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SECURITIES AND EXCHANGE COMMISSION
 Washington, DC
 Form 10-Q
 Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For
the quarterly period ended December 31, 2005
 Commission
file number 0-21018
 TUFCO TECHNOLOGIES, INC.
 Delaware
    
    39-1723477(State of other jurisdiction
of incorporation of organization)
    
    (IRS Employer ID No.)
 PO BOX 23500 Green Bay, WI 54305
  (920) 336-0054
   þ o
  o o ý
  o þ
  o þ
  Class
    
    Outstanding as of February 14, 2006Common Stock, par value $0.01 per share
    
    4,535,244




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##### 



TUFCO TECHNOLOGIES, INC. AND SUBSIDIARY
 Index
 PageNumberPART I:
    
    FINANCIAL INFORMATIONItem 1.
    
    Condensed Consolidated Financial StatementsCondensed Consolidated Balance Sheets as of
December 31, 2005 and September 30, 2005
    
    
    3Condensed Consolidated Statements of Income for the three
months ended December 31, 2005 and 2004
    
    
    4Condensed Consolidated Statements of Cash Flows for the
three months ended December 31, 2005 and 2004
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    10Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    14Item 4.
    
    Controls and Procedures
    
    
    15PART II:
    
    OTHER INFORMATIONItem 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    15Item 5.
    
    Other Information
    
    
    16Item 6.
    
    Exhibits
    
    
    16SIGNATURES
    
    
    17Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a)Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a)Certification Pursuant to Section 906Certification Pursuant to Section 906
  2




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PART I. FINANCIAL INFORMATION
 
 ITEM 1. Condensed Consolidated Financial Statements
 TUFCO TECHNOLOGIES, INC. AND SUBSIDIARY
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 December 31,2005
    
    
    September 30,(Unaudited)
    
    
    2005*AssetsCURRENT ASSETS:Cash and cash
equivalents
    
    $
    7,595
    
    
    $
    5,672Accounts
receivable-net
    
    
    11,423,091
    
    
    
    9,728,418Inventories
    
    
    11,213,477
    
    
    
    10,137,771Prepaid expenses and other current
assets
    
    
    386,248
    
    
    
    170,555Income tax
receivable
    
    
    713,250
    
    
    
    585,390Deferred income
taxes
    
    
    499,947
    
    
    
    499,947Total current
assets
    
    
    24,243,608
    
    
    
    21,127,753PROPERTY,
PLANT AND EQUIPMENT-Net
    
    
    16,457,839
    
    
    
    15,657,028GOODWILL
    
    
    7,211,575
    
    
    
    7,211,575OTHER
ASSETS-Net
    
    
    359,267
    
    
    
    489,662TOTAL
    
    $
    48,272,289
    
    
    $
    44,486,018Liabilities and Stockholders EquityCURRENT LIABILITIES:Accounts
payable
    
    $
    7,437,729
    
    
    $
    4,688,887Accrued payroll, vacation and payroll
taxes
    
    
    424,072
    
    
    
    367,336Other current
liabilities
    
    
    415,591
    
    
    
    662,963Total current
liabilities
    
    
    8,277,392
    
    
    
    5,719,186LONG-TERM
DEBT
    
    
    2,355,531
    
    
    
    1,112,636DEFERRED INCOME
TAXES
    
    
    1,727,888
    
    
    
    1,737,317STOCKHOLDERS EQUITY:Common Stock: $.01 par value: 9,000,000 shares
authorized;4,708,341 shares
issued
    
    
    47,083
    
    
    
    47,083Additional paid-in
capital
    
    
    25,121,966
    
    
    
    25,097,911Retained
earnings
    
    
    11,868,387
    
    
    
    11,845,152Treasury stock, 170,297 and 161,197 common shares at cost,
respectively
    
    
    (1,125,958
    )
    
    
    (1,073,267
    )Total stockholders
equity
    
    
    35,911,478
    
    
    
    35,916,879TOTAL
    
    $
    48,272,289
    
    
    $
    44,486,018
   3




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TUFCO TECHNOLOGIES, INC. AND SUBSIDIARY
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 THREE MONTHS ENDEDDECEMBER 31,2005
    
    
    2004NET SALES
    
    $
    21,312,893
    
    
    $
    20,003,989COST OF SALES
    
    
    20,312,482
    
    
    
    18,552,885GROSS PROFIT
    
    
    1,000,411
    
    
    
    1,451,104OPERATING EXPENSES:Selling, general & administrative
    
    
    967,469
    
    
    
    1,177,984Gain on sale of property, plant and
equipment
    
    
    
    
    
    
    (415,781
    )OPERATING INCOME
    
    
    32,942
    
    
    
    688,901OTHER INCOME (EXPENSE):Interest expense
    
    
    (20,029
    )
    
    
    (13,520
    )Interest income and other income
    
    
    25,302
    
    
    
    14,184INCOME BEFORE INCOME TAXES
    
    
    38,215
    
    
    
    689,565INCOME TAX EXPENSE
    
    
    14,980
    
    
    
    281,567NET INCOME
    
    $
    23,235
    
    
    $
    407,998BASIC EARNINGS PER SHARE:Net Income
    
    $
    0.01
    
    
    $
    0.09DILUTED EARNINGS PER SHARE:Net Income
    
    $
    0.01
    
    
    $
    0.09WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:Basic
    
    
    4,546,595
    
    
    
    4,582,344Diluted
    
    
    4,552,511
    
    
    
    4,615,317
  4




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TUFCO TECHNOLOGIES, INC. AND SUBSIDIARY
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 THREE MONTHS ENDEDDecember 31,2005
    
    
    2004OPERATING ACTIVITIESNet Income
    
    $
    23,235
    
    
    $
    407,998Noncash items in net income:Depreciation and amortization of property, plant and
equipment
    
    
    451,251
    
    
    
    510,132Amortization
    
    
    5,286
    
    
    
    5,286Deferred income taxes
    
    
    (9,429
    )
    
    
    81,826Gain on sale of property, plant and equipment
    
    
    
    
    
    
    (415,781
    )Stock compensation expense
    
    
    24,055
    
    
    
    Changes in operating working capital:Accounts receivable
    
    
    (1,694,673
    )
    
    
    3,189,293Inventories
    
    
    (1,075,706
    )
    
    
    (1,134,538
    )Prepaid expenses and other assets
    
    
    (90,584
    )
    
    
    (229,093
    )Accounts payable
    
    
    2,901,708
    
    
    
    (254,386
    )Accrued and other current liabilities
    
    
    (190,636
    )
    
    
    (488,819
    )Income taxes payable/receivable
    
    
    (127,860
    )
    
    
    (47,069
    )Net cash provided by operating activities
    
    
    216,647
    
    
    
    1,624,849INVESTING ACTIVITIESAdditions to property, plant and equipment
    
    
    (1,252,062
    )
    
    
    (85,813
    )Change in construction payables
    
    
    (152,866
    )
    
    
    Proceeds from disposals of property, plant and equipment
    
    
    
    
    
    
    462,042Net cash (used) provided by investing activities
    
    
    (1,404,928
    )
    
    
    376,229FINANCING ACTIVITIESRepayment of long-term debt
    
    
    
    
    
    
    (2,500,000
    )Borrowings of long-term debt
    
    
    1,242,895
    
    
    
    500,000Purchase of treasury stock
    
    
    (52,691
    )
    
    
    Net cash provided (used) by financing activities
    
    
    1,190,204
    
    
    
    (2,000,000
    )NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    1,923
    
    
    
    1,078CASH AND CASH EQUIVALENTS:Beginning of period
    
    
    5,672
    
    
    
    7,692End of period
    
    $
    7,595
    
    
    $
    8,770NONCASH SUPPLEMENTAL INFORMATION:Deferred gain on sale of equipment
    
    $
    
    
    
    $
    95,000
  5




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TUFCO TECHNOLOGIES, INC. AND SUBSIDIARY
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended December 31, 2005 and 2004
(Unaudited)
 1. Basis of Presentation
  Earnings Per Share
  Stock Based Compensation
    6




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Notes to condensed consolidated financial statements(continued)
   Three Months EndedDecember 31,2004Net income as reported
    
    $
    407,998Less total stock-based employee compensation expense
determined under fair value based method of all awards, net
of related tax effects
    
    
    (19,086
    )Pro forma net income
    
    $
    388,912Earnings per share:Basic  as reported
    
    $
    0.09Basic  pro forma
    
    $
    0.08Diluted  as reported
    
    $
    0.09Diluted  pro forma
    
    $
    0.08
    WeightedAverageWeighted
    
    
    Remaining
    
    
    AggregateAverage
    
    
    Contractual
    
    
    IntrinsicOptions
    
    Shares
    
    
    Exercise Price
    
    
    Term
    
    
    ValueOutstanding
at September 30, 2005
    
    
    541,800
    
    
    $
    7.40New grants
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    94,850
    
    
    $
    6.90Outstanding
at December 31, 2005
    
    
    446,950
    
    
    $
    7.50
    
    
    
    3.9
    
    
    $
    3,353,136Exercisable
at December 31, 2005
    
    
    414,717
    
    
    $
    7.54
    
    
    
    3.6
    
    
    $
    3,125,883
  7




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Notes to condensed consolidated financial statements(continued)
 2. Inventories
  December 31,
    
    
    September 30,2005
    
    
    2005Raw materials
    
    $
    8,826,239
    
    
    $
    7,470,774Finished goods
    
    
    2,387,238
    
    
    
    2,666,997Total inventories
    
    $
    11,213,477
    
    
    $
    10,137,771
 3. Stock Repurchase Plan
  4. Segment Information
  8




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Notes to condensed consolidated financial statements(continued)
 Three Months Ended
    
    Contract
    
    
    Business
    
    
    CorporateDecember 31, 2005
    
    Manufacturing
    
    
    Imaging
    
    
    and Other
    
    
    ConsolidatedNet sales
    
    $
    14,537,254
    
    
    $
    6,775,639
    
    
    $
    
    
    
    $
    21,312,893Gross profit
    
    
    590,657
    
    
    
    684,749
    
    
    
    (274,995
    )
    
    
    1,000,411Operating (loss) income
    
    
    (215,114
    )
    
    
    238,010
    
    
    
    10,046
    
    
    
    32,942Depreciation and
amortization expense
    
    
    341,144
    
    
    
    60,819
    
    
    
    54,574
    
    
    
    456,537Capital expenditures
    
    
    1,246,944
    
    
    
    5,118
    
    
    
    
    
    
    
    1,252,062Assets:Inventories
    
    
    8,661,110
    
    
    
    2,552,367
    
    
    
    
    
    
    
    11,213,477Property, plant and
equipment-net
    
    
    13,838,430
    
    
    
    2,462,604
    
    
    
    156,805
    
    
    
    16,457,839Accounts receivable
and other
(including
goodwill)
    
    
    12,400,232
    
    
    
    6,038,132
    
    
    
    2,162,609
    
    
    
    20,600,973Total assets
    
    $
    34,899,772
    
    
    $
    11,053,103
    
    
    $
    2,319,414
    
    
    $
    48,272,289
 Three Months Ended
    
    Contract
    
    
    Business
    
    
    CorporateDecember 31, 2004
    
    Manufacturing
    
    
    Imaging
    
    
    and Other
    
    
    ConsolidatedNet Sales
    
    $
    14,227,469
    
    
    $
    5,776,520
    
    
    $
    
    
    
    $
    20,003,989Gross Profit
    
    
    1,297,512
    
    
    
    532,189
    
    
    
    (378,597
    )
    
    
    1,451,104Operating Income (loss)
    
    
    236,203
    
    
    
    (97,882
    )
    
    
    550,580
    
    
    
    688,901Depreciation and
amortization expense
    
    
    350,885
    
    
    
    81,044
    
    
    
    83,489
    
    
    
    515,418Capital expenditures
    
    
    77,308
    
    
    
    8,505
    
    
    
    
    
    
    
    85,813Assets:Inventories
    
    
    8,636,441
    
    
    
    2,123,060
    
    
    
    
    
    
    
    10,759,501Property, plant and
equipment-net
    
    
    12,543,802
    
    
    
    2,826,317
    
    
    
    393,636
    
    
    
    15,763,755Accounts receivable
and other (including
goodwill)
    
    
    10,798,102
    
    
    
    5,605,313
    
    
    
    1,660,431
    
    
    
    18,063,846Total assets
    
    $
    31,978,345
    
    
    $
    10,554,690
    
    
    $
    2,054,067
    
    
    $
    44,587,102
 9




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ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward Looking Statements:
  General Information:
    10




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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-PeriodDecember 31,
    
    Change2005
    
    2004
    
    $
    
    %Net Sales
    
    $
    21,313
    
    
    $
    20,004
    
    
    $
    1,309
    
    
    
    7Gross
Profit
    
    
    1,000
    
    
    
    1,451
    
    
    
    (451
    )
    
    
    (31
    )4.7
    %
    
    
    7.3
    %Operating Expenses
    
    
    967
    
    
    
    762
    
    
    
    205
    
    
    
    274.5
    %
    
    
    3.8
    %Operating Income
    
    
    33
    
    
    
    689
    
    
    
    (656
    )
    
    
    (95
    )0.2
    %
    
    
    3.4
    %Interest Expense
    
    
    20
    
    
    
    14
    
    
    
    6
    
    
    
    430.1
    %
    
    
    0.1
    %Income Before Income Taxes
    
    
    38
    
    
    
    690
    
    
    
    (652
    )
    
    
    (94
    )0.2
    %
    
    
    3.4
    %Income Tax Expense
    
    
    15
    
    
    
    282
    
    
    
    (267
    )
    
    
    (95
    )0.1
    %
    
    
    1.4
    %Net Income
    
    $
    23
    
    
    $
    408
    
    
    
    (385
    )
    
    
    (94
    )0.1
    %
    
    
    2.0
    %
 Three Months EndedDecember 31,2005
    
    
    2004% of
    
    
    
    
    
    
    % of
    
    
    Period-to-Period ChangeAmount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    $
    
    
    %Net SalesContract manufacturing and printing
    
    $
    14,537
    
    
    
    68
    %
    
    $
    14,227
    
    
    
    71
    %
    
    $
    310
    
    
    
    2
    %Business Imaging paper products
    
    
    6,776
    
    
    
    32
    
    
    
    5,777
    
    
    
    29
    
    
    
    999
    
    
    
    17
    %Net Sales
    
    $
    21,313
    
    
    
    100
    %
    
    $
    20,004
    
    
    
    100
    %
    
    $
    1,309
    
    
    
    7
    %
 2005
    
    
    2004Margin
    
    
    
    
    
    
    
    
    
    
    Period-to-Period ChangeAmount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    $
    
    
    %Gross
ProfitContract manufacturing and printing
    
    $
    591
    
    
    
    4
    %
    
    $
    1,298
    
    
    
    9
    %
    
    $
    (707
    )
    
    
    (54
    %)Business Imaging paper products
    
    
    685
    
    
    
    10
    %
    
    
    532
    
    
    
    9
    %
    
    
    153
    
    
    
    29
    %Gross Profit
    
    $
    1,276
    
    
    
    6
    %
    
    $
    1,830
    
    
    
    9
    %
    
    $
    (554
    )
    
    
    (30
    %)
 11




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ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of
OperationsContinued
 Net Sales :
   Gross Profit :
  Operating Expenses :
  Interest Expense and Other Income (Expense) net :
  Net Income
  12




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ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of
OperationsContinued
 Liquidity and Capital Resources:
          13




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ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of
OperationsContinued
 Stock Repurchase Plan :
  Critical Accounting Policies:
  Off Balance Sheet Arrangements:
  
 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
  14




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ITEM 4. Controls and Procedures
    
 PART II. OTHER INFORMATION
 
 ITEM 2. Unregistered Sales Of Equity Securities And Use Of Proceeds
 Issuer Purchases of Equity Securities
  Total Number of
    
    Maximum NumberShares Purchased
    
    Of Shares ThatTotal Number
    
    
    
    
    
    as Part of
    
    May Yet BeOf Shares
    
    Average Price
    
    Publicly
    
    Purchased UnderPeriod
    
    Purchased
    
    Paid per Share
    
    Announced Plan
    
    The PlanDecember(12/1/05  12/31/05)
    
    
    9,100
    
    
    $
    5.79
    
    
    
    46,300
    
    
    
    253,700
  15




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ITEM 5. Other Information
  
 ITEM 6. Exhibits
 31.1
    
    Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the
Securities Exchange Act of 1934.31.2
    
    Certification pursuant to Rule 13a-14(a) or Rule
15d-14(a) of the Securities Exchange Act of 1934.32.1
    
    Certification furnished pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification furnished Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 16




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SIGNATURES
  TUFCO TECHNOLOGIES, INC.Date:
    
    February 14, 2006
    
    /s/ Louis LeCalsey, III

Louis LeCalsey, IIIPresident and Chief Executive OfficerDate:
    
    February 14, 2006
    
    /s/ Michael B. Wheeler

Michael B. WheelerVice President and Chief Financial Officer
 17