UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended - July 31, 1996
Commission File Number: 000-21282
SWISHER INTERNATIONAL, INC.
NEVADA 56-1541396
(State of Incorporation) (I.R.S. Employer Identification No.)
6849 Fairview Road
Charlotte, North Carolina 28210
(Address of principal executive offices) (Zip Code)
(704) 364-7707
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 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
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Information
Financial Statements and Supplementary Data
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Cash Flows
Item 2. Management's Discussion and Analysis
<PAGE>
<TABLE>
SWISHER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
July 31,
1996 October 31,
(Unaudited) 1995
----------- -----------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and Cash Equivalents $ 1,013,122 $ 930,492
Restricted Cash 500,000 700,000
Accounts Receivable:
Franchisees 1,529,217 1,183,623
Other 554,756 217,716
Less Allowance for
Doubtful Accounts (146,136) (40,644)
----------- -----------
Net Accounts Receivable 1,937,837 1,360,695
Notes receivable (current year) 587,948 807,646
Inventory 156,423 75,327
Prepaid Expenses 217,414 147,125
Deferred Franchise cost 101,048 110,073
----------- -----------
TOTAL CURRENT ASSETS 4,513,792 4,131,358
PROPERTY AND EQUIPMENT:
Furniture & Equipment 1,051,674 923,219
Land & Building 339,499
Less Accumulated Depreciation (384,834) (281,440)
----------- -----------
NET PROPERTY AND EQUIPMENT 666,840 981,278
OTHER ASSETS:
Notes Receivable 2,582,067 1,978,759
Intangible Assets, less amortization 1,848,638 866,952
----------- -----------
NET OTHER ASSETS 4,430,705 2,845,711
----------- -----------
TOTAL ASSETS $ 9,611,338 $ 7,958,347
============ ============
(continued)
</TABLE>
<PAGE>
<TABLE>
SWISHER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(continued)
<CAPTION>
July 31,
1996 October 31,
(Unaudited) 1995
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Long-Term Debt, Current Portion $ 1,494,144 $ 1,094,158
Accounts Payable 704,040 488,180
Accrued Expenses 154,939 123,851
Deferred Revenue 268,951 240,986
Income Taxes Payable 164,766 40,000
----------- -----------
TOTAL CURRENT LIABILITIES 2,786,840 1,987,175
LONG-TERM DEBT 976,694 1,437,651
DEFERRED INCOME TAXES 85,124 49,000
----------- -----------
TOTAL LIABILITIES 3,848,658 3,473,826
STOCKHOLDERS' EQUITY:
Preferred Stock, $.10 par value;
1,500,000 shares authorized; none
issued - -
Common Stock, $.01 par value; 15,000,000
shares authorized; 1,935,837 shares
issued and outstanding at July 31,
1996 and 1,719,299 outstanding at
October 31, 1995 19,357 17,194
Additional Paid-In Capital 3,925,633 3,002,637
Retained Earnings 1,817,690 1,464,690
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 5,762,680 4,484,521
----------- -----------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $ 9,611,338 $ 7,958,347
=========== ===========
</TABLE>
<PAGE>
<TABLE>
SWISHER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
July 31, July 31,
------------------------- ------------------------
1996 1995 1996 1995
------------------------- ------------------------
<S> <C> <C> <C> <C>
REVENUES:
Annuity Revenues:
Product Sales to Franchisees $ 944,994 $ 649,662 $ 2,325,088 $ 1,688,326
Service Fees 444,935 352,248 1,251,738 989,387
Royalties 420,527 306,036 1,169,552 844,483
Marketing Fees 12,028 9,685 34,622 25,662
----------- ----------- ------------- -----------
Total Annuity Revenues 1,822,484 1,317,631 4,781,000 3,547,858
Revenue from Company
Owned Subsidiaries 601,517 471,850 1,882,225 1,178,973
Initial Franchise Sales:
Swisher Hygiene 0 210,500 287,161 441,596
Swisher Maids 0 6,591 0 508,980
Surface Doctor 95,620 0 95,620 0
Other Income 275,845 73,069 425,969 204,751
----------- ----------- ----------- -----------
TOTAL REVENUES 2,795,466 2,079,641 7,471,975 5,882,158
----------- ----------- ----------- -----------
EXPENSES:
Selling, G & A Expenses:
Corporate & Hygiene Franchising 852,329 629,171 2,493,132 1,997,576
Swisher Maid Franchising 230,370 151,566 452,681 749,437
Surface Doctor Franchising 91,574 0 95,620 0
Cost of Product Sales 843,104 567,317 2,004,699 1,485,867
Expenses of Company
Owned Subsidiaries 572,882 416,534 1,762,062 1,090,926
Interest Expense 59,924 68,255 184,806 87,040
----------- ----------- ----------- -----------
TOTAL EXPENSES 2,650,183 1,832,843 6,988,954 5,410,846
----------- ----------- ----------- -----------
INCOME BEFORE TAXES AND
NON-RECURRING ITEMS 145,283 246,798 483,021 471,312
NON-RECURRING ITEMS
(Loss) on sale of assets 0 0 (17,206) 0
Gain on sale of Company Owned Subsidiaries 94,672 94,672
---------- ---------- ------------
94,672 0 77,466
PROVISION FOR INCOME TAXES 96,069 96,650 227,487 184,560
----------- ----------- ----------- -----------
NET INCOME $ 163,886 $ 150,148 $ 353,000 $ 286,752
=========== =========== =========== ===========
NET INCOME PER COMMON SHARE $ 0.09 $ 0.08 $ 0.19 $ 0.15
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
SHARE OUTSTANDING 1,853,015 1,877,686 1,853,015 1,962,743
=========== =========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
SWISHER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ended
July 31,
------------------------------
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 333,000 $ 286,752
Adjustments to reconcile net income
to net cash provided (used) by
operating activities-
Depreciation and Amortization 105,957 88,503
Change in Assets and Liabilities-
(Increase) decrease in assets-
Accounts receivable (557,142) (355,240)
Inventory (81,096) (47,681)
Prepaid expenses (70,289) (12,805)
Deferred franchise cost 9,025 47,057
Notes receivable (383,610) (493,307)
Increase (decrease) in liabilities-
Accounts payable 215,860 232,477
Accrued expenses 31,088 40,637
Income taxes payable 160,890 33,046
Deferred revenue 27,965 (104,200)
------------ ------------
Total adjustments (541,352) (571,513)
------------ ------------
NET CASH (USED) PROVIDED BY
OPERATING ACTIVITIES (208,352) (284,761)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Fixed Assets (128,455) (215,457)
Sale of Fixed Asset 336,935 0
Decrease (increase) in intangible
& other assets (981,686) (123,216)
------------ ------------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES (773,206) (338,673)
------------ ------------
(continued)
</TABLE)
<PAGE>
</TABLE>
<TABLE>
SWISHER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(continued)
<CAPTION>
Nine Months Ended
July 31,
------------------------------
1996 1995
----------- ------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock transactions $ 925,159 $ -
Proceeds from long-term debt 1,788,432
Net principal payments under capital
lease and long-term debt obligations (60,971) (343,794)
Decrease in restricted cash 200,000 -
Purchase of treasury stock - (842,676)
------------ ------------
NET CASH (USED) PROVIDED BY
FINANCING ACTIVITIES 1,064,188 601,962
------------ ------------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS 82,630 (21,472)
CASH AND CASH EQUIVALENTS,
Beginning of year 930,492 1,454,033
------------ ------------
CASH AND CASH EQUIVALENTS,
End of 3rd quarter $ 1,013,122 $ 1,432,561
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid year to date for -
Interest $ 185,777 $ 87,039
============ ============
Income taxes $ 30,497 $ 157,000
============ ============
During the first nine months of 1995,
the Company increased long-term debt to
acquire an office building and to provide
funds for use in future operations $ - $ 1,788,432
============ ============
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
GENERAL :
The financial information for the periods ended July 31, 1996 and 1995
included herein is unaudited but includes all adjustments which, in the
opinion of management of the Company, are necessary to present fairly the
financial position of the Company at July 31, 1996 and 1995, and the
results of its operations and its cash flows for the three and nine month
periods then ended.
The Company operates in two principal business segments: "Franchise
Operations", which includes Initial Franchise Sales and Annuity Revenues
(Service Fees, Product Sales, Royalties, and Marketing Fees), and "Company
Operations", which includes the Company's Hygiene operations located in
Charlotte, N.C., Jacksonville, FL., Space Coast, FL., Tulsa, OK., the
Company's residential maids operations located in the Charlotte, N.C. and
Scottsdale, AZ. areas and the Company's Surface Doctor operations located
in Atlanta, GA. Subsidiaries are actively engaged in providing hygiene
services, maid services and surface restoration services directly to
customers in the same manner as franchisees.
On July 30, 1996, the Company entered into and closed an Asset Purchase
Agreement with Professional Carpet Systems, Inc. ("PCS") and Old Dixie Supply
Company to acquire substantially all of the assets of an operating division of
PCS known as Surface Doctor. The purchase price paid for the assets consisted
of 200,000 shares of the Company's restricted Common Stock, an Option to
purchase 75,000 shares of the Company's Common Stock at an exercise price of
$6.00 per share, and the assumption of approximately $82,000 in liabilities
relating to the Surface Doctor business.
Surface Doctor has conducted business as a franchisor since November 1993
and currently has approximately 106 domestic and 9 foreign franchisees which
provide kitchen and bath restoration services, particularly with respect to
resurfacing appliances, counter tops and fixtures. Franchisees provide such
services in designated markets to the apartments industry, hotels, other
commercial customers and homeowners. Surface Doctor's revenues are derived
from franchise sales, royalty fees, marketing fees, and sales of supplies.
REVENUE :
Revenues in the third quarter increased 34% to $2,795,466 as compared to
prior year third quarter of $2,079,641. The major factors in the overall
increase are the continued growth in Annuity Revenues and the increase in
Revenues from Company Owned Subsidiaries.
SEGMENT REVENUES:
"Franchise Operations". Annuity Revenues for the three month period ended
July 31, 1996 increased 38% to $1,822,484 as compared to prior year
third quarter results of $1,317,631. Revenue derived from Initial
Franchise Sales decreased by 56% as compared to prior year third quarter
sales of $217,091. During the month of July, there were six additional
Surface Doctor franchises sold, bringing their total number of franchisees
to 115.
"Company Operations". Revenues increased by 27% for the three month
period ended July 31, 1996 over prior year third quarter. This increase
is attributable to acquisition and operation of the Houston,
Jacksonville/Space Coast, and Tulsa hygiene franchises. In July 1996,
the Company sold the hygiene operation in Houston, TX. to a franchisee.
Residential maids operations reported third quarter revenues of
$152,049. This is a substantial increase over the prior year due to
the acquisition of the Scottsdale franchise and increased revenue from
the Charlotte operations.
EXPENSES:
Total pre-tax expenses for the third quarter ended July 31, 1996
increased 44% over third quarter 1995, which represents an increase of
$797,340. Selling, general and administrative expenses increased by 50% to
$1,174,273 as compared to prior year third quarter of $780,737. Expenses of
of Company owned subsidiaries increased $136,273 over the prior year's
third quarter.
<PAGE>
SEGMENT EXPENSES:
"Franchise Operations". Expenses for the third quarter of 1996 increased
$393,536 as compared with the third quarter of 1995. Expenses of
corporate and hygiene franchising increased by $223,158, while costs of
the Swisher Maids franchising division increased $78,804. The remaining
$91,574 was attributable to Surface Doctor. Cost of products for
resale to franchisees increased by $275,787 which is directly related
to the 45% increase in total product sales.
"Company Operations". Expenses for the third quarter ended July 31,
1996 increased by $136,348 or 33% as compared to third quarter 1995.
This increase in expenses is directly related to the start up expenses of
increased Company operations. The Company hygiene and residential maids
operations are operated in the same manner as a franchise operation. The
Company also uses the Charlotte operations for training new franchisees
and to test new programs for later introduction into the franchise system.
INCOME:
Income before taxes for the three months ended July 31, 1996 decreased
$81,515 or 33% as compared to the 1995 third quarter. Net income was
$163,886 for the quarter ended July 31, 1996, as compared to third quarter
1995 of $150,148. Earnings per share, for the three months ended July 31,
1996, was $.09 on weighted average shares outstanding of 1,853,015, as
compared to the same period last year of $.08 per share on 1,877,686 shares.
SEGMENT INCOME:
"Franchise Operations". Operating income for the three month period ended
July 31, 1996, decreased to $116,648 as compared to the same period last
year of $191,482. Operating income was 5.3% of franchise operating
revenues for the third quarter as compared to prior year third quarter
of 11.9%.
"Company Operations". Operating income for the third quarter 1996
decreased by 12%, with a pre-tax income of $48,635 as compared to third
quarter 1995 of $55,316.
LIQUIDITY AND CAPITAL RESOURCES:
Working capital decreased $417,000 during the first nine months of fiscal
1996 due principally to an increase of $400,000 in the current portion of
Long-Term Debt. Total assets increased by $1,653,000 primarily due to the
acquisition of Surface Doctor, Inc. Current liabilities increased by
$800,000 while long-term liabilities decreased by $425,000. Increases in
accounts payable and accrued expenses reflect the increased activity in
both Company and franchisee operations.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal proceedings
not applicable
Item 2. Changes in Securities
not applicable
Item 3. Defaults Upon Senior Securities
not applicable
Item 4. Submission of Matters to a Vote of Security Holders
not applicable
Item 5. Other information
not applicable
Item 6. Exhibits and Reports on Form 8-K
(1) Exhibits
none
(2) Reports on Form 8-K
none
- -----------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SWISHER INTERNATIONAL, INC.
Registrant
Date - September 16, 1996 Patrick L. Swisher
Patrick L. Swisher
Chief Executive Officer
Date - September 16, 1996 D. Chris Lazenby, CPA
D. Chris Lazenby, CPA
Chief Accountant
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> JUL-31-1996
<CASH> 1,513,122
<SECURITIES> 0
<RECEIVABLES> 2,671,921
<ALLOWANCES> 146,136
<INVENTORY> 156,423
<CURRENT-ASSETS> 4,513,792
<PP&E> 1,051,674
<DEPRECIATION> 384,834
<TOTAL-ASSETS> 9,611,338
<CURRENT-LIABILITIES> 2,786,840
<BONDS> 976,694
0
0
<COMMON> 19,357
<OTHER-SE> 5,743,323
<TOTAL-LIABILITY-AND-EQUITY> 9,611,338
<SALES> 2,325,088
<TOTAL-REVENUES> 7,471,975
<CGS> 2,004,699
<TOTAL-COSTS> 6,741,148
<OTHER-EXPENSES> 17,206
<LOSS-PROVISION> 43,000
<INTEREST-EXPENSE> 184,806
<INCOME-PRETAX> 580,487
<INCOME-TAX> 227,487
<INCOME-CONTINUING> 353,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 353,000
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
</TABLE>
