SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 1996.
Commission file no. 0-545.
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Moore Products Co.
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(Exact name of Registrant as specified in its charter)
Pennsylvania 23-1427830
- ------------------------ ------------------------------------
(State of incorporation) (I.R.S. Employer Identification No.)
Spring House, Pennsylvania 19477-0900
- --------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 646-7400
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1 Par Value
- --------------------------------------------------------------------------------
(Title of class)
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 periods 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 [ ].
The aggregate market value of voting stock held by nonaffiliates of the
Registrant (as explained on page 8) as of March 13, 1997, was approximately
$31,800,000.
Common stock outstanding at March 13, 1997, was 2,585,972 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual shareholders report for the year ended December 31, 1996,
are incorporated by reference into Parts II and IV of this report.
Portions of the proxy statement for the annual shareholders meeting to be held
May 1, 1997, are incorporated by reference into Part III of this report.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ].
<PAGE>
PART I
Item 1. Business.
Moore Products Co. ("Registrant") was originally organized in January
1940, as a partnership and incorporated in the Commonwealth of Pennsylvania in
December 1953.
Registrant is in the business that develops, manufactures, sells, and
supports technical products and systems used in the measurement and control of
manufacturing processes. These include a broad range of technologically advanced
systems, industrial controls and instrumentation, dimensional measuring gages,
and high-precision metrology calibration systems. Many of Registrant's products
are of standard design and are sold from stock; some products are custom
engineered and manufactured to order.
Industrial instruments measure and control temperature, pressure, flow
of liquid or gas, liquid level, and other variables found in process industries,
such as chemical, pharmaceutical, pulp and paper, and power and utility.
Metrology products, dimensional gages, and statistical process control systems
are used in quality-related applications in high-precision calibration
laboratories and in the manufacture of precision and discrete parts such as is
found in the automotive industry.
Registrant uses digital electronic, analog electronic, pneumatic and
software technologies in the design of its products and does not specialize in
one particular technology.
The business of the Registrant is primarily capital equipment and
related systems. As such, it is subject to the cyclical nature of commitments to
new or replacement manufacturing facilities and equipment by the industries that
it serves. The business of the Registrant is not generally seasonal, but from
time to time follows a pattern of higher shipments in the second half of the
calendar year in response to customer's capital expenditure cycles.
During the past five years, the Registrant has introduced a series of
new product offerings intended to provide complete, advanced technological
solutions to industries seeking efficient control of their manufacturing
processes. These products range from remote field transmission and control
devices to sophisticated microcomputer-based control systems including both
hardware and software products. In many instances these products are linked
through a standard industry communication protocol and are custom configured to
meet unique requirements of specific customers. The innovative, technical
advances represented by some of these products have been formally
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recognized through industry awards. Increased sales volume in the past year is
attributed to customer acceptance of these newer products.
Markets:
The principal markets for Registrant's products are the batch and
continuous process industries (including chemical, pulp and paper, power and
utility, pharmaceuticals, oil and gas, metals, synthetic fiber, and food and
beverage), precision discrete parts manufacturing industries (including machine
tool, aeronautical and automotive), and calibration laboratories. Certain of the
Registrant's systems products are sold in significant dollar amounts as part of
major customer projects. Changes in quarterly and annual sales can be
significantly influenced by the shipment of these orders.
Sales and Distribution:
Registrant's United States sales are made primarily through
factory-trained employees of its own organization, located in its sales offices
in 40 cities. International sales and customer support are handled through a
combination of 12 subsidiaries and approximately 90 sales representatives
appointed by Registrant or its subsidiaries strategically located throughout the
world. Sales in Canada and Europe are made through Registrant's wholly-owned
Canadian, English, Dutch, Italian and French subsidiaries, Moore Products Co.
(Canada) Inc., Moore Products Co. (U.K.) Limited, Moore Products Co. B.V., Moore
Products Co. (Italia) S.r.l., and Moore Products Co. (France) SARL. Sales in the
Asia/Pacific region are also supported through wholly-owned subsidiaries in
Australia, Japan, and Singapore by Moore Products Co. (Australia) Pty. Ltd.,
Moore Products Co. (Japan) K.K., and Moore Products Co (S) Pte Ltd. Sales in
Mexico, India, Brazil and South Africa, which are not significant, are made
through jointly-owned subsidiaries, Moore Products de Mexico S.A. de C.V., Moore
Controls Pvt. Limited, T & M Controles Ltda. and Moore Controls S.A. (Pty.)
Ltd., respectively.
Raw Materials:
In its manufacturing operation, Registrant uses common metals (aluminum,
brass, stainless steel), various synthetic materials, forgings and castings, and
electronic components. Registrant is experiencing no significant shortages in
raw materials at this time which would be expected to have a serious effect on
the delivery aspect of
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Registrant's business, although occasional disruption in the availability of
certain electronic components can impact the scheduled manufacture and shipment
of some products. In most instances, Registrant has more than one source of
supply for its material requirements.
Patents, Trademarks, and Licenses:
Registrant applies for patents on inventions and developments which it
considers clearly patentable and desirable with respect to its products. As of
December 31, 1996, Registrant owned several unexpired United States patents and
unexpired international patents, none of which are considered individually to be
material to its business.
Considered to be of greater importance to its business is Registrant's
"know-how" in manufacturing products, including those covered by patents which
have expired. Registrant has from time to time granted "know-how" licenses to
others, and has been licensed by others, to manufacture certain products, but
none of these licenses are believed to be material to the Registrant.
Several of the Registrant's products are sold under trademarks, some of
which are registered. Examples of these include "VIEWPAC(TM)", "FIELDPAC(TM)",
"QUADLOG(R)", "APACS(R)", "XTC(R)", "LABMASTER(R)", and "LASERULER(R)". In
addition the Registrant conducts business under the registered trademarks of
"MOORE(R)" in block letters and logo form, "PRATT & WHITNEY(R)" and "P&W(R)" in
logo form, which provide unique identity within its industry.
Backlog:
As of December 31, 1996, Registrant had a total consolidated backlog of
orders, believed by it to be firm, amounting to $46,110,000. Registrant expects
that substantially all such orders will be filled within the current fiscal
year. As of December 31, 1995, Registrant had a total consolidated backlog of
orders amounting to $36,997,000.
Competition:
The process measurement and control industry is highly competitive and
subject to technological changes in both hardware and software development.
Registrant is a medium-sized company in the measurement and control of
manufacturing processes including continuous, batch, and discrete parts
manufacturing. It is one of a limited number of companies in the United States
with the capability to bid as manufacturer for
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complete process instrumentation projects, such as the instrumentation of a
chemical plant, an oil refinery, or a paper mill. Competition in Registrant's
industry has intensified as markets, customers and competitors have become
increasingly international in their focus. Registrant has attempted to maintain
its position in the industry by the quality and performance of its existing
products and technical innovation of new product developments so as to provide
customers with greater functionality and reliability than are available from
competitors. Relative price/performance, product features, availability, service
and support also are important factors.
Registrant's principal competitors in the industry, most of whom are
considerably larger than the Registrant, are The Foxboro Company, a SIEBE
Company; ABB Process Automation, Inc., and ABB Kent-Taylor Inc., two divisions
of ABB Asea Brown Boveri, Inc.; Elsag Bailey Process Automation N.V.; the
Industrial Automation and Control Division of Honeywell, Inc.; Fisher-Rosemount,
a unit of Emerson Electric Co.; Marposs Gauges Corp.; and Illitron Division of
ITW.
Research Activities:
The Registrant's products provide for integration of several complex
technologies including but not limited to electronics, physics, mechanical
design and software. Research and development has consistently been a central
strategic commitment. The Registrant views continued investment in new product
development as key to long-range success. Approximately $11,416,000 was spent
during 1996, $9,989,000 during 1995, and $8,593,000 during 1994 on
company-sponsored research activities relating to the development of new
products or the improvement of existing products. These amounts represent 8.0%,
8.3% and 8.5%, respectively, of total revenues. The amount spent on
customer-sponsored research activity was not significant in any of the years
covered. No costs associated with the development of software products are
capitalized.
Environment:
Compliance with federal, state, and local provisions regulating the
discharge of materials into the environment or otherwise relating to the
protection of the environment is not expected to have a material effect on the
capital expenditures, earnings, or competitive position of Registrant and its
subsidiaries. Registrant's involvement in environmental actions, to date, has
been limited to situations where a
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former licensed waste hauler allegedly disposed of de minimis quantities of
waste materials from Registrant's United States plant to several land fill sites
in an unacceptable manner. Net costs to Registrant with respect to these actions
to date have been immaterial. Registrant presently does not anticipate that its
net uninsured costs with respect to these actions will be material and further
believes that potential monetary sanctions, if any, from any such governmental
actions will not exceed $100,000.
Number of Employees:
Registrant and its subsidiaries had approximately 1,260 employees as of
December 31, 1996.
Foreign and Domestic Operations and Export Sales:
Reference is made to Note J on page 20 of Registrant's Consolidated
Financial Statements contained in Exhibit 13 of this report.
Item 2. Properties.
Registrant's principal manufacturing facility and corporate office are
contained in a modern steel and masonry building of approximately 374,000 square
feet located on 154 acres in Spring House, Montgomery County, Pennsylvania. The
building and land at this facility are owned outright by Registrant. The
Registrant's Pratt & Whitney Division owns and occupies an 18,000 square foot
office and manufacturing facility in Plainville, Connecticut.
Registrant's Canadian subsidiary, Moore Products Co. (Canada) Inc., is
located in a modern plant and office building of approximately 35,000 square
feet. The building is located on 89 acres of land in Brampton, Ontario, Canada.
Both the building and the land are owned outright by Registrant's subsidiary.
Registrant's English subsidiary, Moore Products Co. (U.K.) Limited, is
located in a modern plant and office building of approximately 36,000 square
feet. The building is located on 5 acres of land in Yeovil, Somerset, England.
Both the building and land are owned outright by Registrant's subsidiary. Moore
Measurement Systems, a division of Moore Products Co. (U.K.) Limited, leases an
office and manufacturing facility of approximately 23,000 square feet in
Hitchin, Hertfordshire, England.
The remaining international subsidiaries occupy leased premises.
Registrant's leases for branch sales offices and international subsidiaries in
the aggregate are not material.
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The equipment at Registrant's plants, principally machine tools,
assembly tools, and automatic testing equipment, some of which was built by
Registrant itself, is modern and in good condition. Equipment is generally owned
outright by Registrant.
Registrant believes its facilities are adequate and suitable for its
purposes.
Item 3. Legal Proceedings.
There are no material pending legal proceedings, other than ordinary
routine litigation incidental to the business, to which the Registrant or any of
its subsidiaries is a party or of which any of their property is the subject.
See "Environment" in Part I, Item 1 of this report.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the
fourth quarter of 1996.
Additional Information:
The following information is furnished in this report pursuant to
Instruction 3 to Item 401(b) of Regulation S-K:
Executive Officers of the Registrant:
Set forth below is certain information with respect to the executive
officers of Registrant as of March 13, 1997.
Positions and
Name of Officer Age Offices Held with Registrant
- --------------- --- ----------------------------
William B. Moore 54 President and Chief Executive Officer
Edward J. Curry 50 Executive Vice President and Chief Operating Officer
Edward M. Coll 47 Vice President-General Manager,
Systems Division
James McDonald 47 Vice President, Sales
Robert E. Wisniewski 43 Secretary and Treasurer
Executive officers of Registrant are appointed annually by the Board of
Directors, to serve at the discretion of the Board until their successors are
appointed. All of the
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executive officers of Registrant have served in executive or related
administrative capacities with Registrant for over five years. Mr. Coll was
appointed Vice President-General Manager, Systems Division in May 1996.
------------------
For the purposes of calculating the aggregate market value of the shares
of the voting stock of the Registrant held by nonaffiliates, as shown on the
cover page of this report, the value of the Registrant's outstanding preferred
stock (which has voting rights and is convertible into common stock but is not
publicly traded), which is held entirely by affiliates, has not been included,
and it has been assumed that all the other outstanding voting shares (common
stock) were held by nonaffiliates except for the shares held or beneficially
owned by directors and executive officers of the Registrant, the Moore Products
Co. Pension Plan and by Frances O. Moore, widow of the late Coleman B. Moore,
founder of the Registrant. However, this should not be deemed to constitute an
admission that all directors and executives officers of the Registrant, the
Moore Products Co. Pension Plan and/or Frances O. Moore are, in fact, affiliates
of the Registrant, or that there are not other persons who may be deemed to be
affiliates of the Registrant. Further information concerning shareholdings of
executive officers, directors and principal shareholders of Registrant is
included in the Registrant's definitive proxy statement filed or to be filed
with the Securities and Exchange Commission.
8
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PART II
As indicated in the following table, the information required to be
presented in Part II of this report is hereby incorporated by reference to
Registrant's Annual Report to Shareholders for the year ended December 31, 1996,
the relevant portions of which are set forth in Exhibit 13 to this report.
Material in Annual Report to
Shareholders for the year ended
December 31, 1996, which is
incorporated herein by reference
Form 10-K ------------------------------------------
Item No. and Item Caption Caption Page
- ------------------------- ------------------------------------------
5 Market for Registrant's "Shareholder Information" 22
Common Equity and
Related Stockholder
Matters.
6 Selected Financial Data. "Selected Financial Data" 22
7 Management's Discussion "Report to Shareholders" 2-3
and Analysis of Financial "Management's Discussion
Condition and Results of and Analysis" 8-9
Operations.
8 Financial Statements and "Consolidated Statements of
Supplementary Data. Operations" 9
"Consolidated Balance Sheets" 10
"Consolidated Statements of
Cash Flows" 11
"Notes to Consolidated
Financial Statements" 12-20
"Report of Independent Auditors" 21
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
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PART III
As indicated in the following table, the information required to be
presented in Part III of this report is hereby incorporated by reference to the
Registrant's definitive Proxy Statement for its 1997 Annual Meeting of
Shareholders, to be filed with the Securities and Exchange Commission within 120
days of the end of the fiscal year covered by this report:
<TABLE>
<CAPTION>
Material in Proxy Statement for 1997
Annual Meeting which is incorporated
herein by reference
Form 10-K ------------------------------------
Item No. and Item Caption Caption
- ------------------------- ------------------------------------
<C> <C>
10 Directors and Executive Officers of "1. ELECTION OF DIRECTORS" and "COMPLIANCE WITH
Registrant. SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934"
11 Executive Compensation. "ADDITIONAL INFORMATION"
12 Security Ownership of Certain "Beneficial Ownership of Principal Shareholders and
Beneficial Owners and Management. Management"
13 Certain Relationships and Related "Compensation of Directors"
Transactions.
</TABLE>
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PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a)(1) The following consolidated financial statements of Registrant and
its subsidiaries, included in Registrant's Annual Report to Shareholders for the
year ended December 31, 1996, relevant portions of which are set forth in
Exhibit 13 to this report, are incorporated herein by reference:
Consolidated Statements of Operations -
Years ended December 31, 1996, 1995, and 1994
Consolidated Balance Sheets - December 31, 1996
and December 31, 1995
Consolidated Statements of Cash Flows -
Years ended December 31, 1996, 1995, and 1994
Notes to Consolidated Financial Statements - December 31, 1996
Report of Independent Auditors
11
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All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable and therefore have been
omitted.
(a)(3) Exhibits:
Exhibit
Number Description
------ --------------------------------------------------
3a Articles of Incorporation. (Incorporated by
reference to Exhibit 3a to Registrant's Report on
Form 10-K for the fiscal year ended December 31,
1993.) Amendment to Articles of Incorporation.
(Incorporated by reference to Exhibit 3a to
Registrant's Report on Form 10-Q for the quarterly
period ended September 30, 1996.)
3b By-Laws, as amended through May 2, 1991.
(Incorporated by reference to Exhibit 3b to
Registrant's Report on Form 10-K for the fiscal
year ended December 31, 1991.)
4 Instruments defining the rights of security
holders. (Reference is made to (i) Articles 5 and
10 of Registrant's Articles of Incorporation
(Exhibit 3a to this report) and (ii) Articles III,
IV, VIII, X and XIII of Registrant's By-Laws
(Exhibit 3b to this report).)
10a Registration Rights Agreement entered into as of
December 18, 1995, between Moore Products Co. and
Mellon Bank N.A., as trustee for the Moore
Products Co. Pension Plan. (Incorporated by
reference to Exhibit 10 to Registrant's Report on
Form 10-K for the fiscal year ended December 31,
1995.)
10b* 1994 Incentive Stock Option and Non-qualified
Stock Option Plan. (Incorporated by reference to
Exhibit 10 to Registrant's Report on Form
10-K for the fiscal year ended December 31, 1994.)
10c* Form of agreement with Raymond M. Reed, dated June
7, 1996. (Incorporated by reference to Exhibit 10a
to Registrant's Report on Form 10-Q for the
quarterly period ended September 30, 1996.)
10d* Form of agreement with Edward T. Hurd, dated June
13, 1996. (Incorporated by reference to Exhibit
10b to Registrant's Report on Form 10-Q for the
quarterly period ended September 30, 1996.)
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10e* Form of agreement with R. B. Adams, dated February
28, 1993. (Incorporated by reference to Exhibit
10a to Registrant's Report on Form 10-K for the
fiscal year ended December 31, 1992.)
10f* Form of agreement with F. Lawton Hindle, dated
December 28, 1994. (Incorporated by reference to
Exhibit 10a to Registrant's Report on Form 10-K
for the fiscal year ended December 31, 1994.)
11 Statement Re: Per Share Earnings.
(Filed herewith.)
13 Incorporated by reference portions of the Annual
Report to Shareholders for the year ended December
31, 1996. (Filed herewith.)
21 Subsidiaries of Registrant. (Filed herewith.)
23 Consent of Independent Auditors. (Filed herewith.)
27 Financial Data Schedule. (Filed herewith.)
* Indicates a management contract, arrangement or compensatory plan.
-----------------
(b) No reports on Form 8-K were filed by Registrant during the last quarter
of 1996.
13
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MOORE PRODUCTS CO.
/s/W. B. Moore
-----------------------------------------------
Date: March 27, 1997 W. B. Moore, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/W. B. Moore
-----------------------------------------------
Date: March 27, 1997 W. B. Moore, President,
Chief Executive Officer and Director
/s/E. J. Curry
-----------------------------------------------
Date: March 27, 1997 E. J. Curry, Executive Vice President,
Chief Operating Officer and Director
/s/R. E. Wisniewski
-----------------------------------------------
Date: March 27, 1997 R. E. Wisniewski
Secretary and Treasurer
(Principal Financial & Accounting Officer)
/s/R. B. Adams
-----------------------------------------------
Date: March 27, 1997 R. B. Adams, Director
-----------------------------------------------
Date: F. L. Hindle, Director
/s/E. T. Hurd
-----------------------------------------------
Date: March 27, 1997 E. T. Hurd, Director
/s/J. O. Moore
-----------------------------------------------
Date: March 27, 1997 J. O. Moore, Director
-----------------------------------------------
Date: T. C. Moore, Director
-----------------------------------------------
Date: R. H. Owens, Director
-----------------------------------------------
Date: R. M. Reed, Director
/s/E. G. Rorke
-----------------------------------------------
Date: March 27, 1997 E. G. Rorke, Director
14
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EXHIBIT INDEX
Exhibit
Number Description
- ------- -------------------------------------------------------------
3a Articles of Incorporation. (Incorporated by reference to
Exhibit 3a to Registrant's Report on Form 10-K for the fiscal
year ended December 31, 1993.) Amendment to Articles of
Incorporation. (Incorporated by reference to Exhibit 3a to
Registrant's Report on Form 10-Q for the quarterly period
ended September 30, 1996.)
3b By-Laws, as amended through May 2, 1991. (Incorporated by
reference to Exhibit 3b to Registrant's Report on Form 10-K
for the fiscal year ended December 31, 1991.)
4 Instruments defining the rights of security holders.
(Reference is made to (i) Articles 5 and 10 of Registrant's
Articles of Incorporation (Exhibit 3a to this report) and
(ii) Articles III, IV, VIII, X and XIII of Registrant's
By-Laws (Exhibit 3b to this report).)
10a Registration Rights Agreement entered into as of December
18, 1995, between Moore Products Co. and Mellon Bank N.A., as
trustee for the Moore Products Co. Pension Plan.
(Incorporated by reference to Exhibit 10 to Registrant's
Report on Form 10-K for the fiscal year ended December 31,
1995.)
10b 1994 Incentive Stock Option and Non-qualified Stock Option
Plan. (Incorporated by reference to Exhibit 10 to
Registrant's Report on Form 10-K for the fiscal year ended
December 31, 1994.)
10c Form of agreement with Raymond M. Reed, dated June 7, 1996.
(Incorporated by reference to Exhibit 10a to Registrant's
Report on Form 10-Q for the quarterly period ended September
30, 1996.)
10d Form of agreement with Edward T. Hurd, dated June 13, 1996.
(Incorporated by reference to Exhibit 10b to Registrant's
Report on Form 10-Q for the quarterly period ended September
30, 1996.)
10e Form of agreement with R. B. Adams, dated February 28, 1993.
(Incorporated by reference to Exhibit 10a to Registrant's
Report on Form 10-K for the fiscal year ended December 31,
1992.)
10f Form of agreement with F. Lawton Hindle, dated December 28,
1994. (Incorporated by reference to Exhibit 10a to
Registrant's Report on Form 10-K for the fiscal year ended
December 31, 1994.)
11 Statement Re: Per Share Earnings. (Filed herewith.)
15
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13 Incorporated by reference portions of the Annual Report to
Shareholders for the year ended December 31, 1996.
(Filed herewith.)
21 Subsidiaries of Registrant. (Filed herewith.)
23 Consent of Independent Auditors. (Filed herewith.)
27 Financial Data Schedule. (Filed herewith.)
16
Exhibit 11
STATEMENT RE: PER SHARE EARNINGS
<TABLE>
<CAPTION>
Year Ended December 31
1996 1995 1994
----------------------------------------
<S> <C> <C> <C>
Net income (loss) $ 1,278,000 $ 259,000 ($1,089,000)
Less: Preferred stock dividend (9,000) (9,000) (9,000)
----------- ----------- -----------
$ 1,269,000 $ 250,000 ($1,098,000)
=========== =========== ===========
PRIMARY EARNINGS PER SHARE
Average shares outstanding 2,584,155 2,100,900 2,083,092
Net effect of dilutive stock options-
based on the treasury stock method
using average market price 32,340 13,957 --
----------- ----------- -----------
Total 2,616,495 2,114,857 2,083,092
=========== =========== ===========
Net income (loss) $0.49 $0.12 ($0.53)
===== ===== =====
FULLY DILUTED EARNINGS PER SHARE (a)
Average shares outstanding 2,584,155 2,100,900 2,083,092
Net effect of dilutive stock options-
based on the treasury stock method
using the year-end market price, if
higher than average market price 37,834 27,452 --
Increase in common stock based on
the assumption that the preferred
shares were converted as of the
beginning of the year 70,380 70,380 70,380
----------- ----------- -----------
Total 2,692,369 2,198,732 2,153,472
=========== =========== ===========
Net income (loss) $0.47 $0.12 ($0.51)
===== ===== =====
</TABLE>
(a) This calculation is presented in accordance with Regulation S-K although
the resultant effect of the assumed conversion of preferred stock shares
is antidilutive. Therefore, amounts computed under Regulation S-K differ
from that which is required for financial reporting under Accounting
Principles Board Opinion No. 15.
17
Moore Products Company 1996 Annual Report
PAGES 2 & 3, REPORT TO SHAREHOLDERS
At the top of page 2 is a picture of William B. Moore, President and CEO, and
Edward T. Hurd, Chairman of the Board.
President's Letter:
CONSOLIDATED RESULTS
Consolidated sales for Moore Products Co. reached $142 million in 1996, an 18%
increase over 1995. Earnings for the year were $1,278,000 or $.49 per share.
Since 1994, our growth rate has been well above our industry's growth rate. This
growth can be attributed to the commitment we made in the early part of this
decade to maintain our level of research and development. The products that
resulted from this effort have fueled our growth. Our growth outside of North
America is at a higher rate, confirming the international acceptance of our
current product portfolio. Earnings are constrained by our continued high level
of investment in the expansion of our business.
OPERATIONS
Operational improvement was achieved by a combination of staff reduction, cost
control, structural consolidations and growth. In July, we instituted an early
retirement program. We maintained the resulting cost reductions throughout the
remainder of the year by a combination of process changes and outsourcing of
non-core activities. Under our continuous improvement program, there are many
dedicated employee teams working on process and product improvements throughout
the organization. These teams are an important part of our effort to keep costs
in line. Certain key product lines showed significant improvement in their
margins as a result of these programs. A manufacturing operation consolidation
was completed by June. In addition, our higher shipment volume improved our
absorption of the operating overhead.
MARKETING
A variety of manufacturing enterprises use our measurement and control products.
We deliver our products to this broad base directly or through third-party
integrators who have particular industry expertise. Responding to our customers'
need for complete solutions, we have expanded our capabilities in target markets
where we have competitive advantages. These markets include chemical,
pharmaceutical, pulp & paper, oil & gas, power, automotive and aeronautical.
We are working globally to maximize the revenue from our existing customer base
and provide growth within these target markets. Our systems for control on power
generation span the globe, from major new control systems on existing coal-fired
power plants in the U.K. to systems on new generation facilities in China. Our
alliances with certain chemical companies in the U.S.A. provide opportunities to
install our systems in the Asia-Pacific region and elsewhere in the world. The
Company's success with pharmaceutical installations includes significant
business in China. The 1995 purchase of Vernon Gage in the U.K. expanded our
ability to sell dimensional measurement systems to global manufacturing
companies, helping to produce a very healthy backlog of orders for these systems
at year-end.
Overall, bookings for North America increased over 12% in 1996, while European
bookings were up over 24%. Asia- Pacific bookings were also up significantly.
PRODUCT DEVELOPMENT
Product innovation continues to be the keystone of our success. Our QUADLOG
safety system, which was introduced in 1995, is an example of our innovative
application of technology to new products. This system received TUV approval in
1996. TUV is a European approval agency recognized globally for its evaluation
of safety system design. This TUV approval means QUADLOG meets the highest level
safety standard for programmable devices. As regulatory agencies become
increasingly concerned about the safe operation of processing plants and the
safe shutdown of those plants during an unexpected event, there is a growing
market for safety systems. With the approval of QUADLOG for these safety
applications, we have a unique competitive advantage.
<PAGE>
In the fourth quarter, we introduced the PAC 353 Process Automation Controller.
The PAC 353 provides greatly increased functionality at the same price point as
the Model 352 panel-mounted controller, which has been the market leader for the
past decade. We expect the PAC 353 to continue to be the price/performance
leader and maintain our dominance in this market segment.
New hardware and software releases have enhanced the functionality and
performance of our award-winning APACS process control system for larger system
applications. APACS and PAC 353 continue to rank at the top of surveys in our
industry as "best in class."
Our Model 760D smart valve positioner is an example of leveraging our resources
with the resources of another company. This product, demonstrated last fall, was
developed in conjunction with a major valve manufacturer. The development
benefited from our expertise in valve positioners and our partner's expertise in
valve operations.
OUTLOOK
Our operational plans are in place for the future. We continue to evaluate our
strategic direction in light of rapid technological change in our industry and
growing customer expectations. We have lead products that are considered "best
in class." This is confirmed by our continued solid growth above the industry
average, as well as customer surveys. Our challenge is to effectively expand our
global presence. We have a strong foundation. We have improved our
profitability, and we expect, with the help of our very dedicated personnel, to
continue this improvement.
In June 1996, Edward T. Hurd was elected to the Company's Board of Directors.
Mr. Hurd is a recently retired executive with broad experience in our industry.
In September 1996, Mr. Hurd was elected Chairman of the Board of Directors. He
has been an active participant on our management team and has provided excellent
guidance for the improvement of our operations and strategic planning. In the
following section, Mr. Hurd expands on our Company's opportunities.
William B. Moore
President and Chief Executive Officer
Chairman's Letter:
Moore Products Co. has chosen to significantly increase its strategic
investments in the last few years, resulting in excellent revenue growth during
this period. Our attention is now focused on maintaining this growth, while
returning acceptable earnings. To achieve this, we will use the benefits of
growth in operating margins, along with improved operating ratios from
structural and process improvements.
The rapid advance of technology and an expanding, changing global marketplace
offer opportunity to create significant new value for Moore Products Co.
customers and shareholders. Changes in the vendor selection criteria from
proprietary systems to integrated solutions implemented with "open" components
from multiple vendors places the Company in a preferred position with a growing
list of customers.
Our market-leading APACS open process control solution was recently extended to
include the QUADLOG safety system. We plan to continue our extension of the
APACS system into new applications. Implementation of the complete solution will
be both internal, with our unique hardware and software expertise, and external,
in partnership with other vendors. Our success will depend on rapid response to
global market conditions. An efficient blending of internal and external
resources should provide this response.
Moore Products Co. has a proud heritage, an excellent customer image, and
leading industry expertise. With these qualities as the foundation, we accept
the challenge to deliver market-leading automation solutions to our global
customers, while providing an adequate return to our shareholders. We are in a
unique position in a condensing group of global suppliers to take advantage of
the massive changes and consolidations in the process automation market.
Edward T. Hurd
Chairman of the Board
<PAGE>
PAGE 6, GLOBAL REACH
Visuals: Graphic of world map with dots depicting locations of Corporate
Headquarters, principal locations and local offices, representatives and agents.
Corporate Headquarters
Moore Products Co.
Sumneytown Pike
Spring House, PA 19477-0900
Phone: (215) 646-7400
Fax: (215) 283-6358
Pratt & Whitney Division
Plainville, CT
Wholly-Owned Subsidiaries
Australia
Moore Products Co.
(Australia) Pty. Ltd.
Waterloo, NSW
Canada
Moore Products Co. (Canada) Inc.
Brampton, Ontario
France
Moore Products Co. (France) SARL
Lyon
Italy
Moore Products Co. (Italia) S.r.l.
Milan
Japan
Moore Products Co. (Japan) K.K.
Tokyo
The Netherlands
Moore Products Co. B.V.
Ridderkerk
Singapore
Moore Products Co. (S) Pte. Ltd.
Singapore
United Kingdom
Moore Products Co. (U.K.) Limited
Yeovil, Somerset
Moore Measurement Systems
Hitchin, Hertfordshire
Jointly-Owned Subsidiaries
Brazil
T & M Controles Ltda.
Rio de Janeiro
India
Moore Controls Pvt. Limited
Poona
Mexico
Moore Products de Mexico S.A. de C.V.
Mexico, D.F.
South Africa
Moore Controls S.A. (Pty) Ltd.
Midrand
Regional Engineering Offices
Bahrain
Moore Products Co. Middle East
Manama
Hong Kong
Moore Products Co.
Kowloon
<PAGE>
PAGE 7, FINANCIALS
Table of Contents
Management's Discussion and Analysis 8 - 9
Consolidated Statements of Operations 9
Consolidated Balance Sheets 10
Consolidated Statements of Cash Flows 11
Notes to Consolidated Financial Statements 12 - 20
Report of Independent Auditors 21
Directors and Officers 21
Selected Financial Data 22
Shareholder Information 22
PAGE 8 & 9, MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Comparing 1996 to 1995, the Company experienced a $1,019,000 improvement in
earnings. Net sales increased $21,855,000 or 18%, from $121,037,000 to
$142,892,000. Increased sales of systems products contributed significantly to
the higher volume of products shipped. Increased shipments outside the United
States were also an element of the higher sales. Cost of products 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 45% in 1995
to 43% in 1996.
Selling, research, administrative and general expenses increased 12% from 1995.
Higher payroll and payroll-related costs were the primary reasons for this
increase. During 1996, the Company strategically increased staffing levels in
selected areas of the organization in anticipation of higher levels of business
activity. Research and development costs increased from 1995 to 1996 but were
lower as a percentage of sales due to the increase in sales revenue.
During 1996, the Company recorded two unusual items, including a gain of
$2,056,000 for the combined net effects of settlements, curtailments and special
termination benefits in connection with an early retirement program offered to
eligible employees in the United States. The Company also recorded a special
pretax charge of $1,000,000 for impairment and restructuring of an international
joint venture based upon a review of operations and decisions to refocus
business activities in certain South American markets.
In 1996, income taxes were higher than U.S. federal statutory rates. This was
due mostly to certain nondeductible expenses for federal tax purposes that
create permanent differences between pretax income as determined for financial
reporting and federal tax regulations. Accumulated tax benefits for losses
incurred by certain subsidiaries in tax jurisdictions outside the United States
have been recognized but fully reserved for financial reporting purposes because
the realization of such benefits is not presently considered likely.
Comparing 1995 to 1994, the Company experienced a $1,348,000 improvement in
earnings. This was due primarily to higher sales and increased gross margin. Net
sales increased 20% as a result of the higher volume of products shipped. The
APACS system contributed to much of the increase in shipments. Gage and XTC
transmitter products also experienced significant increases in sales activity.
Economic conditions in the Company's traditional process control markets
continued to be strong in 1995. The Company is also benefiting from a broader
range of customers and worldwide market opportunities.
The 21% increase in gross profit from 1994 was a result of the higher sales
volume and the continuing improvement in capacity utilization by manufacturing
facilities.
Selling, research, administrative and general expenses increased 18% from 1994.
This was attributable mostly to higher sales and marketing costs related to the
increased sales volume. The significant growth in business activity over the
past two years also has caused the Company to increase customer and product
support costs across a broad range of activities. Payrolls and payroll-related
expenses comprise the largest share of these costs, reflecting the increased
employment levels required to support these activities. Research and development
costs increased from 1994 to 1995 in absolute dollars but were lower as a
percentage of sales due to the increase in sales revenue.
In 1995, income taxes were higher than U.S. federal statutory rates. This was
due mostly to certain nondeductible expenses for federal tax purposes that
create permanent differences between pretax income as determined for financial
reporting and federal tax regulations. Accumulated tax benefits for losses
incurred by certain subsidiaries in tax jurisdictions outside the United States
have been recognized but fully reserved for financial reporting purposes because
the realization of such benefits is not presently considered likely.
<PAGE>
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Improved operating results and working capital management supplemented by
limited investment in capital equipment have reduced the Company's dependence on
external financing and increased cash balances by $2,963,000 compared to year
ended December 31, 1995.
The Company continues to maintain bank lines of credit totaling approximately
$16,000,000 in anticipation of short-term cash requirements during the year. It
is expected that short-term cash requirements for the next year will be met from
operations and established credit facilities.
PAGE 9, CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31
1996 1995 1994
<S> <C> <C> <C>
NET SALES............................................... $ 142,892,000 $ 121,037,000 $ 100,680,000
Cost of products sold................................... 81,521,000 66,960,000 56,081,000
--------------- ---------- ----------
GROSS PROFIT...................................... 61,371,000 54,077,000 44,599,000
Selling, research, administrative and general expenses.. 59,352,000 53,149,000 45,116,000
Interest expense........................................ 466,000 438,000 37,000
Unusual items (net gain)................................ ( 1,056,000) -- --
Other income............................................ ( 143,000) ( 119,000) ( 75,000)
------- ------- ------
INCOME (LOSS) BEFORE INCOME TAXES ................ 2,752,000 609,000 ( 479,000)
Income tax provision.................................... 1,474,000 350,000 610,000
--------- ------- -------
NET INCOME (LOSS)................................. $ 1,278,000 $ 259,000 ($ 1,089,000)
=========== =========== ===========
Earnings per common share - primary:
Net income (loss)................................. $ .49 $ .12 ($ .53)
==== ==== ====
Earnings per common share - fully diluted:
Net income (loss)................................. $ .47 $ .12 ($ .53)
==== ==== ====
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
PAGE 10, CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
1996 1995
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash....................................................................... $ 4,066,000 $ 1,103,000
Trade accounts receivable.................................................. 30,541,000 30,701,000
Inventories:
Completed instruments.................................................... 4,554,000 4,373,000
Finished parts........................................................... 11,091,000 11,021,000
Work in process.......................................................... 4,957,000 4,114,000
Raw materials............................................................ 877,000 915,000
------- -------
21,479,000 20,423,000
Prepaid expenses and deferred taxes........................................ 3,608,000 3,117,000
--------- ---------
TOTAL CURRENT ASSETS............................................... 59,694,000 55,344,000
PROPERTY, PLANT AND EQUIPMENT
Land....................................................................... 970,000 939,000
Buildings.................................................................. 14,367,000 13,783,000
Machinery and equipment.................................................... 42,846,000 40,791,000
Less: Accumulated depreciation............................................. ( 41,639,000) ( 38,627,000)
---------- ----------
16,544,000 16,886,000
OTHER ASSETS
Prepaid pension costs...................................................... 9,809,000 5,963,000
--------- ---------
$ 86,047,000 $ 78,193,000
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to bank...................................................... $ 4,230,000 $ 4,306,000
Accounts payable........................................................... 12,370,000 11,032,000
Accrued compensation....................................................... 2,638,000 2,306,000
Advances from customers.................................................... 5,129,000 2,566,000
--------- ---------
TOTAL CURRENT LIABILITIES.......................................... 24,367,000 20,210,000
OTHER LIABILITIES
Postretirement medical benefits and deferred taxes......................... 7,126,000 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 - 2,585,972 shares and 2,583,092 shares......... 2,586,000 2,583,000
Capital in excess of par value............................................. 10,885,000 10,843,000
Retained earnings.......................................................... 42,200,000 40,922,000
Foreign currency translation adjustments..................................... ( 1,293,000) ( 1,541,000)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY......................................... 54,554,000 52,983,000
---------- ----------
$ 86,047,000 $78,193,000
========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
PAGE 11, CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31
1996 1995 1994
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................................ $ 1,278,000 $ 259,000 ($ 1,089,000)
Noncash (income) expenses:
Depreciation........................................... 3,384,000 3,347,000 3,219,000
Deferred income taxes.................................. 146,000 90,000 51,000
Pension and other postretirement benefits.............. ( 805,000) ( 1,221,000) ( 97,000)
Asset impairment charges............................... 1,000,000 -- --
Net gain from early retirement settlements............. ( 2,056,000) -- --
Changes in operating assets and liabilities:
Trade accounts receivable.............................. 160,000 ( 11,232,000) ( 3,518,000)
Inventories............................................ ( 1,056,000) ( 4,297,000) ( 863,000)
Accounts payable....................................... 1,338,000 5,388,000 1,263,000
Accrued compensation................................... 332,000 547,000 789,000
Advances from customers................................ 2,563,000 440,000 677,000
Prepaid expenses....................................... ( 496,000) ( 1,506,000) 1,214,000
------- --------- ---------
5,788,000 ( 8,185,000) 1,646,000
INVESTING ACTIVITY
Net purchase of property, plant and equipment.......... ( 2,897,000) ( 3,602,000) ( 3,105,000)
FINANCING ACTIVITIES
(Decrease) increase in notes payable to bank........... ( 76,000) 4,306,000 --
Proceeds from issuance of common stock................. -- 8,000,000 --
Proceeds from exercise of stock options................ 45,000 -- --
------ ------------ ---------
( 31,000) 12,306,000 --
Effect of exchange rate changes.......................... 103,000 15,000 64,000
------- ------ ------
NET INCREASE (DECREASE) IN CASH.......................... 2,963,000 534,000 ( 1,395,000)
Cash at beginning of year................................ 1,103,000 569,000 1,964,000
--------- ------- ---------
CASH AT END OF YEAR...................................... $ 4,066,000 $ 1,103,000 $ 569,000
========== ========= ==========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
PAGES 12-20, NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE 12
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The consolidated financial statements include the accounts of the Company and
all subsidiaries. All significant intercompany accounts and transactions have
been eliminated. Investments in affiliated companies which are not majority
owned or controlled are accounted for using the equity method.
Use of Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Sales:
The Company recognizes revenue from sales of products as shipped and from
services as performed.
Inventories:
Inventories are stated at the lower of cost or market. Cost of domestic
inventories (approximately 71% of consolidated inventories) was determined by
the last-in, first-out (LIFO) method. Current cost exceeded the LIFO value of
inventories by approximately $8,800,000 and $9,800,000 at December 31, 1996 and
1995, respectively. Cost of international inventories was determined by the
first-in, first-out (FIFO) method.
Property, Plant and Equipment:
Property, plant and equipment are stated at cost. Depreciation is provided over
the estimated useful lives of the assets using primarily the straight-line
method.
Currency Translation:
Balance sheets of the Company's international operations are translated to U.S.
dollars at the current exchange rate, and income statements are translated at
the average exchange rate for the year; resulting translation adjustments are
made directly to a separate component of stockholders' equity. Certain other
transaction adjustments are reported in operations.
Research and Development:
Research and development costs, which approximated $11,416,000 in 1996,
$9,989,000 in 1995, and $8,593,000 in 1994, are expensed as incurred.
Income Taxes:
Income taxes are accounted for under the liability method prescribed by
Statement of Financial Accounting Standards ("SFAS") No. 109. Deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. United States income taxes have not been provided on
unremitted earnings of international subsidiaries because the Company plans to
continue to finance international expansion and operating requirements by
reinvestment of such unremitted earnings. No material amount of income taxes
would result from remittance of such earnings.
Earnings per Share:
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 year and subtracting the Preferred Stock dividends,
declared or current period arrearage declared, from net income. Unless
antidilutive, fully diluted earnings per share have been computed based on the
assumption that the Preferred Stock shares were converted as of the beginning of
the year and no Preferred Stock dividends were paid. The average number of
common shares used to compute primary earnings per share were: 2,616,495 in
1996, 2,114,857 in 1995, and 2,083,092 in 1994. The average number of common
shares used to compute fully diluted earnings per share were: 2,692,369 in 1996,
2,198,732 in 1995, and 2,083,092 in 1994.
Changes in Presentation of Comparative Statements:
Certain reclassifications have been made in prior years' financial statements in
order to conform with the current-year basis of presentation.
<PAGE>
PAGE 13
NOTE B - UNUSUAL ITEMS
In 1996, the Company recorded a pretax gain of $2,056,000 ($1,300,000 and
$756,000 in the second quarter and fourth quarter, respectively) for the
combined net effects of settlements, curtailments and special termination
benefits in connection with an early retirement program offered to eligible
employees in the United States.
In the second quarter of 1996, the Company completed a review of joint venture
operations in certain South American markets. As a result of this review and the
decision to refocus business activities, all assets related to the joint venture
with a carrying value of $1,000,000 have been written off.
NOTE C - CREDIT AGREEMENTS
At December 31, 1996, the Company had lines of credit with U.S. and non-U.S.
banks of approximately $16,000,000, including a $12,400,000 combined U.S.
dollar/U.K. pound sterling committed revolving credit facility with terms
extending through December 31, 1997. The agreements provide the lender with a
security interest in trade accounts receivable and inventory of the U.S.-based
parent company. Advances are limited by formula to eligible collateral. The loan
agreement requires maintenance of certain restrictive financial covenants,
including a limitation on the amount of dividends paid per year. Outstanding
cash advances were $3,400,000 and $4,300,000 at December 31, 1996 and 1995,
respectively. Such cash advances are made at interest rates tied to the bank's
prime or LIBOR. In addition to outstanding loan balances, this line of credit
supported approximately $600,000 of outstanding letters of credit as of December
31, 1996.
The Company's Canadian subsidiary has a $3,600,000 credit facility subject to an
annual renewal and extension on May 31, 1997. Under terms of the agreement, the
lender has a security interest in certain assets of the Canadian subsidiary. The
loan agreement requires maintenance of certain restrictive financial covenants.
Outstanding cash advances were $800,000 at December 31, 1996, and are made at
rates tied to the bank's prime interest rate. The Company's United Kingdom
subsidiary has approximately $750,000 in a separate credit facility that
generally supports periodic bonding and financial guarantee requirements arising
out of routine trade activities.
The weighted-average interest rates on short-term borrowings outstanding as of
December 31, 1996 and 1995, were 8.3% and 9.7%, respectively. Cash outlays for
interest approximate interest expense in each of the years ended December 31,
1996, 1995 and 1994. The fair value of cash advances under credit agreements
approximates the carrying value due to the short-term maturity of these
financial instruments.
NOTE D - MINIMUM LEASE PAYMENTS
The Company leases certain plant, office space and equipment for varying
periods. It is anticipated that in the normal course of business, leases will be
renewed or replaced by other leases. Minimum future rental commitments under
operating leases having noncancelable lease terms in excess of one year
aggregate $6,900,000 at December 31, 1996, and are payable as follows:
$2,500,000 in 1997, $1,900,000 in 1998, $1,300,000 in 1999, $800,000 in 2000,
and $400,000 in 2001.
<PAGE>
PAGE 14
NOTE E - STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Foreign
Capital In Currency
Preferred Common Excess of Retained Translation
Stock Stock Par Value Earnings Adjustments
(Thousands of dollars)
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1994................. $ 176 $ 2,083 $ 3,343 $ 41,752 ($ 1,684)
Net loss................................... -- -- -- ( 1,089) --
Foreign currency translation adjustment.... -- -- -- -- 82
-------- -------- ------- --------- ----------
BALANCE AT DECEMBER 31, 1994............... 176 2,083 3,343 40,663 ( 1,602)
Net income................................. -- -- -- 259 --
Foreign currency translation adjustment.... -- -- -- -- 61
Issuance of restricted stock............... -- 500 7,500 -- --
-------- -------- ------- --------- ----------
BALANCE AT DECEMBER 31, 1995............... 176 2,583 10,843 40,922 ( 1,541)
Net income................................. -- -- -- 1,278 --
Foreign currency translation adjustment.... -- -- -- -- 248
Exercise of stock options.................. -- 3 42 -- --
-------- -------- ------- --------- ----------
BALANCE AT DECEMBER 31, 1996............... $ 176 $ 2,586 $10,885 $ 42,200 ( $ 1,293)
======== ======== ======= ========= ==========
</TABLE>
In December 1995, the Company sold 500,000 shares of restricted common stock to
the Moore Products Co. Pension Plan for $8 million. Coincident with this private
placement of shares, the Company and the Pension Plan have entered into a
registration rights agreement under which the Pension Plan trustee may request
the Company to register the securities.
The 5% cumulative Preferred Stock is entitled to 5 votes for each share issued.
In addition, the preferred shares may, at the election of the holder, be
converted into common shares at a rate of 2.5 preferred shares for each common
share. Subsequent to March 1, 1993, no dividends on either preferred or common
shares have been declared. The Company's current loan agreement limits dividend
payments to 50% of net income after having achieved positive net income for four
quarters. Cumulative Preferred Stock dividends in arrears through December 31,
1996, were $33,000.
NOTE F - STOCK OPTION PLAN
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25), and related interpretations
in accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation," requires use of option valuation
models that were not developed for use in valuing employee stock options. No
compensation expense is recognized under APB 25, because the exercise price of
the Company's employee stock options equals the market price of the underlying
stock on the date of grant.
The Company's 1994 Incentive Stock Option Plan has authorized the grant of
options to key employees and consultants for up to 750,000 shares of the
Company's common stock. Options granted generally have ten-year terms and vest
and become fully exercisable at the end of five years.
<PAGE>
PAGE 15
NOTE F - STOCK OPTION PLAN (continued)
Statement 123 requires pro forma disclosure of 1996 and 1995 net income and
earnings per share for all stock options granted subsequent to December 31,
1994, under the fair value method of that Statement. The fair value for these
options was estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted-average assumptions: risk-free interest rates
of 6.16% to 6.22%, volatility factor of the expected market price of the
Company's common stock of .271, and weighted-average expected life of the option
of six years.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions, including the expected stock price volatility. Because
the Company's stock options have characteristics significantly different from
those of traded options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of the fair
value of its stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information for options granted subsequent to December 31, 1994, follows
(in thousands, except earnings per share information):
1996 1995
Pro forma net income................... $ 1,067 $ 174
Pro forma earnings per share
Primary.............................. $ .41 $ .08
Fully diluted........................ .40 .08
A summary of the Company's stock option activity and related information for the
years ended December 31 follows (in thousands, except weighted-average exercise
price information):
Option Weighted-Average
Shares Exercise Price
Outstanding at December 31, 1994....... 154 $16
Granted.............................. 116 16
Exercised............................ -- --
Canceled............................. ( 3) 15
-----
Outstanding at December 31, 1995...... 267 16
Granted.............................. 140 18
Exercised............................ ( 3) 16
Canceled............................. ( 7) 15
--
Outstanding at December 31, 1996....... 397 $17
=== ===
Exercisable at December 31, 1996...... 82 $16
=== ===
The weighted-average fair value of options granted during 1995 and 1996 was
$6.28 and $7.58, respectively. Exercise prices for options outstanding as of
December 31, 1996, ranged from $15 to $20. The weighted-average remaining
contractual life of those options is 7.9 years.
<PAGE>
PAGE 16
NOTE G - INCOME TAXES
<TABLE>
<CAPTION>
1996 1995 1994
(Thousands of dollars)
Income (loss) before income taxes consisted of the following:
<S> <C> <C> <C>
United States ................................................. $ 2,371 $ 250 $ 1,099
Other countries ............................................... 381 359 ( 1,578)
------- ------- -------
Total ....................................................... $ 2,752 $ 609 ($ 479)
======= ======= =======
Income tax provision consisted of the following:
Current:
Federal ..................................................... $ 784 $ 154 $ 426
State ....................................................... 50 -- 129
Other countries ............................................. 494 106 4
------- ------- -------
1,328 260 559
Deferred ...................................................... 146 90 51
------- ------- -------
TOTAL INCOME TAX EXPENSE .......................................... $ 1,474 $ 350 $ 610
======= ======= =======
NET INCOME TAXES PAID (REFUNDS) ................................... $ 924 $ 167 ($ 689)
======= ======= =======
</TABLE>
The differences between the provision for income taxes and income tax (benefit)
using the federal statutory rate were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
(Thousands of dollars)
<S> <C> <C> <C>
Tax expense (benefit) at the federal statutory rate (34%) ..................... $ 936 $ 207 ($ 163)
Losses in countries for which no tax benefit is recognized .................... 274 275 548
Other countries' rate differences (loss benefits) ............................. 90 (291) --
State income tax, net of federal tax benefit .................................. 100 (63) 4
Permanent differences ......................................................... 74 117 117
Other ......................................................................... -- 105 104
------ ------ ------
Provision for income taxes .................................................. $1,474 $ 350 $ 610
====== ====== ======
</TABLE>
<PAGE>
PAGE 17
NOTE G - INCOME TAXES (continued)
The components of deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
(Thousands of dollars)
Deferred tax liabilities:
<S> <C> <C> <C>
Tax over book depreciation ............................ $1,915 $1,704 $1,875
Prepaid pension costs ................................. 4,197 2,554 2,182
------ ------ ------
Total deferred tax liabilities ...................... 6,112 4,258 4,057
Deferred tax assets:
Net operating loss carryforwards - federal and state .. -- 35 --
Net operating loss carryforwards - other countries .... 3,161 3,171 3,382
Postretirement medical benefits ....................... 1,489 1,045 1,097
Inventories ........................................... 1,475 807 644
Vacation obligations .................................. 460 424 351
Alternative minimum tax credits ....................... 264 480 472
Accruals and reserves ................................. 1,315 531 429
------ ------ ------
Total deferred tax assets ........................... 8,164 6,493 6,375
Valuation allowance for deferred tax assets ........... ( 3,161) ( 3,171) ( 3,382)
------ ------ ------
Net deferred tax assets ............................. 5,003 3,322 2,993
------ ------ ------
Net deferred tax liabilities ........................ $1,109 $ 936 $1,064
====== ====== ======
</TABLE>
The Company's international subsidiaries have net operating loss carryforwards
that aggregate to approximately $9.3 million for income tax purposes, including
approximately $6.8 million with unlimited expiration. The balance expires in
varying amounts beginning in years 1997 through 2004. For financial reporting
purposes, a valuation allowance has been recognized to offset the deferred tax
assets related to these carryforwards. Utilization of these net operating losses
is contingent upon various international operations generating sufficient
taxable income, which cannot be ascertained at this time.
<PAGE>
PAGE 18
NOTE H - EMPLOYEE RETIREMENT PLANS
The Company has pension plans that cover substantially all United States,
Canadian and United Kingdom employees. These plans provide benefits based upon
years of service and compensation prior to retirement. Pension costs are funded
as actuarially determined and to the extent cash contributions are deductible
for tax purposes.
The following is a summary of net periodic pension income:
<TABLE>
<CAPTION>
1996 1995 1994
(Thousands of dollars)
<S> <C> <C> <C>
Service cost - benefits earned during the period.. $ 2,626 $ 2,017 $ 2,484
Interest cost on projected benefit obligation .... 4,141 3,770 3,644
Actual return on plan assets ..................... (19,677) (23,167) (328)
Net amortization and deferral .................... 12,270 16,306 (5,845)
-------- -------- --------
Net periodic pension income .................... ($ 640) ($ 1,074) ($ 45)
======== ======== ========
</TABLE>
In addition to the net periodic pension income noted above, the Company
recognized a pretax noncash gain of $3,066,000 during 1996 for the combined net
effect of settlements, curtailments and special termination benefits in
connection with a special early retirement offer to certain eligible employees
in the United States.
The funded status of pension plans as of December 1 is as follows:
1996 1995
Thousands of Dollars
Plan assets at fair value (primarily stocks
and U.S. Government obligations) ............. $103,724 $ 96,212
Less projected benefits:
Vested ....................................... 43,868 45,396
Accumulated, not vested ...................... 233 199
Effects of future pay increases .............. 12,482 12,378
-------- --------
Plan assets over projected benefits ............ 47,141 38,239
Adjustments:
Unrecognized net asset ....................... ( 4,256) ( 5,899)
Unrecognized net gains ....................... ( 33,076) (26,377)
--------- --------
Net pension asset recognized in the consolidated
balance sheets ............................... $ 9,809 $ 5,963
======== ========
Significant assumptions used in accounting for the pension plans are:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Weighted-average discount rate.................. 7.25% 7.25% 8.25%
Long-term rate of return on plan assets......... 8.00% 8.00% 8.00%
Rate of increase in future compensation levels.. Graded from Graded from Graded from
7.44% to 2.80% 7.44% to 2.80% 7.44% to 2.80%
at ages 21 to 60 at ages 21 to 60 at ages 21 to 60
</TABLE>
Effective November 1, 1994, the Company also sponsors a defined contribution
401(k) plan covering substantially all United States employees under which
employees may defer a portion of their salary. The Company matches 50% of
deferred amounts up to a maximum of 4% of a participant's compensation. Amounts
charged to expense for this plan were approximately $660,000 in 1996, $611,000
in 1995, and $100,000 in 1994.
<PAGE>
PAGE 19
NOTE I - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides medical insurance benefits to early retirees in the United
States until they reach age 65.
Net periodic benefit costs include the following components:
1996 1995 1994
Thousands of Dollars
Service cost of benefits earned ............ $ 86 $ 68 $ 88
Interest cost on the accumulated
postretirement benefit
obligation ("APBO") ...................... 183 141 155
Net amortization and deferral .............. ( 17) ( 42) ( 21)
----- ---- ----
Total net periodic benefit cost ........ $252 $167 $222
==== ==== ====
In addition to the net periodic benefit cost, in 1996, the Company recognized a
net curtailment loss of $1,010,000 related to a special early retirement offer
to certain eligible employees in the United States.
Summary of the unfunded APBO as of December 31 is as follows:
1996 1995
Thousands of Dollars
Early retirees ........................................ $1,887 $ 530
Fully eligible active employees ....................... 267 341
Other active participants ............................. 982 1,132
------ ------
Total APBO .......................................... 3,136 2,003
Unrecognized net gain ................................. 610 740
------ ------
Accrued postretirement medical benefits recognized
in accompanying consolidated balance sheets ......... $3,746 $2,743
====== ======
The discount rate used in determining the APBO was 7.25% at December 31, 1996,
and December 31, 1995. The assumed health care cost trend used in measuring the
APBO was 9% in 1995 and 8% in 1996, declining to 7% by the year 1997 and
remaining level thereafter. If the health care cost trend rate assumptions were
increased by 1%, the net periodic postretirement benefit cost for 1996 would
increase by approximately $37,000 and the APBO as of December 31, 1996, would
increase by approximately $348,000.
<PAGE>
PAGE 20
NOTE J - SEGMENT AND GEOGRAPHIC INFORMATION
The Company, operating in one industry segment, is in the business of
developing, manufacturing and selling process control instruments and systems.
In addition to the United States, the Company conducts separate operations in
Canada, Europe and the Pacific Rim. A summary of operations outside of the
United States is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
Thousands of Dollars
<S> <C> <C> <C>
Sales to unaffiliated customers............................................. $37,993 $27,045 $19,222
Operating income (loss)................................................... 661 276 ( 1,708)
Identifiable assets - including $1,474 in 1996, $1,115 in 1995, and
$866 in 1994 of profits on inventories purchased from the parent........ 25,398 24,849 16,844
Total liabilities - including $9,909 in 1996, $11,320 in 1995, and
$8,179 in 1994 of intercompany obligations to the parent ............... 19,020 18,629 10,901
</TABLE>
Operating income (loss) is total revenue less operating expenses, excluding
interest and corporate expenses. Sales by the parent company to subsidiaries
were $16,039,000 in 1996, $11,956,000 in 1995, and $9,873,000 in 1994. Profit
margins on intercompany sales approximate normal profit margins to unaffiliated
customers.
NOTE K - QUARTERLY DATA (UNAUDITED)
(Thousands of dollars, except per share data)
1996
Quarter Ended
March 31 June 30 September 30 December 31
Net sales .................. $35,155 $35,968 $35,983 $35,786
Gross profit ............... 15,150 14,631 15,454 16,136
Net income ................. 229 59 352 638
Earnings per share:
Primary .................. $ .09 $ .02 $ .13 $ .24
Fully diluted ............ .08 .02 .13 .24
Stock price range:
High ..................... 23 19 3/8 19 3/4 19 3/4
Low ...................... 16 1/4 15 1/4 17 5/16 17 1/2
1995
Quarter Ended
March 31 June 30 September 30 December 31
Net sales ................ $ 24,513 $ 29,451 $ 29,910 $ 37,163
Gross profit ............. 10,827 13,633 13,022 16,595
Net income (loss) ........ (839) 321 (448) 1,225
Earnings (loss) per share:
Primary ................ ($.40) $ .15 ($.22) $ .56
Fully diluted .......... ( .40) .15 (.22) .54
Stock price range:
High ................... 16 18 1/2 18 3/4 18 3/4
Low .................... 13 15 1/4 16 1/2 17 3/4
<PAGE>
PAGE 21, REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders of Moore Products Co.
We have audited the accompanying consolidated balance sheets of Moore
Products Co. as of December 31, 1996 and 1995, and the related consolidated
statements of operations and cash flows for each of the three years in the
period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Moore Products
Co. at December 31, 1996 and 1995, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
Philadelphia, Pennsylvania Ernst & Young LLP
January 31, 1997 ------------------
ERNST & YOUNG LLP
PAGE 21, SIDEBAR
Directors
Robert B. Adams*
Vice President, Engineering
(Retired)
Edward J. Curry*
Executive Vice President and
Chief Operating Officer
F. Lawton Hindle
President (Retired)
Moore Products Co. (Canada) Inc.
Edward T. Hurd*
Chairman of the Board and
Chairman, Executive Committee
James O. Moore*
Director of Corporate Technology
Thomas C. Moore
Regional Manager (Retired)
William B. Moore*
President and
Chief Executive Officer
Ralph H. Owens
Senior Vice President
(Retired)
Raymond M. Reed
President
R. Reed & Associates, Inc.
Edwin G. Rorke*
Chairman Emeritus
*Member of Executive Committee
Officers
William B. Moore
President and
Chief Executive Officer
Edward J. Curry
Executive Vice President and
Chief Operating Officer
Edward M. Coll
Vice President - General Manager
Systems Division
James McDonald
Vice President, Sales
Robert E. Wisniewski
Secretary and Treasurer
<PAGE>
PAGE 22
Selected Financial Data
<TABLE>
<CAPTION>
As Reported for Year Ended December 31
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net sales ................ $ 142,892,000 $ 121,037,000 $ 100,680,000 $ 88,059,000 $ 96,409,000
Income (loss) before
cumulative effect of
change in accounting ... 1,278,000 259,000 (1,089,000) (4,589,000) (1,031,000)
Net income (loss) ........ 1,278,000 259,000 (1,089,000) (4,356,000) (2,603,000)
Total assets ............. 86,047,000 78,193,000 60,150,000 57,459,000 61,229,000
Earnings (loss) per share:
Primary ................ $.49 $.12 ($.53) ($2.09) $(1.25)
Fully diluted .......... .47 .12 (.53) (2.09) (1.25)
Cash dividends per
common share ........... -- -- -- .06 .34
</TABLE>
See Note B in the Notes to Consolidated Financial Statements for
explanation of unusual items. For the years ended December 31, 1993 and 1992,
loss before cumulative effect of change in accounting and net loss include
special gains from early retirement settlements of $580,000 and $2,511,000,
respectively. During 1993, the Company adopted provisions of SFAS No. 109,
"Accounting for Income Taxes," which resulted in a cumulative noncash gain of
$233,000. During 1992, the Company adopted provisions of SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions." This
accounting change resulted in a cumulative pretax charge of $2,587,000 or
$1,572,000 ($.76 per share), net of income taxes.
Shareholder Information
The Company's Common Stock trades on the Nasdaq National Market tier of The
Nasdaq Stock Market under the symbol "MORP." Common Stockholders of record on
December 31, 1996, totaled approximately 960 based on information obtained from
the Company's transfer agent.
Shareholders can receive general information about the Company from its Internet
web site (www.mooreproducts.com). Copies of the Annual Report on Form 10-K and
quarterly financial reports are available to shareholders without charge. If you
would like to request specific information or have your name added to our
mailing list, please write to the Secretary and Treasurer, Moore Products Co.,
Spring House, PA 19477-0900.
If your stock certificate is lost, stolen or destroyed, or if you change your
address, please call our stock transfer agent, ChaseMellon Shareholder Services,
at 1-800-526-0801.
Exhibit 21
SUBSIDIARIES OF REGISTRANT*
State or Other
Jurisdiction of
Incorporation or
Name of Subsidiary Organization
------------------ ----------------
Moore Products Co. (Canada) Inc. Canada
Moore Products Co. (U.K.) Limited England
Moore Products Co. B.V. Netherlands
Moore Products Co. (Italia) S.r.l. Italy
Moore Products Co. (France) SARL France
Moore Products Co. (Australia) Pty. Ltd. Australia
Moore Products Co (S) Pte Ltd Singapore
Moore Products Co. (Japan) K.K. Japan
*The names of certain subsidiaries are omitted pursuant to Item 601(b)(21)(ii)
of Regulation S-K.
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Moore Products Co. of our report dated January 31, 1997, included in the 1996
Annual Report to Shareholders of Moore Products Co.
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-82948) pertaining to the Incentive Stock Option and Non-Qualified
Stock Option Plan of Moore Products Co. of our report dated January 31, 1997,
with respect to the consolidated financial statements of Moore Products Co.
incorporated by reference in the Annual Report (Form 10-K) for the year ended
December 31, 1996.
/s/Ernst & Young LLP
Philadelphia, Pennsylvania
March 27, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 4066000
<SECURITIES> 0
<RECEIVABLES> 30541000
<ALLOWANCES> 0
<INVENTORY> 21479000
<CURRENT-ASSETS> 59694000
<PP&E> 58183000
<DEPRECIATION> 41639000
<TOTAL-ASSETS> 86047000
<CURRENT-LIABILITIES> 24367000
<BONDS> 0
0
176000
<COMMON> 2586000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 86047000
<SALES> 142892000
<TOTAL-REVENUES> 142892000
<CGS> 81521000
<TOTAL-COSTS> 81521000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 466000
<INCOME-PRETAX> 2752000
<INCOME-TAX> 1474000
<INCOME-CONTINUING> 1278000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1278000
<EPS-PRIMARY> .49
<EPS-DILUTED> .47
</TABLE>
