-----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, TrFppeXJ7TmBnw+TArj84yxMRjuAYhGyg2lJvIED9jyVLsZ5Tu9024XDg9TbV/W/ Xi9t9HUsnb9aHvE+t0hHTg== 0000950148-97-002798.txt : 19971113 0000950148-97-002798.hdr.sgml : 19971113 ACCESSION NUMBER: 0000950148-97-002798 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 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: SEC FILE NUMBER: 001-03552 FILM NUMBER: 97715714 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 September 30, 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 October 24, 1997 - -------------------------- ------------------------------- Common Stock, no par value 1,133,352 2 SCOPE INDUSTRIES AND SUBSIDIARIES INDEX
PAGE ---- Part I. Financial Information: Consolidated Balance Sheets - September 30, 1997 and June 30, 1997 3 Consolidated Statements of Income - Three Months Ended September 30, 1997 and 1996 4 Consolidated Statements of Cash Flows - Three Months Ended September 30, 1997 and 1996 5 Notes to Consolidated Financial Statements 6 Management's Discussion and Analysis of Results of Operations and Financial Condition 8 Part II. Other Information: Item 2. Increases and Decreases in Outstanding Securities and Indebtedness 10 Item 4. Submission of Matters to a Vote of Security Holders 10 Item 5. Other Information 10 Item 6. Exhibits and Reports on Form 8-K 10 Signatures 11
-2- 3 PART I. FINANCIAL INFORMATION SCOPE INDUSTRIES AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30 JUNE 30 1997 1997 ------------ ----------- (UNAUDITED) (AUDITED) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 1,326,285 $ 5,946,050 Treasury bills (par value $25,500,000 at September 30, 1997 and $24,000,000 at June 30, 1997) 24,972,766 23,540,939 Accounts and notes receivable, less allowance for doubtful accounts of $173,769 at September 30, 1997 and $159,167 at June 30, 1997 1,557,456 1,637,066 Inventories 652,332 584,401 Deferred income taxes 720,000 675,000 Prepaid expenses and other current assets 456,765 379,654 ----------- ----------- TOTAL CURRENT ASSETS 29,685,604 32,763,110 ----------- ----------- NOTES RECEIVABLE 714,632 232,276 ----------- ----------- PROPERTY AND EQUIPMENT: Machinery and equipment 22,574,139 22,551,992 Land, buildings and improvements 9,644,109 9,652,554 ----------- ----------- 32,218,248 32,204,546 Less accumulated depreciation and amortization 22,338,841 22,016,611 ----------- ----------- 9,879,407 10,187,935 ----------- ----------- OTHER ASSETS: Deferred charges and other assets 70,943 256,006 Investments available for sale-at fair value 19,697,613 15,539,706 Other equity investments-at cost 3,506,000 2,505,000 ----------- ----------- 23,274,556 18,300,712 ----------- ----------- $63,554,199 $61,484,033 =========== =========== LIABILITIES AND SHAREOWNERS' EQUITY CURRENT LIABILITIES: Bank overdraft $ 55,489 $ Accounts payable 767,472 1,104,205 Other accrued liabilities 1,098,532 1,255,321 Accrued payroll and related employee benefits 818,994 940,631 Income taxes payable 506,768 534,231 ----------- ----------- TOTAL CURRENT LIABILITIES 3,247,255 3,834,388 ----------- ----------- DEFERRED INCOME TAXES 1,325,000 ----------- ----------- 4,572,255 3,834,388 ----------- ----------- SHAREOWNERS' EQUITY: Common stock, no par value, 5,000,000 shares authorized; shares issued and outstanding September 30, 1997 1,136,352 June 30, 1997 1,168,665 4,138,462 4,138,462 Retained earnings 44,248,238 45,513,699 Net unrealized gain on investments 10,595,244 7,997,484 ----------- ----------- 58,981,944 57,649,645 ----------- ----------- $63,554,199 $61,484,033 =========== ===========
The accompanying notes are an integral part of these statements. -3- 4 SCOPE INDUSTRIES AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30 ------------ 1997 1996 ----------- ----------- REVENUES: Sales $ 5,357,564 $ 8,692,500 Vocational school revenues 1,137,241 1,089,248 ----------- ----------- 6,494,805 9,781,748 ----------- ----------- OPERATING COSTS AND EXPENSES: Cost of sales 3,687,645 4,411,164 Vocational school expenses 901,160 881,062 Depreciation and amortization 519,577 522,024 General and administrative 1,086,475 1,050,640 ----------- ----------- 6,194,857 6,864,890 ----------- ----------- 299,948 2,916,858 Investment and other income 429,867 9,905,910 ----------- ----------- Income before income taxes 729,815 12,822,768 Provision for income taxes 315,000 3,565,000 ----------- ----------- NET INCOME $ 414,815 $ 9,257,768 =========== =========== NET INCOME PER SHARE $ 0.35 $ 7.72 =========== =========== Weighted average number of shares outstanding 1,168,954 1,199,140
The accompanying notes are an integral part of these statements. -4- 5 SCOPE INDUSTRIES AND SUBSDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30 ------------ 1997 1996 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 414,815 $ 9,257,768 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 519,577 522,024 Gains on investments available for sale (9,435,635) Losses (Gains) on sale of equipment 18,046 (1,309) Deferred income taxes (45,000) (170,000) Changes in operating assets and liabilities: Accounts and notes receivable 26,054 (265,121) Inventories (67,931) 7,348 Prepaid expenses and other current assets (77,111) (60,771) Accounts payable and accrued liabilities (615,159) (727,701) Income taxes payable (27,463) 3,386,799 Other 10,063 13,620 ----------- ----------- Net cash flows from operating activities 155,891 2,527,022 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of U.S. Treasury bills (8,181,827) (5,157,297) Maturities of U.S. Treasury bills 6,750,000 1,785,000 Purchase of property and equipment (282,893) (513,780) Disposition of property and equipment 53,798 13,500 Purchase of investments available for sale (60,147) (2,900,536) Purchase of other equity investments (1,001,000) Disposition of investments available for sale 14,164,386 Purchase of long-term note receivable (428,800) ----------- ----------- Net cash flows (used in) from investing activities (3,150,869) 7,391,273 ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Dividends to shareowners (297,667) Repurchases of common stock (1,680,276) (480,405) Change in bank overdraft 55,489 (250,686) ----------- ----------- Net cash used in financing activities (1,624,787) (1,028,758) ----------- ----------- Net (decrease) increase in cash and cash equivalents (4,619,765) 8,889,537 Cash and cash equivalents at beginning of period 5,946,050 1,721,939 ----------- ----------- Cash and cash equivalents at end of period $ 1,326,285 $10,611,476 =========== ===========
The accompanying notes are an integral part of these statements. -5- 6 SCOPE INDUSTRIES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 1997 1. In the opinion of the Registrant, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the Company's financial position as of September 30, 1997 and June 30, 1997, and the results of its operations for the three months ended September 30, 1997 and 1996. The accounting policies followed by the Company are set forth in Note 1 of its financial statements in its 1997 Annual Report which is incorporated by reference on Form 10-K. 2. Quarterly results of operations are not necessarily indicative of the results to be expected for the full year. 3. Treasury bills consisted of the following: (at adjusted cost which approximates fair value)
September 30 June 30 1997 1997 ------------ ----------- Held to maturity $16,116,565 $22,591,800 Available for sale 8,856,201 949,139 ----------- ----------- $24,972,766 $23,540,939 =========== ===========
4. Inventories consisted of the following:
September 30 June 30 1997 1997 ------------ ----------- Finished products $ 349,139 $ 255,850 Raw materials 138,063 134,968 Operating supplies 165,130 193,583 ----------- ----------- $ 652,332 $ 584,401 =========== ============
-6- 7 SCOPE INDUSTRIES AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 1997 (CONTINUED) 5. Investments consisted of the following:
Net Unrealized Gains Before Provision For Cost Income Taxes Fair Value ---- ------------ ---------- At September 30, 1997: Investments available for sale $5,477,369 $14,220,244 $19,697,613 Other equity investments 3,506,000 3,506,000(a)(b) At June 30, 1997: Investments available for sale $5,417,222 $10,122,484 $15,539,706 Other equity investments 2,505,000 2,505,000(a)
(a) No quoted prices are available for these securities. (b) At September 30, 1997 the Registrant held 1,875,000 shares of OSI Systems, Inc. common stock which, in the financial statements, have been valued at their cost of $2,500,000. In October 1997, an initial public offering of OSI Systems, Inc. common stock occured. Included in the public offering were 227,097 shares sold by the Registrant. Proceeds of $2,821,173 were received from the sale of those shares and a pre-tax gain of $2,518,378 resulted from the October 1997 transaction. The Registrant, as a condition of participating in the initial public offering, has agreed to refrain from disposing of any of its remaining 1,647,903 shares for a six month period following the public offering. Financial statements, when issued by the Registrant for periods subsequent to the October 1997 public offering will classify OSI Systems, Inc. holdings as available-for-sale investments whose valuation will be at fair value. 6. During the three month period ended September 30, 1997, there were no investment gains or losses recognized in the determination of income. Unrealized investment holding gains (excluded from income but reported, net of income taxes, as a separate component of shareowners' equity) increased by $2,597,760 to $10,595,244 at September 30, 1997 from $7,997,484 at June 30, 1997. During the three months ended September 30, 1996, investment gains of $9,435,635 were recognized and included as income. Unrealized investment holding gains, (excluded from income but reported, net of income taxes, as a separate component of shareowners' equity) decreased by $5,461,370 to $8,906,637 at September 30, 1996 from $14,368,007 at June 30, 1996. 7. The provision for income taxes for the three months ended September 30, 1997 represents an effective rate 43.2% for federal and state income taxes. For the three month period ended September 30, 1996 the effective rate for income taxes was 27.8%. In the 1996 period, deferred tax benefits were recognized, which reduced the provision for income taxes to an effective rate that was lower the statutory federal income tax rate. -7- 8 SCOPE INDUSTRIES AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS For the first quarter ended September 30, 1997, net income was down 95.5% from the first quarter of last year. Net income in the current quarter was $414,815 or $0.35 per share compared to $9,257,768 or $7.72 per share for the first quarter of last fiscal year. Last year's results included $9,435,635 in net gains before income taxes from sales of investments. Total operating revenues for this year's first quarter were 33.6% less than the revenues for the same quarter last year. Waste Material Recycling segment sales for the current quarter fell 39.2% from last year's first quarter revenues. Unit selling prices were dramatically below last year's prices due to the much lower price levels for corn and other animal feed commodities which recycled bakery waste material prices must compete with. The average price received for materials sold in this year's first quarter was 38.1% below last year's first quarter average price. Tonnage sold in the current quarter was 2.9% below last year's first quarter. Vocational School Group revenues this quarter were 4.4% above the comparable quarter last year. Operating costs for the Waste Material Recycling segment were 16.4% lower in the current quarter than for the same quarter last year. Operations for the quarter were profitable in the Waste Material Recycling segment. However, the segment's sales revenue decline was greater than the reduction in costs which caused current quarter margins to shrink compared to the comparable quarter last year. The Vocational School Group operations reported small losses in both the current quarter and the comparable quarter last year. Consolidated operating earnings for the first quarter of the current year were 89.7% below the operating earnings in the first quarter last year. Investment and other income for the three months ended September 30, 1997 was $429,867 compared to $9,905,910 for the same three months last year. Last year's income included $9,435,635 in net gains from sales of investments. No investment sales occurred in the current three month period. FINANCIAL POSITION Working Capital was $26,438,349 at September 30, 1997. It was $28,928,722 at June 30, 1997. The working capital ratio at September 30, 1997 was 9.1 and was 8.5 at June 30, 1997. During the first quarter ended September 30, 1997, the net unrealized appreciation on investment securities held as available for sale increased by $4,097,760 (from $10,122,484 to $14,220,244). No securities were sold during the period. Shareowners' equity at September 30, 1997 reflects $10,595,244 for net unrealized gains on investments after a provision for deferred taxes. The unrealized holding gains are excluded from earnings. At September 30, 1997, the Registrant held 1,875,000 common shares of OSI Systems, Inc., which in the financial statements, are classified as Other Equity Investments and are valued at their cost of $2,500,000. In -8- 9 SCOPE INDUSTRIES AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED) October 1997, an initial public offering of OSI Systems, Inc. common stock occurred. Proceeds of $2,821,173 were received from the sale of 227,097 shares which were included in the public offering. A pre-tax gain of $2,518,378 resulted from the October 1997 transaction. The Registrant, as a condition of participating in the public offering, has agreed to refrain from disposing of any of its remaining 1,647,903 shares for a six month period following the public offering. Financial statements, when issued by the Registrant for periods subsequent to the October 1997 public offering, will classify OSI Systems, Inc. holdings as available-for-sale investments whose valuation will be at fair value. TAXES The provision for income taxes for the three month period ended September 30, 1997 is $315,000 and represents an effective rate of 43.2% for federal and state income taxes. For the first three months of the prior fiscal year, the income tax provision was $3,565,000 and the effective tax rate was 27.8%. In the 1996 period, deferred tax benefits were recognized, which reduced the provision for income taxes to an effective rate that is lower than the statuary federal income tax rate. FORWARD LOOKING STATEMENTS Forward looking statements included in the Management's Discussion and Analysis of Results of Operations and Financial Condition and elsewhere in this quarterly report are subject to risks and uncertainties that could affect actual future results. Potential risks and uncertainties include, but are not limited to, general business conditions, unusual volatility in equity and interest rate markets, disruptions in the availability or pricing of raw materials, transportation difficulties, changing government educational aid policies, or disruption of operations from acts of God. -9- 10 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 three months ending September 30, 1997 were as follows:
Common Stock No Par Value ------------ Shares outstanding June 30, 1997 1,168,665 Shares purchased and retired during the three months (32,313) --------- Shares outstanding September 30, 1997 1,136,352 =========
A corporate resolution requires the retirement of all reacquisitions of common stock. During the three months ended September 30, 1997, the Registrant purchased and retired 32,313 shares of common stock at a cost of $1,680,276. Item 4. Submission of Matters to a Vote of Security Holders. At the annual meeting of shareowners held on October 28, 1997 with 1,168,665 shares entitled to vote, five directors were elected to serve for the ensuing year and until their successors have been elected and qualified.
VOTES VOTES ABSTAINED DIRECTORS FOR WITHHELD FROM VOTING TOTAL --------- --- -------- ----------- ----- Robert Henigson 1,127,717 1,127,717 Meyer Luskin 1,127,717 1,127,717 William H. Mannon 1,127,717 1,127,717 Franklin Redlich 1,127,717 1,127,717 Paul D. Saltman 1,121,917 5,800 1,127,717
Item 5. Other Information. On October 28, 1997 the Registrant's board of directors declared a regular dividend of $1.00 per share payable on January 5, 1998 to shareowners of record at December 1, 1997. Item 6. Exhibits and Reports on Form 8-K. (A) Exhibits - None (B) No Form 8-K was filed for the quarter ended September 30, 1997. -10- 11 PART II. OTHER INFORMATION SCOPE INDUSTRIES AND SUBSIDIARIES (CONTINUED) 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: November 13, 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 SEPTEMBER 30, 1997 AND THE CONSOLIDATED STATEMENT OF INCOME FOR THE QUARTER ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS JUN-30-1998 JUL-01-1997 SEP-30-1997 1,326,285 23,203,613 1,731,225 173,769 652,332 29,685,604 32,218,248 22,338,841 63,554,199 3,247,255 0 0 0 4,138,462 54,843,482 63,554,199 5,357,564 6,494,805 3,687,645 6,194,857 0 0 0 729,815 315,000 414,815 0 0 0 414,815 0.35 0.35
-----END PRIVACY-ENHANCED MESSAGE-----