MONARCH SERVICES INC
10QSB, 2000-09-14
GAMES, TOYS & CHILDREN'S VEHICLES (NO DOLLS & BICYCLES)
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<PAGE>






                          UNITED STATES
                     SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, DC 20549

                                  10-QSB

                Quarterly Report Pursuant to Section 13 or 15(d)
                    of the Securities Exchange Act of 1934



FOR QUARTER ENDED    JULY 31, 2000     COMMISSION FILE NO. 0-8512
                  ------------------                      --------


                         MONARCH SERVICES, INC.
------------------------------------------------------------------
 (Exact name of small business issuer as specified in its charter)


          Delaware                                52-1073628
---------------------------------  ------------------------------
 (State or other jurisdiction of  (IRS EmployerIdentification No.)
        incorporation)


     4517 Harford Road, Baltimore, Maryland               21214
------------------------------------------------       ----------
    (Address of principal executive offices)           (Zip Code)


Issuer's telephone number, including area code       410-254-9200
                                                    -------------

                              Not applicable
-----------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.

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  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 [   ]

As  of  July  31, 2000, the number of shares outstanding of the issuer's  common
stock was 1,619,820 shares.

Transitional Small Business Issue Format (check one):

                              YES [   ]      NO [ X ]
<PAGE>
<TABLE>

                       PART I.      FINANCIAL INFORMATION

ITEM I.  FINANCIAL STATEMENTS

                      MONARCH SERVICES, INC. AND SUBSIDIARY
           CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)
<CAPTION>
                                                  July 31, 2000
                                                  -------------
                                                 (000's Omitted)
<S>                                                  <C>
ASSETS
CURRENT ASSETS
   Cash and cash equivalents                         $8,230
   Accounts receivable, net                             129
   Marketable securities available
       for sale                                          23
                                                      -----
                                                      8,382
  Income taxes receivable                               191
  Prepaid expenses                                       98
                                                      -----
           TOTAL CURRENT ASSETS                       8,671

PROPERTY AND EQUIPMENT                                  702
   Less accumulated depreciation                       (465)
                                                      -----
                                                        237
                                                      -----
INTANGIBLE ASSETS, NET                                   18
                                                      -----
                                                     $8,926
                                                      -----
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
   Accounts payable                                  $   70
   Accrued expenses                                      48
   Deferred income taxes                                272
   Deferred subscription revenues                     1,551
                                                     ------
           TOTAL CURRENT LIABILITIES                  1,941

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                                  3,219
   Accumulated other comprehensive income (loss)        (17)
                                                     ------
                                                      7,107
   Treasury stock at par - 490,165 shares              (122)
                                                      -----
             TOTAL STOCKHOLDERS' EQUITY               6,985
                                                      -----
                                                     $8,926
                                                      -----
<FN>
See notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>

                     MONARCH SERVICES, INC. AND SUBSIDIARY
                CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<CAPTION>
                                              Three Months Ended
                                                    July 31,
                                              ------------------

                                               2000         1999
                                               ----         ----

                                 (000's omitted, except per share data)

<S>                                          <C>          <C>
Net Sales - publishing                       $  741       $  603

Cost of goods sold - publishing                 603          488
                                           -------------------------
Gross profit from continuing
        operations                              138          115
                                           -------------------------
Selling, general and
   administrative expenses                      277          141
                                           -------------------------
Loss from continuing
   operations before other
     income and income taxes                   (139)         (26)

Other income:
   Investment and interest income               116           72
   Other                                          0           38
                                           -------------------------
                                                116          110
                                           -------------------------
(Loss) income from continuing
   operations before income taxes               (23)          84

Income tax (benefit) expense                     (8)          30
                                           -------------------------
(Loss) income from continuing operations        (15)          54
                                           -------------------------
Discontinued Operations:
   Operating loss from printing and
     envelope division (net of income
     tax benefit of $143)                         0         (279)
   Estimated loss on disposal of printing
     and envelope and games segments
     (net of income tax benefit of $117)          0         (228)
                                          --------------------------
Loss from discontinued operations                 0         (507)
                                          --------------------------
Net loss                                        (15)        (453)
                                          --------------------------

Net Earnings (loss) per common
     share - basic and diluted:

(Loss) income from continuing
     operations per share                    $  (.01)    $   .03

Loss from discontinued
     operations                                    0        (.31)
                                          --------------------------
Net loss per common share
     - basic and diluted                     $  (.01)     $ (.28)
                                          --------------------------
Weighted average number of
     shares outstanding - basic            1,619,820   1,619,820
                                          --------------------------
Weighted average number of
     shares outstanding - diluted          1,619,820   1,619,820
                                          --------------------------
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
               MONARCH SERVICES, INC. AND SUBSIDIARY
          CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
                                              Three Months Ended
                                                  July 31,
                                              -----------------
                                               2000       1999
                                               ----       ----
                                 (000's Omitted, except per share date)

<S>                                         <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss                                    $  (15)   $  (453)
  Adjustments to reconcile net loss           ------     ------
  to net cash used in operating
  activities:
     Depreciation and amortization               18         30
     Gain on disposal of equipment                0        (27)
     Changes in accounts receivable,
       inventories, other assets,
       assets held for sale, accounts
       payable, accrued expenses,
       deferred subscription revenue
       and income taxes payable                 (122)      332
                                              ------    ------
Total cash used in operating activities         (119)     (118)
                                              ------    ------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property and equipment,
     intangible assets and improvements          (73)      (21)
  Cash proceeds from disposal of property
     and equipment                                 0        27
                                              ------    ------
    Total cash (used) provided by
       investing activities                      (73)        6
                                              ------    ------
NET DECREASE IN CASH AND
  CASH EQUIVALENTS                              (192)     (112)
CASH AND CASH EQUIVALENTS
  BEGINNING OF PERIOD                          8,422     7,321
                                              ------    ------
CASH AND CASH EQUIVALENTS
  END OF PERIOD                              $ 8,230   $ 7,209
                                              ------    ------
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
                 MONARCH SERVICES, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE A - BASIS OF PRESENTATION

The  accompanying  unaudited consolidated financial statements  include  Monarch
Services,  Inc. (Monarch), formerly Monarch Avalon, Inc.,  and its  wholly-owned
active  subsidiary, Girls' Life, Inc. (Monarch and Girls' Life Inc. collectively
referred  to  herein as the Company) have been prepared in accordance  with  the
instructions  to  Form  10-QSB and do not include all  of  the  information  and
disclosures  required by generally accepted accounting principles  for  complete
financial statements.  In the opinion of management, all adjustments (consisting
of normal recurring accruals and charges and accruals for severence to employees
of  the discontinued printing and envelope segment) considered necessary  for  a
fair  presentation  have  been  included.  All  material  intercompany  balances
between  Monarch  and  its  subsidiary have been  eliminated  in  consolidation.
Operating  results for the three months ended July 31, 2000 are not  necessarily
indicative  of  the results that may be expected for the year ending  April  30,
2001.   For  further  information, reference should be  made  to  the  financial
statements and notes included in the Company's annual report on Form 10-KSB  for
the fiscal year ended April 30, 2000.

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.,International  Periodical
Distributors,  Retail  Vision and Worldwide. 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 2000  was  as  set
forth in the following table.

Distribution Channel           Number of Magazines Distributed
--------------------           -------------------------------

         Newsstand Sales                         65,000

         Subscription Sales                     267,000
                                               ---------
            Total Paid Circulation              332,000


         Complementary Copies                     1,000


The following table sets forth the average number of subscriptions
geographically sold per issue, internationally and domestically during
fiscal year 2000.


Geographic Distribution         Number of Magazines Distributed
-----------------------         -------------------------------

         United States                          263,000

         International                            4,000
<PAGE>

NOTE B - DISCONTINUED OPERATIONS

CLOSING OF PRINTING AND ENVELOPE DIVISION:

Effective August 20, 1999, the Company closed the printing and envelope division
due  to  increased  losses. The machinery and equipment and inventories  of  the
printing  and envelope division were sold privately or auctioned off in November
1999.

Due  to the closing of the printing and envelope division; wages, severence pay,
vacation, sick days and accrued rent were estimated and recorded for the quarter
ended July 31, 1999.

Net  sales and income from discontinued operations of the printing and  envelope
division were as follows (in thousands):

                                         Quarter Ended July 31,
                                           2000        1999
---------------------------------------------------------------
Net sales                              $     0    $     392
Estimated loss on disposal
   of printing and envelope
   division (net of tax benefit)             0         (228)
Estimated loss from discontinued
   operations (net of tax benefit)           0         (279)

<PAGE>

NOTE C - ACCOUNTS RECEIVABLE

Accounts receivable consist of the following at July 31, 2000:

Accounts Receivable-Printing       $    2,039
                   -publishing        179,000
                                   -----------
Less:                                 181,039
  Allowance for doubtful accounts     (52,039)
                                   -----------
                                   $  129,000
                                   ===========


<PAGE>

ITEM II             MONARCH SERVICES, INC. AND SUBSIDIARY

                   MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

For purposes of this discussion references to fiscal 2001 are to the fiscal year
ending  April  30, 2001, and references to fiscal 2000 are to  the  fiscal  year
ended April 30, 2000.


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
Report on Form 10-QSB) 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
contained in the Company's Annual Report on Form 10-KSB for the year ended April
30,  2000  and  incorporated herein by reference 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.  Included in these risks  is
the  Company's  history  of  losses,  its  fluctuations  in  operating  results,
competition and other risks set forth herein  and in the Company's annual report
on  Form  10KSB  for the year ended April 30, 2000.  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.

<PAGE>

RESULTS OF OPERATIONS

Monarch Services, Inc. consists of one operating subsidiary,  Girls' Life, Inc.,
that publishes a magazine.


RESULTS FOR THE FIRST QUARTER OF FISCAL YEAR 2001 AND 2000

The  revenues of Girls' Life, Inc. are seasonal in nature.  Girls' Life magazine
is  published  six  times per year.  The Company's typical publication  schedule
usually results in the accrual of revenues for one issue in the first and  third
quarters  of the fiscal year and the accrual of revenues for two issues  in  the
second  and  fourth  quarters of the fiscal year.  The publication  schedule  is
subject to revision without notice.

Sales  of  the Publishing division in the first quarter of fiscal 2001 increased
by $138,000 or 23% from the first quarter of fiscal 2000.  The increase in sales
of  the Publishing division relates primarily to the increase in promotions  and
direct  mailing advertising of the magazine and increased revenue from newsstand
sales and advertising.

Cost  of  goods sold as a percent of sales was 81% in both the first quarter  of
fiscal 2001 and 2000.

Gross profit increased by $23,000 or 20% during the first quarter of fiscal 2001
compared  to  the first quarter of fiscal 2000.   Gross margin was 18.7%  during
the  first quarter of fiscal 2001 as compared to 19.1% during the first  quarter
of fiscal 2000.

Selling,  general and administrative expenses as a percentage of sales were  37%
for  the  first quarter of fiscal 2001 and 23% for the first quarter  of  fiscal
2000.   The increase in fiscal 2001 was due to general corporate overhead  costs
that  were  previously charged to the former printing and envelope business  and
included in discontinued operations. These expenses are currently being  charged
to the publishing business.

Included  in  selling, general and administrative expenses for the three  months
ended  July  31,  2000 are $24,000 in expenditures for web site design  and  new
product development.

Other  income increased $6,000 in the first quarter of fiscal 2001  to  $116,000
from  $110,000  in  the  first  quarter of fiscal 1999.  The  net  increase  was
primarily  due  to  the  increase  in interest  income  the  decrease  of  other
miscellaneous income.

Due  to  continued losses, the Company closed the printing and envelope division
effective  August 20, 1999.  Management estimated the loss on  disposal  of  the
printing  and envelope division to be $228,000 (net of tax benefit of $117,000).
Operations of the printing and envelope division for the three months ended July
31, 1999 have been reclassified as discontinued operations.

LIQUIDITY AND CAPITAL RESOURCES

At  July  31,  2000, the Company has cash and cash equivalents of  approximately
$8,230,000  a  decrease  of $192,000 from the amount at  April  30,  2000.   The
decrease  resulted primarily from cash used in operations of  $119,000  and  the
purchase  of  equipment, intangible assets and improvements. The Company's  cash
and  cash equivalents are subject to variation based upon the timing of receipts
and the payment of payables.

At July 31, 2000, the Company has no debt with third party lenders.
<PAGE>







                      PART II. OTHER INFORMATION


ITEMS 1 THROUGH 5
NONE / NOT APPLICABLE

ITEM 6.  EXHIBITS AND REPORTS FOR FORM 8-K

(a)          Exhibits

             Number                 Description
             ------                 -----------

             27.                     Financial Data Schedule

(b)          Reports on Form 8-K

             No reports have been filed on Form 8-K during this
             quarter.

<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   September 14, 2000          /s/    A. Eric Dott
       ------------------          -------------------------------
                                   A. Eric Dott
                                   Chairman of the Board





Date   September 14, 2000          /s/    A. Eric Dott
       ------------------          -------------------------------
                                   A. Eric Dott
                                   Chairman of the Board
                                   (Principal Executive Officer)




Date   September 14, 2000          /s/    Marshall Chadwell
       ------------------          -------------------------------
                                   Marshall Chadwell, Controller
                                   Chief Financial Officer
                                   (Principal Accounting and
                                        Financial Officer)




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