<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 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 of (IRS Employer Identification No.)
incorporation or organization)
200 Commerce Drive
Montgomeryville, PA 18936
--------------------------------------- -------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including
area code: (215) 855-4300
-------------------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Common stock, par value $.005 per share
---------------------------------------
(Title of Class)
"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 ninety 90 days."
YES X NO
--- -----
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of August 25, 1995 was $41,358,608, the number of shares
outstanding of the Registrant's Common Stock was 3,938,915.
Page 1 of 40
<PAGE>
PART I
ITEM 1. BUSINESS
General
There were no material changes in the nature of the business conducted
by Moyco Industries, Inc. during the fiscal year ended June 30, 1995. The
Company manufacturers and sells commercial abrasive materials, dental
materials and supplies and repacks and sells other disposable materials.
The Company's net sales, operating profit, and identifiable assets for
each of the two aforementioned business segments is detailed in Note 5 and
Item 6 to the financial statements.
Upon the donation of the Philadelphia, Pennsylvania building to
charity, the operations were moved to the company's two other facilities in
York, Pennsylvania, and Montgomeryville, Pennsylvania.
Page 2 of 40
<PAGE>
Business Segments
Commercial Abrasive Materials
The Registrant is engaged through its Ultralap Division in the
manufacture and sale of commercial abrasive materials under the name "Flex-I-
Grit." "Flex-I-Grit" is sold by a master distributor and other repackers to
approximately 45 accounts, five of these accounted for 76% of total sales for
this division.
The Registrant further is engaged through its Ultralap Division in the
manufacture and sale of fine polishing agents and abrasives sold under the
trade name "Ultralap." The "Ultralap" products are sold by in-house salesmen
to approximately 465 customers, six of these customers accounted for over 36%
of the total sales of these products. During the last fiscal year, the sale
of "Ultralap" products accounted for approximately 74% of the total sales of
this division.
Dental Supplies
The Registrant through its dental division is engaged in the
manufacture and sale of dental supplies such as waxes, abrasives, medicaments,
dental mirrors, endodontic materials and equipment, sundry dental items as well
as a repacker of other disposable materials. During the last fiscal year the
sale of a steel-backed dental abrasive manufactured by Registrant and sold under
the trade name of "Lightning" accounted for 5% of the total sales of the dental
division.
All sales are made from existing inventory by six salaried salespersons
to approximately 400 dental supply wholesalers and distributors in the United
States and Overseas. During the last fiscal year foreign sales represented
approximately 10% of the total sales of the dental division. Two customers
accounted for more than 19% of the total sales of this division.
Approximately 2% of the dental supply and repacking business of the
Registrant was done with the United States Government for the fiscal year
ended June 30, 1995.
Backlog
There is a backlog of orders in the aggregate of $1,416,388 as of June
30, 1995. There had been a backlog of $1,083,437 as of June 30, 1994.
Approximately 28% of the backlog at June 30, 1995 was for dental supplies and
materials.
Page 3 of 40
<PAGE>
Sources and Availability of Supplies
The Company procures its raw materials and supplies from various
sources and does not expect to have any difficulty in procurement during the
coming year or during the foreseeable future.
It is intended that the Company will continue in its existing lines of
dental supplies and commercial abrasive materials during the current fiscal
year.
Research and Development
The Company engages in minimal research activities and has two
employees devoting part of their time to this activity. Such research as is
conducted is directed toward the development of new products related to current
product lines and the improvement and enhancement of existing products.
Competition
All of the lines of business in which the Registrant is presently
engaged are highly competitive. There are numerous other manufacturers of
dental supplies, polymer backed abrasives, other abrasives and repackers, many
of which are larger and have greater financial reserves and more sales
representatives.
Employees
The Registrant employs approximately 150 persons, of whom 113 are
involved in manufacturing abrasives and other products of the Ultralap and
Dental divisions, and 37 are engaged in administration, sales, engineering,
supervision and clerical work. The Registrant has had no work stoppages
during the past 11 years and considers its employee relations to be good.
Other
Moyco did not experience any curtailment of supplies of electricity,
gas, oil or water during the fiscal year ended June 30, 1995 and does not
expect any curtailment in the current fiscal year.
In as much as the Company believes it produces no significant
discharges of waste or pollutants into the air, there are no significant effects
on the company in complying with current Federal, State and local environmental
laws and regulations.
Moyco Industries, Inc. as of June 30, 1995 was in compliance with the
enactment of the Clean Air Act, effective August 1992.
Page 4 of 40
<PAGE>
ITEM 2. PROPERTIES
The Registrant is the owner of two buildings. The Montgomeryville,
Pennsylvania facility was a one-story cinder block building containing
approximately 26,000 square feet of which approximately 13,000 square feet
were used for manufacturing; 11,750 square feet for warehousing and
distribution; and 1,250 square feet for offices. This facility is primarily
used for the manufacture of precision coated abrasives for commercial and
industrial use. During the year, the registrant expanded its Montgomeryville,
Pennsylvania facility to 40,125 square feet of which 14,250 square feet are
used for manufacturing; 19,875 square feet for warehousing and distribution;
and 6,000 square feet for offices. The York, Pennsylvania facility is 68,995
square feet of which approximately 45,807 square feet are used for
manufacturing; 16,542 for warehousing and 6,646 for offices. There are
mortgages on both properties. Moyco's facilities are suitable for their
respective uses and are in general, adequate for Moyco's present needs.
During the year the registrant donated the five story brick building in
Philadelphia, Pennsylvania containing approximately 88,000 square feet of which
approximately 59,928 square feet was used for manufacturing, 22,968 square feet
for warehousing and distribution, and 5,104 square feet for offices to a
qualified charity.
The Registrant leased 27,671 square feet of space in a building in
Emigsville, Pennsylvania. Initial lease term began September 30, 1991 and
ended March 31, 1992 at $5,283 per month. Renewal rate at the then prevailing
market rate $6,646, per month. This facility was utilized in connection with
the dental supply segment. The lease was terminated in December of 1994 when
the registrant moved to its newly constructed building in York, Pennsylvania.
The registrant has completed two capital projects. 30% of the total
$1,000,000 expansion of the Montgomeryville facility was financed over 15
years with the Pennsylvania Industrial Development Authority at an interest
rate of 2%, 50% of the project cost was financed by the bank over 15 years at
8 3/4% for 5 years and a variable rate for 10 years thereafter and the
remaining 20% by the registrant. The Montgomeryville project was completed in
March of 1995. Construction of a new building in York, Pennsylvania to
replace the leased facility was completed during December 1994. 37% of the
total project cost of $2,700,000 was financed by the Pennsylvania Industrial
Development Authority at 2%, 53% of the cost was financed by the bank at 9.25%
for 5 years and at prime plus 1% thereafter, and the remaining 10% by the
registrant.
ITEM 3. LEGAL PROCEEDINGS
The Company has filed suit against two defendants in one action for
patent infringement. The proceedings are continuing and the company's
attorneys were not able to estimate the likelihood of the outcome in this
matter.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
N O N E
Page 5 of 40
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS
Price Range of Common Stock:
The following table shows the range of low and high prices for the
common stock in the over-the-counter market for the quarterly periods
indicated according to the Company's records. The quotations represent prices
in the over-the-counter market between dealers in securities and do not
include retail markup, markdown or commission and do not necessarily represent
actual transactions.
Low High
---- ----
First quarter ended September 30, 1994 1.00 1.00
Second quarter ended December 31, 1994 .94 .94
Third quarter ended March 31, 1995 .85 .85
Fourth quarter ended June 30, 1995 2.06 2.13
First quarter ended September 30, 1993 1.00 1.75
Second quarter ended December 31, 1993 .50 1.50
Third quarter ended March 31, 1994 1.25 2.00
Fourth quarter ended June 30, 1994 1.00 3.00
There were no dividends paid during the fiscal year ended June 30, 1995.
The number of shareholders of record on June 30, 1995 was 701.
Page 6 of 40
<PAGE>
ITEM 6. SELECTED STATEMENT OF OPERATIONS AND BALANCE SHEET DATA
Selected statement of operations data:
<TABLE>
<CAPTION>
Year Ended June 30
-------------------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Sales
Dental and consumable
supplies $ 7,399,768 $ 6,459,088 $ 6,872,698 $ 5,921,273 $ 2,312,136
Commercial abrasive
materials, Ultralap
and Flex-I-Grit 4,480,418 3,572,255 4,364,516 3,073,832 2,855,780
----------- ----------- ----------- ----------- -----------
$11,880,186 $10,031,343 $11,237,214 $ 8,995,105 $ 5,167,916
=========== =========== =========== =========== ===========
Income from operations $ 1,419,531 $ 1,092,447 $ 1,036,374 $ 840,801 $ 312,868
=========== =========== =========== =========== ===========
Net Income $ 536,314 $ 391,848 $ 509,792 $ 350,785 $ 154,298
=========== =========== =========== =========== ===========
Weighted average
number of common
shares 3,938,915 3,931,385 3,927,235 3,926,335 3,926,335
=========== =========== =========== =========== ===========
Earnings per share $ .136 $ .100 $ .130 $ .089 $ .039
=========== =========== =========== =========== ===========
</TABLE>
Page 7 of 40
<PAGE>
ITEM 6. SELECTED STATEMENT OF OPERATIONS AND BALANCE SHEET DATA (Continued)
Selected statement of operations data:
<TABLE>
<CAPTION>
June 30
-------------------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Current Assets $ 6,512,511 $ 5,971,107 $ 5,491,009 $ 5,829,603 $ 2,627,426
Current Liabilities 1,922,766 2,967,267 2,000,727 2,809,673 828,590
----------- ----------- ----------- ----------- -----------
Working Capital $ 4,589,745 $ 3,003,840 $ 3,490,282 $ 3,019,930 $ 1,798,836
=========== =========== =========== =========== ===========
Total Assets $12,983,665 $ 9,765,891 $ 8,013,251 $ 8,535,421 $ 4,074,198
=========== =========== =========== =========== ===========
Long-Term Debt $ 6,735,460 $ 3,046,168 $ 2,734,393 $ 2,959,504 $ 830,149
=========== =========== =========== =========== ===========
Deferred Income Taxes $ 174,864 $ 139,445 $ 58,798 $ 58,798 $ 58,798
=========== =========== =========== =========== ===========
Shareholders' Equity $ 4,150,575 $ 3,613,011 $ 3,219,333 $ 2,707,446 $ 2,291,439
=========== =========== =========== =========== ===========
</TABLE>
Page 8 of 40
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Summary
The following table sets forth for the periods indicated (i)
percentages which certain items reflected in the financial data bear to net
sales of the Company and (ii) the percentage increase (decrease) of such items
as compared to the indicated prior period:
<TABLE>
<CAPTION>
Percentage
Relationship Increase
to Net Sales (Decrease)
/----------------------------/ /-----------------/
1995 1994 1993 1995-94 1994-93
<S> <C> <C> <C> <C> <C>
Sales
Dental and consumable supplies 62.29 64.39 61.16 14.6 (6.0)
Commercial abrasive materials 37.71 35.61 38.84 25.4 (18.2)
------ ------ ------
100.00 100.00 100.00 18.4 (10.7)
Cost of Sales 59.1 56.7 57.9 23.4 (12.5)
------ ------ ------
Gross Profit 40.9 43.3 42.1 12.0 (8.3)
Operating Expenses 28.9 32.4 32.9 (5.9) (12.2)
------ ------ ------
Income from operations 12.0 10.9 9.2 29.9 5.4
Net other (Expenses) (3.4) (2.3) (2.4) 74.8 (13.7)
------ ------ ------
Income before provision for
income taxes and cumulative
effect of change in accounting
principle 8.6 8.6 6.8
Provision for Income Taxes 4.0 4.1 2.3
------ ------ ------
Income before cumulative effect
of change in accounting
principle 4.6 4.5 4.5
Cumulative effect of change
in accounting principle -- .5 --
------ ------ ------
Net Income 4.6 4.0 4.5
====== ====== ======
</TABLE>
Page 9 of 40
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Results of Operations
Year Ended June 30, 1995 Compared to Year Ended June 30, 1994
Net sales increased $1,848,843. The increase in net sales is related to
increased pricing, and more directly to increased unit sales in both
our abrasive and dental divisions.
Gross profit increased $518,935 and is directly related to the
increased sales.
Operating expenses increased $191,851 as a result of the increase in
operating activity, increase in costs, as well as increases caused by
the closing of the Philadelphia facility and opening of the new
facilities.
Interest expense increased $207,402 as a result of the increased long-
term borrowings related to the two capital projects in fiscal year end
June 30, 1995.
Operating profit growth will be driven by new products, increased
market demand (domestic and global) and economies of scale the Company
is able to achieve based upon reaching a critical mass in sales volume.
Sales and profit can be accelerated further by a synergistic
acquisition and/or a strategic alliance which the Company is actively
pursuing.
All of our lines of business are in highly competitive markets with
others, domestically and internationally, having greater resources. The
dental domestic market remains relatively flat as the economic
recession continues. Our abrasive division continues to enter new
markets, however, our high tech products are subject to sale swings as
a result of technological changes as well as purchasing practices by
our customers. We are not aware of any conditions in the purchasing of
raw material and/or labor markets that can effect the profitability of
the Company. There is continued need for sales growth as a result of
putting in line new facilities and equipment, inflationary costs, and
general operating expense increases.
Page 10 of 40
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Results of Operations
Year Ended June 30, 1994 Compared to Year Ended June 30, 1993
Net sales decreased $1,205,871. The reduction in net sales is related
to the dental inventory liquidation placed in the market by the
Receiver in the bankruptcy of Healthco International, the world's
largest dental dealer. We believe this process is completed and the
Healthco customer base has been absorbed by other dental dealers. In
addition, our abrasive sales were reduced as a result of a technology
change of one of our high tech customers. These two factors
substantially impacted our net sales greater than the actual year to
date comparisons.
Gross profit decreased $393,596. This is a direct result of the
decrease in net sales.
Operating expenses decreased $449,669. Commission expenses and bad
debts were less in the current year which were directly related to the
decrease in net sales as explained above.
Interest expense decreased $62,739. Lower rates and less debt through
the fiscal year account for this change.
Operating profit growth will be driven by new products, increased
market demand (domestic and global) and economies of scale the Company
is able to achieve based upon reaching a critical mass in sales volume.
Sales and profit can be accelerated further by a synergistic
acquisition and/or a strategic alliance which the Company is actively
pursuing.
All of our company lines of business are in highly competitive markets
with others, domestically and internationally, having greater
resources. The dental market remains relatively flat as the economic
recession continues. Our abrasive division continues to enter new
markets, however, our high tech products are subject to sale swings as
a result of technological changes as well as purchasing practices by
our customers. We are not aware of any conditions in the purchasing of
raw material and/or labor markets that can effect the profitability of
the Company. There is continued need for sales growth as a result of
putting in line new facilities and equipment, inflationary costs, and
general operating expense increases.
Page 11 of 40
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Liquidity and Capital Resources
The Company uses a number of measures of liquidity for internal management
purposes. These measures include working capital and activity ratios, all of
which are set forth below:
Year Ended June 30
-------------------------------------
1995 1994 1993
------ ------ ------
Working capital, the ability to meet short-term obligations:
Working Capital $4,589,745 $3,003,840 $3,490,282
Working Capital Ratio 3.39:1 2.01:1 2.74:1
Activity ratios, which should be helpful in evaluating liquidity:
Calendar days to convert sales
to cash 60 58 61
Inventory turnover 2.33 2.07 2.50
Inventory as a percent of
working capital 70.1 93.8 76.8
Sales to working capital 2.59 3.34 3.22
The Company's working capital at June 30, 1995 was $4,589,745 compared to
$3,003,840, in 1994 representing an increase in the amount of $1,585,905. The
component differences are reflected in the statement in cash flows.
Current assets increased $541,404 and current liabilities decreased
$1,044,501.
During the fiscal years 1993 and 1994 the primary use of funds was the
acquisition of additional equipment and lease of additional facilities located
in Emigsville, Pennsylvania. This facility produced dental supplies under the
name Moyco/Union Broach. During 1994, capital projects were commenced in
Montgomeryville and York, Pennsylvania requiring additional funds. These
projects were completed in the fiscal year ended June 30, 1995.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Responsibility for Preparation of Financial Statements:
The management of Moyco Industries, Inc. is responsible for the integrity and
objectivity of the financial statements. The financial statements and related
notes were prepared by the Company using generally accepted accounting
principles which were considered appropriate for the circumstances and
necessarily include amounts based upon our best estimates and judgment.
Financial data found elsewhere in this Annual Report is consistent with these
financial statements.
Page 12 of 40
<PAGE>
[LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders
Moyco Industries, Inc.
We have audited the balance sheets of Moyco Industries, Inc.
as of June 30, 1995 and 1994 and the related statements of operations, changes
in shareholders' equity and cash flows for each of the three years ended June
30, 1995. Our audits also included the financial statement schedule on page 38.
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of Moyco
Industries, Inc. as of June 30, 1995 and 1994, and the results of its
operations, and its cash flows for each of the three years in the period ended
June 30, 1995 in conformity with generally accepted accounting principles. Also,
in our opinion, such financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects, the information set forth therein.
As described in Note 7 to the financial statements, the
company changed its method of accounting for income taxes as required by the
provisions of Statements of Financial Accounting Standards No. 109.
Philadelphia, Pennsylvania
August 25, 1995,
except for Note 14,
which is dated August 29, 1995
Page 13 of 40
<PAGE>
MOYCO INDUSTRIES, INC.
BALANCE SHEETS
ASSETS (Note 3)
<TABLE>
<CAPTION>
June 30
------------------------
1995 1994
----------- -----------
<S> <C> <C>
Current Assets
Cash and Cash Equivalents $ 1,097,323 $ 1,447,565
Accounts receivable, net of allowance for doubtful
accounts of $78,990 in 1995 and $58,990 in 1994 1,932,913 1,672,346
Note Receivable-trade 41,051 -
Other Receivable 198,000 -
Inventories (Note 2) 3,218,077 2,818,774
Prepaid expenses 25,147 32,422
----------- -----------
Total Current Assets 6,512,511 5,971,107
----------- -----------
Property, Plant and Equipment
Land 452,433 100,000
Buildings and improvements 4,172,201 1,648,469
Automotive equipment 48,511 48,511
Machinery and equipment 4,586,844 3,989,021
Furniture and fixtures 503,450 411,410
Construction in progress - 1,038,067
----------- -----------
9,763,439 7,235,478
Less: Accumulated Depreciation 3,771,798 3,951,760
----------- -----------
Net Property, Plant and Equipment 5,991,641 3,283,718
----------- -----------
Other Assets
Unamortized patents and trademarks, net of
accumulated amortization of $48,309 in 1995
and $41,056 in 1994 7,253 14,506
Unamortized mortgage costs, net of accumulated
amortization of $35,243 in 1995 and $31,811
in 1994 29,702 11,901
Deposits 419,898 466,497
Cash surrender value - officers life insurance 22,660 18,162
----------- -----------
Total Other Assets 479,513 511,066
----------- -----------
TOTAL ASSETS $12,983,665 $ 9,765,891
=========== ===========
</TABLE>
See accompanying notes to financial statements.
Page 14 of 40
<PAGE>
MOYCO INDUSTRIES, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30
-------------------------
1995 1994
----------- -----------
<S> <C> <C>
Current Liabilities
Current maturities of long-term debt (Note 3) $ 526,954 $2,090,671
Accounts payable 963,231 285,287
Accrued expenses:
Payroll 194,556 173,435
Interest 33,750 30,000
Other 138,900 233,448
Profit Sharing 15,000 25,000
Income Tax 50,375 129,426
----------- -----------
Total Current Liabilities 1,922,766 2,967,267
----------- -----------
Long-term debt, net of current maturities (Note 3) 6,735,460 3,046,168
Net Deferred income taxes 174,864 139,445
----------- -----------
Total Liabilities 8,833,090 6,152,880
----------- -----------
Shareholders' Equity
Preferred stock, $.005 par value
Authorized 2,500,000 shares,
None issued
Common stock, $.005 par value 22,654 22,622
Authorized 15,000,000 shares
Issued 4,530,790 shares
Additional paid-in capital 3,038,892 3,037,674
Retained Earnings 1,209,982 673,668
Less: Treasury stock 591,875 shares in 1995 and
593,005 shares in 1994 at cost 120,953 120,953
----------- -----------
Total Shareholders' Equity 4,150,575 3,613,011
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $12,983,665 $9,765,891
=========== ===========
</TABLE>
See accompanying notes to financial statements.
Page 15 of 40
<PAGE>
MOYCO INDUSTRIES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended June 30
-------------------------------------
1995 1994 1993
----------- ----------- ------------
<S> <C> <C> <C>
Net Sales (Note 5) $11,880,186 $10,031,343 $11,237,214
Cost of Sales 7,022,454 5,692,546 6,504,821
----------- ----------- -----------
Gross Profit (Note 5) 4,857,732 4,338,797 4,732,393
Operating Expenses 3,438,201 3,246,350 3,696,019
----------- ----------- -----------
Income from operations 1,419,531 1,092,447 1,036,374
----------- ----------- -----------
Other income (Expense)
Interest Expense (Note 18) (435,174) (227,772) (290,511)
Other Income (Expense) 126,623 42,750 22,175
Donation of Building (Note 17) (96,322) - -
Casualty Loss - (46,571) -
----------- ----------- -----------
Net Other (Expenses) (404,873) (231,593) (268,336)
----------- ----------- -----------
Income before provision for
income taxes and cumulative effect
of change in accounting principle 1,014,658 860,854 768,038
----------- ----------- ----------
Provision for income taxes (Note 7)
Current 442,925 388,359 258,246
Deferred 35,419 20,479 -
----------- ----------- -----------
478,344 408,838 258,246
----------- ----------- -----------
Income before effect of change
in accounting principle 536,314 452,016 509,792
Cumulative effect of change
in accounting principle (Note 7) - 60,168 -
----------- ----------- -----------
Net Income $ 536,314 $ 391,848 $ 509,792
=========== =========== ===========
Earnings per common share
before cumulative effect of change
in accounting principle $.136 $.120 $.130
Cumulative effect of change
in accounting principle - .020 -
---------- ----------- -----------
Net Earnings Per Common Share $.136 $.100 $.130
========== =========== ===========
Weighted average number of
common shares 3,938,915 3,931,385 3,927,235
========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
Page 16 of 40
<PAGE>
MOYCO INDUSTRIES, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Number of Shares Amounts
----------------- ----------------------------------------------
Additional Retained
Common Treasury Common Paid In Earnings Treasury
Stock Stock Stock Capital (Deficit) Stock
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
June 30, 1992 4,519,340 593,005 $22,597 $3,033,774 ($227,972) ($120,953)
-------------
Net income 509,792
Reclassifications ( 1,800) 1,728 367
--------- ------- ------- ---------- ---------- ---------
June 30, 1993 4,519,340 591,205 22,597 3,035,502 281,820 ( 120,586)
-------------
Net income 391,848
Employee
Common stock
Options exercised 2,100 11 1,814
Reclassifications 2,950 1,800 14 358 ( 367)
--------- ------- ------- ---------- ---------- ---------
June 30, 1994 4,524,390 593,005 22,622 3,037,674 673,668 ( 120,953)
-------------
Net income 536,314
Employee
Common stock
Options exercised 1,500 8 1,242
Reclassifications 4,900 ( 1,130) 24 ( 24)
--------- ------- ------- ---------- ---------- ---------
JUNE 30, 1995 4,530,790 591,875 $22,654 $3,038,892 $1,209,982 ($120,953)
------------- ========= ======= ======= ========== ========== =========
</TABLE>
See accompanying notes to financial statements.
Page 17 to 40
<PAGE>
<TABLE>
<CAPTION>
MOYCO INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
1995 1994 1993
Cash flows from operating activities
<S> <C> <C> <C>
Net income $ 536,314 $ 391,848 $ 509,792
Adjustments to reconcile net income to
net cash provided by operating activities
Provision for bad debt allowance 20,000 - -
Depreciation and amortization 542,062 428,916 393,343
(Gain) Loss on sale of Equipment ( 15,489) - 27,638
Donation of Building 96,322 - -
Cash Value-Officers Life Insurance ( 4,498) ( 18,162) -
Decrease in deferred tax asset 8,484 ( 24,007) -
Increase in deferred tax liability 26,935 104,654 -
(Increase) Decrease in accounts receivable ( 280,567) ( 33,667) 478,237
(Increase) Decrease in note receivable-trade( 41,051) - -
(Increase) Decrease in other receivable ( 198,000) - -
(Increase) Decrease in inventory ( 399,303) ( 138,106) ( 164,574)
(Increase) Decrease in prepaid expenses 7,275 ( 1,550) ( 27,350)
(Increase) Decrease in deposits 46,599 ( 318,451) ( 146,408)
Increase (Decrease) in accounts payable 677,944 ( 148,222) ( 336,380)
Increase (Decrease) in accrued expenses ( 158,728) 254,501 ( 225,033)
---------- ---------- ----------
Net Cash Provided by Operating Activities 864,299 497,754 509,265
---------- ---------- ----------
Cash flows from investing activities
Expenditures for property, plant & equipment ( 3,342,633) ( 1,364,845) ( 147,497)
Mortgage Costs ( 21,233) - -
Proceeds from Sale of Equipment 22,500 - 56,500
---------- ---------- ----------
Net Cash (Used) in Financing Activities ( 3,341,366) ( 1,364,845) ( 90,997)
---------- ---------- ----------
Cash flows from financing activities
Exercise of Stock Option 1,250 1,830 2,095
Proceeds from long-term debt 5,380,978 1,443,845 ( 472,644)
Reduction of long-term debt ( 3,255,403) ( 271,809) -
---------- ---------- ----------
Net Cash provided by (Used) in financing
activities 2,126,825 1,173,866 ( 470,549)
Net Increase (Decrease) in cash and
cash equivalents ( 350,242) 306,775 ( 52,281)
Cash and Cash Equivalents, Beginning of Period 1,447,565 1,140,790 1,193,071
---------- ---------- ----------
Cash and Cash Equivalents, End of Period $1,097,323 $1,447,565 $1,140,790
========== ========== ==========
SUPPLEMENTAL DISCLOSURES:
Interest Paid $ 501,649 $ 227,772 $ 290,511
---------- ---------- ----------
Income Taxes Paid $ 521,976 $ 331,920 $ 378,405
---------- ---------- ----------
Interest paid in 1995 included capitalized interest of $70,225.
</TABLE>
See accompanying notes to financial statements.
Page 18 of 40
<PAGE>
MOYCO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
Note 1: Summary of Significant Accounting Policies
Nature of Business
The Company manufactures dental waxes, dental supplies,
endodontic material and equipment, pharmaceuticals, precision
abrasives, commercial abrasives, and is a repacker of other
disposable products for commercial and industrial use and
sells to both domestic and international customers.
Principles of Accounting
Cash and Cash Equivalents
The company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.
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.
Depreciation
Depreciation is computed by the straight-line method over the
assets expected useful lives as follows:
Building and Improvements 10-25 Years
Machinery, Equipment, Furniture
and Fixtures 5-10 Years
Automotive Equipment 3 Years
Depreciation charged to expense for the years ended June 30,
1995, 1994, and 1993 was $531,376, $418,891, and $382,372
respectively.
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.
Mortgage Costs
Mortgage costs are being amortized over the terms of the
related mortgages.
Income Taxes
The Company currently accounts for income taxes in accordance
with the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." Prior to
fiscal 1994, the Company accounted for income taxes in
accordance with Accounting Principles Board Opinion No. 11.
The cumulative effect of this change in accounting principle
decreased net earnings for fiscal 1994 by $60,168 as discussed
in Note 7.
Page 19 of 40
<PAGE>
MOYCO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
Note 1: Summary of Significant Accounting Policies (Continued)
Reclassifications
Certain accounts in the prior-year financial statements have
been reclassified for comparative purposes to conform with the
presentation in the current-year financial statements.
Research and Development
Research and development costs are charged to expense as
incurred. The amounts charged for the years ended June 30,
1995, 1994, and 1993 were $35,718, $19,583, and $3,493,
respectively.
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.
Advertising Costs
Advertising costs are charged to expense as incurred. The
amounts charged for the years ended June 30, 1995, 1994, and
1993 were $251,984, $243,748, and $245,069, respectively.
Note 2: Inventories
The components of inventories are as follows:
June 30
------------------------
1995 1994
----------- ----------
Raw materials $ 813,185 $ 792,493
Work-in-process 755,992 668,234
Finished goods 1,477,032 1,208,648
Cartons 171,868 149,399
---------- ----------
$3,218,077 $2,818,774
========== ==========
Page 20 of 40
<PAGE>
MOYCO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
Note 3: Long-Term Debt
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
JUNE 30
--------------------------
Mortgages Payable 1995 1994
Banks ----------- -----------
<S> <C> <C>
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 June
30, 1995 was 8.50%. $ 351,260 $ 391,755
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. 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. 1,448,847 -
Mortgages Payable
Municipal Authorities
Mortgage payable in 180 monthly
installments of $1,952, including interest
at 2% which matures April 1, 2010. 295,200 -
Mortgage payable in 180 monthly
installments of $6,371, including interest
at 2% which matures July 1, 2010. 990,126 -
Other
Note payable due December 31, 1997 with
monthly interest only payments at prime
beginning July 1995 until maturity. 350,000 -
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 June 30,
1994 was 8.25%. - 750,000
Note payable in monthly installments of
$2,917, including interest at prime plus
.75%. Rate at June 30, 1994 was 8%. - 84,573
Construction loan payable dated April 27,
1994 Interest only payments until Principal
due January 27, 1995. Interest rate of prime
plus 1%. Interest at June 30, 1994 was 8.25%
loan was converted to two mortgages payable in
December 1994. - 467,827
</TABLE>
Page 21 of 40
<PAGE>
MOYCO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
Note 3: Long-Term Debt (Continued)
<TABLE>
<CAPTION>
<S> <C> <C>
Construction loan payable dated April 27,
1994 Interest only payments until Principal
due January 27, 1995. Interest rate of prime
plus 1%. Interest at June 30, 1994 was 8.25%.
Loan was converted to two mortgages payable
in May 1995. $ - $ 185,783
Auto loan payable in forty-eight monthly
installments of $838 plus interest at 7.75%. 30,176 40,235
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. 1,800,000 -
Credit line payable dated December 31, 1991.
Interest rate of prime plus 1%. Rate at
June 30, 1995 was 8.25%. Due on demand. - 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 June 30, 1994 was 8.25%. - 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%). Rate at June 30, 1995 was 9%.
Subordinated to prime lender. 1,500,000 1,500,000
----------- -----------
7,262,414 5,136,839
----------- -----------
Less: Current Maturities ( 526,954) ( 2,090,671)
----------- -----------
$6,735,460 $3,046,168
=========== ===========
</TABLE>
Substantially all of the Company's assets are pledged as
collateral for the long-term debt.
As of June 30, 1995 long-term debt matures as follows:
Twelve Months Ending June 30,
1996 $ 526,954
1997 719,136
1998 1,231,908
1999 885,298
2000 899,479
Thereafter 2,999,639
----------
$7,262,414
==========
Page 22 of 40
<PAGE>
MOYCO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
Note 4: Employee Benefit Plans
Effective July 1, 1979, the Company adopted a non-contributory
profit sharing plan for it's eligible employees. The
contribution to the plan is determined on an annual basis by
the Board of Directors and cannot exceed the maximum amount
which would constitute an allowable deduction for federal
income tax purposes. The contribution expense for the years
ended June 30, 1995, 1994 and 1993 was $15,000, $25,000 and
$25,000, respectively.
In addition to the above, on January 1, 1985 Moyco's Board of
Directors established a tax deferred employee savings and
protection plan under Section 401(K) of the Internal Revenue
Code for all eligible employees. This plan allows employees to
contribute between 3% and 10% of their salary, including
overtime pay, bonus and commissions to the plan and these
contributions are not subject to current federal income taxes.
The Company will contribute 50% of the employee's
contribution, to a maximum of 6% of the employee's salary
subject to the deferral limit (IRC Sec. 401 (a)(30)).
Participants are at all times fully vested in their
contributions and the Company contributions become vested to
the participant at various percentages based on the employee's
years of service with 20% vested after three years of service
and 20% for each year thereafter.
The Company's contribution aggregated $62,220, $58,606, and
$44,919 for the years ended June 30, 1995, 1994, and 1993
respectively.
Note 5: Business Segments
The Company operates within two business segments: dental
supplies and precision abrasives. Through its dental supplies
division the Company manufactures and sells dental supplies
such as waxes, abrasives, medicaments, sundry dental items and
endodontic materials and equipment. Through its precision
abrasive division the Company manufactures and sells
commercial abrasive materials and fine polishing agents.
Financial information concerning the operations in each of the
Company's business segments for the years ended June 30, 1995,
1994 and 1993 is as follows:
<TABLE>
<CAPTION>
Year Ended June 30
--------------------------------------------
1995 1994 1993
------------ ----------- ------------
<S> <C> <C> <C>
Sales
Domestic and U.S. Government
Customers
Dental Supplies $ 6,624,273 $ 5,817,816 $ 6,145,188
Precision Abrasives 4,074,581 3,250,837 4,201,064
International customers
Dental Supplies 775,495 641,272 627,510
Precision Abrasives 405,837 321,418 263,452
----------- ----------- -----------
$11,880,186 $10,031,343 $11,237,214
=========== =========== ===========
</TABLE>
Page 23 of 40
<PAGE>
MOYCO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
Note 5: Business Segments (Continued)
<TABLE>
<CAPTION>
Year Ended June 30
-------------------------------------------
1995 1994 1993
----------- ----------- ----------
<S> <C> <C> <C>
Gross Profit
Dental Supplies $ 3,487,510 $ 3,344,223 $3,273,489
Commercial abrasive materials 1,370,222 994,574 1,458,904
----------- ----------- ----------
4,857,732 4,338,797 4,732,393
Operating expenses 3,438,201 3,246,350 3,696,019
----------- ----------- ----------
Income from operations $ 1,419,531 $ 1,092,447 $1,036,374
=========== =========== ==========
Identifiable Assets
Corporate $ 1,799,983 $ 1,991,053 $1,356,140
Dental Supplies 7,570,516 5,262,739 4,771,945
Commercial Montgomeryville
abrasive materials 3,613,166 2,512,099 1,885,166
----------- ----------- ----------
$12,983,665 $ 9,765,891 $8,013,251
=========== =========== ==========
Depreciation expense
Dental Supplies $ 367,747 $ 316,528 $ 294,472
Commercial abrasive materials 163,629 102,363 87,900
----------- ----------- ----------
$ 531,376 $ 418,891 $ 382,372
=========== =========== ==========
Capital expenditures
Dental Supplies $ 2,254,105 $ 735,346 $ 71,861
Commercial abrasive materials 1,088,528 629,499 75,636
----------- ----------- ----------
$ 3,342,633 $ 1,364,845 $ 147,497
=========== =========== ==========
</TABLE>
For the years ended June 30, 1995, 1994 and 1993 net sales to various
agencies of the U.S. Government represented 1% of the Company's total net sales.
Page 24 of 40
<PAGE>
MOYCO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
Note 6: Quarterly Results (Unaudited)
The following tables summarize quarterly financial data for the
fiscal year's ended June 30, 1995 and 1994:
<TABLE>
<CAPTION>
1995
-----------------------------------------------------------
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1995
Net Sales $2,839,429 $2,867,621 $2,875,029 $3,298,107 $11,880,186
Cost of Sales (*) 1,647,107 1,790,020 1,641,438 1,943,889 7,022,454
---------- ---------- ---------- ---------- -----------
Gross Profit 1,192,322 1,077,601 1,233,591 1,354,218 4,857,732
Operating Expenses 835,186 788,662 861,413 952,940 3,438,201
---------- ---------- ---------- ---------- -----------
Income from operations 357,136 288,939 372,178 401,278 1,419,531
Other (expense) income
Interest (expense) (103,919) (59,010) (121,519) (150,726) (435,174)
Other income 49,178 8,398 47,998 21,049 126,623
Donation of Building - - (96,322) - (96,322)
Less provision for income
taxes 127,263 98,350 131,082 121,649 478,344
---------- ---------- ---------- ---------- -----------
Net Income $ 175,132 $ 139,977 $ 71,253 $ 149,952 $ 536,314
========== ========== ========== ========== ===========
Earnings per share $ .04 $ .04 $ .02 $ .04 $ .14
===== ===== ===== ===== =====
</TABLE>
Page 25 of 40
<PAGE>
MOYCO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
Note 6: Quarterly Results (Unaudited) (Continued)
<TABLE>
<CAPTION>
1994
-----------------------------------------------------------
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1994
Net Sales $2,281,044 $2,734,922 $2,365,433 $2,649,944 $10,031,343
Cost of Sales (*) 1,378,321 1,691,086 1,442,591 1,180,548 5,692,546
---------- ---------- ---------- ---------- -----------
Gross Profit 902,723 1,043,836 922,842 1,469,396 4,338,797
Operating Expenses 752,338 799,348 765,915 928,749 3,246,350
---------- ---------- ---------- ---------- -----------
Income from operations 150,385 244,488 156,927 540,647 1,092,447
Other (expense) Income
Interest Expense (66,711) (33,322) (97,662) (30,077) (227,772)
Other Income 9,786 840 10,938 21,186 42,750
Casualty Loss - - - (46,571) (46,571)
Less provision for
Income Taxes and
cumulative effect of
change in accounting
principle 39,246 89,310 29,544 310,906 469,006
---------- ---------- ---------- ---------- -----------
Net Income $ 54,214 $ 122,696 $ 40,659 $ 174,279 $ 391,848
========== ========== ========== ========== ===========
Earnings per share $ .01 $ .03 $ .01 $ .05 $ .10
===== ===== ===== ===== =====
</TABLE>
* During the current year, the first three quarters' inventory
computation was based on the prior year's gross profit percentages, which
overall was 43.3%. The year end actual inventory valuation resulted in a
40.9% gross profit percentage. Therefore, fourth quarter results reflect
the entire years percentage decrease. The gross profit percentage
decrease was a result of increased costs due to expansion and
construction of two facilities in the year ended June 30, 1995.
Page 26 of 40
<PAGE>
MOYCO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995, 1994 AND 1993
Note 7: Income Taxes
The provision for income taxes consists of the following:
1995 1994 1993
-------- -------- --------
Currently payable:
Federal (net of tax credits) $314,442 $275,215 $183,076
State 128,483 113,144 75,170
-------- -------- --------
442,925 388,359 258,246
-------- -------- --------
Deferred: 35,419 20,479 -
-------- -------- --------
Income taxes before cumulative
effect of accounting change $478,344 $408,838 $258,246
======== ======== ========
Deferred income taxes result from the tax effect of transactions
which are recognized in different periods for financial and tax
reporting purposes. Significant components of deferred income
taxes and their related impact on deferred income tax expense are
as follows:
1995 1994 1993
-------- -------- --------
Cumulative effect of
accounting change $ - $ 60,168 $ -
Accelerated depreciation 26,935 44,486 ( 6,185)
Contributions carry over ( 333) - -
Other 8,817 ( 24,007) 6,185
-------- -------- --------
$ 35,419 $ 80,647 $ -
======== ======== ========
A reconciliation of the U.S. Federal Income Tax rate to the
effective income tax rate is as follows:
1995 1994 1993
---- ---- ----
Federal taxes at graduated
rates from 15% to 39% 31.0% 32.0% 23.8%
===== ===== =====
State taxes 12.7% 13.1% 9.8%
===== ===== =====
Effective income tax rate 43.7% 45.1% 33.6%
===== ===== =====
Effective July 1, 1993, the Company adopted Statement of
Financial Accounting Standard No. 109, Accounting for Income
Taxes. The cumulative effect of the change in accounting
principle amounted to $60,168 and is included in determining net
income for year ended June 30, 1994. Financial statements for
prior years have not been restated.
Page 27 of 40
<PAGE>
MOYCO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
Note 8: Commitments and Contingencies
There are no material pending or contemplated legal proceedings
against the Company or of which any of its property is subject.
Note 9: Shareholders' Equity
On December 17, 1986, the shareholders approved an increase in
the authorized capital to 15,000,000 shares of common stock and
2,500,000 shares of preferred stock, each with a par value of
$.005 per share, and authorized the shares of preferred stock to
be issued in one or more classes, and in one or more series
within a class, with such voting rights, designations, powers,
preferences, qualifications, privileges, limitations, options,
conversion rights, restrictions and other special rights as may
be established from time to time by resolution of the board of
directors of the Company at or prior to the time of issuance of
shares of such class or series.
Subsequent to June 30, 1995 the aggregate market value of the
outstanding common shares increased significantly.
Note 10: Notes Payable, Bank
The Company has an unsecured line of credit with a Bank in the
amount of $2,000,000 with interest of 1% above the bank's
prevailing prime interest rate. There was 0 and $1,000,000 drawn
upon the line of credit at June 30, 1995 and 1994 respectively.
This line of credit matures October 31, 1995.
Note 11: Letters of Credit - Bank
The Company has two letters of credit with a bank. $50,000 issued
December 6, 1994 expiring December 6, 1997, $100,000 issued May
1, 1995 expiring May 2, 1996 whose beneficiaries are the
Montgomery County Industrial Authority and the Pennsylvania
Industrial Development Authority. The beneficiaries are both
holders of mortgages on part of the Company's buildings. At June
30, 1995 there were no funds drawn on these letters of credit.
Page 28 of 40
<PAGE>
MOYCO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
Note 12: Bad Debt
On June 9, 1993 Healthco International, Inc. a major customer of
Moyco Industries Inc. filed for bankruptcy under Chapter 11 of
the Bankruptcy code. Moyco has determined that the amount due
from Healthco International, Inc. is noncollectible and
accordingly the balance due at June 30, 1993 of $212,109 has been
written off.
Note 13: Legal Proceedings
The Company has filed suit against two defendants in one action
for patent infringement. The proceedings are continuing and the
Company's attorneys were not able to estimate the likelihood of
the outcome in this matter.
Note 14: Subsequent Events
The Company filed a civil suit in July of 1995 against a research
and development company for breach of express contract, and fraud
and misrepresentation. The company seeks to recover the amount
paid of $25,000 per the contract and $500,000 to recover economic
losses associated with the nonperformance of this contract, plus
interest, the cost of the suit, and attorneys fees. As of August
25, 1995 the outcome of this suit could not be determined.
The Company signed a letter of intent with Integrated Process
Equipment, Corporation, (IPEC) towards an exclusive distribution
and representation agreement dated August 29, 1995. The agreement
provides that Moyco will manufacture and/or distribute for IPEC
and its Customers a proprietary tungsten abrasive slurry used in
a state of the art chemical mechanical polishing tungsten process
system developed by IPEC, which employs IPEC equipment and Moyco
abrasive slurries to polish semiconductors.
On July 11, 1995 the Company signed a letter of intent to acquire
the assets of a Dental Products Company with approximately
$500,000 in annual sales. The purchase price will be based on
current assets, net fixed assets less liabilities for cash
outlay, plus shares of Moyco Industries, Inc. common stock, the
number of which is to be negotiated, for intellectual property,
patents, trademarks, and "know how". The assets stated above are
subject to due diligence evaluation not yet begun.
Page 29 of 40
<PAGE>
MOYCO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
Note 15: Stock Option
The Company adopted an incentive stock option plan on October 30,
1992. The plan provides that key employees and directors may be
awarded options not to exceed 200,000 shares of the Company's
stock. Under the plans, options are granted at a price not less
than the fair market value at the grant date and generally become
exercisable upon date of grant. In all cases, options expire ten
years after grant. Of the total shares authorized for issuance,
93,500 shares had been granted and 6,400 shares have been
exercised. During the year 1,600 shares of those granted were
cancelled.
The following summarizes the stock option transactions during the
year ended June 30, 1995.
<TABLE>
<CAPTION>
Outstanding Outstanding
July 1, 1994 Granted Exercised Cancelled June 30, 1995
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares under Option I 73,100 - 1,000 1,000 71,100
Option price .75 - .75 - .75
Shares under
Option II 14,500 1,000 500 600 14,400
Option Price 1.00 1.00 1.00 - 1.00
</TABLE>
Shares available for future grant were 108,100 shares at June 30,
1995.
Note 16: Concentration of Credit Risk
The Company had funds in one bank in excess of federally insured
limits of $876,351 at June 30, 1995.
Note 17: Building Donation
In March 1995 the Company donated its Philadelphia building to a
qualified charity. At the time of the donation the book value of
the building was $96,323 which is reflected in these financial
statements as donation expense as part of other expense. The fair
market value of the building was appraised at $125,000 at the
time of the donation.
Note 18: Capitalized Interest
The Company capitalized $70,225 of interest costs paid as part of
their two construction projects completed during the year ended
June 30, 1995.
Page 30 of 40
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
NONE
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(1) Executive Officers of the Registrant:
(a) The names, ages and positions with the Registrant of all of
the executive officers of the Registrant, none of whom are
related by blood, marriage or adoption to each other, are as
follows:
<TABLE>
<CAPTION>
Name Age Position with the Registrant
---- --- ----------------------------
<S> <C> <C>
Marvin E. Sternberg 61 Chairman of the Board and President
Jerome Lipkin 61 Vice-President
William Woodhead 58 Secretary/Treasurer
</TABLE>
(b) The executive officers hold their respective offices until
the first meeting of newly elected directors following the next
annual meeting of the Company and the election of successor
officer unless otherwise terminated by the Board of Directors.
Page 31 of 40
<PAGE>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (Continued)
(c) The following is a brief account of the business experience
of the executive officers of the Registrant:
Mr. Marvin E. Sternberg joined the Registrant in March of
1974, as a Management Consultant and was elected President of the
Registrant on August 9, 1974. From 1965 to 1973, Mr. Sternberg
was Trustee and Operating Officer for the Robinson Trust,
Philadelphia, Pennsylvania. From 1965 to present, Mr. Sternberg
has been a partner and/or director in a number of other companies
in the Philadelphia, Pennsylvania and Fort Lauderdale, Florida
areas.
Mr. Jerome Lipkin joined the Registrant on June 12, 1974 as
assistant to the Vice-President. He was elected to Vice-President
in charge of operations on March 20, 1978.
Mr. William Woodhead joined the Registrant on January 7, 1985
as Controller. He was elected Secretary/Treasurer on December 18,
1985.
(2) Directors of the Registrant:
(a) The following table sets forth the name of each director of
the Registrant and all offices presently held by him. The term of
each director will expire on such date as the Annual Meeting of
Shareholders is held and his successor is duly elected and
qualified.
<TABLE>
<CAPTION>
Name Age Other Positions with Registrant
---- --- -------------------------------
<S> <C> <C>
Marvin E. Sternberg 61 Chairman of the Board and President
Irvin Paul 65 None
Marvin Cravetz 58 None
Jerome Lipkin 61 Vice-President
William Woodhead 58 Secretary/Treasurer
</TABLE>
Page 32 of 40
<PAGE>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (Continued)
(2) Directors of the Registrant: (Continued)
(b) There are no family relationships between any director or
executive officer of the Registrant.
Irvin Paul, D.D.S., has engaged in the practice of Dentistry,
with offices in Upper Darby, Pennsylvania, for more than thirty
years.
Marvin Cravetz, D.D.S., was engaged in the practice of
Dentistry, with offices in Hatboro, Pennsylvania for more than
twenty years.
The business experience of the other directors during the
past six years is reported under Item 10(1) EXECUTIVE OFFICERS OF
THE REGISTRANT.
Item 11. EXECUTIVE COMPENSATION
The following table shows for fiscal years ending June 30, 1995,
1994 and 1993, the cash compensation as well as certain other
compensation paid to the named executive officers:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
| |
| Long Term Compensation |
--------------------------------------
Annual Compensation | Awards | Payouts |
---------------------------------------------------------------------------------
| | |
| Securities | |
Other | Under- | |
Name Annual | Restricted lying | | All Other
and Compen- | Stock Options/ | LTPI | Compen-
Principal sation | Award(s) SARs | Payouts | sation
Position Year Salary ($) Bonus ($) ($) | ($) (#) | ($) | ($)
-------- ---- ---------- -------- ------ --------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Marvin E. Sternberg | | |
Chairman of the | | |
Board & President 1995 $270,000 0 0 | 0 0 | 1,450 | $4,620
1994 275,000 0 0 | 0 0 | 2,416 | 4,620
1993 252,000 0 0 | 0 10,000 | 2,409 | 4,620
Jerome Lipkin | | |
Vice-President 1995 103,200 10,000 0 | 0 0 | 630 | 4,448
1994 96,400 10,000 0 | 0 0 | 1,050 | 4,244
1993 94,750 10,000 0 | 0 10,000 | 944 | 4,194
| | |
William Woodhead 1995 70,900 10,000 4,800 | 0 0 | 464 | 2,427
Treasurer 1994 69,150 10,000 4,800 | 0 0 | 744 | 2,374
1993 61,550 10,000 4,800 | 0 10,000 | 644 | 2,146
| | |
</TABLE>
Page 33 of 40
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION (Continued)
Profit Sharing Plan
Effective July 1, 1979, the Company adopted a non-contributory
profit sharing plan for its employees who have completed one
full year of service and have attained the age of 21. The
contribution to the plan is determined on an annual basis by
the Board of Directors and cannot exceed the maximum amount
which will constitute an allowable deduction for federal
income tax purposes and is based on the Company's
profitability and shall be paid from the Company's net
earnings and/or retained earnings. The Company's contributions
shall be based on the ratio of each eligible employee's
compensation for the year to total compensation for all
eligible employees limited to the lesser of $36,875 or 25% of
the eligible employee's compensation.
A participating employee's full account becomes payable upon
normal retirement, or upon retirement at any age due to
disability, or upon death to the employee's designated
beneficiary. In the event employment is terminated before
normal retirement, a portion of the Company's contribution is
forfeited unless the employee has at least ten full years of
service.
All officers and employee-directors participate in the program
on the same terms as other salaried employees.
Employee Savings Plan
Effective January 1, 1985 Moyco's Board of Directors
established a tax deferred employee savings and protection
plan under Section 401(K) of the Internal Revenue Code for all
eligible employees. This plan allows an employee to contribute
between 3% and 10% of his salary, including overtime pay,
bonus and commissions, to the plan and these contributions are
not subject to current federal income taxes. The Company will
contribute 50% of the employee's contributions, to a maximum
of 6% of the employee's salary subject to the deferral limit
(IRC Sec. 401 (a)(30)). Participants are at all times fully
vested in their contributions and the Company contributions
become vested to the participant at various percentages based
on the employee's years of service with 20% vested after three
years of service and 20% for each year thereafter.
All officers and employee-directors participate in the program
on the same terms as other salaried employees.
Director Compensation
Directors do not receive any compensation for serving as
directors.
Page 34 of 40
<PAGE>
ITEM 11. STOCK OPTIONS (Continued)
The following table shows stock options exercised and fiscal year end
values for the named exective officers under the Moyco Industries, Inc.
stock option plan. The plan does not permit the grant of stock
appreciation rights ("SARs"). There have been no stock options granted
in the current fiscal year.
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Shares Options/SARs Options/SARs
Acquired on Value Realized at FY-End (#) at FY-End ($)
Name Exercise (#) (1) ($) (2) Exercisable Exercisable(2)
---- ---------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Marvin E. Sternberg 0 0 10,000 $20,900
Jerome Lipkin 1,000 $250 9,000 $18,810
William Woodhead 0 0 10,000 $20,900
</TABLE>
(1) Upon exercise of an option, the optionee must pay the exercise
price in cash.
(2) Represents the difference between the fair market value of the
common stock underlying the option and the exercise price at
exercise, or fiscal year-end, respectively.
Page 35 of 40
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) The following table sets forth information as of June 30,
1995 with respect to any person who is known to the Registrant to
be the beneficial owner of more than 5% of any class of
Registrant's voting securities:
<TABLE>
<CAPTION>
Shares Percentage
Beneficially of
Title of Class Name and Address Owned Class
-------------- ---------------- ------------ ----------
<S> <C> <C> <C>
Common Stock Marvin E. Sternberg 2,922,575 (1) (2) 74.19%
937 Mt. Pleasant Rd.
Bryn Mawr, PA 19010
</TABLE>
(1) Of these shares 2,408,365 shares are held by Marvin E.
Sternberg, legally and beneficially in his own name;
16,900 shares by Susan Sternberg, wife of said Marvin E.
Sternberg, legally and beneficially in her own name; and
497,310 shares are held by said Susan Sternberg together
with T. Allen Lipsky in trusts consisting of 165,770
shares each for the respective beneficial interests of
Joseph S. Sternberg, Mark E. Sternberg and Janet L.
Sternberg, children of said Marvin E. Sternberg and Susan
Sternberg.
(2) None of Marvin E. Sternberg, Susan Sternberg or T. Allen
Lipsky claim any beneficial interests in the shares
herein described which are not reported here for his or
her respective legal and beneficial interest.
(b) The following table sets forth information, as of June 30,
1995, as to each class of equity securities of the Registrant
beneficially owned, directly or indirectly, by all directors
and officers of the Registrant, as a group:
<TABLE>
<CAPTION>
Shares Beneficially Percentage
Title of Class Beneficial Owner Owned (1) of Class
-------------- ---------------- ------------------- ------------
<S> <C> <C> <C>
Common Stock Marvin E. Sternberg 2,922,575 74.19%
Common Stock Irvin Paul -
Common Stock Marvin Cravetz -
Common Stock Jerome Lipkin 125,200 3.18%
Common Stock William Woodhead 2,725 .01%
Common Stock All Officers and
Directors (5 in number) 3,050,500 77.38%
</TABLE>
(1) Refer to Footnotes (1) and (2) of previous table.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
No director or officer had any material interest, direct
or indirect, in any business transaction of the Company during
the period July 1, 1994 through June 30, 1995, or in any such
proposed transaction.
Page 36 of 40
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
Page No.
--------
(a) 1. Financial statements
Included in Part II of this report
Report of independent certified public accountants 13
Balance sheets at June 30, 1995 and 1994 14-15
Statements of operations for the three years ended
June 30, 1995 16
Statements of changes in shareholders' equity for
the three years ended June 30, 1995 17
Statements of cash flows for the three
years ended June 30, 1995 18
Notes to financial statements 19-30
2. Financial statement schedules
Included in Part IV of this report
For the three years ended June 30, 1995
Schedule II - Valuation and qualifying accounts 38
(b) 1. Exhibit I 39
2. Reports on Form 8-K - NONE
All other schedules and notes specified under Regulation S-X are
omitted because they are either not applicable, not required or the
information called for therein appears in the financial statements or
notes thereto.
Page 37 of 40
<PAGE>
SCHEDULE VIII
-------------
MOYCO INDUSTRIES, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED JUNE 30, 1995
===============================================================================
Column A Column B Column C Column D Column E
-------- -------- --------- -------- --------
Additions
Balance --------- Balance
at Accounts at
Beginning Charged to Written End of
of Period Expense Off (1) Period
--------- ---------- -------- -------
Allowance for
doubtful
receivables:
June 30, 1995 $58,990 $ 20,084 $ 84 $78,990
======= ======== ======== =======
June 30, 1994 $70,351 $ - $ 11,361 $58,990
======= ======== ======== =======
June 30, 1993 $70,351 $212,109 $212,109 $70,351
======= ======== ======== =======
(1) Represents accounts written off against the reserve.
Page 38 of 40
<PAGE>
MOYCO INDUSTRIES
STOCK OPTION PLAN
FOR THE YEAR ENDED JUNE 30, 1995
EXHIBIT I
The Company adopted an incentive stock option plan on October 30, 1992.
The plan provides that key employees and directors may be awarded
options not to exceed 200,000 shares of the Company's stock. Under the
plans, options are granted at a price not less than the fair market
value at the grant date and generally become exercisable upon date of
grant. In all cases, options expire ten years after grant. Of the total
shares authorized for issuance, 93,500 shares had been granted and
6,400 shares have been exercised. During the year 1,600 shares of those
granted were cancelled.
The following summarizes the stock option transactions during the year
ended June 30, 1995.
<TABLE>
<CAPTION>
Outstanding Outstanding
July 1, 1994 Granted Exercised Cancelled June 30, 1995
------------ ------- --------- --------- -------------
<S> <C> <C> <C> <C>
Shares under Option I 73,100 - 1,000 1,000 71,100
Option price .75 - .75 - .75
Shares under
Option II 14,500 1,000 500 600 14,400
Option Price 1.00 1.00 1.00 - 1.00
</TABLE>
Shares available for future grant were 108,100 shares at June 30, 1995.
Page 39 of 40
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) of the Securities
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MOYCO INDUSTRIES, INC.
BY: /s/ Marvin E. Sternberg
-------------------------------------
Marvin E. Sternberg
President and Chief Executive Officer
Chairman of the Board
Dated: September 14, 1995
----------------------
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.
/s/ Marvin E. Sternberg
------------------------- President and Chief Executive Officer
Marvin E. Sternberg
Dated: September 14, 1995
-------------------------
/s/ Jerome Lipkin
------------------------- Vice President and Director
Jerome Lipkin Executive Officer
Dated: September 14, 1995
-------------------------
/s/ William Woodhead
---------------------- Secretary/Treasurer and
William Woodhead Director
Dated: September 14, 1995
-------------------------
Page 40 of 40
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> JUN-30-1995 JUN-30-1994
<PERIOD-END> JUN-30-1995 JUN-30-1994
<CASH> 1,097,323 1,447,565
<SECURITIES> 0 0
<RECEIVABLES> 2,250,954 1,731,336
<ALLOWANCES> (78,990) (58,990)
<INVENTORY> 3,218,077 2,818,774
<CURRENT-ASSETS> 6,512,511 5,971,107
<PP&E> 9,763,439 7,235,478
<DEPRECIATION> (3,771,798) (3,951,760)
<TOTAL-ASSETS> 12,983,665 9,765,891
<CURRENT-LIABILITIES> 1,922,766 2,967,267
<BONDS> 7,262,414 5,136,839
<COMMON> 22,654 22,622
0 0
0 0
<OTHER-SE> 4,127,921 3,590,389
<TOTAL-LIABILITY-AND-EQUITY> 12,983,665 9,765,891
<SALES> 11,880,186 10,031,343
<TOTAL-REVENUES> 11,880,186 10,031,343
<CGS> 7,022,454 5,692,546
<TOTAL-COSTS> 7,022,454 5,692,546
<OTHER-EXPENSES> 96,322 46,571
<LOSS-PROVISION> 20,000 0
<INTEREST-EXPENSE> 435,174 227,772
<INCOME-PRETAX> 1,014,658 860,854
<INCOME-TAX> 478,344 408,838
<INCOME-CONTINUING> 536,314 452,016
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 60,168
<NET-INCOME> 536,314 391,848
<EPS-PRIMARY> .136 .100
<EPS-DILUTED> .136 .100
</TABLE>
