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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, 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 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
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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 January 14, 1999 - 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 August 31, 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 1. Financial Statements:
Condensed Consolidated Balance Sheet--August 31, 1998... 3
Condensed Consolidated Statements of Income for the three
months ended August 31, 1998 and 1997................. 5
Condensed Consolidated Statements of Cash Flows--for the
three months ended August 31, 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 13
2
<PAGE>
TUFCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
AUGUST 31, 1998
Unaudited
ASSETS
CURRENT ASSETS:
Cash $ 14,902
Accounts and notes receivable, less allowance
for doubtful accounts of $185,000
Trade 1,058,338
Affiliates 528,752
Inventories 417,540
Deferred income tax benefits 79,085
Other current assets 47,647
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2,146,264
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Property and equipment 1,160,586
Accumulated depreciation 477,236
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683,350
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Reacquired franchise territory 356,558
Accumulated amortization 281,249
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75,309
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Other assets 3,705
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$ 2,908,628
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3
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 49,518
Trade accounts payable 973,838
Income taxes payable 147,264
Accrued expenses 26,642
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1,197,262
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LONG-TERM DEBT 471,154
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DEFERRED INCOME TAXES 34,183
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COMMON STOCKHOLDERS' EQUITY:
Common stock,$.001 par value; authorized 50,000,000
shares; issued and outstanding 6,965,800 shares 6,966
Retained earnings 1,351,577
Other common stockholders' equity (152,514)
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1,206,029
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$ 2,908,628
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4
<PAGE>
TUFCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the three months ended August 31, 1998 and 1997
Unaudited
1998 1997
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NET SALES:
Trade $ 1,272,923 $ 1,413,199
Affiliates 109,644 324,783
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1,382,567 1,737,982
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Cost of sales 933,218 1,197,579
Selling expenses 35,037 101,471
General and administrative exp 239,638 298,245
Other income (40,697) (29,471)
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1,167,196 1,567,824
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Income before taxes 215,371 170,158
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Provision for income taxes
Current 88,010 63,007
Deferred 34 1,128
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88,044 64,135
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Net Income $ 127,327 $ 106,023
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INCOME PER SHARE:
Net income $ 0.01828 $ 0.01522
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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, 1998 and 1997
Unaudited
1998 1997
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NET SALES PROVIDED BY (USED IN)
Operating Activities $ 66,225 $ (6,687)
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment 0 (24,310)
Proceeds from sale of property and 7,500 20,500
equipment
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Net cash provided by (used in) 7,500 (3,810)
investing activities ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term de (12,272) (10,049)
Collection of capital contribution 1,000
Employer loan for purchase of ESOP (48,688)
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Net cash used in financing activit (59,960) (10,049)
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INCREASE (DECREASE) IN CASH 13,765 (20,546)
CASH, BEGINNING OF PERIOD 1,137 21,397
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CASH, END OF PERIOD $ 14,902 $ 851
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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, 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 ended August 31, 1998 and 1997 are not necessarily indicative of the
operating results for the full year.
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<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 August 31, 1998 were $2,908,628 compared to $3,040,757 at
the year ended May 31, 1998. The Company's cash position remains limited,
$14,902 at August 31, 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 increased from $1,269,310 at May 31, 1998
to $1,058,338 at August 31, 1998 an increase of approximately 17%. This increase
was primarily the result of decreased collections. Receivables from affiliates
were up from $474,720 at May 31, 1998 to $528,752 at August 31, 1998.
Inventories increased to $417,540 at August 31, 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 August 31, 1998, the Company had total liabilities
to banks of $497,263 of which $37,146 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 August 31, 1998, total liabilities were $1,702,599 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, 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, 1998, were
$1,382,567 compared to $1,737,982 for the three month period ended August 31,
1997, a decrease of approximately 20%. The reduction in sales was primarily
attributable to a reduction in installation by the Company.
Operating Expenses. Cost of sales during the three month period ended
August 31, 1998 was 67% compared to 69% for the three months period ended August
31, 1997.
For the three month period ended August 31, 1998, total general and
administrative expenses were $239,638 (approximately 17% of total sales)
compared to $298,245 (17% of total sales) for the three month period ended
August 31, 1997.
Selling expenses were down for the three month period ended August 31,
1998 from $101,471 for the three months ended August 31, 1997 to $35,037 for the
three months ended August 31, 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 August 31, 1998 were $1,167,196 (84% of total sales) compared to
$1,567,824 (90% of total sales) for the three month period ended August 31,
1997. The decrease in selling expenses of $66,434 for the quarter ended August
31, 1998 compares to August 31, 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 August 31, 1998, the Company
had net income of $127,327 compared to a net income of $106,023 for the three
month period ended August 31, 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 3, 1999 By /s/ Brent E. Mills
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Brent E. Mills
President
Principal Executive Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CYCLO3PSS CORPORATION'S FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> 14,902
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-05-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> AUG-31-1998
<EXCHANGE-RATE> 1
<CASH> 14,902
<SECURITIES> 0
<RECEIVABLES> 1,772,090
<ALLOWANCES> 185,000
<INVENTORY> 417,540
<CURRENT-ASSETS> 2,146,264
<PP&E> 1,160,586
<DEPRECIATION> 477,236
<TOTAL-ASSETS> 2,908,628
<CURRENT-LIABILITIES> 1,197,262
<BONDS> 0
0
0
<COMMON> 6,966
<OTHER-SE> 1,199,063
<TOTAL-LIABILITY-AND-EQUITY> 2,908,628
<SALES> 1,382,567
<TOTAL-REVENUES> 1,382,567
<CGS> 933,218
<TOTAL-COSTS> 1,167,196
<OTHER-EXPENSES> (40,697)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 215,371
<INCOME-TAX> 88,044
<INCOME-CONTINUING> 127,327
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 127,327
<EPS-PRIMARY> .02
<EPS-DILUTED> 0
</TABLE>
