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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, 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 February 10, 2000 - 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 November 30, 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
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Item 1Financial Statements:
Condensed Consolidated Balance Sheet--November 30, 1999. 3
Condensed Consolidated Statements of Income for the three
and six months ended November 30, 1999 and 1998........ 5
Condensed Consolidated Statements of Cash Flows--for the
three and six months ended November 30, 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
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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, 1999
Unaudited
ASSETS
CURRENT ASSETS:
Cash $ 19,767
Accounts and notes receivable, less allowance
for doubtful accounts of $285,000
Trade 1,189,614
Affiliates 447,064
Inventories 444,370
Deferred income tax benefits 117,375
Other current assets 35,894
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2,254,084
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Property and equipment 1,158,381
Accumulated depreciation 499,928
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658,453
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Reacquired franchise territory 356,558
Accumulated amortization 315,351
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41,207
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Other assets 3,705
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$ 2,957,449
==================
3
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 64,502
Trade accounts payable 1,048,068
Income taxes payable 224,450
Accrued expenses 33,521
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1,370,541
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LONG-TERM DEBT 400,782
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DEFERRED INCOME TAXES 28,383
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COMMON STOCKHOLDERS' EQUITY:
Common stock,$.001 par value; authorized 50,000,000
shares; issued and outstanding 6,965,800 shar 6,966
Retained earnings 1,505,491
Other common stockholders' equity (354,714)
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1,157,743
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$ 2,957,449
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4
<PAGE>
TUFCO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the three months and six months ended November 30,1999 and 1998
Unaudited
<TABLE>
<CAPTION>
1999 1998
--------------------------------------------------------
3 MONTHS 6 MONTHS 3 MONTHS 6 MONTHS
--------------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES:
Trade $ 1,555,752 $ 3,111,330 $ 1,433,235 $ 2,706,158
Affiliates 75,256 264,132 133,842 243,486
--------------------------------------------------------
1,631,008 3,375,462 1,567,077 2,949,644
--------------------------------------------------------
Cost of sales 1,102,170 2,255,762 1,054,471 1,987,689
Selling expenses 119,616 181,814 99,062 134,099
General and administrati 322,999 604,817 331,691 571,329
Bad debts 49,806 49,806 0 0
Other income (77,357) (77,407) (28,864) (69,561)
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1,517,244 3,014,792 1,456,360 2,623,556
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Income before income taxes 113,764 360,670 110,717 326,088
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Provision for income taxes
Current 66,937 164,281 50,032 138,042
Deferred (18,760) (19,159) (2,210) (2,176)
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48,177 145,122 47,822 135,866
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Net Income $ 65,587 $ 215,548 $ 62,895 $ 190,222
========================================================
EARNINGS PER SHARE:
Net income $ 0.00942 $ 0.03094 $ 0.00903 $ 0.02731
========================================================
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, 1999 and 1998
Unaudited
<TABLE>
<CAPTION>
1999 1998
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3 MONTHS 6 MONTHS 3 MONTHS 6 MONTHS
--------------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES PROVIDED BY (USED IN)
Operating Activities $ 209,003 $ 296,132 $ 93,652 $ 159,877
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equ (30,252) (53,691) 0 0
Proceeds from sale of proper 5,000 5,000 11,000 18,500
and equipment
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Net cash provided by (used in) (25,252) (48,691) 11,000 18,500
investing activities --------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt 467,187
Principal payments on long-t (15,796) (494,892) (12,416) (24,688)
Collection of capital contri 0 0 1,500 2,500
Employer loan for purchase (164,299) (209,617) (94,969) (143,657)
-------------------------------------------------------
Net cash used in financing a (180,095) (237,322) (105,885) (165,845)
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INCREASE (DECREASE) IN CASH 3,656 10,119 (1,233) 12,532
CASH, BEGINNING OF PERIO 16,111 9,648 14,902 1,137
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CASH, END OF PERIOD $ 19,767 $ 19,767 $ 13,669 $ 13,669
========================================================
</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, 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 and six months ended November 30, 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 November 30, 1999 were $2,957,449 compared to $2,851,885
at the year ended May 31, 1999. The Company's cash position remains limited,
$19,767 at November 30, 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 increased from $1,176,403 at May 31, 1999
to $1,189,614 at November 30, 1999 an increase of approximately 1.12%.
Receivables from affiliates were up from $313,636 at May 31, 1999 to $447,064 at
November 30, 1999.
Inventories decreased to $444,370 at November 30, 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 November 30, 1999, the Company had total
liabilities to banks of $447,818 which $53,726 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 November 30, 1999, total liabilities were $1,799,706 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 November 30, 1999, were
$1,631,008 compared to $1,567,077 for the three month period ended November 30,
1998, an increase of approximately 4.08%. The increase in sales was primarily
attributable to an increase in installations performed by the Company's
franchises. Total net sales for the six months ended November 30, 1999 were
$3,375,462 compared to $2,949,644 for the six months ended November 30, 1998, an
increase of 14.4%.
Operating Expenses. Cost of sales during the three month period ended
November 30, 1999 was 68% compared to 67% for the three month period ended
November 30, 1998. Cost of sales during the six month period ended November 30,
1999 was 67%, the same as for the six month period ended November 30, 1998.
For the three month period ended November 30, 1999, total general and
administrative expenses were $322,999 (approximately 20% of total sales)
compared to $331,691 (21% of total sales) for the three month period ended
November 30, 1998. For the six month period ended November 30, 1999, total
general and administrative expenses were $604,817 (approximately 18% of total
sales), compared to $571,329 for the six months ended November 30, 1998 (19% of
total sales).
Selling expenses increased for the three month period ended November 30,
1999 to $119,616 (7% of total sales) compared to $99,062 (6% of total sales) for
the three months ended November 30, 1998. Selling expenses for the six month
period ended November 30, 1999 were $181,814 (5% of total sales) compared to
$134,099 for the six month period ended November 30, 1998 (5% of total sales).
Total cost of sales and operating expenses for the three month period
ended November 30, 1999 were $1,544,785 (95% of total sales) compared to
$1,485,224 (95% of total sales) for the three month period ended November 30,
1998. For the six month period ended November 30, 1999, total cost of sales and
operating expenses for the six month period ended November 30, 1999 were
$3,042,393 (90% of total sales) compared to $2,693,117 for the six month period
ended November 30, 1998 (91% of total sales).
Net Income. For the three month period ended November 30, 1999, the
Company had net income of $65,587 compared to net income of $62,895 for the
three month period ended November 30, 1998. For the six month period ended
November 30, 1999, the Company had net income of $215,548 compared to $190,222
for the six month ended November 30, 1998.
9
<PAGE>
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 Company has not experienced any system failures relating to Y2K and
does not anticipate future problems from internal systems or the systems of its
major suppliers or customers. The Company has experienced some payment delays
from customers but does not anticipate any significant long term delays.
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.
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 14, 2000. 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> 19,767
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-2000
<PERIOD-START> SEP-01-1999
<PERIOD-END> NOV-30-1999
<EXCHANGE-RATE> 1
<CASH> 19,767
<SECURITIES> 0
<RECEIVABLES> 1,921,678
<ALLOWANCES> 285,000
<INVENTORY> 444,370
<CURRENT-ASSETS> 2,254,084
<PP&E> 1,158,381
<DEPRECIATION> 499,928
<TOTAL-ASSETS> 2,957,449
<CURRENT-LIABILITIES> 1,370,541
<BONDS> 0
0
0
<COMMON> 6,966
<OTHER-SE> 1,150,777
<TOTAL-LIABILITY-AND-EQUITY> 2,957,449
<SALES> 3,375,462
<TOTAL-REVENUES> 3,375,462
<CGS> 2,255,762
<TOTAL-COSTS> 3,042,393
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 49,806
<INTEREST-EXPENSE> 26,369
<INCOME-PRETAX> 360,670
<INCOME-TAX> 145,122
<INCOME-CONTINUING> 215,548
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 215,548
<EPS-BASIC> .03
<EPS-DILUTED> 0
</TABLE>
