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, 2000
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 principal executive offices)
(972) 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, 2000:
Common Stock, $0.10 par value, 3,248,566 shares
<PAGE>
ARROW-MAGNOLIA INTERNATIONAL, INC.
March 31, 2000
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements Page
Arrow-Magnolia International, Inc. 3
Condensed Balance Sheets as of March 31, 2000
(unaudited) and December 31, 1999.
Arrow-Magnolia International, Inc. 4
Condensed Statements of Income for the Three and
Nine Month Periods Ended March 31, 2000 and 1999
(unaudited).
Arrow-Magnolia International, Inc. 5
Condensed Statements of Cash Flows for the Nine
Month Periods Ended March 31, 2000 and 1999
(unaudited).
Notes to Condensed Financial Statements (unaudited). 6
Item 2. Management's Discussion and Analysis or 7
Plan of Operation.
PART II. OTHER INFORMATION.
Item 6. Exhibits and Reports on Form 8-K. 8
<PAGE>
ARROW-MAGNOLIA INTERNATIONAL, INC.
CONDENSED BALANCE SHEETS
March 31, 2000 AND DECEMBER 31, 1999
<TABLE>
March 31, December 31,
Assets 2000 1999
----------- -----------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $2,649,375 $2,710,341
Short-term investments 300,000 300,000
Trade accounts receivable,
less allowance for doubtful
accounts of $515,053 in 2000
and $438,990 in 1999 2,817,627 2,373,686
Inventories 716,315 672,068
Prepaid income taxes 0 79,961
Deferred income taxes 220,900 184,900
Other assets 0 9,247
---------- ----------
Total current assets $6,704,217 $6,330,203
Property and equipment, cost 2,794,483 2,699,263
Accumulated depreciation (1,105,867) (1,048,345)
Intangible assets, net 123,659 125,176
Notes receivable 40,000 40,000
Deferred income taxes 0 0
Other assets, at cost 2,700 2,700
-------- ----------
Total assets $8,559,192 $8,148,997
========== ==========
Liabilities and stockholders' equity
------------------------------------
Current liabilities:
Accounts payable $ 606,884 $ 584,549
Accrued liabilities 155,109 236,510
Income taxes payable 162,437 24,498
---------- ----------
Total current liabilities $ 924,430 $ 845,557
Deferred income taxes 19,700 21,500
Deferred compensation 104,500 104,500
---------- ----------
Total liabilities $ 1,048,630 $ 971,557
---------- ----------
Stockholders' equity:
Preferred stock - par value $.10;
authorized 500,000
shares; none issued $ 0 $ 0
Common stock - par value $.10;
authorized 10,000,000
shares; issued 3,262,066 shares in
2000 and 3,262,066 shares in 1999 326,207 326,207
Additional paid-in capital 5,607,214 5,607,314
Retained earnings 1,638,609 1,305,487
Less cost of 13,500 shares of
common stock in treasury (61,468) (61,468)
---------- ----------
Total stockholders' equity $7,510,562 $7,177,440
---------- ----------
Total liabilities and
stockholders' equity $8,559,192 $8,148,997
========== ==========
See accompanying notes to condensed financial statements.
<PAGE>
ARROW-MAGNOLIA INTERNATIONAL, INC.
CONDENSED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
</TABLE>
<TABLE>
2000 1999
---- ----
(unaudited) (unaudited)
<S> <C> <C>
Net sales $3,516,082 $3,496,046
Cost of sales 1,919,103 1,863,644
---------- ----------
Gross profit $1,596,979 $1,632,402
General and admini-
strative expenses 1,117,839 1,020,006
---------- ---------
Income before other
income (expense) $ 479,140 $ 612,396
---------- ----------
Other income (expense):
Interest expense $ 0 $ 0
Interest income 31,048 23,369
Other income 3,034 4,856
---------- ---------
Total other income
(expense) 34,082 30,225
--------- ---------
Income before income
taxes $ 513,222 $ 642,621
Provision for income
taxes:
Current 217,900 226,144
Deferred (benefit) (37,800) (603)
---------- ----------
180,100 225,541
---------- ----------
Net income 333,122 417,080
========== ==========
Earnings per common share:
Basic $ 0.10 $ 0.13
========== ==========
Diluted $ 0.09 $ 0.11
========== ==========
Weighted average common
shares outstanding:
Basic 3,248,566 3,242,312
========== ==========
Diluted 3,644,759 3,659,675
========== ==========
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
ARROW-MAGNOLIA INTERNATIONAL, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2000 AND 1999
<TABLE>
2000 1999
---- ----
(unaudited)(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 333,122 $ 417,080
Adjustments to reconcile net
earnings to net cash
provided by operating activities:
Depreciation and amortization 59,039 44,805
Deferred income taxes (37,800) (603)
Provision for doubtful accounts 76,063 88,982
Compensation expense from issuance
of stock options and warrants - 12,787
Changes in operating assets and
liabilities:
Receivables (520,004) (525,606)
Inventories (44,247) (107,747)
Prepaid income taxes 79,961 70,861
Other assets 9,247 14,405
Accounts payable 22,335 180,922
Accrued liabilities (81,401) 74,520
Income taxes payable 137,939 84,853
---------- ----------
Net cash provided by
operating activities 34,254 355,259
---------- ----------
Cash flows from investing activities:
Purchase of short-term investments 0 0
Proceeds from maturities of
short-term investments 0 0
Acquisition of property and equipment (95,220) (27,201)
---------- ----------
Net cash (used) by investing
activities (95,220) (27,201)
---------- ----------
Cash flows from financing activities:
Dividends on fractional shares 0 0
Repayments of long-term debt 0 0
Proceeds from issuance of common stock 0 0
Cash issued in lieu of fractional shares 0 0
Acquisitions of treasury stock 0 0
---------- ----------
Net cash provided(used) by
financing activities 0 0
---------- ----------
Net increase in cash and cash equivalents $(60,966) $328,058
Cash and cash equivalents:
Beginning of period 2,710,341 2,386,719
---------- ----------
End of period $2,649,375 $2,714,777
========== ==========
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
ARROW-MAGNOLIA INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(1) Basis of Presentation
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.
(2) Earnings Per Share
The Company adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 128, Earnings Per Share, during 1997 and retroactively
restated all per share amounts. SFAS No. 128 reporting requirements replace
primary and fully?diluted earnings per share (EPS) with basic and diluted EPS.
Basic EPS is calculated by dividing net income (available to common
stockholders) by the weighted average number of common shares outstanding for
the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or
converted into common stock. On May 27, 1999, the Company declared a 10%
common stock dividend for the shareholders of record as of July 15, 1999.
Both basic and diluted EPS have been restated for all periods presented for
the effects of the common stock dividend.
<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 $5,484,646 as of December 31, 1999, increased to
$5,779,787 as of March 31, 2000. The increase in working capital was primarily
the result of growth in increased trade accounts receivable resulting from
intensive sales force recruitment and resultant sales, partially offset by
increased income taxes payable.
The Company's cash flow from operating activities for the three months
provided $34,254 as funds generated from earnings, management of accounts
payable and reduction of the provision for doubtful accounts exceeded cash
used to fund increased accounts receivable and inventories. A total of
$95,220 was also utilized to acquire property and equipment. The resulting
decrease in cash for the quarter was $60,966.
The Company believes that its present financing is adequate for
its capital needs for the foreseeable future.
Material Changes in Results of Operations
Net sales for the three months ended March 31, 2000 increased to
$3,516,082 from $3,496,046, or less than 1.0%, from the same period of 1999.
Cost of sales as a percentage of net sales increased modestly to 54.6%
of net sales for the three months ended March 31, 2000 as compared to 53.3% of
net sales for the same period of 1999. Cost of goods sold has increased as a
result of increased cost of raw materials and equipment used in acquiring the
multi-million dollar contract from Pioneer U.S.A., Inc.
As a result, gross profit fell by 2.2% to $1,596,979 from $1,632,402 for
the three months ended March 31, 2000 versus the comparable period of fiscal
1999.
General and administrative expenses increased by 9.6% for the comparable
three month periods of 2000 and 1999. These increases reflect expenses
associated with moving into the Company's newly expanded facilities as well
as normal increases in operating expenses, some nonrecurring.
As a result of these factors, net income fell for the comparable
three months periods to $333,122 from $417,080, or 20.1%.
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports.
(a) None.
<PAGE>
SIGNATURE
Pursuant to the requirement 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: November 10, 1999 By: /s/ Mark Kenner
------------------------- -------------------------
Mark Kenner, Vice
Chairman and Chief
Executive Officer
Date: November 10, 1999 By: /s/ Fred Kenner
------------------------- -------------------------
Fred Kenner, President
and Chief Financial
Officer
<PAGE>
<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, 1999 and is
qualified in its entirety by reference to such financial statement.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-2000
<PERIOD-END> Mar-31-2000
<CASH> 2649375
<SECURITIES> 300000
<RECEIVABLES> 3332680
<ALLOWANCES> 515053
<INVENTORY> 716315
<CURRENT-ASSETS> 6704217
<PP&E> 2794483
<DEPRECIATION> 1105867
<TOTAL-ASSETS> 8559192
<CURRENT-LIABILITIES> 924430
<BONDS> 0000
0000
0000
<COMMON> 326207
<OTHER-SE> 7184355
<TOTAL-LIABILITY-AND-EQUITY> 8559192
<SALES> 3516082
<TOTAL-REVENUES> 3516082
<CGS> 1919103
<TOTAL-COSTS> 1919103
<OTHER-EXPENSES> 1117839
<LOSS-PROVISION> 0000
<INTEREST-EXPENSE> 0000
<INCOME-PRETAX> 513222
<INCOME-TAX> 180100
<INCOME-CONTINUING> 333122
<DISCONTINUED> 0000
<EXTRAORDINARY> 0000
<CHANGES> 0000
<NET-INCOME> 333122
<EPS-BASIC> 0.10
<EPS-DILUTED> 0.09
</TABLE>
