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, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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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 July 31, 1997, the number of shares of Registrant's Common Stock
outstanding was 2,586,572.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
MOORE PRODUCTS CO.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30
----------------------------
1997 1996
---- ----
<S> <C> <C>
Net sales $75,715,000 $71,123,000
Cost of products sold 43,111,000 41,342,000
----------- -----------
Gross profit 32,604,000 29,781,000
Selling, research and development, administrative
and general expenses (Notes C & D) 29,513,000 28,330,000
----------- -----------
Income from operations 3,091,000 1,451,000
Other income 63,000 62,000
Interest expense (167,000) (253,000)
----------- -----------
Income before income taxes 2,987,000 1,260,000
Income tax provision 884,000 972,000
----------- -----------
Net income $ 2,103,000 $ 288,000
=========== ===========
Earnings per common share:
Primary $ .78 $ .11
===== =====
Fully diluted $ .76 $ .11
===== =====
</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
----------------------------
1997 1996
---- ----
<S> <C> <C>
Net sales $37,897,000 $35,968,000
Cost of products sold 21,339,000 21,337,000
----------- -----------
Gross profit 16,558,000 14,631,000
Selling, research and development, administrative
and general expenses (Notes C & D) 15,023,000 14,170,000
----------- -----------
Income from operations 1,535,000 461,000
Other income 93,000 17,000
Interest expense (83,000) (158,000)
----------- ----------
Income before income taxes 1,545,000 320,000
Income tax provision 497,000 261,000
----------- ----------
Net income $ 1,048,000 $ 59,000
=========== ==========
Earnings per common share:
Primary $ .39 $ .02
===== =====
Fully diluted $ .38 $ .02
===== =====
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
MOORE PRODUCTS CO.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30 December 31
ASSETS 1997 1996
----------- -----------
CURRENT ASSETS (Unaudited) (Note A)
<S> <C> <C>
Cash and cash equivalents $ 4,736,000 $ 4,066,000
Trade accounts receivable 32,106,000 30,541,000
Inventories 21,611,000 21,479,000
Prepaid expenses and deferred taxes 3,693,000 3,608,000
----------- -----------
TOTAL CURRENT ASSETS 62,146,000 59,694,000
PROPERTY, PLANT AND EQUIPMENT 58,940,000 58,183,000
Less: Accumulated depreciation (43,034,000) (41,639,000)
----------- -----------
15,906,000 16,544,000
OTHER ASSETS 10,773,000 9,809,000
----------- -----------
$88,825,000 $86,047,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to bank $ -- $ 4,230,000
Accounts payable 15,226,000 12,370,000
Accrued compensation 3,447,000 2,638,000
Advances from customers 6,545,000 5,129,000
----------- -----------
TOTAL CURRENT LIABILITIES 25,218,000 24,367,000
OTHER LIABILITIES 7,126,000 7,126,000
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 2,585,972 shares 2,586,000 2,586,000
Capital in excess of par value 10,885,000 10,885,000
Retained earnings 42,834,000 40,907,000
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 56,481,000 54,554,000
----------- -----------
$88,825,000 $86,047,000
=========== ===========
</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
-------------------------------
OPERATING ACTIVITIES: 1997 1996
---- ----
<S> <C> <C>
Net income $ 2,103,000 $ 288,000
Noncash (income) expenses:
Depreciation 1,749,000 1,704,000
Deferred income taxes (133,000) 183,000
Pension and other postretirement
benefits (Note C) (964,000) (1,674,000)
Changes in operating assets and liabilities:
Trade accounts receivable (1,565,000) 32,000
Inventories (132,000) (1,113,000)
Accounts payable 2,856,000 674,000
Accrued compensation 809,000 (222,000)
Advances from customers 1,416,000 555,000
Prepaid expenses 48,000 454,000
------------ -----------
6,187,000 881,000
INVESTING ACTIVITY:
Net purchase of property, plant and equipment (1,197,000) (1,946,000)
FINANCING ACTIVITIES:
(Decrease) increase in notes payable to bank (4,230,000) 2,198,000
Proceeds from exercise of stock options --- 12,000
------------ -----------
(4,230,000) 2,210,000
Effect of exchange rate changes (90,000) 31,000
------------ -----------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 670,000 1,176,000
Cash and cash equivalents at beginning of year 4,066,000 1,103,000
------------ -----------
CASH AND CASH EQUIVALENTS
END OF PERIOD $4,736,000 $ 2,279,000
============ ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MOORE PRODUCTS CO.
June 30, 1997
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, 1997, are not necessarily indicative
of the results that may be expected for the year ended December 31, 1997.
The balance sheet at December 31, 1996, 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
2,691,450 shares and 2,621,963 shares for the six month periods ended June 30,
1997 and 1996, respectively; and 2,678,359 shares and 2,613,595 shares for the
three month periods ended June 30, 1997 and 1996, respectively. The average
number of common shares used to compute fully diluted earnings per share were
2,761,739 shares and 2,692,191 shares for the six month periods ended June 30,
1997 and 1996, respectively; and 2,750,495 shares and 2,687,783 shares for the
three month periods ended June 30, 1997 and 1996, respectively.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share, which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
stock options will be excluded. The impact is expected to result in increases in
primary earnings per share of $.03 per share and $.01 per share for the six and
three month periods ended June 30, 1997 and no change for the six and three
month periods ended June 30, 1996.
6
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MOORE PRODUCTS CO.
June 30, 1997
Note A - Basis of Presentation (continued)
The impact of Statement 128 on the calculation of fully diluted earnings per
share for these periods is not expected to be material.
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, 1996.
Certain reclassifications have been made in prior period's financial statements
in order to conform with the current-period basis of presentation.
Note B - Inventories
The components of inventory consist of the following:
June 30 December 31
1997 1996
----------- -----------
Completed instruments $ 4,291,000 $ 4,554,000
Finished parts 10,396,000 11,091,000
Work in process 6,224,000 4,957,000
Raw material 700,000 877,000
----------- -----------
$21,611,000 $21,479,000
=========== ===========
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.
7
<PAGE>
Item 2. Management's Discussion and Analysis of the Results of Operations.
When compared with the same periods in 1996, sales for the six months ended June
30, 1997, increased $4,592,000 or 6% and for the three months ended June 30,
1997, increased $1,929,000 or 5%, the result of a higher volume of products
shipped. Control Systems sales continue to be the primary reason for the overall
sales increases in the current year. Cost of goods sold increased in response to
the higher sales but were also affected by product mix and reduced manufacturing
costs. As a result, gross profit margins improved from 1996 to 1997.
Selling, research and development, administrative and general expenses increased
approximately 4% and 6%, respectively, in the six and three month periods ended
June 30, 1997, compared to the same periods last year. Higher payroll and
payroll-related costs were the primary reasons for this increase. The Company
continues to operate at increased staffing levels in the sales and support areas
of the organization which are experiencing a higher volume of business activity.
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 pension benefits relating to an
early retirement offer. In addition, the Company recorded a loss of $1,000,000
for write-off of assets related to an international joint-venture.
The nontraditional relationship of income tax to pretax income as of June 30,
1997, is the result of improved operating results in countries for which loss
benefit carryovers are available. 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 fully recognized for financial reporting
purposes because the realization of such benefits is not presently assured.
Demand for the Company's products and services has continued to exceed 1996. For
the first six months of 1997, consolidated orders received by the Company were
approximately 5% higher than for the corresponding period in 1996. The
consolidated backlog of unshipped orders as of June 30, 1997, was $46,531,000
compared to $40,493,000 as of June 30, 1996.
Improved operating results and working capital management have reduced the
Company's dependence on external financing. Cash generated from operations was
$6,187,000 for the first 6 months of 1997 compared to $881,000 in the first half
of 1996. Investment in new plant and equipment was $1,197,000 compared to
$1,946,000 in the first half of 1996. It is expected that cash requirements for
the year will continue to be met from operations and existing credit facilities.
8
<PAGE>
PART II. OTHER INFORMATION
Item 3. Defaults Upon Senior Securities.
The Company's Articles of Incorporation, as amended, essentially provide that
(i) holders of the Company's Preferred Shares are entitled to receive, as and
when declared by the Board, cumulative dividends at the rate of 5% ($.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 Company'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 Company has paid cash dividends on both its Common and
Preferred Shares quarterly, and that practice continued through the first
quarter of 1993. No dividends on either Preferred or Common Shares have been
paid since March 1, 1993. At its meeting on July 24, 1997, the Company's Board
of Directors authorized the resumption of quarterly dividends on the Company's
Preferred Shares and declared a quarterly dividend of $.0125 per share on the
Preferred Shares (and also declared and authorized the payment of all cumulative
dividend arrearages, aggregating $37,389, or $.2125 per Preferred Share), all
payable September 2, 1997 to Preferred Shareholders of record on August 15,
1997. No dividend was declared on the Common Shares.
Item 4. Submission of Matters to a Vote of Security Holders.
On May 1, 1997, the Registrant held its Annual Meeting of Shareholders at which
time three directors were elected to serve for terms expiring in 2001. The
tabulation of votes with respect to each nominee was as follows: Robert B.
Adams, For - 3,154,560, Withheld - 5,869; Edward T. Hurd, For - 3,157,675,
Withheld - 2,754; Edwin G. Rorke, For - 3,155,513, Withheld - 4,916.
In addition, the Shareholders approved a proposal for adoption of the 1997
Non-Employee Directors' Equity Incentive Plan, with tabulated votes as follows:
For - 2,649,740, Against - 455,739, Abstain - 34,362; and a proposal to amend
the Company's 1994 Incentive Stock Option and Non-qualified Stock Option Plan to
make non-employee consultants under contract with the Company eligible to
receive options under the Plan, with tabulated votes as follows: For -
2,814,926, Against - 282,199, Abstain - 33,319.
9
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibit
Number Description
- ------- -----------
27 Financial Data Schedule.
(Schedule submitted in electronic format only.)
----------------------
(b) No reports on Form 8-K have been filed during the most recently completed
fiscal quarter.
10
<PAGE>
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 11, 1997 By: /s/ R. E. Wisniewski
-----------------------------
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
11
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,736,000
<SECURITIES> 0
<RECEIVABLES> 32,106,000
<ALLOWANCES> 0
<INVENTORY> 21,611,000
<CURRENT-ASSETS> 62,146,000
<PP&E> 58,940,000
<DEPRECIATION> 43,034,000
<TOTAL-ASSETS> 88,825,000
<CURRENT-LIABILITIES> 25,218,000
<BONDS> 0
0
176,000
<COMMON> 2,586,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 88,825,000
<SALES> 75,715,000
<TOTAL-REVENUES> 75,715,000
<CGS> 43,111,000
<TOTAL-COSTS> 43,111,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 167,000
<INCOME-PRETAX> 2,987,000
<INCOME-TAX> 884,000
<INCOME-CONTINUING> 2,103,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,103,000
<EPS-PRIMARY> .78
<EPS-DILUTED> .76
</TABLE>
