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 - January 31, 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 February 25,
1997: 1,935,799
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>
January 31,
1997 October 31,
(Unaudited) 1996
----------- -----------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and Cash Equivalents $ 842,440 $ 1,809,590
Restricted Cash 250,000 260,826
Accounts Receivable:
Franchisees 2,179,946 1,716,049
Other 594,019 495,130
Less Allowance for
Doubtful Accounts (130,248) (100,247)
----------- -----------
Net Accounts Receivable 2,643,717 2,110,932
Notes receivable (current year) 999,404 1,023,199
Inventory 164,105 166,042
Prepaid Expenses 152,564 154,586
----------- -----------
TOTAL CURRENT ASSETS 5,052,230 5,525,175
PROPERTY AND EQUIPMENT:
Furniture & Equipment 1,298,520 1,154,491
Less Accumulated Depreciation (471,471) (432,103)
----------- -----------
NET PROPERTY AND EQUIPMENT 827,049 722,388
OTHER ASSETS:
Notes Receivable 2,085,100 2,134,748
Deferred Franchise Costs 111,970 105,040
Intangible Assets, less amortization 1,654,861 1,725,360
----------- -----------
NET OTHER ASSETS 3,851,931 3,965,148
----------- -----------
TOTAL ASSETS $ 9,731,210 $10,212,711
============ ============
(continued)
</TABLE>
<PAGE>
<TABLE>
SWISHER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(continued)
<CAPTION>
January 31,
1997 October 31,
(Unaudited) 1996
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Long-Term Debt, Current Portion $ 1,446,291 $ 1,550,478
Accounts Payable 762,455 1,170,438
Accrued Expenses 119,716 181,132
Deferred Revenue 209,324 224,124
Income Taxes Payable 249,807 259,817
----------- -----------
TOTAL CURRENT LIABILITIES 2,787,593 3,385,989
LONG-TERM DEBT 800,919 858,616
DEFERRED INCOME TAXES 108,480 96,480
----------- -----------
TOTAL LIABILITIES 3,696,992 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; 1,935,799 shares
issued and outstanding at January 31,
1997 and 1,935,799 outstanding at
October 31, 1996 19,359 19,359
Additional Paid-In Capital 4,006,659 4,006,659
Retained Earnings 2,008,200 1,845,608
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 6,034,218 5,871,626
----------- -----------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $ 9,731,210 $10,212,711
=========== ===========
</TABLE>
<PAGE>
<TABLE>
SWISHER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended
January 31,
-------------------------
1997 1996
-------------------------
<S> <C> <C>
REVENUES:
Annuity Revenues:
Product Sales to Franchisees $ 972,076 $ 703,620
Service Fees 433,741 406,177
Royalties 517,405 366,490
Marketing Fees 14,085 10,971
----------- -----------
Total Annuity Revenues 1,937,307 1,487,258
Revenue from Company
Owned Subsidiaries 457,545 595,849
Initial Franchise Sales:
Swisher Hygiene 250,000 134,661
Surface Doctor 75,000 0
Gain on Sale Company-Owned Operation 109,378 0
Other Income 58,990 49,343
----------- -----------
TOTAL REVENUES 2,888,220 2,267,111
----------- -----------
EXPENSES:
Selling, G & A Expenses:
Corporate & Hygiene Franchising 929,769 825,797
Swisher Maid Franchising 73,833 115,499
Surface Doctor Franchising 314,438 0
Cost of Product Sales 832,149 588,819
Expenses of Company
Owned Subsidiaries 415,872 530,415
Interest Expense 49,077 58,131
----------- -----------
TOTAL EXPENSES 2,615,138 2,118,661
----------- -----------
INCOME BEFORE TAXES AND
NON-RECURRING ITEMS 273,082 148,450
PROVISION FOR INCOME TAXES 110,490 60,781
----------- -----------
NET INCOME $ 162,592 $ 87,669
=========== ===========
NET INCOME PER COMMON SHARE $ 0.08 $ 0.05
=========== ===========
WEIGHTED AVERAGE NUMBER OF
SHARE OUTSTANDING 2,119,846 1,841,565
=========== ===========
</TABLE>
<PAGE>
<TABLE>
SWISHER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended
January 31,
------------------------------
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 162,592 $ 87,669
Adjustments to reconcile net income
to net cash provided (used) by
operating activities-
Depreciation and Amortization 71,548 35,320
Change in Assets and Liabilities-
(Increase) decrease in assets-
Accounts receivable (532,785) (308,312)
Inventory 1,937 (11,172)
Prepaid expenses 2,022 9,550
Deferred franchise cost (6,930) (84,652)
Notes receivable 73,443 105,796
Increase (decrease) in liabilities-
Accounts payable (407,983) 437,807
Accrued expenses (61,416) 77,167
Income taxes payable 1,990 24,682
Deferred revenue (14,800) (50,000)
------------ ------------
Total adjustments (872,974) 236,186
------------ ------------
NET CASH (USED) PROVIDED BY
OPERATING ACTIVITIES (710,382) 323,855
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Fixed Assets (144,029) (11,709)
Decrease (increase) in intangible
& other assets 38,319 37,992
------------ ------------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES (105,710) 26,283
------------ ------------
(continued)
</TABLE)
<PAGE>
</TABLE>
<TABLE>
SWISHER INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(continued)
<CAPTION>
Three Months Ended
January 31,
------------------------------
1997 1996
----------- ------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net principal payments under long-term
debt obligations (161,884) (98,833)
Decrease in restricted cash 10,826 -
------------ ------------
NET CASH (USED) PROVIDED BY
FINANCING ACTIVITIES (151,058) (98,833)
------------ ------------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (967,150) 251,305
CASH AND CASH EQUIVALENTS,
Beginning of year 1,809,590 930,492
------------ ------------
CASH AND CASH EQUIVALENTS,
End of 1st quarter $ 842,440 $ 1,181,797
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid year to date for -
Interest $ 44,194 $ 59,013
============ ============
Income taxes $ 108,500 $ 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 January 31, 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 January 31, 1997 and 1996, and the
results of its operations and its cash flows for the three months 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 the Charlotte, NC, Scottsdale, AZ., and
Charleston, SC areas. 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 107 domestic and 10 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 first quarter increased 27% to $2,888,220 as compared to
prior year first quarter of $2,267,111. 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
January 31, 1997 increased 30% to $1,937,307 as compared to prior year
first quarter results of $1,487,258. Revenue derived from Initial
Franchise Sales, including sales of Master Licenses in foreign countries,
increased 141% to $325,000 as compared to prior year first quarter sales
of $134,661. During the first quarter of 1997, the Company sold its
Jacksonville hygiene operations to a franchisee.
"Company Operations". Revenues decreased 23% for the three months ended
January 31, 1997 compared to the prior year first 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 first quarter ended January 31, 1997
increased 23% over first quarter 1996, which represents an increase of
$496,477. Selling, general and administrative expenses increased by 40% to
$1,318,040 as compared to prior year first quarter of $941,296. Expenses
of Company-owned subsidiaries decreased $114,543 from the prior year's
first quarter.
<PAGE>
SEGMENT EXPENSES:
"Franchise Operations". Expenses for the first quarter of 1997 increased
$376,744 as compared with the first quarter of 1996. Of this increase, 83%
or $314,438 is attributable to the acquisition of the Surface Doctor
division and its move from Atlanta, GA to Charlotte, NC. The remaining
increase of $62,306 over the prior year first quarter is attributable to
the continuing Hygiene and Maids franchising operations. Cost of
products for resale to franchisees increased $243,000 over the prior year
first quarter and reflects increased product sales revenues.
"Company Operations". Expenses for the first quarter ended January 31,
1997 decreased by $114,543 or 22% as compared to first 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 January 31, 1997 increased
$124,632 or 84% as compared to the 1996 first quarter. Net income was
$162,592 for the quarter ended January 31, 1997, as compared to first quarter
1996 of $87,669. Earnings per share for the three months ended January 31,
1997, was $.08 on weighted average shares outstanding of 2,119,846, as
compared to the same period last year of $.05 per share on 1,841,565 shares.
SEGMENT INCOME:
"Franchise Operations". Operating income for the three month period ended
January 31, 1997, increased to $231,409 as compared to the same period
last year of $83,016. Operating income was 9.5% of franchise operating
revenues for the first quarter as compared to prior year first quarter
of 5.0%.
"Company Operations". Operating income for the first quarter 1997
decreased by 36%, with a pre-tax income of $41,673 as compared to first
quarter 1996 of $65,434.
LIQUIDITY AND CAPITAL RESOURCES:
Working capital increased $125,450 during the first three months of
1997 due principally to a decrease of $408,000 in accounts payable. Total
assets decreased by $481,500 primarily due to a decrease of $967,000 in cash
and cash equivalents. Current liabilities decreased by $604,000 while
long-term liabilities decreased by $46,000. Decreases in accounts payable
and accrued expenses resulted from cash payments in excess of additional
liabilities for the first quarter of 1997.
<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 - February 25, 1997 Patrick L. Swisher
Patrick L. Swisher
Chief Executive Officer
Date - February 25, 1997 Garnett R. Mucha, CPA
Garnett R. Mucha, CPA
Chief Accountant
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> JAN-31-1997
<CASH> 1,092,440
<SECURITIES> 0
<RECEIVABLES> 2,773,965
<ALLOWANCES> 130,248
<INVENTORY> 164,105
<CURRENT-ASSETS> 5,052,230
<PP&E> 1,298,520
<DEPRECIATION> 471,471
<TOTAL-ASSETS> 9,731,210
<CURRENT-LIABILITIES> 2,787,593
<BONDS> 0
0
0
<COMMON> 19,359
<OTHER-SE> 6,014,859
<TOTAL-LIABILITY-AND-EQUITY> 9,731,210
<SALES> 972,076
<TOTAL-REVENUES> 2,888,220
<CGS> 832,149
<TOTAL-COSTS> 1,703,912
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 30,000
<INTEREST-EXPENSE> 49,077
<INCOME-PRETAX> 273,082
<INCOME-TAX> 110,490
<INCOME-CONTINUING> 162,592
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 162,592
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
