<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
OR
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the transition period from to
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COMMISSION FILE NUMBER 0-14324
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MOORE-HANDLEY, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 63-0819773
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(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
HIGHWAY 31 SOUTH, PELHAM, ALABAMA 35124
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(Address of principal executive offices) (Zip Code)
(205) 663-8011
--------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to filing requirements
for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock, $.10 par value 1,854,543 shares
- -------------------------------- --------------------------
Class Outstanding at May 6, 1998
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MOORE-HANDLEY, INC.
INDEX
<TABLE>
<CAPTION>
Item No. Page No.
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<S> <C>
PART I. FINANCIAL INFORMATION - UNAUDITED
1. Balance Sheets -
March 31, 1998 and 1997 and December 31, 1997.............. 3
Statements of Operations -
Three Months Ended March 31, 1998 and 1997................. 4
Statements of Cash Flows -
Three Months Ended March 31, 1998 and 1997................. 5
Note to Financial Statements................................... 6
2. Management's Discussion and Analysis
of Financial Condition and Results of Operations........... 7-10
PART II. OTHER INFORMATION
6. Exhibits and Reports on Form 8-K............................... 10
Signature.............................................................. 11
</TABLE>
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<PAGE> 3
MOORE-HANDLEY, INC.
BALANCE SHEETS
MARCH 31, 1998 AND 1997 AND DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
---------------------------------- -----------
1998 1997 1997
----------- ----------- ----------
<S> <C> <C> <C>
ASSETS:
Current assets: (unaudited) (unaudited)
Cash and cash equivalents............................. $ 866,000 $ 590,000 $ 1,155,000
Trade receivables, net................................ 29,626,000 24,507,000 23,252,000
Other receivables..................................... 2,580,000 1,814,000 2,089,000
Merchandise inventory................................. 16,502,000 14,087,000 17,035,000
Prepaid expenses...................................... 444,000 462,000 226,000
Refundable income tax................................. 632,000 734,000 632,000
Deferred income taxes................................. 551,000 510,000 551,000
----------- ----------- -----------
Total current assets............................. 51,201,000 42,704,000 44,940,000
Prepaid pension cost..................................... 965,000 811,000 955,000
Property and equipment................................... 19,716,000 19,386,000 19,609,000
Less accumulated depreciation......................... (11,662,000) (10,563,000) (11,336,000)
----------- ----------- -----------
Net property and equipment....................... 8,054,000 8,823,000 8,273,000
Deferred charges, net.................................... 27,000 34,000 29,000
----------- ----------- -----------
$60,247,000 $52,372,000 $54,197,000
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank loans............................................ $ --- $ 8,000,000 $ ---
Accounts payable...................................... 25,542,000 20,265,000 17,840,000
Accrued payroll....................................... 453,000 431,000 437,000
Other accrued liabilities............................. 2,030,000 1,568,000 2,034,000
Long-term debt due in one year........................ 1,160,000 1,151,000 1,171,000
----------- ----------- -----------
Total current liabilities........................ 29,185,000 31,415,000 21,482,000
Long-term debt........................................... 16,695,000 4,837,000 18,397,000
Deferred income taxes.................................... 1,150,000 1,129,000 1,150,000
Stockholders' equity:
Common stock, $.10 par value;
10,000,000 shares authorized,
2,510,040 shares issued.......................... 251,000 251,000 251,000
Other stockholders' equity............................ 12,966,000 14,740,000 12,917,000
----------- ----------- -----------
Total stockholders' equity....................... 13,217,000 14,991,000 13,168,000
----------- ----------- -----------
$60,247,000 $52,372,000 $54,197,000
=========== =========== ===========
</TABLE>
See accompanying notes.
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<PAGE> 4
MOORE-HANDLEY, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
1998 1997
----------- -----------
<S> <C> <C>
Net sales.................................................... $40,472,000 $37,842,000
Cost of merchandise sold..................................... 34,406,000 32,331,000
Warehouse and delivery expense............................... 2,254,000 2,294,000
----------- -----------
Cost of sales................................................ 36,660,000 34,625,000
----------- -----------
Gross profit................................................. 3,812,000 3,217,000
Selling and administrative expense........................... 3,374,000 3,498,000
----------- -----------
Operating income (loss)...................................... 438,000 (281,000)
Interest expense, net........................................ 365,000 280,000
----------- -----------
Income (loss) before provision for income tax (benefit)...... 73,000 (561,000)
Income tax (benefit)......................................... 24,000 (180,000)
----------- -----------
Net income (loss)............................................ $ 49,000 $ (381,000)
=========== ===========
Net income (loss) per common share - basic and diluted ...... $ .03 $ (.18)
=========== ===========
Weighted average common shares outstanding................... 1,855,000 2,154,000
=========== ===========
</TABLE>
See accompanying notes.
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<PAGE> 5
MOORE-HANDLEY, INC.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ............................................ $ 49,000 $ (381,000)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization .......................... 326,000 315,000
Provision for doubtful accounts ........................ 60,000 145,000
Change in assets and liabilities:
Trade and other receivables .......................... (6,925,000) (2,502,000)
Merchandise inventory ................................ 533,000 3,606,000
Accounts payable and accrued expenses ................ 7,714,000 1,987,000
Other assets ......................................... (226,000) (103,000)
----------- -----------
Total adjustments .................................... 1,482,000 3,448,000
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NET CASH PROVIDED BY OPERATING ACTIVITIES ........... 1,531,000 3,067,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ........................................ (107,000) (367,000)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES .................... (107,000) (367,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments of bank loans .................................. -- (2,450,000)
Principal payments of long-term debt ........................ (1,713,000) (256,000)
----------- -----------
NET CASH USED IN FINANCING ACTIVITIES .................... (1,713,000) (2,706,000)
----------- -----------
Net (decrease) in cash and cash equivalents ................... (289,000) (6,000)
Cash and cash equivalents at beginning of period .............. 1,155,000 596,000
----------- -----------
Cash and cash equivalents at end of period .................... $ 866,000 $ 590,000
=========== ===========
</TABLE>
See accompanying notes.
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<PAGE> 6
MOORE-HANDLEY, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION PERTAINING TO THE THREE MONTHS
ENDED MARCH 31, 1998 AND 1997 IS UNAUDITED)
1. BASIS OF PRESENTATION
The financial statements included herein have been prepared by
Moore-Handley, Inc. (the "Company"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information presented not
misleading. These financial statements should be read in conjunction with the
financial statements and the notes thereto included in the Company's Annual
Report on Form 10-K filed with the Commission on March 27, 1998.
The financial information presented herein reflects all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary to a fair statement of the results of the interim periods.
The results for interim periods are not necessarily indicative of results to be
expected for the year.
2. INCOME PER COMMON SHARE
Basic net income per share is based on the weighted average number of
common shares outstanding and net income. Diluted net income per share is based
on the weighted average of common shares outstanding plus the effect of dilutive
Employee stock options and net income. Basic and diluted earnings per share were
the same for the first quarter of 1997 and 1998.
3. REVENUE RECOGNITION
The Company recognizes revenues when goods are shipped.
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<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
NET SALES
Net sales for the quarter ended March 31, 1998 were up 6.9% compared to
the same quarter in the prior year. Warehouse shipments increased 3.3% and
factory direct shipments increased 13.5%. The increase in factory direct
shipments reflects record sales at a Dealers' Mart held during the quarter and
the Company's expanded efforts to increase sales of lumber and building
materials.
Gross margins on direct shipments are lower than gross margins on
warehouse shipments; however, expenses related to direct shipments are also
lower. While the trend toward factory direct shipments has resulted in decreased
gross margins, the Company believes that direct shipments are an important part
of its business as a full-service wholesale distributor.
The following table sets forth the major elements of net sales:
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1998 1997
---- ----
(dollars in thousands)
<S> <C> <C> <C> <C>
Net Sales:
Warehouse shipments ........ $25,131 62.1% $24,322 64.3%
Factory direct shipments ... 15,341 37.9 13,520 35.7
------- ----- ------- -----
Net Sales ................ $40,472 100.0% $37,842 100.0%
======= ===== ======= =====
</TABLE>
OPERATIONS
The following table sets forth certain financial data as a percentage of
net sales for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
1998 1997
---- ----
<S> <C> <C>
Net sales ............................ 100.0% 100.0%
===== =====
Gross margin ......................... 15.0 14.6
Warehouse and delivery expense ....... 5.6 6.1
----- -----
Gross profit ......................... 9.4 8.5
Selling and administrative expenses .. 8.3 9.2
----- -----
Operating income (loss) .............. 1.1 (.7)
Interest expense, net ................ .9 .7
----- -----
Income (loss) before provision
for income tax (benefit) ........... .2% (1.5)%
===== =====
</TABLE>
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<PAGE> 8
GROSS MARGIN
The gross margin percentage for the first quarter of 1998 was 15.0%, up
from 14.6% in the first quarter of 1997. The increase is due to a new pricing
program begun late in 1997 and to lower cost of merchandise as the Company has
taken increased advantage of special buying opportunities offered by suppliers.
These factors were offset somewhat by the increase in factory direct shipments
as a percentage of total sales.
The following table sets forth the gross margin dollars, gross margin
percentages and year-over-year changes for 1997 and the first quarter of 1998:
<TABLE>
<CAPTION>
Increase (Decrease)
vs. Same Quarter
Gross Margin in Previous Year
-------------------------- ------------------
Amount Percentage Amount Percentage
Quarter (in thousands) of Sales (in thousands) Points
------- -------------- -------- -------------- ------
<C> <C> <C> <C> <C>
1997 - 1st $5,511 14.6 $ (402) (.7)
2nd 5,394 15.2 (421) (1.0)
3rd 5,843 14.6 (112) (.6)
4th 5,354 16.5 (327) (1.3)
1998 - 1st 6,066 15.0 $ 555 .4
</TABLE>
WAREHOUSE AND DELIVERY EXPENSES
As a percentage of warehouse shipments, warehouse and delivery expenses
decreased to 9.0% in the first quarter of 1998 from 9.4% in the same quarter
last year. Ongoing efforts to further reduce warehouse expense include resetting
the warehouse which the Company now expects will not be completed until the end
of the year.
The following table shows the trend in warehouse and delivery expenses
in 1997 and the first quarter of 1998:
<TABLE>
<CAPTION>
Increase (Decrease)
Warehouse and Delivery vs. Same Quarter
Expenses in Previous Year
------------------------ ----------------------
Percentage
Amount of Warehouse Amount Percentage
Quarter (in thousands) Sales (in thousands) Points
------- -------------- ------------ -------------- ----------
<C> <C> <C> <C> <C>
1997 - 1st $2,294 9.4 $ 91 .9
2nd 2,470 10.3 (125) .2
3rd 2,329 9.3 (374) (1.0)
4th 2,393 11.0 (14) .5
1998 - 1st 2,254 9.0 $(40) (.4)
</TABLE>
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<PAGE> 9
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses for the first quarter of 1997
included an accrual of $225,000 for severance pay; no similar expense occurred
in 1998. This savings was offset in part by increases in other selling and
administrative expenses and overall these expenses decreased $123,000 for the
quarter ended March 31, 1998 compared to the same quarter of 1997.
The following table shows the quarterly trend in selling and
administrative expenses in 1997 and the first quarter of 1998.
<TABLE>
<CAPTION>
Increase (Decrease)
Selling and Administrative vs. Same Quarter
Expenses in Previous Year
-------------------------- -----------------------
Amount Percentage Amount Percentage
Quarter (in thousands) of Sales (in thousands) Points
--------- -------------- ---------- -------------- ----------
<C> <C> <C> <C> <C>
1997 - 1st $3,498 9.2 $ 158 .6
2nd 3,528 10.0 (204) (.4)
3rd 3,212 8.0 (381) (1.1)
4th 3,486 10.7 (8) (.2)
1998 - 1st $3,374 8.3 $(123) (.9)
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
From December 31, 1997 to March 31, 1998 the Company's net trade
receivables increased by $6,374,000 or 27.9%. The increase was due to the higher
level of sales in March 1998 (which includes shipment of orders taken at a
Dealers Mart held in February) and because of extended terms given to customers
as a part of a sales promotion conducted in January.
Inventories decreased by $533,000 or 3.1% in the same period. However,
inventories were up $2,414,000 compared to March 31, 1997 as the Company took
increased advantage of special buying opportunities offered by suppliers.
Trade payables increased $7,702,000 or 43.2% from December 1997 because
of extended terms received from suppliers in connection with the Dealers' Mart.
At March 31, 1998 the Company had unused lines of credit of $2,035,000,
which it believes are adequate to finance its working capital requirements.
IMPACT OF YEAR 2000
Some of the Company's older computer programs were written using two
digits rather than four to define the applicable year. As a result, those
computer programs have time-sensitive software that recognize a date using "00"
as the year 1900 rather than the year 2000. This could cause a system failure or
miscalculations causing disruptions of operations, including, among other
things,
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<PAGE> 10
a temporary inability to process transactions, send invoices, or engage in
similar normal business activities.
The Company is in the process of assessing which portions of its
software will have to be modified or replaced so that its computer systems will
function properly with respect to dates in the year 2000 and thereafter. The
total year 2000 project cost is not yet available. To date, the Company has not
incurred any material costs related to the development of a modification plan.
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. The use of words such as "Expects" and "Believes"
indicate the presence of 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;
- changes in general economic conditions; and
- impact of year 2000 on the Company's information systems.
While the Company periodically reassesses material trends and
uncertainties affecting the Company's results of operations and financial
condition in connection with its preparation of management's discussion and
analysis of results of operations and financial condition contained in its
quarterly and annual reports, the Company does not intend to review or revise
any particular forward-looking statement referenced in light of future events.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits -- 27 Financial Data Schedule (For SEC purposes only).
(b) There were no reports on Form 8-K filed by the Company during the three
month period ended March 31, 1998.
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<PAGE> 11
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MOORE-HANDLEY, INC.
--------------------------
(Registrant)
Date: May 6, 1998 /s/ L. Ward Edwards
------------------- -------------------------
L. Ward Edwards
Vice President, Treasurer
and Secretary
(Principal Accounting and
Financial Officer)
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 866
<SECURITIES> 0
<RECEIVABLES> 29,626
<ALLOWANCES> 0
<INVENTORY> 16,502
<CURRENT-ASSETS> 51,201
<PP&E> 19,716
<DEPRECIATION> (11,662)
<TOTAL-ASSETS> 60,247
<CURRENT-LIABILITIES> 29,185
<BONDS> 16,695
0
0
<COMMON> 251
<OTHER-SE> 12,966
<TOTAL-LIABILITY-AND-EQUITY> 60,247
<SALES> 40,472
<TOTAL-REVENUES> 40,472
<CGS> 34,406
<TOTAL-COSTS> 36,660
<OTHER-EXPENSES> 3,374
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 365
<INCOME-PRETAX> 73
<INCOME-TAX> 24
<INCOME-CONTINUING> 49
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 49
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
