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| TFCO > SEC Filings for TFCO > Form 10-Q on 14-Aug-2008 | All Recent SEC Filings |
14-Aug-2008
Quarterly Report
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations-Continued
Results of Operations:
Condensed operating data, percentages of net sales and period-to-period changes
in these items are as follows (dollars in thousands):
Three Months Ended Period-to-Period Nine Months Ended Period-to-Period
June 30, Change June 30, Change
2008 2007 $ % 2008 2007 $ %
Net Sales $ 30,674 $ 29,815 $ 859 3 $ 85,096 $ 84,420 $ 676 1
Gross Profit 1,667 1,650 17 1 4,214 4,128 86 2
5.4 % 5.5 % 5.0 % 4.9 %
Operating Expenses 1,073 1,075 (2 ) (0.2 ) 3,089 3,028 61 2
3.5 % 3.6 % 3.6 % 3.6 %
Operating Income 594 575 19 3 1,125 1,100 25 2
1.9 % 1.9 % 1.3 % 1.3 %
Interest Expense 50 133 (83 ) (62 ) 219 382 (163 ) (43 )
0.2 % 0.4 % 0.3 % 0.5 %
Income Before Income Taxes 544 443 101 23 925 737 188 26
1.8 % 1.5 % 1.1 % 0.9 %
Income Tax Expense 213 156 57 37 363 271 92 34
0.7 % 0.5 % 0.4 % 0.3 %
Net Income $ 331 $ 287 44 15 $ 562 $ 465 97 21
1.1 % 1.0 % 0.7 % 0.6 %
Basic and Diluted Earnings
Per Share $ 0.07 $ 0.06 $ 0.12 $ 0.10
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ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations-Continued
Three Months Ended
June 30,
2008 2007
% of % of Period-to-Period Change
Amount Total Amount Total $ %
Net Sales
Contract Manufacturing
and printing $ 24,314 79 % $ 24,228 81 % $ 86 0.4 %
Business Imaging paper
products 6,360 21 % 5,587 19 % 773 14 %
Net Sales $ 30,674 100 % $ 29,815 100 % $ 859 3 %
2008 2007
Margin Margin Period-to-Period Change
Amount % Amount % $ %
Gross Profit
Contract Manufacturing
and printing $ 1,390 6 % $ 1,204 5 % $ 186 15 %
Business Imaging paper
products 277 4 % 446 8 % (169 ) (38 %)
Gross Profit $ 1,667 5 % $ 1,650 6 % $ 17 1 %
Nine Months Ended
June 30,
2008 2007
% of % of Period-to-Period Change
Amount Total Amount Total $ %
Net Sales
Contract Manufacturing
and printing $ 67,141 79 % $ 66,539 79 % $ 602 1 %
Business Imaging paper
products 17,955 21 % 17,881 21 % 74 0.4 %
Net Sales $ 85,096 100 % $ 84,420 100 % $ 676 1 %
2008 2007
Margin Margin Period-to-Period Change
Amount % Amount % $ %
Gross Profit
Contract Manufacturing
and printing $ 3,224 5 % $ 2,763 4 % $ 461 17 %
Business Imaging paper
products 990 6 % 1,365 8 % (375 ) 27 %
Gross Profit $ 4,214 5 % $ 4,128 5 % $ 86 2 %
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ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations-Continued
Net Sales:
Consolidated net sales increased $0.9 million (3%) to $30.7 million in the third
quarter of fiscal 2008, when compared to the same period last year. This was due
to an increase of $0.1 million (0.4%) in the Contract Manufacturing segment and
an increase of $0.8 million (14%) in the Business Imaging segment.
For the nine months ended June 30, 2008, net sales increased $0.7 million (1%)
when compared to the first nine months of fiscal 2007. This was due to an
increase of $0.6 million (1%) in the Contract Manufacturing segment and an
increase of $0.1 million (0.4%) in the Business Imaging segment.
The Company depends on two Contract Manufacturing customers for a significant
portion of its business. One customer accounted for 30% of the Company's total
net sales in the third quarter of fiscal 2008 compared to 29% for the same
period in fiscal 2007. This same customer accounted for 34% of the Company's
total net sales in the first nine months of fiscal 2008, compared to 32% for the
same period last year. The second customer accounted for 40% of the Company's
total net sales in the third quarter of fiscal 2008 compared to 44% for the same
period in fiscal 2007. This customer accounted for 35% of the Company's total
net sales in the first nine months of fiscal 2008, compared to 38% for the same
period last year.
In Contract Manufacturing, the increase in revenues for the first nine months
was primarily due to two new wipes converting product lines that were not in
production for the entire first nine months of fiscal 2007, offset by decreases
in customer demand for existing products. The Business Imaging segment sales
increase for the first nine months was primarily due to a pass through of raw
material increases to the segment's customers. Both segments were affected by
the slowdown in the economic environment.
Gross Profit:
Consolidated gross profit increased $17,000 (1%) for the third quarter of fiscal
2008 when compared to the third quarter of fiscal 2007. This was due to an
increase of $186,000 (15%) in the Contract Manufacturing segment and a decrease
of $169,000 (38%) in the Business Imaging segment.
For the nine months ended June 30, 2008, gross profit increased $86,000 (2%)
when compared to the same period last year. This was due to an increase of
$461,000 (17%) in the Contract Manufacturing segment and a decrease of $375,000
(27%) in the Business Imaging segment.
In Contract Manufacturing, the increase in gross profit for the three and nine
months was primarily due to operational gains made as a result of the Company's
continuing LEAN Manufacturing and Six Sigma initiatives. In Business Imaging,
the decrease in gross profit for the three and nine months was largely due to
strong price competition for the segment's products combined with rising raw
material costs. The effect of the economic slowdown had a negative impact on
both segments.
Operating Expenses:
Selling, general and administrative expenses decreased $2,000 (0.2%) for the
third quarter of fiscal 2008 when compared to the same period in fiscal 2007 and
increased $61,000 (2%) when compared to the first nine months of fiscal 2007.
Interest Expense and Other Income (Expense) net:
Interest expense decreased $83,000 to $50,000 for the third quarter of fiscal
2008 compared to the same period in fiscal 2007 and decreased $163,000 for the
first nine months of fiscal 2008 when compared to the same period in fiscal 2007
due to lower average debt outstanding and lower interest rates on borrowings.
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations-Continued
Net Income:
The Company reported net income of $331,000 (per share: $0.07 basic and diluted)
for the third quarter of fiscal 2008, versus net income of $287,000 (per share:
$0.06 basic and diluted) for the same period in fiscal 2007.
For the nine months ended June 30, 2008, net income was $562,000 (per share:
$0.12 basic and diluted) compared to net income of $465,000 (per share: $0.10
basic and diluted) for the first nine months of fiscal 2007.
Liquidity and Capital Resources:
The Company generated $3.8 million in cash from operations through the first
nine months of fiscal 2008, compared to cash provided by operations of
$3.4 million for the same period last year. Cash generated from operations for
the first nine months of fiscal 2008 resulted from a reduction in accounts
receivable of $1.4 million. Accounts payable decreased $0.8 million in the first
nine months of fiscal 2008 compared to the same period last year. Inventories
decreased $0.7 million as a result of efforts to reduce average on hand
inventory levels for major raw material components. Depreciation was
$1.6 million for the first nine months.
Net cash used in investing activities was $0.8 million for the first nine months
of fiscal 2008, primarily related to capital expenditures to support ongoing
operational needs and to a down payment on a canister line to support the
Company's growth in the expanding disposable nonwovens wipes market.
Net cash used by financing activities was $3.1 million for the first nine months
of fiscal 2008, primarily due to the Company paying down its revolving credit
line. In February 2008, the Company's Board of Directors approved a program for
open market stock repurchases through December 31, 2008 for up to 100,000 shares
of its stock at prevailing market prices after concluding that the cash and debt
position would enable these purchases without impairment to the Company's
capital. A total of 67,000 shares were purchased under the plan for an aggregate
purchase price of $0.4 million from approval of the plan through June 30, 2008.
The Company's primary need for capital resources is to finance inventories,
accounts receivable and capital expenditures. As of June 30, 2008, cash recorded
on the balance sheet was $5,680.
The credit agreement governing the Company's revolving credit line, as amended
on February 9, 2007 and March 18, 2008, includes a $14.0 million revolving line
of credit facility as well as a $1.0 million swing line available for overdrafts
and expires on May 18, 2010.
As of August 14, 2008, the Company had approximately $11.0 million available and
$4.0 million outstanding under the revolving credit line pursuant to its credit
agreement. According to the terms of the credit agreement, the Company is
subject to certain financial and operational covenants. As of June 30, 2008, the
Company was in compliance with all of its covenants under the credit agreement.
Management believes that the Company's operating cash flow, together with
amounts available under its credit agreement, are adequate to service the
Company's long term obligations as of June 30, 2008 and any budgeted capital
expenditures.
The Company intends to retain earnings to finance future operations and
expansion and does not expect to pay any dividends within the foreseeable
future.
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