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 March 31, 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 April 30, 1998, the number of shares of Registrant's Common Stock
outstanding was 2,612,671.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
MOORE PRODUCTS CO.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31
------------------------------
1998 1997
------------ ------------
Net sales $ 38,356,000 $ 37,818,000
Cost of sales 22,897,000 22,350,000
------------ ------------
Gross profit 15,459,000 15,468,000
Selling, research and development,
administrative and general expenses 13,645,000 13,913,000
------------ ------------
Operating income 1,814,000 1,555,000
Interest expense -- 84,000
Other (income) expense (87,000) 29,000
------------ ------------
Income before income taxes 1,901,000 1,442,000
Income tax provision 699,000 387,000
------------ ------------
Net income $ 1,202,000 $ 1,055,000
============ ============
Earnings per common share:
Basic $ .46 $ .41
===== =====
Diluted $ .41 $ .38
===== =====
See Notes to Condensed Consolidated Financial Statements.
2
<PAGE>
MOORE PRODUCTS CO.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31 December 31
1998 1997
------------ ------------
(Unaudited) (Note A)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4,056,000 $ 3,816,000
Trade accounts receivable, less allowances of
$1,849,000 in 1998 and $1,771,000 in 1997 38,443,000 40,768,000
Inventories 19,886,000 18,317,000
Prepaid expenses and deferred income taxes 4,959,000 4,209,000
------------ ------------
TOTAL CURRENT ASSETS 67,344,000 67,110,000
PROPERTY, PLANT AND EQUIPMENT 60,765,000 59,526,000
Less: Accumulated depreciation (45,211,000) (44,257,000)
------------ ------------
15,554,000 15,269,000
OTHER ASSETS
Prepaid pension costs 12,495,000 11,613,000
------------ ------------
$ 95,393,000 $ 93,992,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 9,681,000 $ 8,861,000
Accrued compensation 3,627,000 4,890,000
Advances from customers 3,466,000 2,977,000
Accrued income taxes 2,469,000 1,893,000
Other accrued liabilities 7,575,000 7,254,000
------------ ------------
TOTAL CURRENT LIABILITIES 26,818,000 25,875,000
OTHER LIABILITIES 7,558,000 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 - 2,605,331 shares
in 1998 and 2,592,628 shares in 1997 2,605,000 2,593,000
Capital in excess of par value 11,163,000 10,980,000
Retained earnings 48,787,000 48,627,000
Foreign currency translation adjustments (1,714,000) (1,887,000)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 61,017,000 60,489,000
------------ ------------
$ 95,393,000 $ 93,992,000
============ ============
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
MOORE PRODUCTS CO.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31
--------------------------
1998 1997
----------- -----------
OPERATING ACTIVITIES:
Net income $ 1,202,000 $ 1,055,000
Noncash (income) expenses:
Depreciation 913,000 864,000
Deferred income taxes (305,000) (117,000)
Pension and other postretirement benefits (952,000) (274,000)
Changes in operating assets and liabilities:
Trade accounts receivable 2,325,000 (2,323,000)
Inventories (1,569,000) 859,000
Accounts payable 820,000 1,574,000
Other accrued liabilities 321,000 356,000
Accrued compensation (1,263,000) 595,000
Advances from customers 489,000 146,000
Accrued income taxes 576,000 26,000
Prepaid expenses (445,000) 10,000
----------- -----------
Net cash provided by (used in)
operating activities 2,112,000 2,771,000
INVESTING ACTIVITY:
Net purchase of property, plant and equipment (1,162,000) (300,000)
FINANCING ACTIVITIES:
Decrease in notes payable to bank -- (3,345,000)
Proceeds from exercise of stock options 195,000 --
Dividends paid (1,042,000) --
----------- -----------
Net cash (used in) provided by
financing activities (847,000) (3,345,000)
Effect of exchange rate changes 137,000 5,000
----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 240,000 (869,000)
Cash and cash equivalents at beginning of year 3,816,000 4,066,000
----------- -----------
CASH AND CASH EQUIVALENTS
END OF PERIOD $ 4,056,000 $ 3,197,000
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MOORE PRODUCTS CO.
March 31, 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 month period ended March 31,
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 with the current-period basis of presentation.
Note B - Inventories
The components of inventory consist of the following:
March 31, December 31,
1998 1997
----------- -----------
Completed instruments $ 3,206,000 $ 3,590,000
Finished parts 10,256,000 9,078,000
Work in process 5,952,000 5,196,000
Raw material 472,000 453,000
----------- -----------
$19,886,000 $18,317,000
=========== ===========
5
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MOORE PRODUCTS CO.
March 31, 1998
Note C - Earnings per Share
The following table sets forth the computation of basic and diluted earnings per
share:
Three Months Ended
March 31
--------------------------
1998 1997
----------- -----------
Numerator:
Net income $ 1,202,000 $ 1,055,000
Preferred stock dividends (2,000) (2,000)
----------- -----------
Numerator for basic earnings per share -
income available to common stockholders 1,200,000 1,053,000
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 $ 1,202,000 $ 1,055,000
=========== ===========
Denominator:
Denominator for basic earnings per share -
weighted average shares 2,599,761 2,585,972
Effect of dilutive securities:
Stock options 240,399 114,004
Convertible preferred stock 70,380 70,380
----------- -----------
Dilutive potential common shares 310,779 184,384
----------- -----------
Denominator for diluted earnings per share -
adjusted weighted average shares and
assumed conversions 2,910,540 2,770,356
=========== ===========
Basic income per share $ .46 $ .41
===== =====
Diluted income per share $ .41 $ .38
===== =====
6
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MOORE PRODUCTS CO.
March 31, 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 first quarter of 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
$1,375,000 and $949,000, respectively.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Sales for the first quarter of 1998 were $38,356,000 compared to
$37,818,000 for the same period last year. Higher shipments in the United
States were largely offset by lower shipments in Europe.
Order bookings for the first quarter of fiscal 1998 were $45,217,000
compared to $39,217,000 for the same period last year, a 15% increase. This
increase is primarily attributed to orders placed for process automation
systems products, including orders placed on our United Kingdom subsidiary
of approximately $7 million for delivery in 1998. The consolidated backlog
of unshipped orders as of March 31, 1998 was $44,874,000 compared to
$46,634,000 as of March 31, 1997.
Gross profit for the first quarter was $15,459,000, or 40% of sales,
compared to $15,468,000, or 41% of sales, for the first quarter of 1997. As
a result of product mix and higher manufacturing costs, gross profit margin
percentages declined slightly compared to last year.
Selling, research and development, administrative and general expenses for
the first quarter were $13,645,000, or 36% of sales, compared to
$13,913,000, or 37% of sales in 1997. Higher payroll, sales and marketing
expenses in 1998 were offset by higher net periodic pension income related
to the Company's defined benefit pension plan.
There was no interest expense recorded for the first quarter of 1998
compared to $84,000 for the first quarter last year.
The Company's year-to-date effective tax rate was 37% of pretax income
compared to 27% for the first three 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 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 first quarter ended March 31, 1998 was $1,202,000
compared to net income of $1,055,000 for the first quarter of 1997. Diluted
net income per share was $0.41 for the first quarter of 1998 compared to
$0.38 for the first quarter of 1997.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Liquidity and Capital Resources
Cash and cash equivalents increased during the first quarter of 1998 by
$240,000. Positive cash flow of $2,112,000, 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 $709,000 at March 31, 1998, to $40,526,000 from
$41,235,000 at December 31, 1997. Accounts receivable declined $2,325,000 in the
first quarter of 1998 following record sales in the fourth quarter of 1997.
During the first quarter of 1998 inventory levels increased by $1,569,000
reflecting the increase in order backlog from the year ended 1997.
Cash and cash equivalents amounted to $4,056,000 at March 31, 1998. The Company
had no outstanding advances under credit arrangements at March 31, 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.
The Company has reviewed computer 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 the Company's computer systems. The Company expects to
be compliant by the end of the calendar year 1998. The Company is conducting
ongoing discussions with its suppliers and key customers to ensure that those
parties have taken appropriate steps to address Year 2000 issues in their
systems which may interface with the Company's systems or otherwise impact
operations. The Company has determined that current product offerings are Year
2000 compliant. For very limited older generation products, the Company is in
communications with customers with advice on recommended corrective actions.
Amounts expended for Year 2000 projects have not been and are not expected to be
significant to the Company's results of operations or financial condition.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
This report contains various forward-looking statements and includes
assumptions concerning the Company's operations, future results and
prospects. These forward-looking statements are based on current
expectations and subject to risks and uncertainties. The Company 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, the Company 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.
10
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibit
Number Description
------- -------------------------------------------------------------------
27.1 Financial Data Schedule for Quarter Ended March 31, 1998.
27.2 Restated Financial Data Schedule for Quarters Ended March 31, 1997,
June 30, 1997 and September 30, 1997.
27.3 Restated Financial Data Schedule for Year Ended December 31, 1997.
-------------------------------------
(b) No reports on Form 8-K were filed during the most recently completed fiscal
quarter.
11
<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: May 13, 1998 By: /s/ R. E. Wisniewski
--------------------------------------
As Secretary and Treasurer and as
Principal Financial and Accounting Officer
12
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