SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Three Months Ended September 30, 1995 Commission File No. 0-4123
MOYCO INDUSTRIES, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Pennsylvania 23-1697233
- ----------------------------- ---------------------------------
(State or other Jurisdiction) (IRS Employer Identification No.)
200 Commerce Drive Montgomeryville, PA 18936
- ---------------------------------------------------------------------------
*(Address of Principal Executive Offices) (Zip Code)
200 Commerce Drive, Montgomeryville, PA 18936
- ---------------------------------------------------------------------------
*(As of June 1995 Principal Executive Offices)
Registrant's telephone number, including area code: (215) 855-4300
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, and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
On September 30, 1995, there were 4,009,415 shares of the Registrant's common
stock outstanding.
Page 1
<PAGE>
Item 1. Financial Information
MOYCO INDUSTRIES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
1995 June 30,
ASSETS (Substantially Pledged) (Note 3) (Unaudited) 1995
------------- -------
<S> <C> <C>
Current Assets
Cash (including cash equivalents of $0 at $ 1,232,971 $ 1,097,323
September 30, 1995 and June 30, 1995)
Accounts receivable, net of doubtful account 1,855,112 1,932,913
allowances of $78,990 at September 30, 1995
and $78,990 at June 30, 1995)
Note Receivable-Trade 32,980 41,051
Other Receivable - 198,000
Inventories, estimated (Note 1 and 2) 3,672,259 3,218,077
Prepaid expenses 56,087 25,147
----------- -----------
Total Current Assets 6,849,409 6,512,511
----------- -----------
Property, Plant and Equipment
Land 452,433 452,433
Buildings and improvements 4,284,654 4,172,201
Automotive equipment 48,511 48,511
Machinery and equipment 4,738,831 4,586,844
Furniture and fixtures 539,469 503,450
----------- -----------
10,063,898 9,763,439
Less: Accumulated Depreciation 3,899,934 3,771,798
----------- -----------
Net Property, Plant and Equipment 6,163,964 5,991,641
----------- -----------
Other Assets
Unamortized patents and trademarks, net of 629,149 7,253
accumulated amortization of $50,122 at September
30, 1995 and $48,309 at June 30, 1995 (Note 1)
Unamortized mortgage costs, net of accumulated 28,667 29,702
amortization of $36,278 at September 30, 1995
and $35,243 at June 30, 1995 (Note 1)
Surrender Value Officers Life 22,660 22,660
Deposits 77,753 419,898
----------- -----------
Total Other Assets 758,229 479,513
----------- -----------
TOTAL ASSETS $13,771,602 $12,983,665
=========== ===========
</TABLE>
See accompanying notes.
Page 2
<PAGE>
<TABLE>
<CAPTION>
September 30,
1995 June 30,
LIABILITIES AND SHAREHOLDERS' EQUITY (Unaudited) 1995
------------- -------
<S> <C> <C>
Current Liabilities
Current maturities of long-term debt (Note 3) $ 1,478,489 $ 526,954
Accounts payable 946,627 963,231
Accrued expenses:
Payroll 134,200 194,556
Interest 66,563 33,750
Other 283,427 138,900
Profit Sharing - 15,000
Income Tax 43,213 50,375
----------- -----------
Total Current Liabilities 2,952,519 1,922,766
Long-term debt, net of current maturities 6,369,191 6,735,460
Deferred income taxes 174,864 174,864
----------- -----------
Total Liabilities 9,496,574 8,833,090
----------- -----------
Shareholders' Equity
Preferred stock, $.005 par value - -
Authorized 2,500,000 shares,
None issued
Common stock, $.005 par value 23,718 22,654
Authorized 15,000,000 shares
Issued 4,601,290 shares
Additional paid-in capital 3,093,803 3,038,892
Retained Earnings 1,278,460 1,209,982
Less: Treasury stock 591,875 shares at September 30,
1995 and at June 30, 1995, at cost 120,953 120,953
----------- -----------
Total Shareholders' Equity 4,275,028 4,150,575
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $13,771,602 $12,983,665
=========== ===========
</TABLE>
<PAGE>
MOYCO INDUSTRIES, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30
------------------------
1995 1994
------------------------
<S> <C> <C>
Net Sales $2,710,084 $2,839,429
Cost of Sales 1,662,983 1,647,107
---------- ----------
Gross Profit 1,047,101 1,192,322
Operating Expenses 834,889 835,186
---------- ----------
Income from Operations 212,212 357,136
---------- ----------
Other Income (Expenses)
Interest Expense ( 163,249) ( 103,919)
Other Income 69,273 49,178
---------- ----------
Total Other Income (Expense) ( 93,976) ( 54,741)
---------- ----------
Income Before Provision for Income Taxes 118,236 302,395
---------- ----------
Provision for Income Taxes 49,758 127,263
---------- ----------
Net Income 68,478 175,132
Retained Earnings, beginning of period 1,209,982 673,668
---------- ----------
Retained Earnings, end of period $1,278,460 $ 848,800
========== ==========
Earnings per Share $ 0.02 $ 0.04
========== ==========
Weighted Average Number of Common Shares 4,009,415 3,931,385
========== ==========
</TABLE>
See accompanying notes.
Page 3
<PAGE>
MOYCO INDUSTRIES, INC.
STATEMENT OF CASH FLOWS
THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
Increase (Decrease) in cash and cash equivalents
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30
-------------------------
1995 1994
-------------------------
<S> <C> <C>
Net cash provided by operating activities $ 128,779 $ 539,815
Cash flows from investing activities
(Expenditures) Retirements for property, plant
and equipment ( 300,459) ( 1,727,084)
Expenditures for equipment deposits ( 277,938) -
----------- ----------
Net Cash (used in) investing activities ( 578,397) ( 1,727,084)
----------- ----------
Cash flows from financing activities
Reduction of long-term debt obligations ( 114,734) ( 1,071,034)
New borrowings of long-term debt 700,000 2,175,210
----------- ----------
Net cash Provided by financing activities 585,266 1,104,176
----------- ----------
Net Increase (Decrease) in cash 135,648 ( 83,093)
Cash and cash equivalents, beginning of period 1,097,323 1,447,565
----------- ----------
Cash and cash equivalents, end of period $1,232,971 $1,364,472
========== ==========
</TABLE>
See accompanying notes.
Page 4
<PAGE>
MOYCO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(UNAUDITED)
Note 1: Summary of Significant Accounting Policies
Nature of Business
------------------
The Company is engaged in the business of manufacturing dental
waxes, dental supplies, endodontic and dental products,
pharmaceuticals, precision coated abrasives, commercial
abrasives, and is a repacker of other disposable products for
commercial and industrial use.
Principles of Accounting
------------------------
The balance sheet as of September 30, 1995, and the related
statements of operations and retained earnings, and cash flows
for the three months ended September 30, 1995 and 1994 are
unaudited: in the opinion of management, all adjustments
necessary for a fair presentation of such financial statements
have been included. Such adjustments consisted only of normal
recurring items. Interim results are not necessarily
indicative of results for a full year.
Valuation of Inventories
------------------------
Inventories are stated at the lower of cost or market. Costs
of raw materials and cartons are determined by the first-in,
first-out method. Labor and overhead included in
work-in-process and finished goods are determined at average
cost. Ending inventories at interims are estimated by the
gross profit method.
Depreciation
------------
Depreciation is computed by the straight-line method at rates
adequate to allocate the cost of applicable assets over their
expected useful lives.
Patents and Trademarks
----------------------
The costs of patents and trademarks are capitalized and
amortized to operations over their estimated useful lives or
statutory lives, whichever is shorter. Amortization is
computed by the straight-line method. Cost of defending
patents are added to the unamortized balance at date of
incurred expenditure. At such time as litigation is resolved
the remaining balance will be amortized over the remaining
useful lives.
Mortgage Costs
--------------
Mortgage costs are being amortized over the terms of the
related mortgages.
Page 5
<PAGE>
MOYCO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(UNAUDITED)
Note 1: Summary of Significant Accounting Policies (Continued)
Income Taxes
------------
The Company provides for deferred income taxes resulting from
timing differences resulting from using different depreciation
methods and different methods of recording and amortizing
interest costs related to the acquisition and rehabilitation
of the Montgomeryville building. They also result from the use
of the uniform capitalization rules and bad debt reserve
policy required by the Tax Reform Act of 1986. Job credits for
increasing research activities are accounted for the
flow-through method which recognizes the credits as reductions
of federal income tax expenses in the year utilized.
Research and Development
------------------------
Research and development costs are charged to expense as
incurred. The amounts charged for the three months ended
September 30, 1995 and year ended June 30, 1995 were $405 and
$35,718 respectively, and are included in costs of sales
category.
Earnings Per Common Share
-------------------------
Earnings per common share have been computed by dividing
earnings for each year by the weighted average number of
common shares outstanding during each period.
Note 2: Inventories (Estimated)
The components of inventory are as follows:
September 30, June 30,
1995 1995
------------- ----------
Raw materials $ 927,953 $ 813,185
Work-in-process 862,689 755,992
Finished goods 1,685,492 1,477,032
Cartons 196,124 171,868
---------- ----------
$3,672,259 $3,218,077
========== ==========
Page 6
<PAGE>
MOYCO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(UNAUDITED)
Note 3: Long-Term Debt
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
------------- ----------
<S> <C> <C>
Mortgages Payable
Mortgage payable in monthly installments of $6,569, including
interest at .85% of prime (not to exceed 15% or be below
8.5%), which matures in August 2001. $ 339,252 $ 351,260
Mortgage payable in monthly installments of $5,053, including
interest at 8.75% for five years and at prime plus 1% for the
remaining term through maturity December 1, 2009. 492,731 496,805
Mortgage payable in monthly installments of $14,950 including
interest at 9.25% for five years and at prime plus 1% for the
remaining term through maturity May 1, 2010. 1,438,182 1,448,847
Mortgage Payable
Municipal Authorities
Mortgage payable in 180 monthly installments
of $1,952, including interest at 2%, which
matures April 1, 2010. 290,816 295,200
Mortgage payable in 180 monthly installments
of $6,371, including interest at 2%, which
matures July 1, 2010. 969,875 990,126
Other
Note payable due December 31, 1997
with monthly interest only payments at
prime beginning July 1995 until maturity. 350,000 350,000
Auto loan payable in forty eight monthly
installments of $838 plus interest at 7.75% 26,824 30,176
Note payable in quarterly interest-only
payments through 1996. Thereafter, twenty
equal quarterly payments including principal
and interest at prime. (interest rate not
to exceed 10% or be below 8%). 1,500,000 1,500,000
</TABLE>
Page 7
<PAGE>
MOYCO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(UNAUDITED)
Note 3: Long-Term Debt (Continued)
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
------------- ----------
<S> <C> <C>
Commercial term note payable in monthly installments of
$30,000 plus interest at prime rate plus 1/2% beginning
August 1, 1995 which matures August 1, 2000. 1,740,000 1,800,000
Credit line payable dated December 31,
1991. Amended November 28, 1994. Interest
rate of prime plus .5%. 700,000 -
---------- ---------
7,847,680 7,262,414
Less: Current Maturities ( 1,478,489) ( 526,954)
---------- ----------
Substantially all of the Company's Assets
are pledged as collateral for the long-
term debt $6,369,191 $6,735,460
========== ==========
</TABLE>
As of September 30, 1995 long-term debt matures as follows:
1996 $1,478,489
1997 868,947
1998 1,226,392
1999 881,751
2000 834,030
Thereafter 2,558,071
----------
$7,847,680
==========
Page 8
<PAGE>
MOYCO INDUSTRIES, INC.
A. SUMMARIZED FINANCIAL INFORMATION
MANAGEMENT'S ANALYSIS AND DISCUSSION OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
FOR THE
THREE MONTHS ENDED SEPTEMBER 30, 1995
-----------------------------------------------
Results of Operations
Comparison of recent quarter (9/30/95) and immediate preceding Quarter
(6/30/95):
----------------------------------------------------------------------
Net Sales decreased by $588,023 and is mainly attributable to the
dental division. The decrease in sales activity is mainly attributable
to the closing of the Philadelphia facility and the movement of
equipment and inventory to our other locations. In addition, this
quarter is historically our slowest as we close for year end inventory
count as well as vacation period.
The decrease in gross profit is correlated to the decrease in volume.
The procedure for computing inventories by department is the gross
profit method using the previous fiscal years actual gross profit
percentage, unless management is aware of a significant adjustment
required in the quarter, continues as the standard procedure in
computing interim in quarterly accounting.
As a result of the final phase closing of the Philadelphia facility,
the inventory of work-in-process and finished goods were increased in
our dental division. In addition, the abrasive division had to increase
inventory to accommodate contract customers in both fiber optic and
metallurgy markets to meet their just in time delivery schedules. The
combination reflected an unusual increase in inventory some of which
should be reduced during the next two quarters.
Operating expenses decreased as year end bonus and awards and other
adjustments were recorded in the comparative period and not incurred in
the current quarter.
The decrease in net profit is related to the decrease in sales.
Working capital is sufficient for current operating needs however,
should the current state of the economy continue, both nationally and
internationally, the need for additional sales levels will put further
stress on working capital needs. Inflationary pressures have
significantly less bearing on current profitability than the continued
need for additional sales.
Page 9
<PAGE>
MOYCO INDUSTRIES, INC.
A. SUMMARIZED FINANCIAL INFORMATION
(Continued)
MANAGEMENT'S ANALYSIS AND DISCUSSION OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
FOR THE
THREE MONTHS ENDED SEPTEMBER 30, 1995
-----------------------------------------------
Comparison of recent Quarter (9/30/95) and Equivalent Quarter
(9/30/94):
----------------------------------------------------------------------
Net sales increased by $129,345 primarily in our dental division as a
result of the closing of the Philadelphia facility and the movement of
equipment and inventory to our other locations.
The procedure for computing inventories by department by the gross
profit method, using the previous fiscal years actual gross profit
percentage unless management is aware of a significant adjustment
required in the quarter continues as the standard procedure in
computing interim quarterly accounting.
Manufacturing and operating overhead costs should realize some
reduction as a result of consolidating operations sometime at the start
of the 1996 calendar year.
Operating expenses remained constant in the current quarter.
The decrease in net profit is directly related to the decrease in value
and the increase in interest expense. Interest expense has risen as a
result of the debt associated with our new facilities and equipment.
Working capital decreased as a result of additional debt borrowings
during the three months ended September 30, 1995.
Working capital is sufficient for current operating needs, however
should the state of the economy continue the need for additional sales
levels will put further stress on working capital. Inflationary
pressures have significantly less bearing on current profitability than
the continued need for additional sales.
Page 10
<PAGE>
MOYCO INDUSTRIES, INC.
A. SUMMARIZED FINANCIAL INFORMATION
(Continued)
MANAGEMENT'S ANALYSIS AND DISCUSSION OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
FOR THE
THREE MONTHS ENDED SEPTEMBER 30, 1995
-----------------------------------------------
Liquidity and Capital Resources
-------------------------------
It is anticipated that pressures on earnings will continue. The current
economic recession, and the continuing need to increase sales to offset
costs are a reality. The addition of capital improvement projects of
plant facilities and equipment, along with the financial commitments,
will require sales growth and earnings to repay the additional debt
service. Moyco currently has enjoyed twenty straight quarters of
profitability. Also, changes in the high tech products sold by our
abrasive division are subject to swings which directly effect net sales
and profits.
Moyco Industries, Inc. as of June 30, 1994 was in compliance with the
enactment of the Clean Air Act, effective August 1992.
Uncertainties
-------------
There is a constant need for increased sales in both units and dollars.
There is no stronger factor in determining our companies current and
future abilities to meet debt service and generate future profits. The
economy and the degree of recovery will be a major factor in
forecasting the future.
Litigation
----------
The litigation against Tulsa Dental Products and Quality Dental
Products for their infringement of our patented R tip endodontic
instrument is scheduled for trial at the end of the calendar year. It
is believed however, that the trial will be delayed until the first
quarter of the calendar year 1996. The costs of litigation and appeal
is significant and there is no guarantee of winning. Nevertheless,
management and counsel feel extremely strong with the merits of the
case and are cautiously optimistic. Should treble damages be awarded
the financial gain could be significant.
Page 11
<PAGE>
MOYCO INDUSTRIES INC.
PART II. OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits - None
(b) Exhibits - None
SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report is signed below by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
MOYCO INDUSTRIES, INC.
(Registrant)
Date By
----------------------------- --------------------------------------
Marvin E. Sternberg
President and Chief Executive
Officer
Chairman of the Board
Date By
----------------------------- --------------------------------------
Jerome Lipkin
Vice President and Director
Executive Officer
Date By
----------------------------- --------------------------------------
William G. Woodhead
Secretary/Treasurer and Director
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-1-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,232,971
<SECURITIES> 0
<RECEIVABLES> 1,967,082
<ALLOWANCES> 78,990
<INVENTORY> 3,672,259
<CURRENT-ASSETS> 6,849,409
<PP&E> 10,063,898
<DEPRECIATION> 3,899,934
<TOTAL-ASSETS> 13,771,602
<CURRENT-LIABILITIES> 2,952,519
<BONDS> 0
<COMMON> 23,718
0
0
<OTHER-SE> 3,093,803
<TOTAL-LIABILITY-AND-EQUITY> 13,771,602
<SALES> 2,710,084
<TOTAL-REVENUES> 2,779,357
<CGS> 1,662,983
<TOTAL-COSTS> 2,497,872
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 163,249
<INCOME-PRETAX> 118,236
<INCOME-TAX> 49,758
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 68,478
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
