<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
------------------------------------------------
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 0-545
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Moore Products Co.
- -------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Pennsylvania 23-1427830
--------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Spring House, PA 19477
--------------------------------- --------------------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (215) 646-7400
--------------------------
Not applicable
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report.)
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 ___.
As of June 30, 1996, there were 2,583,892 shares of the Registrant's Common
Stock outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
- ------------------------------
MOORE PRODUCTS CO.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30
-----------------------------
1996 1995
----------- -----------
<S> <C> <C>
Net sales $71,123,000 $53,964,000
Cost of products sold 39,657,000 27,853,000
----------- -----------
Gross profit 31,466,000 26,111,000
Selling, research and development, administrative
and general expenses (Notes C & D) 30,112,000 26,347,000
----------- -----------
Income (loss) from operations 1,354,000 ( 236,000)
Other income 159,000 148,000
Interest expense ( 253,000) ( 89,000)
----------- -----------
Income (loss) before income taxes 1,260,000 ( 177,000)
Income tax provision 972,000 341,000
----------- -----------
Net income (loss) $ 288,000 ($ 518,000)
=========== ===========
Earnings per share - primary:
Net income (loss) $.11 ($.25)
==== ====
Earnings per share - fully diluted:
Net income (loss) $.11 ($.25)
==== ====
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
2
<PAGE>
MOORE PRODUCTS CO.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
June 30
-----------------------------
1996 1995
----------- -----------
<S> <C> <C>
Net sales $35,968,000 $29,451,000
Cost of products sold 20,502,000 14,960,000
----------- -----------
Gross profit 15,466,000 14,491,000
Selling, research and development, administrative
and general expenses (Notes C & D) 15,075,000 13,789,000
----------- -----------
Income from operations 391,000 702,000
Other income 63,000 106,000
Interest expense ( 134,000) ( 82,000)
----------- -----------
Income before income taxes 320,000 726,000
Income tax provision 261,000 405,000
----------- -----------
Net income $ 59,000 $ 321,000
=========== ===========
Earnings per share - primary:
Net income $.02 $.15
==== ====
Earnings per share - fully diluted:
Net income $.02 $.15
==== ====
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
MOORE PRODUCTS CO.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30 December 31
1996 1995
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<S> <C> <C>
ASSETS
CURRENT ASSETS (Unaudited) (Note A)
Cash $ 2,279,000 $ 1,103,000
Trade accounts receivable 30,669,000 30,701,000
Inventories 21,536,000 20,423,000
Prepaid expenses 2,729,000 3,117,000
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TOTAL CURRENT ASSETS 57,213,000 55,344,000
PROPERTY, PLANT AND EQUIPMENT 57,416,000 55,513,000
Less: Accumulated depreciation (40,289,000) (38,627,000)
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17,127,000 16,886,000
OTHER ASSETS 8,437,000 5,963,000
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$82,777,000 $78,193,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to bank $ 6,504,000 $ 4,306,000
Accounts payable 11,706,000 11,032,000
Accrued compensation 2,084,000 2,306,000
Advances from customers 3,121,000 2,566,000
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TOTAL CURRENT LIABILITIES 23,415,000 20,210,000
OTHER LIABILITIES 6,049,000 5,000,000
STOCKHOLDERS' EQUITY
Preferred Stock, 5% cumulative, voting and
convertible, par value $1 per share:
Authorized - 325,000 shares
Issued and outstanding - 175,950 shares 176,000 176,000
Common Stock, par value $1 per share:
Authorized - 7,500,000 shares
Issued and outstanding - 2,583,892 shares
and 2,583,092 shares 2,584,000 2,583,000
Capital in excess of par value 10,854,000 10,843,000
Retained earnings 39,699,000 39,381,000
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TOTAL STOCKHOLDERS' EQUITY 53,313,000 52,983,000
----------- -----------
$82,777,000 $78,193,000
=========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
MOORE PRODUCTS CO.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30
-----------------------------
1996 1995
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<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 288,000 ($ 518,000)
Noncash (income) expenses:
Depreciation 1,704,000 1,650,000
Deferred income taxes 183,000 ( 44,000)
Pension and other postretirement
benefits (Note C) ( 1,674,000) ( 572,000)
Changes in operating assets and liabilities:
Trade accounts receivable 32,000 ( 4,069,000)
Inventories ( 1,113,000) ( 3,027,000)
Accounts payable 674,000 2,841,000
Accrued compensation ( 222,000) 53,000
Advances from customers 555,000 1,184,000
Prepaid expenses 454,000 ( 345,000)
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881,000 ( 2,847,000)
INVESTING ACTIVITY:
Purchase of property, plant and equipment ( 1,946,000) ( 1,998,000)
FINANCING ACTIVITIES:
Increase in notes payable to bank 2,198,000 5,000,000
Proceeds from issuance of common stock 12,000 --
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2,210,000 5,000,000
Effect of exchange rate changes 31,000 39,000
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NET INCREASE IN CASH 1,176,000 194,000
Cash beginning of year 1,103,000 569,000
------------ -----------
CASH END OF PERIOD $ 2,279,000 $ 763,000
============ ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MOORE PRODUCTS CO.
June 30, 1996
Note A - Basis of Presentation
- -------------------------------
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and in compliance with the Instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. Operating results for the
three and six month periods ended June 30, 1996, are not necessarily indicative
of the results that may be expected for the year ended December 31, 1996.
The balance sheet at December 31, 1995, has been derived from the audited
financial statements at that date.
Primary earnings per share have been computed using the average number of shares
of Common Stock and dilutive Common Stock equivalents (stock options)
outstanding during the period and subtracting the Preferred Stock dividends,
declared or cumulative even though not declared, from net income. Unless
antidilutive, fully diluted earnings per share are computed based upon the
assumption that the Preferred Stock shares were converted into Common Stock as
of the beginning of the period and no Preferred Stock dividends were paid. The
average number of common shares used to compute primary earnings per share were
2,621,963 shares and 2,083,092 shares for the six month periods ended June 30,
1996 and 1995, respectively; and 2,613,595 shares and 2,083,092 shares for the
three month periods ended June 30, 1996 and 1995, respectively. The average
number of common shares used to compute fully diluted earnings per share were
2,692,191 shares and 2,083,092 shares for the six month periods ended June 30,
1996 and 1995, respectively; and 2,687,783 shares and 2,083,092 shares for the
three month periods ended June 30, 1996 and 1995, respectively.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1995.
6
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MOORE PRODUCTS CO.
June 30, 1996
Note B - Inventories
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The components of inventory consist of the following:
June 30 December 31
1996 1995
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Completed instruments $ 3,368,000 $ 4,373,000
Finished parts 11,947,000 11,021,000
Work in process 5,337,000 4,114,000
Raw material 884,000 915,000
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$21,536,000 $20,423,000
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Note C - Gain from Early Retirement Program
- -------------------------------------------
During the quarter ended June 30, 1996, the Company recorded an estimated,
special, pretax net gain of $1,300,000 for the combined net effect of
settlements, curtailments and special termination benefits in connection with an
early retirement program offered to certain eligible employees in the United
States. This gain is included in the 1996 selling, research and development,
administrative and general expenses.
Note D - Loss on Joint-Venture Restructuring
- --------------------------------------------
During the quarter ended June 30, 1996, the Company recognized a special pretax
charge of $1,000,000 consisting principally of a provision to write-off certain
carrying values of assets related to its joint-venture investment in Brazil. The
provision was based on a special review of the operations and decisions to
refocus business activities in Brazil and certain South American markets. This
loss is included in the 1996 selling, research and development, administrative
and general expenses.
Note E - Credit Agreements
- --------------------------
Adding to the Company's existing lines of credit, a new credit facility totaling
5,000,000 Canadian dollars was entered into by the Company's Canadian subsidiary
in May 1996. Under terms of this new agreement, the lender has a security
interest in the assets of the Canadian subsidiary, except for real estate. The
loan agreement requires maintenance of certain restrictive financial covenants.
Cash advances will be made at rates tied to the Canadian bank's prime rate plus
1/2%, which was 7% as of June 30, 1996. No advances were made under this line as
of June 30, 1996.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE RESULTS OF OPERATIONS
When compared with the same periods in 1995, sales for the six months ended June
30, 1996, increased 32% and for the three months ended June 30, 1996, increased
22%, the result of a higher volume of products shipped. Increases in systems
products sales and the addition of Moore-Vernon, acquired in June 1995, were
primarily responsible for the sales increases. Cost of goods sold increased in
response to the higher sales but were also affected by product mix and higher
manufacturing costs. As a result gross profit margins declined from 1995 to
1996.
Selling, research and development, administrative and general expenses increased
approximately 14% and 9%, respectively, in the six and three month periods ended
June 30, 1996, compared to the same periods last year. Higher payroll and
payroll-related costs were the primary reasons for this increase. Throughout the
past year, the Company has strategically increased staffing levels in selected
areas of the organization in anticipation of higher levels of business activity.
Moore-Vernon also contributed to a higher level of expenses in 1996.
Included in selling, research and development, administrative and general
expenses for the six months and three months ended June 30, 1996, is a
$1,300,000 gain resulting from the settlement of benefits relating to an early
retirement offer to certain United States employees. In addition, the Company
has recorded a loss of $1,000,000 for write-off of assets related to an
international joint-venture. In evaluating various business strategies it was
determined that the Company would refocus its business activities in Brazil and
certain South American markets resulting in a restructuring and the impairment
of certain assets.
The nontraditional relationship of income tax to pretax income as of June 30,
1996, is the result of mixed operating results in various countries. Statutory
rates are applied to pretax income in the United States. Consistent with
previous reporting periods, tax benefits for losses incurred by certain
international subsidiaries in tax jurisdictions outside the United States have
not been recognized for financial reporting purposes because the realization of
such benefits is not presently considered likely.
Strong demand for the Company's products and services has continued into 1996.
For the first six months of 1996, consolidated orders received by the Company
were approximately 24% higher than for the corresponding period in 1995. The
consolidated backlog of unshipped orders as of June 30, 1996, was $40,493,000
compared to $32,654,000 as of June 30, 1995.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE RESULTS OF OPERATIONS
(continued)
In summary, sales orders received in 1996 continue to be higher than in the
previous year. The Company has increased costs with additional personnel in
support of a growth in sales. It is expected that the sales and production cycle
of large-scale systems and gage products will significantly influence shipments
from one quarter to the next. Shipments for the third quarter of 1996 are
expected to be at levels comparable to the second quarter. Therefore, it is not
yet clear if profitable operating results will be achieved.
The Company's working capital continues to be positive; however, higher levels
of business activity along with higher accounts receivable and inventory levels
have increased the reliance on bank financing. The Company continues to maintain
lines of credit in anticipation of short-term cash requirements during the year.
During the second quarter of 1996 a new five million Canadian dollar facility
was established to supplement previously existing credit lines. Total borrowing
capacity under all lines of credit currently approximates $15,750,000.
9
<PAGE>
PART II. OTHER INFORMATION
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Items 1, 2 and 5.
- -----------------
In accordance with the Instructions to Part II of Form 10-Q, Items 1, 2 and 5 of
Part II of Registrant's Quarterly Report on Form 10-Q are omitted, since none of
the Items listed thereunder are applicable.
Item 3. Defaults Upon Senior Securities.
- -----------------------------------------
The Registrant's Articles of Incorporation, as amended, essentially provide that
(i) holders of the Registrant's Preferred Shares are entitled to receive, as and
when declared by the Board, cumulative dividends at the rate of 5% ($.05 per
share), (ii) such dividends may be declared and paid quarterly, semi-annually or
annually in the discretion of the Board, and (iii) if full cumulative dividends
in cash or in Preferred Shares have not been paid or declared and set aside for
payment for the first three quarters of any fiscal year, no dividend may be paid
or distribution made on the Registrant's Common Shares (other than dividends
payable in Common Shares) until full cumulative dividends in cash or in
Preferred Shares for such year and all prior periods have been paid or declared
and set aside for payment.
Traditionally, the Registrant has paid cash dividends on both its Common and
Preferred Shares quarterly, and that practice continued through the first
quarter of 1993. However, in recognition of the difficult business climate, no
dividends on either Preferred or Common Shares have been paid or declared and
set aside for payment since March 1, 1993, and it is uncertain when the payment
of dividends will recommence. The cumulative arrearage in Preferred Share
dividends through the end of the Registrant's second quarter of 1996 (calculated
on a quarterly basis) was $28,592.
Item 4. Submission of Matters to a Vote of Security Holders.
- -------------------------------------------------------------
On May 2, 1996, the Registrant held its Annual Meeting of Shareholders at which
time three directors were elected to serve for terms expiring in 2000. The
tabulation of votes with respect to each nominee was as follows: William B.
Moore, For - 2,983,680, Withheld - 161,974; James O. Moore, For - 2,983,680,
Withheld - 161,974; and Ralph H. Owens, For - 2,987,254, Withheld - 158,400.
In addition, the Shareholders approved a proposal to change the Articles of
Incorporation increasing the number of authorized shares of common stock from
3,750,000 to 7,500,000 shares, with tabulated votes as follows: For - 2,807,323,
Against - 226,687, Abstain - 6,337; and a proposal to change the 1994 Incentive
Stock Option Plan and Non-qualified Stock Option Plan increasing the number of
shares available for issuance under the plan from 300,000 to 750,000, with
tabulated votes as follows: For - 2,198,180, Against - 642,994, Abstain -
150,930.
10
<PAGE>
PART II. OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K.
- ------------------------------------------
No reports on Form 8-K have been filed during the most recently completed fiscal
quarter.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MOORE PRODUCTS CO.
Dated: August 12, 1996 By: /S/R. E. Wisniewski
--------------------------------------------
R. E. Wisniewski,
Secretary and Treasurer
(Principal Financial and Accounting Officer)
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,279,000
<SECURITIES> 0
<RECEIVABLES> 30,669,000
<ALLOWANCES> 0
<INVENTORY> 21,536,000
<CURRENT-ASSETS> 57,213,000
<PP&E> 57,416,000
<DEPRECIATION> 40,289,000
<TOTAL-ASSETS> 82,777,000
<CURRENT-LIABILITIES> 23,415,000
<BONDS> 0
0
176,000
<COMMON> 2,584,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 82,777,000
<SALES> 71,123,000
<TOTAL-REVENUES> 71,123,000
<CGS> 39,657,000
<TOTAL-COSTS> 39,657,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 253,000
<INCOME-PRETAX> 1,260,000
<INCOME-TAX> 972,000
<INCOME-CONTINUING> 288,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 288,000
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
</TABLE>
