[ARTICLE] 5
FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended: June 30, 1995
Commission File Number: 0-4728
ARROW-MAGNOLIA INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)
State of Texas
(State or other jurisdiction of incorporation or organization)
75-0408335
(I.R.S. Employer Identification No.)
2646 Rodney Lane, Dallas, Texas 75229
(Address of principal executive offices) (Zip Code)
(214) 247-7111
(Issuer's telephone number, including area code)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act 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.
X
Yes No
Number of common shares outstanding as of June 30, 1995:
Common Stock, $0.10 par value, 1,100,000 shares
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ARROW-MAGNOLIA INTERNATIONAL, INC.
June 30, 1995
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements Page
Arrow-Magnolia International, Inc. and Subsidiary 2
Condensed Consolidated Balance Sheets as of
June 30, 1995 (unaudited) and December 31, 1994.
Arrow-Magnolia International, Inc. and Subsidiary 3
Condensed Consolidated Statements of Earnings for
the Three and Six Months Ended June 30, 1995 and
1994 (unaudited).
Arrow-Magnolia International, Inc. and Subsidiary 4
Condensed Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 1995 and 1994
(unaudited).
Notes to Condensed Consolidated Financial 5
Statements (unaudited).
Item 2. Management's Discussion and Analysis or 6
Plan of Operation.
PART II. OTHER INFORMATION.
Item 6. Exhibits and Reports on Form 8-K 7
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ARROW-MAGNOLIA INTERNATIONAL, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
(See accompanying report of KPMG Peat Marwick LLP)
<TABLE>
<CAPTION>
June 30 December 31,
1995 1994
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash $ 710,008 856,883
Trade accounts receivable, less allowance for
doubtful accounts of $314,793 in 1995 and
$241,508 in 1994 1,252,944 869,663
Other receivables 43,189 18,583
Inventories 649,251 610,613
Deferred income taxes 98,643 78,368
Prepaid expenses 6,953 19,142
Total current assets 2,760,988 2,453,252
Property and equipment, net 373,371 400,415
Intangible assets, net 110,308 122,308
Note receivable 40,000 40,000
Deferred income taxes 19,056 19,056
Other assets 1,000 1,000
$ 3,304,723 3,036,031
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt $ 108,175 108,175
Accounts payable 478,815 294,807
Accrued liabilities 79,262 129,810
Income taxes payable 76,202 129,666
Total current liabilities 742,454 662,458
Note payable 630,000 690,000
Long-term debt, excluding current installments 296,765 361,352
Total liabilities 1,669,219 1,713,810
Stockholders' equity:
Preferred stock - par value $.10; authorized
500,000 shares; none issued
Common stock - par value $.10; authorized
10,000,000 shares; 1,100,000 shares issued and
outstanding 110,000 100,000
Additional paid-in capital 1,190,000 900,000
Accumulated earnings 335,504 322,221
Total stockholders' equity 1,635,504 1,322,221
Commitments $ 3,304,723 3,036,031
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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[CAPTION]
ARROW-MAGNOLIA INTERNATIONAL, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Earnings
(Unaudited - see accompanying report of
KPMG Peat Marwick LLP)
<TABLE>
<CAPTION>
Six months Three Months
ended June 30 ended June 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales $ 3,948,563 3,340,249 1,978,745 1,688,073
Cost of sales 1,947,948 1,647,241 1,037,264 868,743
Gross profit 2,000,615 1,693,008 941,481 819,330
General and administrative
expenses 1,483,230 1,328,282 731,876 642,095
Operating income 517,385 364,726 209,605 177,235
Other income (expenses):
Interest expense (51,735) (49,773) (25,843) (24,146)
Gain on disposition of assets 2,500 805 2,500 -
Other income 7,810 3,958 4,391 2,012
Other expenses, net (41,425) (45,010) (18,952) (22,134)
Earnings before income
taxes 475,960 319,716 190,653 155,101
Income taxes:
Current 182,952 131,078 76,211 60,674
Deferred income tax benefit (20,275) (22,374) (10,576) (7,940)
Net earnings $ 313,283 211,012 125,018 102,367
Earnings per common share:
Net earnings $ .31 .21 .12 .10
Weighted average shares
outstanding 1,016,574 1,016,574 1,016,574 1,016,574
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
ARROW-MAGNOLIA INTERNATIONAL, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
Six months ended June 30, 1995 and 1994
(Unaudited - see accompanying report of
KPMG Peat Marwick LLP)
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 313,283 211,012
Adjustments to reconcile net
earnings to net cash
provided by operating activities:
Depreciation and amortization 42,000 46,014
Gain on disposition of property
and equipment (2,500) (805)
Deferred income taxes (20,275) (22,374)
Provision for doubtful accounts 91,242 65,805
Changes in assets and liabilities:
Increase in receivables (499,129) (337,810)
Increase in inventories (38,638) (11,938)
Decrease in prepaid expenses 12,189 22,743
Increase in other assets - (7,773)
Increase in accounts payable 184,008 85,568
Increase in accrued liabilities (50,548) (34,732)
Increase (decrease) in income
taxes payable (53,464) 81,078
Net cash (used in) provided by
operating activities (21,832) 96,788
Cash flows from investing activities:
Acquisition of property and equipment (2,956) (18,294)
Proceeds from sale of property and
equipment 2,500 19,131
Net cash provided by (used in)
investing activities (456) 837
Cash flows from financing activities:
Repayments of note payable (60,000) (25,000)
Repayments of long-term debt (64,587) (74,787)
Repayments of capital lease
obligation - (3,210)
Net cash used in financing
activities (124,587) (102,997)
Net decrease in cash (146,875) (5,372)
Cash at beginning of period 856,883 517,404
Cash at end of period $ 710,008 512,032
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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[CAPTION]
ARROW-MAGNOLIA INTERNATIONAL, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements
June 30, 1995 and 1994
(Unaudited - see accompanying report of
KPMG Peat Marwick LLP)
(1) Basis of Presentation
The June 30, 1995 condensed consolidated financial statements include the
accounts of Arrow-Magnolia International, Inc., and its Chemco Chemical
Company Division, and its wholly-owned subsidiary, Bio/Dyne Chemical Company, an
inactive corporation. All significant intercompany balances and transactions
have been eliminated.
The quarterly financial information included herein is unaudited; however,
such information reflects all adjustments (consisting solely of normal
recurring adjustments) which are, in the opinion of management, necessary for
a fair statement of results for the interim period.
For further information, refer to the financial statements and notes
thereto included in the Company's annual report on Form 10-KSB as of
and for the year ended December 31, 1994.
<PAGE>
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
Material Changes in Financial Condition.
The Company's working capital (total current assets less total current
liabilities), which was $1,790,794 as of December 31, 1994, increased to
$2,018,534 as of June 30, 1995. The Company's current ratio remained steady
at 3.7. The increase in working capital was primarily the result of growth
in trade accounts receivable as a result of improved sales in the quarter,
partially offset by increased accounts payable necessary to support increased
sales.
The Company experienced negative cash flow from operations as earnings were
used to fund additional growth. In addition, funds were utilized to reduce
debt, resulting in a net decrease in cash for the first six months.
The Company anticipates no material commitments for capital expenditures in
the near future and management therefore anticipates that it will have
adequate funding for the foreseeable future.
Material Changes in Results of Operations
Net sales for the six months ended June 30, 1994 increased to $3,948,563
from $3,340,249, or 18.2%, from the same period of the previous year and to
$1,978,745 from $1,688,073, or 17.2%, from the second quarter of 1994 to the
corresponding quarter of 1995. These increases are attributable to the
Company's focused marketing efforts permitted by its continuing financial
strength.
Cost of sales, including salesmen expenses, as a percentage of net sales
remained steady at 49.3% of net sales for the six months ended June 30, 1994
and the same period of 1995. For the second quarters of 1994 and 1995, cost of
sales were 51.5% and 52.4% of net sales, respectively.
Gross profit therefore increased significantly from $1,693,008 to $2,000,615
for the six months ended June 30, 1995 versus the six months ended June 30,
1994, an increase of 18.2%. The increase realized during the second quarter
of the two years was less dramatic, an increase from $742,292 to $819,330, or
14.9%.
Selling, general and administrative expenses increased by 11.7% and 14.0%
for the comparable six month and three month periods, respectively, as the
Company incurred additional costs to support its sales growth.
As a result of these factors, net earnings before income taxes increased to
$475,960 from $319,716 for the corresponding six month periods of 1995 and
1994 and to $190,653 from $155,101 for the second quarters of those years.
Similarly, net earnings increased dramatically for the comparable six month
periods, from $211,012 to $313,283, or 48.5% and for the second quarter of
the two years, from $102,367 to $125,018, or 22.1%.
<PAGE> <PAGE>
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports.
(a) None
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SIGNATURE
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on to behalf of the
undersigned thereunto duly authorized.
ARROW-MAGNOLIA INTERNATIONAL, INC.
Date: August 14, 1995 By: /s/ Morris Shwiff
Morris Shwiff, President
and Principal Executive Officer
Date: August 14, 1995 By: /s/ Fred Kenner
Fred Kenner, Vice President,
Secretary and Treasurer; the
Principal Financial and
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from registrant's
Form 10-QSB for the quarter ended June 30, 1995 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 710008
<SECURITIES> 0
<RECEIVABLES> 1567737
<ALLOWANCES> 314793
<INVENTORY> 649251
<CURRENT-ASSETS> 2760988
<PP&E> 373371
<DEPRECIATION> 0
<TOTAL-ASSETS> 3304723
<CURRENT-LIABILITIES> 742454
<BONDS> 0
<COMMON> 110000
0
0
<OTHER-SE> 1525504
<TOTAL-LIABILITY-AND-EQUITY> 3304723
<SALES> 3948563
<TOTAL-REVENUES> 3948563
<CGS> 1947948
<TOTAL-COSTS> 3431178
<OTHER-EXPENSES> (10310)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51735
<INCOME-PRETAX> 475960
<INCOME-TAX> 162677
<INCOME-CONTINUING> 313283
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 313283
<EPS-PRIMARY> .31
<EPS-DILUTED> .31
</TABLE>
