<PAGE> 1
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
Nine Months Ended March 31, 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.)
21st and Clearfield Streets, Philadelphia, PA 19132
- - ------------------------------------------------------ ---------
*(Address of Principal Executive Offices) (Zip Code)
200 Commerce Drive, Montgomeryville, PA 18936
- - ------------------------------------------------------ ----------
*(As of June 1995 Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (215) 229-0470
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 March 31, 1995, there were 3,932,885 shares of the Registrant's common
stock outstanding.
Page 1
<PAGE> 2
Item 1. Financial Information
MOYCO INDUSTRIES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,
1995 June 30,
ASSETS (Substantially Pledged) (Note 3) (Unaudited) 1994
----------- ----------
<S> <C> <C>
Current Assets
Cash (including cash equivalents of $0 at $ 1,284,941 $1,447,565
March 31, 1995 and June 30, 1994)
Accounts receivable, net of doubtful account 1,581,575 1,672,346
allowances of $78,990 at March 31, 1995
and $58,990 at June 30, 1994)
Inventories, estimated (Note 2) 3,198,197 2,818,774
Prepaid expenses 22,556 32,422
Prepaid income taxes 294,100 -
----------- -----------
Total Current Assets 6,381,369 5,971,107
----------- -----------
Property, Plant and Equipment
Land 65,000 100,000
Buildings and improvements 4,175,975 1,648,469
Construction in progress - 1,038,067
Automotive equipment 48,511 48,511
Machinery and equipment 4,525,941 3,989,021
Furniture and fixtures 436,772 411,410
----------- -----------
9,252,199 7,235,478
Less: Accumulated Depreciation 3,625,562 3,951,760
----------- -----------
Net Property, Plant and Equipment 5,626,637 3,283,718
----------- -----------
Other Assets
Deferred tax asset 24,007 24,007
Unamortized patents and trademarks, net of 125,655 14,506
accumulated amortization of $46,495 in March
31, 1995 and $41,056 at June 30, 1994 (Note 1)
Unamortized mortgage costs, net of accumulated 30,383 11,901
amortization of $34,562 at March 31, 1995
and $31,811 at June 30, 1994 (Note 1)
Surrender Value Officers Life 18,162 18,162
Deposits on equipment 71,773 466,497
----------- -----------
Total Other Assets 269,980 535,073
----------- -----------
TOTAL ASSETS $12,277,986 $9,789,898
=========== ===========
</TABLE>
See accompanying notes.
<PAGE> 3
<TABLE>
<CAPTION>
March 31,
1995 June 30,
LIABILITIES AND SHAREHOLDERS' EQUITY (Unaudited) 1994
----------- --------
<S> <C> <C>
Current Liabilities
Current maturities of long-term debt (Note 3) $ 3,541,024 $2,090,671
Accounts payable 425,196 285,287
Accrued expenses:
Payroll 168,411 173,435
Interest - 30,000
Other 148,786 233,448
Profit Sharing - 25,000
Income Tax 327,445 129,426
----------- -----------
Total Current Liabilities 4,610,862 2,967,267
Long-term debt, net of current maturities 3,473,799 3,046,168
Deferred income taxes 192,702 163,452
----------- -----------
Total Liabilities 8,277,363 6,176,887
----------- -----------
Shareholders' Equity
Preferred stock, $.005 par value - -
Authorized 2,500,000 shares,
None issued
Common stock, $.005 par value 22,628 22,622
Authorized 15,000,000 shares
Issued 4,525,890 shares
Additional paid-in capital 3,038,918 3,037,674
Retained Earnings 1,060,030 673,668
Less: Treasury stock 593,005 shares at December 31,
1994 and at June 30, 1994, at cost 120,953 120,953
----------- -----------
Total Shareholders' Equity 4,000,623 3,613,011
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $12,277,986 $9,789,898
=========== ==========
</TABLE>
Page 2
<PAGE> 4
MOYCO INDUSTRIES, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
NINE MONTHS ENDED MARCH 31, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31
-------------------------
1995 1994
-------------------------
<S> <C> <C>
Net Sales $8,582,079 $7,381,399
Cost of Sales 5,078,565 4,511,998
----------- -----------
Gross Profit 3,503,514 2,869,401
Operating Expenses 2,485,261 2,317,601
----------- -----------
Income from Operations 1,018,253 551,800
----------- -----------
Other Income (Expenses)
Interest Expense ( 284,448) ( 197,695)
Other Income 105,574 21,564
Contribution ( 96,322) -
----------- -----------
Total Other Income (Expense) ( 275,196) ( 176,131)
----------- -----------
Income Before Provision for Income Taxes 743,057 375,669
----------- -----------
Provision for Income Taxes 356,695 158,100
----------- -----------
356,695 158,100
----------- -----------
Net Income 386,362 217,569
Retained Earnings, beginning of period 673,668 281,820
----------- -----------
Retained Earnings, end of period $1,060,030 $ 499,389
========== ===========
Earnings per Share $ 0.10 $ 0.06
========== ===========
Weighted Average Number of Common Shares 3,932,885 3,930,235
========== ===========
</TABLE>
See accompanying notes.
Page 3
<PAGE> 5
MOYCO INDUSTRIES, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31
-------------------------
1995 1994
-------------------------
<S> <C> <C>
Net Sales $2,875,029 $2,365,433
Cost of Sales 1,641,438 1,442,591
----------- -----------
Gross Profit 1,233,591 922,842
Operating Expenses 861,413 765,915
----------- -----------
Income from Operations 372,178 156,927
----------- -----------
Other Income (Expenses)
Interest Expense ( 121,519) ( 97,662)
Other Income 47,998 10,938
Contribution ( 96,322) -
----------- -----------
Total Other Income (Expense) ( 169,843) ( 86,724)
----------- -----------
Income Before Provision for Income Taxes 202,335 70,203
----------- -----------
Provision for Income Taxes 131,082 29,544
----------- -----------
131,082 29,544
----------- -----------
Net Income 71,253 40,659
Retained Earnings, beginning of period 988,777 458,730
----------- -----------
Retained Earnings, end of period $1,060,030 $ 499,389
========== ===========
Earnings per Share $ 0.02 $ 0.01
========== ===========
Weighted Average Number of Common Shares 3,932,885 3,930,235
========== ===========
</TABLE>
See accompanying notes.
Page 4
<PAGE> 6
MOYCO INDUSTRIES, INC.
STATEMENT OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, 1995 AND 1994
Increase (Decrease) in cash and cash equivalents
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31
-------------------------
1995 1994
-------------------------
<S> <C> <C>
Net cash provided by (used in) operating activities ($ 418,610) $ 538,958
Cash flows from investing activities
(Expenditures) Retirements for property, plant and
equipment ( 1,581,747) ( 685,505)
Expenditures for equipment deposits ( 40,250) ( 230,979)
----------- -----------
Net Cash provided by (used in) investing activities ( 1,621,997) ( 916,484)
----------- -----------
Cash flows from financing activities
Reduction of long-term debt obligations ( 2,140,016) ( 226,211)
New borrowings of long-term debt 4,017,999 750,000
----------- -----------
Net cash Provided by financing activities 1,877,983 523,789
----------- -----------
Net (Decrease) Increase in cash ( 162,624) 146,263
Cash and cash equivalents, beginning of period 1,447,565 1,140,790
----------- -----------
Cash and cash equivalents, end of period $1,284,941 $1,287,053
=========== ==========
</TABLE>
See accompanying notes.
Page 5
<PAGE> 7
MOYCO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 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 March 31, 1995, and the related statements of
operations and retained earnings, and cash flows for the nine months
ended March 31, 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 6
<PAGE> 8
MOYCO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 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 nine months ended March 31, 1995 and year
ended June 30, 1994 were $34,115 and $19,583 respectively, and are
included in costs of sales category.
Earnings (loss) Per Common Share
--------------------------------
Earnings (loss) 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:
March 31, June 30,
1995 1994
---------- ----------
Raw materials $ 899,167 $ 792,493
Work-in-process 758,182 668,234
Finished goods 1,371,339 1,208,648
Cartons 169,509 149,399
---------- ----------
$3,198,197 $2,818,774
========== ==========
Page 7
<PAGE> 9
MOYCO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995
(UNAUDITED)
Note 3: Long-Term Debt
Long-term debt is summarized as follows:
March 31,
1995 June 30,
(Unaudited) 1994
----------- -------
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. Rate at
March 31, 1995 was 9.20842% $ 361,523 $391,755
Mortgage payable in monthly
installments of $1,952, including
interest at 2%, Mortgage matures
January 1, 2001. Total loan
commitment $303,360 298,608 -
Construction loan payable dated
April 27, 1994 interest only payments
until principal due January 27, 1995.
Interest rate of prime plus 1%
interest at December 31, 1994 was
8.75%. As of December 31, 1994 the
construction loan was converted to a
mortgage payable and a note payable
with interest fixed at 8.75% for
five years and at prime plus 1% for
the next ten years. 500,789 467,827
Other
Commercial Term Note payable, interest
only payments at prime plus 1% through
October 31, 1994 then sixty monthly
installments of $12,500 plus
interest. Rate at March 31, 1995
was 10.0% 675,000 750,000
Note payable in monthly installments
of $2,917, including interest at
prime plus .75%. Rate at March
31, 1995 was 9.75%. 58,320 84,573
Auto loan payable in forty eight
monthly installments of $838 plus
interest at 7.75% 32,691 40,235
Construction loan payable dated
April 27, 1994 interest only payments
until principal due January 27, 1995.
Interest rate of prime plus 1%
interest at March 31, 1995 was
10.0% total loan commitment
$2,442,726. 2,321,226 185,783
Page 8
<PAGE> 10
MOYCO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995
(UNAUDITED)
Note 3: Long-Term Debt (Continued)
March 31,
1995 June 30,
(Unaudited) 1994
----------- -------
Credit line payable dated December
31, 1991. Amended November 28, 1994
Interest rate of prime plus .5%.
Interest rate at March 31, 1995
was 10.0%. $ 700,000 $1,000,000
Commercial Term Note payable in
monthly payments of $8,333 thru
January 1994 and $16,667 thereafter.
Interest rate is prime plus 1%.
Rate at March 31, 1995 was 10.0% 566,666 716,666
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
---------- ----------
7,014,823 5,136,839
Less: Current Maturities ( 3,541,024) ( 2,090,671)
---------- ----------
$3,473,799 $3,046,168
========== ==========
Substantially all of the Company's
assets are pledged as collateral for
the long-term debt.
As of March 31, 1995 long-term
debt matures as follows:
Twelve Months Ending March 31,
1996 $ 590,876
1997 615,725
1998 548,104
1999 477,350
2000 409,275
Thereafter 832,469
----------
$3,473,799
==========
The $2,442,726 construction loan for the Union Broach division is
expected to be converted to a mortgage payable at a 2% interest rate
and a note payable at a 9.25% interest rate, both for a fifteen year
period. This conversion is anticipated before the year ending June 30,
1995.
Page 9
<PAGE> 11
MOYCO INDUSTRIES, INC.
A. SUMMARIZED FINANCIAL INFORMATION
MANAGEMENT'S ANALYSIS AND DISCUSSION OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
FOR THE
NINE MONTHS ENDED MARCH 31, 1995
Results of Operations
Comparison of recent quarter (3/31/95) and immediate preceding Quarter
(12/31/94):
Net Sales increased nominally by $7,408. The increase was in both our
abrasive and dental divisions.
An increase in gross profit in the amount of $155,990 is related to the
product mix. 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
quarterly accounting.
Operating expenses increased in the amount of $72,751.
The decrease in net profit of $68,724 is related to the contribution of the
plant in Philadelphia, PA to the Deliverance Center of Hope, Inc.
Working capital is sufficient for current operating needs however, with the
litigation and the close of the Philadelphia facility, as well as
anticipating additional related costs, we have requested funding from our
prime lender and restructuring of our bank line. This new financing is
anticipated to be in place by fiscal year end. The need for continued sales
growth is a constant as the new debt structure is put in place.
Inflationary pressures have significantly less bearing on current
profitability than the continued need for additional sales.
Page 10
<PAGE> 12
MOYCO INDUSTRIES, INC.
A. SUMMARIZED FINANCIAL INFORMATION
(Continued)
MANAGEMENT'S ANALYSIS AND DISCUSSION OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
FOR THE
NINE MONTHS ENDED MARCH 31, 1995
Comparison of recent Quarter (3/31/95) and Equivalent Quarter (3/31/94):
------------------------------------------------------------------------
Net sales increased by $509,596. The increase in both our dental and
abrasive divisions.
Cost of sales increased in the amount of $198,847 and is correlated to the
increase in sales volume. Manufacturing expenses had an increase as a
result of employment of new assets (equipment) and the recording of
depreciation thereon. 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.
Operating expenses increased $95,498 in the comparative quarter.
Interest expense increased $23,857 as a result of additional borrowings in
the recent quarter compared to the equivalent quarter. In addition, the
charitable contribution of the Philadelphia PA facility is reflected in the
current operating statement.
The increase in net profit is related to increased sales, and product mix
creating a better gross profit on sales realized during the current period.
Working capital is sufficient for current operating needs, however with the
litigation and the close of the Philadelphia facility, as well as
anticipating additional related costs, we have requested funding from our
prime lender and restructuring of our bank line. This new financing is
anticipated to be in place by fiscal year end. The need for continued sales
growth is a constant as the new debt structure is put in place.
Inflationary pressures have significantly less bearing on current
profitability than the continued need for additional sales.
Page 11
<PAGE> 13
MOYCO INDUSTRIES, INC.
A. SUMMARIZED FINANCIAL INFORMATION
(Continued)
MANAGEMENT'S ANALYSIS AND DISCUSSION OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
FOR THE
NINE MONTHS ENDED MARCH 31, 1995
Comparison of Recent Year-to-Date (3/31/95) and Equivalent Period in
Prior Year (3/31/94):
---------------------------------------------------------------------
Net sales increased $1,200,680. The increase was in both our abrasive and
dental segments. Cost of sales increased $566,567 and is directly related
to the increase in sales volume. The procedure for computing interim
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 accounting.
Operating expenses increased $167,660 and is related to increased sales
volume. In addition, the charitable contribution of the Philadelphia, PA
facility is reflected in the current operating statement.
The increase in net profit of $168,793 is directly related to the increase
in sales.
Working capital decreased as a result of additional debt borrowings during
the nine months ended March 31, 1995. However, the company has requested
from our prime lender, restructuring and additional long term debt in
anticipation of possible cash demands caused by the closing of the
Philadelphia, PA facility and ongoing litigation.
Page 12
<PAGE> 14
MANAGEMENT'S ANALYSIS AND DISCUSSION OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
FOR THE
NINE MONTHS ENDED MARCH 31, 1995
Liquidity and Capital Resources
It is anticipated that pressures on earnings will continue. The current
economic recession, and the continuing need to increase sale to offset
costs are a reality. The addition of capital improvement projects of needed
space and equipment, although long term financial arrangements are in
place, will require sales growth and earnings to amortize the additional
debt service. Moyco currently has enjoyed fifteen 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.
Critical mass in sales volume remains the essential ingredient.
Page 13
<PAGE> 15
MOYCO INDUSTRIES, INC.
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings
-----------------
The Company is currently engaged in litigation in the U.S. District
Court for the Northern District of Oklahoma (Case Number 94-C 669B)
against Tulsa Dental Products and Quality Dental Products, Inc. Moyco
alleges that Tulsa and QDP are infringing and inducing infringement of
U.S. patents 4,443,193; 4,536,159; and 4,611,508. These patents
protect endodontic instruments marketed to the dental profession under
Moyco tradenames of Flex-R and Onyx-R. This case for protection of our
intellectual property was filed in August 1994 and is seeking relief
by way of permanent injunction, compensatory damages and treble
damages.
Item 5 - Other Information
-----------------
On March 23, 1995 the Company transferred the deed to our
Philadelphia, PA facility to the Deliverance Center of Hope, Inc. It
is anticipated that all manufacturing operations will cease by the end
of this current fiscal year. Our corporate offices will be relocated
to the Montgomeryville, PA facility on or before the month of June
1995. The contribution of land and building had a remaining book value
of $96,322 and is reflected in the current quarter financials. The
transition costs (moving, severances, shut down) will be reflected in
the financials during the next two quarters. Savings realized by the
consolidation of facilities should start to be realized at the
completion of the move and the shut down of the Philadelphia facility.
*(Deliverance is a 501(c)(3) qualified charitable organization
and they plan the reuse of this building for multiple purposes).
Item 6 - Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits - None
(b) Exhibits - None
Page 14
<PAGE> 16
MOYCO INDUSTRIES, INC.
PART II. OTHER INFORMATION (Continued)
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
Page 15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,284,941
<SECURITIES> 0
<RECEIVABLES> 1,660,565
<ALLOWANCES> 78,990
<INVENTORY> 3,198,197
<CURRENT-ASSETS> 6,381,369
<PP&E> 9,252,199
<DEPRECIATION> 3,625,562
<TOTAL-ASSETS> 12,277,986
<CURRENT-LIABILITIES> 4,610,862
<BONDS> 3,473,799
<COMMON> 22,628
0
0
<OTHER-SE> 3,977,995
<TOTAL-LIABILITY-AND-EQUITY> 12,277,986
<SALES> 8,582,079
<TOTAL-REVENUES> 8,687,653
<CGS> 5,078,565
<TOTAL-COSTS> 7,563,826
<OTHER-EXPENSES> 96,322
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 284,448
<INCOME-PRETAX> 743,057
<INCOME-TAX> 356,695
<INCOME-CONTINUING> 386,362
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 386,362
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
