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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 November 30, 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
---------------- ---------------
(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
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 14, 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 November 30, 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
Item 1Financial Statements:
Condensed Consolidated Balance Sheet--November 30, 1998. 3
Condensed Consolidated Statements of Income for the three months
and six months ended November 30, 1998 and 1997........ 5
Condensed Consolidated Statements of Cash Flows--for the
three months and six months ended November 30, 1998 and 1997 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
NOVEMBER 30, 1998
Unaudited
ASSETS
CURRENT ASSETS:
Cash $ 13,669
Accounts and notes receivable, less allowance
for doubtful accounts of $185,000
Trade 1,241,119
Affiliates 592,626
Inventories 383,730
Deferred income tax benefits 79,085
Other current assets 22,891
------------------
2,333,120
------------------
Property and equipment 1,126,351
Accumulated depreciation 477,799
------------------
648,552
------------------
Reacquired franchise territory 356,558
Accumulated amortization 288,070
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68,488
------------------
Other assets 3,705
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$ 3,053,865
==================
3
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 49,794
Trade accounts payable 1,108,631
Income taxes payable 197,296
Accrued expenses 32,255
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1,387,976
------------------
LONG-TERM DEBT 458,462
------------------
DEFERRED INCOME TAXES 31,972
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COMMON STOCKHOLDERS' EQUITY:
Common stock,$.001 par value; authorized 50,000,000
shares; issued and outstanding 6,965,800 shares 6,966
Retained earnings 1,414,472
Other common stockholders' equity (245,983)
------------------
1,175,455
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$ 3,053,865
==================
4
<PAGE>
TUFCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the three months and six months ended November 30, 1998 and 1997
Unaudited
<TABLE>
<CAPTION>
1998 1997
---------------------------------------------- -----------------------------------------------
3 MONTHS 6 MONTHS 3 MONTHS 6 MONTHS
------------------- ------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
NET SALES:
Trade $ 1,433,235 $ 2,706,158 $ 1,066,269 $ 2,479,468
Affiliates 133,842 243,486 379,005 703,788
------------------- ------------------- ------------------- --------------------
1,567,077 2,949,644 1,445,274 3,183,256
------------------- ------------------ ------------------- --------------------
Cost of sales 1,054,471 1,987,689 1,030,778 2,228,357
Selling expenses 99,062 134,099 116,233 217,704
General and administrative
expenses 331,691 571,329 286,846 585,091
Bad debts 0 0 8,453 8,453
Other income (28,864) (69,561) (28,885) (58,356)
------------------- ------------------- ------------------- --------------------
1,456,360 2,623,556 1,413,425 2,981,249
------------------- ------------------- ------------------- --------------------
Income before taxes 110,717 326,088 31,849 202,007
------------------- ------------------- ------------------- --------------------
Provision for income taxes
Current 50,032 138,042 (14,998) 48,009
Deferred (2,210) (2,176) 27,231 28,359
------------------- ------------------- ------------------- --------------------
47,822 135,866 12,233 76,368
------------------- ------------------- ------------------- --------------------
Net Income $ 62,895 $ 190,222 $ 19,616 $ 125,639
=================== =================== =================== ====================
EARNINGS PER SHARE:
Net income $ 0.00903 $ 0.02731 $ 0.00282 $ 0.01804
=================== =================== ==================== ====================
Weighted average number of
shares outstanding 6,965,800 6,965,800 6,965,800 6,965,800
=================== =================== ==================== ====================
</TABLE>
5
<PAGE>
TUFCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months and six months ended November 30, 1998 and 1997
Unaudited
<TABLE>
<CAPTION>
1998 1997
------------------------------------------- -------------------------------------
3 MONTHS 6 MONTHS 3 MONTHS 6 MONTHS
------------------- ------------------- ------------------- --------------
<S> <C> <C> <C> <C>
NET SALES PROVIDED BY (USED IN)
Operating Activities $ 93,652 $ 159,877 $ 44,233 $ 37,546
------------------- ------------------- ------------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment 0 0 (2,458) (26,768)
Proceeds from sale of property and equipment 11,000 18,500 20,500
------------------- ------------------- ------------------- --------------
Net cash provided by (used in)
investing activities 11,000 18,500 (2,458) (6,268)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt (12,416) (24,688) (11,878) (21,927)
Collection of capital contributions receivable 1,500 2,500
Employer loan for purchase of ESOP shares (94,969) (143,657)
------------------- ------------------- ------------------- --------------
Net cash used in financing activities (105,885) (165,845) (11,878) (21,927)
------------------- -------------------- ------------------- --------------
INCREASE (DECREASE) IN CASH (1,233) 12,532 29,897 9,351
CASH, BEGINNING OF PERIOD 14,902 1,137 851 21,397
------------------- -------------------- ------------------- --------------
CASH, END OF PERIOD $ 13,669 $ 13,669 $ 30,748 $ 30,748
=================== ==================== =================== ==============
</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, 1998 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 six months ended November 30, 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, 1998.
Financial Condition
Total assets at November 30, 1998 were $3,053,865 compared to $3,040,757
at the year ended May 31, 1998. The Company's cash position remains limited,
$13,669 at November 30, 1998 compared to $1,137 at May 31, 1998. 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 $1,269,310 at May 31, 1998
to $1,241,119 at November 30, 1998 a decrease of approximately 2%. This slight
decrease was primarily the result of increased collections. Receivables from
affiliates were up from $474,720 at May 31, 1998 to $592,626 at November 30,
1998. Total receivables were up $246,655 from total receivables at August 31,
1998.
Inventories increased to $383,730 at November 30, 1998 compared to
$361,850 at May 31, 1998.
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 November 30, 1998, the Company had total
liabilities to banks of $488,296 which $38,085 was classified as current debt.
At May 31, 1998, the Company had total liabilities to banks of $506,163 of which
$40,092 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 November 30, 1998, total liabilities were $1,878,410 compared to
$1,915,217 at May 31, 1998.
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, 1998, 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 November 30, 1998, were
$1,567,077 compared to $1,445,274 for the three month period ended November 30,
1997, an increase of approximately 8%. Total net sales for the six month period
ended November 30, 1998, were $2,949,644 compared to $3,183,256 for the six
month period ended November 30, 1997, a decrease of approximately 7%. The
reduction in sales was primarily attributable to a reduction in installations
performed by the Company.
Operating Expenses. Cost of sales during the three month period ended
November 30, 1998 was 67% compared to 71% for the three month period ended
November 30, 1997. Cost of sales during the six month period ended November 30,
1998 was 67% of total sales compared to 70% for the six month period ended
November 30, 1997.
For the three month period ended November 30, 1998, total general and
administrative expenses were $331,691 (approximately 21% of total sales)
compared to $286,846 (20% of total sales) for the three month period ended
November 30, 1997. For the six month period ended November 30, 1998, total
general and administrative expenses were $571,329 (approximately 19% of total
sales) compared to $585,091 (18% of total sales) for the six month period ended
November 30, 1997.
Selling expenses were down for both the three month period and six month
period ended November 30, 1998 from $116,233 and $217,704 respectively for the
three months and six months ended November 30, 1997 to $99,062 and $134,099 for
the three months and six months ended November 30, 1998.
Total cost of sales and operating expenses for the three month period
ended November 30, 1998 were $1,456,360 (93% of total sales) compared to
$1,413,425 (98% of total sales) for the three month period ended November 30,
1997. Total cost of sales and operating expenses for the six month period ended
November 30, 1998 were $2,623,556 (89% of total sales) compared to $2,981,249
(94% of total sales) for the six month period ended November 30, 1997. The
decrease in selling expenses of $83,605 for six months ended November 30, 1998
compares to November 30, 1997 as 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 November 30, 1998, the Company
had net income of $62,895 compared to net income of $19,616 for the three month
period ended November
9
<PAGE>
30, 1997. For the six month period ended November 30, 1998, the Company had net
income of $190,222 compared to net income of $125,639 for the six month period
ended November 30, 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. None
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: February 19, 1999. TUFCO INTERNATIONAL, INC.
By /s/ Brent E. Mills
Brent E. Mills
President
Principal Executive 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> 13,669
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> NOV-30-1998
<EXCHANGE-RATE> 1
<CASH> 13,669
<SECURITIES> 0
<RECEIVABLES> 2,018,745
<ALLOWANCES> 185,000
<INVENTORY> 383,730
<CURRENT-ASSETS> 2,333,120
<PP&E> 1,126,351
<DEPRECIATION> 477,799
<TOTAL-ASSETS> 3,053,865
<CURRENT-LIABILITIES> 1,387,976
<BONDS> 0
0
0
<COMMON> 6,966
<OTHER-SE> 1,168,489
<TOTAL-LIABILITY-AND-EQUITY> 3,053,865
<SALES> 2,949,644
<TOTAL-REVENUES> 2,949,644
<CGS> 1,987,689
<TOTAL-COSTS> 2,623,556
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 326,088
<INCOME-TAX> 135,866
<INCOME-CONTINUING> 190,222
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 190,222
<EPS-PRIMARY> .03
<EPS-DILUTED> 0
</TABLE>
