximately 31% of the
Company's net sales were attributable to purchases under the direct shipment
program.
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CUSTOMERS
The Company currently services approximately 1,100 customers, including retail
home centers, hardware stores, building materials dealers, combination stores
and a limited number of mass merchandisers. No customer or affiliated group of
customers accounted for more than 3% of the Company's 1995 net sales.
The Company's current customers are located primarily in Alabama, Florida,
Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina,
Tennessee and Virginia.
From time to time the Company receives extended terms from its suppliers which
it passes on to its customers.
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PURCHASING, SUPPLIERS AND INVENTORY MANAGEMENT
The Company distributes approximately 36,600 items purchased from
approximately 1,400 manufacturers. The Company's ten largest vendors in 1995
accounted for approximately 23% of total Company purchases, but
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no single manufacturer accounted for more than 5% of the Company's total
purchases during the year. The Company has no long-term supply or distribution
agreements with its vendors. Substantially all products of the type distributed
by the Company are available from a number of manufacturers.
Because inventory constitutes a substantial portion of the Company's total
assets, efficient control of inventory is an important management priority. The
Company's inventory turns (determined by dividing monthly cost of stocked goods
sold by average monthly inventory) were 5.0 in 1995, unchanged from 1994.
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COMPETITION
The Company's markets and those of its customers are highly competitive. The
Company competes directly with other national and regional wholesalers
(including co-ops), with direct-selling manufacturers and with specialty
distributors on the basis of fill-rate, delivery time, price, breadth of product
lines, marketing programs and support services. A number of these competitors
are larger and have greater financial resources than the Company. The Company's
business depends on its ability to distribute a large volume and variety of
products efficiently and to provide high quality support services.
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EMPLOYEES
As of December 31, 1995, the Company employed 426 persons, of whom
approximately 171 are subject to a collective bargaining agreement expiring in
December 1998. The Company has not experienced any strikes or work stoppages and
considers its relationship with employees to be good.
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EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company as of March 1, 1996, their ages and
their present positions with the Company and their principal occupations since
1990 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- ----------------------------------------------------------
<S> <C> <C>
William Riley............................. 64 Chairman of the Board
Pierce E. Marks, Jr....................... 67 Vice Chairman
Emery H. White............................ 58 President and Chief Executive Officer (since June 1995)(1)
John L. Sawyer............................ 58 Senior Vice President -- Merchandising
L. Ward Edwards........................... 59 Vice President -- Finance, Treasurer and Secretary
</TABLE>
(1) Mr. White was employed by a subsidiary of K-Mart, Builders Square, a
retailer of home improvement merchandise and building materials from 1992 to
1994. From 1985 to 1992 he was employed by Emery-Waterhouse, a wholesale
distributor.
Officers are elected annually and serve at the discretion of the Board of
Directors.
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PROPERTIES
The Company's distribution facility and executive offices are located in a
single 430,000 square foot facility on a 30-acre site in Pelham, Alabama. The
Company leases the Pelham facility pursuant to leases entered into in connection
with the issuance of three series of industrial development bonds. The Company
has guaranteed payment of the principal and interest on such bonds, and in 1995
paid an aggregate of $952,000 pursuant to such lease agreements. The Company has
options to purchase the property for a nominal cost at the
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5
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expiration of the leases. The Company believes that its Pelham facility is
adequate for its presently foreseeable needs. The Company also leases 20,000
square foot warehouse redistribution facilities in Winston-Salem, North Carolina
and in Ocala, Florida for monthly rental of approximately $4,700 and $5,300,
respectively, and office space in Atlanta, Georgia and New York, New York for
which lease payments are approximately $64,000 and $120,000 per annum,
respectively.
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MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded in the over-the-counter market and quoted
on the NASDAQ National Market System, symbol MHCO. The following table shows the
high and low sales prices by quarter in 1995 and 1994.
<TABLE>
<CAPTION>
1995 1994
---------------- ----------------
QUARTER ENDED HIGH LOW HIGH LOW
- ----------------------------------------------------------------- ---- --- ---- ---
<S> <C> <C> <C> <C>
March 31,........................................................ 5 3/4 4 3/4 4 1/4 3
June 30,......................................................... 5 5/8 4 3/4 5 1/2 3 1/4
September 30,.................................................... 3 5/8 3 1/2 5 1/2 4 1/2
December 31,..................................................... 3 5/8 3 1/2 5 1/4 4 1/4
</TABLE>
At March 8, 1996 there were 75 holders of record of the Company's common
stock. Since a large number of these holders are nominees, the Company believes
beneficial holders represent a substantially larger number.
The Company has not paid cash dividends on its common stock. It has been the
policy of the Board of Directors to retain all available earnings to support the
growth and expansion of its business. The payment of dividends on common stock
in the future and the rate of such dividends, if any, will be determined by the
Board of Directors based on the Company's earnings, financial condition and
capital requirements.
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SELECTED FINANCIAL DATA
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<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales................................. $ 142,157 $ 136,236 $ 129,355 $ 126,003 $ 123,627
Cost of sales............................. 127,076 120,945 114,684 110,304 108,993
--------- --------- --------- --------- ---------
Gross profit.............................. 15,081 15,291 14,671 15,699 14,634
Selling and administrative expenses....... 13,094 12,360 12,861 13,101 15,331
--------- --------- --------- --------- ---------
Operating income (loss)................... 1,987 2,931 1,810 2,598 (697)
Interest expense, net..................... 659 595 539 567 756
--------- --------- --------- --------- ---------
Income (loss) before income tax
(benefit)............................... 1,328 2,336 1,271 2,031 (1,453)
Income tax (benefit)...................... 520 880 465 690 (477)
--------- --------- --------- --------- ---------
Net income (loss)......................... $ 808 $ 1,456 $ 806 $ 1,341 $ (976)
========= ========= ========= ========= =========
Per share data:
Net income (loss).................... $ .37 $ .65 $ .36 $ .59 $ (.43)
========= ========= ========= ========= =========
Weighted average common shares
outstanding............................. 2,203,000 2,249,000 2,265,000 2,275,000 2,257,000
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Current assets............................ $ 39,597 $ 42,747 $ 35,921 $ 36,148 $ 35,288
Property and equipment -- net............. 7,421 7,216 7,420 7,283 7,356
Other assets.............................. 797 785 776 807 424
--------- --------- --------- --------- ---------
Total assets......................... $ 47,815 $ 50,748 $ 44,117 $ 44,238 $ 43,068
========= ========= ========= ========= =========
Current liabilities....................... $ 26,316 $ 29,318 $ 23,531 $ 24,128 $ 24,681
Long-term debt............................ 3,996 4,699 5,198 5,516 6,014
Deferred income taxes..................... 1,059 988 968 880 --
Stockholders' equity...................... 16,444 15,743 14,420 13,714 12,373
--------- --------- --------- --------- ---------
Total liabilities and stockholders'
equity............................. $ 47,815 $ 50,748 $ 44,117 $ 44,238 $ 43,068
========= ========= ========= ========= =========
</TABLE>
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QUARTERLY FINANCIAL DATA -- UNAUDITED
QUARTERLY FINANCIAL DATA -- UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------------- ----------------- ----------------- -----------------
1995 1994 1995 1994 1995 1994 1995 1994
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales........................... $35,766 $33,984 $36,676 $33,825 $37,579 $36,607 $32,136 $31,820
Gross Profit........................ 3,847 3,895 3,905 3,921 3,772 3,942 3,557 3,533
Net Income.......................... 298 442 227 431 148 312 135 271
======= ======= ======= ======= ======= ======= ======= =======
Net income per share................ $ .13 $ .20 $ .10 $ .19 $ .07 $ .14 $ .06 $ .12
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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In order to keep its customers competitive in their markets, the Company
introduced a new dealer buying plan in 1993 which features lower prices for
volume purchases. Increased sales to larger accounts has more than offset the
sales lost from the elimination of smaller accounts and a reduction in the
number of salesmen; however, more competitive pricing has reduced the gross
margin percentage.
NET SALES
Net sales increased by $5,921,000, or 4.3%, in 1995 compared to 1994, largely
due to an increase in factory direct shipments. Net sales increased by
$6,881,000, or 5.3%, in 1994 over 1993.
As the Company's customer base has changed towards larger customers, sales
shipped direct from the factory to the customer have increased. Gross margins on
direct shipments are lower than gross margins on warehouse shipments; however,
expenses related to direct shipments are also substantially lower, and the
Company believes that direct shipments are an important part of its business as
a full-service wholesale distributor.
The following table sets forth the major elements of net sales in the past
three years.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------
1995 1994 1993
----------------- ----------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net Sales:
Warehouse shipments.............................. $ 98,558 69.3% $ 98,154 72.0% $ 92,779 71.7%
Factory direct shipments......................... 43,599 30.7 38,082 28.0 36,576 28.3
-------- ----- -------- ----- -------- -----
Net Sales................................ $142,157 100.0% $136,236 100.0% $129,355 100.0%
======== ===== ======== ===== ======== =====
</TABLE>
OPERATIONS
The following table sets forth certain financial data as a percentage of net
sales for the years indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Net sales................................................................... 100.0% 100.0% 100.0%
===== ===== =====
Gross margin................................................................ 16.1% 17.0% 17.2%
Warehouse and delivery expense.............................................. 5.5 5.8 5.9
----- ----- -----
Gross profit................................................................ 10.6 11.2 11.3
Selling and administrative expense.......................................... 9.2 9.1 9.9
----- ----- -----
Operating income............................................................ 1.4 2.1 1.4
Interest expense, net....................................................... .5 .4 .4
----- ----- -----
Income before income tax.................................................... .9% 1.7% 1.0%
===== ===== =====
</TABLE>
GROSS MARGIN
Gross margin percentage has decreased due to the elimination of a number of
smaller accounts which did not qualify for more competitive prices available to
the Company's larger customers and the introduction of the more competitively
priced dealer buying plan noted above. Gross margin decreased $261,000, or 1.1%,
to $22,948,000 compared with 1994. About half the decrease in 1995 was due to
the increase in the proportion of total shipments represented by factory direct
shipments, which carry a lower gross margin percentage. The balance of the
decrease was due to more competitive pricing. In 1994 gross margin dollars
increased by $923,000, or 4.1%, over 1993 to
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$23,209,000, as volume increases more than offset the lower gross margin
percentage. The following table sets forth gross margin and gross margin
percentages and year-to-year changes for the last three years.
<TABLE>
<CAPTION>
INCREASE (DECREASE)
VS. SAME QUARTER
GROSS MARGIN IN PREVIOUS YEAR
------------------------------- -------------------------------
AMOUNT PERCENTAGE AMOUNT PERCENTAGE
QUARTER (IN THOUSANDS) OF SALES (IN THOUSANDS) POINTS
------------------------------------------- -------------- ---------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
1993 -- 1st........................................ $5,475 17.0% $ (334) (1.9)%
2nd........................................ 5,852 17.7 (309) (.8)
3rd........................................ 5,802 16.6 (226) (1.6)
4th........................................ 5,157 17.6 (113) (.6)
1994 -- 1st........................................ 5,815 17.1 340 .1
2nd........................................ 5,912 17.5 60 (.2)
3rd........................................ 5,936 16.2 134 (.4)
4th........................................ 5,546 17.4 389 (.2)
1995 --.. 1st........................................ 5,829 16.3 14 (.8)
2nd........................................ 5,924 16.2 12 (1.3)
3rd........................................ 5,807 15.5 (129) (.7)
4th........................................ 5,388 16.8 (158) (.6)
</TABLE>
WAREHOUSE AND DELIVERY EXPENSES
In 1995 warehouse and delivery expenses decreased by $51,000, or .6%, over
1994, as a result of favorable workers' compensation and medical claims
experience which was recorded in the fourth quarter. As a percent of warehouse
shipments, they decreased to 8.0% in 1995 compared with 8.1% in 1994. In 1994
warehouse and delivery expenses increased $303,000, or 4.0%, over 1993, in part
due to steps taken to improve order filling accuracy and customer satisfaction.
However, as a percent of warehouse shipments they decreased slightly to 8.1%.
The following table shows the trend of warehouse and delivery expense by
quarter for the last three years.
<TABLE>
<CAPTION>
INCREASE (DECREASE)
WAREHOUSE & DELIVERY EXPENSES VS. SAME QUARTER
--------------------------------- IN PREVIOUS YEAR
PERCENTAGE ---------------------------
AMOUNT OF WAREHOUSE AMOUNT PERCENTAGE
QUARTER (IN THOUSANDS) SHIPMENTS (IN THOUSANDS) POINTS
--------------------------------------- -------------- ------------ -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
1993 -- 1st.................................... $1,816 7.8% $ (4) (.1)%
2nd.................................... 1,925 8.1 46 .1
3rd.................................... 1,959 8.3 18 .3
4th.................................... 1,915 8.6 (14) (.1)
1994 -- 1st.................................... 1,920 7.9 104 .1
2nd.................................... 1,991 8.1 66 .0
3rd.................................... 1,994 7.9 35 (.4)
4th.................................... 2,013 8.4 98 (.2)
1995 -- 1st.................................... 1,982 8.0 62 .1
2nd.................................... 2,019 8.0 28 (.1)
3rd.................................... 2,035 8.1 41 .2
4th.................................... 1,831 7.7 (182) (.7)
</TABLE>
SELLING AND ADMINISTRATIVE EXPENSES
In 1995 selling and administrative expenses increased by $734,000, or 5.9%,
over 1994, largely due to upgrading the Corporation's computer system and
changing the compensation package for salesmen. Selling and administrative
expense as a percent of sales decreased from 10.4% of sales in 1992 to 9.9% of
sales in 1993 and 9.1% in 1994 by consolidation of sales territories and
reducing the number of territory managers and administrative employees.
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The following table shows the quarterly trend of selling and administrative
expenses in the last three years.
<TABLE>
<CAPTION>
INCREASE (DECREASE)
SELLING & ADMINISTRATIVE VS. SAME QUARTER
EXPENSES IN PREVIOUS YEAR
--------------------------------- ---------------------------
AMOUNT PERCENTAGE AMOUNT PERCENTAGE
QUARTER (IN THOUSANDS) OF SALES (IN THOUSANDS) POINTS
--------------------------------------- -------------- ------------ -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
1993 -- 1st.................................... $3,298 10.2% $ 24 (.5)%
2nd.................................... 3,189 9.7 (132) (.3)
3rd.................................... 3,260 9.4 (68) (.7)
4th.................................... 3,114 10.6 (64) (.4)
1994 -- 1st.................................... 3,030 8.9 (268) (1.3)
2nd.................................... 3,104 9.2 (85) (.5)
3rd.................................... 3,298 9.0 38 (.4)
4th.................................... 2,928 9.2 (186) (1.4)
1995 -- 1st.................................... 3,145 8.8 115 (.1)
2nd.................................... 3,400 9.3 296 .1
3rd.................................... 3,382 9.0 84 .0
4th.................................... 3,167 9.9 239 .7
</TABLE>
INTEREST EXPENSE
Interest expense increases in 1994 and 1995 compared to the prior year are
mainly due to overall higher average interest rates on long and short-term
borrowings.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital requirements are met with funds provided by
operations and bank lines of credit providing for maximum borrowings of up to
$11,000,000. Actual borrowings under these lines of credit and the average
interest rate were as follows during the past three years:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE YEAR-END
AVERAGE YEAR-END MAXIMUM INTEREST INTEREST
BORROWINGS(1) BORROWINGS BORROWINGS RATE(2) RATE
------------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
1993.................................................. $ 4,825,000 $7,450,000 $7,655,000 6.00% 6.00%
1994.................................................. 5,117,000 8,500,000 8,500,000 7.10 8.50
1995.................................................. 4,479,000 7,750,000 8,500,000 6.86 8.50
</TABLE>
(1) The average amount outstanding during the period was computed by dividing
the total month-end outstanding principal balances by twelve.
(2) The weighted average interest rate during the period was computed by
dividing the actual interest expense by the average borrowings.
Trade receivables were up $918,000 at December 31, 1995 because of increased
sales at extended payment terms and an increase in past due accounts. At
December 31, 1994 they were up $2,277,000 from December 31, 1993 because of an
increase in sales with extended payment terms in the fourth quarter.
The following are the number of inventory items carried and average inventory
turns for the last three years.
<TABLE>
<CAPTION>
NUMBER OF AVERAGE
ITEMS INVENTORY
CARRIED TURNS
--------- ---------
<S> <C> <C>
1993..................................................................................... 38,000 5.2
1994..................................................................................... 38,000 5.0
1995..................................................................................... 36,600 5.0
</TABLE>
At December 31, 1994 inventories were up $3,971,000 compared to the prior
year. In order to improve the "fill rate" (the percentage of items shipped
within 48 hours of the receipt of an order) on customer orders, inventories were
increased during 1994, and as a result the "fill rate" increased from
approximately 93% in 1993 to approximately 95% in 1994 and 1995. Inventories at
December 31, 1994 were increased in order to take advantage of volume rebates
available from certain suppliers. At the end of 1995 there were fewer volume
rebates available and
- --------------------------------------------------------------------------------
11
<PAGE> 13
inventories at December 31, 1995 were down $3,382,000 compared to the prior
year. Accounts payable at December 31, 1995 were down $2,296,000 from December
31, 1994 as a result of the decrease in inventories.
Capital expenditures during the current year totaled $1,299,000 and have been
financed by operations. Late in 1994 the Company began a $2,000,000 warehouse
modernization and computerization program which is being financed with a 5 year
term loan. Depreciation and amortization for 1995 was $1,084,000.
- --------------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
Board of Directors
Moore-Handley, Inc.
We have audited the accompanying balance sheets of Moore-Handley, Inc. as of
December 31, 1995 and 1994, and the related statements of income, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1995. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Moore-Handley, Inc. at December
31, 1995 and 1994, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
LOGO
Birmingham, Alabama
February 16, 1996
- --------------------------------------------------------------------------------
12
<PAGE> 14
MOORE-HANDLEY, INC.
STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales.................................... $142,157,000 $136,236,000 $129,355,000
Cost of merchandise sold..................... 119,209,000 113,027,000 107,069,000
Warehouse and delivery expense............... 7,867,000 7,918,000 7,615,000
------------ ------------ ------------
Cost of sales................................ 127,076,000 120,945,000 114,684,000
------------ ------------ ------------
Gross profit................................. 15,081,000 15,291,000 14,671,000
Selling and administrative expense........... 13,094,000 12,360,000 12,861,000
------------ ------------ ------------
Operating income............................. 1,987,000 2,931,000 1,810,000
Interest expense, net........................ 659,000 595,000 539,000
------------ ------------ ------------
Income before provision for income tax....... 1,328,000 2,336,000 1,271,000
Income tax................................... 520,000 880,000 465,000
------------ ------------ ------------
Net income................................... $ 808,000 $ 1,456,000 $ 806,000
============ ============ ============
Per share data:
Net income per common share............ $ .37 $ .65 $ .36
============ ============ ============
Weighted average common shares
outstanding......................... 2,203,000 2,249,000 2,265,000
============ ============ ============
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
13
<PAGE> 15
MOORE-HANDLEY, INC.
BALANCE SHEETS
- --------------------------------------------------------------------------------
December 31, 1995 and 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
<S> <C> <C>
- -------------------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents............................... $ 197,000 $ 781,000
Trade receivables, net of allowance for doubtful
accounts
of $1,100,000 in 1995 and 1994....................... 21,267,000 20,349,000
Other receivables....................................... 1,798,000 1,947,000
Merchandise inventory................................... 15,331,000 18,713,000
Prepaid expenses........................................ 215,000 243,000
Refundable income tax................................... 319,000 --
Deferred income taxes................................... 470,000 714,000
----------- -----------
Total current assets.............................. 39,597,000 42,747,000
Prepaid pension cost.......................................... 735,000 704,000
Loan to officer, less amount due within one year.............. 19,000 31,000
Property and equipment:
Land.................................................... 718,000 718,000
Buildings............................................... 7,163,000 6,937,000
Equipment............................................... 8,619,000 7,615,000
----------- -----------
16,500,000 15,270,000
Less accumulated depreciation........................... (9,079,000) (8,054,000)
----------- -----------
Net property and equipment.............................. 7,421,000 7,216,000
Deferred charges, net of accumulated amortization of $64,000
and $57,000 in 1995 and 1994, respectively................. 43,000 50,000
----------- -----------
Total Assets.................................................. $47,815,000 $50,748,000
============ ============
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
14
<PAGE> 16
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Current liabilities:
Bank loans.............................................. $ 7,750,000 $ 8,500,000
Accounts payable........................................ 15,606,000 17,902,000
Accrued payroll......................................... 417,000 407,000
Other accrued liabilities............................... 1,575,000 1,542,000
Long-term debt due within one year...................... 968,000 843,000
Accrued income tax...................................... -- 124,000
----------- -----------
Total current liabilities......................... 26,316,000 29,318,000
Long-term debt, less amount due within one year............... 3,996,000 4,699,000
Deferred income taxes......................................... 1,059,000 988,000
Stockholders' equity:
Common stock, $.10 par value; 10,000,000 shares
authorized, 2,510,040 shares issued.................... 251,000 251,000
Capital in excess of par value.......................... 12,883,000 12,883,000
Retained earnings....................................... 5,153,000 4,345,000
Less:
Treasury stock at cost, 345,497 and 300,497 shares in
1995 and 1994, respectively........................ (1,800,000) (1,587,000)
Loans to officers.................................... (43,000) (149,000)
----------- -----------
Total stockholders' equity........................ 16,444,000 15,743,000
----------- -----------
Total Liabilities and Stockholders' Equity.................... $47,815,000 $50,748,000
============ ============
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
15
<PAGE> 17
MOORE-HANDLEY, INC.
STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
COMMON STOCK
--------------------------
SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance at December 31, 1992..................................................... 2,510,040 $251,000
Purchase of shares for treasury.................................................. -- --
Net income....................................................................... -- --
--------- --------
Balance at December 31, 1993..................................................... 2,510,040 251,000
Purchase of shares for treasury.................................................. -- --
Net income....................................................................... -- --
--------- --------
Balance at December 31, 1994..................................................... 2,510,040 251,000
Purchase of shares for treasury.................................................. -- --
Net income....................................................................... -- --
--------- --------
Balance at December 31, 1995..................................................... 2,510,040 $251,000
========= ========
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
16
<PAGE> 18
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
CAPITAL IN TREASURY STOCK TOTAL
EXCESS OF RETAINED ----------------------- LOANS TO STOCKHOLDERS'
PAR VALUE EARNINGS SHARES AMOUNT OFFICERS EQUITY
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$12,883,000 $2,083,000 252,597 $(1,354,000) $(149,000) $ 13,714,000
-- -- 20,000 (100,000) -- (100,000)
-- 806,000 -- -- -- 806,000
----------- ---------- ------- ----------- --------- -------------
12,883,000 2,889,000 272,597 (1,454,000) (149,000) 14,420,000
-- -- 27,900 (133,000) -- (133,000)
-- 1,456,000 -- -- -- 1,456,000
----------- ---------- ------- ----------- --------- -------------
12,883,000 4,345,000 300,497 (1,587,000) (149,000) 15,743,000
-- -- 45,000 (213,000) 106,000 (107,000)
-- 808,000 -- -- -- 808,000
----------- ---------- ------- ----------- --------- -------------
$12,883,000 $5,153,000 345,497 $(1,800,000) $ (43,000) $ 16,444,000
=========== ========== ======= =========== ========= ===========
See accompanying notes.
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 19
MOORE-HANDLEY, INC.
STATEMENTS OF CASH FLOW
- --------------------------------------------------------------------------------
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................... $ 808,000 $ 1,456,000 $ 806,000
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization........................... 1,084,000 972,000 947,000
Provision for doubtful accounts......................... 422,000 369,000 331,000
Gain on sale of equipment............................... (17,000) (92,000) (35,000)
Deferred income taxes................................... 315,000 (62,000) 46,000
Change in assets and liabilities:
Trade and other receivables........................ (1,191,000) (3,001,000) 26,000
Merchandise inventory.............................. 3,382,000 (3,971,000) (595,000)
Prepaid expenses................................... 28,000 53,000 33,000
Prepaid pension cost............................... (31,000) (29,000) 12,000
Loan to officer.................................... 12,000 12,000 12,000
Accounts payable and accrued expenses.............. (2,253,000) 4,481,000 (2,260,000)
(Refundable) accrued income taxes.................. (443,000) 62,000 62,000
----------- ----------- -----------
Total adjustments.................................. 1,308,000 (1,206,000) (1,421,000)
----------- ----------- -----------
Net cash provided by (used in) operating
activities...................................... 2,116,000 250,000 (615,000)
Cash flows from investing activities:
Capital expenditures......................................... (1,299,000) (762,000) (1,119,000)
Proceeds from sale of equipment.............................. 34,000 94,000 77,000
----------- ----------- -----------
Net cash used in investing activities................... (1,265,000) (668,000) (1,042,000)
Cash flows from financing activities:
Net borrowings under bank loans.............................. (750,000) 1,050,000 1,450,000
Principal payments under long-term debt...................... (682,000) (754,000) (527,000)
Additional long-term borrowings.............................. 104,000 449,000 360,000
Purchase of treasury stock................................... (107,000) (133,000) (100,000)
----------- ----------- -----------
Net cash (used in) provided by financing
activities...................................... (1,435,000) 612,000 1,183,000
----------- ----------- -----------
Net (decrease) increase in cash and cash
equivalents..................................... (584,000) 194,000 (474,000)
Cash and cash equivalents at beginning of year.................... 781,000 587,000 1,061,000
----------- ----------- -----------
Cash and cash equivalents at end of year.......................... $ 197,000 $ 781,000 $ 587,000
=========== =========== ===========
</TABLE>
Supplemental Disclosures of Cash Flow Information
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Cash paid during the year for:
Interest..................................................... $ 742,000 $ 662,000 $ 593,000
Income taxes................................................. 647,000 818,000 280,000
</TABLE>
Supplemental Disclosures of Non-cash Financing Activities
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Purchase of treasury stock in exchange for loan to officer........ $ 106,000 -- --
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
18
<PAGE> 20
- --------------------------------------------------------------------------------
MOORE-HANDLEY, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Cash and Cash Equivalents
The Company considers all highly liquid securities with original maturities of
three months or less to be cash equivalents.
Basis of Financial Statements
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 amount of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Concentration of Credit Risk
The Company is a wholesaler of hardware and building material products and as
such grants credit to its customers, most of whom are independent retailers
located in the Southeast. The Company performs periodic credit evaluations of
its customers' financial condition and obtains personal guarantees and/or
security interests where it deems necessary.
Inventory
Inventory is stated at the lower of weighted average cost or market.
Property and Equipment
Property and equipment is stated at cost and depreciation is computed using
the straight line method over estimated useful lives as follows:
Buildings...................................................... 25-31.5 years
Equipment..................................................... 3-10 years
Income Taxes
Deferred income taxes are provided for temporary differences between financial
and income tax reporting, primarily related to depreciation, inventory valuation
and certain accrued costs.
Deferred Charges
Deferred charges, consisting of financing costs, are amortized over the term
of the indebtedness.
Stock Option Accounting
The Company accounts for its stock compensation arrangements under the
provisions of APB 25, "Accounting for Stock Issued to Employees," and intends to
continue to do so.
Income per Common Share
Income per common share is computed based on the weighted average number of
common and common equivalent shares outstanding during the year. Common
equivalent shares include dilutive employees' stock options.
2. Loans to Officers
In 1989 two officers of the Company, Mr. Sawyer and Mr. West, purchased an
aggregate of 35,000 shares of treasury stock, at market value, for notes of
$149,000 collateralized by the shares and bearing interest at 10%. Mr. Sawyer's
note for $106,000 was repaid in 1995 and Mr. West's note for $43,000 was repaid
in January, 1996. The outstanding balance of the notes is reflected as a
reduction of stockholders' equity in the balance sheet.
In 1990 the Company also loaned Mr. Sawyer $60,000 in connection with the
purchase of a home. This note was repaid in 1995.
The Company also loaned Mr. West $50,000 in 1990 and $72,000 in 1992. He has
made principal payments on these loans of $12,000 in 1993, 1994, and 1995. The
balance at December 31, 1995 of $31,000 ($43,000 at December 31, 1994) bears
interest at 7% and is payable $1,000 per month plus the net amount of any bonus
paid to him.
3. Bank Loans
The Company has lines of credit, renewable annually, with three banks which
allow unsecured borrowings in the aggregate of up to $11,000,000 at the banks'
prime interest rates. The Company is charged a commitment fee of 3/8 of 1% on
the unused portion of one of the lines of credit.
4. Long-Term Debt
Long-term debt at December 31, 1995 and 1994 includes industrial development
bonds with interest payable at rates from 85% to 93% of prime and obligations
under capital leases financing transportation equipment. The Company is a party
to lease agreements with an industrial development board which are being
- --------------------------------------------------------------------------------
19
<PAGE> 21
- --------------------------------------------------------------------------------
accounted for as asset purchases. Under the agreements, industrial development
bonds were issued and the proceeds used to purchase land of $534,000 and
building and equipment of $8,881,000. The Company has an unconditional
obligation to pay the principal and interest on the bonds.
The Company has financed the purchase of certain transportation and computer
equipment with leases. The leases, which include interest, are being accounted
for as capital leases. Annual installments of principal on all capital leases
decrease from approximately $968,000 in 1996 to $806,000 in 2001.
Maturities of long-term debt during the next five years are as follows:
<TABLE>
<S> <C>
1996............................ $ 968,000
1997............................ 801,000
1998............................ 793,000
1999............................ 769,000
2000............................ 827,000
Thereafter...................... 806,000
----------
$4,964,000
==========
</TABLE>
Interest expense on long-term debt and bank loans for the years ended December
31, 1995, 1994 and 1993 was $739,000, $677,000, and $603,000 respectively. At
December 31, 1995, the carrying value of the Company's long-term debt
approximated its fair value.
5. Commitments
Total future rental payments under non-cancelable equipment operating leases
which expire in 1998 are $156,000. Annual rentals for the remainder of the lease
terms are as follows:
<TABLE>
<S> <C>
1996................................ 92,000
1997................................ 51,000
1998................................ 13,000
</TABLE>
Rental expense was $442,000, $408,000, and $409,000 in 1995, 1994 and 1993,
respectively.
6. Income Tax
The provision (benefit) for income tax consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal........................... $199,000 $839,000 $372,000
State............................. 6,000 103,000 47,000
Deferred............................ 315,000 (62,000) 46,000
-------- -------- --------
$520,000 $880,000 $465,000
======== ======== ========
</TABLE>
Deferred income tax expense (benefit) is related to the following items:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Depreciation........................ $ 54,000 $ 36,000 $ 59,000
Provision for pension expenses...... 17,000 (16,000) 29,000
Accrued health insurance and
vacation costs.................... (1,000) (26,000) --
Allowance for doubtful accounts..... -- (36,000) --
Inventory costs capitalized for tax
purposes.......................... 222,000 (5,000) (27,000)
Provision for writedown of excess
inventory......................... 23,000 (15,000) (15,000)
-------- -------- --------
$315,000 $(62,000) $ 46,000
======== ======== ========
</TABLE>
The deferred income tax liabilities (assets) are reflected in the balance
sheet as follows:
<TABLE>
<CAPTION>
1995 1994
----------- ---------
<S> <C> <C>
Net current assets
Accrued health insurance and vacation
costs.................................. $ (108,000) $(107,000)
Allowance for doubtful accounts.......... (409,000) (409,000)
Inventory costs capitalized for tax
purposes............................... 88,000 (134,000)
Provision for write down of excess
inventory.............................. (41,000) (64,000)
----------- ---------
(470,000) (714,000)
Non-current liabilities
Depreciation............................. 783,000 729,000
Provision for pension expenses........... 276,000 259,000
----------- ---------
1,059,000 988,000
----------- ---------
Net liability.......................... $ 589,000 $ 274,000
=========== =========
</TABLE>
The provision for income taxes differs from the statutory federal income tax
rate as a result of the following:
<TABLE>
<CAPTION>
PERCENT OF PRE-TAX INCOME
--------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Statutory U. S. income tax rate........ 34% 34% 34%
Increase in rates resulting from:
State income taxes -- net of
federal benefit.................. 2 3 2
Non-deductible and other items..... 3 1 1
---- ---- ----
Effective income tax rate.............. 39% 38% 37%
===== ===== =====
</TABLE>
7. Pension Plans
The Company has two trusteed, noncontributory, qualified defined benefit
pension plans ("Pension Plans") covering substantially all employees of the
Company. Retirement benefits are provided based on employees' years of service
and earnings. Contributions to the Pension Plans are based on the amount
necessary to fund the net periodic pension cost. Contributions are limited to
the amount that can be currently deducted for federal income tax purposes and
are based on the amount necessary to fund the minimum level required
- --------------------------------------------------------------------------------
20
<PAGE> 22
- --------------------------------------------------------------------------------
by the Employee Retirement Income Security Act of 1974.
The Company's net periodic pension cost for the last three years included the
following components:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Service cost --
benefits earned
during the
period............ $ 256,000 $ 215,000 $ 254,000
Interest cost on
projected benefit
obligation........ 319,000 289,000 268,000
Actual return on
assets............ (602,000) 88,000 (255,000)
Net amortization and
deferral.......... 374,000 (305,000) 70,000
--------- --------- ---------
Net periodic pension
cost.............. $ 347,000 $ 287,000 $ 337,000
========= ========= =========
</TABLE>
The following table sets forth the assets and liabilities of the plans and the
amount of the net prepaid pension cost recognized in the Company's balance
sheets as of December 31, 1995 and 1994.
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit
obligations............ $4,111,000 $3,743,000
Nonvested benefit
obligations............ 94,000 98,000
---------- ----------
Accumulated benefit
obligations............ 4,205,000 3,841,000
Effect of projected
future salary
increases.............. 941,000 802,000
---------- ----------
Projected benefit
obligations............ 5,146,000 4,643,000
Plan assets at fair
value(a).................... 5,251,000 4,394,000
---------- ----------
Plan assets in excess of (less
than) projected benefit
obligations................. 105,000 (249,000)
Unrecognized obligations at
transition.................. 531,000 609,000
Unrecognized net (gain)/
loss........................ (27,000) 203,000
Unrecognized prior service
cost........................ 126,000 141,000
---------- ----------
Net prepaid pension cost
recognized in the balance
sheet....................... $ 735,000 $ 704,000
========== ==========
</TABLE>
- ------------
(a) Plan assets consist of debt securities and comingled funds.
The assumed rates used to measure the projected benefit obligations and the
expected earnings on plan assets at December 31 for the last three years were:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate.... 7% 7% 7%
Long-term rate of return on
assets.......................... 7% 7% 7%
Increase in future compensation
levels.......................... 4% 4% 4%
</TABLE>
The Company has 401(k) savings plans covering substantially all employees.
Contributions by the Company are discretionary and no contributions were made in
the last three years.
8. Incentive Compensation Plan
On May 23, 1991 the stockholders approved the 1991 Incentive Compensation Plan
pursuant to which a maximum aggregate of 250,000 shares of common stock may be
issued to employees and directors until April 12, 2001.
As of December 31, 1995 the following options have been granted under this
plan:
A. Options to Officers for 80,000 shares at $3.75 per share (market value
at date of grant) exercisable through April 2001 in four equal annual
installments beginning April 12, 1992.
B. Options to Independent Directors for 12,000 shares at approximately
$5.00 per share, 4,000 shares at approximately $4.75 per share and 4,000
shares at approximately $4.875 per share (market value at date of grant)
exercisable through May 2004.
C. Options to Officer-Directors for 110,000 shares at $5.36 per share
(approximately 143% of market value at date of grant) exercisable, if at all,
through April 2001 upon the first to occur of (i) the Company earning $.85 or
more per share in any fiscal year during the term of the option; (ii) three
months before the tenth anniversary of the date of grant of the option if the
holder is still an employee; or (iii) the date of retirement of the holder if
he is age 70 or older.
D. Option to Officer for 100,000 shares at $5.50 per share (market value at
date of grant) exercisable through June 2005, in five installments of 18,181
shares and one installment of 9,095 beginning in June 1996, subject to
shareholder approval of an increase in the maximum shares which may be issued
under the Plan.
- --------------------------------------------------------------------------------
21
<PAGE> 23
MOORE-HANDLEY, INC.
Index of Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ------------------------------------------------------------------------------------------------
<C> <S>
3 (a) Restated Certificate of Incorporation of Company, filed as Exhibit 3(a) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1987 and incorporated herein by reference.
a)-1 Amendment to Restated Certificate of Incorporation dated May 7, 1987, filed as Exhibit 3(a)-1 to
the Company's Annual Report on Form 10-K for the year ended December 31, 1987 and incorporated
herein by reference.
(b) By-laws of the Company, filed as Exhibit 3(d) to the Company's Registration Statement on Form
S-1 (Reg. No. 33-3032) and incorporated herein by reference.
b)-1 Article VII of By-laws of the Company, as amended May 7, 1987, filed as Exhibit 3(b)-1 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1987 and incorporated
herein by reference.
4 (a) Lease Agreement, dated as of December 1, 1981, as amended, between the Company and the
Industrial Development Board of the Town of Pelham (the "Board"), filed as Exhibit 10(a) to
the Company's Registration Statement on Form S-1 (Reg. No. 33-3032) and incorporated herein by
reference.
(b) Guarantee Agreement, dated as of December 1, 1981, between the Company and the First Alabama
Bank of Birmingham, as Trustee ("Trustee"), filed as Exhibit 10(b) to the Company's
Registration Statement on Form S-1 (Reg. No. 33-3032) and incorporated herein by reference.
(c) Mortgage and Trust Indenture, dated as of December 1, 1981, between the Trustee and the Board,
filed as Exhibit 10(c) to the Company's Registration Statement on Form S-1 (Reg. No. 33-3032)
and incorporated herein by reference.
(d) Lease Agreement, dated as of December 1, 1982, between the Company and the Board, filed as
Exhibit 10(d) to the Company's Registration Statement on Form S-1 (Reg. No. 33-3032) and
incorporated herein by reference.
(e) Guarantee Agreement, dated as of December 1, 1982, between the Company and the Trustee, filed as
Exhibit 10(e) to the Company's Registration Statement on Form S-1 (Reg. No. 33-3032) and
incorporated herein by reference.
(f) Mortgage and Trust Indenture, dated as of December 1, 1982, between the Trustee and the Board,
filed as Exhibit 10(f) to the Company's Registration Statement on Form S-1 (Reg. No. 33-3032)
and incorporated herein by reference.
(g) Guarantee Agreement, dated as of December 30, 1986, between the Company and the First Alabama
Bank of Birmingham, as Trustee ("Trustee"), filed as Exhibit 10(dd) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1987 and incorporated herein by reference.
(h) Mortgage and Trust Indenture, dated as of December 30, 1986, between the Trustee and the Board,
filed as Exhibit 10(ee) to the Company's Annual Report on Form 10-K for the year ended
December 31, 1987 and incorporated herein by reference.
(i) Master Lease Agreement, dated as of September 30, 1993, between the Company and The CIT Group/
Equipment Financing, related to the lease of 10 Navistar Tractors for the term of 36 months
and incorporated herein by reference.
10 (n) The Moore-Handley Incorporated Salaried Pension Plan, effective January 1, 1985, as amended,
filed as Exhibit 10(n) to the Company's Registration Statement on Form S-1 (Reg. No. 33-3032)
and incorporated herein by reference.
n)-1 Amendment No. 4 to The Moore-Handley Incorporated Salaried Pension Plan, dated February 10, 1992
but effective January 1, 1987, filed as Exhibit 10(n)-1 to the Company's Annual Report on Form
10-K for the year ended December 31, 1991 and incorporated herein by reference.
n)-2 Amendment No. 5 to The Moore-Handley Incorporated Salaried Pension Plan, dated February 10, 1992
but effective January 1, 1988, filed as Exhibit 10(n)-2 to the Company's Annual Report on Form
10-K for the year ended December 31, 1991 and incorporated herein by reference.
n)-3 Amended and Restated Moore-Handley, Inc. Salaried Pension Plan, dated February 10, 1992 but
effective January 1, 1989, filed as Exhibit 10(n)-3 to the Company's Annual Report on Form
10-K for the year ended December 31, 1991 and incorporated herein by reference.
n)-4 Amendment No. 6 to The Moore-Handley Incorporated Salaried Pension Plan, dated February 10,
1992, filed as Exhibit 10(n)-4 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1991 and incorporated herein by reference.
n)-5 Amendment No. 2 to The Moore-Handley Incorporated Salaried Pension Plan, dated December 29,
1994, filed as Exhibit 10(n)-5 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1994.
(o) Employees' Retirement Plan B of Moore-Handley, Inc. (Non-Exempt and Hourly), effective January
1, 1984, filed as Exhibit 10(o) to the Company's Registration Statement on Form S-1 (Reg. No.
33-3032) and incorporated herein by reference.
</TABLE>
- --------------------------------------------------------------------------------
22
<PAGE> 24
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ------------------------------------------------------------------------------------------------
<C> <S>
o)-1 Amendment No. 2 to Employees' Retirement Plan B of Moore-Handley, Inc. (Non-Exempt and Hourly),
dated February 10, 1992 but effective January 1, 1987, filed as Exhibit 10(o)-1 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1991 and incorporated
herein by reference.
o)-2 Amendment No. 3 to Employees' Retirement Plan B of Moore-Handley, Inc. (Non-Exempt and Hourly),
dated February 10, 1992, filed as Exhibit 10(o)-2 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1991 and incorporated herein by reference.
o)-3 Amended and Restated Moore-Handley, Inc. Hourly Employees' Retirement Plan dated February 10,
1992 but effective January 1, 1989, filed as Exhibit 10(o)-3 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1991 and incorporated herein by reference.
o)-4 Amendment No. 2 to the Moore-Handley, Inc. Hourly Employees' Retirement Plan, dated December 29,
1994, filed as Exhibit 10(o)-4 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1994.
(p) The Moore-Handley Salaried Employees' Savings Plan and Trust, effective January 1, 1985, as
amended, filed as Exhibit 10(p) to the Company's Registration Statement on Form S-1 (Reg. No.
33-3032) and incorporated herein by reference.
p)-1 Amended and restated The Moore-Handley Salaried Employees' Savings Plan and Trust dated February
4, 1994 but effective January 1, 1989, filed as Exhibit 10(p)-1 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1994.
q)-3 Collective Bargaining Agreement between the Company and United Wholesale and Warehouse
Employees' Union, effective December 23, 1992 through December 23, 1995, filed as Exhibit
10(q)-3 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992 and
incorporated herein by reference.
(r) The Moore-Handley Return-on-Investment Bonus Program, dated February 23, 1983, filed as Exhibit
10(r) to the Company's Registration Statement on Form S-1 (Reg. No. 33-3032) and incorporated
herein by reference.
(aa) Form of Stock Subscription Agreement, dated as of January 29, 1986, between the Company and
certain managers of the Company, filed as Exhibit 10(aa) to the Company's Registration
Statement on Form S-1 (Reg. No. 33-3032) and incorporated herein by reference.
(bb) Form of Amendatory Agreements, dated as of March 3, 1986 between the Company, the Trustee and
the Board, relating to the Lease Agreements listed as items 10(c) and 10(d), respectively,
filed as Exhibit 10(bb) to the Company's Registration Statement on Form S-1 (Reg. No. 33-3032)
and incorporated herein by reference.
(cc) Lease Agreement, dated as of December 30, 1986, between the Company and the Industrial
Development Board of the Town of Pelham (the "Board"), filed as Exhibit 10(cc) to the
Company's Annual Report on Form 10-K for the year ended December 31, 1987 and incorporated
herein by reference.
(dd) Agreement dated August 15, 1989 between the Company and John L. Sawyer related to the purchase
of common stock, filed as Exhibit 19.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1989 and incorporated herein by reference.
(ee) Agreement dated August 15, 1989 between the Company and J. Franklin West related to the purchase
of common stock, filed as Exhibit 19.2 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1989 and incorporated herein by reference.
(ff) 1991 Incentive Compensation Plan, filed as Exhibit A to the Company's Proxy Statement dated
April 30, 1991 and incorporated herein by reference.
(gg) The Moore-Handley, Inc. Employees' 401(k) Profit Sharing Prototype Non-Standardized Adoption
Agreement effective July 1, 1993 and incorporated herein by reference.
(hh) Employment Agreement, dated June 5, 1995, between the Company and Emery H. White, filed as
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1995 and incorporated herein by reference.
(hh)-1 Letter Agreement, dated June 5, 1995, between the Company and Emery H. White, filed as Exhibit
10.2(hh)-1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995
and incorporated herein by reference.
</TABLE>
- --------------------------------------------------------------------------------
23
<PAGE> 25
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-Handley, Inc.
By: /s/ L. WARD EDWARDS
---------------------------------------
L. Ward Edwards
Vice President, Treasurer and Secretary
and Director
(Principal Accounting and Financial
Officer)
March 18, 1996
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.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- --------------------------------------------- ----------------------------------------------- ---------------
<C> <S> <C>
/s/ WILLIAM RILEY Chairman of the Board and Director March 18, 1996
- ---------------------------------------------
William Riley
/s/ PIERCE E. MARKS, JR. Vice Chairman and Director March 18, 1996
- ---------------------------------------------
Pierce E. Marks, Jr.
/s/ EMERY H. WHITE President and Chief Executive Officer March 18, 1996
- ---------------------------------------------
Emery H. White
/s/ L. WARD EDWARDS Vice President, Treasurer and Secretary and March 18, 1996
- --------------------------------------------- Director (Principal Accounting and Financial
L. Ward Edwards Officer)
/s/ RONALD J. JUVONEN Director March 18, 1996
- ---------------------------------------------
Ronald J. Juvonen
</TABLE>
- --------------------------------------------------------------------------------
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
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0
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