<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 24, 1999
------------------------------------------------
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 33-67908
--------------------
MOSLER INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
31-1172814
DELAWARE ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
8509 BERK BOULEVARD
HAMILTON, OHIO 45015-2213
- ------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
(513) 870-1900
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
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 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
------------------------- -----------------
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the Issuer's classes of
common stock, as of the latest practical date.
Common Stock, $0.10 Par Value 2,239,823 SHARES AS OF SEPTEMBER 24, 1999
- ----------------------------- -----------------------------------------
Page 1
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INDEX
FINANCIAL INFORMATION (PART I)
<TABLE>
<CAPTION>
PAGE
<S> <C>
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED CONDENSED BALANCE SHEETS - SEPTEMBER 24, 1999
AND JUNE 25, 1999 3-4
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS - THREE MONTHS
ENDED SEPTEMBER 24, 1999 AND SEPTEMBER 26, 1998 5
CONSOLIDATED CONDENSED STATEMENT OF COMMON STOCKHOLDERS'
DEFICIENCY - THREE MONTHS ENDED SEPTEMBER 24, 1999 6
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - THREE MONTHS
ENDED SEPTEMBER 24, 1999 AND SEPTEMBER 26, 1998 7
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 8-11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 12-17
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK 17
OTHER INFORMATION (PART II)
ITEM 1. LEGAL PROCEEDINGS 18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 19
SIGNATURES 20
</TABLE>
Page 2
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MOSLER INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
Sept. 24, June 25,
1999 1999
============== ==============
(Unaudited) (Derived from Audited
Financial Statements)
Assets
- ------
Current assets:
Cash and cash equivalents $ 730 $ 363
Accounts receivable, net 99,439 99,629
Equity securities available
for sale (amortized cost of $101) 4,092 3,117
Inventories 39,370 31,754
Other current assets 1,442 2,088
-------- --------
Total current assets 145,073 136,951
Facilities:
Land and land improvements 1,107 1,107
Buildings 7,156 7,142
Machinery and equipment 40,484 39,938
-------- --------
Gross facilities 48,747 48,187
Less accumulated depreciation 32,454 32,254
-------- --------
Net facilities 16,293 15,933
Other assets:
Service agreements 3,384 4,512
Deferred debt issuance costs 3,248 3,518
Goodwill 18,450 16,514
Sundry 327 644
-------- --------
Total other assets 25,409 25,188
$186,775 $178,072
======== ========
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<TABLE>
<CAPTION>
Sept. 24, June 25,
Liabilities, redeemable stock and common 1999 1999
- ---------------------------------------- ============= ==============
Stockholders' deficiency (Unaudited) (Derived from Audited
------------------------ Financial Statements)
<S> <C> <C>
Current liabilities:
Accounts payable $ 30,112 $ 27,615
Accrued liabilities:
Compensation & payroll taxes 6,953 8,454
Product warranty 1,706 1,788
Accrued workers' compensation 3,917 4,534
Accrued interest 2,603 6,318
Other 11,364 7,435
Unearned revenue 22,527 26,732
Income taxes payable 1,161 1,144
Long-term debt due within one year 351 414
--------- ---------
Total current liabilities 80,694 84,434
Long-term debt due after one year 201,809 188,721
Accrued pension and other benefit liabilities 1,092 615
Commitments and contingencies
Redeemable stock:
Series D increasing rate preferred stock 69,457 66,235
Series C adjustable rate preferred stock 48,164 46,241
Common Stock 463 463
--------- ---------
Total redeemable stock 118,084 112,939
Common stockholders' deficiency:
Common stock 254 254
Accumulated deficit (213,175) (205,953)
Redemption value of common stock held by ESOP (463) (463)
Accumulated other comprehensive income (loss) 2,576 1,621
Common stock held in treasury (4,096) (4,096)
--------- ---------
Total common stockholders' deficiency (214,904) (208,637)
--------- ---------
$ 186,775 $ 178,072
========= =========
</TABLE>
See accompanying notes to financial statements.
Page 4
<PAGE> 5
MOSLER INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Three months ended
======================
Sept. 24, Sept. 26,
1999 1998
========= =========
<S> <C> <C>
Net sales:
Service $ 37,020 $ 24,245
Product 31,750 33,136
-------- --------
68,770 57,381
Cost of sales:
Service 26,156 18,378
Product 25,370 26,720
Plant Closing 41 1,589
-------- --------
51,567 46,687
-------- --------
Gross profit 17,203 10,694
Selling and administrative expense 14,109 9,107
Other expense 124 107
-------- --------
14,233 9,214
-------- --------
Operating income 2,970 1,480
Debt expense:
Interest expense (Includes non cash interest on preferred
Stock of $2,238 and $1,617 respectively) 7,142 5,343
Amortization of debt expense 132 258
Interest income (15) (5)
-------- --------
7,259 5,596
-------- --------
Loss before income taxes and preferred stock charges (4,289) (4,116)
Provision for income taxes 25 (1)
-------- --------
Loss before preferred stock charges (4,314) (4,115)
Preferred dividends (2,848) (2,416)
Amortization of preferred stock discount (60) (109)
-------- --------
Net loss applicable to common stockholders ($ 7,222) ($ 6,640)
======== ========
Basic and diluted net loss per common
share ($ 3.22) ($ 3.19)
======== ========
</TABLE>
See accompanying notes to financial statements.
Page 5
<PAGE> 6
MOSLER INC.
CONSOLIDATED CONDENSED STATEMENT OF COMMON STOCKHOLDERS' DEFICIENCY
THREE MONTHS ENDED SEPTEMBER 24, 1999
(Unaudited)
(In thousands of dollars)
<TABLE>
<CAPTION>
Redemption
Common Value of Accumulated
Stock Common Other
$.10 Par Accumulated Stock held Comprehensive Comprehensive
Value Deficit By ESOP Income (Loss) Income (Loss)
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at June 25, 1999 $254 ($205,953) ($463) $1,621
Net loss before preferred stock charges (4,314) ($4,314)
Foreign currency translation adjustment (20) (20)
Change in unrealized gain (loss) on available for
sale securities 975 975
-----------
Comprehensive income (loss) ($3,359)
===========
Amortization of Series D preferred stock discount (60)
Dividends on Series D preferred stock (924)
Dividends on Series C preferred stock (1,924)
======================================================================
Balance at September 24, 1999 $254 ($213,175) ($463) $2,576
======================================================================
</TABLE>
<TABLE>
<CAPTION>
Treasury
Stock Total
---------------------
<S> <C> <C>
Balance at June 25, 1999 ($4,096) ($208,637)
Net loss before preferred stock charges (4,314)
Foreign currency translation adjustment (20)
Change in unrealized gain (loss) on available for
sale securities 975
Comprehensive income (loss)
Amortization of Series D preferred stock discount (60)
Dividends on Series D preferred stock (924)
Dividends on Series C preferred stock (1,924)
=====================
Balance at September 24, 1999 ($4,096) ($214,904)
=====================
</TABLE>
See accompanying notes to financial statements.
Page 6
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MOSLER INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three months ended
=======================
Sept. 24, Sept. 26,
1999 1998
========= =========
<S> <C> <C>
Net loss $ (4,314) $ (4,115)
Adjustments to reconcile loss to net cash
used by operating activities:
Depreciation 894 623
Amortization 2,202 1,511
Loss on disposal of facilities 131 7
Interest paid in shares of preferred stock 2,125 1695
Provision for doubtful accounts 4
Decrease (increase) in:
Accounts receivable 190 1,290
Inventories (7,616) 705
Other current assets 646 (950)
Increase (decrease) in:
Accounts payable 2,497 1,240
Accrued liabilities (3,787) 1,512
Unearned revenue (4,205) (5,312)
Income taxes payable 17 (6)
-------- --------
Net cash used by operating activities (11,220) (1,796)
Cash flows from investing activities:
Capital expenditures (1,868) (489)
Decrease in other assets 318 (39)
-------- --------
Net cash used by investing activities (1,550) (528)
Cash flows from financing activities:
Purchase of preferred stock (75)
Net proceeds from revolving line of credit 12,957 2,297
Deferred debt issuance costs 132 258
Principal payment on long-term debt (250)
Term debt amortization 68
-------- --------
Net cash provided by financing activities 13,157 2,230
Effect of exchange rate changes on cash (20) (26)
-------- --------
Net increase (decrease) in cash and cash equivalents 367 (120)
Cash and cash equivalents at beginning of period 363 537
-------- --------
Cash and cash equivalents at end of period $ 730 $ 417
======== ========
</TABLE>
See accompanying notes to financial statements.
Page 7
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FINANCIAL INFORMATION
Item 1. Notes to Consolidated Condensed Financial Statements
----------------------------------------------------
1. Basis of Presentation
---------------------
In the opinion of management, the unaudited consolidated financial
statements include all adjustments (which consist of only normal, recurring
accruals) necessary to present fairly the consolidated financial position
as of September 24, 1999, and the results of operations for the three
months ended September 24, 1999 and September 26, 1998 and the cash flows
for the three months ended September 24, 1999 and September 26, 1998. In
accordance with generally accepted accounting principles for interim
financial information, these statements do not include all of the
information and footnotes required by generally accepted accounting
principles for complete annual financial statements. Financial information
as of June 25, 1999 has been derived from the audited consolidated
financial statements of the Registrant. The results of operations and cash
flows for the three months ended September 24, 1999 and September 26, 1998
are not necessarily indicative of the results to be expected for the full
year. For further information, refer to the consolidated financial
statements and footnotes thereto for the year ended June 25, 1999, included
in the Registrant's Annual Report on Form 10-K. Certain prior year's data
has been reclassified to conform to current presentation.
2. Inventories
-----------
The Company's inventories are stated at the lower of cost (determined using
the first-in, first-out method) or market.
The components of inventories are as follows:
Sept. 24, June 25,
1999 1999
---- ----
(in thousands)
--------------
Finished products and service $33,449 $31,710
Products in Process 2,757 281
Raw materials 11,301 8,128
Less Allowance (8,137) (8,365)
----------------------
Total $39,370 $31,754
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3. Net Loss per share
------------------
Net loss per share is computed based on the weighted average number of
shares Common outstanding for the period after deducting preferred dividend
requirements including amortization of preferred stock discount. The
average number of shares of common stock outstanding for the first quarter
of fiscal 2000 is 2,239,823 as compared to 2,080,408 shares for the same
period of fiscal 1999.
4. Contingencies
-------------
The Internal Revenue Service (IRS) has conducted examinations of the
Company's federal income tax returns for fiscal years 1988 through 1993 and
has proposed various adjustments to increase taxable income. The Company
has agreed to certain adjustments and has previously recorded a provision
for additional income tax and interest. The IRS has issued deficiency
notices on these issues related to 1) the allocation of the Company's
purchase price of assets from American Standard Inc. and 2) the value of
the Company's Series C preferred stock contributed to its ESOP.
In September 1999, the Company agreed to settle these issues with the IRS.
Under the terms of the settlement, the Company will pay additional taxes of
approximately $576,000 along with related interest of approximately
$575,000. These amounts were accrued as of June 25, 1999. The Company will
also, for tax purposes, reduce the allocated value of it intangibles to $45
million and increase the amortization period to 17 years.
Various lawsuits and claims arising during the normal course of business
are pending against the Company. In the opinion of management, the ultimate
liability, if any, resulting from these matters will have no significant
effect on the Company's consolidated financial position, results of
operations or cash flows.
5. Acquisition
-----------
On October 9, 1998, the Company acquired substantially all the assets and
assumed substantially all the liabilities of the LeFebure Division of De La
Rue Cash Systems Inc. ("LeFebure") for approximately $39 million. LeFebure
specializes in the manufacture, distribution and service of security
equipment for financial institutions. The acquisition of LeFebure has been
accounted for by the purchase method of accounting. The cost of the
acquisition has been allocated on the basis of the fair market value of
assets acquired and liabilities assumed, resulting in goodwill of
approximately $19 million which is being amortized over a period of 15
years. The final allocation of the purchase price of LeFebure will be
Page 9
<PAGE> 10
determined once all valuations and studies have been finalized, which is
expected within one year from the date of acquisition. LeFebure's operating
results are included in the Company's consolidated statements of operations
beginning on October 9, 1998.
On August 23, 1999, as part of the Company's acquisition integration plan,
management announced the shut down of LeFebure's Mexico, Missouri plant.
The cost of this shut down of approximately $1.8 million, which includes
fixed asset write-offs and severance costs, is recorded as an adjustment to
the purchase price.
The unaudited consolidated results of operations for the quarter ended
September 26, 1998 on a pro forma basis as though LeFebure had been
acquired as of June 28,1998 are as follows ($000's except per share
amount):
Net sales $88,612
Net loss (2,334)
Net loss per share (1.12)
The pro forma financial information is presented for informational purposes
only and is not necessarily indicative of the operating results that would
have occurred had the LeFebure acquisition been consummated as of the above
date, nor are they indicative of future operating results.
6. New Accounting Standards
------------------------
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities", as subsequently amended, is effective for the Company's 2001
fiscal year. The statement revises the accounting for derivative
instruments and requires, among other things, that all derivative
instruments be recorded within the financial statements. The Company has
not yet determined the impact of adopting this standard.
7. Segment Information
-------------------
Since the Company's fiscal year 1999 financial statements, there have been
no changes in reportable segments or the manner in which the Company
determines reportable segments or measures segment profit or loss.
Summarized segment information for the interim periods for fiscal year 2000
and 1999 is as follows (000's):
Page 10
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<TABLE>
<CAPTION>
Electronic Physical
Security Security Corporate
Service Systems Products and Other Eliminations Total
<S> <C> <C> <C> <C> <C> <C>
Quarter ended
September 24, 1999
Segment Information
Customer Revenue 37,020 13,381 17,058 1,392 (81) 68,770
Operating Profit 1,975 490 598 (93) 0 2,970
Identifiable Assets 64,707 44,758 38,385 38,925 0 186,775
Quarter ended
September 26, 1998
Segment Information
Customer Revenue 24,245 16,067 15,306 1,938 (175) 57,381
Operating Profit 1,517 319 (351) 3 0 1,480
Identifiable Assets 39,448 25,198 25,610 13,000 0 103,256
</TABLE>
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MOSLER INC.
Item 2 Management's Discussion and Analysis of
---------------------------------------
Financial Condition and Results of Operations
---------------------------------------------
This document contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended. Such statements include,
without limitations, the Company's beliefs about trends in the Company's
industries, and its views about the long-term future of these industries
and the Company. The following factors, among others, could cause the
Company's financial performance to differ materially from that expressed in
such statements: (i) changes in consumer preferences resulting in a decline
in the demand for product and service, (ii) the inability to reduce SG&A
expenses as expected, (iii) an increase in the price of raw materials, (iv)
political and/or economic instability in foreign countries where the
Company has operations or has suppliers who supply the Company, (v) an
unexpected increase in interest rates, (vi) a shift in strength of the
overall U.S. economy thereby possibly reducing purchases, and, (vii)
failure to remedy in a timely manner any Year 2000 issues that might arise.
Results of Operations
- ---------------------
Three Months Ended September 24, 1999 Compared to the
- -----------------------------------------------------
Three Months Ended September 26, 1998
- -------------------------------------
Sales
- -----
The Company's sales increased during the three months ended September 24,
1999 by 19.7% to $68.7 million from $57.4 million. Service Sales increased
by 52.9% to $37.0 million from $24.2 million. These increases are due
principally to the acquisition of LeFebure in October 1998.
Product net sales decreased during the three months ended September 24,
1999 by 4.0% to $31.8 million from $33.1 million. Electronic Security
product sales decreased by 16.8% to $13.4 million from $16.1 million. This
decrease related to a reduction in the sales of Currency Handling
equipment. Physical Security product sales increased by 11.8% to $17.1
million from $15.3 million. This increase is attributable to the
acquisition of LeFebure.
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Gross Profit
- ------------
Gross profit increased during the three months ended September 24, 1999 by
60.8% percent from $10.7 million to $17.2 million for the same period in
the prior year. Gross profit as a percentage of sales increased to 25.0%
from 18.6% for the three months ended September 24, 1999, resulting
principally from higher sales volumes and higher margins.
Selling and Administrative Expenses
- -----------------------------------
Selling and administrative expense increased during the three months ended
September 24, 1999 by 54.9% to $14.1 million from $9.1 million for the
three months ended September 26, 1998. The increase is due to the need for
more administrative and sales support resulting from the LeFebure
acquisition.
Operating Income
- ----------------
The Company's operating income for the three months ended September 24,
1999 increased by 100% to $3.0 million from $1.5 million for the three
months ended September 26, 1998. Included in operating income in 1998 was a
one time charge of $1.6 million associated with the closing of the
Company's Wayne, N. J. manufacturing facility. Included in 1999 operating
income were transition costs associated with the acquisition of LeFebure
amounting to approximately $700,000.
Debt Expense
- ------------
Debt expense increased for the three months ended September 24, 1999 by
30.4% to $7.3 million from $5.6 million. The increase was due to higher
interest costs on higher bank debt primarily attributable to the LeFebure
acquisition.
Net Loss
- --------
Net loss before preferred stock charges increased by $0.2 million for the
three months ended September 24, 1999 to $4.3 million from $4.1 million for
the three months ended September 26, 1998.
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Inflation
- ---------
The Company believes that its business is affected by inflation to
approximately the same extent as the national economy. Generally, the
Company has been able to offset the inflationary impact of wages and other
costs through a combination of improved productivity, cost reduction
programs and price increases. The Company has had difficulty in effecting
significant price increases due to the competitive nature of the industries
which it serves.
Liquidity and Capital Resources
- -------------------------------
As more fully described in Item I, Note 5, the Company on October 9, 1998
acquired substantially all the assets of the LeFebure division of De La Rue
Cash Systems Inc. and De La Rue Systems Americas Corporation. Coincident
with the acquisition the Company entered into a Financing Agreement with a
group of lenders, led by Fleet National Bank, to finance the acquisition
and provide working capital for operations. Under the terms of the
Financing Agreement, a Credit facility was established at $85 million.
Effective September 25, 1999 this was increased to $90 million. At
September 24, 1999, after considering outstanding letters of credit which
reduce availability under the credit facility, available borrowing capacity
was approximately $100,000 and $2.5 million at November 8, 1999. Borrowing
under the credit facility bears interest at LIBOR plus 2.625% or at the
prime lending rate plus 1.625%.
The Company is experiencing slow collections of its accounts receivable,
which at September 24, 1999 averaged 115 days outstanding based on trailing
12-month sales. The slow collections are contributing to the reduced
liquidity noted above. The Company's liquidity requirements will be
exacerbated by the January 14, 2000 scheduled semi-annual bond interest
payment of $6.325 million. The Company is taking steps to expedite
collection of its accounts receivable by increasing the promptness and
accuracy of its billing, and the Company is also trying to relieve pressure
on working capital by reducing inventory levels. The Company will also
endeavor, among other things, to increase its credit line in order to allow
it to satisfy its liquidity requirements. There can be no assurance,
however, that these efforts will be successful.
Cash used by operating activities was $11.2 million for the three months
ended September 24, 1999 as compared to $1.8 million for the same period of
fiscal 1999 for an unfavorable change of $9.4 million. The increase relates
primarily to an increase in inventory and decrease in current liabilities.
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The Company's capital expenditures were $.9 million for the first quarter
of fiscal 2000 as compared to $.5 million in the previous year's first
quarter. The Company anticipates capital expenditures for fiscal 2000 will
be approximately $2.3 million.
The Company currently makes cash contributions to the ESOP only to the
extent necessary to fund the cash needs of the ESOP for payments to
retired, terminated and deceased participants and for administrative
expenses.
The Company is required to maintain certain financial debt covenants under
its Financing Agreement as amended on September 25, 1999. For the fiscal
quarter ended September 24, 1999 the Company was in violation of the
Consolidated Senior Debt to EBITDA covenant, primarily as a result of
additional borrowings supporting the increase in working capital, primarily
accounts receivable, noted above. On November 8, 1999 the Company received
a one-time waiver for this violation.
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Year 2000
- ---------
The Year 2000 problem is a result of computer programs being written using
two digits (rather than four) to define the applicable year. Any of the
Company's programs that have time-sensitive software may recognize a date
using "00" as the year 1990 rather than the year 2000, which would result
in miscalculations or system failures.
The Company's major computer systems consist of third-party software. The
conclusion of the Company's research is that the latest existing releases
of this software contain the necessary changes to correct any significant
Year 2000 problems. As a matter of ongoing policy, in order to assure
continuing contractual vendor support, the Company promptly installs and
implements new releases of third-party software. To date, the Company has
implemented third-party releases that it believes are Year 2000 compliant
for substantially all of its software. The Company has spent approximately
$1.6 million on these releases during 1999, which amounts were planned
expenditures irrespective of any Year 2000 issues. The Company has tested
and has further plans to test its software for compliance. Costs of
addressing potential problems has not and are not currently expected to
have a material adverse impact on the Company's financial position, results
of operations or cash flows in future periods.
The Company's compliance plan includes review of Year 2000 readiness of its
major manufacturing equipment, products, suppliers, and customers. The
Company has no Electronic Data Interchange (EDI) interfaces with either its
customers or vendors. To date, the Company has not discovered any
significant Year 2000 issues in these areas and does not anticipate any
significant problems.
Therefore, the Company has not developed specific contingency plans in
preparation for the year 2000. As the Company continues to evaluate and
test its readiness for the year 2000, the Company will assess whether there
are any specific areas where a contingency plan could help alleviate
possible adverse effects from the year 2000. If so, the Company will
develop contingency plans in those areas prior to the end of 1999.
Accordingly, the Company plans to devote the necessary resources to resolve
all significant Year 2000 issues in a timely manner.
The most likely Year 2000 problems that the Company may face appear to
arise from the possible noncompliance of third parties. Possible
difficulties could arise in receiving materials from suppliers or from
failures in the operation of the Company's customers. The Company has
documented and confirmed (in writing) Y2K compliance of the services and
products provided to Mosler by our vendors. In addition, in the event that
the Year 2000 would cause widespread loss of power or other utilities in
areas where the Company, its suppliers or
Page 16
<PAGE> 17
customers operate, the Company's business and operations could be
disrupted. Such events could have a material adverse effect on the Company.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
The principal market risk (i.e., the risk of loss arising from adverse changes
in market rates and prices) to which the Company is exposed is interest rates on
debt.
At September 24, 1999, the carrying value of the Company's debt total $202
million. Approximately $76 million was at variable interest rates. For such
floating rate debt, interest rate changes generally do not affect the fair
market value but do impact earnings and cash flows, assuming other factors are
held constant. Holding other variables constant (such as debt levels), the
earnings and cash flow impact for the next year resulting from a one percentage
point increase in interest rates on variable rate debt would be approximately
$.7 million. The Company has limited its risk related to interest rate increases
by purchasing an interest rate cap.
Page 17
<PAGE> 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
None
Page 18
<PAGE> 19
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The following are the results of voting by stockholders present or
represented by proxy at the Annual Meeting of Stockholders held on
September 30, 1999. At such meeting, Messrs. William A. Marquard, Michel
Rapoport, Thomas R. Wall, IV, and Robert A. Young, III were elected
directors to service until the 2000 Annual Meeting of Stockholders and the
Mosler Inc. Stock Incentive Plan was approved. The votes cast on each of
such matters was as follows:
1. Election of Directors
For Withheld
--- --------
William A. Marquard 1,822,680.49792 67,162.1835
Michel Rapoport 1,819,898.49792 69,944.1835
Thomas R. Wall IV 1,822,680.49792 67,162.1835
Robert A. Young III 1,822,680.49792 67,162.1835
2. Approval of Stock Incentive Plan
For Against Abstain
--- ------- -------
1,809,393.73874 78,292.64268 2,156.3
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) List of Exhibits
(27) Financial Data Schedule for the three months ended
September 24, 1999.
(b) Reports on Form 8-K
None
Page 19
<PAGE> 20
MOSLER INC.
Signature
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.
Mosler Inc.
(Registrant)
Date: 11/8/99 /s/ Thomas J. Bell
-------------------------- ----------------------------
Thomas J. Bell
Chief Financial Officer
Page 20
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUN-26-1999
<PERIOD-END> SEP-24-1999
<CASH> 730,000
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<RECEIVABLES> 101,481,000
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117,621,000
0
<COMMON> 463,000
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<CGS> 25,370,000
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<INCOME-TAX> 25
<INCOME-CONTINUING> (4,314,000)
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<EPS-BASIC> (3.22)
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</TABLE>
