1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended June 30, 2001
-OR-
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to ________________
Commission file number 1-3552
SCOPE INDUSTRIES
(Exact name of Registrant as specified in its charter)
CALIFORNIA 95-1240976
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
233 WILSHIRE BOULEVARD, SUITE 310
SANTA MONICA, CALIFORNIA 90401-1206
(Address of principal executive office, zip code)
(Registrant's telephone number, including area code) (310) 458-1574
Securities registered pursuant to Section 12(b) of the Act
TITLE OF EACH CLASS NAME OF EXCHANGE ON WHICH REGISTERED
No par value Common Stock American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (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. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
or Regulation S-K is not contained herein, and will not be contained to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value of the voting stock held by non-affiliates of the
Registrant as of September 17, 2001, computed by reference to the closing sales
price of such shares on such date was $16,254,365.
The number of shares of Registrant's common stock outstanding as of September
17, 2001 was 1,029,267.
DOCUMENTS INCORPORATED BY REFERENCE:
Part of Form 10-K into which
Document Document incorporated
-------- ----------------------------
Annual Report to Shareowners for the fiscal
year ended June 30, 2001 Parts I, II, and IV
Proxy Statement for the Annual Meeting of
Shareholders to be held October 23, 2001 Parts III and IV
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TABLE OF CONTENTS
FORM 10-K ANNUAL REPORT
For the Fiscal Year Ended June 30, 2001
SCOPE INDUSTRIES
PART I
Page
----
Item 1. Business 3
Item 2. Properties 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 6
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters 7
Item 6. Selected Financial Data 7
Item 7. Management's Discussion and Analysis of Results of Operations and
Financial Condition 7
Item 8. Financial Statements and Supplementary Data 7
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosures 7
PART III
Item 10. Directors and Executive Officers of the Registrant 8
Item 11. Executive Compensation 8
Item 12. Security Ownership of Certain Beneficial Owners and Management 8
Item 13. Certain Relationships and Related Transactions 8
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 9-10
Signatures 11
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PART I
ITEM 1. BUSINESS
Except for the historical information contained in this Annual Report on
Form 10-K, the information contained herein constitutes forward looking
information within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act, including, in particular statements about the Company's
plans, strategies, and prospects. These statements, which may include words such
as "may," "will," "expect," "believe," "intend," "plan," "anticipate,"
"estimate" or similar words, are based on the Company's current beliefs,
expectations and assumptions as reflected therein, and are not guarantees of
performance. The Company's actual results and financial performance may prove to
be very different from what the Company might have predicted on the date of this
Annual Report on Form 10-K. Some of the risks and uncertainties that might cause
such differences are discussed below and others are discussed under the heading
"Risk Factors."
GENERAL DEVELOPMENT AND DESCRIPTION OF BUSINESS
The Registrant was organized in 1938 and incorporated in the State of
California on February 8, 1938. The term "Registrant" for purposes of this Item
1 includes the subsidiaries of the Registrant, unless the content discloses
otherwise. The Registrant and its subsidiaries have organized its business into
principally two business segments: (1) Waste Material Recycling and (2) Beauty
Schools.
OPERATING SEGMENTS
Waste Material Recycling Segment
In this business segment, the Registrant operates plants for the
collection and processing of bakery waste materials into food supplement for
animals. The Registrant currently operates 14 manufacturing facilities
throughout the United States under the name of Dext Company, International
Processing Corporation ("IPC") and ReConserve, Inc. in which animal food
supplement is produced. Principal customers are dairies, feed lots, pet food
manufacturers and poultry farms. The Registrant also owns and operates a plant
in Vernon, California, where bakery waste material is processed and converted
into edible breadcrumbs for human consumption. The principal customers are
pre-packaged and restaurant supply food processors. This business segment is
dependent upon the Registrant's ability to secure surplus and waste material,
which it does under long-term contracts with bakeries and snack food
manufacturers. The competition for securing the waste and surplus material is
widespread and intensive.
The market value of bakery waste material recycled into animal food
supplement products is directly tied to commodity prices, primarily corn and
some animal grade fat items that are alternatives to our finished product. As
such, the selling price of our product is directly correlated to the selling
prices of the related commodity items. Corn commodity prices and the
Registrant's average unit selling prices were approximately 5% and 8% lower in
fiscal 2001 respectively, than they were in the prior fiscal year while sales
tonnage volume for fiscal 2001 increased slightly above the prior year.
Historically, over the last 21 years corn prices have averaged $2.49 per bushel.
Corn prices averaged $1.80, $1.90 and $2.01 during fiscal 2001, 2000 and 1999,
respectively, reaching a low of $1.49 during August of 2000. Corn prices for the
month of July and August 2001 averaged $1.92 and $2.00 per bushel.
The Waste Material Recycling segment contributed 91%, 91% and 84% of the
sales and revenues of the Registrant for fiscal years 2001, 2000 and 1999,
respectively. The Waste Material Recycling segment has operated at a loss for
fiscal years 2001, 2000 and 1999.
Capital expenditures for the Waste Material Recycling segment were
$9,429,531 and represented 99% of the Registrant's total capital expenditures
for fiscal 2001. In fiscal 2000 and 1999, capital expenditures for the Waste
Material Recycling segment was $6,069,997, (94%) and $3,889,838, (94%),
respectively. A new bakery waste recycling facility is under construction in
Georgia and is being partly financed through the issuance in fiscal 2000 of
$6,000,000 in tax exempt Industrial Revenue Bonds. The new plant will replace
two existing plants in the State of Georgia. A manufacturing facility near
Chicago was completed during fiscal 2000 and placed into operation; the new
plant replaced two former facilities that previously operated in the Chicago
area.
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ITEM 1. BUSINESS. (CONTINUED)
Capital expenditures for expansion and modernization of existing bakery
waste material recycling operations are expected to continue for the next few
years. Cash flows from operations, remaining proceeds from the industrial
revenue bond financing and liquid instrument holdings are expected to be
sufficient to meet fiscal 2002 capital expenditures and operating cash
requirement needs without incurring additional debt. However, this does not
preclude the Company from reviewing any financing options that it feels would be
beneficial to the Company's financial position.
Vocational School Group Segment
Scope Beauty Enterprises, Inc., doing business as Marinello Schools of
Beauty, is comprised of 12 vocational beauty schools where cosmetology and
manicuring are taught. A new school is under construction in Nevada and is
expected to open in the last quarter of calendar 2001. The schools are located
in southern California and Nevada. At its vocational beauty schools, the
Registrant enrolls students who pay tuition to learn to become cosmetologist or
manicurist. Vocational programs and Federal grants are also utilized for the
students' tuition. In addition, members of the public patronize the schools for
hair styling and other cosmetological services that are performed by students.
There usually are competitive schools available to the public near each of the
Registrant's schools.
This segment has contributed 9%, 8% and 15% of the Registrant's total
revenues for the past three years. In fiscal 2001 and 2000, the segment incurred
operating losses before income tax benefits of $9,997 and $22,466; and in fiscal
1999, the segment's operating income before income taxes was $53,635.
Other Business
The Registrant owns various oil and gas royalty and working interests.
Oil and gas revenues represent 1% or less of total sales and revenues in fiscal
years 2001, 2000, and 1999.
In fiscal 2001, Registrant sold property in Riverside, California and
Phoenix, Arizona that was not being used by the Company realizing gain from the
sales of $774,655. The Registrant owns 207 acres of unimproved real estate in
Somis, Ventura County, California, that was acquired in 1979. Options are being
considered for the use or sale of the remaining real estate. The Registrant also
owns and manages various marketable and non-marketable securities, U.S. Treasury
Bills and other short-term investments.
Investment income consists primarily of interest income and gains or
losses on the sale of marketable securities. At June 30, 2001 and June 30, 2000,
the Registrant held $10,000,000 and $19,100,000 par value respectively, in U.S.
Treasury Bills maturing in less than one year. In fiscal 2001, 2000 and 1999,
interest income from Treasury and Money Market obligations amounted to
$1,373,832, $1,048,544 and $1,962,585, respectively. Net gains from the sale of
securities of $352,160 and $10,186,300 were recognized in fiscals 2001 and 2000,
respectively. A net loss of $288,957 was recognized in fiscal 1999. In fiscal
2000, the Registrant sold it's excess Emission Reduction Credits realizing a
gain of $3,727,000. The Registrant recognized losses on securities whose decline
in value was deemed to be other than temporary of $423,800 and $299,215 in
fiscals 2000 and 1999, respectively and recognized a loss of $116,847 based upon
the equity method of accounting for an investment acquired in fiscal 2001.
Impact of Environmental Protection Measures
Certain of the Registrant's activities are affected by federal, state
and/or local air and water pollution control regulations. Compliance with these
regulations has required the purchase and installation of pollution abatement
equipment and adjustment of production procedures. The Registrant has followed a
policy of regular expenditures to assure compliance with such regulations. Air
pollution control equipment to be installed at the new production facility in
Georgia is estimated will cost approximately $1,500,000. Air pollution equipment
installed in the new production facility in Illinois during fiscal 2000 cost
$750,000 and another $750,000 was expended for pollution equipment in fiscal
2001 at an existing facility.
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ITEM 1. BUSINESS. (CONTINUED)
Risk Factors
The market value of Bakery Waste Material recycled into animal food
supplement products is directly tied to commodity prices, primarily corn and
some animal grade fat items that are alternatives to our finished product. As
such, the sales price of our product is directly correlated to the selling
prices of the related commodity items. Historically, over the last 21 years corn
prices have averaged $2.49 per bushel. The past three years has seen the price
of corn at its lowest level since 1987 when corn averaged $1.55 per bushel. In
fiscal 1999 the corn price averaged $2.01 per bushel, fiscal 2000 corn prices
averaged $1.90 per bushel and fiscal 2001 corn prices averaged $1.80 per bushel,
due to record harvests of corn. The next year's forecast for the American corn
crop is not as aggressive as in the past three years. The average price per
bushel of corn for the months of July and August 2001 was $1.92 and $2.00,
respectively. The increasing price of corn appears to be based upon the belief
that the corn harvest this year will not be as productive as it has been the
past three years in the United States.
State government legislates requirements for licensing of beauticians
and manicurists who are trained at our beauty schools. Federal and state
government through its educational assistance programs provide much of the money
that enables the students to obtain the training. Should the federal or state
government change its directions towards licensing requirements or reduce its
student educational assistance programs the beauty schools would be severely
impacted financially.
Employees
The Registrant (including its subsidiaries) employs approximately 404
individuals.
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ITEM 2. PROPERTIES
Principal properties owned by the Registrant are listed below:
Location Function
-------- --------
Waste Material Recycling Segment:
Los Angeles, CA Processing Plant
San Jose, CA Processing Plant
Vernon, CA Processing Plant
Lodi, CA Collection Depot
Denver, CO Processing Plant
Conley, GA Processing Plant
Lake City, GA Processing Plant
Hodgkins, IL Processing Plant
Kansas City, KS Processing Plant
Baltimore, MD Processing Plant
Secaucus, NJ Collection Depot
Dallas, TX Processing Plant
Mt. Pleasant, TX Processing Plant
Flowery Branch, GA Processing Plant (under construction)
Unimproved Land:
Somis, CA
Principal properties leased by the Registrant are:
Location Function
-------- --------
Waste Material Recycling Segment:
Fresno, CA Collection Depot
Terre Haute, IN Processing Plant
Carteret, NJ Processing Plant
Durham, NC Processing Plant
Fairfield, OH Processing Plant
Vocation School Group Segment:
Eleven Southern California Locations Beauty Schools
One Las Vegas, Nevada Location Beauty School
Administrative Offices:
Santa Monica, CA
For additional lease information, Note 5 to the Financial Statements in
the 2001 Annual Report to Shareowners, page 15, is hereby incorporated by
reference.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings against the Registrant,
any of its subsidiaries or any of their property, and none other than routine
litigation incidental to the business, as noted in the 2001 Annual Report to
Shareowners, Note 7 on page 15, which is hereby incorporated by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year ended June 30, 2001 no
matters were submitted to a vote of the Shareowners of the Registrant, either
through the solicitation of proxies, or otherwise.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Reference is made to the information with respect to the principal
market on which the Registrant's common stock is being traded, and the high and
low sales prices for each quarterly period for the last two fiscal years set
forth on page 2 and outside back cover of the Registrant's 2001 Annual Report to
Shareowners and, by reference, such information is incorporated herein.
The number of holders of record of the Registrant's common stock as of
August 31, 2001, based on a listing of the Registrant's Transfer Agent, was 77.
Reference is made to the information regarding the dividends declared
during the past two years with respect to the Registrant's common stock set
forth on page 2 of the Registrant's 2001 Annual Report to Shareowners and, by
reference, such information is incorporated herein. Dividends per share were
paid in January 2001 ($1.00), and January 2000 ($1.00).
ITEM 6. SELECTED FINANCIAL DATA
Reference is made to the financial data with respect to the Registrant
set forth on the inside front cover of the Registrant's 2001 Annual Report to
Shareowners and, by reference, such financial data is incorporated herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Reference is made to Management's Discussion and Analysis of Financial
Condition and Results of Operations set forth on pages 3 to 5 of the
Registrant's 2001 Annual Report to Shareowners and, by reference, such
information is incorporated herein.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Reference is made to Management's Discussion and Analysis of Financial
Condition and Results of Operations set forth on pages 3 to 5 of the
Registrant's 2001 Annual Report to Shareowners and, by reference, such
information is incorporated herein.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the Registrant and
its subsidiaries included in its Annual Report to Shareowners for the year ended
June 30, 2001 are incorporated herein by reference:
Consolidated Balance Sheets - June 30, 2001 and 2000.
Consolidated Statements of Operations - Years ended June 30, 2001, 2000
and 1999.
Consolidated Statements of Cash Flows - Years ended June 30, 2001, 2000
and 1999
Consolidated Statements of Shareowners' Equity - Years ended June 30,
2001, 2000 and 1999
Consolidated Statements of Comprehensive Income -- Year ended June 30,
2001, 2000 and 1999
Notes to Consolidated Financial Statements
Unaudited Quarterly Financial Data shown on page 2 of the Registrant's
2001 Annual Report to Shareowners for the years ended June 30, 2001 and 2000 is
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
The Registrant did not change accountants and there were no
disagreements on any matters involving accounting principles or financial
statement disclosures during the two-year period ended June 30, 2001.
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PART III
Reference is made to the definitive Proxy Statement pursuant to
Regulation 14A, which involves the election of directors at the Annual Meeting
of Shareowners to be held on October 23, 2001, which was filed with the
Securities and Exchange Commission on September 14, 2001 and, by such reference,
said Proxy Statement is incorporated herein in response to the information
called for by Part III (ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT; ITEM 11. EXECUTIVE COMPENSATION; ITEM 12. SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT; AND ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS.)
The following additional information is furnished in response to Item 10:
Executive Officers of the Registrant
The name, age, position and business experience of each of the executive
officers of the Registrant as of June 30, 2001 are listed below:
Name, Age and Position Business Experience During Past Five Years
---------------------- ------------------------------------------
Meyer Luskin, 75 Chairman, President and Chief Executive
Chairman of the Board, President Officer since 1961; responsible primarily
and Chief Executive Officer for the formation of overall corporate
policy and oversight of the main business
segments.
Robert E. McMullen, 55 Chief Operating Officer of Waste Material
President of Subsidiary Recycling Segment since April 1999,
(Scope Products, Inc.) responsible for the operations of waste
material recycling business. From February
1997 to April 1999, he was President of
International Processing Corporation, a
wholly owned subsidiary of Darling
International, Inc. From March 1982 to
February 1997, he served in various
management positions of International
Processing Corporation and its predecessor
companies.
F. Duane Turney, 54 Chief Operating Officer of Vocational
President of Subsidiary School Group segment since July 1991,
(Scope Beauty Enterprises, Inc.) responsible for the operations of
Marinello Schools of Beauty.
Eric M. Iwafuchi, 56 Vice President-Finance and Chief Financial
Vice President-Finance and Officer since November, 1999; responsible
Chief Financial Officer primarily for the overall corporate
accounting, financial policies and
procedures and a variety of treasury
functions. From 1987 to 1999, he was Vice
President and Chief Financial Officer of
Concept Enterprises, Inc., a manufacturer,
importer and distributor of consumer
electronic products. Mr. Iwafuchi is a
Certified Public Accountant.
Eleanor R. Smith, 69 Controller since 1974, Assistant
Vice President, Secretary, Secretary, 1978 -- 1986, Secretary since
Controller and Chief 1986, Vice President since 2001,
Accounting Officer responsible for financial reporting and
record keeping, internal controls, systems
and procedures, as well as corporate
secretarial functions.
The term of office of each executive officer is until his or her
respective successor is elected and has been qualified, or until his or her
death, resignation or removal. The Board of Directors elects officers annually
at its first meeting following the Annual Meeting of Shareowners. No officers
have employment contracts with the Registrant. There are no family relationships
among any of the Registrant's directors and officers.
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PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) The following financial statements of the Registrant, together with
the Independent Auditors' Report, included as part of the
Registrant's 2001 Annual Report to Shareowners, on pages 6 through
21 thereof, are incorporated by reference and filed herewith as part
of Item 8 of this report:
Independent Auditors' Report.
Consolidated Balance Sheets at June 30, 2001 and 2000.
Consolidated Statements of Operations for the years ended June 30,
2001, 2000 and 1999
Consolidated Statements of Cash Flows for the years ended June 30,
2001, 2000 and 1999
Consolidated Statements of Shareowners' Equity for the years ended
June 30, 2001, 2000 and 1999
Consolidated Statements of Comprehensive Income for the years ended
June 30, 2001, 2000 and 1999
Notes to Consolidated Financial Statements
(2) Independent Auditors' Report on Schedules
(3) Financial Statement Schedule
Schedule II: Valuation and Qualifying Accounts
All other schedules have been omitted as they are not applicable,
not material or the required information is given in the financial
statements or notes thereto.
(b) Registrant did not file any reports on Form 8-K during the fourth quarter
ended June 30, 2001.
(c) Exhibits:
(3.1) Registrant's Restated Articles of Incorporation that was Exhibit
No. 3.1 to Registrant's Annual Report on Form 10-K for the fiscal
year ended June 30, 1989, is incorporated herein by this
reference.
(3.2) Registrant's By-laws as amended was filed as Exhibit 3.2 to
Registrant's Annual Report on Form 10-K for the fiscal year ended
June 30, 2000, is incorporated herein by this reference.
(10) Material Contracts:
(10.1) 1992 Stock Option Plan, reference is made to Exhibit 4(a) to the
Registrant's Registration Statement on Form S-8 (File No.
33-47053), and by reference such information is incorporated
herein.
(10.2) Scope Products, Inc., 2000 Non-Qualified Stock Incentive Stock
Option Plan.
(13) Annual Report to Shareowners
(21) Subsidiaries of Registrant
(22) Proxy Statement for the Annual Meeting of Shareowners to be held on
October 23, 2001, which was filed with the Securities and Exchange
Commission on September 14, 2001, and by reference such information is
incorporated herein in response to the information called for by Part
III (ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT; ITEM
11,
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EXECUTIVE COMPENSATION; ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT; AND ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS.)
(23) Independent Auditors' Consent
(b) Reports on Form 8-K:
No reports were filed on Form 8-K during the quarter ended June
30, 2001.
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SIGNATURES
Pursuant to the requirements of 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.
SCOPE INDUSTRIES
By /s/ Eric M. Iwafuchi September 25, 2001
--------------------------------- ---------------------------
Eric M. Iwafuchi Date
Vice President-Finance and
Chief Financial Officer
Pursuant to the requirements of 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:
Signature Title Date
--------- ----- ----
/s/ Meyer Luskin Chairman of the Board, President, September 25, 2001
--------------------------- Chief Executive Officer and --------------------------
Meyer Luskin Director
/s/ Eric M. Iwafuchi Vice President-Finance and September 25, 2001
--------------------------- Chief Financial Officer ---------------------------
Eric M. Iwafuchi (Principal Financial Officer)
/s/ Eleanor R. Smith Vice President, Secretary September 25, 2001
--------------------------- and Controller ---------------------------
Eleanor R. Smith (Principal Accounting Officer)
/s/ Babette Heimbuch Director September 25, 2001
--------------------------- ---------------------------
Babette Heimbuch
/s/ Robert Henigson Director September 25, 2001
--------------------------- ---------------------------
Robert Henigson
/s/ William H. Mannon Director September 25, 2001
--------------------------- ---------------------------
William H. Mannon
/s/ Franklin Redlich Director September 25, 2001
--------------------------- ---------------------------
Franklin Redlich
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INDEPENDENT AUDITORS' REPORT
Board of Directors and
Shareowners
Scope Industries
Santa Monica, California
We have audited the consolidated financial statements of Scope Industries and
subsidiaries as of June 30, 2001 and 2000, and for each of the three years in
the period ended June 30, 2001, and have issued our report thereon dated August
31, 2001; such financial statements and report are included in the 2001 Annual
Report to Shareowners and are incorporated herein by reference. Our audits also
included the financial statement schedule of Scope Industries and subsidiaries,
listed in Item 14 (a) (3). This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based upon our audits. In our opinion, such financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
/s/ Deloitte & Touche LLP
Los Angeles, California
August 31, 2001
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SCOPE INDUSTRIES AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
JUNE 30, 2001
Balance at Charged to Charged to Balance at
Beginning Cost Other End of
Description of Period Expenses Accounts Deductions Period
----------- --------- --------- --------- --------- ---------
Year Ended June 30, 2001:
Allowance for doubtful accounts-
Accounts receivable $645,903 $155,144 $0 $109,764(b) $691,283
Year Ended June 30, 2000:
Allowance for doubtful accounts-
Accounts receivable $484,885 $174,120 $0 $13,102(b) $645,903
Year Ended June 30, 1999:
Allowance for doubtful accounts-
Accounts receivable $205,318 $188,658 $194,987(a) $104,078(b) $484,885
(a) Valuation allowances received upon the acquisition of International
Processing Corporation.
(b) Reductions to the allowance and uncollectible accounts charged against the
allowance, net.
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