<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC
Form 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1996
--------------
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to ____________
Commission file number 0-21018
TUFCO TECHNOLOGIES, INC.
Delaware 39-1723477
- - --------------------------------- -------------------------
(State of other jurisdiction (IRS Employer ID No.)
of incorporation of organization)
4270 Simonton Road, Dallas, Texas 75244
---------------------------------------
(Address of principal executive offices)
(214)387-0500
-------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 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 [ ]
Indicate the number of shares outstanding of each or the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at May 14, 1996
----- ---------------------------
Common Stock, par value $0.01 per share 3,669,169
Non-Voting Common Stock, par value $.01 per share 709,870
Page 1 of 15
<PAGE> 2
TUFCO TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I: CONDENSED FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 1995
and March 31, 1996 (Unaudited) 3
Condensed Consolidated Statements of Earnings for the three
months ended March 31, 1996 and 1995 (Unaudited) and
for the six months ended March 31, 1996 and 1995 (Unaudited) 4
Condensed Consolidated Statement of Stockholders' Equity for the
six months ended March 31, 1996 (Unaudited) 5
Condensed Consolidated Statements of Cash Flows for the six
months ended March 31, 1996 and 1995 (Unaudited) 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II: OTHER INFORMATION 14
SIGNATURES 15
</TABLE>
2
<PAGE> 3
TUFCO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
---------- -------------
<S> <C> <C>
Assets
Current Assets:
Cash and Cash Equivalents ............................................................ $ 538,344 $ 2,972,600
Accounts Receivable, less allowance for
doubtful accounts of $81,288 and $105,000 ........................................ 8,241,526 8,373,065
Inventories (Note 4) ................................................................. 8,513,900 9,092,197
Prepaid Expenses and Other Current Assets ............................................ 564,581 437,863
Deferred Income Taxes ................................................................ 257,000 260,758
------------ ------------
Total Current Assets ........................................................... 18,115,351 21,136,483
Property and Equipment, Net (Note 5) .................................................... 15,667,646 15,362,242
Advance to Stockholders ................................................................. 237,571 233,909
Excess of Cost over Fair Value of Assets Acquired- Net .................................. 13,833,444 14,017,541
Other Assets ............................................................................ 550,675 309,743
------------ ------------
TOTAL ................................................................................... $ 48,404,687 $ 51,059,918
============ ============
Liabilities and Stockholders' Equity
Current Liabilities:
Current Maturities of Long-Term Notes Payable ........................................ $ 2,621,324 $ 2,587,990
Accounts Payable - Trade ............................................................. 2,245,962 2,451,221
Accrued and Other Liabilities ........................................................ 1,181,782 1,540,660
Accrued Income Taxes ................................................................. 136,910 398,310
------------ ------------
Total Current Liabilities ...................................................... 6,185,978 6,978,181
Long-Term Liabilities:
Notes Payable ........................................................................ 13,715,805 16,309,178
Deferred Income Taxes ................................................................ 1,326,914 1,327,855
------------ ------------
Total Long-Term Liabilities .................................................... 15,042,719 17,637,033
Stockholders' Equity
Voting Common Stock;
3,704,123 and 3,700,363 shares issued; and 3,669,169 and 3,679,788 outstanding ... 37,042 37,004
Nonvoting Common Stock;
709,870 shares issued and outstanding ............................................ 7,099 7,099
Additional Paid-In Capital ........................................................... 23,392,881 23,375,176
Retained Earnings .................................................................... 4,381,914 3,635,740
------------ ------------
Subtotal ............................................................................. 27,818,936 27,055,019
Less Stock Purchase Plan Notes ....................................................... (450,786) (497,747)
Less Treasury Stock; 34,954 shares of Voting Common Stock at March 31, 1996
and 20,575 shares at September 30, 1995; at cost ................................ (192,160) (112,568)
------------ ------------
Total Stockholders' Equity ...................................................... 27,175,990 26,444,704
------------ ------------
TOTAL ................................................................................ $ 48,404,687 $ 51,059,918
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
TUFCO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
March 31, March 31,
---------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Sales .............................. $ 16,391,705 12,080,013 $ 32,758,981 22,364,526
Cost of Sales (Note 8) ................. 14,169,044 10,282,712 27,694,699 19,069,138
------------ ------------ ------------ ------------
Gross Profit ........................... 2,222,661 1,797,301 5,064,282 3,295,388
Operating Expenses:
Selling, General and Administrative
Expenses (Note 8) ................... 1,307,247 1,003,744 2,975,253 1,952,037
Amortization and Other Post-
Acquisition Expenses ................ 178,525 132,966 314,371 264,873
------------ ------------ ------------ ------------
Operating Income ....................... 736,889 660,591 1,774,658 1,078,478
Other Income (Expense):
Interest Expense .................... (279,083) (198,571) (611,252) (377,966)
Interest Income ..................... 17,446 4,002 32,251 7,999
Other ............................... 780 18,441 29,650 34,396
------------ ------------ ------------ ------------
Income Before Provision For
Income Taxes ........................ 476,031 484,463 1,225,306 742,907
Provision For Income Taxes ............. 180,961 194,623 479,133 297,395
------------ ------------ ------------ ------------
Net Income ............................. $ 295,071 $ 289,840 $ 746,174 $ 445,512
============ ============ ============ ============
Earnings Per Common Share and Common
Share Equivalent: ................... $ .07 $ .09 $ .17 $ .14
Weighted average number of common
shares and common share equiv-
alents outstanding .................. 4,420,977 3,111,851 4,427,925 3,117,409
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
TUFCO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
VOTING NON VOTING
COMMON STOCK COMMON STOCK ADDITIONAL
PAID-IN
SHARES $ SHARES $ CAPITAL
--------- -------- --------- -------- -----------
<S> <C> <C> <C> <C> <C>
Balance, September 30, 1995 .............. 3,700,363 $37,004 709,870 $7,099 $23,375,176
Exercise of Employee Stock Options ....... 3,760 38 17,705
Repayment of Stock Purchase Plan Notes ...
Purchase of Treasury Stock ...............
Net Income For The Period ................
--------- -------- --------- -------- -----------
Balance, March 31, 1996 .................. 3,704,123 $37,042 709,870 $7,099 $23,392,881
========= ======== ========= ======== ===========
<CAPTION>
STOCK
PURCHASE TREASURY STOCK TOTAL
RETAINED PLAN STOCKHOLDERS'
EARNINGS NOTES SHARES $ EQUITY
---------- ---------- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
Balance, September 30, 1995 .............. $3,635,740 ($497,747) 20,575 (112,568) $26,444,704
Exercise of Employee Stock Options ....... 17,743
Repayment of Stock Purchase Plan Notes ... 46,961 46,961
Purchase of Treasury Stock ............... 14,379 (79,592) (79,592)
Net Income For The Period ................ 746,174 746,174
---------- ---------- -------- --------- -----------
Balance, March 31, 1996 .................. $4,381,914 ($450,786) 34,954 ($192,160) $27,175,990
========== ========== ======== ========= ===========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
TUFCO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
March 31,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
Operating Activities
Net Income ................................................ $ 746,174 $ 445,512
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for depreciation and amortization ......... 1,115,500 825,843
Provision for deferred income taxes ................. 2,817 4,232
Provision for bad debts ............................. (23,712) 10,000
Gain on sale of property and equipment .............. (11,850) --
Changes in operating assets and liabilities:
Accounts receivable - trade ....................... 155,251 (910,375)
Inventories ....................................... 578,297 (1,845,974)
Prepaid expenses and other assets ................. (377,481) (94,906)
Accounts payable - trade .......................... (205,259) 490,155
Accrued and other liabilities ..................... (358,878) 74,416
Accrued income taxes .............................. (261,400) 36,660
----------- -----------
Total adjustments ................................. 613,285 (1,409,949)
----------- -----------
Net cash provided by (used in) operating activities .... 1,359,459 (964,437)
Investing Activities
Addition to property and equipment ..................... (1,280,976) (689,439)
Proceeds from disposition of property and equipment .... 65,850 --
Increase in advances to stockholders ................... (3,662) (14,622)
----------- -----------
Net cash used in investing activities .................. (1,218,788) (704,061)
Financing Activities
Principal payments on notes payable .................... (2,560,039) (588,976)
Proceeds from issuance of notes payable ................ -- 2,177,950
Decrease in stock purchase plan notes .................. 46,961 15,750
Purchase of treasury stock ............................. (79,592) (88,413)
Net proceeds from issuance of common stock ............. 17,743 --
----------- -----------
Net cash provided by (used in) financing activities .... (2,574,927) 1,516,311
----------- -----------
Net Decrease in Cash and Cash Equivalents ................. (2,434,256) (152,187)
Cash and Cash Equivalents Beginning of Period ............. 2,972,600 467,813
----------- -----------
Cash and Cash Equivalents End of Period ................... $ 538,344 $ 315,626
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE> 7
TUFCO TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED MARCH 31, 1996 AND 1995
1. ORGANIZATION
Tufco Technologies, Inc. (formerly Tufco Holding Company, the "Company")
was organized in 1992 to acquire Tufco Industries, Inc. Tufco Industries,
Inc. was incorporated in Wisconsin in 1974. Executive Converting
Corporation was acquired January 28, 1994. Hamco, Inc. was acquired August
23, 1995.
The Company, through its wholly owned subsidiaries, performs specialty
printing, custom converting, and packaging. The Company also manufactures
and distributes a wide variety of consumer disposables that are sold in
the home improvement and paint retailing industries.
2. SIGNIFICANT ACCOUNTING POLICIES
The unaudited interim financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and Rule 10-01 of Regulation S-X. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included. Some
adjustments involve estimates which may require revision in subsequent
interim periods or at year end. The unaudited financial statements and
footnotes should be read in conjunction with the Company's financial
statements for the year ended September 30, 1995 that are included in Form
10-K that was filed with the Securities and Exchange Commission on
December 15, 1995. Operating results for the six month period are not
necessarily indicative of results expected for the remainder of the year.
3. ACQUISITIONS
Effective August 23, 1995, the Company acquired all of the assets and
assumed certain liabilities of Hamco, Inc. in Newton, North Carolina. The
assets were acquired by the Company's wholly owned subsidiary, Hamco
Industries, Inc., using the proceeds from the sale of 1,200,000 shares of
common stock and additional bank borrowings. The acquisition was accounted
for as a purchase.
Hamco Industries, Inc. is primarily engaged in printing and converting
fine grade printed paper products which are sold principally through
distributorships. The results of operations of Hamco Industries, Inc. are
included in the consolidated financial statements since the date of
acquisition. The total cost of the acquisition $13,725,615, exceeded the
fair value of the net assets acquired by $2,984,575. The excess is being
amortized on a straight-line method over 40 years.
7
<PAGE> 8
TUFCO TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE SIX MONTHS ENDED MARCH 31, 1996 AND 1995
The following summarized pro forma (unaudited) information assumes the
acquisition occurred on October 1, 1994:
<TABLE>
<CAPTION>
Six Months Ended March 31,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
Net sales .............................. $32,758,981 $30,526,519
=========== ===========
Net Income ............................. $ 746,174 $ 824,030
=========== ===========
Earnings per common share and
common share equivalent .............. $ .17 $ .19
=========== ===========
Weighted average common shares and
common share equivalents
outstanding .......................... 4,427,925 4,402,409
=========== ===========
</TABLE>
4. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
----------- ------------
<S> <C> <C>
At current cost:
Raw materials ................ $ 5,111,863 $ 5,069,067
Finished products ............ 3,725,987 4,537,811
----------- -----------
Total at current cost ........ 8,837,850 9,606,878
Excess of current costs over LIFO
inventory values .................. (323,950) (514,681)
----------- -----------
Totals ....................... $ 8,513,900 $ 9,092,197
=========== ===========
</TABLE>
5. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
------------ ------------
<S> <C> <C>
Land and land improvements ....... $ 497,662 $ 497,662
Buildings ........................ 6,211,018 6,170,657
Leasehold improvements ........... 362,809 366,241
Machinery and equipment .......... 15,795,298 14,977,616
Furniture and fixtures ........... 907,268 941,081
Vehicles ......................... 118,328 118,328
------------ ------------
Totals ........................... 23,892,383 23,071,585
Less accumulated depreciation .... (8,619,715) (7,709,343)
------------ ------------
Net depreciated value ............ 15,272,668 15,362,242
Construction in progress ......... 394,978 --
------------ ------------
Net property and equipment ....... $ 15,667,646 $ 15,362,242
============ ============
</TABLE>
8
<PAGE> 9
TUFCO TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE SIX MONTHS ENDED MARCH 31, 1996 AND 1995
6. SEASONALITY
The Company normally operates at lower operating levels during the first
and second quarters of its fiscal year. This occurs because of the
seasonal demand for certain printed products displaying a holiday theme as
well as products which are used by customers in conjunction with
end-of-year activities. These products are normally shipped during the
Company's third and fourth fiscal quarters. Demand for its consumer
disposable products is generally lower during the first and second fiscal
quarters as cold weather restricts the amount of new construction and
remodeling projects that require the Company's products.
7. ACCOUNTING FOR STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," which will be effective for the Company
beginning October 1, 1996. SFAS No. 123 requires expanded disclosures of
stock-based compensation arrangements with employees and encourages (but
does not require) compensation cost to be measured based on the fair value
of the equity instrument awarded. Companies are permitted, however, to
continue to apply APB Opinion No. 25, which recognizes compensation cost
based on the intrinsic value of the equity instrument awarded. The Company
will continue to apply APB Opinion No. 25 to its stock-based compensation
awards to employees and will disclose the required pro forma effect on net
income and earnings per share for the annual results of operations.
8. RECLASSIFICATION
The cost of sales for second quarter of 1995 was revised which had the
effect of increasing cost of sales and lowering gross profit and selling,
general and administrative expenses by corresponding amounts. The change
did not affect operating income.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS:
Six Months Ended March 31, 1996 Compared To Six Months Ended March 31, 1995
NET SALES:
Net sales for the six months ended March 31, 1996 increased 46%, or $10.4
million to $32.8 million from $22.4 million for the six months ended March 31,
1995. The increase was primarily attributable to the additive effect of the
Hamco Industries, Inc. (Hamco) acquisition which occurred in August of 1995.
Hamco's sales for the first six months of 1996 were $10.1 million and were
comprised primarly of printed and unprinted small roll products. After
adjustment for the effect of Hamco's revenue, the remainder of the Company
increased its revenue by $0.3 million. Management attributes this slow rate of
growth to the sharp reduction in paper prices which began in January 1996, as
the Company's customers reduced their orders in anticipation of further price
decreases.
GROSS PROFIT:
Gross profit increased $1.8 million, or 54%, to $5.1 million compared to $3.3
million for the same period last year. Hamco accounted for the entire increase
with gross profit of $1.8 million for the first six months of 1996. Gross
profit margin increased to 15.5% for the first six months of 1996 compared to
14.7% for the same period of 1995. The primary reason for the increase in
margin percent is the inclusion of the Hamco margin in 1996. Hamco does not
suffer the seasonal downturn in revenue experienced by the remainder of the
Company in the first and second quarters of the year (See note 6 in the "Notes
to Consolidated Financial Statements"). As a result, Hamco is better able to
absorb labor and overhead costs which results in higher margin percent.
Adjusted for the effect of Hamco's performance, the remainder of the Company
posted a gross profit margin of 14.4%, down 0.3 points from 1995. During the
six months of 1996, the Company reduced inventory levels, and this reduction
resulted in a liquidation of LIFO inventory quantities carried at lower costs
prevailing in prior years. The effect was a decrease in cost of sales in l996
of $220,000.
OPERATING EXPENSES:
Operating expenses increased $1.1 million (48%) to $3.3 million as compared to
$2.2 million in the prior year. This increase is entirely attributable to the
sales and administrative expenses of Hamco and to the increased amortization
expense associated with the acquisition. After adjustment for the effects of
Hamco's operations, the operating costs of the Company showed no increase over
the prior year.
OPERATING INCOME:
Operating income increased $0.7 million, or 65%, to $1.8 million compared to
$1.1 million for the same period last year. The increase is attributable to the
operations of Hamco as detailed above.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS --CONTINUED
INTEREST EXPENSE:
Interest expense increased by $233,000 to $611,000 from $378,000 last year. The
increase resulted from the increase in debt associated with the Hamco
acquisition.
NET INCOME:
Net income increased $300,000 to $746,000 compared to $446,000 last year. The
increase was primarily attributable to the addition of Hamco. Earnings per
share for the six months of 1996 was $.17 compared to $.14 for 1995, a 21%
increase with 1.3 million additional shares outstanding.
LIQUIDITY AND CAPITAL RESOURCES:
Net cash provided by operating activities was $1.4 million for the six months
ended March 31, 1996. This compares to cash used in operations of $1.0 million
for the same period in 1995. Improved operating results, after adding back the
effect of non-cash expenses, accounted for the improved cash flow from
operations. Additionally, the Company has reduced its investment in inventory
since the beginning of the fiscal year and improved the collection rate of its
receivables resulting in improved cash flow compared to the prior year.
Net cash used in investing activities was $1.2 million for the six months ended
March 31, 1996, compared to $0.7 million for the same period in fiscal 1995.
Investment in property, plant and equipment, primarily a major renovation at
the Company's Green Bay facility, accounts for the increase.
Effective February 1, 1996, the Company renegotiated its borrowing agreement
with its primary lender. As a result, the Company converted approximately $6.6
million of its borrowings to a four-year fixed rate of 7.03%, down from a
floating rate of 8.25% for the first four months of fiscal 1996. The Company's
working capital line of credit was reduced to a rate just below 7%, adjusted at
90 day intervals and varying with changes in the LIBOR borrowing standard. The
Company has reduced its borrowings by $2.6 million since the beginning of the
year.
The Company expects to spend approximately $1.9 million for capital
expenditures in fiscal 1996, primarily on new machinery and equipment as well
as upgrades to its Green Bay facilities. The Company's management believes that
cash flow from operations, current cash and available financing under its line
of credit are sufficient to fund operations and capital expenditures for the
next 12 months. As of May 14, 1996, the Company had approximately $5 million
available under its revolving credit line.
The Company intends to retain earnings to finance future operations and
expansion and does not expect to pay any dividends within the foreseeable
future. In addition, the Company's primary lender must approve the payment of
any dividends.
11
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS:
Three Months Ended March 31, 1996 Compared To Three Months Ended March 31, 1995
NET SALES:
Net sales for the three months ended March 31, 1996 increased 36%, or $4.3
million to $16.4 million from $12.1 million for the three months ended March
31, 1995. The increase was attributable to the additive effect of the Hamco
Industries, Inc. (Hamco) revenue which was $5.0 million for the second quarter
of 1995. Adjusting for the effect of the Hamco acquisition, revenue for the
remainder of the Company declined $0.7 million in the second quarter of 1996
compared to the same period of 1995. The majority of the decrease occurred in
the Company's custom converting segment at its Dallas facility, where sales
decreased $0.6 million for the three month period. Management believes that the
principal reason for the decrease in revenue is the significant reduction in
the price of raw materials, principally paper, which occurred during the
period. As paper prices fall, customers tend to deplete inventories in
anticipation of lower prices in future months. Management anticipates demand
for converting services to increase as prices stabilize.
GROSS PROFIT:
Gross profit increased $0.4 million, or 22%, to $2.2 million versus $1.8
million for the same period last year. Of this increase, approximately $0.8
million was the result of the additive effect of the Hamco acquisition. After
adjusting for the effect of Hamco's margin, the Company experienced a decline
of $0.4 million in gross margin in the second quarter of 1996 when compared to
the same period of fiscal 1995. The principal reason for the decline in margin
is the reduction in revenue previously discussed. Additionally, the gross
profit margin decreased to 13.6% in 1996 from 14.9% in 1995. The decrease in
margins was the result of higher average raw material costs in the six months
of 1996 compared to the same period of 1995, as well as reduced operating
efficiencies experienced while undergoing a redesign of the manufacturing
layout in the Company's Green Bay facility which was completed during the
quarter. Raw material costs began to decline in January of 1996, and by March,
certain key raw materials had decreased in cost by over 30% from December
levels. As material costs continue to decline, management anticipates an
increase in profit margins.
OPERATING EXPENSES:
Operating expenses increased $0.4 million (30%) to $1.5 million as compared to
$1.1 million in the prior year. Operating costs at Hamco, which are included in
the $1.5 million for 1996, were $0.5 million for the quarter. After removing
the effect of the Hamco costs, operating costs decreased by $0.2 million (18%)
for 1996 when compared to 1995. The primary reasons for the decrease are
reductions to certain administrative costs, such as long distance telephone and
corporate insurance, which were negotiated at the beginning of the year. In
addition, travel expense for the Company has decreased.
12
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS --CONTINUED
OPERATING INCOME:
Operating income increased $75,000 or 11%, to $737,000 compared to $661,000 in
the prior year. Hamco accounted for approximately $219,000 of operating income
for the quarter, and after adjustment for this contribution, the Company
experienced a reduction in operating income of $143,000 to $158,000 in 1996.
The decrease was the result of the lower margins mitigated by the savings in
selling and administrative costs.
INTEREST EXPENSE:
Interest expense increased by $80,000 to $279,000 from $199,000 last year. Of
this increase, approximately $134,000 was the result of debt assumed with the
acquisition of Hamco. After adjusting for the Hamco debt, the Company has
decreased its total debt by $1.6 million at March 31, 1996 when compared to
March 31, 1995.
NET INCOME:
Net income increased $5,000 to $295,000 compared to $290,000 last year. The
increase was primarily attributable to higher operating income offset by higher
interest expense. Earnings per share were $.07 for the three month period of
1996 compared to $.09 for 1995, primarily due to the 1.3 million increase in
shares outstanding.
13
<PAGE> 14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
On March 11, 1996 the shareholders of the Company ratified an amendment to the
Company's 1992 Non-Qualified Stock Option Plan which increased the shares
available under the plan from 50,000 shares to 200,000 shares.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following summarizes the Annual Meeting highlights:
(a) The Annual Meeting of Shareholders of the Company was held at the
Skybird Meeting Center, Rotunda Building No. 6, Chicago O'Hare
Airport, Chicago, Illinois 60666 on March 11, 1996. Proxies for
the Annual Meeting were solicited pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended.
(b) At the Annual Meeting, shareholders elected the following
individuals to the board of directors for one-year terms.
Director For Withheld
-------- --- --------
Robert J. Simon 3,333,701 15,670
Samuel J. Bero 3,334,316 14,425
Robert E. Coghan 3,333,416 15,325
C. Hamilton Davison, Jr. 3,333,416 15,325
Carl B. Francis 3,330,639 18,102
Patrick J. Garland 3,333,166 14,675
Edward A. Leinss 3,333,616 15,125
William J. Malooly 3,333,616 15,125
(c) The shareholders ratified an amendment to the 1992 Non-Qualified
Stock Option Plan which increased the number of shares available
under the plan from 50,000 shares to 200,000 shares.
For Against Abstain
--- ------- -------
3,262,408 59,788 26,545
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TUFCO TECHNOLOGIES, INC.
Date: May 14, 1996 /s/ Carl Francis
-----------------------------------
Carl Francis
Chief Executive Officer
Date: May 14, 1996 /s/ Greg Wilemon
-----------------------------------
Greg Wilemon
Chief Financial Officer, Secretary,
Treasurer and Vice President - Finance
15
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- - ------- -----------
<S> <C>
27 - Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 538,344
<SECURITIES> 0
<RECEIVABLES> 8,322,814
<ALLOWANCES> 81,288
<INVENTORY> 8,513,900
<CURRENT-ASSETS> 18,115,351
<PP&E> 24,287,361
<DEPRECIATION> 8,619,715
<TOTAL-ASSETS> 48,404,687
<CURRENT-LIABILITIES> 6,185,978
<BONDS> 0
<COMMON> 44,141
0
0
<OTHER-SE> 27,131,849
<TOTAL-LIABILITY-AND-EQUITY> 48,404,687
<SALES> 32,758,981
<TOTAL-REVENUES> 32,758,981
<CGS> 27,694,699
<TOTAL-COSTS> 27,694,699
<OTHER-EXPENSES> 3,289,624
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 611,252
<INCOME-PRETAX> 1,225,306
<INCOME-TAX> 479,133
<INCOME-CONTINUING> 746,174
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 746,174
<EPS-PRIMARY> 0
<EPS-DILUTED> .17
</TABLE>
