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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) March 01, 2004
SCOPE INDUSTRIES
California | 1-3552 | 95-1240976 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
233 Wilshire Boulevard, Suite 310, Santa Monica, California | 90401-1206 | |
(Address of principal executive offices) | (Zip code) |
Registrant’s telephone number, including area code (310) 458-1574 |
Item 2. Acquisition or Disposition of Assets | ||||||||
Item 7 Financial Statements, Pro Forma Financial Information and Exhibits | ||||||||
SIGNATURES | ||||||||
EXHIBIT 4.1 |
Table of Contents
FORM 8-K
SCOPE INDUSTRIES
CURRENT REPORT
Item 2.Acquisition or Disposition of Assets.
On March 1, 2004, Scope Industries (“Scope”) sold all the outstanding shares of its wholly owned subsidiary Scope Beauty Enterprises, Inc. (dba Marinello Schools of Beauty) to B & H Education, Inc. (“B & H”) for a purchase price of $8,250,000. The purchase price consists of a $1,237,500 deposit into an escrow account, a cash payment of $4,125,000 and $2,887,500 pursuant to a three-year floating rate promissory note. The purchase price is subject to adjustment based upon the amount that total assets exceed total liabilities on February 29, 2004. The excess of assets or liabilities will be added to/or subtracted from the promissory note. Scope believes that the assets will exceed liabilities at February 29, 2004, subject to an audit of the financial statements as of that date. The purchase price was determined through arms length negotiations between the management of Scope and B & H.
The sale was effected by the transfer of ownership of all the shares of Scope Beauty Enterprises, Inc. to B & H. The terms of the sale provide that B & H has a 90-day rescission period in the event that certain federal and state education regulatory and accrediting agency approvals cannot be obtained.
Scope Beauty Enterprises, Inc., with approximately 800 students operates 13 schools in leased premises in Southern California and Southern Nevada where cosmetology and manicuring are taught to students who pay tuition
The purchaser, B & H, is a Delaware corporation. B & H and its shareholders have no relationship with Scope or any director or officer of Scope, or any affiliates of any of Scope’s officers or directors.
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FORM 8-K
CURRENT REPORT
SCOPE INDUSTRIES
Page | ||||||||
Item 7 Financial Statements,Pro FormaFinancial Information and Exhibits | ||||||||
(b) | Pro Forma Financial Information | |||||||
Pro Forma Consolidated Statement of Income – | ||||||||
Six Months Ended December 31, 2003 | 4 | |||||||
Pro Forma Consolidated Statement of Income – | ||||||||
Year Ended June 30, 2003 | 5 | |||||||
Pro Forma Consolidated Balance Sheet – | ||||||||
December 31, 2003 | 6 | |||||||
Notes to Pro Forma Consolidated Financial Statements | 7 | |||||||
Signatures | 8 | |||||||
(c) | Exhibits | |||||||
4.1 Stock Purchase Agreement dated November 10, 2003 |
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FORM 8-K
SCOPE INDUSTRIES
Pro Forma Consolidated Statement of Income
For the Six Months Ended December 31, 2003
(Unaudited)
As | Pro Forma | Pro Forma | ||||||||||
Reported | Adjustments | Restatement | ||||||||||
Operating Sales and Revenues: | ||||||||||||
Sales | $ | 36,834,790 | $ | $ | 36,834,790 | |||||||
Vocational school revenues | 3,659,375 | (3,659,375 | ) | — | ||||||||
40,494,165 | (3,659,375 | ) | 36,834,790 | |||||||||
Operating Costs and Expenses: | ||||||||||||
Cost of sales | 26,532,174 | — | 26,532,174 | |||||||||
Vocational school expenses | 2,461,294 | (2,461,294 | ) | — | ||||||||
Depreciation and amortization | 3,863,154 | (104,757 | ) | 3,758,397 | ||||||||
General and administrative | 4,562,491 | (644,631 | ) | 3,917,860 | ||||||||
37,419,113 | (3,210,682 | ) | 34,208,431 | |||||||||
3,075,052 | (448,693 | ) | 2,626,359 | |||||||||
Investment and other income | 177,924 | (22,316 | ) | 155,608 | ||||||||
Income from continuing operations before income taxes | 3,252,976 | (471,009 | ) | 2,781,967 | ||||||||
Provision for income taxes | (987,000 | ) | (182,200 | ) | (804,800 | ) | ||||||
Income from continuing operations | 1,977,167 | |||||||||||
Income from discontinued operations (net) | $ | (288,809 | ) | 288,809 | ||||||||
Net Income | $ | 2,265,976 | $ | 2,265,976 | ||||||||
Net Income Per Share – Basic & Diluted | $ | 2.27 | $ | (0.29 | ) | $ | 2.27 | |||||
Average shares outstanding – Basic & Diluted | 998,691 |
The accompanying notes are an integral part of these statements.
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FORM 8-K
SCOPE INDUSTRIES
Pro Forma Consolidated Statement of Income
For the Year Ended June 30, 2003
(Unaudited)
As | Pro Forma | Pro Forma | ||||||||||
Reported | Adjustments | Restatement | ||||||||||
Operating Sales and Revenues: | ||||||||||||
Sales | $ | 74,269,604 | $ | $ | 74,269,604 | |||||||
Vocational school revenues | 7,108,048 | (7,108,048 | ) | — | ||||||||
81,377,652 | (7,108,048 | ) | 74,269,604 | |||||||||
Operating Costs and Expenses: | ||||||||||||
Cost of sales | 53,398,568 | — | 53,398,568 | |||||||||
Vocational school expenses | 4,788,594 | (4,788,594 | ) | — | ||||||||
Depreciation and amortization | 9,285,938 | (233,531 | ) | 9,052,407 | ||||||||
General and administrative | 9,301,719 | (1,201,042 | ) | 8,100,677 | ||||||||
76,774,819 | (6,223,167 | ) | 70,551,652 | |||||||||
4,602,833 | ( 884,881 | ) | 3,717,952 | |||||||||
Investment and other income | 666,434 | (43,088 | ) | 623,346 | ||||||||
Income from continuing operations before income taxes | 5,269,267 | (927,969 | ) | 4,341,298 | ||||||||
Provision for income taxes | 2,088,000 | (369,600 | ) | 1,718,400 | ||||||||
Income from continuing operations | 2,622,898 | |||||||||||
Income from discontinued operations (net) | $ | (558,369 | ) | 558,369 | ||||||||
Net Income | $ | 3,181,267 | $ | 3,181,267 | ||||||||
Net Income Per Share – Basic & Diluted | $ | 3.12 | $ | (0.55 | ) | $ | 3.12 | |||||
Average shares outstanding – Basic & Diluted | 1,019,334 |
The accompanying notes are an integral part of these statements.
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Pro Forma Consolidated Balance Sheets
December 31, 2003
(Unaudited)
As Reported | Pro Forma | Pro Forma | ||||||||||||
Reported | Adjustments | Restatement | ||||||||||||
ASSETS | ||||||||||||||
Current Assets: | ||||||||||||||
Cash and cash equivalents | $ | 7,494,022 | $ | 126,787 | $ | 7,620,809 | ||||||||
Accounts and notes receivable, less allowance for doubtful accounts of $359,788 | 5,504,595 | (505,118 | ) | 4,999,477 | ||||||||||
Inventories | 744,483 | (101,896 | ) | 642,587 | ||||||||||
Deferred income taxes | 566,600 | — | 566,600 | |||||||||||
Prepaid expenses and other current assets | 1,078,144 | (86,971 | ) | 991,173 | ||||||||||
Net current assets discontinued operations | — | 24,057 | 24,057 | |||||||||||
Total current assets | 15,387,844 | (543,141 | ) | 14,844,703 | ||||||||||
Notes Receivable | 560,090 | (256,802 | ) | 303,288 | ||||||||||
Assets Held for Sale (net) | 1,352,980 | — | 1,352,980 | |||||||||||
Net Long-term Assets Discontinued Operations | — | 989,215 | 989,215 | |||||||||||
Property and Equipment: | ||||||||||||||
Machinery and equipment | 65,267,171 | (1,277,836 | ) | 63,989,335 | ||||||||||
Land, buildings and improvements | 19,557,051 | (1,341,612 | ) | 18,215,439 | ||||||||||
84,824,222 | (2,619,448 | ) | 82,204,774 | |||||||||||
Less accumulated depreciation and amortization | 42,015,209 | (1,877,035 | ) | 40,128,174 | ||||||||||
42,809,013 | (732,413 | ) | 42,076,600 | |||||||||||
Collection Routes and Contracts, less accumulated amortization of $9,093,007 | 451,429 | 451,429 | ||||||||||||
Other Assets: | ||||||||||||||
Non-appropriated funds – IRB | 4,906,358 | 4,906,358 | ||||||||||||
Restricted cash and investments | 11,081,193 | 11,081,193 | ||||||||||||
Deferred charges and other assets | 103,054 | 103,054 | ||||||||||||
Deferred income taxes | 502,400 | 502,400 | ||||||||||||
Investments available for sale at fair value | 2,486,110 | 2,486,110 | ||||||||||||
Other equity investments | 6,378,800 | 6,378,800 | ||||||||||||
25,457,915 | 25,457,915 | |||||||||||||
$ | 86,019,271 | $ | (543,141 | ) | $ | 85,476,130 | ||||||||
LIABILITIES AND SHAREOWNERS’ EQUITY | ||||||||||||||
Current Liabilities: | ||||||||||||||
Accounts payable | $ | 4,751,450 | $ | ( 425 | ) | $ | 4,471,025 | |||||||
Current portion of Industrial Revenue Bond | 250,000 | 250,000 | ||||||||||||
Dividends payable | 998,691 | 998,691 | ||||||||||||
Other accrued liabilities | 2,011,326 | (349,243 | ) | 1,662,083 | ||||||||||
Accrued payroll and related employee benefits | 976,802 | (193,473 | ) | 783,329 | ||||||||||
Total current liabilities | 8,988,269 | (543,141 | ) | 8,445,128 | ||||||||||
Long term debt | 9,750,000 | — | 9,750,000 | |||||||||||
18,738,269 | (543,141 | ) | 18,195,128 | |||||||||||
Commitments and Contingent Liabilities | ||||||||||||||
Shareowners’ Equity: | ||||||||||||||
Common stock, no par value, 5,000,000 shares authorized, shares issued and outstanding at December 31, 2003 – 998,691 | 4,576,050 | — | 4,576,050 | |||||||||||
Retained earnings | 61,508,352 | — | 61,508,352 | |||||||||||
Accumulated other comprehensive income | 1,196,600 | — | 1,196,600 | |||||||||||
67,281,002 | — | 67,281,002 | ||||||||||||
$ | 86,019,271 | $ | (543,141 | ) | $ | 85,476,130 | ||||||||
The accompanying notes are an integral part of these consolidated statements.
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FORM 8-K
CURRENT REPORT
SCOPE INDUSTRIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
On March 1, 2004, Scope Industries (“Scope”) sold all the outstanding shares of its wholly owned subsidiary Scope Beauty Enterprises, Inc. (dba Marinello Schools of Beauty) to B & H Education, Inc. (“B & H”) for a purchase price of $8,250,000, in cash and a three-year note. The sale was effected by the transfer of ownership of all the shares of Scope Beauty Enterprises, Inc. to B & H. The terms of the sale provide a 90-day recession period in the event that certain federal and state education regulatory and accrediting agency approvals cannot be obtained.
Pro Forma adjustments represent the exclusion of the Vocational School segment operating results and certain assets and liabilities from the Company’s consolidated financial statements.
The results of operation as reflected in the Pro Forma Restatements are not necessarily indicative of the results to be expected in future periods. In addition, the Pro Forma Restatements are not necessarily indicative of the results that would have occurred had the sale occurred prior to the periods presented herein.
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FORM 8-K
CURRENT REPORT
SCOPE INDUSTRIES
SIGNATURES
Pursuant to the requirements of the Security and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
SCOPE INDUSTRIES | |||
March 1, 2004 | By: | /s/ Eric M. Iwafuchi | |
(Date) | Eric M. Iwafuchi, Vice President, Chief Financial Officer and Secretary |
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