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: March 31, 1996
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 Number)
2646 Rodney Lane, Dallas, Texas 75229
(Address of principal executive offices)
(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 March 31, 1996:
Common Stock, $0.10 par value, 1,157,600 shares
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ARROW-MAGNOLIA INTERNATIONAL, INC.
March 31, 1996
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
March 31, 1996 (unaudited) and December 31, 1995.
Arrow-Magnolia International, Inc. and Subsidiary 3
Condensed Consolidated Statements of Earnings for
Three Months Ended March 31, 1996 and 1995 (unaudited).
Arrow-Magnolia International, Inc. and Subsidiary 4
Condensed Consolidated Statements of Cash Flows for
Three Months Ended March 31, 1995 and 1995 (unaudited).
Arrow-Magnolia International, Inc. and Subsidiary 5
Notes to Condensed Consolidated Financial
Statements March 31, 1996 and 1995 (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
March 31, 1996 and December 31, 1995
(See accompanying report of KPMG Peat Marwick LLP)
<TABLE>
March 31, December 31,
Assets 1996 1995
(unaudited)
<S> <C> <C>
Current assets:
Cash $326,474 761,419
Short-term investments, at cost 696,730 690,051
Trade accounts receivable, less allowance for
doubtful accounts of $290,690 in 1996 and
$269,813 in 1995 1,750,514 1,339,408
Other receivables 65,706 5,319
Inventories 684,484 681,825
Deferred income taxes 98,528 91,430
Prepaid expenses 303 18,548
Total current assets 3,622,739 3,588,000
Property and equipment, net 357,820 371,320
Intangible assets, net 106,923 110,560
Note receivable 40,000 40,000
Deferred income taxes 24,811 24,811
Other assets 1,000 1,000
$4,153,293 4,135,691
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt $110,541 112,835
Accounts payable 480,976 421,283
Accrued liabilities 91,487 183,080
Income taxes payable 126,032 174,754
Total current liabilities 809,036 891,952
Note payable 700,000 790,000
Long-term debt, excluding current installments 218,724 250,844
Total liabilities 1,727,760 1,932,796
Stockholders' equity:
Preferred stock - par value $.10; authorized 500,000
shares; none issued
Common stock - par value $.10; authorized 10,000,000
shares; 1,157,600 shares issued and outstanding 115,760 115,760
Additional paid-in capital 1,385,840 1,385,840
Accumulated earnings 923,933 701,295
Total stockholders' equity 2,425,533 2,202,895
Commitments
$ 4,153,293 4,135,691
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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ARROW-MAGNOLIA INTERNATIONAL, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Earnings
Three months ended March 31, 1996 and 1995
(Unaudited - see accompanying report of
KPMG Peat Marwick LLP)
<TABLE>
1996 1995
<S> <C> <C>
Net sales $2,481,625 1,969,818
Cost of sales 1,194,512 910,683
Gross profit 1,287,113 1,059,135
General and administrative expenses 918,686 751,354
Operating income 368,427 307,781
Other income (expenses):
Interest expense (23,184) (25,892)
Other income 5,287 3,419
Other expenses, net (17,897) (22,473)
Earnings before income taxes 350,530 285,308
Income taxes:
Current 134,990 119,543
Deferred income tax benefit (7,098) ( 9,699)
Net earnings $ 222,638 175,464
Net earnings per common share and share equivalent .17 .14
Weighted average common shares and share equivalents
outstanding 1,319,332 1,296,429
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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ARROW-MAGNOLIA INTERNATIONAL, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
Three months ended March 31, 1996 and 1995
(Unaudited - see accompanying report of
KPMG Peat Marwick LLP)
<TABLE>
1996 1995
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Cash flows from operating activities:
Net earnings $222,638 175,464
Adjustments to reconcile net earnings to net cash
used in operating activities:
Depreciation and amortization 17,137 20,999
Deferred income taxes (7,098) (9,699)
Provision for doubtful accounts 57,233 45,433
Changes in assets and liabilities:
Increase in receivables(528,726) (332,789)
Increase in inventories (2,659) (28,089)
Decrease in prepaid expenses 18,245 16,439
Increase in accounts payable 59,693 160,349
Decrease in accrued liabilities (91,593) (48,656)
Decrease in income taxes payable (48,722) (26,862)
Net cash used in operating activities (303,852) (27,411)
Cash flows from investing activities:
Purchase of short-term investments (6,679) -
Acquisition of property and equipment - (2,956)
Net cash used in investing activities (6,679) (2,956)
Cash flows from financing activities:
Repayments of note payable (90,000) (30,000)
Repayments of long-term debt (34,414) (32,294)
Net cash used in financing activities (124,414) (62,294)
Net decrease in cash (434,945) (92,661)
Cash at beginning of period 761,419 856,883
Cash at end of period $326,474 764,222
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
March 31, 1996 and 1995
(Unaudited - see accompanying report of
KPMG Peat Marwick LLP)
(1) Basis of Presentation
The March 31, 1996 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, 1995.
(2) Net Earnings per Common Share and Share Equivalent
Net earnings per common share and share equivalent is based on
the weighted average number of common shares and share equivalents
outstanding during the period. Net earnings per common share and
share equivalent has been restated for the three months ended March
31, 1995 to reflect the ten percent common stock dividend declared
on April 5, 1995 and the stock options issued by the Company.
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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 $2,696,048 as of December 31, 1995,
increased to $2,813,703 as of March 31, 1996, primarily due to an
increase in trade accounts receivable during the first quarter
attributable to increased sales during the first quarter of the
fiscal year and a decrease in cash, which was used to fund such
accounts receivable and reduce debt and accrued liabilities.
These trends are likewise reflected in the Company's cash
flows, which reflect a net use of cash in operating activities of
$303,852. Net earnings of $222,638 were offset by increased
accounts receivable of $528,726 attributable to growth in sales.
The Company also used funds to reduce its indebtedness, resulting
in a total use of cash of $434,945.
Currently, the Company is evaluating whether to construct an
additional 30,000 square feet of warehouse space to its existing
facilities. Based upon its initial review, the Company believes it
has more than adequate funds on hand to complete this addition if
the Company concludes that it is desirable. The Company believes
that its present financing is also otherwise adequate for its
capital needs for the foreseeable future.
Material Changes in Results of Operations
Net sales for the quarter ended March 31, 1996 increased to
$2,481,625 from $1,968,818, or 26.0%, from the same quarter of the
previous year. Cost of sales, including salesmen expenses,
increased absolutely and as a percentage of net sales from
$910,683, or 46.2% of net sales, for the quarter ended March 31,
1995 to $1,194,512, or 48.1% of net sales for the same quarter of
1996 as some pricing adjustments were implemented to increase the
volume of sales. As a result, gross profit improved from
$1,059,135 to $1,287,113 for the quarter ended March 31, 1996
versus the quarter ended March 31, 1995, an increase of 21.5%.
Selling, general and administrative expenses increased by
22.3%, less rapidly than the increase in revenues, as the Company
incurred additional costs to support its sales growth.
As a result, net earnings increased to $222,638 for the
quarter ended March 31, 1996 from $175,464 for the comparable three
month period in 1995, an increase of 26.9%.
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Part II. OTHER INFORMATION
Item 6. Exhibits and Reports.
(a) None
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SIGNATURE
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ARROW-MAGNOLIA INTERNATIONAL, INC.
Date: May 10, 1996 By: /s/ Morris Shwiff
Morris Shwiff, President
and Principal Executive Officer
Date: May 10, 1996 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 March 31, 1996 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
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<PERIOD-END> MAR-31-1996
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</TABLE>
