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<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<S> <C>
For the Quarter Ended Commission File
March 31, 1995 Number 1-3552
-------------- -------------
</TABLE>
SCOPE INDUSTRIES
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
California 95-1240976
- - ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
<TABLE>
<S> <C>
233 Wilshire Blvd., Ste.310, Santa Monica, CA 90401
- - --------------------------------------------- ----------
(Address of principal executive office) (ZIP Code)
</TABLE>
Registrant's telephone number, including area code (310) 458-1574
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceeding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes_X_No___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<S> <C>
Class Outstanding at April 18, 1995
- - -------------------------- -----------------------------
Common Stock, no par value 1,248,865
</TABLE>
<PAGE> 2
SCOPE INDUSTRIES AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Part I. Financial Information:
Consolidated Balance Sheets -
March 31, 1995 and June 30, 1994 3
Consolidated Statements of Operations -
Three Months Ended
March 31, 1995 and 1994 4
Consolidated Statements of Operations
Nine Months Ended
March 31, 1995 and 1994 5
Consolidated Statements of Cash Flows -
Nine Months Ended
March 31, 1995 and 1994 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Anaylsis of
Results of Operations and
Financial Condition 8
Part II. Other Information:
Item 2. Increases and Decreases in
Outstanding Securities and
Indebtedness 9
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 9
</TABLE>
- 2 -
<PAGE> 3
PART I. FINANCIAL INFORMATION
SCOPE INDUSTRIES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31 JUNE 30
1995 1994
---------- ----------
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 656,492 $ 30,397
Treasury bills (par value $1,200,000 at
March 31, 1995 and $2,500,000 at
June 30, 1994) 1,178,770 2,481,535
Accounts and notes receivable, less allowance
for doubtful accounts of $356,142 at
March 31, 1995 and $324,671 at June 30, 1994 1,698,601 4,586,228
Inventories 413,218 411,975
Prepaid expenses and other current assets 1,030,695 706,203
----------- -----------
TOTAL CURRENT ASSETS 4,977,776 8,216,338
----------- -----------
NOTES RECEIVABLE 3,478,971 1,093,006
PROPERTY AND EQUIPMENT, AT COST:
Machinery and equipment 20,803,126 22,362,097
Land, buildings and improvements 10,344,098 9,818,056
----------- -----------
31,147,224 32,180,153
Less accumulated depreciation
and amortization 19,786,681 20,042,985
----------- -----------
11,360,543 12,137,168
----------- -----------
OTHER ASSETS:
Deferred charges and other assets 140,500 104,800
Marketable securities 20,052,466 12,667,008
Other equity securities 999,900 0
----------- -----------
21,192,866 12,771,808
----------- -----------
$41,010,156 $34,218,320
=========== ===========
LIABILITIES AND SHAREOWNERS' EQUITY
CURRENT LIABILITIES:
Bank overdraft $ 225,285 $ 427,197
Accounts payable 816,408 1,034,695
Other accrued liabilities 936,030 885,194
Accrued payroll and related
employee benefits 712,379 609,455
Income taxes payable 150,437 67,155
----------- -----------
TOTAL CURRENT LIABILITIES 2,840,539 3,023,696
----------- -----------
SHAREOWNERS' EQUITY:
Common stock, no par value, 5,000,000 shares
authorized; shares issued and outstanding
March 31, 1995 1,252,865
June 30, 1994 1,261,436 3,921,287 3,921,287
Retained earnings 27,449,151 27,273,337
Net unrealized gain on investments 6,799,179 0
----------- -----------
38,169,617 31,194,624
----------- -----------
$41,010,156 $34,218,320
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
- 3 -
<PAGE> 4
SCOPE INDUSTRIES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
----------------------------
1995 1994
----------- ------------
<S> <C> <C>
REVENUES:
Sales $ 4,525,933 $ 4,762,376
Vocational school revenues 1,010,546 956,796
----------- -----------
5,536,479 5,719,172
----------- -----------
OPERATING COSTS AND EXPENSES:
Cost of sales 3,229,555 3,059,853
Vocational school expenses 853,975 940,914
Depreciation and amortization 551,479 573,294
General and administrative 875,755 992,815
----------- -----------
5,510,764 5,566,876
----------- -----------
25,715 152,296
OTHER INCOME:
Investment and other income 289,106 81,652
----------- -----------
Income before taxes 314,821 233,948
Provision for income taxes 30,000 25,000
----------- -----------
NET INCOME $ 284,821 $ 208,948
=========== ===========
INCOME PER SHARE $ 0.23 $ 0.17
=========== ===========
Weighted average number of shares
outstanding 1,253,651 1,263,436
</TABLE>
The accompanying notes are an integral part of these statements.
- 4 -
<PAGE> 5
SCOPE INDUSTRIES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31
----------------------------
1995 1994
----------- ------------
<S> <C> <C>
REVENUES:
Sales $14,118,910 $14,011,966
Vocational school revenues 2,971,978 3,262,494
----------- -----------
17,090,888 17,274,460
----------- -----------
OPERATING COSTS AND EXPENSES:
Cost of sales 9,531,722 9,524,547
Vocational school expenses 2,664,958 2,880,381
Depreciation and amortization 1,683,534 1,674,480
General and administrative 2,967,448 3,625,973
----------- -----------
16,847,662 17,705,381
----------- -----------
243,226 (430,921)
OTHER INCOME:
Investment and other income 642,343 1,158,180
----------- -----------
Income before taxes 885,569 727,259
Provision for income taxes 60,000 35,000
----------- -----------
NET INCOME $ 825,569 $ 692,259
=========== ===========
INCOME PER SHARE $ 0.66 $ 0.55
=========== ===========
CASH DIVIDENDS DECLARED PER COMMON SHARE $ 0.35 $ 0
Weighted average number of shares
outstanding 1,257,372 1,267,106
</TABLE>
The accompanying notes are an integral part of these statements.
- 5 -
<PAGE> 6
SCOPE INDUSTRIES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31
----------------------------
1995 1994
----------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 825,569 $ 692,259
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization 1,683,534 1,674,480
(Gains) losses on marketable securities (12,232) (861,748)
(Gains) losses on sale of equipment (53,330) (14,648)
Provision for loss on note receivable 0 250,000
Deferred income taxes (75,000) 0
Other 14,035 11,348
Changes in operating assets and liabilities:
Accounts and notes receivable 487,627 (148,533)
Inventories (1,243) 59,059
Prepaid expenses and other current assets (324,492) (202,975)
Accounts payable and accrued liabilities (64,529) (614,126)
Income taxes payable 83,282 76,052
----------- -----------
Net cash flows from operating activities 2,563,221 921,168
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of U.S. Treasury bills (2,992,392) (3,746,771)
Maturities or dispositions of U.S.
Treasury bills 4,295,159 4,250,000
Purchase of property and equipment (1,781,742) (2,075,201)
Disposition of property and equipment 967,464 32,875
Purchase of non-current securities (2,639,729) (1,057,175)
Disposition of non-current securities 1,065,782 2,323,283
----------- -----------
Net cash flows used in investing activities (1,085,458) (272,989)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends to shareowners (439,088) 0
Repurchase of common stock (210,668) (298,475)
Reduction of bank overdraft (201,912) 0
----------- -----------
Net cash used in financing activities (851,668) (298,475)
----------- -----------
Net change in cash and cash equivalents 626,095 349,704
Cash and cash equivalents at beginning
of period 30,397 501,168
----------- -----------
Cash and cash equivalents at end of period $ 656,492 $ 850,872
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
- 6 -
<PAGE> 7
SCOPE INDUSTRIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1995
1. In the opinion of the Registrant, the accompanying unaudited
consolidated financial statements contain all adjustments (consisting
of only normal recurring accruals) necessary to present fairly Scope
Industries' financial position as of March 31, 1995 and June 30, 1994,
and the results of its operations for the three and nine months ended
March 31, 1995 and 1994. The accounting policies followed by the
Registrant are set forth in Note 1 of its financial statements in the
1994 Scope Industries Annual Report which is incorporated by reference
on Form 10-K.
2. Quarterly results of operations are not necessarily indicative of the
results to be expected for the full year.
3. Inventories consisted of the following:
<TABLE>
<CAPTION>
March 31 June 30
1995 1994
---------- ----------
<S> <C> <C>
Finished products $ 153,242 $ 164,106
Raw materials 91,521 89,479
Operating supplies 168,455 158,390
---------- ----------
$ 413,218 $ 411,975
========== ==========
</TABLE>
4. The Registrant has adopted Statement of Financial Accounting Standards
No. 115 (SFAS 115), "Accounting For Certain Investments in Debt and
Equity Securities". SFAS 115 changes the accounting treatment
afforded the Registrant's fixed maturity investments and equity
investments that have readily determinable fair values. Accounting
for fixed maturity securities to be held to maturity will be
unchanged, and these securities will continue to be carried at cost.
Accounting for securities that are held as available for sale or as
trading securities will be valued at estimated fair value. Unrealized
gains and losses on available for sale securities (net of applicable
deferred taxes) are to be credited or charged to shareowners' equity.
In accordance with SFAS 115, prior-period financial statements have
not been restated to reflect the change in accounting principle.
The cumulative effect as of July 1, 1994 of adopting SFAS 115
increased shareowners' equity by $5,730,365. In the nine month period
ended March 31, 1995, those net unrealized holding gains increased by
$1,068,814 and were $6,799,179 at March 31, 1995.
<TABLE>
<CAPTION>
Amount At Which
Carried On The
Balance Sheet
March 31, 1995
--------------
<S> <C>
Held To Maturity Securities
(Cost $948,425; Market $876,500) $ 948,425
Available For Sale Securities
(Cost $12,304,862 ; Market $19,104,041) 19,104,041
-----------
$20,052,466
===========
</TABLE>
5. The Registrant has a net operating loss carryforward for Federal taxes
of $1,000,000 through June 30, 1994 which may be applied against
current and future years' income taxes. There are substantial capital
loss carryforwards available to offset future financial statement
capital gains.
- 7 -
<PAGE> 8
SCOPE INDUSTRIES AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
(UNAUDITED)
RESULTS OF OPERATIONS
For the quarter ended March 31, 1995, net income was $284,821 or $0.23 per
share compared to net income of $208,948 or $0.17 per share for the same
quarter last year. Total revenues for the quarter ended March 31, 1995 were
approximately 3.2% lower than the revenues for the same quarter last year.
Recycled bakery product sales decreased 1.7% from last year's comparable
quarter. The tonnage of product shipped increased 16.1% over last year's
comparable quarter but prices received were 15.3% below prices received this
quarter last year. Vocational school revenues were 5.6% above the year ago
quarter. Costs reductions achieved for the vocational school operations and
for general and administrative expenses were partially offset by higher costs
incurred in the recycled bakery products operation, due to handling increased
tonnage volume. Overall, costs and expenses for the current quarter were 1.0%
below those of the comparable quarter last year.
For the nine months ended March 31, 1995, net income was $825,569 or $0.66 per
share. This compares to net income of $692,259 or $0.55 per share for the same
nine months last year. Total revenues for the current nine month period were
1.1% below the prior year comparable period. Recycled bakery product revenues
increased 1.6% while vocational school revenues decreased 8.9% for this year's
nine month versus last year's. Costs and expenses for the current nine month
period were 4.8% lower than they were for last year's comparable period.
During the first nine months of this fiscal year, the waste material recycling
segment has operated profitably. During this same current period, the
vocational school group operations have incurred losses. Over the past nine
months, four schools have moved into new and refurbished quarters and two other
locations were closed. Most students attending schools that closed transferred
to one of the remaining 13 school locations. Positive financial results are
already appearing from these strategic changes. Compared to the same period of
the previous year, vocational school group revenues are higher and costs are
lower for the current quarter.
FINANCIAL POSITION
Working capital was $2,137,237 at March 31, 1995. It was $5,192,642 at June
30, 1994. The working capital ratio at March 31, 1995 is 1.8 and at June 30,
1994 it was 2.7. The April 1995 maturity of the $2,500,000 note receivable
from Opto Sensors, Inc. was extended by two years and is reclassified from
working capital to a long-term receivable.
The provisions of Statement of Financial Accounting Standards No. 115 (SFAS
115) "Accounting For Certain Investments in Debt and Equity Securities", were
adopted on July 1, 1994. Marketable securities at March 31, 1995 are accounted
for under SFAS 115 and include $6,799,179 in unrealized gains based on fair
valuations that exceed adjusted costs for certain securities. In accordance
with SFAS 115, prior-period financial statements have not been restated to
reflect this change in accounting principle. If SFAS 115 had been adopted as
of June 30, 1994, the marketable securities at that date would have been
increased by unrealized gains of $5,730,365.
TAXES
A net operating loss carryforward for Federal taxes of $1,000,000 is available
to apply against current income taxes. Substantial capital loss carryforwards
are available to offset future financial statement capital gains.
- 8 -
<PAGE> 9
SCOPE INDUSTRIES AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 2. Increases and Decreases in Outstanding Securities and Indebtedness.
Increases and decreases in outstanding equity securities in the nine months
ending March 31, 1995, were as follows:
<TABLE>
<CAPTION>
Common Stock
No Par Value
------------
<S> <C>
Shares outstanding June 30, 1994 1,261,436
Shares purchased and retired
during the nine months (8,571)
---------
Shares outstanding March 31, 1995 1,252,865
=========
</TABLE>
A corporate resolution requires the retirement of all reacquisitions of common
stock. During the nine months ended March 31, 1995, the Registrant purchased
and retired 8,571 shares of common stock at a cost of $210,668.
Item 6. Exhibits and Reports on Form 8-K.
(A) Exhibits - None
(B) No Form 8-K was filed for the quarter ended
March 31, 1995.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized and accepting responsibility as the
signatory.
SCOPE INDUSTRIES
(Registrant)
<TABLE>
<S> <C> <C>
DATE: May 5, 1995 /s/ John J. Crowley
--------------------- -------------------------------
John J. Crowley, Vice President
and Chief Financial Officer
</TABLE>
- 9 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from (a) the
Consolidated Balance Sheets, the Consolidated Statements of Income and the
Consolidated Statements of Cash Flows; and is qualified in its entirety by
reference to such (b) Financial Statements.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 656,492
<SECURITIES> 20,052,466
<RECEIVABLES> 2,054,743
<ALLOWANCES> 356,142
<INVENTORY> 413,218
<CURRENT-ASSETS> 4,977,776
<PP&E> 31,147,224
<DEPRECIATION> 19,786,681
<TOTAL-ASSETS> 41,010,156
<CURRENT-LIABILITIES> 2,840,539
<BONDS> 0
<COMMON> 3,921,287
0
0
<OTHER-SE> 34,248,330
<TOTAL-LIABILITY-AND-EQUITY> 41,010,156
<SALES> 4,525,933
<TOTAL-REVENUES> 5,536,479
<CGS> 4,083,530
<TOTAL-COSTS> 5,510,764
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 314,821
<INCOME-TAX> 30,000
<INCOME-CONTINUING> 284,821
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 284,821
<EPS-PRIMARY> .023
<EPS-DILUTED> .023
</TABLE>
|
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