U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended August 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 33-10984-LA
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TUFCO INTERNATIONAL, INC.
(Name of Small Business Issuer as specified in its charter)
Nevada 95-4071623
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization identification No.)
Pioneer Lane, Gentry, AR 72734
(Address of principal executive offices)
Registrant's telephone no., including area code: (501) 736-2201
No Change
Former name, former address, and former fiscal year, if
changed since last report.
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act: None
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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. Yes _X_
No __.
Common Stock outstanding at January 20, 1998 - 6,965,800 shares of $.001 par
value Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
1
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FORM 10-QSB
FINANCIAL STATEMENTS AND SCHEDULES
TUFCO INTERNATIONAL, INC.
For the Quarter Ended August 31, 1997.
The following financial statements and schedules of the registrant and its
consolidated subsidiaries are submitted herewith:
PART I - FINANCIAL INFORMATION
Page of
Form 10-Q
Item 1. Financial Statements:
Condensed Consolidated Balance Sheet--August 31, 1997 3
Condensed Consolidated Statements of Income for the three months
ended August 31, 1997 and 1996 5
Condensed Consolidated Statements of Cash Flows--for the
three months ended August 31, 1997 and 1996 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................... 8
PART II - OTHER INFORMATION
Page
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6(a).Exhibits 11
Item 6(b).Reports on Form 8-K 11
2
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TUFCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
AUGUST 31, 1997
Unaudited
ASSETS
CURRENT ASSETS:
Cash $ 851
Accounts and notes receivable, less allowance
for doubtful accounts of $250,000
Trade 1,212,196
Affiliates 968,679
Inventories 525,403
Deferred income tax benefits 104,495
Other current assets 72,143
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2,883,767
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Property and equipment 1,247,276
Accumulated depreciation 490,213
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757,063
------------------
Reacquired franchise territory 356,558
Accumulated amortization 253,967
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102,591
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Other assets 4,190
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$ 3,747,611
==================
3
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt 48,761
Trade accounts payable 1,778,732
Income taxes payable 47,255
Accrued expenses 160,823
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2,035,571
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LONG-TERM DEBT 425,053
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DEFERRED INCOME TAXES 32,361
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COMMON STOCKHOLDERS' EQUITY:
Common stock, $.001 par value; authorized 50,000,000
shares; issued and outstanding 6,965,800 shares 6,966
Retained earnings 1,077,812
Other common stockholders' equity 169,848
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1,254,626
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$ 3,747,611
==================
4
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TUFCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the three months ended August 31, 1997 and 1996
Unaudited
1997 1996
-------------------------------------
NET SALES:
Trade $ 1,413,199 $ 1,666,022
Affiliates 324,783 329,450
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1,737,982 1,995,472
-------------------------------------
Cost of sales 1,197,579 1,437,806
Selling expenses 101,471 221,707
General and administrative expenses 298,245 310,149
Other income (29,471) (27,437)
-------------------------------------
1,567,824 1,942,225
-------------------------------------
Income before taxes 170,158 53,247
-------------------------------------
Provision for income taxes
Current 63,007 25,190
Deferred 1,128 4,398
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64,135 29,558
-------------------------------------
Net Income $ 106,023 $ 23,689
=====================================
EARNINGS PER SHARE:
Net income $ 0.01522 $ 0.00305
=====================================
Weighted average number of
shares outstanding 6,965,800 7,777,800
=====================================
5
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TUFCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended August 31, 1997 and 1996
Unaudited
1997 1996
--------------------------------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES $ (6,687) $ 66,172
--------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (24,310) (74,007)
Proceeds from sale of property
and equipment 20,500 0
Proceeds from sale of reacquired
franchise territory 0 3,528
--------------------------------------
Net cash provided by (used in)
investing activities (3,810) (70,479)
--------------------------------------
CASH FLOWS FROM FINANCIAL ACTIVITIES
Principal payments on long-term debt (10,049) (9,648)
--------------------------------------
Net cash used in financing
activities (10,049) (9,648)
--------------------------------------
DECREASE IN CASH (20,546) (13,955)
CASH, BEGINNING OF PERIOD 21,397 14,606
--------------------------------------
CASH, END OF PERIOD $ 851 $ 651
======================================
6
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TUFCO INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
NOTE 1: BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements are presented in
accordance with the requirements of Form 10-QSB and consequently do not include
all of the disclosures normally required by generally accepted accounting
principles for complete financial statements or those normally made in the
Company's annual Form 10-KSB filing. Accordingly, the reader of these financial
statements may wish to refer to the Company's financial statements for the year
ended May 31, 1997 included in the Company's Form 10-KSB for further
information.
The financial information has been prepared in accordance with generally
accepted accounting principles and has not been audited. In the opinion of
management, the information presented reflects all adjustments necessary for a
fair statement of interim results. All such adjustments are of a normal and
recurring nature. The condensed consolidated results of operations for the three
months ended August 31, 1997 and 1996 are not necessarily indicative of the
operating results for the full year.
7
<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company is engaged in the business of selling and installing
industrial flooring systems. The following Management's Discussion and Analysis
should be read in conjunction with the Management's Discussion and Analysis
included in the Company's Form 10-KSB for the year ended May 31, 1997.
Financial Condition
Total assets at August 31, 1997 were $3,747,611 compared to $3,298,429 at
the year ended May 31, 1997 an increase of approximately 13.6%. The Company's
cash position remains limited, $851 at August 31, 1997 compared to $21,397 at
May 31, 1997. During the last several years, the Company's cash position has
been limited and its ability to expand its operations in a meaningful way is
restricted by its limited cash position.
Receivables from non-affiliates increased from $900,123 at May 31, 1997 to
$1,212,196 at August 31, 1997 an increase of approximately 34.67%. This
significant increase was primarily the result of decreased collections.
Receivables from affiliates were up from $756,874 at May 31, 1997 to $968,679 at
August 31, 1997 and increase of approximately 27.8%. The reason for this
increase was also primarily the result of the decreased collections.
Inventories remained essentially the same - $525,403 at August 31, 1997
compared to $535,155 at May 31, 1997.
The Company does not currently have any lines of credit and has
historically borrowed short term funds from its affiliates and from commercial
banks for working capital. At August 31, 1997, the Company had total liabilities
to banks of which $36,007 was classified as current debt and $48,353 which was
classified as long-term debt. At May 31, 1997, the Company had total liabilities
to banks of which $444,323 was classified as current debt. The Company's bank
debt has historically been renewed in June of each year. This loan is secured by
the Company's real property and is guaranteed by Donald L. Cox and Lucille M.
Cox, officers and directors of the Company.
At August 31, 1997, total liabilities were $2,492,985 compared to
$2,150,657 at May 31, 1997 an increase of approximately 15.92%. The increase was
primarily due to decreased collections in accounts receivable. During this same
period, there was an increase of approximately 13.62% in total assets. During
the same period, stockholder's equity increased 9.31% from $1,147,772 to
$1,254,626.
8
<PAGE>
Results of Operations
The Company's revenues are primarily attributed to the sale of flooring
components to franchisees and licensees, the sale and installation of complete
flooring jobs by the Company. Effective March 1, 1997, the Company discontinued
the sale and installation of interior ceiling and wall systems. The Company
discontinued the product line to concentrate on Tufco flooring.
Total net sales for the three month period ended August 31, 1997, were
$1,737,982 compared to $1,995,472 for the three month period ended August 31,
1996, a decrease of approximately 12.9%. The decrease in sales was attributable
to a decrease in flooring installations performed by the company. During the
past year, several franchise territories have been divided into smaller
territories and the Company has added several new franchises.
Operating Expenses. Cost of sales during the three month period ended
August 31, 1997 was 69% of total sales compared to 72% for the three month
period ended August 31, 1996. The decrease is attributable to lower installation
costs incurred.
For the three month period ended August 31, 1997, total general and
administrative expenses were $298,245 (approximately 17% of total sales)
compared to $310,149 (16% of total sales) for the three month period ended
August 31, 1996.
Total cost of sales and operating expenses for the three month period
ended August 31, 1997 were $1,567,824 (90% of total sales) compared to
$1,942,225 (97% of total sales) for the three month period ended August 31,
1996. The decrease in selling expenses of $120,236 for the quarter ended August
31, 1997 compares to August 31, 1996 was the primary reason for the decrease in
cost of goods sold and operating expenses as a percentage of revenue.
Net Income. For the three month period ended August 31, 1997, the Company
had net income of $106,023 compared to net income of $23,689 for the three month
period ended August 31, 1996. The net income was primarily the result of the
reduction in selling expenses.
Inflation
The Company's business and operations have not been materially affected by
inflation during the past year and the current fiscal year.
9
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. None.
Item 2. Changes in Securities. None.
Item 3. Defaults Upon Senior Securities. None.
Item 4. Submission of Matters to a Vote of Security Holders. None.
Item 5. Other Information.
Item 6(a). Exhibits. None.
Item 6(b). Reports on Form 8-K. None
10
<PAGE>
SIGNATURE
In accordance with the requirements of the Exchange Act, the Registrant
has caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
Dated: February __, 1998 TUFCO INTERNATIONAL, INC.
By /s/ Donald L. Cox
Donald L. Cox
President
Principal Executive Officer
By /s/ Brent E. Mills
Brent E. Mills
Controller
Principal Financial Officer
11
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TUFCO
INTERNATIONAL, INC.'S FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> AUG-31-1997
<CASH> 851
<SECURITIES> 0
<RECEIVABLES> 2,430,875
<ALLOWANCES> 250,000
<INVENTORY> 525,403
<CURRENT-ASSETS> 2,883,767
<PP&E> 1,247,236
<DEPRECIATION> (490,213)
<TOTAL-ASSETS> 3,747,611
<CURRENT-LIABILITIES> 2,035,571
<BONDS> 0
0
0
<COMMON> 6,966
<OTHER-SE> 1,247,660
<TOTAL-LIABILITY-AND-EQUITY> 3,747,611
<SALES> 1,737,982
<TOTAL-REVENUES> 1,737,982
<CGS> 1,197,579
<TOTAL-COSTS> 1,567,824
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 170,518
<INCOME-TAX> 64,135
<INCOME-CONTINUING> 106,028
<DISCONTINUED> 0
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<NET-INCOME> 106,023
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