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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended: September 30, 1995
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________________ to ____________________
Commission file number: 0-17385
----------------------
DYNA GROUP INTERNATIONAL, INC.
--------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEVADA 87-0404753
--------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1801 W. 16th Street, Broadview, Illinois 60153
------------------------------------------- --------------------
(Address of principal executive offices) (Zip Code)
708 - 450-9200
-----------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable
-----------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report.)
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
The number of shares outstanding of the registrant's common stock as of
September 30, 1995 was 7,465,147.
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DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS September 30, December 31,
------ 1995 1994
------------- -------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 24,789 $ 305,610
Accounts receivable, less allowance
for doubtful accounts of $92,000 2,712,050 1,915,466
Inventories 3,363,048 2,379,669
Prepaid expenses and other 187,761 111,589
Deferred tax assets 71,660 71,660
------------ ------------
6,359,308 4,783,994
------------ ------------
PROPERTY AND EQUIPMENT, less
accumulated depreciation of
$1,879,672 and $1,661,778 1,173,307 1,060,108
------------ ------------
OTHER ASSETS:
Cost in excess of net assets of acquired
business, less accumulated amortization
of $95,993 and $81,084 39,759 54,668
Investment in joint venture 31,691 25,490
Due from joint venture 28,190 39,441
Other 106,313 76,085
------------ -----------
205,953 195,684
------------ -----------
$ 7,738,568 $ 6,039,786
============ ===========
</TABLE>
See accompanying notes.
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DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
LIABILITIES AND September 30, December 31,
STOCKHOLDERS' EQUITY 1995 1994
-------------------- ------------ -----------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable to banks $ 1,757,000 $ 740,000
Notes payable related party 450,000 500,000
Accounts payable 1,141,659 648,650
Accrued expenses 523,638 481,829
Current maturities of long-term debt 145,480 145,480
------------ -----------
4,017,777 2,515,959
------------ -----------
LONG-TERM DEBT BANK: 728,189 835,197
------------ -----------
STOCKHOLDERS' EQUITY:
Common stock $.001 par value - authorized,
100,000,000 shares; issued 8,179,704 8,180 8,180
Capital in excess of par value 950,687 944,574
Retained earnings 2,202,626 1,859,135
Treasury stock - 714,557 and 684,057
shares, at cost (143,657) (100,196)
Unearned compensation (25,234) (23,063)
------------ -----------
2,992,602 2,688,630
------------ -----------
$ 7,738,568 $ 6,039,786
============ ===========
</TABLE>
See accompanying notes.
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DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30,
1995 1994
------------ -----------
<S> <C> <C>
NET SALES $ 3,077,217 $ 2,886,374
COST OF SALES 1,677,875 1,566,475
----------- -----------
Gross profit 1,399,342 1,319,899
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,005,227 947,711
----------- -----------
Operating income 394,115 372,188
INTEREST EXPENSE 61,608 44,947
----------- -----------
GAIN FROM JOINT VENTURE 13,551 ----
----------- -----------
Income before income
taxes 346,058 327,241
PROVISION FOR INCOME TAXES
131,502 113,133
----------- -----------
NET INCOME $ 214,556 $ 214,108
=========== ===========
INCOME PER COMMON SHARE $ .03 $ .03
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 7,465,147 7,513,647
</TABLE>
See accompanying notes.
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DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1995 1994
------------ ------------
<S> <C> <C>
NET SALES $ 7,241,424 $ 7,387,353
COST OF SALES 3,803,578 3,937,170
------------ ------------
Gross profit 3,437,846 3,450,183
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 2,727,749 2,551,140
------------ ------------
Operating income 710,097 899,043
INTEREST EXPENSE 162,280 126,041
------------ ------------
GAIN FROM JOINT VENTURE 6,201 ----
------------ ------------
Income before income
taxes 554,018 773,002
PROVISION FOR INCOME TAXES 210,527 286,088
------------ ------------
NET INCOME $ 343,491 $ 486,914
============ ============
INCOME PER COMMON SHARE $ .05 $ .07
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 7,464,747 7,478,647
</TABLE>
See accompanying notes.
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DYNA GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
CASH FLOWS FROM OPERATING ACTIVITIES: 1995 1994
-------------- --------------
<S> <C> <C>
Net income $ 343,491 $ 486,914
Adjustments to reconcile income from
operations to net cash used
by operating activities -
Depreciation and amortization 232,803 227,862
Provision for losses on accounts receivable 30,888 63,811
Amortization of unearned compensation 11,892 9,886
Other ----- 24,095
(Gain) from joint venture (6,201) -----
Change in assets and liabilities:
(Increase) in accounts receivable (827,472) (200,363)
(Increase) in inventories (983,379) (360,315)
Decrease (increase) in prepaid expenses and other (76,172) 17,527
Increase in accounts payable 493,009 194,395
Increase in accrued expenses 41,809 128,443
Decrease (increase) in other assets (18,977) (29,403)
---------- ----------
Cash provided (used) by operating activities (758,309) 562,852
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (331,093) (237,149)
---------- ----------
Cash used by investing activities (331,093) (237,149)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (107,008) (30,274)
Increase (decrease) in notes payable 967,000 (511,000)
Repurchase common stock (51,411) -----
---------- ----------
Cash provided (used) by financing activities 808,581 (541,274)
---------- ----------
DECREASE IN CASH (280,821) (215,571)
CASH, beginning of period 305,610 290,870
---------- ----------
CASH, end of period $ 24,789 $ 75,299
========== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for -
Interest $ 160,739 $ 101,712
Income Taxes 90,522 78,258
</TABLE>
See accompanying notes.
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DYNA GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1 - FINANCIAL INFORMATION
The consolidated financial statements included herein have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to or as permitted by such
rules and regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading. These financial
statements should be read in conjunction with the consolidated financial
statements and footnotes thereto contained in the Company's Annual Report on
Form 10-K for the year ended December 31, 1994.
The financial information included herein at September 30, 1995 and for
the three months and nine months ended September 30, 1995 and September 30,
1994 is unaudited and, in the opinion of the Company, reflects all adjustments
(which includes only normal recurring adjustments) necessary for the fair
presentation of financial position as of that date and the results of
operations for those periods. The information in the consolidated balance
sheet as of December 31, 1994 was derived from the Company's audited financial
statements for 1994.
NOTE 2 - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
September 30, 1995 December 31, 1994
------------------ -----------------
<S> <C> <C>
Raw materials and work in process $ 1,482,587 $ 839,827
Finished goods 1,880,461 1,539,842
----------- -----------
$ 3,363,048 $ 2,379,669
=========== ===========
</TABLE>
NOTE 3 - NOTES PAYABLE TO BANKS
The Company has an agreement with a bank that provides for maximum
aggregate borrowing of $2,750,000 on qualified accounts receivable and
inventories as defined. This debt is represented by a revolving credit note
with a due date of June 30, 1996, and with interest payable at prime plus 1/2
percent (9 1/4% at September 30, 1995). The note is collateralized by accounts
receivable and inventory. At September 30, 1995, the Company had approximately
$471,000 available for borrowing and was in compliance with all of its bank
covenants.
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DYNA GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 4 - NOTE PAYABLE TO RELATED PARTY
In December 1994, the Company borrowed $560,000 from a bank to repay the
long-term debt due to the major stockholder. Concurrently, the major
stockholder loaned the Company $500,000 as evidenced by a promissory note due
December 14, 1995 with interest at prime plus 1/2 percent (9 1/4% at September
30, 1995). The proceeds from this loan were used to reduce current
indebtedness to the bank.
NOTE 5 - INCOME TAXES
The provision for income taxes from operations for the three months and
nine months ended September 30, 1995 and September 30, 1994 reflect the
Company's estimated effective income tax rate for the full year. These
effective rates differed from the federal statutory income tax rate primarily
because of the graduated federal income tax rate structure.
NOTE 6 - LONG-TERM DEBT
In September 1993, the Company borrowed $465,159, with interest at 7.74%,
secured by land and building, and payable in monthly installments of $5,580
for principal and interest, through September 17, 1998, at which time the
balance of the principal is due. The proceeds from this borrowing were used
to repay the previous 9% first mortgage loan. The balance due on this debt is
$396,995 at September 30, 1995.
In December 1994, the Company borrowed $560,000, secured by a personal
investment account of the major stockholder, and a second mortgage on the land
and building. This note is payable in monthly installments of $9,333 plus
interest at prime plus 1/2% (9 1/4% at September 30, 1995) through December 14,
1999. The proceeds from this note were used to retire the long-term
indebtedness of $536,211 to the major stockholder. The outstanding balance on
this debt was $476,000 at September 30, 1995.
NOTE 7 - STOCKHOLDERS' EQUITY
During the first quarter of 1995, the Company repurchased 64,000 shares of
stock for its treasury at a cost of $51,411.
In May 1995, the Company issued 37,500 shares of treasury stock to
employees as a bonus. In connection with this transaction, the Company
recorded $14,063 in unearned compensation which is being amortized over three
years. Also in May, 1995 the Company redeemed 4,000 shares of stock at no
cost.
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
The Company's working capital ratio declined to approximately 1.6 to 1,
and net cash in bank decreased by $280,821.
Operating activities used $758,309. Income from operations and non-cash
adjustments provided $612,873. Changes in net working capital items and other
assets used $1,371,182. Net working capital decreased primarily as a result of
increases in inventory and accounts receivable. The increase in receivables
was the result of higher sales volumes in August and September. Anticipated
strong sales during the fourth quarter 1995 prompted the increase in
inventories. The use of cash was partially offset by a substantial increase in
accounts payable. Capital expenditures, primarily dies and molds, used
$331,093. Financing activities provided $808,581. Payments on long-term debt
and the repurchase of common stock used $158,419, while an increase in notes
payable provided $967,000.
At September 30, 1995 the Company has a revolving line of credit with a
bank allowing borrowing up to $2,750,000 against qualified accounts receivable
and inventory. At September 30, 1995 approximately $471,000 was available for
borrowing. This line of credit is due June 30, 1996.
As of September 30, 1995, there are no material commitments for future
capital expenditures, and management does not anticipate any major expenditures
in the foreseeable future. It is management's belief that the Company's
present facilities will be adequate to meet its current and future needs.
Results of Operations
Net sales for the three months ended September 30, 1995 as compared to the
three months ended September 30, 1994 increased by $190,843 or 6.6%. This
increase was due to higher volumes with the company's major retail customers as
well as a major new client in the company's premium products division. Gross
margin percent remained virtually unchanged, declining a slight .2%.
Selling, general and administrative expenses increased by $57,516. This
increase was related to introducing new products and improving product
presentation. The Company is continuing its emphasis on cost control and views
these increased expenditures as an investment for future growth.
Interest expense increased by $16,661 as a result of higher borrowing
levels.
The Company's joint venture operation showed a gain of $13,551 during the
quarter ended September 30, 1995.
The above discussed factors resulted in an after tax profit from operations
of $214,556 for the quarter ended September 30, 1995 as compared to $214,108
for the quarter ended September 30, 1994.
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For the nine months ended September 30, 1995 as compared to the nine
months ended September 30, 1994 sales decreased by $145,929 or 2.0%. This
decrease was a result of factors present during the first six months of the
year--restructuring of the sales representative force and a change in some
customer buying patterns. Gross margin percent increased a nominal .8%.
Selling, general and administrative expenses for the nine months ended
September 30, 1995 increased by $176,609. This increase was related to the
introduction of new products, improving product presentation, and added
personnel. The Company is continuing its emphasis on cost control, and views
these increased expenditures as necessary for future growth and to better
service the Company's customer base.
Interest expense for the nine months ended September 30, 1995 increased by
$36,239 over the similar period in 1994, primarily as a result of higher
borrowing levels.
The Company's joint venture showed a gain of $6,201 for the nine months
ended September 30, 1995. The Company anticipates as the volume of work done
by the joint venture increases, it will become more profitable, and additional
cost savings will be realized.
The above discussed factors resulted in an after tax profit from
operations of $343,491 for the nine months ended September 30, 1995 as compared
to $486,914 for the nine months ended September 30, 1994.
The income tax provisions for the three and nine months ended September
30, 1995 and September 30, 1994 were based upon the Company's estimate of the
tax for the full year.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None.
(b) On August 29, 1995 the Company filed Form 8-K in reference to a change in
accountants from Arthur Andersen LLP to BDO Seidman, LLP.
<PAGE> 12
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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.
DYNA GROUP INTERNATIONAL, INC.
----------------------------------------
(Registrant)
Date: November 1, 1995
------------------
/s/ Roger T. Tuttle
----------------------------------------
(Signature) Roger R. Tuttle, Chairman of the Board and
Chief Executive Officer
Date: November 1, 1995
------------------
/s/ Thomas J. Heslinga
----------------------------------------
(Signature) Thomas J. Heslinga, Treasurer (Principal
Accounting and
Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 24789
<SECURITIES> 0
<RECEIVABLES> 2804050
<ALLOWANCES> 92000
<INVENTORY> 3363048
<CURRENT-ASSETS> 6359308
<PP&E> 3052979
<DEPRECIATION> 1879672
<TOTAL-ASSETS> 7738568
<CURRENT-LIABILITIES> 4017777
<BONDS> 728189
<COMMON> 8180
0
0
<OTHER-SE> 2984422
<TOTAL-LIABILITY-AND-EQUITY> 7738568
<SALES> 7241424
<TOTAL-REVENUES> 7241424
<CGS> 3803578
<TOTAL-COSTS> 3803578
<OTHER-EXPENSES> 2721548
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 162280
<INCOME-PRETAX> 554018
<INCOME-TAX> 210527
<INCOME-CONTINUING> 343491
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 343491
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
