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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 February 28, 1998
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 (I.R.S. employer
of incorporation or identification No.)
organization)
Pioneer Lane, Gentry, AR 72734
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(Address of principal executive offices)
Registrant's telephone no., including area code: (501) 736-2201
No Change
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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 June 16, 1998 - 6,965,800 shares of $.001 par
value Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
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<PAGE>
FORM 10-QSB
FINANCIAL STATEMENTS AND SCHEDULES
TUFCO INTERNATIONAL, INC.
For the Quarter Ended February 28, 1998.
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
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Item 1. Financial Statements:
Condensed Consolidated Balance Sheet--February 28, 1998 3
Condensed Consolidated Statements of Income for the three months
and nine months ended February 28, 1998 and 1997 5
Condensed Consolidated Statements of Cash Flows--for the three months
and nine months ended February 28, 1998 and 1997 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
<PAGE>
TUFCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
FEBRUARY 28, 1998
Unaudited
ASSETS
CURRENT ASSETS:
Cash $ 5,974
Accounts and notes receivable, less allowance
for doubtful accounts of $185,000
Trade 818,469
Affiliates 849,029
Inventories 470,685
Deferred income tax benefits 79,606
Other current assets 10,354
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2,234,117
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Property and equipment 1,238,234
Accumulated depreciation 511,870
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726,364
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Reacquired franchise territory 356,558
Accumulated amortization 267,608
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88,950
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Other assets 4,190
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$ 3,053,621
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3
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 50,108
Trade accounts payable 1,104,100
Income taxes payable 76,485
Accrued expenses 31,895
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1,262,588
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LONG-TERM DEBT 399,032
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DEFERRED INCOME TAXES 35,492
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COMMON STOCKHOLDERS' EQUITY:
Common stock, $.001 par value; authorized
50,000,000 shares; issued and
outstanding 6,965,800 shares 6,966
Retained earnings 1,179,195
Other common stockholders' equity 170,348
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1,356,509
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$ 3,053,621
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4
<PAGE>
TUFCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the three months and nine months ended February 28, 1998 and 1997
Unaudited
<TABLE>
<CAPTION>
1998 1997
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3 MONTHS 9 MONTHS 3 MONTHS 9 MONTHS
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<S> <C> <C> <C> <C>
NET SALES:
Trade $1,355,746 $3,835,214 $1,619,428 $4,708,366
Affiliates 470,821 1,174,609 431,370 1,255,750
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1,826,567 5,009,823 2,050,798 5,964,116
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Cost of sales 1,282,286 3,510,643 1,515,190 4,305,998
Selling expenses 88,157 305,861 192,446 605,984
General and administrati 352,861 937,952 400,768 1,005,061
Bad debts 9,035 17,488 86,103 86,103
Other income (32,555) (90,911) (3,748) (44,336)
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1,699,784 4,681,033 2,190,759 5,958,810
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Income (loss) before taxes 126,783 328,790 (139,961) 5,306
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Provision (credit) for income
taxes
Current 44,228 92,237 (67,752) 540
Deferred 789 29,148 21,434 25,251
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45,017 121,385 (46,318) 25,791
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Net Income (loss) $ 81,766 $ 207,405 $ (96,643) $ (20,485)
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INCOME (LOSS) PER SHARE:
Net income (loss) $ 0.01174 $ 0.02977 $ 0.01204 $ 0.00263
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Weighted average number of
shares outstanding 6,965,800 6,965,800 7,777,800 7,777,800
================================================================
</TABLE>
5
<PAGE>
TUFCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months and nine months ended February 28, 1998 and 1997
Unaudited
<TABLE>
<CAPTION>
1998 1997
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3 MONTHS 9 MONTHS 3 MONTHS 9 MONTHS
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<S> <C> <C> <C> <C>
NET SALES PROVIDED BY (USED IN)
Operating Activities $ 89,286 $ 126,832 $ 12,314 $ (7,606)
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CASH FLOWS FROM INVESTING ACTIVITIES
Advances to employee stock
ownership plan (101,764) (101,764)
Proceeds from sale of property 20,500
and equipment
Proceeds from sale of 7,120
franchise territory
Purchase of property and equ (26,768) (132,616)
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Net cash provided by (used in (101,764) (108,032) 0 (125,496)
investing activities ----------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt (12,796) (34,723) (11,590) (29,333)
Principal payments on short-term (125,000)
bank notes
Proceeds from long-term debt 275,000
Proceeds from stock issued for future 500 500
Income rights
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Net cash provided by (used in) (12,296) (34,223) (11,590) 120,667
financing activities
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INCREASE (DECREASE) IN CASH (24,774) (15,423) 724 (12,435)
CASH, BEGINNING OF PERIO 30,748 21,397 1,447 14,606
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CASH, END OF PERIOD $ 5,974 $ 5,974 $ 2,171 $ 2,171
=================================================================
</TABLE>
6
<PAGE>
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 and nine months ended February 28, 1998 and 1997 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 February 28, 1998 were $3,053,621 compared to $3,298,429
at the year ended May 31, 1997. The Company's cash position remains limited,
$5,974 at February 28, 1998 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 decreased from $900,123 at May 31, 1997 to
$818,469 at February 28, 1998 a decrease of approximately 9.07%. This slight
decrease was primarily the result of increased collections. Receivables from
affiliates were up from $756,874 at May 31, 1997 to $849,029 at February 28,
1998.
Inventories decreased to $470,685 at February 28, 1998 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 February 28, 1998, the Company had total
liabilities to banks of $419,061 of which $36,538 was classified as current
debt. At May 31, 1997, the Company had total liabilities to banks of $444,323
which 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 February 28, 1998, total liabilities were $1,697,112 compared to
$2,150,657 at May 31, 1997.
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 February 28, 1998, were
$1,826,567 compared to $2,050,798 for the three month period ended February 28,
1997, a decrease of approximately 11%. Total net sales for the nine month period
ended February 28, 1998, were $5,009,823 compared to $5,964,116 for the nine
month period ended February 28, 1997, a decrease of approximately 16%. The
reduction in sales was primarily attributable to a reduction in installations by
the company and the elimination of the Arcoplast Division.
Operating Expenses. Cost of sales during the three month period ended
February 28, 1998 was 70% compared to 74% for the three months period ended
February 28, 1997. Cost of sales during the nine month period ended February 28,
1998 was 70% of total sales compared to 72% for the nine month period ended
February 28, 1997.
For the three month period ended February 28, 1998, total general and
administrative expenses were $352,861 (approximately 19% of total sales)
compared to $400,768 (20% of total sales) for the three month period ended
February 28, 1997. For the nine month period ended February 28, 1998, total
general and administrative expenses were $937,952 (approximately 19% of total
sales) compared to $1,005,061 (17 % of total sales)for the nine month period
ended February 28, 1997.
Selling expenses were down for both the three month period and nine month
period ended February 28, 1998 from $192,446 and $605,984 respectively for the
three months and nine months ended February 28, 1997 to $88,157 and $305,861 for
the three months and nine months ended February 28, 1998. The reduction in
selling expenses was primarily attributable to a reduction in installations by
the company and the elimination of the Arcoplast Division.
Total cost of sales and operating expenses for the three month period
ended February 28, 1998 were $1,699,784 (93% of total sales) compared to
$2,190,759 (107% of total sales) for the three month period ended February 28,
1997. Total cost of sales and operating expenses for the nine month period ended
February 28, 1998 were $4,681,033 (93% of total sales) compared to $5,958,810
(100% of total sales) for the nine month period ended February 28, 1997. The
decrease in selling expenses of $104,289 for the quarter ended February 28, 1998
compares to February 28, 1997 as the primary reason for the decrease in cost of
goods sold and operating expenses as a percentage of revenue.
9
<PAGE>
Net Income. For the three month period ended February 28, 1998, the
Company had net income of $81,766 compared to a loss of $96,693 for the three
month period ended February 28, 1997. For the nine month period ended February
28, 1998, the Company had net income of $207,405 compared to a loss of $20,485
for the nine month period ended February 28, 1997..
Inflation
The Company's business and operations have not been materially affected by
inflation during the past year and the current fiscal year.
10
<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. On January 14, 1998, the Company
prepared an 8-K regarding Change of Control, Donald and Lucille
Cox and Employment Agreements. This was filed with the SEC via the
Edgar system on April 16, 1998.
11
<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: June __, 1998 TUFCO INTERNATIONAL, INC.
By /s/ Donald L. Cox
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Donald L. Cox
President
Principal Executive Officer
By /s/ Brent E. Mills
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Brent E. Mills
Controller
Principal Financial Officer
12
<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>
<MULTIPLIER> 1
<CURRENCY> 5,974
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> FEB-28-1998
<EXCHANGE-RATE> 1
<CASH> 5,974
<SECURITIES> 0
<RECEIVABLES> 1,667,498
<ALLOWANCES> 185,000
<INVENTORY> 470,685
<CURRENT-ASSETS> 2,234,117
<PP&E> 1,238,234
<DEPRECIATION> 511,870
<TOTAL-ASSETS> 3,053,621
<CURRENT-LIABILITIES> 1,262,588
<BONDS> 0
0
0
<COMMON> 180,161
<OTHER-SE> 1,356,509
<TOTAL-LIABILITY-AND-EQUITY> 3,053,509
<SALES> 1,826,567
<TOTAL-REVENUES> 1,826,567
<CGS> 1,282,286
<TOTAL-COSTS> 1,699,784
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 126,783
<INCOME-TAX> 45,017
<INCOME-CONTINUING> 81,766
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 81,766
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
