FORM 10-QSB
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: September 30, 1995
Commission File Number: 0-4728
ARROW-MAGNOLIA INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)
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 principle 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 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.
X
Yes No
Number of common shares outstanding as of September 30, 1995:
Common Stock, $0.10 par value, 1,100,000 shares
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ARROW-MAGNOLIA INTERNATIONAL, INC.
September 30, 1995
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements Page
Arrow-Magnolia International, Inc. and Subsidiary
Condensed Consolidated Balance Sheets as of
September 30, 1995 (unaudited) and December 31,
1994.
Arrow-Magnolia International, Inc. and Subsidiary
Condensed Consolidated Statements of Earnings for
the Three and Nine Months Ended September 30, 1995
and 1994 (unaudited).
Arrow-Magnolia International, Inc. and Subsidiary
Condensed Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 1995
and 1994 (unaudited).
Notes to Condensed Financial Statements
(unaudited).
Item 2. Management's Discussion and Analysis or
Plan of Operations.
PART II. OTHER INFORMATION.
Item 6. Exhibits and Reports on Form 8-K
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<CAPTION>
ARROW-MAGNOLIA INTERNATIONAL, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
(See accompanying report of KPMG Peat Marwick LLP)
<S> <C> <C>
September 30,
December 31,
Assets
1995
1994
(unaudited)
Current assets:
Cash
$ 725,777
$ 856,883
Trade accounts receivable, less allowance for doubtful
accounts of $270,215 in 1995 and $241,508 in 1994
1,512,517
869,663
Other receivables
43,913
18,583
Inventories
615,059
610,613
Deferred income taxes
80,887
78,368
Prepaid expenses
12,643
19,142
Total current assets
2,990,796
2,453,252
Property and equipment, net
383,821
400,415
Intangible assets, net
104,308
122,308
Note receivable
40,000
40,000
Deferred income taxes
19,056
19,056
Other assets
1,000
1,000
$3,538,981
3,036,031
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt
$ 115,128
108,175
Accounts payable
425,584
294,807
Accrued liabilities
129,894
129,810
Income taxes payable
131,108
129,666
Total current liabilities
801,714
662,458
Note payable
600,000
690,000
Long-term debt, excluding current installments
282,965
361,352
Total liabilities
1,684,679
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
554,302
322,221
Total stockholders' equity
1,854,302
1,322,221
Commitments
$3,538,981
$3,036,031
See accompanying notes to condensed consolidated financial statements.
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<TABLE>
<CAPTION>
ARROW-MAGNOLIA INTERNATIONAL, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Earnings
(Unaudited - see accompanying report of
KPMG Peat Marwick LLP)
Nine months
ended September 30
Three months
ended September 30
1995
1994
1995
1994
<S>
<C>
<C>
<C>
<C>
Net sales
$6,213,163
$5,058,098
$2,264,600
$1,717,849
Cost of sales
3,061,761
2,474,547
1,113,813
827,306
Gross profit
3,151,402
2,583,551
1,150,787
890,543
General and administrative expenses
2,262,509
1,975,552
779,279
647,270
Operating income
888,893
607,999
371,508
243,273
Other income (expenses):
Interest expense
(75,682)
(76,040)
(23,947)
(26,267)
Gain on disposition of assets
2,500
805
-
-
Other income (expense)
12,489
(26,768)
4,679
(30,726)
Other expenses, net
(60,693)
(102,003)
(19,268)
(56,993)
Earnings before income
taxes
828,200
505,996
352,240
186,280
Income taxes:
Current
298,638
205,854
115,686
74,776
Deferred tax expense (benefit)
(2,519)
(37,589)
17,756
(15,215)
Net earnings
$ 532,081
$ 337,731
$ 218,798
$ 126,719
Earnings per common share:
Net earnings
$ .48
$ .31
$ .20
$ .12
Weighted average shares
outstanding
1,100,000
1,100,000
1,100,000
1,100,000
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
Nine months ended September 30, 1995 and 1994
(Unaudited - see accompanying report of
KPMG Peat Marwick LLP)
<S> <C> <C>
1995
1994
Cash flows from operating activities:
Net earnings
$ 532,081
$337,731
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization
63,000
70,016
Gain on disposition of property and equipment
(2,500)
(805)
Deferred income taxes
(2,519)
(37,589)
Provision for doubtful accounts
143,504
110,559
Changes in assets and liabilities:
Increase in receivables
(811,688)
(364,295)
Increase in inventories
(4,446)
(12,192)
Decrease in prepaid expenses
6,499
22,743
Increase in other assets
-
(15,603)
Increase in accounts payable
130,777
63,667
Increase in accrued liabilities
84
(43,565)
Increase in income taxes payable
1,442
150,228
Net cash provided by operating activities
56,234
280,895
Cash flows from investing activities:
Acquisition of property and equipment
(28,406)
(20,647)
Proceeds from sale of property and equipment
2,500
19,131
Net cash used in investing activities
(25,906)
(1,516)
Cash flows from financing activities:
Proceeds from note payable
703,838
Repayments of note payable
(90,000)
(725,000)
Proceeds from long-term debt
25,448
495,000
Repayments of long-term debt
(96,882)
(524,841)
Repayments of capital lease obligation
-
(20,473)
Net cash used in financing activities
(161,434)
(71,476)
Net increase (decrease) in cash
(131,106)
207,903
Cash at beginning of period
856,883
517,404
Cash at end of period
$ 725,777
$725,307
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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ARROW-MAGNOLIA INTERNATIONAL, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements
September 30, 1995 and 1994
(Unaudited - see accompanying report of
KPMG Peat Marwick LLP)
(1) Basis of Presentation
The September 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.
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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
$2,189,082 as of September 30, 1995 as trade accounts receivable grew in
response to increased sales during the third quarter, offset in part by
increased accounts payable incurred to support such increases.
The Company experienced positive cash flow from operations of $56,234 as
earnings were utilized to reduce debt and fund additional growth.
The Company believes that its present financing will provide adequate
funding for its capital needs for the foreseeable future.
Material Changes in Results of Operations
Net sales for the nine months ended September 30, 1995 increased to
$6,213,163 from $5,058,098, or 22.8%, from the same quarter of the previous
year, primarily as a result of the Company's focused marketing efforts
permitted by its continuing financial strength. For the comparable three
month periods then ended, net sales increased more dramatically from
$1,717,849 to $2,264,600 or 31.8%.
Cost of sales, including salesmen expenses, increased modestly as a
percentage of net sales from $2,474,547 or 48.9% of net sales, for the nine
months ended September 30, 1994 to $3,061,761 or 49.3% of net sales for the
same period of 1995. Cost of sales were 49.1% and 48.1%, respectively, of
net sales for the comparable quarters of 1995 and 1994.
As a result of increased sales, gross profit improved from $2,583,551 to
$3,151,402 for the nine months ended September 30, 1995 versus the nine
months ended September 30, 1994, an increase of 22.0%. For the comparable
quarters, gross profit increased from $890,543 to $1,150,787 or 29.2%.
General and administrative expenses increased by 14.5% and 20.4% for the
comparable nine month and 3 month periods, respectively, as the Company
incurred additional costs to support its sales growth. As a percentage of
net sales, general and administrative costs fell to 36.4% for the first nine
months of 1995 from 39.1% for the first nine months of 1994 as sales growth
absorbed more of this overhead. For the three month periods, the comparable
percentages were 34.4% for 1995 and 37.7% for 1994.
Earnings before income taxes improved by approximately 63.7% for the first
nine months and 89.1% for the quarter ended September 30, 1995 as compared to
the corresponding periods of 1994 due to the factors previously described.
Net earnings increased dramatically for the comparable nine month periods,
from $337,731 to $532,081, or 57.5%, and for the third quarter of the two
years, from $126,719 to $218,798, or 72.7%.
PAGE
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Part II. OTHER INFORMATION
Item 6. Exhibits and Reports.
(a) None
PAGE
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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: November 9,1995 By: /s/ Morris Shwiff
Morris Shwiff, President
and Principal Executive Officer
Date: November 9, 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 September 30, 1995 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 725777
<SECURITIES> 0
<RECEIVABLES> 1782786
<ALLOWANCES> 270215
<INVENTORY> 615059
<CURRENT-ASSETS> 2990796
<PP&E> 995510
<DEPRECIATION> 611689
<TOTAL-ASSETS> 3538981
<CURRENT-LIABILITIES> 801714
<BONDS> 0
<COMMON> 110000
0
0
<OTHER-SE> 1744302
<TOTAL-LIABILITY-AND-EQUITY> 3538981
<SALES> 6213163
<TOTAL-REVENUES> 6213163
<CGS> 3061761
<TOTAL-COSTS> 5324270
<OTHER-EXPENSES> (14989)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 75682
<INCOME-PRETAX> 828200
<INCOME-TAX> 296119
<INCOME-CONTINUING> 532081
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 532081
<EPS-PRIMARY> .48
<EPS-DILUTED> .48
</TABLE>
