##### Table of Contents



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, 2007
 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
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
  o þ
  Class
    
    Outstanding as of February 14, 2008Common Stock, par value $0.01 per share
    
    4,535,644




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##### 



TUFCO TECHNOLOGIES, INC.
 Index
 PageNumberPART I:
    
    FINANCIAL INFORMATIONItem 1.
    
    Condensed Consolidated Financial StatementsCondensed Consolidated Balance Sheets as of
December 31, 2007 and September 30, 2007
    
    
    3Condensed Consolidated Statements of Income for the three months
ended December 31, 2007 and 2006
    
    
    4Condensed Consolidated Statements of Cash Flows for the
three months ended December 31, 2007 and 2006
    
    
    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
    
    
    14PART II:
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    14Item 1A.
    
    Risk Factors
    
    
    14Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    14Item 3.
    
    Defaults Upon Senior Securities
    
    
    14Item 4.
    
    Submission of Matters to Vote for Security Holders
    
    
    14Item 5.
    
    Other Information
    
    
    15Item 6.
    
    Exhibits
    
    
    15SIGNATURES
    
    
    16Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a)Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a)Certification Furnished Pursuant to 18 U.S.C. Section 1350Certification Furnished Pursuant to 18 U.S.C. Section 1350
  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,
    
    
    September 30,2007
    
    
    2007(Unaudited)AssetsCURRENT ASSETS:Cash and cash equivalents
    
    $
    7,521
    
    
    $
    6,663Accounts receivable-net
    
    
    11,645,785
    
    
    
    15,301,870Inventories
    
    
    17,510,107
    
    
    
    16,354,816Prepaid expenses and other current assets
    
    
    1,080,134
    
    
    
    833,896Income tax receivable
    
    
    46,747
    
    
    
    Deferred income taxes
    
    
    534,990
    
    
    
    534,990Total current assets
    
    
    30,825,284
    
    
    
    33,032,235PROPERTY, PLANT AND EQUIPMENT-Net
    
    
    18,744,125
    
    
    
    19,002,401GOODWILL
    
    
    7,211,575
    
    
    
    7,211,575OTHER ASSETS-Net
    
    
    126,923
    
    
    
    126,729TOTAL
    
    $
    56,907,907
    
    
    $
    59,372,940Liabilities and Stockholders EquityCURRENT LIABILITIES:Accounts payable
    
    $
    9,507,551
    
    
    $
    11,706,586Accrued payroll, vacation and payroll taxes
    
    
    656,998
    
    
    
    513,331Income taxes payable
    
    
    
    
    
    
    107,182Other current liabilities
    
    
    687,452
    
    
    
    716,620Total current liabilities
    
    
    10,852,002
    
    
    
    13,043,719LONG-TERM DEBT
    
    
    5,871,087
    
    
    
    6,191,666DEFERRED INCOME TAXES
    
    
    2,532,372
    
    
    
    2,537,154COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITY:Common Stock: $.01 par value: 9,000,000 shares
authorized;
4,708,741 shares issued
    
    
    47,087
    
    
    
    47,087Additional paid-in capital
    
    
    25,316,620
    
    
    
    25,304,421Retained earnings
    
    
    13,430,545
    
    
    
    13,390,699Treasury stock, 173,097 common shares at cost
    
    
    (1,141,806
    )
    
    
    (1,141,806
    )Total stockholders equity
    
    
    37,652,446
    
    
    
    37,600,401TOTAL
    
    $
    56,907,907
    
    
    $
    59,372,940
 3




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TUFCO TECHNOLOGIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 THREE MONTHS ENDEDDECEMBER 31,2007
    
    
    2006NET SALES
    
    $
    24,817,953
    
    
    $
    27,017,412COST OF SALES
    
    
    23,713,435
    
    
    
    25,725,274GROSS PROFIT
    
    
    1,104,518
    
    
    
    1,292,138OPERATING EXPENSES:Selling, general & administrative
    
    
    969,615
    
    
    
    1,000,989OPERATING INCOME
    
    
    134,903
    
    
    
    291,149OTHER INCOME (EXPENSE):Interest expense
    
    
    (87,111
    )
    
    
    (91,041
    )Interest income and other income
    
    
    17,745
    
    
    
    16,387INCOME BEFORE INCOME TAXES
    
    
    65,537
    
    
    
    216,495INCOME TAX EXPENSE
    
    
    25,691
    
    
    
    84,865NET INCOME
    
    $
    39,846
    
    
    $
    131,630BASIC EARNINGS PER SHARE:Net Income
    
    $
    0.01
    
    
    $
    0.03DILUTED EARNINGS PER SHARE:Net Income
    
    $
    0.01
    
    
    $
    0.03WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:Basic
    
    
    4,535,644
    
    
    
    4,535,244Diluted
    
    
    4,552,607
    
    
    
    4,552,786
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TUFCO TECHNOLOGIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 THREE MONTHS ENDEDDecember 31,2007
    
    
    2006OPERATING ACTIVITIESNet income
    
    $
    39,846
    
    
    $
    131,630Noncash items in net income:Depreciation and amortization of property, plant and equipment
    
    
    548,752
    
    
    
    525,200Amortization
    
    
    
    
    
    
    5,286Non-monetary reimbursement of cost
    
    
    (100,000
    )
    
    
    (330,000
    )Deferred income taxes
    
    
    (4,782
    )
    
    
    (8,359
    )Gain on sale of property, plant and equipment
    
    
    
    
    
    
    (145
    )Stock-based compensation expense
    
    
    12,199
    
    
    
    21,324Changes in operating working capital:Accounts receivable
    
    
    3,656,085
    
    
    
    3,156,567Inventories
    
    
    (1,155,291
    )
    
    
    (3,134,707
    )Prepaid expenses and other assets
    
    
    (246,432
    )
    
    
    (635,207
    )Accounts payable
    
    
    (2,173,212
    )
    
    
    562,486Accrued and other current liabilities
    
    
    114,500
    
    
    
    132,081Income taxes payable/receivable
    
    
    (153,929
    )
    
    
    93,224Net cash provided by operating activities
    
    
    537,736
    
    
    
    519,380INVESTING ACTIVITIESAdditions to property, plant and equipment
    
    
    (190,476
    )
    
    
    (1,094,121
    )Proceeds from disposals of property, plant and equipment
    
    
    
    
    
    
    500Payment of construction payable
    
    
    (25,823
    )
    
    
    Net cash used in investing activities
    
    
    (216,299
    )
    
    
    (1,093,621
    )FINANCING ACTIVITIESNet (repayments) borrowings of debt
    
    
    (320,579
    )
    
    
    576,989Net cash (used) provided by financing activities
    
    
    (320,579
    )
    
    
    576,989NET INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    858
    
    
    
    2,748CASH AND CASH EQUIVALENTS:Beginning of period
    
    
    6,663
    
    
    
    5,267End of period
    
    $
    7,521
    
    
    $
    8,015
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TUFCO TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended December 31, 2007 and 2006
(Unaudited)
 1.
    
    Basis of Presentation
  2.
    
    Income Taxes
   3.
    
    Earnings Per Share
  6




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Notes to condensed consolidated financial statements(continued)
 4.
    
    Reclassifications
  5.
    
    Inventories
  December 31,
    
    
    September 30,2007
    
    
    2007Raw materials
    
    $
    12,809,633
    
    
    $
    11,448,432Finished goods
    
    
    4,700,474
    
    
    
    4,906,384Total inventories
    
    $
    17,510,107
    
    
    $
    16,354,816
 6.
    
    Stock Based Compensation
    WeightedAverageExerciseShares
    
    
    PriceOutstanding at September 30, 2007
    
    
    296,300
    
    
    $
    6.74New grants
    
    
    16,850
    
    
    $
    7.60Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    
    
    
    
    Outstanding at December 31, 2007
    
    
    313,150
    
    
    $
    6.79Exercisable at December 31, 2007
    
    
    296,300
    
    
    $
    6.74
 7




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##### Table of Contents



Notes to condensed consolidated financial statements(continued)
  Three Months EndedDecember 31,
    
    December 31,2007
    
    2006Total pre-tax share-based compensation
    
    $
    12,199
    
    
    $
    21,324Weighted-average grant date fair value
    
    $
    2.36
    
    
    $
    3.88Total unrecognized compensation cost
    
    $
    17,572
    
    
    $
    27,153Remaining weighted-average period cost
will be recognized over
    
    33 Months
    
    9 MonthsProceeds from options exercise
    
    $
    
    
    
    $
    Intrinsic value of options exercise
    
    $
    
    
    
    $
    
 7.
    
    Segment Information
 
  8




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Notes to condensed consolidated financial statements(continued)
 Three Months Ended
    
    Contract
    
    Business
    
    CorporateDecember 31, 2007
    
    Manufacturing
    
    Imaging
    
    and Other
    
    ConsolidatedNet sales
    
    $
    19,098,813
    
    
    $
    5,719,140
    
    
    $
    
    
    
    $
    24,817,953Gross profit
    
    
    729,255
    
    
    
    375,263
    
    
    
    
    
    
    
    1,104,518Operating income (loss)
    
    
    124,224
    
    
    
    199,667
    
    
    
    (188,988
    )
    
    
    134,903Depreciation and
amortization expense
    
    
    492,135
    
    
    
    55,044
    
    
    
    1,573
    
    
    
    548,752Capital expenditures
    
    
    165,844
    
    
    
    24,632
    
    
    
    
    
    
    
    190,476
 Three Months Ended
    
    Contract
    
    Business
    
    CorporateDecember 31, 2006
    
    Manufacturing
    
    Imaging
    
    and Other
    
    ConsolidatedNet sales
    
    $
    20,580,187
    
    
    $
    6,437,225
    
    
    $
    
    
    
    $
    27,017,412Gross profit
    
    
    852,292
    
    
    
    439,846
    
    
    
    
    
    
    
    1,292,138Operating income (loss)
    
    
    266,495
    
    
    
    190,055
    
    
    
    (165,401
    )
    
    
    291,149Depreciation and
amortization expense
    
    
    460,550
    
    
    
    54,772
    
    
    
    15,164
    
    
    
    530,486Capital expenditures
    
    
    1,074,769
    
    
    
    19,352
    
    
    
    
    
    
    
    1,094,121
 Contract
    
    
    Business
    
    
    CorporateDecember 31, 2007
    
    Manufacturing
    
    
    Imaging
    
    
    and Other
    
    
    ConsolidatedAssets:Inventories
    
    $
    15,011,293
    
    
    $
    2,498,814
    
    
    $
    
    
    
    $
    17,510,107Property, plant and
equipment-net
    
    
    16,596,496
    
    
    
    2,137,102
    
    
    
    10,527
    
    
    
    18,744,125Accounts receivable
and other
(including
goodwill)
    
    
    14,683,529
    
    
    
    5,253,965
    
    
    
    716,181
    
    
    
    20,653,675Total assets
    
    $
    46,291,318
    
    
    $
    9,889,881
    
    
    $
    726,708
    
    
    $
    56,907,907
 Contract
    
    
    Business
    
    
    CorporateSeptember 30, 2007
    
    Manufacturing
    
    
    Imaging
    
    
    and Other
    
    
    ConsolidatedAssets:Inventories
    
    $
    14,023,642
    
    
    $
    2,331,174
    
    
    $
    
    
    
    $
    16,354,816Property, plant and
equipment-net
    
    
    16,822,787
    
    
    
    2,167,514
    
    
    
    12,100
    
    
    
    19,002,401Accounts receivable
and other
(including
goodwill)
    
    
    17,687,370
    
    
    
    5,659,972
    
    
    
    668,381
    
    
    
    24,015,723Total assets
    
    $
    48,533,799
    
    
    $
    10,158,660
    
    
    $
    680,481
    
    
    $
    59,372,940
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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,
    
    Change2007
    
    2006
    
    $
    
    %Net
Sales
    
    $
    24,818
    
    
    $
    27,017
    
    
    $
    (2,199
    )
    
    
    (8
    )Gross
Profit
    
    
    1,105
    
    
    
    1,292
    
    
    
    (187
    )
    
    
    (14
    )4.5
    %
    
    
    4.8
    %Operating Expenses
    
    
    970
    
    
    
    1,001
    
    
    
    (31
    )
    
    
    (3
    )3.9
    %
    
    
    3.7
    %Operating Income
    
    
    135
    
    
    
    291
    
    
    
    (156
    )
    
    
    (54
    )0.5
    %
    
    
    1.1
    %Interest Expense
    
    
    87
    
    
    
    91
    
    
    
    (4
    )
    
    
    (4
    )0.4
    %
    
    
    0.3
    %Income Before Income Taxes
    
    
    66
    
    
    
    216
    
    
    
    (150
    )
    
    
    (69
    )0.3
    %
    
    
    0.8
    %Income Tax Expense
    
    
    26
    
    
    
    85
    
    
    
    (59
    )
    
    
    (69
    )0.1
    %
    
    
    0.3
    %Net Income
    
    $
    40
    
    
    $
    132
    
    
    
    (92
    )
    
    
    (70
    )0.2
    %
    
    
    0.5
    %
 Three Months EndedDecember 31,2007
    
    
    2006% of
    
    
    
    
    
    
    % of
    
    
    Period-to-Period ChangeAmount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    $
    
    
    %Net
SalesContract Manufacturing and printing
    
    $
    19,099
    
    
    
    77
    %
    
    $
    20,580
    
    
    
    76
    %
    
    $
    (1,481
    )
    
    
    (7
    %)Business Imaging paper products
    
    
    5,719
    
    
    
    23
    
    
    
    6,437
    
    
    
    24
    
    
    
    (718
    )
    
    
    (11
    %)Net Sales
    
    $
    24,818
    
    
    
    100
    %
    
    $
    27,017
    
    
    
    100
    %
    
    $
    (2,199
    )
    
    
    (8
    %)
 2007
    
    
    2006Margin
    
    
    
    
    
    
    Margin
    
    
    Period-to-Period ChangeAmount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    $
    
    
    %Gross
ProfitContract Manufacturing and printing
    
    $
    729
    
    
    
    4
    %
    
    $
    852
    
    
    
    4
    %
    
    $
    (123
    )
    
    
    (14
    %)Business Imaging paper products
    
    
    376
    
    
    
    7
    %
    
    
    440
    
    
    
    7
    %
    
    
    (64
    )
    
    
    (15
    %)Gross Profit
    
    $
    1,105
    
    
    
    4
    %
    
    $
    1,292
    
    
    
    5
    %
    
    $
    (187
    )
    
    
    (14
    %)
 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 3. Quantitative and Qualitative Disclosures About Market Risk
  
 ITEM 4. Controls and Procedures
    
 PART II. OTHER INFORMATION
 
 ITEM 1. Legal Proceedings
  
 ITEM 1A. Risk Factors
  
 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 ITEM 3. Defaults Upon Senior Securities
  
 ITEM 4. Submission of Matters to a Vote of Security Holders
  14




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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
 15




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SIGNATURES
  TUFCO TECHNOLOGIES, INC.Date: February 14, 2008
    /s/ Louis LeCalsey, IIILouis LeCalsey, IIIPresident and Chief Executive OfficerDate: February 14, 2008
    /s/ Michael B. WheelerMichael B. WheelerExecutive Vice President, Chief Financial Officer and
Chief Operating Officer 16