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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, 2006
 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 þ
  o þ
  Class
    
    Outstanding as of February 14, 2007Common 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, 2006 and September 30, 2006
    
    
    3Condensed Consolidated Statements of Income for the three months ended December 31, 2006 and 2005
    
    
    4Condensed Consolidated Statements of Cash Flows for the three months ended December 31, 2006 and 2005
    
    
    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 6. Exhibits
    
    
    15SIGNATURES
    
    
    16Certification Pursuant to Rule 13a-14(a)Certification Pursuant to Rule 13a-14(a)Certification Pursuant to 18 U.S.C. Section 1350Certification 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 31,2006
    
    
    September 30,(Unaudited)
    
    
    2006*AssetsCURRENT ASSETS:Cash and cash equivalents
    
    $
    8,015
    
    
    $
    5,267Accounts receivable-net
    
    
    11,922,140
    
    
    
    15,078,707Inventories
    
    
    17,260,124
    
    
    
    14,125,417Prepaid expenses and other current assets
    
    
    1,270,257
    
    
    
    635,243Income tax receivable
    
    
    
    
    
    
    46,893Deferred income taxes
    
    
    490,637
    
    
    
    490,637Total current assets
    
    
    30,951,173
    
    
    
    30,382,164PROPERTY, PLANT AND EQUIPMENT-Net
    
    
    19,438,161
    
    
    
    18,940,513GOODWILL
    
    
    7,211,575
    
    
    
    7,211,575OTHER ASSETS-Net
    
    
    149,373
    
    
    
    154,466TOTAL
    
    $
    57,750,282
    
    
    $
    56,688,718Liabilities and Stockholders EquityCURRENT LIABILITIES:Accounts payable
    
    $
    10,084,310
    
    
    $
    9,922,742Accrued payroll, vacation and payroll taxes
    
    
    669,489
    
    
    
    507,923Other current liabilities
    
    
    512,881
    
    
    
    542,366Income taxes payable
    
    
    46,331
    
    
    
    Total current liabilities
    
    
    11,313,001
    
    
    
    10,973,031LONG-TERM DEBT
    
    
    7,650,000
    
    
    
    7,073,011DEFERRED INCOME TAXES
    
    
    2,094,591
    
    
    
    2,102,950STOCKHOLDERS EQUITY:Common Stock: $.01 par value: 9,000,000 shares
authorized; 4,708,341 shares
issued
    
    
    47,083
    
    
    
    47,083Additional paid-in capital
    
    
    25,247,850
    
    
    
    25,226,526Retained earnings
    
    
    12,539,553
    
    
    
    12,407,923Treasury stock, 173,097 common shares at cost
    
    
    (1,141,806
    )
    
    
    (1,141,806
    )Total stockholders equity
    
    
    36,692,680
    
    
    
    36,539,726TOTAL
    
    $
    57,750,282
    
    
    $
    56,688,718
  
 *
    
    Condensed from audited financial statements 3




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TUFCO TECHNOLOGIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 THREE MONTHS ENDEDDECEMBER 31,2006
    
    
    2005NET SALES
    
    $
    27,017,412
    
    
    $
    21,312,893COST OF SALES
    
    
    25,725,274
    
    
    
    20,312,482GROSS PROFIT
    
    
    1,292,138
    
    
    
    1,000,411OPERATING EXPENSES:Selling, general & administrative
    
    
    1,001,134
    
    
    
    967,469Gain on sale of property, plant and
equipment
    
    
    (145
    )
    
    
    OPERATING INCOME
    
    
    291,149
    
    
    
    32,942OTHER INCOME (EXPENSE):Interest expense
    
    
    (91,041
    )
    
    
    (20,029
    )Interest income and other income
    
    
    16,387
    
    
    
    25,302INCOME BEFORE INCOME TAXES
    
    
    216,495
    
    
    
    38,215INCOME TAX EXPENSE
    
    
    84,865
    
    
    
    14,980NET INCOME
    
    $
    131,630
    
    
    $
    23,235BASIC EARNINGS PER SHARE:Net Income
    
    $
    0.03
    
    
    $
    0.01DILUTED EARNINGS PER SHARE:Net Income
    
    $
    0.03
    
    
    $
    0.01WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:Basic
    
    
    4,535,244
    
    
    
    4,546,595Diluted
    
    
    4,552,786
    
    
    
    4,552,511
  4




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TUFCO TECHNOLOGIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 THREE MONTHS ENDEDDecember 31,2006
    
    
    2005Net Income
    
    $
    131,630
    
    
    $
    23,235Noncash items in net income:Depreciation and amortization of property, plant and
equipment
    
    
    525,200
    
    
    
    451,251Amortization
    
    
    5,286
    
    
    
    5,286Non-monetary reimbursement of cost
    
    
    (330,000
    )
    
    
    Deferred income taxes
    
    
    (8,359
    )
    
    
    (9,429
    )Gain on sale of property, plant and equipment
    
    
    (145
    )
    
    
    Stock-based compensation expense
    
    
    21,324
    
    
    
    24,055Changes in operating working capital:Accounts receivable
    
    
    3,156,567
    
    
    
    (1,694,673
    )Inventories
    
    
    (3,134,707
    )
    
    
    (1,075,706
    )Prepaid expenses and other assets
    
    
    (635,207
    )
    
    
    (90,584
    )Accounts payable
    
    
    562,486
    
    
    
    2,901,708Accrued and other current liabilities
    
    
    132,081
    
    
    
    (190,636
    )Income taxes payable/receivable
    
    
    93,224
    
    
    
    (127,860
    )Net cash provided by operating activities
    
    
    519,380
    
    
    
    216,647INVESTING ACTIVITIESAdditions to property, plant and equipment
    
    
    (1,094,121
    )
    
    
    (1,404,928
    )Proceeds from disposals of property, plant and equipment
    
    
    500
    
    
    
    Net cash used in investing activities
    
    
    (1,093,621
    )
    
    
    (1,404,928
    )FINANCING ACTIVITIESBorrowings of long-term debt
    
    
    576,989
    
    
    
    1,242,895Purchase of treasury stock
    
    
    
    
    
    
    (52,691
    )Net cash provided by financing activities
    
    
    576,989
    
    
    
    1,190,204NET INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    2,748
    
    
    
    1,923CASH AND CASH EQUIVALENTS:Beginning of period
    
    
    5,267
    
    
    
    5,672End of period
    
    $
    8,015
    
    
    $
    7,595NONCASH SUPPLEMENTAL INFORMATION:Construction payable
    
    
    
    
    
    
    156,383
  5




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TUFCO TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended December 31, 2006 and 2005
(Unaudited)
 1. Basis of Presentation
  2. Recently Issued Accounting Standards
 Accounting For Uncertainty in Income Taxes-an interpretation of FASB Statement No.
109
  3. Earnings Per Share
  6




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Notes to condensed consolidated financial statements(continued)
 4. Reclassifications
  5. Inventories
  December 31,
    
    
    September 30,2006
    
    
    2006Raw materials
    
    $
    12,359,329
    
    
    $
    11,021,598Finished goods
    
    
    4,900,795
    
    
    
    3,103,819Total inventories
    
    $
    17,260,124
    
    
    $
    14,125,417
 6. Stock Based Compensation
     7




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Notes to condensed consolidated financial statements(continued)
   Expected option life (in years)
    
    
    7Expected volatility
    
    
    50.3
    %Dividend yield
    
    
    0
    %Risk-free interest rate
    
    
    4.58
    %
  WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Term
    
    
    ValueOutstanding at September 30, 2006
    
    
    460,950
    
    
    $
    7.47New grants
    
    
    2,000
    
    
    
    6.76Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    (173,250
    )
    
    
    8.83Outstanding at December 31, 2006
    
    
    289,700
    
    
    $
    6.66
    
    
    
    5.8
    
    
    $
    1,928,772Exercisable at December 31, 2006
    
    
    279,867
    
    
    $
    6.62
    
    
    
    5.7
    
    
    $
    1,851,384
 7. Stock Repurchase Plan
  8




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Notes to condensed consolidated financial statements(continued)
 8. Segment Information
  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
    
    
    
    
    
    
    
    1,094,121Assets:Inventories
    
    
    14,284,712
    
    
    
    2,975,412
    
    
    
    
    
    
    
    17,260,124Property, plant and
equipment-net
    
    
    17,099,600
    
    
    
    2,306,379
    
    
    
    32,182
    
    
    
    19,438,161Accounts receivable
and other
(including
goodwill)
    
    
    13,555,417
    
    
    
    5,478,299
    
    
    
    2,018,281
    
    
    
    21,051,997Total assets
    
    $
    44,939,729
    
    
    $
    10,760,090
    
    
    $
    2,050,463
    
    
    $
    57,750,282
 Three Months Ended
    
    Contract
    
    
    Business
    
    
    CorporateDecember 31, 2005
    
    Manufacturing
    
    
    Imaging
    
    
    and Other
    
    
    ConsolidatedNet sales
    
    $
    14,537,254
    
    
    $
    6,775,639
    
    
    $
    
    
    
    $
    21,312,893Gross profit
    
    
    428,410
    
    
    
    572,001
    
    
    
    
    
    
    
    1,000,411Operating (loss) income
    
    
    (52,867
    )
    
    
    350,758
    
    
    
    (264,949
    )
    
    
    32,942Depreciation and
amortization expense
    
    
    341,144
    
    
    
    60,819
    
    
    
    54,574
    
    
    
    456,537Capital expenditures
    
    
    1,399,810
    
    
    
    5,118
    
    
    
    
    
    
    
    1,404,928Assets: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
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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,
    
    Change2006
    
    2005
    
    $
    
    %Net Sales
    
    $
    27,017
    
    
    $
    21,313
    
    
    $
    5,704
    
    
    
    27Gross Profit
    
    
    1,292
    
    
    
    1,000
    
    
    
    292
    
    
    
    294.8
    %
    
    
    4.7
    %Operating Expenses
    
    
    1,001
    
    
    
    967
    
    
    
    34
    
    
    
    43.7
    %
    
    
    4.5
    %Operating Income
    
    
    291
    
    
    
    33
    
    
    
    258
    
    
    NM1.1
    %
    
    
    0.2
    %Interest Expense
    
    
    91
    
    
    
    20
    
    
    
    71
    
    
    NM0.3
    %
    
    
    0.1
    %Income Before Income Taxes
    
    
    216
    
    
    
    38
    
    
    
    178
    
    
    NM0.8
    %
    
    
    0.2
    %Income Tax Expense
    
    
    85
    
    
    
    15
    
    
    
    70
    
    
    NM0.3
    %
    
    
    0.1
    %Net Income
    
    $
    132
    
    
    $
    23
    
    
    
    109
    
    
    NM0.5
    %
    
    
    0.1
    %
 Three Months Ended December 31,2006
    
    
    2005% of
    
    
    
    
    
    
    % of
    
    
    Period-to-Period ChangeAmount
    
    
    Total
    
    
    Amount
    
    
    Total
    
    
    $
    
    
    %Net
SalesContract manufacturing and printing
    
    $
    20,580
    
    
    
    76
    %
    
    $
    14,537
    
    
    
    68
    %
    
    $
    6,043
    
    
    
    42
    %Business Imaging paper products
    
    
    6,437
    
    
    
    24
    
    
    
    6,776
    
    
    
    32
    
    
    
    (339
    )
    
    
    (5
    %)Net Sales
    
    $
    27,017
    
    
    
    100
    %
    
    $
    21,313
    
    
    
    100
    %
    
    $
    5,704
    
    
    
    27
    %
 2006
    
    
    2005Margin
    
    
    
    
    
    
    Margin
    
    
    
    Period-to-Period ChangeAmount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    $
    
    
    %Gross
ProfitContract manufacturing and printing
    
    $
    852
    
    
    
    4
    %
    
    $
    428
    
    
    
    3
    %
    
    $
    424
    
    
    
    99
    %Business Imaging paper products
    
    
    440
    
    
    
    7
    %
    
    
    572
    
    
    
    8
    %
    
    
    (132
    )
    
    
    (23
    %)Gross Profit
    
    $
    1,292
    
    
    
    5
    %
    
    $
    1,000
    
    
    
    5
    %
    
    $
    292
    
    
    
    29
    %
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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 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, 2007
    /s/ Louis LeCalsey, IIILouis LeCalsey, IIIPresident and Chief Executive OfficerDate: February 14, 2007
    /s/ Michael B. WheelerMichael B. WheelerExecutive Vice President, Chief
Financial Officer and
Chief Operating Officer 16