UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended - April 30, 1997
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
Number of share of Common Stock outstanding as of June 12,
1997: 2,082,213
Transitional Small Business Disclosure Format:
[ ] Yes [ X ] 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>
April 30,
1997 October 31,
(Unaudited) 1996
----------- -----------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and Cash Equivalents $ 583,675 $ 1,809,590
Restricted Cash 250,000 260,826
Accounts Receivable:
Franchisees 2,211,814 1,716,049
Other 555,570 495,130
Less Allowance for
Doubtful Accounts (130,247) (100,247)
----------- -----------
Net Accounts Receivable 2,637,137 2,110,932
Notes Receivable (current year) 1,204,786 1,023,199
Inventory 182,528 166,042
Prepaid Expenses 245,196 154,586
----------- -----------
TOTAL CURRENT ASSETS 5,103,322 5,525,175
PROPERTY AND EQUIPMENT:
Furniture & Equipment 1,326,762 1,154,491
Less Accumulated Depreciation (515,805) (432,103)
----------- -----------
NET PROPERTY AND EQUIPMENT 810,957 722,388
OTHER ASSETS:
Notes Receivable 2,317,980 2,134,748
Deferred Franchise Costs 113,315 105,040
Intangible Assets, less amortization 1,678,104 1,725,360
----------- -----------
NET OTHER ASSETS 4,109,399 3,965,148
----------- -----------
TOTAL ASSETS $10,023,678 $10,212,711
============ ============
(continued)
</TABLE>
<PAGE>
<TABLE>
SWISHER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(continued)
<CAPTION>
April 30,
1997 October 31,
(Unaudited) 1996
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Long-Term Debt, Current Portion $ 789,594 $ 1,550,478
Accounts Payable 1,556,348 1,170,438
Accrued Expenses 140,241 181,132
Deferred Revenue 209,323 224,124
Income Taxes Payable 360,617 259,817
----------- -----------
TOTAL CURRENT LIABILITIES 3,056,123 3,385,989
LONG-TERM DEBT 674,113 858,616
DEFERRED INCOME TAXES 108,480 96,480
----------- -----------
TOTAL LIABILITIES 3,838,718 4,341,085
STOCKHOLDERS' EQUITY:
Preferred Stock, $.10 par value;
1,500,000 shares authorized; none
issued - -
Common Stock, $.01 par value; 15,000,000
shares authorized; 2,355,002 shares
issued and outstanding at April 30,
1997 and 1,935,799 outstanding at
October 31, 1996 20,822 19,359
Additional Paid-In Capital 4,009,123 4,006,659
Retained Earnings 2,155,017 1,845,608
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 6,184,962 5,871,626
----------- -----------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $10,023,678 $10,212,711
=========== ===========
</TABLE>
<PAGE>
<TABLE>
SWISHER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
April 30, April 30,
------------------------- -------------------------
1997 1996 1997 1996
------------------------- -------------------------
<S> <C> <C> <C> <C>
REVENUES:
Annuity Revenues:
Product Sales to Franchisees $ 1,352,781 $ 676,474 $ 2,324,857 $ 1,380,094
Service Fees 450,991 400,626 884,732 806,803
Royalties 500,797 382,534 1,018,202 749,024
Marketing Fees 14,314 11,623 28,399 22,594
----------- ----------- ----------- -----------
Total Annuity Revenues 2,318,883 1,471,257 4,256,190 2,958,515
Revenue from Company
Owned Subsidiaries 400,634 684,859 858,179 1,280,709
Initial Franchise Sales:
Swisher Hygiene 95,525 152,500 345,525 287,161
Surface Doctor 159,605 0 234,605 0
Gain on Sale Company-Owned Operation 38,804 0 148,182 0
Other Income 83,201 100,781 142,191 150,124
----------- ----------- ----------- -----------
TOTAL REVENUES 3,096,652 2,409,397 5,984,872 4,676,509
----------- ----------- ----------- -----------
EXPENSES:
Selling, G & A Expenses:
Corporate & Hygiene Franchising 975,025 811,148 1,904,794 1,640,803
Swisher Maid Franchising 34,864 110,930 108,697 222,311
Surface Doctor Franchising 357,499 0 671,937 0
Cost of Product Sales 1,052,487 572,776 1,884,636 1,161,595
Expenses of Company
Owned Subsidiaries 386,774 658,504 802,646 1,189,180
Interest Expense 45,476 66,751 94,553 124,882
----------- ----------- ----------- -----------
TOTAL EXPENSES 2,852,125 2,220,109 5,467,263 4,338,771
----------- ----------- ----------- -----------
INCOME BEFORE TAXES AND
NON-RECURRING ITEMS 244,527 189,288 517,609 337,738
NON-RECURRING ITEMS
Loss on sale of assets 0 17,206 0 17,206
PROVISION FOR INCOME TAXES 97,710 70,637 208,200 131,418
----------- ----------- ----------- -----------
NET INCOME $ 146,817 $ 101,445 $ 309,409 $ 189,114
=========== =========== =========== ===========
EARNINGS PER COMMON SHARE AND
COMMON SHARE EQUIVALENT
PRIMARY EARNINGS $ 0.07 $ 0.06 $ 0.15 $ 0.11
=========== =========== =========== ===========
COMMON SHARES AND EQUIVALENTS 2,355,002 1,794,649 2,333,495 1,794,649
=========== =========== =========== ===========
FULLY DILUTED EARNINGS $ 0.06 $ 0.06 $ 0.13 $ 0.11
=========== =========== =========== ===========
COMMON SHARES AND EQUIVALENTS 2,398,958 1,794,649 2,386,308 1,794,649
=========== =========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
SWISHER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Six Months Ended
April 30,
------------------------------
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 390,409 $ 189,114
Adjustments to reconcile net income
to net cash provided (used) by
operating activities-
Depreciation and amortization 147,750 70,639
Change in Assets and Liabilities-
(Increase) decrease in assets-
Accounts receivable (526,205) (333,214)
Inventory (16,486) (21,442)
Prepaid expenses (90,610) (21,063)
Deferred franchise costs (29,691) (60,748)
Notes receivable (364,819) 58,234
Increase (decrease) in liabilities-
Accounts payable 385,910 190,491
Accrued expenses (40,891) (2,905)
Income taxes payable 112,800 95,319
Deferred revenue (14,801) (65,000)
------------ ------------
Total adjustments (437,043) (89,689)
------------ ------------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES (127,634) 99,425
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (172,271) (29,916)
Sale of fixed asset - 336,935
Decrease (increase) in intangible
& other assets 4,624 (149,144)
------------ ------------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES (167,647) 157,875
------------ ------------
(continued)
</TABLE)
<PAGE>
</TABLE>
<TABLE>
SWISHER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(continued)
<CAPTION>
Six Months Ended
April 30,
------------------------------
1997 1996
----------- ------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net principal payments under long-term
debt obligations (945,387) (449,441)
Proceeds from stock transactions 3,927 37,125
Decrease in restricted cash 10,826 10,826
------------ ------------
NET CASH (USED) PROVIDED BY
FINANCING ACTIVITIES (930,634) (412,316)
------------ ------------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (1,225,915) (155,016)
CASH AND CASH EQUIVALENTS,
Beginning of year 1,809,590 930,492
------------ ------------
CASH AND CASH EQUIVALENTS,
End of 2nd quarter $ 583,675 $ 775,476
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid year to date for -
Interest $ 84,502 $ 133,420
============ ============
Income taxes $ 94,500 $ 36,100
============ ============
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
GENERAL :
The financial information for the periods ended April 30, 1997 and 1996
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 April 30, 1997 and 1996, and the
results of its operations and its cash flows for the six-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, NC; Space Coast, FL.; and Tulsa, OK.; and the Company's
residential maids operations located in Charlotte, NC and Scottsdale, AZ.
Subsidiaries are actively engaged in providing hygiene services and maid
services directly to customers in the same manner as franchisees.
On July 30, 1996, the Company entered into 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 116 domestic and 12 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 second quarter increased 29% to $3,096,652 as compared to
prior year second quarter of $2,409,397. The major factor in the overall
increase is the continued growth in Annuity Revenues.
SEGMENT REVENUES:
"Franchise Operations." Annuity Revenues for the three month period
ended April 30, 1997 increased 58% to $2,318,883 as compared to prior
year second quarter results of $1,471.257. Revenue derived from Initial
Franchise Sales, including sales of Master Licenses in foreign countries,
increased 67% to $255,130 as compared to prior year second quarter sales
of $152,500.
"Company Operations." Revenues decreased 42% for the three months ended
April 30, 1997 compared to the prior year second quarter. This decrease
is attributable to the sales in July and December, 1996 of the Houston
and Jacksonville operations to franchisees.
EXPENSES:
Total pre-tax expenses for the second quarter of 1997 increased 28% over
second quarter 1996, which represents an increase of $632,016. Selling,
general and administrative expenses increased by 48% to $1,367,388
compared to prior year second quarter of $922,078. Expenses of Company-
owned subsidiaries decreased $271,730 from the prior year's second quarter.
<PAGE>
SEGMENT EXPENSES:
"Franchise Operations." Expenses for the second quarter of 1997
increased $445,310 compared with the second quarter of 1996. Of this
increase, 80% or $357,499 is attributable to the acquisition and
operation of the Surface Doctor division. The remaining increase of
$87,811 over the prior year second quarter is attributable to the
continuing Hygiene and Maids franchising operations. Cost of products
for resale to franchisees increased $479,711 or 84% over the prior year
second quarter and reflects a 100% increase in product sales revenues.
"Company Operations." Expenses for the quarter ended April 30, 1997
decreased by $271,730 or 41% as compared to second quarter 1996. This
decrease in expenses is attributable to the sale of the company's
Houston, TX and Jacksonville, FL hygiene operations to franchisees. The
Company hygiene and residential maids operations are operated in the
same manner as franchise operations. 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 April 30, 1997 increased
$72,445 or 42% compared to the 1996 second quarter. Net income was
$146,817 for the quarter ended April 30, 1997, compared to second
quarter 1996 of $101,445. Primary earnings per share for the three months
ended April 30, 1997, was $.07 on common shares and common share
equivalents of 2,355,002, as compared to the same period last year of $.06
per share on 1,794,649 shares.
SEGMENT INCOME:
"Franchise Operations." Operating income for the three month period
ended April 30, 1997, increased to $191,863 compared to the same
period last year of $163,000. Operating income was 7.1% of franchise
operating revenues for the second quarter compared to prior year
second quarter of 9.5%.
"Company Operations." Operating income for the second quarter 1997
decreased to $13,860 as compared to second quarter 1996 of $26,355.
LIQUIDITY AND CAPITAL RESOURCES:
Working capital decreased $91,987 during the first six months of 1997
due principally to an increase in accounts payable. Total assets decreased
by $189,033 primarily due to a decrease in cash. Current liabilities
decreased by $329,866 while long-term liabilities decreased by $172,503,
both of which reflect the use of cash.
<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 - June 12, 1997 Patrick L. Swisher
Patrick L. Swisher
Chief Executive Officer
Date - June 12, 1997 Charles H. Cendrowski
Charles H. Cendrowski
Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<CASH> 833,675
<SECURITIES> 0
<RECEIVABLES> 2,767,384
<ALLOWANCES> 130,247
<INVENTORY> 182,528
<CURRENT-ASSETS> 5,103,322
<PP&E> 1,326,762
<DEPRECIATION> 515,805
<TOTAL-ASSETS> 10,023,678
<CURRENT-LIABILITIES> 3,056,123
<BONDS> 0
0
0
<COMMON> 20,822
<OTHER-SE> 4,009,123
<TOTAL-LIABILITY-AND-EQUITY> 10,023,678
<SALES> 1,352,781
<TOTAL-REVENUES> 3,096,652
<CGS> 1,052,487
<TOTAL-COSTS> 1,799,638
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45,476
<INCOME-PRETAX> 244,527
<INCOME-TAX> 97,710
<INCOME-CONTINUING> 146,817
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 146,817
<EPS-PRIMARY> .07
<EPS-DILUTED> .06
</TABLE>
