UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003

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

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.

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

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MOORE-HANDLEY, INC.

INDEX

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1.  Basis of Presentation

    The financial statements included herein have been prepared by Moore-Handley, Inc. without audit in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10Q and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in complete financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations, although we believe that the disclosures are adequate to make the information presented not misleading. The balance sheet at December 31, 2002 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial stat ements. For further information, these financial statements should be read in conjunction with the financial statements and the notes thereto included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 26, 2003.

    The financial information presented herein reflects all adjustments (consisting only of normal recurring adjustments) which are, in our opinion, necessary for a fair presentation of the results of the interim period. The results for the interim period are not necessarily indicative of results to be expected for the year.

    Certain prior year amounts have been reclassified to conform to the current year presentation. Such reclassifications had no material effect on previously reported financial position, results of operations or cash flows of the Company.

&#    We are 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. Our customers include retail home centers, hardware stores, building materials dealers, paint stores, combination stores, a limited number of mass merchandisers, businesses and institutions.

    Our customers are separated into two divisions, Core and National. Our Core division is made up of customers in our traditional 10 Southeastern states trading area and our National division includes customers across the U.S. that are outside the Southeast. We currently service over 2,300 Core and National customers. No customer or affiliated group of customers accounted for more than 2% of our net sales in 2002, 2001, and 2000.

    We consider all highly liquid securities with maturity at the time of purchase of three months or less to be cash. As of March 31, 2003, we had no such instruments.

    We maintain an allowance for doubtful accounts to reflect expected credit losses. We provide for bad debts based on collection history and specific risks identified on a customer-by-customer basis. A considerable amount of judgment is required to assess the ultimate realization of accounts receivable and the creditworthiness of each customer. Furthermore, these judgments must be continually evaluated and updated. If the financial condition of our customers were to deteriorate, resulting in impairment in their ability to make payments, additional allowances may be required in future periods.

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    We are a wholesaler of hardware and building materials products and as such grant credit to our customers, most of whom are independent retailers located in the Southeast. We perform periodic credit evaluations of our customers' financial condition and obtain personal guarantees and/or security interests where we deem necessary.

    We state our inventory at the lower of average cost or market. An allowance for obsolete or excess inventory is maintained to reflect the estimated net realizable value of the inventory based on current market conditions and the inventory's recent historical movement and future demands. If actual market conditions and future demand are less favorable than we project, additional inventory provisions may be required.

    Other receivables consist primarily of vendor rebates and vendor allowances receivable. We record the credits and payments as a reduction of cost of sales at the point in time at which the activities required by the supplier related to the credit or payment are completed, the amount is fixed and determinable, and collectibility is reasonably assured. Arrangements with suppliers for volume incentives are typically based on a contractual arrangement covering a one-year or less period of time providing for incentives based on purchasing volume. We are not obligated to purchase a specified volume of any product.

    Property and equipment is stated at cost and depreciation is computed using the straight-line method over estimated useful lives.

    Deferred income taxes are provided for temporary differences between financial and income tax reporting, primarily related to depreciation, inventory valuation and certain accrued costs. We continuously assess the need for valuation allowances on recorded deferred tax assets and establish an allowance when we believe it is more likely than not that the asset will not be realized.

    We estimate the depreciable lives of property and equipment when purchased and evaluate those lives when facts and circumstances change. In regards to impairment, we adopted Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which supercedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets to be Disposed Of. Under SFAS No. 144, when events and circumstances indicate that the long-lived assets used in operations may be impaired and the undiscounted cash flows estimated to be generated from those assets are less than their carrying values, we record an impairment loss equal to the excess of the carrying value over the fair value. Long-lived assets held for disposal are valued at the lower of the carrying value or fair value less disposal costs. The adoption of SFAS 144 had no significant impact on our financial condition or results of operations.

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    We have pension benefit costs and credits that are developed from actuarial valuations. Inherent in these valuations are key assumptions including discount rates and expected return on plan assets. We are required to consider current market conditions, including changes in interest rates, in selecting these assumptions. Periodic changes in these key assumptions, along with changes in head count, could have a significant impact on future pension costs and recorded pension liabilities.

    We account for our stock compensation arrangements under the provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB No. 25), under which no compensation cost has been recognized.

    The Company uses the intrinsic value method for stock option grants to individuals defined as employees under which no compensation is recognized for options granted at or above the fair market value of the underlying stock on the grant date. The Company uses the fair value method for stock options granted for services rendered by non-employees in accordance with the SFAS No. 123, Accounting for Stock Based Compensation.

    The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.

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    Basic net income or loss per share is computed using the weighted average number of common shares outstanding. Diluted net income or loss per share is computed using the weighted average number of common shares outstanding plus the effect of dilutive stock options.

                           Revenue Recognition

    We recognize revenues, net of estimated sales returns, discounts and allowances, when goods are shipped, title has passed, the sales price is fixed and the collectibility is reasonably assured. We assume no significant obligations after goods are shipped. Regarding our direct shipment program, sales are recorded gross in our statements of operations since we act as principal in the sales transaction and assume the credit risk.

    We record provisions for estimated sales returns and allowances on sales in the same period as the related sales are recorded. These estimates are based on historical sales returns and analyses of credit memo data and other known factors. If the historic data we use to calculate these estimates do not properly reflect future returns and allowances, net sales could either be understated or overstated.

    In September 2000, the Emerging Issues Task Force issued EITF 00-10, Accounting for Shipping and Handling Fees and Costs (EITF 00-10). EITF 00-10 requires shipping and handling fees billed to customers to be classified as revenue and shipping and handling costs to be either classified as cost of sales or disclosed in the notes to the consolidated financial statements. Shipping and handling costs associated with inbound freight are included in cost of sales. Shipping and handling fees billed to customers are included in net sales in the Statement of Operations with the associated cost included in warehouse and delivery expense.

    Statement of Position 93-7, Reporting on Advertising Costs, requires the disclosure of advertising costs. We expense the cost of advertising when incurred.

    Long-term debt at March 31, 2003 and 2002 and December 31, 2002 includes obligations under capital leases, a term loan and a revolving line of credit all of which approximate fair value. Long-term debt at March 31, 2003 and 2002 and December 31, 2002 consisted of:

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     We have financed the purchase of transportation and computer equipment with leases. These leases are being accounted for as capital leases. The amortization expense relating to these leases is combined with depreciation expense.

     In February 2002, we negotiated an amendment to our working capital line that extended the maturity date to April 2005.   The amendment will allow maximum borrowings of $28,000,000 with availability based on 85% of eligible receivables and 50% of eligible inventory up to $11,000,000. The advance rate on eligible inventory is increased to 60% from 50% during the months of December, January and February to compensate for reduced borrowing availability due to seasonal decline in eligible accounts receivable. The borrowings bear interest at the prime interest rate or, at our option, 2 1/2% over LIBOR (2 1/4% for the 2nd, 3rd, and 4th quarters of 2002 since we met certain requirements). Our receivables and inventory secure the borrowings.

    In November 2002, we received a $7,000,000 term loan secured by a real estate mortgage on our Pelham facility and a security interest in certain equipment. The loan bears a fixed interest rate of 5.03% payable in monthly installments based on a fifteen (15) year amortization schedule and has a maturity date of December 1, 2008. The net proceeds of this term loan were used to pay off an existing term note and reduce the outstandings under the existing revolving line of credit.

    Commitments consist of future rental payments under miscellaneous non-cancelable operating leases of which the last expires in 2008.

    We have two trusteed, noncontributory, qualified defined benefit pension plans covering substantially all of our employees. Retirement benefits are provided based on years of service and earnings for salaried employees and years of service for hourly employees. 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.

    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 could be issued to employees and directors until April 12, 2001. No further options may be granted under the 1991 Incentive Compensation Plan. On April 26, 2001, the stockholders approved the 2001 Incentive Compensation Plan pursuant to which a maximum aggregate of 460,000 shares of common stock may be issued to employees and directors until March 23, 2011.

    We have elected to follow APB No. 25 and related interpretations in accounting for our employee stock options. Under APB No. 25, because the exercise price for the employees' stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. These options vest either in six months after the date of grant or in equal annual installments over five years.

    Pro forma information regarding net income and earnings per share is required by FASB Statement No. 123, Accounting for Stock-Based Compensation ( SFAS No. 123), and has been determined as if we had accounted for our employee stock options under the fair value method of Statement No. 123. The fair value for these options was estimated at the date of grant using Black-Scholes option pricing model with the following weighted-average calculations:

 

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    For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. Our pro forma information follows:

Computation of basic and diluted earnings per share:

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                            GROSS MARGIN

    The gross margin percentage for the quarter ended March 31, 2003 was 15.1%, down from 15.6% in the first quarter of 2002 primarily as a result of increased shipments of price sensitive products. The following table sets forth the gross margin dollars, gross margin percentages and year-over-year changes for 2002 and the first quarter of 2003:

    Warehouse and delivery expense increased $61,000 or 2.6% compared to the same quarter last year, mainly due to increased warehouse shipments. As a percent of warehouse shipments, warehouse and delivery expense was 9.4%, unchanged from the same quarter last year.

    The following table sets forth the trend in warehouse and delivery expenses in 2002 and the first quarter of 2003:

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    Selling and administrative expenses for the first quarter of 2003 increased by $69,000 or 0.2% over the same period in 2002 primarily as a result of increased general insurance expense and salaries, benefits and other costs associated with our national sales initiative. These increased expenses were partially offset by an increase in vendor allowances. The following table sets forth the quarterly trend in selling and administrative expenses in 2002 and the first quarter of 2003:

    Interest expense, net increased $28,000 or 13.9% during the first quarter of 2003 compared to the same period during 2002. The increase was primarily due to an increase in average borrowings. The weighted average interest rates for the quarter ended March 31, 2003 and 2002 were 4.57% and 4.65%, respectively.

    From December 31, 2002 to March 31, 2003, our net trade receivables increased $9,000,000 or 59.1%. The increase was primarily due to sales generated at our February Dealers' Mart. Net trade receivables decreased during the first quarter 2003 by $724,000 or 2.9% compared to the first quarter 2002 primarily due to improved receivables turnover.

    Inventories increased seasonally by $273,000 or 1.5% as of March 31, 2003 compared with December 31, 2002 mainly in response to anticipated higher sales in the spring months. Inventories increased $1,437,000 or 8.4% compared to March 31, 2002 mainly due to the addition of new products.

    Trade payables increased $8,808,000 or 79.5% from December 31, 2002 because of extended terms received from suppliers in connection with the February Dealers' Mart. Trade payables decreased $1,308,000 or 6.2% compared to March 31, 2002 mainly because of increased purchases of merchandise with accelerated payment terms.

    At March 31, 2003 we had unused lines of credit of $13,129,000 based on a collateral base of $28,000,000.

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    In February 2002, we negotiated an amendment to our working capital line that extended the maturity date to April 2005. We believe our new credit facility is adequate to finance our current working capital needs. We believe that we will have sufficient cash flow from operations and available capacity under the Credit Facility, to fund both our current operations and anticipated internal expansion, for the current year and for the additional period remaining under the Credit Facility.

    In November 2002, we received a $7,000,000 term loan secured by a real estate mortgage on our Pelham facility and a security interest in certain equipment. The loan bears a fixed interest rate of 5.03% payable in monthly installments based on a fifteen (15) year amortization schedule and has a maturity date of December 1, 2008. The net proceeds of this term loan were used to pay off an existing term note and reduce the outstandings under the existing revolving line of credit.

    The following discussion about our 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.

    Our principal credit agreement bears a floating interest rate based on the prime rate or, at our option, a 2 1/2 % over LIBOR. Accordingly, we are subject to market risk associated with changes in interest rates. At March 31, 2003, $14,871,000 was outstanding under the credit agreement. For 2002, the average principal amount outstanding under the credit agreement was $19,693,000. Assuming the average amount outstanding under the credit agreement during 2003 is equal to such average amount outstanding during 2002 less the average outstanding under our fixed rate term loan of approximately $6,800,000, a 1% increase in the applicable interest rate during 2003 would result in additional annual interest expense of approximately $128,930, which would reduce cash flow and pre-tax earnings dollar for dollar.

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    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" and "believes" indicate the presence of forward-looking statements. There can be no assurance that future developments will be in accordance with management's expectations or that the effect of future developments on us 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 our customers;

• our ability to achieve projected cost savings from our warehouse modernization program and ongoing cost reduction efforts;

• changes in cost of goods and the effect of differential terms and conditions available to our larger competitors;

• uncertainties associated with our national sales initiative or any acquisition which we may seek to implement; and

• changes in general economic conditions, including increases in interest rates.

ITEM 4.

    The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

    Within 90 days prior to the date of this Quarterly Report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on the foregoing, the Company's Chief Executive Officer, Chief Operating Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective.

    There have been no significant changes in the Company's internal controls or in other factors that could significantly affect the internal controls subsequent to the date the Company completed its evaluation.

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            PART II. OTHER INFORMATION

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, William Riley, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Moore-Handley, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a - 14 and 15d - 14) for the registrant and we have:

1. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
2. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
3. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

1. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
2. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 14, 2003

William Riley
Chairman and Chief Executive Officer

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CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Gary C. Mercer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Moore-Handley, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a - 14 and 15d - 14) for the registrant and we have:

1. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
2. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
3. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

1. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
2. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 14 , 2003

Gary C. Mercer
Chief Financial Officer

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