<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, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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 5, 1999, 1,854,543 shares of the Registrant's Common Stock were
outstanding, and the aggregate market value of such shares held by
non-affiliates was approximately $1,959,405. 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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1
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MOORE-HANDLEY, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM NO. PAGE NO.
--------- --------
<C> <S> <C> <C>
Part I.
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 1998).................................... None
Part II.
5. Market for Registrant's Common Equity and Related Stockholder
Matters........................................................ 5
6. Selected Financial Data.......................................... 7
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................... 9
7a Quantitative and Qualitative Disclosures about Market Risk....... 12
8. Financial Statements and Supplementary Data...................... 15
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure........................................... None
Part III.
10. Directors and Executive Officers of the Registrant............... *
11. Executive Compensation........................................... *
12. Security Ownership of Certain Beneficial Owners and Management *
13. Certain Relationships and Related Transactions................... *
*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........................................ 15
(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.
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2
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BUSINESS
Moore-Handley, Inc. (the "Company") is a full-service distributor of plumbing
and electrical supplies, power and hand tools, paint and paint sundries, lawn
and garden equipment and other hardware and building materials products. The
Company's customers include retail home centers, hardware stores, building
materials dealers, paint stores, combination stores, a limited number of mass
merchandisers, businesses and institutions. The Company has approximately 1,400
active customers located mainly throughout the Southeast which it services from
a 488,000 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 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, 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 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 1998 1997 1996
- -------------------- ----- ----- -----
<S> <C> <C> <C>
Electrical and plumbing supplies............................ 22.4% 22.2% 23.2%
Home center products (including lawn and garden equipment,
paint and accessories, sporting goods and appliances)..... 22.0 17.7 18.3
Building supplies (including aluminum windows and doors,
roofing products and lumber).............................. 25.6 24.9 21.9
General and shelf hardware (including power and hand tools,
lock sets and wire products).............................. 30.0 35.2 36.6
----- ----- -----
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. Sales
assistants work with certain of the more senior territory managers. At December
31, 1998, there were 70 territory managers and assistants employed by the
Company.
At December 31, 1998, the Company also employed 8 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,
some costs of which are shared by the Company's suppliers, 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 profitability.
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. By the end of 1997 and continuing
throughout 1998 the fill-rate had returned to normal levels. 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 40 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 1998, approximately 36% 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 1,400 customers, including retail
home centers, hardware stores, building materials dealers, paint stores,
combination stores, a limited number of mass merchandisers, businesses and
institutions. No customer or affiliated group of customers accounted for more
than 1.5% of the Company's 1998 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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4
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PURCHASING, SUPPLIERS AND INVENTORY MANAGEMENT
The Company distributes approximately 37,250 items purchased from
approximately 1,400 manufacturers. The Company's ten largest vendors in 1998
accounted for approximately 22.5% of total Company purchases, but no single
manufacturer accounted for more than 4.5% 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 cost of stocked goods sold by
average monthly inventory) were 5.1 in 1998 and in 1997.
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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, 1998, the Company employed 432 persons, of whom
approximately 200 are subject to a collective bargaining agreement expiring in
December 2001. The Company has not experienced any strikes or work stoppages and
considers its relationship with employees to be good. In December 1998 the
Company entered into a three year collective bargaining agreement that provides
for gain-sharing with employees based upon warehouse cost reductions.
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COMMON STOCK INFORMATION
The Company's common stock trades on The Nasdaq SmallCap Market(SM) under the
symbol MHCO. The following table shows the high and low bid prices by quarter in
1998 and 1997.
<TABLE>
<CAPTION>
1998 1997
--------------- ---------------
QUARTER ENDED HIGH LOW HIGH LOW
- ------------- ---- --- ---- ---
<S> <C> <C> <C> <C>
March 31,................................................... 2 11/16 2 5/16 3 5/8 2 3/4
June 30,.................................................... 2 3/4 2 3/8 3 3/8 2 3/4
September 30,............................................... 3 1/4 2 1/2 3 2
December 31,................................................ 2 7/8 1 3/4 3 3/8 2 3/8
</TABLE>
For periods prior to December 24, 1998, the Company's common stock was
included in The Nasdaq National Market(R) system and thereafter in The Nasdaq
SmallCap Market(SM). Such over-the-counter quotations reflect inter-dealer
quotations, without retail mark-up, mark-down or commissions and may not
necessarily represent actual transactions.
At March 5, 1999, there were 69 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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5
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EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company as of March 1, 1999, their ages and
their present positions with the Company and their principal occupations since
1993 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
William Riley...................................... 67 Chairman of the Board and Chief Executive Officer
Pierce E. Marks, Jr................................ 70 Director and Member of the Executive Committee
Michael J. Gaines.................................. 56 President and Chief Operating Officer(1)
L. Ward Edwards.................................... 62 Vice President-- Finance, Treasurer and Secretary
Andrew W. Reid..................................... 51 Vice President-- Sales
Gregory S. Murphy.................................. 36 Vice President-- Operations(2)
</TABLE>
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(1) 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.
(2) Mr. Murphy was employed by Decatur-Hopkins, a hardware distributor, from
1982 to 1997.
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 488,000 square foot facility, which includes a 51,000 square foot
mezzanine, on a 30-acre site in Pelham, Alabama. The Company leases the Pelham
facility pursuant to a lease entered into in connection with the issuance of
industrial development bonds. The Company has guaranteed payment of the
principal and interest on such bonds, and in 1998 paid an aggregate of $938,000
pursuant to such lease agreement. The Company has options to purchase the
property for a nominal cost at the expiration of the lease. 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. The Atlanta lease expires March 31,
1999, and the office has been closed.
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6
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SELECTED FINANCIAL DATA
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<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales............................ $ 159,027 $ 145,730 $ 145,785 $ 142,157 $ 136,236
Cost of sales........................ 144,078 133,114 132,329 127,076 120,945
---------- ---------- ---------- ---------- ----------
Gross profit......................... 14,949 12,616 13,456 15,081 15,291
Selling and administrative
expenses........................... 13,315 13,705 14,140 13,094 12,360
---------- ---------- ---------- ---------- ----------
Operating income (loss).............. 1,634 (1,089) (684) 1,987 2,931
Interest expense, net................ 1,337 991 908 659 595
---------- ---------- ---------- ---------- ----------
Income (loss) before income tax
(benefit).......................... 297 (2,080) (1,592) 1,328 2,336
Income tax (benefit)................. 136 (664) (520) 520 880
---------- ---------- ---------- ---------- ----------
Net income (loss).................... $ 161 $ (1,416) $ (1,072) $ 808 $ 1,456
========== ========== ========== ========== ==========
Per share -- basic and diluted data:
Net income (loss)............... $ .09 $ (.66) $ (.50) $ .37 $ .65
========== ========== ========== ========== ==========
Weighted average common shares
outstanding........................ 1,861,000 2,135,000 2,159,000 2,203,000 2,249,000
========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Current assets.................................... $46,105 $44,940 $43,876 $39,597 $42,747
Property and equipment-- net...................... 8,006 8,273 8,771 7,421 7,216
Other assets...................................... 1,164 984 825 797 785
------- ------- ------- ------- -------
Total assets................................. $55,275 $54,197 $53,472 $47,815 $50,748
======= ======= ======= ======= =======
Current liabilities............................... $23,408 $21,482 $31,860 $26,316 $29,318
Long-term debt.................................... 17,453 18,397 5,111 3,996 4,699
Deferred income taxes............................. 1,085 1,150 1,129 1,059 988
Stockholders' equity.............................. 13,329 13,168 15,372 16,444 15,743
------- ------- ------- ------- -------
Total liabilities and stockholders' equity... $55,275 $54,197 $53,472 $47,815 $50,748
======= ======= ======= ======= =======
</TABLE>
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7
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QUARTERLY FINANCIAL DATA -- UNAUDITED
QUARTERLY FINANCIAL DATA -- UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------------- ----------------- ----------------- -----------------
1998 1997 1998 1997 1998 1997 1998 1997
---- ---- ------- ---- ------- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales........................... $40,472 $37,842 $38,012 $35,424 $38,729 $40,000 $41,814 $32,464
Gross profit........................ 3,812 3,217 3,817 2,924 3,538 3,514 3,782 2,961
Net income (loss)................... $ 49 $ (381) $ 58 $ (561) $ (97) $ 45 $ 151 $ (519)
======= ======= ======= ======= ======= ======= ======= =======
Net income (loss) per share -- basic
and diluted....................... $ .03 $ (.18) $ .03 $ (.26) $ (05) $ .02 $ .08 $ (.25)
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
Typically, sales in the 1st and 3rd quarters are higher than in other quarters
due to additional sales generated by Dealers' Marts. The majority of the
additional sales are factory direct shipments which carry a lower gross margin
than warehouse shipments so the gross margin percentage for these quarters is
lower than in others. In 1998, the regular third quarter Dealers' Mart was held
late in the quarter and most of the orders taken at the mart were not shipped
until the fourth quarter. Sales and margin in the 2nd quarter are affected to a
lesser degree by a special promotion, or in the case of 1998, a smaller third
Dealers' Mart.
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8
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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Total gross margin for 1998 increased $2,221,000 or 10% from 1997 on a 9.1%
sales increase. At the same time total operating expenses decreased $502,000 or
2.2% despite the sales increase and approximately $805,000 of special expenses
related mainly to warehouse improvements and new business start-ups. As a result
of the increase in gross margin and decrease in operating expenses, operating
income increased $2,723,000 from 1997.
Although net sales for 1997 were flat compared to 1996, there was a 6%
decrease in warehouse shipments, which was offset by an increase in factory
direct shipments, which carry a lower gross margin. The resulting decrease in
total gross margin was only partially offset by expense reductions and the net
loss for 1997 was $1,416,000.
NET SALES
Warehouse shipments for 1998 increased $7,586,000 or 8.0%, compared to 1997
and factory direct shipments increased $5,711,000 or 11.2%.
Net sales in 1997 were flat compared to 1996. Warehouse shipments decreased
5.6% which was offset by an increase in factory direct shipments. The increase
in factory direct shipments as a percent of total sales has been due to 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 in the past
three years.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1998 1997 1996
---------------- ---------------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net Sales:
Warehouse shipments............................ $102,546 64.5% $ 94,960 65.2% $100,582 69.0%
Factory direct shipments....................... 56,481 35.5 50,770 34.8 45,203 31.0
-------- ----- -------- ----- -------- -----
Net Sales.............................. $159,027 100.0% $145,730 100.0% $145,785 100.0%
======== ===== ======== ===== ======== =====
</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,
-------------------------------
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Net sales................................................... 100.0% 100.0% 100.0%
===== ===== =====
Gross margin................................................ 15.3% 15.2% 16.0%
Warehouse and delivery expense.............................. 5.9 6.5 6.8
----- ----- -----
Gross profit................................................ 9.4 8.7 9.2
Selling and administrative expense.......................... 8.4 9.4 9.7
----- ----- -----
Operating income (loss)..................................... 1.0 (.7) (.5)
Interest expense, net....................................... .8 .7 .6
----- ----- -----
Income (loss) before income tax (benefit)................... .2% (1.4)% (1.1)%
===== ===== =====
</TABLE>
GROSS MARGIN
The gross margin percentage increased to 15.3% for 1998 from 15.2% for 1997,
as the effects of the continuing trend toward increased factory direct shipments
in 1998 were more than offset by an improvement in margins on warehouse
shipments. The gross margin percentage in 1997 decreased to 15.2% from 16.0% in
1996. The decrease was due to the increase in factory direct shipments as a
percent of total sales.
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9
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Total gross margin dollars in the 1st and 3rd quarters are normally higher
than in other quarters, although the gross margin percentages for the first and
third quarters are typically lower than in other quarters. This is because of
increased sales generated at Dealers' Marts typically held during the 1st and
3rd quarters which include a higher proportion of factory direct shipments at
lower gross margins. In 1998, there were three Dealers Marts, most of the sales
from which were shipped in the first, second and fourth quarters.
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> <C>
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
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 0.4
2nd........................................ 6,037 15.9 643 0.7
3rd........................................ 5,960 15.4 117 0.8
4th........................................ 6,260 15.0 906 (1.5)
</TABLE>
WAREHOUSE AND DELIVERY EXPENSE
The efficiency of the warehouse and delivery operations increased during 1998;
however, the net decrease in expenses in 1998 was only $112,000 or 1.2% as
compared with 1997, because of the following special items:
<TABLE>
<S> <C>
Cost of resetting warehouse................................. $403,000
Estimated installation and training cost related to a radio
frequency stocking and picking system..................... 76,000
Less gain on sale of equipment in excess of similar gain in
1997...................................................... (87,000)
--------
Net special expenses........................................ $392,000
========
</TABLE>
In 1997 warehouse and delivery expense decreased by $422,000 or 4.3%, compared
to 1996. However, as a percent of warehouse shipments this expense increased
slightly
The following table shows the trend of warehouse and delivery expense by
quarter for the last three years.
<TABLE>
<CAPTION>
INCREASE (DECREASE)
WAREHOUSE & DELIVERY EXPENSE 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>
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
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) (0.4)
2nd...................................... 2,220 8.7 (250) (1.6)
3rd...................................... 2,422 9.5 93 0.2
4th...................................... 2,478 9.3 85 (1.7)
</TABLE>
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10
<PAGE> 11
SELLING AND ADMINISTRATIVE EXPENSE
Selling and administrative expense decreased $390,000 or 2.8% in 1998 and
$435,000 or 3.1% in 1997 compared to the previous year. The expense for 1998
includes $326,000 related to new business start-ups and year 2000 compliance and
the expense for 1997 includes $365,000 of severance pay and expenses.
The following table shows the quarterly trend of selling and administrative
expense in the last three years.
<TABLE>
<CAPTION>
INCREASE (DECREASE)
SELLING & ADMINISTRATIVE VS. SAME QUARTER
EXPENSE IN PREVIOUS YEAR
------------------------------ ------------------------------
AMOUNT PERCENTAGE AMOUNT PERCENTAGE
QUARTER (IN THOUSANDS) OF SALES (IN THOUSANDS) POINTS
------- -------------- ---------- -------------- ----------
<C> <C> <S> <C> <C> <C> <C>
1996 -- 1st.................................... $3,339 8.6% $ 194 (.2)%
3,732 10.4 332 1.1
2nd....................................
3,593 9.1 211 .1
3rd....................................
3,476 10.9 309 1.0
4th....................................
1997 -- 1st.................................... 3,497 9.2 158 .6
3,528 10.0 (204) (.4)
2nd....................................
3,212 8.0 (381) (1.1)
3rd....................................
3,468 10.7 (8) (.2)
4th....................................
1998 -- 1st.................................... 3,374 8.3 (123) (0.9)
3,367 8.9 (161) (0.1)
2nd....................................
3,358 8.6 146 0.6
3rd....................................
3,216 7.7 (252) (3.0)
4th....................................
</TABLE>
INTEREST EXPENSE
Interest expense increased $346,000 or 34.9% in 1998 compared to 1997 as a
result of additional borrowing to finance higher average receivables and
inventories, the purchase of treasury stock, and the loss incurred in 1997.
In 1997, net interest expense increased $83,000 or 9.1% over 1996 due to
increased average borrowings to finance higher average trade receivables.
EARNINGS PER SHARE
In late November 1997, the Company purchased 300,000 shares of its common
stock for treasury which reduced the average shares outstanding in 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company finances its working capital requirements with a line of credit
under which it may borrow up to 85% of eligible receivables. During 1998, this
line of credit was renegotiated from $15,000,000 to $20,000,000. The Company
believes this credit facility, which matures in 2000, is adequate to finance its
working capital needs. Actual borrowings under 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>
1996.............................................. $ 6,198,000 $10,450,000 $10,450,000 8.38% 8.25%
1997.............................................. 7,231,000 14,389,000 14,389,000 8.63 8.50
1998.............................................. 12,039,000 14,430,000 15,014,000 8.57 7.75
</TABLE>
Average borrowings in 1998 increased from 1997 as a result of higher average
receivables and inventories, the purchase of treasury stock, and the loss
incurred in 1997.
Average borrowings in 1997 increased only slightly from 1996 as average
inventory levels were lowered offsetting borrowings required to finance the loss
for the year and capital expenditures. Borrowings at December 31, 1997 were
$3,939,000 higher than at December 31, 1996 due to higher year-end trade
receivables as well as the loss for the year, capital expenditures, the purchase
of treasury stock and principal payments on other long-term debt.
- --------------------------------------------------------------------------------
11
<PAGE> 12
Typically, borrowings are greatest in December, January and February as
average inventories increase as the Company takes advantage of special year-end
buying opportunities from its suppliers. Borrowings then decrease as the
inventory returns to normal levels.
(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 including availability fees by the
average borrowings.
Trade receivables increased $976,000 or 4.2% and $1,237,000 or 5.7% at
December 31, 1998 and 1997, respectively, compared to the prior year mainly due
to 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>
1996........................................................ 36,600 5.0
1997........................................................ 36,450 5.1
1998........................................................ 37,250 5.1
</TABLE>
At December 31, 1998, inventories increased $672,000 or 3.9% compared to the
prior year. At December 31, 1997 inventories decreased $658,000 or 3.7% 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
decreased due to warehouse disruption, inventories were increased in the latter
part of 1996. Accounts payable at December 31, 1998 increased $1,793,000 or
10.1% from December 31, 1997, largely due to extended terms from vendors in
connection with the Fall Dealers' Mart.
Capital expenditures in 1998 were $1,066,000. Depreciation and amortization
for 1998 was $1,220,000.
INTEREST RATE RISK
The following discussion about the Company's interest rate risk includes
"forward looking statements" that involve risks and uncertainties. Actual
results could differ materially from those projected in the forward looking
statements.
The Company's principal credit agreement and the Company's lease with respect
to industrial development bonds issued to finance the Company's principal
warehouse distribution facility both bear a floating interest rate based on, in
the case of the credit agreement, the prime rate or at the Company's option
2 1/2% over LIBOR, and in the case of the industrial development lease, based on
92% of the prime rate. Accordingly, the Company is subject to market risk
associated with changes in interest rates. At December 31, 1998, $14,430,000 was
outstanding under the credit agreement and $2,405,000 was outstanding under the
industrial development lease agreement. For 1998, the average principal amount
outstanding under the credit agreement was $12,039,000. Assuming the average
amount outstanding under the credit agreement during 1999 is equal to such
average amount outstanding during 1998 and assuming the Company makes its
scheduled amortization payments on its industrial development lease of $769,000
in 1999, a 1% increase in the applicable interest rate during 1999 would result
in additional interest expense of approximately $60,000, which would reduce cash
flow and pre-tax earnings dollar for dollar.
IMPACT OF YEAR 2000
The Company is in the process of modifying or replacing those portions of its
software and hardware which are used in the ordinary course of the Company's
business so that its computer, telephone and other systems will function
properly with respect to dates of the year 2000 and thereafter. Based on its
current assessment of which portions of the software and hardware must be
modified, the Company estimates the cost of year 2000 project will be
approximately 200,000, of which $16,000 has been expended through the end of
1998. The Company anticipates that the required modifications will be largely
completed in a timely fashion between now and year end and does not anticipate
any material interruption of its business stemming from the failure of its
software and hardware to be year 2000 compliant. The Company is focusing its
efforts on those systems which it believes are essential to its ability to
conduct its operations in the ordinary course and anticipates that the
modification, replacement and testing of those systems will be largely completed
by the end of the third quarter of 1999.
- --------------------------------------------------------------------------------
12
<PAGE> 13
The Company has made an assessment of the year 2000 compliance of most of its
embedded microchips and other microprocessors in the non-information technology
equipment that it uses in its operations. While it is impossible to be certain,
the Company presently anticipates that it will be able to repair or replace
non-year 2000 compliant equipment as necessary without material disruption to
its operations.
Even though the Company is in the process of converting its computer and other
systems so that they will be year 2000 compliant, it is possible that third
parties with whom the Company does business will encounter problems with their
systems that may have an adverse impact on the Company. The Company has not
ascertained the year 2000 compliance of the approximately 1,400 suppliers of the
products it distributes. However, no supplier accounts for more than 4.5% of the
Company's total purchases and substantially all products of the type distributed
by the Company are available from a number of manufacturers. The Company has no
contingency plan for addressing possible disruptions in utility service to the
Company stemming from year 2000 problems, such as power, telephone and the like,
but will rely on those suppliers to address their year 2000 issues in a timely
manner so as to avoid a material disruption of service to the Company.
The Company is unable to predict with any certainty the reasonable worst case
scenario for disruption to its operations stemming from year 2000 issues. These
could range from minor disruption of its operations requiring temporary
work-around solutions that may involve additional overtime or other
unanticipated costs, to the potential for lost sales and additional costs to
repair or replace equipment if the Company encounters greater disruption than is
currently anticipated.
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. Words such as "expects", "believes", "estimates", "anticipates", "in
the process", "could", "target" and "objective" 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, including interest rates; and
- impact of year 2000 issues on the Company's operations, including issues
relating to the compliance or lack thereof by third-party suppliers.
- --------------------------------------------------------------------------------
13
<PAGE> 14
- --------------------------------------------------------------------------------
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, 1998 and 1997, 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, 1998. 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, 1998 and 1997, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Birmingham, Alabama
February 19, 1999
- --------------------------------------------------------------------------------
14
<PAGE> 15
MOORE-HANDLEY, INC.
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
For the Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales....................................... $159,027,000 $145,730,000 $145,785,000
Cost of merchandise sold........................ 134,704,000 123,628,000 122,421,000
Warehouse and delivery expense.................. 9,374,000 9,486,000 9,908,000
------------ ------------ ------------
Cost of sales................................... 144,078,000 133,114,000 132,329,000
------------ ------------ ------------
Gross profit.................................... 14,949,000 12,616,000 13,456,000
Selling and administrative expense.............. 13,315,000 13,705,000 14,140,000
------------ ------------ ------------
Operating income (loss)......................... 1,634,000 (1,089,000) (684,000)
Interest expense, net........................... 1,337,000 991,000 908,000
------------ ------------ ------------
Income (loss) before provision for income tax
(benefit).................................... 297,000 (2,080,000) (1,592,000)
Income tax (benefit)............................ 136,000 (664,000) (520,000)
------------ ------------ ------------
Net income (loss)............................... $ 161,000 $ (1,416,000) $ (1,072,000)
============ ============ ============
Per share -- basic and diluted data:
Net income (loss) per common share........... $ .09 $ (.66) $ (.50)
============ ============ ============
Weighted average common shares outstanding... 1,861,000 2,135,000 2,159,000
============ ============ ============
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
15
<PAGE> 16
MOORE-HANDLEY, INC.
STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
For the Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)...................................... $ 161,000 $(1,416,000) $(1,072,000)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization..................... 1,220,000 1,268,000 1,176,000
Provision for doubtful accounts................... 280,000 224,000 500,000
Gain on sale of equipment......................... (173,000) (86,000) (10,000)
Deferred income taxes............................. (104,000) (20,000) 30,000
Change in assets and liabilities:
Trade and other receivables.................. (2,240,000) (1,601,000) (1,356,000)
Merchandise inventory........................ (672,000) 658,000 (2,362,000)
Prepaid expenses............................. (159,000) 17,000 (28,000)
Prepaid pension cost......................... (191,000) (166,000) (54,000)
Loan to officer.............................. -- -- 19,000
Accounts payable and accrued expenses........ 1,851,000 34,000 2,679,000
Refundable or accrued income taxes........... 632,000 238,000 (551,000)
----------- ----------- -----------
Total adjustments............................ 444,000 566,000 43,000
----------- ----------- -----------
Net cash provided by (used in) operating
activities................................. 605,000 (850,000) (1,029,000)
Cash flows from investing activities:
Capital expenditures................................... (1,066,000) (792,000) (2,519,000)
Proceeds from sale of equipment........................ 297,000 115,000 10,000
----------- ----------- -----------
Net cash used in investing activities............. (769,000) (677,000) (2,509,000)
Cash flows from financing activities:
Net borrowings (repayments) under bank loans........... -- (10,450,000) 2,700,000
Principal payments under long-term debt................ (1,214,000) (1,065,000) (978,000)
Net borrowings (repayments) under line of credit....... 42,000 14,389,000 2,258,000
Additional long-term borrowings........................ 303,000 -- --
Purchase of treasury stock............................. -- (788,000) (43,000)
----------- ----------- -----------
Net cash (used in) provided by financing
activities...................................... (869,000) 2,086,000 3,937,000
----------- ----------- -----------
Net (decrease) increase in cash and cash
equivalents..................................... (1,033,000) 559,000 399,000
Cash and cash equivalents at beginning of year.............. 1,155,000 596,000 197,000
----------- ----------- -----------
Cash and cash equivalents at end of year.................... $ 122,000 $ 1,155,000 $ 596,000
=========== =========== ===========
</TABLE>
Supplemental Disclosures of Cash Flow Information
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash paid (refunded) during the year for:
Interest............................................... $ 1,352,000 $ 929,000 $ 867,000
Income taxes........................................... (605,000) (882,000) 29,000
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
16
<PAGE> 17
(This page intentionally left blank)
17
<PAGE> 18
MOORE-HANDLEY, INC.
BALANCE SHEETS
- --------------------------------------------------------------------------------
December 31, 1998 and 1997
<TABLE>
<CAPTION>
ASSETS 1998 1997
<S> <C> <C>
- -----------------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents............................ $ 122,000 $ 1,155,000
Trade receivables, net of allowance for doubtful
accounts of $1,150,000 in 1998 and $1,100,000 in
1997................................................ 24,228,000 23,252,000
Other receivables.................................... 3,073,000 2,089,000
Merchandise inventory................................ 17,707,000 17,035,000
Prepaid expenses..................................... 385,000 226,000
Refundable income taxes.............................. -- 632,000
Deferred income taxes................................ 590,000 551,000
------------ ------------
Total current assets........................... 46,105,000 44,940,000
Prepaid pension cost....................................... 1,146,000 955,000
Property and equipment:
Land................................................. 718,000 718,000
Buildings............................................ 9,475,000 9,288,000
Equipment............................................ 9,309,000 9,603,000
Less accumulated depreciation........................ (11,496,000) (11,336,000)
------------ ------------
Net property and equipment........................... 8,006,000 8,273,000
Deferred charges, net of accumulated amortization of
$80,000 and $71,000 in 1998 and 1997, respectively...... 18,000 29,000
------------ ------------
Total Assets............................................... $ 55,275,000 $ 54,197,000
============ ============
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
18
<PAGE> 19
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Current liabilities:
Accounts payable...................................... $19,633,000 $17,640,000
Accrued payroll....................................... 535,000 437,000
Other accrued liabilities............................. 1,994,000 2,234,000
Long-term debt due within one year.................... 1,246,000 1,171,000
----------- -----------
Total current liabilities....................... 23,408,000 21,482,000
Long-term debt, less amount due within one year............. 17,453,000 18,397,000
Deferred income taxes....................................... 1,085,000 1,150,000
Stockholders equity:
Common stock, $.10 par value: 10,000,000 shares
authorized, 2,510,040 shares issued.................. 251,000 251,000
Common stock subscribed, 112,000 shares subscribed.... 11,200 --
Capital in excess of par value........................ 13,165,800 12,883,000
Retained earnings..................................... 2,826,000 2,665,000
Less:
Treasury stock at cost, 655,497 shares in 1998 and
1997............................................. (2,631,000) (2,631,000)
Common stock subscriptions receivable.............. (294,000) --
----------- -----------
Total stockholders' equity......................... 13,329,000 13,168,000
----------- -----------
Total Liabilities and Stockholders' Equity.................. $55,275,000 $54,197,000
=========== ===========
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
19
<PAGE> 20
MOORE-HANDLEY, INC.
STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
For the Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
COMMON STOCK COMMON STOCK SUBSCRIBED
-------------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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 -- --
Purchase of shares for treasury..................... -- -- -- --
Net loss............................................ -- -- -- --
--------- -------- ------- -------
Balance at December 31, 1997........................ 2,510,040 251,000 -- --
Net income.......................................... -- -- -- --
Common stock subscribed............................. -- -- 112,000 11,200
--------- -------- ------- -------
Balance at December 31, 1998........................ 2,510,040 $251,000 112,000 $11,200
========= ======== ======= =======
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
20
<PAGE> 21
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL IN TREASURY SHARES COMMON STOCK TOTAL
EXCESS OF RETAINED ---------------------- LOANS TO SUBSCRIPTIONS STOCKHOLDERS'
PAR VALUE EARNINGS SHARES AMOUNT OFFICERS RECEIVABLE EQUITY
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$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
-- -- 300,000 (788,000) -- -- (788,000)
-- (1,416,000) -- -- -- -- (1,416,000)
----------- ----------- ------- ----------- -------- --------- -----------
12,883,000 2,665,000 655,497 (2,631,000) -- -- 13,168,000
-- 161,000 -- -- -- -- 161,000
282,800 -- -- -- -- (294,000) --
----------- ----------- ------- ----------- -------- --------- -----------
$13,165,000 $ 2,826,000 655,497 $(2,631,000) $ -- $(294,000) $13,329,000
=========== =========== ======= =========== ======== ========= ===========
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
21
<PAGE> 22
- --------------------------------------------------------------------------------
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.
Certain Concentrations
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.
Merchandise Inventory
Merchandise 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 Accounting Principles Board Opinion No. 25 Accounting for Stock
Issued to Employees (APB 25), and intends to continue to do so.
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.
Revenue and Expense Recognition
The Company recognizes revenues when goods are shipped and recognizes expenses
when incurred. Any shared costs with its suppliers such as advertising and
promotional items are offset against the specific expense.
Segment Reporting
Effective January 1, 1998, the Company adopted the Financial Accounting
Standards Board's (FASB) Statement of Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise and Related Information (Statement
131). Statement 131 superseded FASB Statement No. 14, Financial Reporting for
Segments of a Business Enterprise. Statement 131 establishes standards for the
way that public business enterprises report information about operating segments
in annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial reports.
Statement 131 also establishes standards for related disclosures about products
and services, geographic areas, and major customers. The adoption of Statement
131 did not affect results of operations or financial position, but did affect
the disclosure of segment information. See note 6.
Reclassification
Certain amounts in the financial statements for the year ended December 31,
1997 have been reclassified to conform with the 1998 presentation.
2. Long-Term Debt
Long-term debt at December 31, 1998 and 1997 includes industrial development
bonds, obligations under capital leases financing transportation equipment,
- --------------------------------------------------------------------------------
22
<PAGE> 23
- --------------------------------------------------------------------------------
a term loan and a revolving line of credit all of which approximate fair value.
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 at 92% of prime
(7.75% December 31, 1998) on the bonds and has options to purchase the property
for a nominal cost at the expiration of the lease.
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. Total capital leases outstanding at December 31, 1998 and
1997 were $2,818,000 and $3,441,000, respectively. Annual installments of
principal on all capital leases decrease from approximately $966,000 in 1999 to
$830,000 in 2001.
The assets purchased under capital leases include:
<TABLE>
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
Land, building and
equipment.................. $10,052,000 $9,749,000
Less accumulated
amortization............... (5,058,000) (4,744,000)
----------- ----------
Net land, building and
equipment............... $ 4,994,000 $5,005,000
=========== ==========
</TABLE>
The amortization expense relating to these leases is included in depreciation
expense.
The Company has financed a $2,000,000 warehouse modernization program with a
term loan payable in equal monthly principal payments thru January 2004,
together with interest at 8.25%. The balance of this term loan outstanding as of
December 31, 1998 and 1997 was $1,452,000, and $1,738,000 respectively.
On August 7, 1997 the Company entered into a credit agreement, as amended on
September 24, 1998, under which it may borrow up to 85% of eligible receivables
up to a maximum of $20,000,000, of which $14,430,000 was outstanding at December
31, 1998. The borrowings bear interest at the prime interest rate or, at the
Company's option, 2 1/2% over LIBOR, and are secured by the Company's trade
receivables. The Company is charged a commitment fee of 1/2% on the unused
portion of the line of credit. Unless extended this line of credit becomes due
in August 2000. This credit facility replaced the Company's lines of credit with
banks totaling $10,000,000 and one of which was amended in the second quarter of
1997 to avoid a violation of a debt covenant.
Maturities of long-term debt during the next five years are as follows:
<TABLE>
<S> <C>
1999............................ $ 1,246,000
2000............................ 15,694,000
2001............................ 1,161,000
2002............................ 286,000
2003............................ 286,000
Thereafter...................... 26,000
-----------
$18,699,000
===========
</TABLE>
Interest expense on long-term debt bank loans and capital lease obligations
for the years ended December 31, 1998, 1997 and 1996 was $1,419,000, $1,140,000
and $1,022,000, respectively.
3. Commitments
Total future rental payments under non-cancelable operating leases which
expire in 2006 are $5,065,000. Annual rentals for the remainder of the lease
terms are as follows:
<TABLE>
<S> <C>
1999............................ $ 984,000
2000............................ 892,000
2001............................ 845,000
2002............................ 576,000
2003............................ 494,000
Thereafter...................... 1,274,000
----------
$5,065,000
</TABLE>
Rental expense was $780,000, $384,000 and $394,000 in 1998, 1997 and 1996,
respectively.
4. Income Tax
The provision for income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
1998 1997 1996
-------- --------- ---------
<S> <C> <C> <C>
Current:
Federal......................... $240,000 $(633,000) $(542,000)
State........................... -- (11,000) (8,000)
Deferred.......................... (104,000) (20,000) 30,000
-------- --------- ---------
$136,000 $(664,000) $(520,000)
======== ========= =========
</TABLE>
The current year tax provision reflects the tax benefit of a state net
operating loss carry forward of approximately $10,000.
- --------------------------------------------------------------------------------
23
<PAGE> 24
- --------------------------------------------------------------------------------
The deferred income tax liabilities (assets) are reflected in the balance
sheets as follows:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Current Assets
Accrued health insurance and vacation
costs................................... $(147,000) $(151,000)
Allowance for doubtful accounts......... (426,000) (409,000)
Inventory costs capitalized for tax
purposes.............................. 41,000 83,000
Reserve for write down of excess
inventory............................. (58,000) (74,000)
--------- ---------
(590,000) (551,000)
Non-current liabilities Depreciation...... 750,000 815,000
Provision for pension expenses.......... 335,000 335,000
--------- ---------
1,085,000 1,150,000
--------- ---------
Net liability............................. $ 495,000 $ 599,000
========= =========
</TABLE>
The provision for income taxes (benefit) differs from the statutory federal
income tax rate as a result of the following:
<TABLE>
<CAPTION>
PERCENT OF PRE-TAX
INCOME
------------------
1998 1997 1996
---- ---- ----
<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.................................... -- -- --
Non-deductible meals and entertainment....... 8 -- --
Other non-deductible items................... 4 2 1
-- --- ---
Effective income tax rate...................... 46% (32)% (33)%
== === ===
</TABLE>
5. Pension Plan
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>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Service
cost-- benefits
earned during the
period.............. $290,000 $270,000 $273,000
Interest cost on
projected benefit
obligation.......... 432,000 392,000 356,000
Actual return on
assets.............. (457,000) (475,000) (260,000)
Net amortization and
deferral............ 119,000 143,000 (30,000)
-------- -------- --------
Net periodic pension
cost................ $384,000 $330,000 $339,000
======== ======== ========
</TABLE>
The following table sets forth benefit obligations, 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, 1998 and 1997.
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at
beginning of year....... $6,272,000 $5,728,000
Service costs.............. 290,000 270,000
Interest costs............. 432,000 392,000
Benefits paid.............. (198,000) (118,000)
---------- ----------
Benefit obligation at end
of year................. 6,796,000 6,272,000
---------- ----------
Change in plan assets:
Fair value of plan assets
at beginning of year.... 6,594,000 5,775,000
Actual return on plan
assets.................. 457,000 475,000
Company contributions...... 552,000 462,000
Benefits paid.............. 198,000 118,000
---------- ----------
Fair value of assets at end
of year................. 7,405,000 6,594,000
---------- ----------
Funded status of plan...... 609,000 322,000
Unrecognized obligations at
transition.............. 254,000 362,000
Unrecognized net actuarial
loss.................... 187,000 163,000
Unrecognized prior service
cost.................... 96,000 108,000
---------- ----------
Prepaid benefit cost....... $1,146,000 $ 955,000
========== ==========
</TABLE>
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>
<S> <C>
Weighted average discount rate.................. 7%
Long-term rate of return on assets.............. 7%
Increase in future compensation levels.......... 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
1998, 1997 or 1996.
- --------------------------------------------------------------------------------
24
<PAGE> 25
- --------------------------------------------------------------------------------
6. Segment Reporting
The Company operates in one business segment. Revenues from products are as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Electrical and plumbing
supplies............... $ 35,622,000 $ 32,352,000 $ 33,822,000
Home center products
(including lawn and
garden equipment, paint
and accessories,
sporting goods and
appliances)............ 34,986,000 25,794,000 26,679,000
Building supplies
(including aluminum
windows and doors,
roofing products and
lumber)................ 40,711,000 36,287,000 31,927,000
General and shelf
hardware (including
power and hand tools,
lock sets and wire
products).............. 47,708,000 51,297,000 53,357,000
------------ ------------ ------------
$159,027,000 $145,730,000 $145,785,000
============ ============ ============
</TABLE>
7. Incentive Compensation Plan
On May 23, 1991, the stockholders approved the 1991 Incentive Compensation
Plan pursuant to which a maximum aggregate of 460,000 shares of common stock may
be issued to employees and directors until April 12, 2001.
The Company has elected to follow APB 25 and related Interpretations in
accounting for its employee stock options. Under APB 25, because the exercise
price for the employees' stock options equal the market price of the underlying
stock on the date of grant, no compensation expense is recognized. These options
vest either in six months or in equal annual installments over five years.
Pro forma information regarding net income and earnings per share is required
by 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 1998 and 1997; risk-free interest rate of 7%; dividend yield of
0%; volatility factor of the expected market price of the Company's common stock
of .33; a weighted-average expected life of the option of 4.0 and 5.3 years,
respectively; and a weighted average grant date fair value of options granted of
$0.95 and $1.46, respectively.
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>
1998 1997 1996
-------- ----------- -----------
<S> <C> <C> <C>
Pro forma net income (loss)... $101,000 $(1,463,000) $(1,161,000)
======== =========== ===========
Pro forma net income (loss)
per share -- basic and
diluted..................... $ .05 $ (.69) $ (.54)
======== =========== ===========
</TABLE>
The effect of FASB Statement 123 on pro forma net income or loss in 1998, 1997
and 1996 is not likely to be representative of the effects on pro forma net
income or loss in future years.
As of December 31, 1998 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 1997 and 30,000 shares have been exercised.
B. Options to Independent Directors for 12,000 shares at $5.00 per share
(canceled in 1998), 4,000 shares at $4.75 per share, 4,000 shares at $4.875
per share, 4,000 at $3.50 per share, 4,000 at $3.375 per share and 4,000 at
$2.438 per share (market value at date of grant) exercisable through May 2006.
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. Options for 100,000 shares were cancelled in 1998.
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 1997. These
options were canceled in 1997.
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 have
a weighted average exercise price of approximately $3.48. Of these, 75,000
have been canceled.
F. Options to Officers for 125,000 shares were granted in 1997 at $2.375 to
$3.267 per share (market value at date of grant) exercisable through 2007 in
- --------------------------------------------------------------------------------
25
<PAGE> 26
- --------------------------------------------------------------------------------
five equal installments beginning in 1998. These options have a weighted
average exercise price of approximately $2.91.
G. Options to Officers and employees for 40,000 shares were granted in 1998
at $1.875 to $2.532 per share (market value at date of grant) exercisable
through 2008 in five equal installments beginning in 1999. These options have
a weighted average exercise price of approximately $2.12.
During 1998, the stockholders approved the Employee Stock Purchase Plan (the
"Plan"). The Plan is designed to encourage and facilitate stock ownership by
employees by providing a continued opportunity to purchase Common Stock,
generally through voluntary after-tax payroll deductions. The price per share of
the Common Stock shall be 85% of the fair market value on the date of the grant
of the option for the qualified stock options and shall not be less than 100% of
the fair market value on the date of the grant of the option for the
non-qualified stock options.
8. Common Stock Subscriptions Receivable
In connection with the Employee Stock Purchase Plan formed in 1998, certain
individuals issued three year promissory notes to the Company whereby the
individuals are obligated to pay annual interest of 8.5% and a balloon principal
payment no later than June 30, 2001. These notes are secured by the related
shares of common stock.
9. Earnings Per Share
Basic and diluted earnings per share were the same for 1998, 1997 and 1996.
The numerator for basic and diluted earnings per share includes net income
(loss) of $161,000, $(1,416,000) and $(1,072,000) for 1998, 1997 and 1996,
respectively. The denominator for diluted earnings per share includes weighted
average common shares outstanding of 1,863,000, 2,135,000 and 2,159,000 for
1998, 1997 and 1996, respectively. The denominator for basic earnings per share
includes weighted average common shares outstanding of 1,861,000, 2,135,000 and
2,159,000 for 1998, 1997 and 1996, respectively.
- --------------------------------------------------------------------------------
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 29, 1999
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, Director and Chief March 27, 1999
- ----------------------------------------------------- Executive Officer
William Riley
/s/ PIERCE E. MARKS, JR. Director March 29, 1999
- -----------------------------------------------------
Pierce E. Marks, Jr.
/s/ MICHAEL J. GAINES President and Chief Operating Officer March 27, 1999
- -----------------------------------------------------
Michael J. Gaines
/s/ L. WARD EDWARDS Vice President, Treasurer and Secretary and March 29, 1999
- ----------------------------------------------------- Director (Principal Accounting and Financial
L. Ward Edwards Officer)
/s/ MICHAEL B. STUBBS Director March 30, 1999
- -----------------------------------------------------
Michael B. Stubbs
/s/ RONALD J. JUVONEN Director March 29, 1999
- -----------------------------------------------------
Ronald J. Juvonen
</TABLE>
- --------------------------------------------------------------------------------
27
<PAGE> 28
MOORE-HANDLEY, INC.
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <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.
3(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.
3(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.
3(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.
10.1 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.
10.2 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.
10.3 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.
10.4 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.
10.5 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.
10.6 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.
10.7 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.
10.8 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.
10.9 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.
10.10 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.
10.11 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.
10.12 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.
10.13 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.
10.14 1991 Incentive Compensation Plan, filed as Exhibit A to the
Company's Proxy Statement dated April 30, 1991 and
incorporated herein by reference.
10.15 The Moore-Handley, Inc. Employees' 401(k) Profit Sharing
Prototype Non-Standardized Adoption Agreement effective
July 1, 1993, filed as Exhibit 10(gg) to the Company's
Annual Report on Form 10-K for the year ended December 31,
1993 and incorporated herein by reference.
10.16 Financing Agreement, dated August 7, 1997, between the
Company and The CIT Group/Business Credit, Inc. filed as
Exhibit 10(ii) to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997 and incorporated
herein by reference.
10.17 The Moore-Handley, Inc. Employee Stock Purchase Plan filed
as Exhibit 10 to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1998, and
incorporated herein by reference.
10.18 Amendment dated September 24, 1998 to Financing Agreement,
dated August 7, 1997, between the Company and The CIT
Group/Business Credit, Inc. filed as Exhibit 10-(a) to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1998 and incorporated herein by
reference.
21 List of Subsidiaries is incorporated herein by reference to
Exhibit 21 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1996.
23 Consent of Ernst & Young LLP, Independent Auditors
27 Financial Data Schedule (For SEC purposes only).
</TABLE>
- --------------------------------------------------------------------------------
28
<PAGE> 1
EXHIBIT 23
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 333-59611) pertaining to the Moore-Handley, Inc. Employee Stock
Purchase Plan of our report dated February 19, 1999, with respect to the
financial statements of Moore-Handley, Inc. included in the Annual Report (Form
10-K) for the year ended December 31, 1998.
/s/ ERNST & YOUNG LLP
Birmingham, Alabama
March 29, 1999
- --------------------------------------------------------------------------------
<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, 1998, 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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 122
<SECURITIES> 0
<RECEIVABLES> 24,228
<ALLOWANCES> 0
<INVENTORY> 17,707
<CURRENT-ASSETS> 46,105
<PP&E> 19,502
<DEPRECIATION> (11,496)
<TOTAL-ASSETS> 55,275
<CURRENT-LIABILITIES> 23,408
<BONDS> 17,453
0
0
<COMMON> 251
<OTHER-SE> 13,078
<TOTAL-LIABILITY-AND-EQUITY> 55,275
<SALES> 159,027
<TOTAL-REVENUES> 159,027
<CGS> 134,704
<TOTAL-COSTS> 144,078
<OTHER-EXPENSES> 13,315
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,337
<INCOME-PRETAX> 297
<INCOME-TAX> 136
<INCOME-CONTINUING> 161
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 161
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
