<PAGE> 1
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
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
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.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 63-0819773
---------------------------------------- -------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OF ORGANIZATION) IDENTIFICATION NO.)
3140 PELHAM PARKWAY, PELHAM, ALABAMA 35124
---------------------------------------- -------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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 checkmark 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 checkmark 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. ___
As of March 7, 1997, 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 $4,273,391. 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 documents 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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<PAGE> 2
MOORE-HANDLEY, INC.
Table of Contents
<TABLE>
<CAPTION>
Part I.
Item No. Page No.
- ------- -------
<S> <C>
1. Business.................................................. 3
2. Properties................................................ 6
3. Legal Proceedings......................................... None
4. Submission of Matters to a Vote of Security Holders
(none during the fourth quarter of 1996)............... None
Part II.
5. Market for Registrant's Common Equity
and Related Stockholder Matters............................. 7
6. Selected Financial Data..................................... 8
7. Management's Discussion and Analysis of
Financial Condition and Results of Operations............... 9
8. Financial Statements and Supplementary Data................. 14
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....................................... 14
(b) Reports on Form 8-K........................................ None
(c) Exhibits Filed............................................. 28
(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.
- 2 -
<PAGE> 3
PART I
Item 1.
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.
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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<PAGE> 4
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>
Class of Merchandise Percentage of Net Sales
- -------------------- ------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Electrical and plumbing supplies 23.2% 23.1% 23.5%
Home center products (including lawn and
garden equipment, paint and accessories,
sporting goods and appliances) 18.3 18.3 18.9
Building supplies (including aluminum
windows and doors, roofing products
and lumber) 21.9 26.4 25.7
General and shelf hardware (including power
and hand tools, lock sets and wire products) 36.6 32.2 31.9
----- ----- -----
100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
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, 1996 there were 68 territory managers and assistants employeed by
the Company.
At December 31, 1996, the COmpany also employed four 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".
The Company has developed a personal computer-based system for use by its
customers which includes a color digitized catalog, electronic ordering and
order editing capabilities and, additional software programs to enable the
dealer to increase profitablity.
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 1996 the
Company's fill-rate, which has generally exceeded 95%, fell as a result of
disruption to operations caused by changes made to the warehouse. See
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
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
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<PAGE> 5
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 1996, approximately 31% of the
Company's net sales were attributable to purchases under the direct shipment
program.
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 1996 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.
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 1996
accounted for approximately 28.6% of total Company purchases, but no single
manufacturer accounted for more than 5.8% 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 5.1 in 1996 as compared to 5.0 in 1995.
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.
EMPLOYEES
As of December 31, 1996, the Company employed 455 persons, of whom
approximately 182 are subject to a collective bargaining agreement expiring in
December 1998. The
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<PAGE> 6
Company has not experienced any strikes or work stoppages and considers its
relationship with employees to be good.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company as of March 1, 1997, their ages and
their present positions with the Company and their principal occupations since
1991 are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
William Riley............... 65 Chairman of the Board
Pierce E. Marks, Jr......... 68 Vice Chairman
Emery H. White.............. 59 President and Chief Executive Officer
(since June 1995) (1)
L. Ward Edwards............. 60 Vice President - Finance, Treasurer
and Secretary
John L. Norris.............. 53 Senior Vice President, Sales and
Marketing - (Since Sept. 1996) (2)
Andrew W. Reid ............. 49 Vice President - Sales
Kenneth A. Trant ........... 62 Vice President - Operations (3)
Michael J. Gaines .......... 54 Vice President - Merchandising (4)
</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.
(2) Mr. Norris was employed by Agway Consumer Products, Inc., a
wholesaler/retailer, from 1990 to 1995.
(3) Mr. Trant was self employed as a consultant from 1995 through August
1996; he was employed by C. D. Smith Co., a pharmaceutical distributor,
from September through December of 1984. Prior to that he had been self
employed as a consultant since 1990.
(4) Mr. Gaines was employed by Grossman's, a home center chain, from 1993
to 1996; he was employed by Triangle Building Centers, a home
center chain, from 1992 to 1993; prior to that he was
employed by Mr. Goodbuys, a home center chain, from 1990 to 1992.
Officers are elected annually and serve at the discretion of the Board of
Directors.
Item 2.
PROPERTIES
The Company's distribution facility and executive offices are located in a
single 430,000 square foot facility, with a 100,000 square foot mezzanine, 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 1996 paid an aggregate of $949,700
pursuant to such lease agreements. The Company has options to purchase the
property for a nominal cost at the 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 $87,000 per annum, respectively.
- 6 -
<PAGE> 7
PART II
Item 5.
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 1996 and 1995.
<TABLE>
<CAPTION>
1996 1995
------------ ------------
Quarter Ended High Low High Low
----- ----- ----- -----
<S> <C> <C> <C> <C>
March 31, 3 1/2 3 1/2 5 3/4 4 3/4
June 30, 4 1/4 3 5/8 5 5/8 4 3/4
September 30, 3 5/8 3 5/8 3 5/8 3 1/2
December 31, 3 7/8 3 1/4 3 5/8 3 1/2
</TABLE>
At March 7, 1997 there were 74 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.
- 7 -
<PAGE> 8
Item 6.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------------------
1996 1995 1994 1993 1992
----------- ----------- ----------- ---------- ----------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales $ 145,785 $ 142,157 $ 136,236 $ 129,355 $ 126,003
Cost of sales 132,329 127,076 120,945 114,684 110,304
----------- ---------- ---------- ---------- ----------
Gross profit 13,456 15,081 15,291 14,671 15,699
Selling and adminis-
trative expenses 14,140 13,094 12,360 12,861 13,101
----------- ---------- ---------- ---------- ----------
Operating income (loss) (684) 1,987 2,931 1,810 2,598
Interest expense, net 908 659 595 539 567
----------- ---------- ---------- ---------- ----------
Income before (loss)
income tax (benefit) (1,592) 1,328 2,336 1,271 2,031
Income tax (benefit) (520) 520 880 465 690
----------- ---------- ---------- ---------- ----------
Net income (loss) $ (1,072) $ 808 $ 1,456 $ 806 $ 1,341
=========== ========== ========== ========== ==========
Per share data:
Net income (loss) $ (.50) $ .37 $ .65 $ .36 $ .59
=========== ========== ========== ========== ==========
Weighted average
common shares outstanding 2,159,000 2,203,000 2,249,000 2,265,000 2,275,000
=========== ========== ========== ========== ==========
<CAPTION>
Years Ended December 31,
----------------------------------------------------------------------
1996 1995 1994 1993 1992
----------- ----------- ----------- ---------- ----------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Current assets $ 43,876 $ 39,597 $ 42,747 $ 35,921 $ 36,148
Property and
equipment - net 8,771 7,421 7,216 7,420 7,283
Other assets 825 797 785 776 807
----------- ---------- ---------- ---------- ----------
Total assets $ 53,472 $ 47,815 $ 50,748 $ 44,117 $ 44,238
=========== ========== ========== ========== ==========
Current liabilities $ 31,860 $ 26,316 $ 29,318 $ 23,531 $ 24,128
Long-term debt 5,111 3,996 4,699 5,198 5,516
Deferred income taxes 1,129 1,059 988 968 880
Stockholders' equity 15,372 16,444 15,743 14,420 13,714
----------- ---------- ---------- ---------- ----------
Total liabilities
and stockholders'
equity $ 53,472 $ 47,815 $ 50,748 $ 44,117 $ 44,238
=========== ========== ========== ========== ==========
</TABLE>
QUARTERLY FINANCIAL DATA - UNAUDITED
<TABLE>
<CAPTION>
Quarterly Financial Data - Unaudited
(in thousands)
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
----------------- ------------------- ------------------- ----------- -------
1996 1995 1996 1995 1996 1995 1996 1995
------- ------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $38,680 $35,766 $ 35,843 $36,676 $ 39,280 $37,579 $ 31,982 $32,136
Gross Profit 3,710 3,847 3,220 3,905 3,252 3,772 3,274 3,557
Net Income
(Loss) $ 108 $ 298 $ (429) $ 277 $ (372) $ 148 $ (379) $ 135
======= ======= ======== ======= ======== ======= ======== =======
Net Income
(Loss)
Per Share $ .05 $ .13 $ (.20) $ .10 $ (.17) $ .07 $ (.18) $ .06
======= ======= ======== ======= ======== ======= ======== =======
</TABLE>
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<PAGE> 9
Item 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
During the year the Company made major changes and improvements to its
warehouse. Operations were disrupted while these changes were made resulting in
higher expenses and a lower than normal service level, which the Company
estimates have reduced net income for the year by about $1,500,000. By the end
of the year service level was back to a normal level of 95% and warehouse
expenses had begun to decrease. There may have been additional costs which
cannot be quantified.
Net Sales
Net sales increased by $3,628,000, or 2.6%, in 1996 compared to 1995.
However, the Company estimates sales would have been $3,818,000 higher if a
normal service level had been maintained throughout the year.
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,
----------------------------------------------------
1996 1995 1994
---------------- ---------------- ----------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Net Sales:
Warehouse shipments $100,582 69.0% $ 98,558 69.3% $ 98,154 72.0%
Factory direct shipments 45,203 31.0 43,599 30.7 38,082 28.0
-------- ----- -------- ----- -------- -----
Net Sales $145,785 100.0% $142,157 100.0% $136,236 100.0%
======== ===== ======== ===== ======== =====
</TABLE>
Operations
The following table sets forth certain financial data as a percentage of
net sales for the past three years:
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
===== ===== =====
Gross margin 16.0% 16.1% 17.0%
Warehouse and delivery expense 6.8 5.5 5.8
----- ----- -----
Gross profit 9.2 10.6 11.2
Selling and administrative expense 9.7 9.2 9.1
----- ----- -----
Operating income (loss) (.5) 1.4 2.1
Interest expense, net .6 .5 .4
----- ----- -----
Income (loss) before
income tax (benefit) (1.1)% .9% 1.7%
===== ===== =====
</TABLE>
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<PAGE> 10
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 a more competitively
priced dealer buying plan. Gross margin increased $416,000, or 1.8%, to
$23,364,000 compared with 1995 although the gross margin percentage decreased
slightly from 16.1% in 1995 to 16.0% in 1996. The following table sets forth
gross margin and gross margin percentages and year-to-year changes by quarter
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>
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)
1996 - 1st 5,913 15.3 84 (1.0)
2nd 5,815 16.2 (109) --
3rd 5,955 15.2 148 (.3)
4th 5,681 17.8 293 1.0
</TABLE>
Warehouse and Delivery Expenses
Warehouse and delivery expenses increased by $2,041,000, or 25.9%,
compared to 1995. As noted above, warehouse operations were disrupted while
major changes and improvements to its warehouse were being made resulting in
higher warehouse expenses. By the end of the year warehouse expenses had begun
to reduce.
The following table shows the trend of warehouse and delivery expense by
quarter for the last three years.
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<PAGE> 11
<TABLE>
<CAPTION>
Increase (Decrease)
Warehouse & Delivery 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>
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)
1996 - 1st 2,203 8.5 221 .5
2nd 2,595 10.1 576 2.1
3rd 2,703 10.3 668 2.2
4th 2,407 10.5 576 2.8
</TABLE>
Selling and Administrative Expenses
In 1996 selling and administrative expenses increased by $1,046,000, or
8%, compared to 1995. The increase was due in part to severance pay to
terminated employees and moving expenses of new employees. See "Management
Changes". 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.
The following table shows the quarterly trend of selling and
administrative expenses in the last three years.
<TABLE>
<CAPTION>
Selling & Administrative Increase (Decrease)
------------------------ vs. Same Quarter
Expense in Previous Year
------------------------------------ -----------------------------------
Amount Percentage Amount Percentage
Quarter (in thousands) of Sales (in thousands) Points
-------------- -------- -------------- ------
<S> <C> <C> <C> <C> <C>
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
1996 - 1st 3,339 8.6 194 (.2)
2nd 3,732 10.4 332 1.1
3rd 3,593 9.1 211 .1
4th 3,476 10.9 309 1.0
</TABLE>
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<PAGE> 12
Interest Expense
Interest expense increased by $249,000, or 37.8% over 1995 due to
increased borrowings to finance the warehouse improvements and higher average
inventories.
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
$12,000,000. 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>
1994 $3,878,000 $ 8,500,000 $8,500,000 7.13% 8.50%
1995 3,301,000 7,750,000 8,500,000 8.92 8.50
1996 6,198,000 10,450,000 10,450,000 8.38 8.25
</TABLE>
(1) The average amount outstanding during the period was computed by
dividing the daily outstanding principal balances by the number of days of the
year.
(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 $728,000 and $918,000 at December 31, 1996 and
1995, respectively, compared to the prior year because of increased sales with
extended payment terms in the fourth quarters.
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>
1994 38,000 5.0
1995 36,600 5.0
1996 36,600 5.1
</TABLE>
At December 31, 1996 inventories were up $2,362,000 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, which was down
due to warehouse disruption, inventories were increased in the later part of
1996. Accounts payable at December 31, 1996 were up $2,528,000 from December
31, 1995 as a result of the increase in inventories.
Capital expenditures in 1996 were $2,519,000 including the $2,000,000
warehouse modernization and computerization program which is being financed
with a 7-year term loan. Depreciation and amortization for 1996 was $1,176,000.
- 12 -
<PAGE> 13
Management Changes
In May 1995 Mr. Emery H. White was elected President and Chief Executive
Officer of the Company. Mr. White previously served as Senior Vice President
of Builders Square, a 185 unit home center chain, and before that was
President of Emery-Waterhouse Co., a Maine based distributor of hardware and
home center products.
During 1996 and early 1997 the following executives were hired for key
positions in operations, sales and merchandising:
Mr. Kenneth A. Trant was hired as Vice President of Operations. Mr.
Trant has had many years experience with various major companies in the
distribution industry.
Mr. John L. Norris was hired as Senior Vice President, Sales and
Marketing. He was previously President of the consumer products group of
Agway, Inc.
Mr. Michael J. Gaines was hired as Vice President of Merchandising. He
was formerly Vice President-General Merchandise Manager for Grossman's, a home
center chain.
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
Certain of the statements contained in this report (other than the
financial statements and other statements of historical fact) are
forward-looking statements. There can be no assurance that future developments
will be in accordance with management's expectations or that the effect of
future developments on the Company will be those anticipated by management.
Among the factors that could cause actual results to differ materially from
estimates reflected in such forward-looking statements are the following:
- competitive pressures on sales and pricing, including those
from other wholesale distributors and those from retailers in
competition with the Company's customers;
- the Company's ability to achieve projected cost savings from
its warehouse modernization program and ongoing cost reduction efforts;
- changes in cost of goods and the effect of differential terms
and conditions available to larger competitors of the Company;
- uncertainties associated with any acquisition the Company may
seek to implement; and
- changes in general economic conditions.
- 13 -
<PAGE> 14
Item 8.
Financial Statements and Supplementary Data
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, 1996 and 1995, and the related statements of operations, changes
in stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1996. 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, 1996 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
Ernst & Young LLP
Birmingham, Alabama
February 14, 1997
- 14 -
<PAGE> 15
MOORE-HANDLEY, INC.
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
ASSETS 1996 1995
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents ......................... $ 596,000 $ 197,000
Trade receivables, net of allowance for doubtful
accounts of $1,100,000 in 1996 and 1995....... 21,995,000 21,267,000
Other receivables ................................. 1,969,000 1,798,000
Merchandise inventory ............................. 17,693,000 15,331,000
Prepaid expenses .................................. 243,000 215,000
Refundable income taxes ........................... 870,000 319,000
Deferred income taxes ............................. 510,000 470,000
------------ ------------
Total current assets ..................... 43,876,000 39,597,000
Prepaid pension cost ................................. 789,000 735,000
Loan to officer, less amount due within one year ..... -- 19,000
Property and equipment:
Land .............................................. 718,000 718,000
Buildings ......................................... 8,797,000 7,163,000
Equipment ......................................... 9,504,000 8,619,000
Less accumulated depreciation ..................... (10,248,000) (9,079,000)
------------ ------------
Net property and equipment ........................ 8,771,000 7,421,000
Deferred charges, net of accumulated amortization
of $71,000 and $64,000 in 1996 and 1995,
respectively ...................................... 36,000 43,000
------------ ------------
Total Assets ......................................... $ 53,472,000 $ 47,815,000
============ ============
</TABLE>
See accompanying notes.
- 15 -
<PAGE> 16
MOORE-HANDLEY, INC.
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
---- ----
Current liabilities:
<S> <C> <C>
Bank loans .............................................................. $ 10,450,000 $ 7,750,000
Accounts payable ........................................................ 18,134,000 15,606,000
Accrued payroll ......................................................... 453,000 417,000
Other accrued liabilities ............................................... 1,690,000 1,575,000
Long-term debt due within one year ...................................... 1,133,000 968,000
------------ ------------
Total current liabilities ......................................... 31,860,000 26,316,000
Long-term debt, less amount due within one year .......................... 5,111,000 3,996,000
Deferred income taxes .................................................... 1,129,000 1,059,000
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 ....................................................... 4,081,000 5,153,000
Less:
Treasury stock at cost, 355,497 and 345,497
shares in 1996 and 1995, respectively ............................. (1,843,000) (1,800,000)
Loans to officers .................................................... -- (43,000)
------------ ------------
Total stockholders' equity .................................... 15,372,000 16,444,000
------------ ------------
Total Liabilities and Stockholders' Equity ........................... $ 53,472,000 $ 47,815,000
============ ============
</TABLE>
See accompanying notes.
- 16 -
<PAGE> 17
MOORE-HANDLEY, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
1996 1995 1994
------------- ------------ ------------
<S> <C> <C> <C>
Net sales .......................... $ 145,785,000 $142,157,000 $136,236,000
Cost of merchandise sold ........... 122,421,000 119,209,000 113,027,000
Warehouse and delivery expense ..... 9,908,000 7,867,000 7,918,000
------------- ------------ ------------
Cost of sales ...................... 132,329,000 127,076,000 120,945,000
------------- ------------ ------------
Gross profit ....................... 13,456,000 15,081,000 15,291,000
Selling and administrative expense 14,140,000 13,094,000 12,360,000
------------- ------------ ------------
Operating income (loss) ............ (684,000) 1,987,000 2,931,000
Interest expense, net .............. 908,000 659,000 595,000
------------- ------------ ------------
Income (loss) before provision for
income tax (benefit) .............. (1,592,000) 1,328,000 2,336,000
Income tax (benefit) ............... (520,000) 520,000 880,000
------------- ------------ ------------
Net income (loss) .................. $ (1,072,000) $ 808,000 $ 1,456,000
============= ============ ============
Per share data:
Net income (loss)
per common share ................ $ (.50) $ .37 $ .65
============= ============ ============
Weighted average common shares
outstanding ..................... 2,159,000 2,203,000 2,249,000
============= ============ ============
</TABLE>
See accompanying notes.
- 17 -
<PAGE> 18
MOORE-HANDLEY, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
Common Stock
-------------------------------
Shares Amount
------------ ------------
<S> <C> <C>
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
Purchase of shares for treasury ...................... -- --
Net loss ............................................. -- --
------------ ------------
Balance at December 31, 1996 ......................... 2,510,040 $ 251,000
============ ============
</TABLE>
See accompanying notes.
- 18 -
<PAGE> 19
<TABLE>
<CAPTION>
Treasury Stock
Capital in --------------------- Total
Excess of Retained Loans to Stockholders'
Par Value Earnings Shares Amount Officers Equity
----------- ------------ ------- ------------ --------- -------------
<S> <C> <C> <C> <C> <C>
$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
--- --- 10,000 (43,000) 43,000 ---
--- (1,072,000) --- --- --- (1,072,000)
----------- ----------- ------- ----------- --------- -----------
$12,883,000 4,081,000 355,497 $(1,843,000) $ --- $15,372,000
=========== =========== ======= =========== ========= ===========
</TABLE>
See accompanying notes.
- 19 -
<PAGE> 20
MOORE-HANDLEY, INC.
STATEMENTS OF CASH FLOW
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income $(1,072,000) $ 808,000 $ 1,456,000
Adjustments to reconcile net (loss) income
to net cash (used in) provided by
operating activities:
Depreciation and amortization 1,176,000 1,084,000 972,000
Provision for doubtful accounts 500,000 422,000 369,000
Gain on sale of equipment (10,000) (17,000) (92,000)
Deferred income taxes 30,000 315,000 (62,000)
Change in assets and liabilities:
Trade and other receivables (1,356,000) (1,191,000) (3,001,000)
Merchandise inventory (2,362,000) 3,382,000 (3,971,000)
Prepaid expenses (28,000) 28,000 53,000
Prepaid pension cost (54,000) (31,000) (29,000)
Loan to officer 19,000 12,000 12,000
Accounts payable and
accrued expenses 2,679,000 (2,253,000) 4,481,000
(Refundable) accrued
income taxes (551,000) (443,000) 62,000
------------ ------------ ------------
Total adjustments 43,000 1,308,000 (1,206,000)
------------ ------------ ------------
Net cash (used in) provided by
operating activities (1,029,000) 2,116,000 250,000
Cash flows from investing activities:
Capital expenditures (2,519,000) (1,299,000) (762,000)
Proceeds from sale of equipment 10,000 34,000 94,000
------------ ----------- ------------
Net cash used in investing activities (2,509,000) (1,265,000) (668,000)
Cash flows from financing activities:
Net borrowings under bank loans 2,700,000 (750,000) 1,050,000
Principal payments
under long-term debt (978,000) (682,000) (754,000)
Additional long-term borrowings 2,258,000 104,000 449,000
Purchase of treasury stock (43,000) (107,000) (133,000)
----------- ----------- ------------
Net cash provided by (used in)
financing activities 3,937,000 (1,435,000) 612,000
----------- ---------- ------------
Net increase (decrease) in cash
and cash equivalents 399,000 (584,000) 194,000
Cash and cash equivalents at beginning
of year 197,000 781,000 587,000
----------- ---------- ------------
Cash and cash equivalents at end of year $ 596,000 $ 197,000 $ 781,000
=========== =========== ============
</TABLE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- -------
<S> <C> <C> <C>
Cash paid during the year for:
Interest $ 867,000 $ 742,000 $ 662,000
Income taxes 29,000 647,000 818,000
</TABLE>
SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITIES
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Purchase of treasury stock in exchange
for loan to officer $ 43,000 $ 106,000 $ --
</TABLE>
See accompanying notes.
- 20 -
<PAGE> 21
MOORE-HANDLEY, INC.
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
The Company considers all highly liquid securities with maturities at the
time of purchase 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:
<TABLE>
<S> <C>
Buildings............... 25-31.5 years
Equipment............... 3- 10 years
</TABLE>
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.
- 21 -
<PAGE> 22
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 had been reflected as a
reduction of stockholders' equity in the accompanying 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. The balance was $31,000 at December
31, 1995 and was repaid in 1996.
In 1996 the Company loaned Mr. Norris $100,000 in connection with the
purchase of a home and is due upon the sale of his former residence. This note
bears interest at 1% above the prime lending rate.
The Company also has a demand note of $5,000 outstanding to Mr. Reid which
bears interest at the prime rate.
3. BANK LOANS
The Company has lines of credit, renewable annually, with three banks which
allow unsecured borrowings in the aggregate of up to $12,000,000 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.
As of December 31, 1996, the Company was in violation of a covenant
contained in one of its line of credit agreements that required the Company to
maintain a certain ratio of income before income taxes and interest expense to
interest expense. The lender has waived this debt covenant violation as of
December 31, 1996 and has amended the covenant requirements for 1997.
4. LONG-TERM DEBT
Long-term debt at December 31, 1996 and 1995 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 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 $206,000 in 1997 to $19,000 in 2000.
Maturities of long-term debt during the next five years are as follows:
<TABLE>
<S> <C>
1997 $1,133,000
1998 1,153,000
1999 1,136,000
2000 1,132,000
2001 1,095,000
Thereafter 595,000
----------
$6,244,000
==========
</TABLE>
- 22 -
<PAGE> 23
Interest expense on long-term debt and bank loans for the years ended
December 31, 1996, 1995 and 1994 was $975,000, $739,000, and $677,000
respectively.
5. COMMITMENTS
Total future rental payments under non-cancelable equipment operating
leases which expire in 1998 are $120,000. Annual rentals for the remainder of
the lease terms are as follows:
<TABLE>
<S> <C>
1997 90,000
1998 30,000
</TABLE>
Rental expense was $394,000, $442,000, and $408,000 in 1996, 1995 and
1994, respectively.
6. INCOME TAX
The (benefit) provision for income tax consists of the following:
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
Current:
Federal $(542,000) $199,000 $839,000
State (8,000) 6,000 103,000
Deferred 30,000 315,000 (62,000)
--------- -------- --------
$(520,000) $520,000 $880,000
========= ======== ========
</TABLE>
Deferred income tax expense (benefit) is related to the following items:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Depreciation $ 35,000 $ 54,000 $ 36,000
Provision for pension expenses 35,000 17,000 (16,000)
Accrued health insurance and
vacation costs 15,000 (1,000) (26,000)
Allowance for doubtful accounts --- --- (36,000)
Inventory costs capitalized for tax purposes(28,000) (28,000) 222,000 (5,000)
Provision for writedown of excess inventory (27,000) 23,000 (15,000)
-------- -------- --------
$ 30,000 $315,000 $(62,000)
======== ======== ========
</TABLE>
The deferred income tax liabilities (assets) are reflected in the balance
sheet as follows:
<TABLE>
<CAPTION>
Current assets 1996 1995
--------- ----------
<S> <C> <C>
Accrued health insurance and vacation costs $ (93,000) $ (108,000)
Allowance for doubtful accounts (409,000) (409,000)
Inventory costs capitalized for
tax purposes 60,000 88,000
Provision for write down of excess inventory (68,000) (41,000)
--------- ----------
(510,000) (470,000)
Non-current liabilities
Depreciation 818,000 783,000
Provision for pension expenses 311,000 276,000
--------- ----------
1,129,000 1,059,000
--------- ----------
</TABLE>
- 23 -
<PAGE> 24
<TABLE>
<S> <C> <C>
Net liability $ 619,000 $ 589,000
========= ==========
</TABLE>
The (benefit) 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
<S> <C> <C> <C>
1996 1995 1994
------- -------- --------
Statutory U. S. income tax rate (34)% 34% 34%
Increase in rates resulting from:
State income taxes - net of federal benefit - 2 3
Non-deductible and other items 1 3 1
------- -------- --------
Effective income tax rate (33)% 39% 38%
======= ======== ========
</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 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>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Service cost -- benefits earned
during the period $ 273,000 $ 256,000 $ 215,000
Interest cost on projected
benefit obligation 356,000 319,000 289,000
Actual return on assets (260,000) (602,000) 88,000
Net amortization and deferral (30,000) 374,000 (305,000)
--------- --------- ---------
Net periodic pension cost $ 339,000 $ 347,000 $ 287,000
========= ========= =========
</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, 1996 and 1995.
<TABLE>
<CAPTION>
1996 1995
------------ -------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligations $ 4,626,000 $ 4,111,000
Nonvested benefit obligations 38,000 94,000
------------ ------------
Accumulated benefit obligations 4,664,000 4,205,000
Effect of projected future salary increases 1,064,000 941,000
------------ ------------
Projected benefit obligations 5,728,000 5,146,000
Plan assets at fair value (a) 5,775,000 5,251,000
------------ ------------
Plan assets in excess of (less than)
projected benefit obligations 47,000 105,000
Unrecognized obligations at transition 444,000 531,000
Unrecognized net loss/(gain) 186,000 (27,000)
Unrecognized prior service cost 112,000 126,000
------------ ------------
Net prepaid pension cost recognized
in the balance sheet $ 789,000 $ 735,000
============ ============
</TABLE>
- 24 -
<PAGE> 25
(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:
Weighted average discount rate 7%
Long-term rate of return on assets 7%
Increase in future compensation levels 4%
The Company has 401(k) savings plans covering substantially all employees.
Contributions by the Company are discretionary and no contributions were made
in 1996, 1995 or 1994.
8. INCENTIVE COMPENSATION PLAN
On May 23, 1991 the stockholders approved the 1991 Incentive Compensation
Plan pursuant to which a maximum aggregate of 350,000 shares of common stock
may be issued to employees and directors until April 12, 2001.
The Company has elected to follow Acounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretation in accounting for its employee stock options. Under APB 25,
because the exercise price for the Company's employees stock options equals the
market price of the underlying stock on the date of grant, no compensation
expense is recognized.
Pro forma information regarding net income and earnings per share is
required by Financial Accounting Standards Board (FASB) Statement 123, and has
been determined as if the Company had accounted for its employee stock options
under the fair value method of that Statement. The fair value for these options
was estimated at the date of grant using a Black-Scholes option pricing model
with the following weighted-average assumptions for 1996 and 1995;
respectively: risk-free interest rate of 7% and 7%; dividend yield of 0% and
0%; volatility factor of the expected market price of the Company's common
stock of .34 and .34; and a weighted-average expected life of the option of 5.3
and 6.8 years.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Pro forma net income (loss) $(1,161,000) $771,000
=========== ========
Pro forma net income (loss)
per share $ (.54) $ .35
=========== ========
</TABLE>
The effects of FASB Statement 123 on pro forma net income or loss in 1996
and 1995 is not likely to be representative of the effects on pro forma net
income or loss in futures years.
As of December 31, 1996 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. Options for 40,000 shares were
forfeited in 1996, 30,000 shares have been exercised, and 10,000 were
outstanding as of December 31, 1996.
B. Options to Independent Directors for 12,000 shares at $5.00 per share,
4,000 shares at $4.75 per share, 4,000 shares at $4.875 per share and 4,000 at
- 25 -
<PAGE> 26
$3.50 per share (market value at date of grant) exercisable through May 2005.
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. Options 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.
E. Options to Officers and employees for 150,000 shares were granted in
1996 at $3.375 to $3.625 per share (market value at date of grant) exercisable
through 2006 in five equal installments beginning in 1997. These options, which
have a weighted average exercise price of approximately $3.48, are subject to
shareholder approval of an increase in the maximum shares which may be issued
under the Plan.
- 26 -
<PAGE> 27
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 25, 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
<S> <C> <C>
/s/ William Riley Chairman of the Board March 21, 1997
----------------------- and Director
William Riley
/s/ Pierce E. Marks Jr. Vice Chairman and Director March 20, 1997
-----------------------
Pierce E. Marks Jr.
/s/ Emery H. White President and Chief March 20, 1997
----------------------- Executive Officer
Emery H. White
/s/ L. Ward Edwards Vice President, Treasurer March 24, 1997
----------------------- and Secretary and Director
L. Ward Edwards (Principal Accounting and
Financial Officer)
/s/ Micheal B. Stubbs Director March 20, 1997
---------------------
Michael B. Stubbs
/s/ Ronald J. Juvonen Director March 25, 1997
---------------------
Ronald J. Juvonen
</TABLE>
- 27 -
<PAGE> 28
MOORE-HANDLEY, INC.
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
NO.
- ---
<S> <C>
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.
</TABLE>
- 28 -
<PAGE> 29
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
NO.
- ---
<S> <C>
(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 1987 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 and incorporated herein by reference.
(o) Employees' Retirement Plan B of Moore-Handley, Inc. (Non-Exempt
and Hourly), effective January 1, 1994, filed as Exhibit 10(o) to
the Company's Registration Statement on Form S-1 (Reg. No.
33-3032) and incorporated herein by reference.
(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.
</TABLE>
- 29 -
<PAGE> 30
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
NO.
- ---
<S> <C>
(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 and incorporated herein by reference.
(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 and incorporated
herein by reference.
(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.
(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) Employee 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.
</TABLE>
- 30 -
<PAGE> 31
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
NO.
- --
<S> <C>
(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.
21 List of Subsidiaries filed as Exhibit 21 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1996.
27 Financial Data Schedule (for SEC purposes only)
</TABLE>
- 31 -
<PAGE> 1
Exhibit 21
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
Subsidiary #1 Subsidiary #2
------------- -------------
<S> <C> <C>
Name Moore Handley Machine Old Lyme Corp.
Tool & Industrial, Inc.
State of Incorporation Delaware Delaware
Percent of Ownership 100% 100%
</TABLE>
- 32 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF MOORE-HANDLEY FOR THE YEAR ENDED DECEMBER 31,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 596
<SECURITIES> 0
<RECEIVABLES> 21,995
<ALLOWANCES> 0
<INVENTORY> 17,693
<CURRENT-ASSETS> 43,876
<PP&E> 9,504
<DEPRECIATION> (10,248)
<TOTAL-ASSETS> 53,472
<CURRENT-LIABILITIES> 31,810
<BONDS> 5,111
0
0
<COMMON> 251
<OTHER-SE> 15,121
<TOTAL-LIABILITY-AND-EQUITY> 53,472
<SALES> 145,785
<TOTAL-REVENUES> 145,785
<CGS> 122,421
<TOTAL-COSTS> 122,421
<OTHER-EXPENSES> 14,140
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 908
<INCOME-PRETAX> (1,592)
<INCOME-TAX> (520)
<INCOME-CONTINUING> (1,072)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,072)
<EPS-PRIMARY> (.50)
<EPS-DILUTED> (.50)
</TABLE>
