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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 August 31, 1999
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
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(Address of principal executive offices)
Registrant's telephone no., including area code: (501) 736-2201
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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 November 9, 1999 - 6,965,800 shares of $.001 par
value Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
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1
<PAGE>
FORM 10-QSB
FINANCIAL STATEMENTS AND SCHEDULES
TUFCO INTERNATIONAL, INC.
For the Quarter Ended August 31, 1999
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 1Financial Statements:
Condensed Consolidated Balance Sheet--August 31, 1999... 3
Condensed Consolidated Statements of Income for the three
months ended August 31, 1999 and 1998.................. 5
Condensed Consolidated Statements of Cash Flows--for the
three months ended August 31, 1999 and 1998........... 6
Notes to Condensed Consolidated Financial Statements.... 7
Item 2Management'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
AUGUST 31, 1999
Unaudited
ASSETS
CURRENT ASSETS:
Cash $ 16,111
Accounts and notes receivable, less allowance
for doubtful accounts of $235,000
Trade 1,062,684
Affiliates 548,464
Inventories 470,674
Deferred income tax benefits 98,230
Other current assets 38,766
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2,234,929
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Property and equipment 1,152,572
Accumulated depreciation 508,579
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643,993
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Reacquired franchise territory 356,558
Accumulated amortization 308,531
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48,027
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Other assets 3,705
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$ 2,930,654
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3
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 61,417
Trade accounts payable 924,707
Income taxes payable 210,405
Accrued expenses 30,009
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1,226,538
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LONG-TERM DEBT 419,663
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DEFERRED INCOME TAXES 27,998
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COMMON STOCKHOLDERS' EQUITY:
Common stock,$.001 par value; authorized 50,000,000
shares; issued and outstanding 6,965,800 shar 6,966
Retained earnings 1,439,904
Other common stockholders' equity (190,415)
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1,256,455
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$ 2,930,654
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4
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TUFCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the three months ended August 31, 1999 and 1998
Unaudited
1999 1998
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NET SALES:
Trade $ 1,555,578 $ 1,272,923
Affiliates 188,876 109,644
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1,744,454 1,382,567
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Cost of sales 1,153,592 933,218
Selling expenses 62,198 35,037
General and administrative expenses 281,818 239,638
Other income (60) (40,697)
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1,497,548 1,167,196
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Income before taxes 246,906 215,371
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Provision for income taxes
Current 97,344 88,010
Deferred (399) 34
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96,945 88,044
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Net Income $ 149,961 $ 127,327
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INCOME PER SHARE:
Net income $ 0.02153 $ 0.01828
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Weighted average number of
shares outstanding 6,965,800 6,965,800
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5
<PAGE>
TUFCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended August 31, 1999 and 1998
Unaudited
1999 1998
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NET SALES PROVIDED BY (USED IN)
Operating Activities $ 87,129 $ 66,225
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (23,439) 0
Proceeds from sale of property and 0 7,500
equipment
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Net cash provided by (used in) (23,439) 7,500
investing activities -------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt 467,187 0
Principal payments on long-term de (479,096) (12,272)
Collection of capital contributions
receivable 0 1,000
Employer loan for purchase of ESOP (45,318) (48,688)
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Net cash used in financing activit (57,227) (59,960)
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INCREASE (DECREASE) IN CASH 6,463 13,765
CASH, BEGINNING OF PERIOD 9,648 1,137
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CASH, END OF PERIOD $ 16,111 $ 14,902
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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, 1999 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, 1999 and 1998 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, 1999.
Financial Condition
Total assets at August 31, 1999 were $2,930,654 compared to $2,851,885 at
the year ended May 31, 1999. The Company's cash position remains limited,
$16,111 at August 31, 1999 compared to $9,648 at May 31, 1999. 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 $1,176,403 at May 31, 1999
to $1,062,684 at August 31, 1999 a decrease of approximately 9.67%. This
decrease was primarily the result of increased collections. Receivables from
affiliates were up slightly from $313,636 at May 31, 1999 to $548,464 at August
31, 1999.
Inventories decreased to $470,674 at August 31, 1999 compared to $509,473
at May 31, 1999.
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, 1999, the Company had total liabilities
to banks of $460,236 which $47,918 was classified as current debt. At May 31,
1999, the Company had total liabilities to banks of $468,840 of which $47,158
was classified as current debt. This loan is secured by the Company's real
property and is guaranteed by Brent Mills, officer and director of the Company.
At August 31, 1999, total liabilities were $1,674,199 compared to
$1,680,848 at May 31, 1999.
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.
Total net sales for the three month period ended August 31, 1999, were
$1,744,454 compared to $1,382,567 for the three month period ended August 31,
1998, an increase of approximately 26.17%. The increase in sales was primarily
attributable to an increase in installations performed by the Company's
franchises.
Operating Expenses. Cost of sales during the three month period ended
August 31, 1999 was 66% compared to 67% for the three month period ended August
31, 1998.
For the three month period ended August 31, 1999, total general and
administrative expenses were $281,818 (approximately 16% of total sales)
compared to $239,638 (17% of total sales) for the three month period ended
August 31, 1998.
Selling expenses increased for the three month period ended August 31,
1999 to $62,198 (4% of total sales) compared to $35,037 (3% of total sales) for
the three months ended August 31, 1998.
Total cost of sales and operating expenses for the three month period
ended August 31, 1999 were $1,497,548 (86% of total sales) compared to
$1,167,196 (84% of total sales) for the three month period ended August 31,
1998.
Net Income. For the three month period ended August 31, 1999, the Company
had net income of $149,961 compared to net income of $127,327 for the three
month period ended August 31, 1998.
Inflation
The Company's business and operations have not been materially affected by
inflation during the past year and the current fiscal year.
Year 2000
The year 2000 ("Y2K") issue is the result of computer programs using a
two-digit format, as opposed to four digits, to indicate the year. Such computer
systems will be unable to interpret dates beyond 1999, which could cause a
system failure or other computer errors, leading to disruptions in operations.
In 1998, the Company developed a three-phase program for Y2K information systems
compliance. Phase I is to identify those systems with which the Company has
exposure to Y2K issues. Phase II is the development and implementation of action
plans to be Y2K compliant in all areas by January 1999. Phase III to be
completed by Mid-1999, is the final testing of each major area of exposure to
ensure compliance. The Company has identified the major areas determined to be
critical for successful Y2K compliance. (1) financial and informational system
applications, and (2) third party relationships.
9
<PAGE>
The Company, in accordance with Phase I of the program conducted an
internal review of all systems and contacted all software suppliers to determine
major areas of exposure to Y2K issues. In the financial and information system
area, a number of applications have been identified as Y2K compliant due to
their recent implementation. The Company's core financial and reporting systems
are Y2K compliant. In the third-party area, the Company has communicated with
the primary vendors and has determined that all are making significant progress
toward their Y2K compliance.
The Company believes it is compliant with Y2K.
Forward-looking Statements
The foregoing discussions in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contain forward-looking
statements, within the meaning of section 27a of the Securities Act of 1933 and
section 21e of the Securities Act, which reflect Management's current views with
respect to the future events and financial performance. Such forward looking
statements may be deemed to include, among other things, statements relating to
anticipated growth, and increased profitability, as well as to statements
relating to the Company's strategic plan, including plans to develop and
increase factored receivables, loan originations, and to selectively acquire
other companies. These forward-looking statements are subject to certain risks
and uncertainties, including, but not limited to, future financial performance
and future events, competitive pricing for services, costs of obtaining capital
as well as national, regional and local economic conditions. Actual results
could differ materially from those addressed in the forward looking statement.
Due to such uncertainties and risks, readers are cautioned not to place undue
reliance on such forward-looking statements, which speak only of the date
hereof.
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: November 9, 1999. TUFCO INTERNATIONAL, INC.
By
Brent E. Mills
President
Principal Executive Officer
11
<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> 16,111
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-2000
<PERIOD-START> JUN-01-1999
<PERIOD-END> AUG-31-1999
<EXCHANGE-RATE> 1
<CASH> 16,111
<SECURITIES> 0
<RECEIVABLES> 1,846,148
<ALLOWANCES> 235,000
<INVENTORY> 470,674
<CURRENT-ASSETS> 2,234,929
<PP&E> 1,152,572
<DEPRECIATION> 508,579
<TOTAL-ASSETS> 2,930,654
<CURRENT-LIABILITIES> 1,226,538
<BONDS> 0
0
0
<COMMON> 6,966
<OTHER-SE> 1,249,489
<TOTAL-LIABILITY-AND-EQUITY> 2,930,654
<SALES> 1,744,454
<TOTAL-REVENUES> 1,744,454
<CGS> 1,153,592
<TOTAL-COSTS> 1,497,548
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 246,906
<INCOME-TAX> 96,945
<INCOME-CONTINUING> 149,961
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 149,961
<EPS-BASIC> .02
<EPS-DILUTED> 0
</TABLE>
