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FORM 10 - Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 29, 2001
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 1-8903
MOORE MEDICAL CORP.
(Exact name of registrant as specified in its charter)
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Delaware 22-1897821
(State of incorporation) (I.R.S. Employer
Identification Number)
P.O. Box 1500, New Britain, CT 06050
(Address of principal executive offices)
860-826-3600
(Registrant's telephone number)
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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 such
filing requirements for the past 90 days. Yes X No _____
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3,153,943 number of shares of Common Stock outstanding as of October 27, 2001.
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MOORE MEDICAL CORP.
Balance Sheets
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(Amounts in thousands, except par value) September 29, 2001 December 30, 2000
(Unaudited)
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ASSETS
Current Assets
Cash $ 872 $ 5,233
Accounts receivable, less allowances
of $ 246 and $201............................. 16,451 12,326
Inventories...................................... 9,879 9,554
Prepaid expenses and other current assets........ 2,644 2,152
Deferred income taxes............................ 3,692 3,692
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Total Current Assets....................... 33,538 32,957
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Noncurrent Assets
Equipment and leasehold improvements, net. 8,466 9,672
Other assets..................................... 2,269 2,500
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Total Noncurrent Assets.................... 10,735 12,172
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$44,273 $45,129
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable................................. $13,633 $10,192
Accrued expenses................................. 1,041 2,984
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Total Current Liabilities.................. 14,674 13,176
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Deferred Income Taxes............................... 2,387 2,387
Long Term Notes Payable 4,804 5,208
Shareholders' Equity
Preferred stock, no shares outstanding........... - -
Common stock - $.01 par value;
Shares authorized - 10,000
Shares issued - 3,246............................ 32 32
Capital in excess of par value................... 21,543 21,700
Note receivable.................................. (294) -
Retained earnings................................ 1,947 3,913
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23,228 25,645
Less treasury shares, at cost, 92 and 145
shares........................................ (820) (1,287)
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Total Shareholders' Equity................. 22,408 24,358
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$44,273 $45,129
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The accompanying notes are an integral part of the financial statements.
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MOORE MEDICAL CORP.
Statements of Operations
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(Amounts in thousands, except per share data) Third Quarter
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2001 2000
(Unaudited)
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Net sales....................................... $34,472 $33,038
Cost of products sold........................... 24,008 23,127
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Gross profit.................................... 10,464 9,911
Selling, general & administrative expenses...... 10,597 10,890
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Operating loss ................................. (133) (979)
Interest expense (income), net.................. 67 (65)
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Loss before income taxes........................ (200) (914)
Income tax benefit.............................. (74) (347)
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Net loss........................................ $ (126) $ (567)
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Basic net loss per share ....................... $ (0.04) $ (0.18)
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Basic common shares outstanding* 3,154 3,083
* weighted average
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Note: The third quarters end as of September 29, 2001 and September 30, 2000.
The accompanying notes are an integral part of the financial statements.
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MOORE MEDICAL CORP.
Statements of Operations
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(Amounts in thousands, except per share data) First Three Quarters
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2001 2000
(Unaudited)
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Net sales......................................................... $99,197 $92,808
Cost of products sold............................................. 69,171 65,146
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Gross profit...................................................... 30,026 27,662
Selling, general & administrative expenses........................ 33,026 29,017
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Operating loss.................................................... (3,000) (1,355)
Interest expense (income), net.................................... 140 (168)
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Loss before income taxes.......................................... (3,140) (1,187)
Income tax benefit................................................ (1,157) (444)
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Net loss.......................................................... $(1,983) $ (743)
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Basic net loss per share.......................................... $ (0.63) $ (0.24)
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Basic common shares outstanding* 3,141 3,033
* weighted average
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Note: The first three quarters end as of September 29, 2001 and September 30,
2000.
The accompanying notes are an integral part of the financial statements.
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MOORE MEDICAL CORP.
Statements of Cash Flows
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(Amounts in thousands) First Three Quarters
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2001 2000
(Unaudited)
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Cash Flows From Operating Activities
Net loss............................................................... $(1,983) $ (743)
.......................................................................
Adjustments to reconcile net loss to net
cash flows (used in) provided by operating activities:
Depreciation and amortization......................................... 2,306 2,036
Changes in operating assets and liabilities:
Accounts receivable.................................................. (4,125) (2,518)
Inventories.......................................................... (325) 2,803
Other current & noncurrent assets.................................... (364) (879)
Accounts payable..................................................... 3,441 3,723
Other current liabilities............................................ (1,944) 39
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Net cash flows (used in) provided by
operating activities................................................... (2,994) 4,461
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Cash Flows From Investing Activities
Equipment & leasehold improvements acquired............................ (997) (1,503)
Acquisition of business................................................ - (1,684)
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Net cash flows used in investing activities............................ (997) (3,187)
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Cash Flows From Financing Activities
(Decrease) increase in long term notes payable......................... (404) 500
Sale of treasury stock................................................. 34 1,444
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Net cash flows (used in) provided by financing
activities............................................................. (370) 1,944
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(Decrease) increase in cash............................................ (4,361) 3,218
Cash at beginning of period............................................ 5,233 744
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Cash At End Of Period.................................................. $ 872 $ 3,962
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The accompanying notes are an integral part of the financial statements.
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MOORE MEDICAL CORP.
NOTES TO FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies
The Company
Moore Medical Corp. is a multi-channel, Internet-enabled marketer and
distributor of medical/surgical products and pharmaceuticals. We provide these
products to over 100,000 health care practices and facilities in non-hospital
settings nationwide, including: physicians, emergency medical technicians,
medical departments at industrial sites, municipalities, university and school
health services, correctional facilities and other specialty practice
communities. We market and serve our customers through the Internet, direct
mail, industry specialized telephone support representatives, and key
opportunity sales representatives. Moore Medical's direct marketing and
distribution business has more than fifty years of operating experience.
Basis of Presentation
Moore Medical has prepared the accompanying unaudited financial statements in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulations
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for fair presentation have been
included. The results for the three months ended September 29, 2001 do not
necessarily indicate the results to be expected for the fiscal year ended
December 29, 2001 or any other future period. The fiscal quarters ended on
September 29, 2001 and September 30, 2000.
The accompanying unaudited financial statements should be read in conjunction
with the Notes to Financial Statements and Management's Discussion and Analysis
of Results of Operations and Financial Condition included in the Company's 2000
Annual Report filed on Form 10-K and in this Form 10-Q Quarterly Report.
Basic earnings per common share are based on net loss divided by the weighted
average of common shares outstanding during the period.
Certain prior year amounts have been reclassified to conform with the current
year presentation.
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Recent Pronouncements
Statement of Financial Accounting Standards No. 141, "Business Combinations,"
("FAS 141"), effective for business combinations initiated after June 30, 2001
provides guidance on accounting for business combinations and requires that the
purchase method of accounting be used for all business combinations initiated
after June 30, 2001.
Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets," ("FAS 142"), effective for fiscal years beginning after
December 15, 2001, requires that goodwill recorded from business combinations
completed on or before June 20, 2001 shall no longer be amortized after the
effective date. In addition, goodwill recorded as a result of a business
combination completed after June 30, 2001 will not be amortized. Goodwill,
however, must be reviewed for impairment in connection with the implementation
of this standard and subsequently on an annual basis.
The effect of adopting FAS 141 and 142 is still being assessed.
MOORE MEDICAL CORP.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATIONS
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OVERVIEW
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Moore Medical's mission is to provide medical professionals with the supplies
and safety products they need to improve wellness and save lives. With more
than fifty years of business experience, we currently market and distribute
medical/surgical and pharmaceutical products through multiple channels to over
100,000 health care practices and facilities in non-hospital settings
nationwide. Moore Medical continues to move forward with a renewed dedication to
understanding the needs of the customer communities we serve and delivering
quality medical products and services to our customers.
RESULTS OF OPERATIONS
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Third Quarter Ended September 29, 2001 Compared to September 30, 2000
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Net sales for the third quarter were $34.5 million, the Company's highest
quarterly sales since exiting the wholesale pharmaceutical distribution business
in the fourth quarter 1997. Net sales increased 4.3% from $33.0 million in the
same period a year ago. This revenue growth was driven by consistent
application of direct marketing towards targeted health care specialties and
enhanced functionality of the Company's web site. As a result, Internet-based
revenue grew 123.8% over the prior year quarter and a 5.8% increase in our
overall customer base was realized compared to the third quarter
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2000. Internet based revenue represents 8.6% of third quarter net sales versus
4.0% in the same period a year ago.
For the third quarter, gross profit increased by 6.1% to $10.5 million from $9.9
million for the period a year ago. This was the highest quarterly gross profit
since exiting the wholesale pharmaceutical distribution business in 1997.
Overall gross profit margins continued to remain above 30.0% in third quarter at
30.4% versus 30.0% for the same period a year ago. The Company continued to
maintain these margins through increased sales volume in higher margin products
and continued improvement of our supply chain operations.
Selling, general and administrative expenses for the third quarter 2001 were
$10.6 million versus $10.9 million in the same period a year ago. S,G&A
expenses expressed as a percentage of net sales were 30.7% for the third quarter
2001 compared to 33.0% for the same period in 2000. This is the third
consecutive quarter in which S,G&A expenses expressed as a percentage of net
sales have decreased. The decrease from prior year demonstrates the positive
impact of leveraging earlier investments in the areas of technology, recruiting,
e-commerce and supply chain to generate operational synergy and efficiency. The
Company's supply chain efficiency initiatives include the closure of the Lemont,
IL distribution facility and successful diversion of that warehouse's workload
to two of the three remaining distribution centers. A provision of $0.5 million
was established during the fourth quarter of 2000 and the facility was
successfully shutdown during the third quarter without impacting customer
service or requiring additional provision.
Interest expense increased in the third quarter 2001 to $0.1 million from
interest income of $0.1 million for the same period a year ago. This increase
was attributable to the interest bearing, long term settlement note, dated
February 1, 2001, to the U.S. Government.
Net loss for the third quarter 2001 of ($0.1) million or ($0.04) per share is an
improvement of $0.5 million or $0.14 per share over the prior year quarter which
was a net loss of ($0.6) million or ($0.18) per share. The loss for the current
quarter reflects the continuation of the Company's planned investment program
that is nearing completion in the areas of marketing, customer care and
operating efficiency initiatives. Earnings improvements have been attained for
three consecutive quarters due to the leveraging of these earlier investments to
gain operational synergy and efficiency.
First three Quarters Ended September 29, 2001 Compared to September 30, 2000
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For the first three quarters of 2001 net sales were $99.2 million, an increase
of nearly 7.0% from $92.8 million in the comparable period of 2000. The overall
net sales growth also reflects strong revenue growth for the Company's Internet-
based revenue, which increased $4.9 million, or 175.3%, to $7.7 million for the
first nine months of the fiscal year, compared to $2.8 million for the same
period a year ago. Internet based revenue
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represents 7.8% of the first three quarters net sales versus 3.0% in the same
period a year ago.
Gross profit increased by 8.5% to $30.0 million for the nine months ended
September 29, 2001 compared to $27.7 million for the same period a year ago.
Overall gross profit margins increased to 30.3% from 29.8% in 2000. The
increased gross profit margin was primarily attributable to increased sales
volume in higher margin products and to continued improvement of our supply
chain operations.
Selling, general and administrative expenses during the nine months of 2001
increased $4.0 million to $33.0 million compared to $29.0 million in the nine
months of 2000. S,G&A expenses as a percentage of sales were 33.3% in
comparison to 31.3% a year ago. Contributing to the year-over-year increase,
are expenses related to the continuing transformation of the Company to a multi-
channel direct marketer, on going expenses related to the acquisitions of
Podiatry Online and MERGInet.com, higher depreciation and amortization expense
related to the Company's prior investments in technology, and the filling of key
management and staff positions. The increase in expenses was partially offset
by the realization of efficiencies in the supply chain, including the closing of
the Lemont distribution facility during the third quarter 2001. Continued
leveraging of supply chain initiatives without impacting customer service levels
should continue to reduce fulfillment costs and overall operating costs.
Interest expense for the nine months of 2001 increased to $0.1 million from
interest income of $0.2 million for the same period a year ago. This increase
was attributable to the interest bearing, long term settlement note, dated
February 1, 2001, to the U.S. Government.
Results for the first three quarters of 2001 showed a net loss of ($2.0)
million, or ($0.63) per share, compared with a net loss of ($0.7) million, or
($0.24) per share, in the same period of 2000.
LIQUIDITY AND CAPITAL RESOURCES
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The Company ended the third quarter with $0.9 million in cash and short-term
investments, a $4.4 million decrease from December 30, 2000. The liquidity
decline was the result of net cash used in operating and investing activities.
The Company's operations used $3.0 million in cash during the nine months of
2001. The primary sources of cash were: a $3.4 million increase in accounts
payable, attributable to supply chain management which resulted in an increase
in inventory turns, and non cash sources of $2.3 million related to depreciation
and amortization ,mainly associated with increased technology investments. The
primary uses of cash included ($2.0) million of net loss, an increase in
accounts receivable of $4.1 million attributable to an increase in net sales,
and $2.6 million in other assets, liabilities and inventory.
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Investing activities used $1.0 million in the nine months of 2001 as called for
in management's strategic plan primarily for technology and operating efficiency
initiatives which compares favorably to investing activities of $3.2 million in
the nine months of 2000, which included investments in the Podiatry Online and
MERGInet.com acquisitions.
Financing activities used $0.4 million for the nine months of 2001, primarily
attributable to payments relating to the settlement with the U.S. Government.
On January 26, 2001, the Company entered into a three-year bank financing
agreement, which will provide up to $15.0 million in a revolving credit line.
Our business continues not to be materially impacted by seasonal factors. The
Company expects that available cash and the existing line of credit will be
sufficient to meet its normal operating requirements including increased demands
due to anticipated capital expenditures, business growth and expansion and
projected debt service requirements.
FORWARD-LOOKING INFORMATION
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From time to time, the Company may make forward-looking statements, that is
statements about the future rather than of past or present fact. Statements
about our mission, strategy or plans, or which are about an expectation,
intention, anticipation, projection or belief concerning the future, are also
forward-looking. Words such as "believes", "expects", "anticipates", "intends",
"plans", "estimates", "should" or similar expressions, also identify forward
looking statements. You should not place undue reliance on such statements
because actual events or results may differ materially from those described
therein by reason of many factors, including:
. issues regarding changes in, or compliance with, laws regulating the
distribution of drugs and medical devices;
. changes in governmental support or insurance coverage of health care products
or services;
. intensified competition resulting (for example) from further distributor
consolidations or from larger distributors able to benefit from economies of
scale;
. disruptions in, or cost increases for services or systems on which the
Company is dependant, such as (for example) deliveries of inventory to
customers;
. unforeseen disruptions or security breaches in the Company's web sites;
online security breaches;
. failure to keep up with rapidly changing technologies or Internet
developments; and
. new governmental regulation of the Internet.
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These factors are not all-inclusive. Others may be referred to, from time to
time, in other filings of the Company with the Securities and Exchange
Commission. In addition, management may not be able to identify all factors.
Moreover, new ones may emerge and the Company does not necessarily update its
forward-looking statements. Accordingly, they should not be relied upon as
assurances regarding the future.
ITEM 3. QUANTITATIVE & QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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We have no material market risk exposure associated with activities in
derivative financial statements, other financial instruments, or derivative
commodity instruments.
PART II. OTHER INFORMATION
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ITEM 5. OTHER MATTERS
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As of September 29, 2001, the members of the Board of Directors of the Company
and of its Committees, were:
Director Committees
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Linda M. Autore --
Christopher Brody Compensation.
Steven Kotler Executive (Chairman); Audit; Nominating;
Compensation.
Robert H. Steele Executive; Audit (Chairman).
(Chairman)
Peter C. Sutro --
Wilmer J. Thomas, Jr. Executive; Audit; Compensation;
Nominating.
Dan K. Wassong --
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) Exhibits
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Stock Repurchase Program, Exhibit 3.4
adopted September 17, 2001
(b) Reports on Form 8-K
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No report on Form 8-K was filed during the quarter.
SIGNATURES
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Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MOORE MEDICAL CORP.
(REGISTRANT)
BY: /s/ Linda M. Autore BY: /s/ James R. Simpson
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Linda M. Autore, President James R. Simpson, Executive
and Chief Executive Officer Vice President and Chief
November 2, 2001 Financial Officer
November 2, 2001
BY: /s/ John M. Zinzarella
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John M. Zinzarella, Vice President
and Controller
November 2, 2001
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