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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 March 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES 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
P.O. Box 1500, New Britain, CT 06050 Identification Number)
(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 April 27,
2001.
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MOORE MEDICAL CORP.
Balance Sheets
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(Amounts in thousands, except par value) First Quarter 2001 Year End 2000
(Unaudited)
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ASSETS
Current Assets
Cash .......................................... $ 1,361 $ 5,233
Accounts receivable, less allowances
of $220 and $201 .......................... 13,601 12,326
Inventories ................................... 10,369 9,554
Prepaid expenses and other current assets ..... 3,229 2,152
Deferred income taxes ......................... 3,692 3,692
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Total Current Assets ................. 32,252 32,957
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Noncurrent Assets
Equipment and leasehold improvements, net ..... 9,219 9,672
Other assets .................................. 2,633 2,500
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Total Noncurrent Assets .............. 11,852 12,172
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$ 44,104 $ 45,129
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable .............................. $ 11,236 $ 10,192
Accrued expenses .............................. 2,137 2,984
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Total Current Liabilities ............ 13,373 13,176
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Deferred Income Taxes ............................... 2,387 2,387
Long Term Notes Payable .............................. 5,067 5,208
Shareholders' Equity
Preferred stock, no shares outstanding ........ -- --
Common stock - $.01 par value;
Shares authorized - 10,000
Shares issued - 3,246 ......................... 32 32
Capital in excess of par value ................ 21,535 21,700
Note receivable ............................... (285) --
Retained earnings ............................. 2,815 3,913
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24,097 25,645
Less treasury shares, at cost, 92 and 145
shares .................................... (820) (1,287)
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Total Shareholders' Equity ........... 23,277 24,358
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$ 44,104 $ 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) First Quarter
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2001 2000
(Unaudited)
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Net sales .......................................... $ 32,249 $ 29,517
Cost of products sold .............................. 22,473 20,844
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Gross profit ....................................... 9,776 8,673
Selling, general & administrative expenses ......... 11,614 9,105
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Operating loss ..................................... (1,838) (432)
Interest income, net ............................... (36) (27)
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Loss before income taxes ........................... (1,802) (405)
Income tax benefit ................................. (705) (150)
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Net loss ........................................... $ (1,097) $ (255)
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Basic and diluted net loss per share ............... $ (0.35) $ (0.09)
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Basic and diluted common shares outstanding* ....... 3,117 2,972
* weighted average
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Note: The first quarters end as of March 31, 2001 and April 1, 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 Quarter
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2001 2000
(Unaudited)
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Cash Flows From Operating Activities
Net (loss) ........................................ $(1,097) $ (255)
Adjustments to reconcile net (loss) to net
cash flows provided by operating activities:
Depreciation and amortization ..................... 811 676
Changes in operating assets and liabilities:
Accounts receivable ............................. (1,275) (767)
Inventories ..................................... (815) 3,057
Other current & noncurrent assets ............... (1,245) (898)
Accounts payable ................................ 1,044 3,008
Other current liabilities ....................... (848) 370
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Net cash flows (used in ) provided by operating
activities ........................................ (3,425) 5,191
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Cash Flows From Investing Activities
Equipment & leasehold improvements acquired ....... (323) (363)
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Net cash flows used in investing activities ....... (323) (363)
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Cash Flows From Financing Activities
Long term notes payable ........................... (141) --
Note receivable ................................... (285) --
Sale of treasury stock ............................ 302 1,000
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Net cash flows (used in) provided by financing
activities ................................... (124) 1,000
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(Decrease) increase in cash ....................... (3,872) 5,828
Cash at beginning of period ....................... 5,233 744
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Cash At End Of Period ......................................... $ 1,361 $ 6,572
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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 nearly 100,000 health care professionals in non-hospital settings
nationwide, including: physicians, podiatrists, surgeons, obstetricians,
gynecologists, pediatricians, 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
statements. In the opinion of management, all adjustments necessary for a fair
presentation of the results for the interim period have been made. The results
for the three months ended March 31, 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 March 31, 2001 and April 1, 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.
Certain prior year amounts have been reclassified to conform with the current
year presentation.
Recent Pronouncements
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin 101, Revenue Recognition in Financial Statements ("SAB 101"), as
amended in March and June 2000. SAB 101 provides guidance on the recognition,
presentation and disclosure of revenue in financial statements for all public
registrants. We are
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required to adopt SAB 101 no later than our fourth quarter of 2001. The adoption
of SAB 101 is not expected to have material effect on our financial position or
results of operations.
MOORE MEDICAL CORP.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
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CONDITION AND RESULTS 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
50 years of business experience, we currently market and distribute
medical/surgical and pharmaceutical products to nearly 100,000 health care
professionals 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. While the significant investments made in technology
in late 1999 and 2000 have not yet been fully realized in our financial results,
Moore has begun to see the benefits of transformational changes throughout the
organization. These investments, coupled with improvements in supply chain
management, should help bolster earnings improvements throughout 2001 and
beyond.
RESULTS OF OPERATIONS
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Three Months Ended March 31, 2001 Compared to Three Months Ended
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April 1, 2000
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Net sales for the first quarter ended March 31, 2001 increased to $32.2 million,
an increase of $2.7 million or 9.3% from the same period a year ago. This marked
the highest year-over-year quarterly growth rate in more than five years and the
third consecutive quarterly increase of over 6% on a year-to-year basis. The
Company's sales growth in the first quarter was primarily attributable to the
acceleration of numerous marketing programs from the second quarter in 2000 to
early in the first quarter of 2001. These programs include direct mail catalogs,
flyers and letters, e-marketing initiatives, customer support center
representatives and specialty practice sales representatives. The sales and
marketing strategy focused on optimizing direct marketing and channel
deliverables resulting in a 12.2% increase in the number of customer sales
orders processed in the period from the same period a year ago. The Company's
e-commerce net sales quadrupled to nearly $2.4 million for the period from $0.6
million a year ago. The Company has achieved continued growth in its online web
site since the opening of its integrated e-business site on May 30, 2000. Online
sales growth was reflected across all market communities and was the result of
direct
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marketing initiatives such as e-mail campaigns, web site promotions, investments
in online communities and web affiliations.
Gross profit increased $1.1 million or 12.7% to $9.8 million, compared to $8.7
million for the same period a year ago. Overall gross profit margins increased
to 30.3% from 29.4% in 2000. The increase is primarily attributable to the
increased sales volume, product mix and continuing improvements in our supply
chain operations.
Selling, general and administrative expenses increased by $2.5 million or 27.6%
to $11.6 million in 2001 from $9.1 million in 2000. Selling, general and
administrative expenses as a percentage of net revenue was 36.0% as compared to
30.8% a year ago. The increase was attributable to the timing of publication and
distribution of our direct mail catalog, increased salary expenses relating to
filling key management and staff positions, outside consulting primarily
associated with e-commerce initiatives and freight and distribution expenses
proportionate to net revenue growth. Besides the timing of certain marketing
expenses as compared to 2000, the increase in selling, general and
administrative expenses was primarily a result of the Company's transformation
from an offline catalog direct marketer to a multi-channel Internet enabled
marketer. The Company continues to improve efficiencies in its cost structure,
but believes it is adequate to attain future growth.
Net income decreased to ($1.1) million, or ($0.35) loss per share compared to
($0.3) million, or ($0.09) loss per share, the same period a year ago.
Three Months Ended April 1, 2000 Compared to Three Months Ended April 3, 1999
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Overall, net sales of $29.5 million for the first quarter of 2000 increased 2%
over the comparable period in 1999. Moore Medical experienced growth in its
business communities and e-commerce. The favorable increase was partially offset
by the contraction of pharmaceutical product sales. In the business communities,
the increase in net sales was primarily due to increased account penetration
with core dealer accounts. The remaining increase in the first quarter 2000 net
sales was due to increased e-commerce activity on our unpromoted transactional
web site, which increased $0.4 million, or over 200%, to $0.6 million for the
three months ended April 1, 2000 from $0.2 million for the three months ended
April 3, 1999, while traffic had nearly doubled.
Gross profit decreased by $0.8 million, or 9%, to $8.7 million for the three
months ended April 1, 2000 from $9.5 million for the three months ended April 3,
1999. The decrease was primarily attributable to the price erosion in
pharmaceutical products resulting in lower margins. Also, the Company's average
order size increased 13% over the prior year, generating higher volume but at
lower margins.
Selling, general and administrative expenses increased by $0.3 million, or 3%,
to $9.1 million for the first quarter 2000 from $8.8 million. The increase was
primarily due to
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higher depreciation charges associated with investments in technology. Other
contributing factors to the increase were additional media and advertising costs
associated with the acquisition of and intensive e-commerce marketing research
of customers. We anticipated increased selling and marketing expenses relating
to our Internet-based business as a result of accelerated spending to fully web
enable the Company.
A net loss for the quarter of ($0.3) million, or ($0.09) loss per share, was
reported compared with net income of $0.5 million, or $0.16 earnings per share,
in the first quarter of 1999.
LIQUIDITY AND CAPITAL RESOURCES
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The Company ended the 2001 first quarter with $1.4 million in cash and cash
equivalents, a decrease of $3.9 million from year end. The decrease was
primarily the result of net cash used in operating activities. The primary uses
of cash in the current year's first quarter were net operating losses of ($1.1)
million as compared to net operating losses of ($0.3) million a year ago.
Inventories increased by $0.8 million in the 2001 first quarter, compared with a
decrease of $3.1 million the same period a year ago, largely due to the
reduction of excess inventory levels in last year's period. The increase in
inventory of $0.8 million and accounts receivable of $1.3 million was consistent
with the Company's net revenue growth.
Investing activities used $0.3 million in the first quarter as compared to $0.4
million in the same period a year ago.
Financing activities used $0.1 million as compared to cash provided of $1.0
million in the same period a year ago. The $1.0 million in 2000 related to the
proceeds the Company received for sale of treasury stock.
FORWARD-LOOKING INFORMATION
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From time to time, the Company may make forward-looking statements, that is
statements not of past or present fact but of beliefs, expectations or plans for
the future. The words "expects," "anticipates," "believes," "seeks," "plans,"
"estimates," "projects," "intends," "should help," and similar expressions
identify forward-looking statements. Such statements are qualified by certain
factors such as (among others) the following which may cause actual results to
differ materially from the forward-looking statements:
. pressures on revenues resulting, for example, from customer consolidations
or changes in customer buying patterns;
. reductions in health care funding affecting its customers' services or
revenues resulting, for example, from changes in legislation or regulations
or in HMO, managed care or other insurance programs;
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. intensified competition resulting, for example, from distributor
consolidations or pricing pressures from larger distributors able to
benefit from economies of scale or other operating efficiencies;
. disruptions in or cost increases for services or systems on which the
Company is dependent, such as by truckers in deliveries from its suppliers,
by UPS or other common carriers in deliveries to its customers, by its
catalog printers or in telecommunication services, or relating to its
computer systems;
. changes in supply chain relationships, such as product availability and
regulations; decreasing reliance on distributors as manufacturers establish
direct internet sales channels to end-users, that could adversely effect
the market, supply and flow of products;
. rapidly changing technology and customer expectations; increased costs of
hosting services; loss of business and costs to business interruptions
arising from the Company's e-business platform;
. further Internet and infrastructure developments (for example, in high
speed data lines and modems);
. difficulties in attracting and retaining qualified technical and marketing
talent in an economy in which such talent is in short supply and in high
demand;
. new laws or regulations or government agency policies or positions
affecting e-commerce or the distribution of pharmaceuticals or other
regulated products, which could increase the cost of doing business or
customers' purchase costs (for example, by the introduction of sales taxes
to Internet transactions); and
. security breaches that could significantly disrupt the Internet network,
halt sales, or discourage customers.
These factors are not all-inclusive. Other factors may be referred to from
time-to-time in other filings by the Company with the Securities and Exchange
Commission. In addition, new factors may emerge from time to time, and it is not
possible to predict all factors, nor can management necessarily identify or
assess all factors. The factors identified should therefore not be relied on as
comprehensive. Moreover, the Company does not necessarily update its forward
looking statements. Accordingly, they should not be relied upon as a prediction
of actual results.
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.
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PART II. OTHER INFORMATION
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ITEM 5. OTHER MATTERS
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Beginning in 1991, the Company's former Wholesale Division entered into
contracts with the Department of Veterans Affairs. In 1996, the Company learned
that there were questions regarding its pricing under the contracts and it made
a voluntary disclosure to the government. On February 1, 2001, the Department of
Veterans Affairs settled its claims on the Company's agreement to pay the
government $5.2 million, including $0.5 million paid on signing, plus interest,
over five years, pursuant to its promissory note. The amount of the settlement
in excess of the reserve established for the claims was charged in the Company's
2000 financial statements.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) Exhibits
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Promissory Note of the Company to the U.S. Exhibit 10.28
Government, dated February 1, 2001.
(b) Reports on Form 8-K
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No report on Form 8-K was filed during the quarter.
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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
May 14, 2001 Financial Officer
May 14, 2001
BY: /s/ Susan G. D'Amato
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Susan G. D'Amato, Vice President -
Finance and Controller
May 14, 2001
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