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 June 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 incorporation or organization) (I.R.S. Employer
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 July 31, 1998, the number of shares of Registrant's Common Stock
outstanding was 2,616,071.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
MOORE PRODUCTS CO.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Ended
June 30
--------------------------
1998 1997
---- ----
Net sales $81,998,000 $75,715,000
Cost of sales 49,566,000 44,273,000
----------- -----------
Gross profit 32,432,000 31,442,000
Selling, research and development,
administrative and general expenses 28,195,000 28,351,000
----------- -----------
Operating income 4,237,000 3,091,000
Interest expense 20,000 167,000
Other (income) expense (204,000) (63,000)
----------- ------------
Income before income taxes 4,421,000 2,987,000
Income tax provision 1,862,000 884,000
----------- -----------
Net income $ 2,559,000 $ 2,103,000
=========== ===========
Earnings per common share:
Basic $.98 $.81
==== ====
Diluted $.88 $.76
==== ====
See Notes to Condensed Consolidated Financial Statements.
2
<PAGE>
MOORE PRODUCTS CO.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
June 30
--------------------------
1998 1997
---- ----
Net sales $43,642,000 $37,897,000
Cost of sales 26,669,000 21,923,000
----------- -----------
Gross profit 16,973,000 15,974,000
Selling, research and development,
administrative and general expenses 14,550,000 14,438,000
----------- -----------
Operating income 2,423,000 1,536,000
Interest expense 20,000 83,000
Other (income) expense (116,000) (92,000)
----------- ------------
Income before income taxes 2,519,000 1,545,000
Income tax provision 1,163,000 497,000
----------- -----------
Net income $ 1,356,000 $ 1,048,000
=========== ===========
Earnings per common share:
Basic $.52 $.40
==== ====
Diluted $.47 $.38
==== ====
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
MOORE PRODUCTS CO.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30 December 31
1998 1997
----------- -----------
(Unaudited) (Note A)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,364,000 $ 3,816,000
Trade accounts receivable, less allowances of
$1,712,000 in 1998 and $1,771,000 in 1997 39,503,000 40,768,000
Inventories 18,951,000 18,317,000
Prepaid expenses and deferred income taxes 4,772,000 4,209,000
------------ ------------
TOTAL CURRENT ASSETS 66,590,000 67,110,000
PROPERTY, PLANT AND EQUIPMENT 62,444,000 59,526,000
Less: Accumulated depreciation (46,036,000) (44,257,000)
------------ ------------
16,408,000 15,269,000
OTHER ASSETS
Prepaid pension costs 13,379,000 11,613,000
------------ ------------
$ 96,377,000 $ 93,992,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 8,765,000 $ 8,861,000
Accrued compensation 3,956,000 4,890,000
Advances from customers 3,923,000 2,977,000
Accrued income taxes 1,973,000 1,893,000
Other accrued liabilities 7,906,000 7,254,000
------------ ------------
TOTAL CURRENT LIABILITIES 26,523,000 25,875,000
OTHER LIABILITIES 7,556,000 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 - 2,614,071 shares
in 1998 and 2,592,628 shares in 1997 2,614,000 2,593,000
Capital in excess of par value 11,296,000 10,980,000
Retained earnings 50,141,000 48,627,000
Foreign currency translation adjustments (1,929,000) (1,887,000)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 62,298,000 60,489,000
------------ ------------
$ 96,377,000 $ 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>
Six Months Ended
June 30
-----------------------------
1998 1997
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 2,559,000 $ 2,103,000
Noncash (income) expenses:
Depreciation 1,866,000 1,749,000
Deferred income taxes (321,000) (133,000)
Pension and other postretirement benefits (1,836,000) (964,000)
Changes in operating assets and liabilities:
Trade accounts receivable 1,265,000 (1,565,000)
Inventories (634,000) (132,000)
Accounts payable (96,000) 2,514,000
Other accrued liabilities 652,000 245,000
Accrued compensation (934,000) 809,000
Advances from customers 946,000 1,416,000
Accrued income taxes 80,000 97,000
Prepaid expenses (244,000) 48,000
----------- -----------
Net cash provided by (used in)
operating activities 3,303,000 6,187,000
INVESTING ACTIVITY:
Net purchase of property, plant and equipment (3,026,000) (1,197,000)
FINANCING ACTIVITIES:
Decrease in notes payable to bank --- (4,230,000)
Proceeds from exercise of stock options 337,000 ---
Dividends paid (1,044,000) ---
----------- -----------
Net cash (used in) provided by
financing activities (707,000) (4,230,000)
Effect of exchange rate changes (22,000) (90,000)
------------ ------------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (452,000) 670,000
Cash and cash equivalents at beginning of year 3,816,000 4,066,000
----------- -----------
CASH AND CASH EQUIVALENTS
END OF PERIOD $ 3,364,000 $ 4,736,000
=========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MOORE PRODUCTS CO.
June 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 six month periods ended June
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:
June 30 December 31
1998 1997
----------- -----------
Completed instruments $ 3,300,000 $ 3,590,000
Finished parts 9,834,000 9,078,000
Work in process 5,385,000 5,196,000
Raw material 432,000 453,000
----------- -----------
$18,951,000 $18,317,000
=========== ===========
6
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MOORE PRODUCTS CO.
June 30, 1998
Note C - Earnings per Share
The following table sets forth the computation of basic and diluted earnings per
share:
Six Months Ended
June 30
-----------------------
1998 1997
---- ----
Numerator:
Net income $2,559,000 $2,103,000
Preferred stock dividends (4,000) (4,000)
---------- ----------
Numerator for basic earnings per share -
income available to common stockholders 2,555,000 2,099,000
Effect of dilutive securities:
Preferred stock dividends 4,000 4,000
---------- ----------
Numerator for diluted earnings per share -
income available to common stockholders
after assumed conversions $2,559,000 $2,103,000
========== ==========
Denominator:
Denominator for basic earnings per share -
weighted average shares 2,606,281 2,585,972
Effect of dilutive securities:
Stock options 234,628 104,165
Convertible preferred stock 70,380 70,380
---------- ----------
Dilutive potential common shares 305,008 174,545
---------- ----------
Denominator for diluted earnings per share -
adjusted weighted average shares and
assumed conversions 2,911,289 2,760,517
========== ==========
Basic income per share $.98 $.81
===== =====
Diluted income per share $.88 $.76
===== =====
7
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MOORE PRODUCTS CO.
June 30, 1998
Note C - Earnings per Share (continued)
Three Months Ended
June 30
-----------------------
1998 1997
---- ----
Numerator:
Net income $1,356,000 $1,048,000
Preferred stock dividends (2,000) (2,000)
---------- ----------
Numerator for basic earnings per share -
income available to common stockholders 1,354,000 1,046,000
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 $1,356,000 $1,048,000
========== ==========
Denominator:
Denominator for basic earnings per share -
weighted average shares 2,609,350 2,585,972
Effect of dilutive securities:
Stock options 224,209 93,109
Convertible preferred stock 70,380 70,380
---------- ----------
Dilutive potential common shares 294,589 163,489
---------- ----------
Denominator for diluted earnings per share -
adjusted weighted average shares and
assumed conversions 2,903,939 2,749,461
========== ==========
Basic income per share $.52 $.40
==== ====
Diluted income per share $.47 $.38
==== ====
8
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MOORE PRODUCTS CO.
June 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 six-month periods ended June 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 six month period,
amounted to $2,517,000 and $1,926,000, respectively. For the quarters ended June
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 $1,141,000 and $977,000,
respectively.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
Moore Products Co. ("Moore") sales for the second quarter of 1998 were
$43,642,000 compared to $37,897,000 for the same period last year, an increase
of 15%. Year-to-date sales for the six months ended June 30, 1998 were
$81,998,000 compared to $75,715,000 for the same period last year, an 8%
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 second quarter of fiscal 1998 were $43,457,000 compared
to $38,430,000 for the same period last year, a 13% increase. Year-to-date order
bookings grew by 14% to $88,782,000 from $77,701,000 last year. These increases
are primarily attributed to orders placed for process control automation systems
products. The consolidated backlog of unshipped orders as of June 30, 1998 was
$44,364,000 compared to $46,530,000 as of June 30, 1997.
Gross profit for the quarter was $16,973,000, or 39% of sales, compared to
$15,974,000, or 42% of sales, for the second quarter of 1997. Gross profit
year-to-date was $32,432,000, or 40% of sales, compared to $31,442,000, or 42%
of sales, in 1997. As a result of product mix and higher manufacturing costs,
gross profit margin percentages declined compared to last year.
Selling, research and development, administrative and general expenses for the
second quarter were $14,550,000, or 33% of sales, compared to $14,438,000, or
38% of sales in 1997. These expenses year-to-date were $28,195,000, or 34% of
sales, compared to $28,351,000, 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 second quarter of 1998 was $883,000 compared to $274,000 for the same period
last year. For the six months ended June 30, 1998, net periodic pension income
was $1,766,000 compared to $548,000 for the same period last year.
Interest expense for the second quarter of 1998 was $20,000 compared to $83,000
for the same quarter last year. Year-to-date interest expense was $20,000
compared to $167,000 for the same six-month period in 1997. The decrease from
last year was attributed to reduced borrowing activity in 1998.
Moore's year-to-date effective tax rate was 42% of pretax income compared to 30%
for the first six months of 1997. The fluctuation in the rates was attributable
to a changing mix of operating results in countries for which loss benefit
carryovers are available. Statutory rates are applied to pretax income in the
United States. Consistent with
10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
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 second quarter ended June 30, 1998 was $1,356,000 compared to
net income of $1,048,000 for the same quarter of 1997. For the six months ended
June 30, 1998, net income was $2,559,000 compared to $2,103,000 for the same
period in 1997. Diluted net income per share was $0.47 for the second quarter of
1998 compared to $0.38 for the second quarter of 1997. For the six months ended
June 30, 1998, diluted net income per share was $0.88 compared to $0.76 in 1997.
Liquidity and Capital Resources
Cash and cash equivalents decreased during the six-month period ended June 30,
1998 by $452,000. Positive cash flow of $3,303,000, generated from operations,
was used to fund capital expenditures and a special 40-cent per share cash
dividend on the common stock. Capital expenditures were related primarily to
facilities and equipment in support of sales and marketing promotion, and
product development.
Working capital decreased $1,168,000 at June 30, 1998, to $40,067,000 from
$41,235,000 at December 31, 1997. Accounts receivable declined $1,265,000 in the
first six months of 1998 following record sales in the fourth quarter of 1997.
During the first six months of 1998, inventory levels increased by $634,000
reflecting the increase in order backlog from the year ended December 31, 1997.
Cash and cash equivalents amounted to $3,364,000 at June 30, 1998. Moore had no
outstanding advances under credit arrangements at June 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.
Moore has reviewed both 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
believes that after modification to existing software and conversion to new
software, the Year 2000 problem will not pose significant operational problems
for Moore. As of June 30, 1998, the significant U.S.-based business computer
systems, operating and application software have been modified and tested. Moore
expects remaining information technology systems, which are primarily in
subsidiary locations, and other non-information technology systems to be
compliant by the end of the calendar year 1998.
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued).
Moore is conducting ongoing discussions with its suppliers and key 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 systems or
otherwise impact operations. Moore's current product offerings are all designed
to be Year 2000 compliant. We expect to have completed all testing to confirm
Year 2000 compliance of all current product offerings by the end of 1998. For
limited older generation products, Moore is in communications with customers
with advice on recommended corrective actions. 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 is estimated to be
less than $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.
This report contains various forward-looking statements and includes
assumptions concerning Moore's 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.
12
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
On May 1, 1998, the Registrant held its Annual Meeting of Shareholders at which
time three directors were elected to serve for terms expiring in 2002. The
tabulation of votes with respect to each nominee was as follows: Donald E.
Bogle, For - 3,042,602, Withheld - 11,626; F. Lawton Hindle, For - 3,032,751,
Withheld - 21,477; Thomas C. Moore, For - 3,042,200, Withheld - 12,028.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibit
Number Description
- ------- ------------------------------------------------------------------
27 Financial Data Schedule for Quarter Ended June 30, 1998.
---------------------------------
(b) No reports on Form 8-K were filed during the most recently completed fiscal
quarter.
13
<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 12, 1998 By: /s/R. E. Wisniewski
-------------------------------------
As Secretary and Treasurer and as
Principal Financial and Accounting Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 3364000
<SECURITIES> 0
<RECEIVABLES> 41215000
<ALLOWANCES> 1712000
<INVENTORY> 18951000
<CURRENT-ASSETS> 66590000
<PP&E> 62444000
<DEPRECIATION> 46036000
<TOTAL-ASSETS> 96377000
<CURRENT-LIABILITIES> 26523000
<BONDS> 0
0
176000
<COMMON> 2614000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 96377000
<SALES> 81998000
<TOTAL-REVENUES> 81998000
<CGS> 49566000
<TOTAL-COSTS> 49566000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20000
<INCOME-PRETAX> 4421000
<INCOME-TAX> 1862000
<INCOME-CONTINUING> 2559000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2559000
<EPS-PRIMARY> .98
<EPS-DILUTED> .88
</TABLE>
