-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VuRXbdPEF40BRM3gpPaJqiHzWMUhzp7PlcXdO0emWwiiMwzt3G3Y+gmoXp30fdCk pIu9QY72WEU6Fl56O0+Cdw== 0000950148-97-001193.txt : 19970512 0000950148-97-001193.hdr.sgml : 19970512 ACCESSION NUMBER: 0000950148-97-001193 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970509 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCOPE INDUSTRIES CENTRAL INDEX KEY: 0000087864 STANDARD INDUSTRIAL CLASSIFICATION: GRAIN MILL PRODUCTS [2040] IRS NUMBER: 951240976 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03552 FILM NUMBER: 97598591 BUSINESS ADDRESS: STREET 1: 233 WILSHIRE BLVD STE 310 CITY: SANTA MONICA STATE: CA ZIP: 90401 BUSINESS PHONE: 3104581574 MAIL ADDRESS: STREET 1: 233 WILSHIRE BLVD STE 310 CITY: SANTA MONICA STATE: CA ZIP: 90401 10-Q 1 FORM 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended Commission File March 31, 1997 Number 1-3552 -------------- ------------- SCOPE INDUSTRIES ---------------- (Exact name of Registrant as specified in its charter) California 95-1240976 - ------------------------------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 233 Wilshire Blvd., Ste.310, Santa Monica, CA 90401 - --------------------------------------------- ----- (Address of principal executive office) (ZIP Code) Registrant's telephone number, including area code (310) 458-1574 -------------- 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 preceeding 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 --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at April 21, 1997 - -------------------------- ----------------------------- Common Stock, no par value 1,166,865 2 SCOPE INDUSTRIES AND SUBSIDIARIES INDEX
PAGE ---- Part I. Financial Information: Consolidated Balance Sheets - March 31, 1997 and June 30, 1996 3 Consolidated Statements of Income - Three Months Ended March 31, 1997 and 1996 4 Consolidated Statements of Income - Nine Months Ended March 31, 1997 and 1996 5 Consolidated Statements of Cash Flows - Nine Months Ended March 31, 1997 and 1996 6 Notes to Consolidated Financial Statements 7 Management's Discussion and Analysis of Results of Operations and Financial Condition 9 Part II. Other Information: Item 2. Increases and Decreases in Outstanding Securities and Indebtedness 11 Item 6. Exhibits and Reports on Form 8-K 11 Signatures 11
-2- 3 PART I. FINANCIAL INFORMATION SCOPE INDUSTRIES AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
MARCH 31 JUNE 30 1997 1996 ----------- ----------- (UNAUDITED) (AUDITED) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 2,077,906 $ 1,721,939 Treasury bills (par value $27,000,000 at March 31, 1997 and $5,035,000 at June 30, 1996) held to maturity investments 26,262,276 4,973,377 Accounts and notes receivable, less allowance for doubtful accounts of $149,196 at March 31, 1997 and $149,180 at June 30, 1996 1,626,649 5,173,445 Inventories 561,001 531,637 Prepaid expenses and other current assets 421,078 531,639 ----------- ----------- TOTAL CURRENT ASSETS 30,948,910 12,932,037 ----------- ----------- NOTES RECEIVABLE 1,028,564 1,154,378 ----------- ----------- PROPERTY AND EQUIPMENT: Machinery and equipment 22,714,852 22,160,240 Land, buildings and improvements 9,720,689 9,743,940 ----------- ----------- 32,435,541 31,904,180 Less accumulated depreciation and amortization 21,901,111 20,867,899 ----------- ----------- 10,534,430 11,036,281 ----------- ----------- OTHER ASSETS: Deferred charges and other assets 91,378 130,930 Investments available for sale-at fair value 15,260,064 29,647,443 Investments held to maturity-at cost 633,426 633,426 ----------- ----------- 15,984,868 30,411,799 ----------- ----------- $58,496,772 $55,534,495 =========== =========== LIABILITIES AND SHAREOWNERS' EQUITY CURRENT LIABILITIES: Bank overdraft $ 90,822 $ 250,686 Accounts payable 652,537 1,410,953 Other accrued liabilities 1,247,337 1,447,406 Accrued payroll and related employee benefits 1,098,386 1,069,429 Income taxes payable 1,711,572 467,983 ----------- ----------- TOTAL CURRENT LIABILITIES 4,800,654 4,646,457 ----------- ----------- DEFERRED INCOME TAXES 80,000 2,750,000 ----------- ----------- 4,880,654 7,396,457 ----------- ----------- SHAREOWNERS' EQUITY: Common stock, no par value, 5,000,000 shares authorized; shares issued and outstanding March 31, 1997 1,166,865 June 30, 1996 1,202,565 4,040,287 3,921,287 Retained earnings 44,534,018 29,848,744 Net unrealized gain on investments 5,041,813 14,368,007 ----------- ----------- 53,616,118 48,138,038 ----------- ----------- $58,496,772 $55,534,495 =========== ===========
The accompanying notes are an integral part of these statements. -3- 4 SCOPE INDUSTRIES AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED MARCH 31 ----------------------------- 1997 1996 ----------- ----------- REVENUES: Sales $ 5,473,282 $ 5,913,408 Vocational school revenues 1,129,391 1,136,612 ----------- ----------- 6,602,673 7,050,020 ----------- ----------- OPERATING COSTS AND EXPENSES: Cost of sales 3,740,035 3,383,687 Vocational school expenses 882,964 847,414 Depreciation and amortization 533,618 544,520 General and administrative 879,965 1,042,498 ----------- ----------- 6,036,582 5,818,119 ----------- ----------- 566,091 1,231,901 Investment and other income 2,562,004 322,062 ----------- ----------- Income before income taxes 3,128,095 1,553,963 Provision (benefit) for income taxes (640,000) 610,000 ----------- ----------- NET INCOME $ 3,768,095 $ 943,963 =========== =========== NET INCOME PER SHARE $ 3.15 $ 0.76 =========== =========== Weighted average number of shares outstanding 1,194,653 1,236,173
The accompanying notes are an integral part of these statements. -4- 5 SCOPE INDUSTRIES AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
NINE MONTHS ENDED MARCH 31 ----------------------------- 1997 1996 ----------- ----------- REVENUES: Sales $20,020,116 $17,925,227 Vocational school revenues 3,410,966 3,522,714 ----------- ----------- 23,431,082 21,447,941 ----------- ----------- OPERATING COSTS AND EXPENSES: Cost of sales 12,005,375 10,558,300 Vocational school expenses 2,594,839 2,578,782 Depreciation and amortization 1,582,453 1,605,345 General and administrative 2,877,687 3,426,056 ----------- ----------- 19,060,354 18,168,483 ----------- ----------- 4,370,728 3,279,458 Investment and other income 19,033,221 1,226,895 ----------- ----------- Income before income taxes 23,403,949 4,506,353 Provision for income taxes 5,450,000 1,590,000 ----------- ----------- NET INCOME $17,953,949 $ 2,916,353 =========== =========== NET INCOME PER SHARE $ 15.00 $ 2.36 =========== =========== CASH DIVIDENDS DECLARED PER COMMON SHARE $ 1.25 $ 0.50 Weighted average number of shares outstanding 1,197,199 1,237,805
The accompanying notes are an integral part of these statements. -5- 6 SCOPE INDUSTRIES AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED MARCH 31 ----------------------------- 1997 1996 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $17,953,949 $ 2,916,353 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 1,582,453 1,605,345 Gains on investments available for sale (17,309,726) (89,052) Gains on sale of equipment (3,952) (47,470) Deferred income taxes (2,115,000) (295,000) Changes in operating assets and liabilities: Accounts and notes receivable 1,172,610 238,707 Inventories (29,364) (54,880) Prepaid expenses and other current assets 110,561 221,073 Accounts payable and accrued liabilities (929,528) 1,032,426 Income taxes payable 1,243,589 762,549 Other assets 39,552 (15,730) ----------- ----------- Net cash flows from operating activities 1,715,144 6,274,321 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of U.S. Treasury bills (29,323,899) (8,104,279) Maturities of U.S. Treasury bills 8,035,000 5,370,000 Purchase of property and equipment (1,099,496) (1,499,150) Disposition of property and equipment 22,846 412,897 Purchase of long-term notes receivable (230,000) Purchase of investments available for sale (3,181,872) (1,805,371) Disposition of investments available for sale 27,497,783 2,350,916 ----------- ----------- Net cash flows from (used in) investing activities 1,950,362 (3,504,987) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Dividends to shareowners (1,491,132) (616,783) Repurchases of common stock (1,777,543) (388,240) Proceeds from stock options exercised 119,000 Change in bank overdraft (159,864) 37,021 ----------- ----------- Net cash flows used in financing activities (3,309,539) (968,002) ----------- ----------- Net change in cash and cash equivalents 355,967 1,801,332 Cash and cash equivalents at beginning of period 1,721,939 242,794 ----------- ----------- Cash and cash equivalents at end of period $ 2,077,906 $ 2,044,126 =========== =========== Noncash investing transaction: Purchased for investment the preferred stock of Opto Sensors, Inc. in exchange for cancellation of the loan to that company through exercise of warrants held as a condition of the loan $ 2,500,000 ===========
The accompanying notes are an integral part of these statements. -6- 7 SCOPE INDUSTRIES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 1997 1. The accompanying unaudited consolidated financial statements contain adjustments (consisting of only normal recurring accruals) necessary to present fairly the Company's financial position as of March 31, 1997 and June 30, 1996, and the results of its operations for the three and nine months ended March 31, 1997 and 1996. The accounting policies followed by the Company are set forth in Note 1 of its financial statements in its 1996 Annual Report which is incorporated by reference on Form 10-K. 2. As of July 1, 1996, the Company adopted Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based Compensation" (SFAS 123). As provided for in the standard, the Company will not adopt the recognition provisions and will provide the pro forma net income earnings per share disclosures required by the standard in its 1997 annual financial statements. 3. Quarterly results of operations are not necessarily indicative of the results to be expected for the full year. 4. Inventories consisted of the following:
March 31 June 30 1997 1996 ---------- ---------- Finished products $ 242,925 $ 184,520 Raw materials 114,522 144,853 Operating supplies 203,554 202,264 ---------- ---------- $ 561,001 $ 531,637 ========== ==========
5. During the nine month period ended March 31, 1997, gains on sale of investments of $17,309,726 were recognized and included as income. Unrealized gains on investments available for sale, (excluded from income but reported, net of income taxes, as a separate component of shareowners' equity) decreased by $9,326,194 to $5,041,813 at March 31, 1997 from $14,368,007 at June 30, 1996. During the nine month period ended March 31, 1996, gains on sale of investments of $357,718 were recognized and included as income. Unrealized gains on investments available for sale, (excluded from income but reported, net of income taxes as a separate component of shareowners' equity) were $12,529,296 at March 31, 1996. -7- 8 SCOPE INDUSTRIES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) MARCH 31, 1997
Net Unrealized Gains (Losses) Before Provision Cost For Income Taxes Fair Value ----------- ---------------- ----------- At March 31, 1997: ------------------ Investments held to maturity $ 633,426 $ (31,370) $ 602,056 Investments available for sale 7,243,251 8,016,813 15,260,064 At June 30, 1996: ---------------- Investments held to maturity $ 633,426 $ (29,826) $ 603,600 Investments available for sale 11,749,436 17,898,007 29,647,443
6. The provision for income taxes for the nine months ended March 31, 1997 represents an effective rate of 23.3% for federal and state income taxes. Valuation reserves have been eliminated for those deferred tax assets that can be realized as a result of investment gains being recognized during the nine month period. Recognizing the deferred tax benefit during the period reduces the provision for income taxes to an effective rate that is lower than the statuary federal income tax rate. For the first nine months of the prior fiscal year, the income tax provision resulted in an effective rate of 35.3%. -8- 9 SCOPE INDUSTRIES AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS Net income for the third quarter ended March 31, 1997 increased 299% from the third quarter last year to $3,768,095 or $3.15 per share. Net income was $943,963 or $0.76 per share for the third quarter last year. Total operating revenues for the third quarter were 6.3% less than the revenues for the same quarter last year. Waste Material Recycling segment sales for the current quarter fell 9.3% from last year's third quarter revenues. Tonnage volume in this year's third quarter was 13.1% greater than tonnage for the same quarter last year. Unit selling prices were 20.5% below prices in last year's third quarter. Commodity prices for corn and other grains in the third quarter just ended were substantially below the prices that prevailed last year. Waste Material Recycling segment unit pricing closely follows these commodity prices. Vocational School Group revenues this quarter were about equal to the comparable quarter last year. Operating costs for the Waste Material Recycling segment increased 9.4% compared to the same quarter last year. The segment's lower sales revenues and higher costs caused current quarter margins to shrink compared to the comparable quarter last year. Operations for the quarter were profitable in the Waste Material Recycling segment and the Vocational School Group segment. Investment and other income for the quarter ended March 31, 1997 was $2,562,004 compared to $322,062 for the same three months last year. The investment income included gains of $1,891,071 from sales of investments during the current period and $15,068 in gains from investment sales in the prior year's third quarter. For the nine months ended March 31, 1997, net income was $17,953,949 or $15.00 per share. Last year net income was $2,916,353 or $2.36 per share for the comparable nine months. Revenues for the nine months ended March 31, 1997 were 9.2% above revenues for the comparable nine months last year. The increased revenue in the current nine month period is a result of higher product prices in this year's first quarter. Corn prices were sharply higher during the first quarter of this year and the Company's Dried Bakery Product sold at higher prices as a direct result. Corn prices fell dramatically in this year's second and third quarters. The Company's second and third quarter revenues reflect the corn price drop. The Waste Material Recycling segment and the Vocational School Group segment operated profitably during the current and the previous year's nine months periods ended March 31. Investment and other income for the nine months ended March 31, 1997 was $19,033,221. This includes gains of $17,309,726 from sales of investments. Investment and other income was $1,226,895 including $357,718 of investment gains for the comparable nine months last year. -9- 10 SCOPE INDUSTRIES AND SUBSIDIARIES MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED) FINANCIAL POSITION Working Capital was $26,148,256 at March 31, 1997. It was $8,285,580 at June 30, 1996. The working capital ratio at March 31, 1997 was 6.4 and at June 30, 1996 was 2.8. During the nine months ended March 31, 1997, the Company sold investment securities whose aggregate proceeds totaled $27,497,783. The long term investment positions in Imperial Bancorp and Mesa, Inc. have been liquidated. The sales of investments and the resulting gain recognition for the nine month period caused a decrease in the unrealized investment holding gains. At March 31, 1997, investments include $8,016,813 in unrealized gains based on fair values that exceed adjusted costs for investment securities. At June 30, 1996, the unrealized gains were $17,898,007. Shareowners' equity at March 31, 1997 reflects $5,041,813 for net unrealized gains on investments after a provision for deferred taxes. The unrealized holding gains are excluded from earnings. TAXES The provision for income taxes for the nine month period ended March 31, 1997 is $5,450,000 and represents an effective rate of 23.3% for federal and state income taxes. Valuation reserves have been eliminated for those deferred tax assets that can be realized as a result of investment gains being recognized during the nine month period. Recognizing the deferred tax benefit during the period reduces the provision for income taxes to an effective rate that is lower than the statuary federal income tax rate. For the first nine months of the prior fiscal year, the income tax provision was $1,590,000 and the effective tax rate was 35.3%. -10- 11 SCOPE INDUSTRIES AND SUBSIDIARIES PART II. OTHER INFORMATION Item 2. Increases and Decreases in Outstanding Securities and Indebtedness. Increases and decreases in outstanding equity securities in the nine months ending March 31, 1997 were as follows:
Common Stock No Par Value ------------ Shares outstanding June 30, 1996 1,202,565 Incentive stock options exercised 4,000 Shares purchased and retired during the nine months (39,700) --------- Shares outstanding March 31, 1997 1,166,865 =========
A corporate resolution requires the retirement of all reacquisitions of common stock. During the nine months ended March 31, 1997, the Registrant purchased and retired 39,700 shares of common stock at a cost of $1,777,543. Item 6. Exhibits and Reports on Form 8-K. (A) Exhibits - None (B) No Form 8-K was filed for the quarter ended March 31, 1997. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized and accepting responsibility as the signatory. SCOPE INDUSTRIES (Registrant) DATE: May 9, 1997 /s/ John J. Crowley ---------------------- ------------------------------------- John J. Crowley, Vice President and Chief Financial Officer -11- EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AT MARCH 31, 1997 AND THE CONSOLIDATED STATEMENT OF INCOME FOR THE QUARTER ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS JUN-30-1997 JAN-01-1997 MAR-31-1997 2,077,906 15,984,868 1,775,845 149,196 561,001 30,949,910 32,435,541 21,901,111 58,496,772 4,800,654 0 0 0 4,040,287 49,575,831 58,496,772 5,473,282 6,602,673 3,740,035 6,036,582 0 0 0 3,128,095 (640,000) 3,768,095 0 0 0 3,768,095 3.15 3.15
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