SECURITES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended April 30, 1999 Commission File No. 0-8512
----------------------
MONARCH SERVICES, INC.
(Name of small business issuer in its charter)
DELAWARE 410-254-9200 52-1073628
(State or other jurisdiction (Issuer's telephone (I.R.S. Employer
of incorporation or number, including Identification No.)
organization) area code)
4517 Harford Road 21214
Baltimore, Maryland (Zip code)
(Address of principal executive offices)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.25 par value
(Title of each class)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past
twelve months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes [ X ] No [ ]
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
The issuer's revenues for the fiscal year ended April 30, 1999 are
$5,827,080.
As of July 15, 1999, the aggregate market value of the Issuer's common
stock held by non-affiliates was $2,856,715.
As of July 15, 1999, the number of shares outstanding of the Issuer's
common stock was 1,619,820.
-----------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement to be filed under Regulation 14A
for the annual meeting to be held in October, 1999 are incorporated by reference
into Part III.
Transitional small business disclosure format (check one):
Yes [ ] No [ X ]
<PAGE>
PART I
Item 1. DESCRIPTION OF BUSINESS
Monarch Services, Inc. (the "Company") formerly Monarch Avalon, Inc. was
incorporated in Delaware on December 20, 1976 as a commercial printing company
and as the successor to a developer and publisher of strategy board games that
originally entered the games business in 1958. In 1993, the Company
incorporated a subsidiary, Girls' Life, Inc. which commenced substantial
operations with the sale of the first issue of Girls' Life magazine in August
1994.
On October 27, 1998, the Company sold substantially all the assets of its former
games division to a subsidiary of Hasbro, Inc. for $6,000,000 in cash. The
assets sold included trademarks, copyrights and other intellectual property
rights, inventory and tooling. The operating results of the games division have
been classified as discontinued operations for all periods presented in the
consolidated statements of operations.
The Company operated in three businesses during fiscal 1999: publishing,
printing and envelope and games. The game business was sold during fiscal 1999
and is included in discontinued operations. The businesses share certain
facilities and operate under common management.
Publishing Business
Girls' Life, Inc. publishes a bi-monthly magazine for young girls ages nine to
fourteen. The publishing business contributed $3,803,000 in net sales or
approximately 65% of the Company's total revenue in 1999. In 1998, Girls' Life,
Inc. created the magazine's website to be used by its readers and the general
public. The Girls' Life website (www.girlslife.com) allows girls to read past
articles, enter contests, connect with other girls via message boards, and chat
with the magazine's editors. Girls' Life can be enjoyed by millions of girls
worldwide every hour of every day.
Girls' Life is intended to be an intelligent, non-condescending and easily read
magazine. The philosophy behind the graphic representation and every article
presented is that girls are important, independent, and intelligent people with
opinions of their own. Each article seeks to reinforce that message and inspire
confidence in a girl's thoughts, opinions, and feelings. Editorial material is
created by the magazine's staff as well as through outside writers. The
magazine is printed through one large national printing service company.
Printing and Envelope Business
Monarch Services offers a full line of printing and graphic arts services to a
wide range of customers in the industrial, financial and advertising fields in
the Mid-Atlantic region. Its services include offset and letterpress printing,
design and idea conceptions, finished art, and direct mailing. Monarch Services
also manufactures various types and sizes of envelopes to customer order.
<PAGE>
Monarch Services also provides printing services to Girls' Life magazine. It
designs and prints promotional and direct mail literature for the magazine.
During fiscal 1999 publishing production accounted for approximately 12% of
Monarch Services' revenues on an interdivisional basis.
The Company's printing and publishing businesses are not seasonal in nature.
MARKETING
Girls' Life magazine subscriptions are sold through traditional sources such as
direct-mail solicitation, insert cards and via subscription agents. The
magazine is also sold on newsstands and subscriptions can be obtained or renewed
through the internet on the Girls' Life website. Newsstand copies are
distributed nationally by Ingram Periodicals Inc. and International Periodical
Distributors. Newsstand copies are distributed nationally and internationally
by Warner Publisher Services. The Company has entered into a joint venture with
the Girl Scouts of the U.S.A. through which the Company has direct access to the
Girl Scout's mailing list of over 2,000,000 girls.
The basic domestic price of a one year Girls' Life subscription is $17.85. The
suggested retail price of a single issue of Girls' Life in the United States at
the newsstand is $2.95.
The average total distribution per issue during fiscal year 1999 was as set
forth in the following table.
Distribution Channel Number of Magazines Distributed
------------------------ -----------------------------------
Newsstand Sales 60,000
Subscription Sales 233,000
---------
Total Paid Circulation 293,000
Complementary Copies 1,000
The following table sets forth the average number of subscriptions
geographically sold per issue, internationally and domestically during FY 1999.
Item 1. DESCRIPTION OF BUSINESS (Continued)
Geographic Distribution Number of Magazines Distributed
--------------------------- -----------------------------------
United States 229,000
International 4,000
<PAGE>
Printing and graphic arts services and envelopes are marketed primarily in the
Baltimore-Washington area through Company sales personnel who are compensated on
a salary basis. The Company offers credit terms to its trade customers for the
purchase of its printing and envelope products.
Copyrights and Trademarks
The Company's magazine is generally protected by registered trademarks and
copyrights in the United States and foreign countries to the extent that such
protection is available.
COMPETITION
Competition in the printing and envelope business is largely based on price,
quality, range of services offered, distribution capabilities, ability to
service the specialized needs of customers, availability of printing time on
appropriate equipment and use of state-of-the-art technology. The Company
competes for commercial business not only with large national printers, but also
with smaller regional printers, many of which have broader product offerings and
greater experience, depth of management and financial resources than the
Company. The Company believes that excess capacity in the industry has resulted
in downward pricing pressure and intensified competition in the printing and
envelope industry. Further, technology in the printing and envelope industry
has evolved and continues to evolve as customer's needs have become more
specialized and sophisticated. This trend requires successful competitors to
invest significant additional capital in new and improved technology. Since the
Company is pursuing strategic alternatives for the printing and envelope
business, the Company has not devoted its capital to increasing the technology
of its printing and envelope operations. Given these factors, there can be no
assurance that the Company will be able to compete successfully against existing
or new competitors in the forseeable future. The failure to successfully
compete will continue to have a material adverse effect on the results of the
printing and envelope business pending the implementation of a strategic
alternative.
Competition in the publishing industry is intense with numerous other publishers
and retailers, as well as other media, competing for readers and advertising
revenue. Most of the Company's competitors in the publishing business have
broader and better recognized product offerings and greater experience, depth of
management and creative and financial resources than the Company. Given these
factors, there can be no assurance that the Company will be able to continue to
compete successfully in the publishing industry and the failure to do so may
have a material adverse effect on the results of the publishing business.
Raw Materials
The principal raw materials used by the Company are finished paper and ink. The
Company generally purchases its requirements for each of these items from single
sources, but the Company believes there are, at present, numerous sources from
which its requirements could be met. The price of paper is a significant
expense of the Company's publishing and printing businesses and price increases
may have an adverse effect on the Company's future results.
<PAGE>
Employees
At April 30, 1999, the Company employed approximately 65 personnel, including 15
executive and administrative personnel and 50 production personnel. Four of the
administrative personnel are part time. None of the Company's employees are
represented by a union. The Company believes its relations with its employees
are good.
Item 2. DESCRIPTION OF PROPERTY
The Company leases property at the following locations for the following
purposes:
1. 4517 Harford Road, Baltimore, Maryland 21214. This property contains the
Company's offices as well as its printing plant. The property is leased through
2006.
2. 6500 Quad Avenue, Baltimore, Maryland 21205. This property contains a
warehouse facility and the lease expires on May 14, 2000.
The Company leases the Harford Road property from A. Eric Dott who is the
Chairman and a major stockholder of the Company. Although not negotiated at arms
length, management believes the terms of the lease with Mr. Dott are comparable
to lease terms for like properties in the same geographic area.
Item 3. LEGAL PROCEEDINGS
Companies in the printing and envelope and publishing industries are, in the
ordinary course of business, made the subject of actions alleging copyright
infringement and other actions. Such actions may allege large damages. The
Company has, on an infrequent basis, had such claims made against it.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
NONE
<PAGE>
PART II
Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Common Stock Market Prices and Dividends
The Company's common stock is traded on the Nasdaq SmallCap Market under the
symbol MAHI. The number of stockholders of record on July 15, 1999 was 588. The
number of stockholders holding 100 or more shares on July 15, 1999 was 341.
Effective with the commencement of trading on June 19, 1998, the Company's
Common Stock was voluntarily delisted from the Nasdaq National Market and
transferred to the Nasdaq SmallCap Market.
High and low closing sale prices for the last two years were:
Fiscal 1999 Fiscal 1998
Quarter Price Price
Ended High Low High Low
------- ------- ------- -------
July 31 1-3/4 1-1/2 3 2-1/4
October 31 1-15/16 1-15/16 3-1/4 1-11/16
January 31 3-5/16 3-1/8 2-1/4 2
April 30 3 3 2-1/4 2-1/4
Prior to June 19, 1998, such prices are from the Nasdaq National Market.
Subsequent to such date the prices are from the Nasdaq SmallCap Market.
Such prices reflect inter-dealer prices, without retail mark-up, mark-down or
commissions and may not represent actual transactions. The Company has not paid
any cash dividends since April 1987. Although the board of directors will
continue to review the Company's profitability with respect to the resumption of
dividends, there can be no assurance as to the timing or amount of any future
dividends.
<PAGE>
Item 5A. CERTAIN CAUTIONARY INFORMATION
In connection with the Private Securities Litigation Reform Act of 1995 (the
"Litigation Reform Act"), the Company is hereby disclosing certain cautionary
information to be used in connection with written materials (including this
Annual Report on Form 10-KSB) and oral statements made by or on behalf of its
employees and representatives that may contain "forward-looking statements"
within the meaning of the Litigation Reform act. Such statements consist of any
statement other than a recitation of historical fact and can be identified by
the use of forward-looking terminology such as "may," "expect," "anticipate,"
"estimate," or "continue" or the negative thereof or other variations thereon or
comparable terminology. The listener or reader is cautioned that all forward-
looking statements are necessarily speculative and there are numerous risks and
uncertainties that could cause actual events or results to differ materially
from those referred to in such forward-looking statements. The discussion below
highlights some of the more important risks identified by management, but should
not be assumed to be the only factors that could affect future performance. The
reader or listener is cautioned that the Company does not have a policy of
updating or revising forward-looking statements and thus he or she should not
assume that silence by management over time means that actual events are bearing
out as estimated in such forward-looking statements.
HISTORY OF OPERATING LOSSES
The Company has reported losses from continuing operations before taxes in each
of the past five years. There can be no assurance that the Company's business
strategies and tactics will be successful and that the Company will be
profitable in future periods.
PRINTING AND ENVELOPE BUSINESS COST OF GOODS SOLD EXCEEDS SALES
The losses the Company has experienced in the printing and envelope business
have been caused by decreases in sales due to intense competition in the
regional printing and envelope industry in which the Company competes and the
loss of printing and envelope sales to the Company's former games business. As
a result of the loss of sales experienced in the printing and envelope business
and associated decreases in economies of scale, the cost of goods sold in the
printing and envelope business was 111% of printing and envelope business sales
during 1999. The Company expects the printing and envelope business to continue
to lose sales resulting in an increase in the cost of goods sold as a percentage
of printing and envelope sales in future periods. The Company is aggressively
pursuing strategic alternatives for the printing and envelope business and
the Company anticipates that it will incur costs to implement a strategic
alternative in addition to the costs of continued operation of the printing and
envelope business. There can be no assurance that the proceeds of any strategic
alternative will completely offset the implementation costs of such strategic
alternative and the costs incurred in continuing the operation of the printing
and envelope business pending such implementation.
<PAGE>
DEPENDENCE OF PRINTING AND ENVELOPE BUSINESS ON FEW MAJOR CUSTOMERS
In 1999, $912,000 or 45% of the revenues of the printing and envelope business
resulted from sales to the five largest customers of such business and $485,000
or 24% of such revenues resulted from sales to its two largest customers. In
late 1999 the Company was advised by a customer, which accounted for $201,000 or
10% of printing and envelope revenues in 1999 and $714,500 or 28% of printing
and envelope revenues in 1998, that it would no longer be a customer of the
Company. The Company expects that the loss of this customer will adversely
affect its results of operations in future periods. Furthermore, the loss of
any more of the major customers of the printing and envelope business can be
expected to have a material adverse effect on the Company's future results of
operations.
CONTINUING EFFECT OF GAMES BUSINESS OVERHEAD
The Company has experienced increases in its selling, general and administrative
expenses due to overhead costs that were previously charged to the former games
business and are currently charged to the printing and envelope and publishing
businesses. The Company is attempting to decrease such costs through the sale
of the remaining equipment of, and the sublease of the plant facilities
associated with, the former games division. Pending the success of such
efforts, such expenses can be expected to affect the Company's results of
operations for the foreseeable future.
COMPETITION
Competition in the printing and envelope business is largely based on price,
quality, range of services offered, distribution capabilities, ability to
service the specialized needs of customers, availability of printing time on
appropriate equipment and use of state-of-the-art technology. The Company
competes for commercial business not only with large national printers, but also
with smaller regional printers, many of which have broader product offerings and
greater experience, depth of management and financial resources than the
Company. The Company believes that excess capacity in the industry has resulted
in downward pricing pressure and intensified competition in the printing and
envelope industry. Further, technology in the printing and envelope industry
has evolved and continues to evolve as customers' needs have become more
specialized and sophisticated. This trend requires successful competitors to
invest significant additional capital in new and improved technology. Since the
Company is pursuing strategic alternatives for the printing and envelope
business, the Company has not devoted its capital to increasing the technology
of its printing and envelope operations. Given these factors, there can be no
assurance that the Company will be able to compete successfully against existing
or new competitors in the foreseeable future. The failure to successfully
compete will continue to have a material adverse effect on the results of the
printing and envelope business pending the implementation of a strategic
alternative.
<PAGE>
Competition in the publishing industry is intense with numerous other publishers
and retailers, as well as other media, competing for readers and advertising
revenue. Most of the Company's competitors in the publishing business have
broader and better recognized product offerings and greater experience, depth of
management and creative and financial resources than the Company. Given these
factors, there can be no assurance that the Company will be able to continue to
compete successfully in the publishing industry and the failure to do so may
have a material adverse effect on the results of the publishing business.
LIMITED MARKET FOR PUBLISHING BUSINESS
The Girls' Life magazine is targeted to girls ages nine to fourteen. Since
Girls' Life's target audience is limited by age and gender, Girls' Life, unlike
other magazines that appeal to broader age groups, must replace a large portion
of its readership each year due to maturation of audience. Accordingly, Girls'
Life's promotional expenses that are designed to replace and expand its
readership may be higher than other magazines with comparable circulation.
There can be no assurance that Girls' Life will be able to replace its existing
readers and expand its circulation going forward. Any decrease in Girls' Life's
circulation, due to demographic or other factors, can be expected to have a
material adverse effect on the revenues of the Company's publishing business.
DEPENDENCE ON KEY EXECUTIVE
For the foreseeable future, we will place substantial reliance upon the personal
efforts and abilities of Ms. Karen Bokram, the Executive Editor of Girl's Life
magazine. Ms. Bokram is an at-will employee and is under no obligation to
continue with the Company in her current capacity. Any loss of the services of
Ms. Bokram could be expected to have a material adverse effect on the Company's
business, operations, revenue and prospects. The Company does not maintain key
employee insurance coverage on Ms. Bokram.
EFFECT OF INCREASES IN PAPER AND POSTAGE COSTS
The price of paper is a significant expense of the Company's publishing and
printing and envelope businesses. Paper price increases may have an adverse
effect on the Company's future results. Postage for product and magazine
distribution is also a significant expense of the Company. The Company uses the
U.S. Postal Service for distribution of many of its products and magazine.
Postage costs increase periodically and can be expected to increase in the
future. No assurances can be given that the Company can pass such cost increases
through to its customers.
<PAGE>
CONTROL BY PRINCIPAL STOCKHOLDERS
A. Eric Dott and, his son, Jackson Y. Dott, the Company's Chairman and
President, respectively, beneficially own an aggregate of 42% of the outstanding
voting securities of the Company. Accordingly, these stockholders have the
ability, acting together, to exercise significant control over fundamental
corporate transactions requiring stockholder approval, including without
limitation the election of Directors, approval of merger transactions involving
the Company and sales of all or substantially all of the Company's assets.
YEAR 2000 SOFTWARE ISSUE
As the year 2000 approaches, an issue has emerged regarding how existing
software programs and operating systems can accommodate information that employs
dates after December 31, 1999. We are working with our software vendors to
prepare our systems for the year 2000. Based on information currently available,
we do not anticipate that we will incur significant operating expenses or be
required to incur material costs to be year 2000 compliant. We are, however,
still analyzing and modifying our systems and requirements. In addition, we have
relationships with third parties that have computer systems that may not be year
2000 compliant. To the extent that their systems are not fully year 2000
compliant, we cannot be sure that potential systems interruptions or the cost
necessary to update software would not have a material adverse effect on our
business, financial condition, results of operations, or business prospects. See
"Management's Discussion and Analysis or Plan of Operation--Year 2000 Issue."
<PAGE>
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS FISCAL 1998 THROUGH FISCAL 1999
Sales increased $440,000 or 8% in 1999 from 1998. The increase relates entirely
to Girls' Life sales which increased $1,003,000 or 36% in 1999 from 1998 as a
result of increased promotions and direct mail advertising of the magazine and
increased revenue from newsstand sales and advertising. Printing and envelope
sales decreased $563,000 or 22% from 1998 primarily as a result of the loss of
one major customer.
Cost of goods sold as a percent of sales was 81% in 1999 and 83% in 1998. The
overall decrease in 1999 was primarily due to the increase of the publishing
business which has higher margins than the printing and envelope business. Cost
of goods sold as a percent of sales for Girls' Life decreased to 65% in 1999
from 72% in 1998 due to increased sales. Cost of goods sold as a percent of
sales for Printing increased to 111% in 1999 from 95% in 1998 due to decreased
sales combined with certain fixed costs in cost of sales.
The losses the Company has experienced in the printing and envelope business
have been caused by decreases in sales due to intense competition in the
regional printing and envelope industry in which the Company competes and the
loss of printing and envelope sales to the Company's former games business. As
a result of the loss of sales experienced in the printing and envelope business
and associated decreases in economies of scale, the cost of goods sold in the
printing and envelope business was 111% of printing and envelope business sales
during 1999. The Company expects the printing and envelope business to continue
to lose sales resulting in an increase in the cost of goods sold as a percentage
of printing and envelope sales in future periods. The Company is aggressively
pursuing strategic alternatives for the printing and envelope business.
However, the Company anticipates that it will incur costs to implement a
strategic alternative in addition to the costs of continued operation of the
printing and envelope business. There can be no assurance that the proceeds of
any strategic alternative will completely offset the implementation costs of
such strategic alternative and the costs incurred in continuing the operation of
the printing and envelope business pending such implementation.
In 1999, $912,000 or 45% of the revenues of the printing and envelope
business resulted from sales to the five largest customers of such
business, and $485,000 or 24% of such revenues resulted from sales to its two
largest customers. In late 1999, the Company was advised by a customer,
which accounted for $201,000 or 10% of printing and envelope revenues in
1999 and $714,500 or 28% of printing and envelope revenues in 1998,
that it would no longer be a customer of the Company. The Company expects
that the loss of this customer will adversely affect its results of
operations in future periods. Furthermore, the loss of any more of the
major customers of the printing and envelope business can be expected to
have a material adverse effect on the Company's future results of
operations.
<PAGE>
Selling, general and administrative expenses as a percentage of sales were 23%
in 1999 and 21% in 1998. The Company has experienced increases in its selling,
general and administrative expense due to general corporate overhead costs that
were previously charged to the former games business and are currently being
charged to the printing and envelope and publishing businesses. The Company is
attempting to decrease such costs through the sale of the remaining equipment
of, and the sublease of the plant facilities associated with, the former games
division. Pending the success of such efforts, such expenses can be expected to
affect the Company's results of operations for the foreseeable future.
Research and development expenses for the games division were discontinued after
the sale of the games division to Hasbro, Inc. in October 1998.
Other income increased $112,000 in 1999 to $207,000 from $95,000 in 1998. The
1999 increase was primarily due to the increase in interest income in the amount
of $64,000 and sale of equipment. Other income decreased $119,000 in 1998 from
1997. The 1998 decrease was primarily due to the sale of marketable securities
and lower earned interest.
A deferred tax benefit of $79,000 has been recorded for fiscal year 1999. No
provision (benefit) for income taxes was recorded for fiscal year 1998.
LIQUIDITY AND SOURCES OF CAPITAL
Cash and cash equivalents increased $5,583,000 in fiscal 1999 to $7,321,000. The
increase in 1999 resulted primarily from the net proceeds from the sale of the
games division to Hasbro, Inc. of $5,247,000 in October 1998, cash provided by
operations of $282,000, proceeds from the disposal of equipment in the amount of
$77,000, less purchases of intangibles and equipment in the amount of $23,000.
The decrease in fiscal 1998 of $393,000 was principally the result of cash used
by operations of $415,000 and purchases of equipment in the amount of $140,000.
The Company leases its office, warehouse, and manufacturing facilities under
noncancellable operating leases. Annual commitments under these leases at April
30, 1999 are as follows: fiscal 2000 - $329,000, fiscal 2001 through
fiscal 2006 - $129,000, annually. Certain of these leases are with the
Company's Chairman and a member of his family.
At April 30, 1999, the Company has no debt with third-party lenders.
During fiscal 1999, cash and cash equivalents ranged from approximately $1.7
million to $7.3 million. The Company's cash and cash equivalents are subject to
variation based upon the timing of receipts and the payment of payables. During
fiscal 1999 and fiscal 1998, the Company maintained an average balance for
certificates of deposit and treasury bills of approximately $4,230,000 and
$1,670,000, respectively.
<PAGE>
Management believes that existing cash and cash equivalents, together with cash
generated from operations and investing activities, will be sufficient to meet
the Company's liquidity and capital needs for the next 12 months. Due to the
Company's losses from continuing operations before income taxes in each of the
past three years and its net losses (excluding proceeds of the sale of the games
division) for two of the last three years, the Company has determined to focus
its efforts on the publishing business and seek strategic alternatives for the
printing and envelope business.
IMPACT OF INFLATION AND CHANGING PRICES
Due to the highly competitive nature of the printing industry in which the
Company operates, increased costs were unable to be fully passed on to customers
during the past three years.
Charges to depreciation represent the allocation of historical costs over past
years, and are significantly less than if they were based on the consumption of
current cost of productive assets. Assets replaced in future years will be
replaced at significantly higher costs but replacements are expected to produce
economies in production.
Year 2000 Issue
As the Year 2000 approaches, existing software programs and operating systems
must be reviewed to determine if they can accommodate information that employs
dates after December 31, 1999. As of April 30, 1999, the Company has incurred
direct Year 2000 compliance costs of approximately $12,500, to cover assessment
of systems, internal testing, training, and replacement and modification of
existing systems. The Company's Year 2000 compliance costs consist of software,
consulting time, employee time and new and upgraded hardware. The Company
expects to complete its Year 2000 program during fiscal 2000 at an estimated
cost to completion of an additional $17,500.
Management has hired an independent consultant to establish and implement a plan
to address the Company's software and operating systems issues for the Year
2000. The Company's plan includes assessment, remediation and renovation and
testing. The Company has completed the assessment phase which includes the
identification of critical and non-critical operating systems and external
interfaces with third-party computer systems and a survey of the majority of the
Company's vendors concerning Year 2000 compliance. Responses from vendors have
generally indicated that such vendors expect to be Year 2000 compliant. The
Company commenced the remediation and renovation phase in April 1999 with the
purchase of hardware and software to replace critical and non-critical operating
systems that would likely be affected by the Year 2000 issue. The replacement
hardware and software are off-the-shelf, Gateway based, products from Intuit and
Microsoft which, based upon manufacturer information, management believes are
less susceptible to Year 2000 issues. The Company is currently working with its
hardware and software vendors and other third parties to complete the
remediation and renovation phase. Completion and transition to the Company's new
systems are expected by September 1999. The Company expects to complete the
testing phase in October 1999.
<PAGE>
The Company has not identified a cost-effective Year 2000 contingency plan
beyond confirming its ability to shift its business to alternative vendors and
service providers. Since the Company has three to four vendors for the major
inventory items, management feels that there will be no interruptions of service
from suppliers. The Company uses one major vendor for the printing and mailing
of Girls' Life magazine, but based on documentation and discussions with the
vendor, management does not expect a disruption of service due to the Year 2000
issue. The Company believes that other vendors of printing and mailing services
could meet the needs of Girls' Life if necessary.
While the Company believes that it is taking prudent and necessary action to
comply with Year 2000 requirements, there can be no assurance that the Year 2000
issue will not result in information or communications systems interruptions.
Such interruptions, if of significant duration, could be expected to have a
material adverse effect on the Company's business, financial condition, results
of operations and business prospects.
<PAGE>
<TABLE>
Item 7. FINANCIAL STATEMENTS
Consolidated Statement of Financial Condition
<CAPTION>
- ------------------------------------------------------------
April 30, 1999
- ------------------------------------------------------------
(000's Omitted)
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $7,321
Accounts receivable, net 429
Inventories, less $65,000 allowance
for obsolescence
Raw materials and component parts 161
Work in progress 49
Finished goods 30
-------
240
Prepaid expenses 10
--------
TOTAL CURRENT ASSETS 8,000
PROPERTY AND EQUIPMENT
Machinery, equipment, furniture and
fixtures 3,709
Leasehold improvements 305
Accumulated depreciation (3,690)
--------
324
--------
INTANGIBLE ASSETS-NET 2
--------
DEFERRED TAX ASSET 79
ASSETS HELD FOR SALE 89
--------
$8,494
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 142
Accrued expenses 198
Income taxes payable 165
Deferred subscription revenue 1,246
--------
TOTAL CURRENT LIABILITIES 1,751
--------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred Stock-par value $.01 per share:
Authorized 100,000 shares; no shares
issued
Common Stock-par value $.25 per share:
Authorized - 3,000,000 shares; shares
issued - 2,109,985: shares outstanding
1,619,820 527
Capital surplus 3,378
Retained earnings 2,960
--------
6,865
Treasury stock at par - 490,165 shares (122)
--------
TOTAL STOCKHOLDERS' EQUITY 6,743
--------
$8,494
=======
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Item 7. FINANCIAL STATEMENTS (Continued)
Consolidated Statements of Operations
<CAPTION>
- ---------------------------------------------------------------
Year Ended April 30, 1999 1998
- ---------------------------------------------------------------
(000's Omitted, except share information)
<S> <C> <C>
Net Sales - printing 2,024 2,587
- publishing 3,803 2,800
-------------------------
5,827 5,387
-------------------------
Cost of goods sold - printing 2,239 2,462
- publishing 2,465 2,016
-------------------------
4,704 4,478
-------------------------
Gross profit from continuing
operations 1,123 909
-------------------------
Selling, general and
administrative expenses 1,344 1,144
-------------------------
Loss from continuing operations
before other income (221) (235)
Other income:
Investment and interest income 137 73
Realized and unrealized gain
on marketable securities 0 27
Gain on sale of property 70 0
other 0 (5)
-----------------------
207 95
-----------------------
Loss from continuing operations,
before income taxes ( 14) (140)
Deferred benefit for income taxes 79 0
-----------------------
Income (loss) from continuing
operations 65 (140)
Discontinued Operations:
Operating loss from
games division (433) (1,585)
Gain on disposal of games
business (net of income
taxes of $580) 3,881 0
--------------------------
Net income (loss) 3,513 (1,725)
--------------------------
Net Earnings (loss) per common
share - basic and diluted:
Income (loss) from continuing
operations per share $ .04 $ ( .09)
Gain (loss) from discontinued
operations 2.13 ( .98)
--------------------------
Net Earnings (loss) per common
share - basic and diluted 2.17 (1.07)
==========================
Weighted average number of
shares outstanding 1,619,820 1,619,820
==========================
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Item 7. FINANCIAL STATEMENTS (Continued)
Consolidated Statements of Changes in Stockholders' Equity
(000's omitted, except shares outstanding data)
<CAPTION>
Total
Shares Common Capital Retained Treasury Stockolders'
Outstanding Stock Surplus Earnings Stock Equity
---------- ------ ------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance
May 1, 1997 1,620,820 527 3,378 1,172 (122) 4,955
Net Loss-1998 (1,725) (1,725)
----------------------------------------------------------
Balance
April 30, 1998 1,619,820 527 3,378 (553) (122) 3,230
Net income-1999 3,513 3,513
----------------------------------------------------------
Balance
April 30, 1999 1,619,820 $ 527 $ 3,378 $ 2,960 $ (122) $ 6,743
==========================================================
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Item 7. FINANCIAL STATEMENTS (Continued)
<CAPTION>
Consolidated Statements of Cash Flows
- ----------------------------------------------------------------
Year Ended April 30, 1999 1998
- ----------------------------------------------------------------
(000's Omitted)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 3,513 (1,725)
Adjustments to reconcile net income -------------------
(loss)to net cash provided by (used in)
operating activities:
Depreciation 143 155
Deferred benefit for income taxes (79) 0
Amortization 0 58
Gain on disposal of games business (3,881) 0
Gain on disposal of property
and equipment ( 70) 0
Gain on sale of marketable
securities 0 ( 27)
Decrease in accounts receivable
allowances (45) ( 146)
Changes in operating assets and liabilities:
(Increase) decrease in operating assets:
Accounts receivable, gross 589 386
Inventories 436 55
Prepaid expenses 24 87
Increase (decrease) in operating
liabilities:
Accounts payable (210) ( 107)
Accrued expenses (525) 442
Income taxes payable 165 0
Deferred subscription revenue 222 407
-----------------
Total adjustments (3,231) 1,310
-----------------
Total cash provided by (used in)
operating activities 282 ( 415)
-----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ( 5) ( 140)
Purchases of intangible assets ( 18) ( 13)
Cash proceeds from disposal of property
and equipment 77 0
Cash proceeds from the sale of marketable
securities 0 175
Cash proceeds from sale of substantially
all the assets of the games division,
net of related expenses 5,247 0
-----------------
Total cash provided by investing
activities 5,301 22
-----------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 5,583 ( 393)
CASH AND CASH EQUIVALENTS
BEGINNING OF YEAR 1,738 2,131
-----------------
CASH AND CASH EQUIVALENTS
END OF YEAR $ 7,321 $ 1,738
=================
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The consolidated financial statements of Monarch Services, Inc., formerly
Monarch Avalon, Inc., and its wholly-owned Subsidiaries (collectively, "the
Company"), include Monarch Services, Inc., Girls' Life, Inc. and Broken Windows,
Inc.
Girls' Life, Inc. ("Girls' Life") was incorporated in December 1993 in the State
of Maryland and publishes a magazine for girls ages nine to fourteen.
Substantial operations began in fiscal year 1995 with the release of its initial
bi-monthly publication in August 1994. Magazines are sold nationally and
internationally through distributors and directly by Girls' Life through one and
two year subscriptions.
Monarch Services, Inc. ("Monarch") consists of one division, printing and
envelopes, and is incorporated in the State of Delaware. Monarch's printing
division manufactures envelopes and provides printing and graphic arts services
to various commercial customers. Printing and envelope sales are predominantly
with commercial customers in various industries located in the Mid-Atlantic
region of the United States. Monarch also provides printing services to Girl's
Life magazine. It designs and prints promotional and direct mail literature for
the magazine. During fiscal 1999 publishing production accounted for
approximately 12% of Monarch Services' revenues on an interdivision basis,
including sales to discontinued operations.
Creampuffs, Inc. was incorporated on March 12, 1997 in the State of Maryland as
a marketing company for others. This subsidiary did not engage in any
operations in the years ended April 30, 1999 and 1998.
Broken Windows, Inc. was incorporated on June 11, 1997 in the State of Maryland
as a retail operation. On November 26, 1997, Broken Windows, Inc. opened a
retail store in Maryland for the purpose of selling computer and board games
manufactured by Monarch Avalon, Inc. and computer and board games manufactured
by other companies. Products associated with Girls' Life magazine were also
offered for sale to the general public. The retail store was closed on January
17, 1998. This subsidiary did not engage in any operations in the year ended
April 30, 1999.
All material intercompany balances between Monarch Services, Inc. and Girls'
Life Inc. have been eliminated in consolidation.
<PAGE>
NOTE B - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
REVENUE RECOGNITION: Girls' Life Inc. recognizes revenue related to
subscriptions for its magazine according to the ratio of magazines issued to
total subscribed issues. Deferred subscription revenue represents amounts
collected for subscriptions of the magazine not yet issued.
Revenues from the sale of products by Monarch Services, Inc. are recorded upon
shipment to the customer.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH EQUIVALENTS: For the purpose of reporting cash flows, the Company considers
all highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
ACCOUNTS RECEIVABLE: Monarch's principal customers are commercial entities.
Receivables are generally due within 30 days. No one customer accounted for over
10% of total net sales in 1999 or 1998 for Girls' Life. Two customers of
printing and envelopes accounted for approximately 10% and 14%, respectively of
the total Monarch's net sales in 1999. One major printing customer, whose
account was lost in 1999, accounted for approximately 10% of net printing sales
in 1999 and 28% in 1998.
Girls' Life sells its magazine through distributors and direct individual
subscriptions. Receivables consist of advertising income and sales of magazines
through the distributors for issues released prior to April 30.
INTANGIBLE ASSETS: Intangible assets consist of Girls' Life, Inc. trademarks and
are amortized using the straight-line method over periods estimated to be
benefited. At April 30, 1999, intangible assets were $2,158.
INVENTORIES: The Company values inventories at the lower of average cost (first-
in, first-out) or market.
PROPERTY AND EQUIPMENT: Property and equipment is carried at cost and
depreciation is computed by the straight-line method over estimated useful lives
ranging from three to ten years.
FINANCIAL INSTRUMENTS: The current carrying value of current assets and current
liabilities is a reasonable estimate of their fair value due to the short-term
nature of such accounts.
<PAGE>
MARKETABLE SECURITIES: The Company accounts for its investments in equity
securities under the accounting and reporting provisions of Statement of
Financial Accounting Standards No. 115 ("SFAS No. 115"). The Company has
classified its investments as trading securities based on its intended use. As
such, unrealized holding gains and losses are included in the consolidated
statements of operations. The marketable securities were sold during fiscal year
1998. There were no marketable securities held during fiscal year 1999.
RESEARCH AND DEVELOPMENT COSTS: Research and development costs are charged to
expense when incurred.
INCOME TAXES: The Company provides for income taxes using Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," ("SFAS No. 109")
which requires an asset and liability approach to financial accounting and
reporting for income taxes (see Note D). Under SFAS No. 109, deferred tax assets
and liabilities are provided for differences between the financial statement and
tax basis of assets and liabilities that will result in future taxable income or
deductible amounts. The deferred tax assets and liabilities are measured using
enacted tax laws and rates applicable to the periods in which the differences
are expected to affect taxable income. Income tax expense is computed as the tax
payable or refundable for the period plus or minus the change during the period
in deferred tax assets or liabilities.
EARNINGS PER SHARE: Basic earnings per share are based on the weighted average
number of shares of common stock outstanding during each year. There are no
potentially dilutive common shares.
STOCK-BASED COMPENSATION ARRANGEMENTS: The Company applies APB Opinion No. 25
and related interpretations in accounting for stock based compensation
arrangements. Accordingly, no compensation has been recognized. Had
compensation costs been determined based on fair value at the grant date forward
consistent with SFAS No. 123, "Accounting for Stock-Based Compensation," the
Company's net income or loss would not have been effected on a pro forma basis.
NEW ACCOUNTING PRONOUNCEMENTS:
The Company adopted Statement of Financial Accounting Standard No. 130 (SFAS
130), "Reporting Comprehensive Income" for the fiscal year ended April 30, 1999.
SFAS No. 130 establishes standards for reporting and display of comprehensive
income and its components. Comprehensive income is defined as the change in
equity of a business enterprise during a period from transactions and other
events and circumstances from nonowner sources. It includes all changes in
equity during a period except those resulting from investments by owners and
distributions to owners. The implementation of SFAS No. 130 did not have an
effect on the financial statements.
The Company adopted Statement of Financial Accounting Standard No. 131 (SFAS
131), "Disclosures about Segments of an Enterprise and Related Information" for
the fiscal year ended April 30, 1999. SFAS 131 establishes standards for the
way that public business enterprises report information about operating
segments.
<PAGE>
The Company is required to adopt Statement of Financial Accounting Standard No.
133 (SFAS 133) "Accounting for Derivative Instruments and Hedging Activities"
for the year ending April 30, 2001. SFAS 133 requires reporting entities to
disclose certain information for derivative financial instruments. The Company
has not assessed the impact of implementing SFAS 133.
DISCONTINUED OPERATIONS:
On October 27, 1998, the Company sold substantially all the assets of the games
division to a subsidiary of Hasbro, Inc. for $6,000,000 in cash. The assets
sold included trademarks, copyrights and other intellectual property rights,
inventory and tooling. The operating results of the games division have been
classified as discontinued operations for all periods presented in the
consolidated statements of operations.
Inventories and intangibles from discontinued operations sold were
approximately as follows:
Net inventories $1,292,000
Net intangibles 60,000
Net sales and income from discontinued operations are as follows:
Years Ended April 30,
1999 1998
- -----------------------------------------------------
Net sales $ 1,076 $ 2,844
Loss from discontinued
operations ( 433) (1,585)
Net assets of discontinued operations are as follows:
Year Ended April 30,
1999
- ---------------------------------------------------
Net assets held for sale $89
NOTE C - ACCOUNTS RECEIVABLE
Accounts receivable consist of the following at April 30, 1999:
Accounts Receivable-Games 64,406
-Printing $ 349,402
-publishing 157,738
-----------
Less: 571,546
Allowance for doubtful accounts (142,491)
-----------
$ 429,055
===========
<PAGE>
The Accounts Receivable-Games in the amount of $64,406 is fully reserved in the
Allowance for doubtful accounts.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE D-INCOME TAXES
A reconciliation of the effective tax rate for income taxes in the financial
statements to the Federal statutory rates is as follows:
- --------------------------------------------------------------
Year Ended April 30, 1999 1998
- --------------------------------------------------------------
Federal income tax at statutory rate 34% (34)%
Net operating losses and other tax credits (21) 33
Non-deductible items and other 1 1
----- -----
14 % - %
===== =====
The deferred tax assets (liabilities) result from the following temporary
differences:
- --------------------------------------------------------------
April 30, 1999
- --------------------------------------------------------------
Current:
Financial statement accruals, net $ 36,000
Inventory reserves and uniform capitalization 8,000
Allowances for accounts receivable 36,000
----------
80,000
Non-current: ----------
Depreciation (13,000)
Amortization 6,000
Net operating loss and other tax
credits-carryforwards 6,000
----------
( 1,000)
----------
Net deferred tax asset $ 79,000
=========
In fiscal 1999 the Company did not record a valuation allowance due to the
expected timing of the reversal of temporary differences and the Company's
ability to realize the deferred tax asset.
Cash payments of $415,000 were made for income taxes in the current year. There
were no cash payments for income taxes in 1998.
<PAGE>
NOTE E - PROFIT-SHARING PLAN
Substantially all of the Company's employees participate in a profit-sharing
plan. Contributions are determined by the results of operations and can be
increased at the discretion of the Board. There were no contributions in 1999
and 1998.
NOTE F - COMMITMENTS AND CONTINGENCIES
LEASES: The Company leases office, warehouse and manufacturing facilities.
Several of the leases provide for renewal options ranging from two to five
years. The Company generally must pay for property taxes, insurance and
maintenance costs related to the properties. Total rental expense for 1999 and
1998 was approximately $329,000 and $317,000 respectively.
The future annual minimum rental commitments for non-cancellable operating
leases as of April 30, 1999 are as follows: 2000 - $329,000, 2001 through 2006
- - $129,000, annually.
Certain facilities are leased annually for approximately $127,000 from the
Chairman of the Company and a member of his family.
LITIGATION: At April 30, 1998 the Company accrued settlement costs of $411,000
related to a lawsuit. The lawsuit was settled in July 1998 and the
$411,000 was paid in August 1998. The Company is involved, from time to time,
in legal actions arising in its normal course of operations.
STOCK OPTIONS: During 1992 the Company's Chairman was granted a ten year option
to purchase up to 300,000 shares of the Company's common stock at the greater of
the book or market value of the stock as of the date of exercise. Such option
can only be exercised in the event of the following:
* An individual or entity acquires the Company's common stock to the extent
in which they have greater than twenty percent of the total number of
outstanding shares of the Company's common stock.
* An individual or entity makes a tender offer for thirty percent or more of the
Company's outstanding common stock.
* An individual or entity proposes the election of a director or slate of
directors opposed to any directors or slate of directors proposed by the
management of the Company.
The Chairman may only exercise the option within sixty days following any of the
above events.
On October 3, 1997, the stockholders approved the proposal to grant to each of
the Company's President and two outside directors options to purchase 40,000
unregistered shares of the Company's common stock for $2.00 per share and
approved the proposal to grant to the Company's Chairman options to purchase
80,000 unregistered shares of the Company's common stock for $2.00 per share, a
price approximating the fair value of these shares at the dates of grant. The
options terminated on September 30, 1998.
<PAGE>
No options have been exercised during the years ended April 30, 1999 and 1998.
Options outstanding total 300,000 shares at April 30, 1999.
NOTE G - SEGMENT INFORMATION
The Company operates in two industry segments: Printing and envelope and
Publishing. Operating profit (loss) represents net sales less all identifiable
operating expenses. General corporate expenses, income taxes and other income or
expense are excluded from segment operations.
($000 Omitted)
1999 1998
---- ----
Net Sales
-Printing $2,024 2,587
-Publishing 3,803 2,800
------- -------
Total $5,827 $5,387
======= =======
Operating profit (loss):
-Printing (860) (354)
-Publishing 895 262
------- -------
Total 35 ( 92)
General Corporate Expenses, net (256) (143)
Other Income, net 207 95
------- -------
Loss before income taxes $ (14) $ (140)
======= =======
($000 Omitted)
1999 1998
---- ----
Identifiable Assets:
-Games $ 89 $2,204
-Printing 959 1,214
-Publishing 744 488
General Corporate 6,702 1,423
------- -------
$8,494 $5,329
======= =======
Depreciation and Amortization:
-Games $ 35 $ 102
-Printing 94 111
-Publishing 14 0
------- -------
$ 143 $ 213
======= =======
Capital Expenditures:
-Games $ 5 $ 65
-Printing 0 88
------- -------
$ 5 $ 153
======= =======
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Corporate assets consist mainly of cash and cash equivalents, and certain other
assets.
Intersegment sales or transfers were $77,000 for 1999 and $851,000 for 1998.
These sales are not included in the sales shown above. Intersegment sales are
accounted for at prices comparable to unaffiliated customer sales. All segments
share certain facilities and operate under common management. These expenses are
allocated ratably to each segment.
-----------------------
Consolidated Quarterly Results of Operations
A summary of the unaudited consolidated quarterly results of operations for the
years ended April 30, 1999 and 1998 is as follows.
Fiscal 1999
Three Months Ended
--------------------------------------------
July 31 October 31 January 31 April 30
------- ---------- ---------- --------
(000 Omitted, except per share data)
Net operating Sales $1,067 $2,038 $1,173 $1,549
Gross Profit 38 719 (5) 371
Net (Loss) Income (127) 4,286 (328) (318)
Net (Loss) Income
per Common Share (.08) 2.65 (.20) (.20)
The increase in sales for the three months ended October 31, 1998 was primarily
due to publishing sales. There was one issue of Girls' Life magazine in the
three months ended July 31, 1998 and two issues in the three months ended
October 31, 1998.
The increase in net income per common share for the three months October 31,
1999 was primarily due to the sale of the games division.
Fiscal 1998
Three Months Ended
--------------------------------------------
July 31 October 31 January 31 April 30
------- ---------- ---------- --------
(000 Omitted, except per share data)
Net Operating Sales $ 886 $1,490 $1,131 $1,880
Gross Profit 108 323 (207) 685
Net (Loss) Income (65) 6 (686) (980)
Net (Loss) Income
per Common Share (.04) .00 (.42) (.61)
<PAGE>
In July 1998, the Company settled a lawsuit and accrued the settlement cost of
$411,000 in the three months ended April 30, 1998. The $411,000 settlement cost
was paid in August 1998.
Independent Auditors' Report
To the Stockholders and Board of Directors, Monarch Services, Inc. Baltimore,
Maryland
We have audited the accompanying consolidated statement of financial condition
of Monarch Services, Inc. and Subsidiaries as of April 30, 1999 and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for the years ended April 30, 1999 and 1998. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements 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 our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Monarch Services, Inc. and
Subsidiaries as of April 30, 1999, and the results of their operations and their
cash flows for the years ended April 30, 1999 and 1998, in conformity with
generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Baltimore, Maryland
July 22, 1999
<PAGE>
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
NONE
PART III
Information required in Part III, Items 9-12 is incorporated by
reference to the Company's proxy statement to be filed in
connection with the October 1999 Annual Meeting of Stockholders.
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS, COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT
The information required by Item 9 is incorporated by
reference from the information set forth under the heading
"Election of Directors--Directors and Officers" and "Section
16(A) Beneficial Ownership Reporting Compliance" in the
Company's definitive proxy statement for its annual meeting
of stockholders to be held in October 1999.
Item 10. EXECUTIVE COMPENSATION
The information required by Item 10 is incorporated by reference
from the information set forth under the heading "Election of
Directors--Executive Compensation" in the Company's definitive
proxy statement for its annual meeting of stockholders to be
held in October 1999.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by Item 11 is incorporated by reference
from the information set forth under the heading "Ownership of
Voting Securities--Principal Stockholders" in the Company's
definitive proxy statement for its annual meeting of stockholders
to be held in October 1999.
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 12 is incorporated by reference
from the information set forth under the heading "Election of
Directors--Certain Relationships and Related Transactions" in
the Company's definitive proxy statement for its annual meeting
of stockholders to be held in October 1999.
<PAGE>
Item 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Listing of Exhibits:
3.(a) The Company's Restated Certificate of Incorporation
dated October 14, 1982 (incorporated by reference to
Exhibit 3(a) to the Company's Form 10-KSB for the
fiscal year ended April 30, 1995).
(b) The Company's Restated and Amended Bylaws dated
August 17, 1981 (incorporated by reference to
Exhibit 3(b) to the Company's Form 10-KSB for
the fiscal year ended April 30,1995).
(c) Amendment to the Company's Restated and Amended
Bylaws (incorporated by reference to Exhibit 3(c) to
the Company's 10-K for the year ended April 30, 1986).
(d) Amendment to the Company's Restated and Amended
Bylaws (incorporated by reference to Exhibit 3(d) to
the Company's 10-K for the year ended April 30, 1990).
(e) Amendment dated November 6, 1987 to the Company's
Restated Certificate of Incorporation (incorporated
by reference to Exhibit 3(d) to the Company's 10-Q
for the quarter ended October 31, 1987).
(f) Amendment to the Company's by-laws dated August
1, 1996 (incorporated by reference to Exhibit 3(f)
to the Company's 10-QSB for the quarter ended
July 31, 1997).
10. (a) Lease Agreement dated July 2, 1973 between the
Company as Lessee and A. Eric Dott and Esther J.
Dott as lessors (incorporated by reference to
Exhibit 10(a) to the Company's Form 10-KSB for
the fiscal year ended April 30, 1995).
(b) Lease renewal and Amendment of Lease Agreement
dated July 1, 1983 between the Company and A. Eric
Dott and Esther J. Dott, renewing and amending
terms of the Lease Agreement in Exhibit 10(a)
(incorporated by reference to Exhibit 10(b) to
the Company's Form 10-KSB for the fiscal year
ended April 30, 1995).
(c) Option to Purchase Common Stock dated June 19,
1991 issued to A. Eric Dott, Chairman of the
Company (incorporated by reference to Exhibit
10(f) to the Company's 10-K for the year ended
April 30, 1992).
21. Subsidiaries of the Registrant (incorporated
by reference to Exhibit 21 to the Company's
Form 10-QSB for the quarter ended October 31,
1997).
27. Financial Data Schedule.
(b) The Company did not file any report on Form 8-K
during the fourth quarter of the year ended
April 30, 1999.
<PAGE>
S I G N A T U R E S
In accordance with Section 13 or 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, thereunto duly authorized.
MONARCH SERVICES, INC.
By: /s/ A. Eric Dott
--------------------------
A. Eric Dott, Chairman
and Director
DATE: July 29, 1999
-------------
<PAGE>
In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Date July 29, 1999 /s/ Jackson Y. Dott
---------------- -------------------------------
Jackson Y. Dott, President
(Principal Executive Officer),
Treasurer and Director
Date July 29, 1999 /s/ David F. Gonano
---------------- -------------------------------
David F. Gonano, Director
Date July 29, 1999 /s/ Helen Delich Bentley
---------------- -------------------------------
Helen Delich Bentley, Director
Date July 29, 1999 /s/ Steven M. Szekely
---------------- -------------------------------
Steven M. Szekely, Executive
Vice-President and Secretary
Date July 29, 1999 /s/ A. Eric Dott
---------------- -------------------------------
A. Eric Dott, Chairman and
Director
Date July 29, 1999 /s/ Marshall Chadwell
---------------- -------------------------------
Marshall Chadwell, Controller
(Principal Financial Officer),
Principal Accounting Officer
<PAGE>
EXHIBIT INDEX
Exhibit Number
- --------------
27 - Financial Data Schedule
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CAPTION>
EXHIBIT 27 - FINANCIAL DATA SCHEDULE
Article 5
The schedule contains summary financial information extracted from Monarch
Services, Inc.'s audited financial statements for the Fiscal Year ended April
30, 1999, and is qualified in its entirety by reference to such financial
statements and the notes thereto.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Apr-30-1999
<PERIOD-START> May-01-1998
<PERIOD-END> Apr-30-1999
<CASH> 7,321
<SECURITIES> 0
<RECEIVABLES> 429
<ALLOWANCES> 142
<INVENTORY> 240
<CURRENT-ASSETS> 8,000
<PP&E> 4,014
<DEPRECIATION> 3,690
<TOTAL-ASSETS> 8,494
<CURRENT-LIABILITIES> 1,751
<BONDS> 0
0
0
<COMMON> 527
<OTHER-SE> 3,256
<TOTAL-LIABILITY-AND-EQUITY> 8,494
<SALES> 5,827
<TOTAL-REVENUES> 6,034
<CGS> 4,704
<TOTAL-COSTS> 6,048
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (14)
<INCOME-TAX> 79
<INCOME-CONTINUING> 65
<DISCONTINUED> 3,448
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,513
<EPS-BASIC> 2.17
<EPS-DILUTED> 2.17
</TABLE>
