SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
---------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to ___________________
Commission file number 0-545
----------------
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
-------------------
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 October 31, 1998, the number of shares of Registrant's Common Stock
outstanding was 2,617,071.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
MOORE PRODUCTS CO.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Nine Months Ended
September 30
------------------------------
1998 1997
---- ----
Net sales $122,736,000 $116,138,000
Cost of sales 74,494,000 67,339,000
------------ ------------
Gross profit 48,242,000 48,799,000
Selling, research and development,
administrative and general expenses 42,246,000 42,624,000
------------ ------------
Operating income 5,996,000 6,175,000
Interest expense 60,000 170,000
Other (income) expense (289,000) (147,000)
------------ ------------
Income before income taxes 6,225,000 6,152,000
Income tax provision 3,089,000 2,262,000
------------ ------------
Net income $ 3,136,000 $ 3,890,000
============ ============
Earnings per common share:
Basic $1.20 $1.50
===== =====
Diluted $1.09 $1.41
===== =====
See Notes to Condensed Consolidated Financial Statements.
2
<PAGE>
MOORE PRODUCTS CO.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
September 30
---------------------------------
1998 1997
---- ----
Net sales $ 40,738,000 $ 40,423,000
Cost of sales 24,928,000 23,066,000
------------ ------------
Gross profit 15,810,000 17,357,000
Selling, research and development,
administrative and general expenses 14,051,000 14,273,000
------------ ------------
Operating income 1,759,000 3,084,000
Interest expense 40,000 3,000
Other (income) expense (85,000) (84,000)
------------ ------------
Income before income taxes 1,804,000 3,165,000
Income tax provision 1,227,000 1,378,000
------------ ------------
Net income $ 577,000 $ 1,787,000
============ ============
Earnings per common share:
Basic $ .22 $ .69
===== =====
Diluted $ .20 $ .65
===== =====
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
MOORE PRODUCTS CO.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30 December 31
1998 1997
(Unaudited) (Note A)
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,870,000 $ 3,816,000
Trade accounts receivable, less allowances of
$1,742,000 in 1998 and $1,771,000 in 1997 38,203,000 40,768,000
Inventories 19,770,000 18,317,000
Prepaid expenses and deferred income taxes 5,042,000 4,209,000
------------ ------------
TOTAL CURRENT ASSETS 65,885,000 67,110,000
PROPERTY, PLANT AND EQUIPMENT 63,286,000 59,526,000
Less: Accumulated depreciation (46,993,000) (44,257,000)
------------ ------------
16,293,000 15,269,000
OTHER ASSETS
Prepaid pension costs 14,262,000 11,613,000
------------ ------------
$ 96,440,000 $ 93,992,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to bank $ 1,700,000 $ --
Accounts payable 5,554,000 8,861,000
Accrued compensation 3,636,000 4,890,000
Advances from customers 4,149,000 2,977,000
Accrued income taxes 2,464,000 1,893,000
Other accrued liabilities 8,812,000 7,254,000
------------ ------------
TOTAL CURRENT LIABILITIES 26,315,000 25,875,000
OTHER LIABILITIES 7,553,000 7,628,000
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 - 2,616,871 shares
in 1998 and 2,592,628 shares in 1997 2,617,000 2,593,000
Capital in excess of par value 11,338,000 10,980,000
Retained earnings 50,715,000 48,627,000
Foreign currency translation adjustments (2,274,000) (1,887,000)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 62,572,000 60,489,000
------------ ------------
$ 96,440,000 $ 93,992,000
============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements
4
<PAGE>
MOORE PRODUCTS CO.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
---------------------------------
1998 1997
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 3,136,000 $ 3,890,000
Noncash (income) expenses:
Depreciation 2,903,000 2,619,000
Deferred income taxes (348,000) (209,000)
Pension and other postretirement benefits (2,719,000) (1,226,000)
Changes in operating assets and liabilities:
Trade accounts receivable 2,565,000 (3,385,000)
Inventories (1,453,000) (327,000)
Accounts payable (3,307,000) 969,000
Other accrued liabilities 1,558,000 965,000
Accrued compensation (1,254,000) 1,462,000
Advances from customers 1,172,000 1,342,000
Accrued income taxes 571,000 742,000
Prepaid expenses (490,000) 102,000
----------- -----------
Net cash provided by (used in)
operating activities 2,334,000 6,944,000
INVESTING ACTIVITY:
Net purchase of property, plant and equipment (3,968,000) (1,904,000)
FINANCING ACTIVITIES:
Increase (decrease) in notes payable to bank 1,700,000 (4,230,000)
Proceeds from exercise of stock options 382,000 41,000
Dividends paid (1,047,000) (39,000)
----------- -----------
Net cash provided by (used in)
financing activities 1,035,000 (4,228,000)
Effect of exchange rate changes (347,000) (256,000)
----------- -----------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (946,000) 556,000
Cash and cash equivalents at beginning of year 3,816,000 4,066,000
----------- -----------
CASH AND CASH EQUIVALENTS
END OF PERIOD $ 2,870,000 $ 4,622,000
=========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MOORE PRODUCTS CO.
September 30, 1998
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
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and nine month
periods ended September 30, 1998, are not necessarily indicative of the results
that may be expected for the year ended December 31, 1998.
The balance sheet at December 31, 1997 has been derived from the audited
financial statements at that date.
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, 1997.
Certain reclassifications have been made in prior periods' financial statements
in order to conform to the current-period basis of presentation.
Note B - Inventories
- --------------------
The components of inventory consist of the following:
September 30 December 31
1998 1997
----------- -----------
Completed instruments $ 3,339,000 $ 3,590,000
Finished parts 7,960,000 9,078,000
Work in process 8,056,000 5,196,000
Raw material 415,000 453,000
----------- -----------
$19,770,000 $18,317,000
=========== ===========
6
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MOORE PRODUCTS CO.
September 30, 1998
Note C - Earnings per Share
- ---------------------------
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Nine Months Ended
September 30
-----------------------------
1998 1997
---------- ----------
<S> <C> <C>
Numerator:
Net income $3,136,000 $3,890,000
Preferred stock dividends (7,000) (7,000)
---------- ----------
Numerator for basic earnings per share -
income available to common stockholders 3,129,000 3,883,000
Effect of dilutive securities:
Preferred stock dividends 7,000 7,000
---------- ----------
Numerator for diluted earnings per share -
income available to common stockholders
after assumed conversions $3,136,000 $3,890,000
========== ==========
Denominator:
Denominator for basic earnings per share -
weighted average shares 2,609,799 2,586,432
Effect of dilutive securities:
Stock options 198,925 103,455
Convertible preferred stock 70,380 70,380
---------- ----------
Dilutive potential common shares 269,305 173,835
---------- ----------
Denominator for diluted earnings per share -
adjusted weighted average shares and
assumed conversions 2,879,104 2,760,267
========== ==========
Basic income per share $1.20 $1.50
===== =====
Diluted income per share $1.09 $1.41
===== =====
</TABLE>
7
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MOORE PRODUCTS CO.
September 30, 1998
Note C - Earnings per Share (continued)
- ---------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
September 30
-----------------------------
1998 1997
---------- ----------
<S> <C> <C>
Numerator:
Net income $ 577,000 $1,787,000
Preferred stock dividends (2,000) (2,000)
---------- ----------
Numerator for basic earnings per share -
income available to common stockholders 575,000 1,785,000
Effect of dilutive securities:
Preferred stock dividends 2,000 2,000
---------- ----------
Numerator for diluted earnings per share -
income available to common stockholders
after assumed conversions $ 577,000 $1,787,000
========== ==========
Denominator:
Denominator for basic earnings per share -
weighted average shares 2,616,384 2,587,352
Effect of dilutive securities:
Stock options 135,799 102,121
Convertible preferred stock 70,380 70,380
---------- ----------
Dilutive potential common shares 206,179 172,501
---------- ----------
Denominator for diluted earnings per share -
adjusted weighted average shares and
assumed conversions 2,822,563 2,759,853
========== ==========
Basic income per share $ .22 $ .69
===== =====
Diluted income per share $ .20 $ .65
===== =====
</TABLE>
8
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MOORE PRODUCTS CO.
September 30, 1998
Note D - Comprehensive Income
- -----------------------------
As of January 1, 1998, the Company adopted Statement 130, "Reporting
Comprehensive Income." Statement 130 establishes new rules for the reporting and
display of comprehensive income and its components; however, the adoption of
this Statement had no impact on the Company's net income or shareholders'
equity. Statement 130 requires foreign currency translation adjustments, which
prior to adoption were reported separately in shareholders' equity, to be
included in other comprehensive income.
During the nine month periods ended September 30, 1998 and 1997, total
comprehensive income, which is comprised of net income and net change in the
accumulated foreign currency translation adjustment account for the nine month
period, amounted to $2,749,000 and $3,483,000, respectively. For the quarters
ended September 30, 1998 and 1997, total comprehensive income, which is
comprised of net income and net change in the accumulated foreign currency
translation adjustment account for the three month period, amounted to $232,000
and $1,557,000, respectively.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
This report contains various forward-looking statements and includes
assumptions concerning Moore Products Co.'s ("Moore") operations, future results
and prospects. These forward-looking statements are based on current
expectations and subject to risks and uncertainties. Moore does not undertake
any obligation to publicly release the results of any revisions that may be made
to these forward-looking statements to reflect any future events or
circumstances. In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, Moore provides this cautionary
statement identifying important factors that, among others, could cause the
actual results and events to differ materially from those set forth in or
implied by forward-looking statements and related assumptions. Such factors
include, but are not limited to: product demand and market acceptance risks; the
effect of global economic conditions; the impact of competitive products and
pricing; product development and technological difficulties; capacity and supply
constraints or difficulties; availability of capital resources; general business
conditions; and changes in government laws and regulations, including taxes.
Results of Operations
Moore sales for the third quarter of 1998 were $40,738,000 compared to
$40,423,000 for the same period last year. Year to date sales for the nine
months ended September 30, 1998 were $122,736,000 compared to $116,138,000 for
the same period last year, a 6% increase. These increases reflect higher
shipments of process control and measurement systems from operations in the
United States and the United Kingdom.
Order bookings for the third quarter of fiscal 1998 were $42,680,000 compared to
$42,309,000 for the same period last year. A slowing in sales order growth is
attributed to a strategic shift in 1998 from direct to indirect distribution for
certain measurement and control products in the United States. Several
agreements have only recently been concluded within the third quarter of 1998
and are expected to improve future sales coverage for these products. Year to
date order bookings grew by 10% to $131,462,000 from $120,010,000 last year.
These increases are primarily attributed to orders placed for process control
automation systems products. The consolidated backlog of unshipped orders as of
September 30, 1998 was $46,302,000 compared to $47,893,000 as of September 30,
1997.
Gross profit for the quarter was $15,810,000, or 39% of sales, compared to
$17,357,000, or 43% of sales, for the third quarter of 1997. Gross profit year
to date was $48,242,000, or 39% of sales, compared to $48,799,000, or 42% of
sales, in 1997. Gross profit margin percentages declined compared to last year
as a result of margin erosion on a large power project in the United Kingdom,
product mix and higher manufacturing costs.
10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
Selling, research and development, administrative and general expenses for the
third quarter were $14,051,000, or 34% of sales, compared to $14,273,000, or 35%
of sales in 1997. These expenses year to date were $42,246,000, or 34% of sales,
compared to $42,624,000, or 37% of sales, in 1997. Higher payroll, sales and
marketing expenses in 1998 were offset by higher net periodic pension income
related to Moore's defined benefit pension plan. Net periodic pension income for
the third quarter of 1998 was $883,000 compared to $274,000 for the same period
last year. For the nine months ended September 30, 1998, net periodic pension
income was $2,649,000 compared to $821,000 for the same period last year.
Interest expense for the third quarter of 1998 was $40,000 compared to $3,000
for the same quarter last year. Year to date interest expense was $60,000
compared to $170,000 for the same nine month period in 1997. The decrease from
last year was attributed to reduced borrowing in 1998.
Moore's year to date effective tax rate was 50% of pretax income compared to 37%
for the first nine months of 1997. The fluctuation in the rates was attributable
to a changing mix of operating results and losses in countries for which current
loss benefits are not 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.
Net income for the third quarter ended September 30, 1998 was $577,000 compared
to net income of $1,787,000 for the same quarter of 1997. For the nine months
ended September 30, 1998, net income was $3,136,000 compared to $3,890,000 for
the same period in 1997. Diluted net income per share was $0.20 for the third
quarter of 1998 compared to $0.65 for the third quarter of 1997. For the nine
months ended September 30, 1998, diluted net income per share was $1.09 compared
to $1.41 in 1997.
Recent trends in crude oil prices and worldwide economic concerns have caused
customers in certain process industries to reevaluate capital investment plans.
This may further slow opportunities for sales growth by Moore in the near term.
However, it is felt that Moore's current product offerings and recent
enhancements to APACS+ and QUADLOG systems offer an attractive value in open
automation solutions to customers seeking to maximize return on process
automation investments.
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
Liquidity and Capital Resources
Cash and cash equivalents decreased during the nine-month period ended September
30, 1998 by $946,000. Positive cash flow of $2,334,000, generated from
operations, was used to fund capital expenditures and a special 40-cent per
share cash dividend on the common stock. Capital expenditures are related
primarily to facilities and equipment in support of sales and marketing
promotion, and product development.
Working capital decreased $1,665,000 at September 30, 1998, to $39,570,000 from
$41,235,000 at December 31, 1997. Accounts receivable declined $2,565,000 in the
first nine months of 1998 following record sales in the fourth quarter of 1997
and subsequent collections. During the first nine months of 1998, inventory
levels increased by $1,453,000 reflecting the increase in order backlog from the
year ended December 31, 1997.
Cash and cash equivalents amounted to $2,870,000 at September 30, 1998. Moore
had $1,700,000 of outstanding advances under credit arrangements at September
30, 1998. Management believes that current cash and cash equivalents, cash flow
from operations, and its established credit facilities of approximately
$16,000,000 should be sufficient during 1998 to fund planned capital
expenditures, working capital needs, dividends, and other cash requirements.
Year 2000 Readiness Disclosures
Moore has reviewed its internal information technology and non-information
technology systems to identify and address code changes, testing, and
implementation procedures necessary to make these systems Year 2000 compliant.
Management currently believes that after modification to existing software and
conversion to new software, the Year 2000 problem will not pose significant
operational problems. Moore's significant U.S.-based business computer systems,
operating and application software have been modified and tested. Remaining
information technology systems, which are primarily in subsidiary locations, and
other non-information technology systems are expected to be compliant by the end
of the calendar year 1998. Moore is conducting ongoing discussions with its
suppliers and customers in an attempt to ensure that those parties have taken
appropriate steps to address Year 2000 issues in their systems which may
interface with Moore's business systems or otherwise impact Moore's operations.
Moore is not aware of any supplier or customer with a Year 2000 issue that would
impact Moore significantly.
12
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
Moore has made an assessment of its current product offerings and identified all
products that have date-sensitive software or embedded chips. Initial analysis
suggests that Year 2000 compliance will have minimal impact on Moore's products.
Test plans to confirm proper operation have been developed and are currently
underway for these products. Such testing is approximately 60% complete and is
expected to be completed by December 31, 1998.
Because Moore expects to be compliant for all business critical systems, no
contingency plans have been established at this time. Amounts expended for Year
2000 projects have not been and are not expected to be significant to Moore's
results of operations or financial condition. The total cost of Year 2000
projects, incurred to date and/or expected to be incurred, is currently
estimated to be $700,000. Most of this cost involves internal resources
committed to testing and evaluation of the Company's products and upgrade of
existing business systems.
13
<PAGE>
PART II. OTHER INFORMATION
Item 5. Other Information.
Recently, the Securities and Exchange Commission adopted a new proxy rule (Rule
14a-4(c)(i) under the Securities Exchange Act of 1934) which specifies the
circumstances in which a company's annual meeting proxies executed by its
shareholders may confer discretionary authority on the persons named in the
proxies to vote on shareholder proposals which may be presented at the annual
meeting. Under this new rule, such proxies may confer discretionary authority to
vote on shareholder proposals presented at an annual meeting if: (i) the company
did not have notice of the shareholder proposal at least 45 days before the date
on which the company first mailed its proxy materials for the prior year's
annual meeting, and (ii) a specific statement to that effect is made in the
company's proxy statement or form of proxy.
The Company intends to avail itself of the provisions of Rule 14a-4(c)(i), and
accordingly, with respect to the Company's 1999 annual meeting, Company proxies
executed by shareholders will be deemed to have granted discretionary authority
to vote on any shareholder proposals presented at the 1999 annual meeting of
which the Company has not received written notice (addressed to the Company at
its principal executive offices set forth on the cover page of this Report,
Attention: Corporate Secretary) by February 10, 1999, or such other date as the
Company may hereafter specify.
The foregoing has no affect on the requirement (as set forth in the Company's
proxy statement for its May 1, 1998 annual meeting) that in order to be eligible
for inclusion in the Company's proxy statement relating to its 1999 annual
meeting, shareholder proposals must be received by the Company not later than
December 7, 1998.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibit
Number Description
- ------ -----------
27 Financial Data Schedule for Quarter Ended September 30, 1998.
----------------
(b) No reports on Form 8-K were filed during the most recently completed fiscal
quarter.
14
<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: November 12, 1998 By: /s/ R. E. Wisniewski
------------------------------------
As Secretary and Treasurer and as
Principal Financial and Accounting
Officer
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,870,000
<SECURITIES> 0
<RECEIVABLES> 39,945,000
<ALLOWANCES> 1,742,000
<INVENTORY> 19,770,000
<CURRENT-ASSETS> 65,885,000
<PP&E> 63,286,000
<DEPRECIATION> 46,993,000
<TOTAL-ASSETS> 96,440,000
<CURRENT-LIABILITIES> 26,315,000
<BONDS> 0
0
176,000
<COMMON> 2,617,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 96,440,000
<SALES> 122,736,000
<TOTAL-REVENUES> 122,736,000
<CGS> 74,494,000
<TOTAL-COSTS> 74,494,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 60,000
<INCOME-PRETAX> 6,225,000
<INCOME-TAX> 3,089,000
<INCOME-CONTINUING> 3,136,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,136,000
<EPS-PRIMARY> 1.20
<EPS-DILUTED> 1.09
</TABLE>
