UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended September 30, 2009
 or
 o
    
    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 or other jurisdiction
    
    (I.R.S. Employer Identification No.)of incorporation or organization)
 PO Box 23500, Green Bay, WI
    
    54305-3500(Address of principal executive offices)
    
    (Zip Code)
 920-336-0054
  Title of Class
    
    Name of Each Exchange on Which RegisteredCommon Stock, Par Value $0.01 per share
    
    Nasdaq Capital Market
  o þ
 o þ
  þ o
 þ
 o o
  Large Accelerated Filer o
Accelerated Filer o
Non-Accelerated Filer o(Do not check if a smaller reporting company)
Smaller Reporting Company þ o þ




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PART I
 ITEM 1   BUSINESS
 General
    Products and Services
  1




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Contract Manufacturing
     Business Imaging
    2




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Business Imaging (Continued)
    Manufacturing and Operations
    Sales and Marketing
    3




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Sales and Marketing (Continued)
  Competition
    Product Development and Quality Control
  4




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Product Development and Quality Control (Continued)
  Raw Materials and Suppliers
   Environmental Matters
    5




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Employees
  Working Capital
  Class of Products
  ITEM 1A   RISK FACTORS
  ITEM 1B   UNRESOLVED STAFF COMMENTS
  ITEM 2   PROPERTIES
     6




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ITEM 3   LEGAL PROCEEDINGS
  ITEM 4   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  7




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##### 



PART II
 ITEM 5   MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES
OF EQUITY SECURITIES
  High
    
    Low
    
    CloseFiscal 2008:Quarter ended December 31, 2007
    
    $
    8.59
    
    
    $
    5.52
    
    
    $
    6.50Quarter ended March 31, 2008
    
    $
    8.10
    
    
    $
    5.02
    
    
    $
    6.25Quarter ended June 30, 2008
    
    $
    7.49
    
    
    $
    5.62
    
    
    $
    6.35Quarter ended September 30, 2008
    
    $
    6.89
    
    
    $
    4.82
    
    
    $
    5.89Fiscal 2009:Quarter ended December 31, 2008
    
    $
    6.00
    
    
    $
    1.77
    
    
    $
    3.26Quarter ended March 31, 2009
    
    $
    5.60
    
    
    $
    2.66
    
    
    $
    3.88Quarter ended June 30, 2009
    
    $
    5.00
    
    
    $
    2.70
    
    
    $
    3.29Quarter ended September 30, 2009
    
    $
    3.65
    
    
    $
    2.24
    
    
    $
    2.90
      8




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Issuer Purchases of Equity Securities
  Maximum NumberOf Shares ThatTotal Number
    
    
    
    
    
    Total Number of
    
    May Yet BeOf Shares
    
    Average Price
    
    Shares Purchased as Part of
    
    Purchased UnderPeriod
    
    Purchased
    
    Paid per Share
    
    Publicly Announced Plan
    
    The PlanFebruary thru June
(2/1/08-6/30/09)
    
    
    222,909
    
    
    $
    3.87
    
    
    
    222,909
    
    
    
    77,091July
(7/1/09-7/31/09)
    
    
    500
    
    
    $
    2.99
    
    
    
    500
    
    
    
    76,591August
(8/1/09-8/31/09)
    
    
    1,329
    
    
    $
    3.15
    
    
    
    1,329
    
    
    
    75,262September
(9/1/09-9/30/09)
    
    
    1,959
    
    
    $
    2.94
    
    
    
    1,959
    
    
    
    73,303Total
    
    
    226,697
    
    
    $
    3.79
    
    
    
    226,697
    
    
    
    73,303
  ITEM 6   SELECTED CONSOLIDATED FINANCIAL DATA
  ITEM 7   MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward Looking Statements
  9




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General
   Results of Operations
   Percentage of
    
    Year-to-YearNet Sales
    
    Percentage Change2009
    
    2008
    
    2009 to 2008Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    (22
    %)Cost of sales
    
    
    95.6
    
    
    
    94.3
    
    
    
    (21
    )Gross profit
    
    
    4.4
    
    
    
    5.7
    
    
    
    (40
    )Selling, general and administrative
expenses
    
    
    5.9
    
    
    
    4.7
    
    
    
    (1
    )Operating (loss) income
    
    
    (1.5
    )
    
    
    1.0
    
    
    NMInterest expense
    
    
    (0.1
    )
    
    
    (0.2
    )
    
    
    (58
    )Interest income and other income
    
    
    0.0
    
    
    
    0.0
    
    
    NM(Loss) income before income taxes
    
    
    (1.6
    )
    
    
    0.8
    
    
    NMIncome tax (benefit) expense
    
    
    (0.6
    )
    
    
    0.3
    
    
    NMNet (loss) income
    
    
    (1.0
    %)
    
    
    0.5
    %
    
    NM
 
 NM = Not Meaningful  2009
    
    
    2008% of
    
    
    
    
    
    
    % ofAmount
    
    
    Total
    
    
    Amount
    
    
    TotalNet
SalesContract manufacturing and printing
    
    $
    63.9
    
    
    
    74
    %
    
    $
    86.8
    
    
    
    78
    %Business imaging paper products
    
    
    22.9
    
    
    
    26
    
    
    
    24.5
    
    
    
    22Net sales
    
    $
    86.8
    
    
    
    100
    %
    
    $
    111.3
    
    
    
    100
    %
 Margin
    
    
    
    
    
    
    MarginAmount
    
    
    %
    
    
    Amount
    
    
    %Gross
ProfitContract manufacturing and printing
    
    $
    2.4
    
    
    
    4
    %
    
    $
    4.7
    
    
    
    5
    %Business imaging paper products
    
    
    1.4
    
    
    
    6
    %
    
    
    1.6
    
    
    
    7
    %Gross profit
    
    $
    3.8
    
    
    
    4
    %
    
    $
    6.3
    
    
    
    6
    %
 10




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Fiscal Year Ended September 30, 2009 Compared to September 30, 2008
 Net Sales
  Gross profit
 Selling, general and administrative expenses
 Interest expense
 Income tax (benefit) expense
 Basic and diluted net (loss) earnings per share
 Selected Quarterly Financial Data
  11




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Liquidity and Capital Resources
         12




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Liquidity and Capital Resources (Continued)
      Inflation
  Credit Environment
  Off Balance Sheet Arrangements
  13




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Critical Accounting Policies
        14




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Critical Accounting Policies (Continued)
    Recently Issued Accounting Standards
 Subsequent Events
 ITEM 7A   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  ITEM 8   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  ITEM 9   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  ITEM 9A (T)  CONTROLS AND PROCEDURES
  15




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ITEM 9A (T)  CONTROLS AND PROCEDURES (Continued)
        ITEM 9B   OTHER INFORMATION
  16




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PART III
 ITEM 10  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 THE DIRECTORS OF THE COMPANY
  Name
    
    Age
    
    Position HeldRobert J. Simon
    
    
    51
    
    
    Chairman of the Board of DirectorsSamuel J. Bero
    
    
    74
    
    
    DirectorC. Hamilton Davison, Jr.
    
    
    50
    
    
    DirectorBrian Kelly
    
    
    66
    
    
    DirectorLouis LeCalsey, III
    
    
    70
    
    
    Director, President and Chief Executive OfficerRichard M. Segel
    
    
    69
    
    
    DirectorWilliam R. Ziemendorf
    
    
    50
    
    
    Director
 Mr. Simon
 Mr. Bero
 Mr. Davison
 Mr. Kelly
 17




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THE DIRECTORS OF THE COMPANY (Continued)
 Mr. LeCalsey
 Mr. Segel
 Mr. Ziemendorf
  18




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THE EXECUTIVE OFFICERS OF THE COMPANY
 Name
    
    Age
    
    Positions With the CompanyLouis LeCalsey, III
    
    
    70
    
    
    Director, President and Chief Executive OfficerMichael B. Wheeler
    
    
    64
    
    
    Executive Vice President, Chief Financial Officer and
Chief Operating OfficerMichele M. Cherney
    
    
    41
    
    
    Sr. Vice President, Sales and MarketingGeorge Hare
    
    
    52
    
    
    General Manager, Business Imaging Sector
  Executive Officers
 Louis LeCalsey, III
 Michael B. Wheeler
 Michele M. Cherney
 George Hare
 19




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CERTAIN CORPORATE GOVERNANCE MATTERS
  Audit Committee Composition
   Code of Ethics
  Compliance with Section 16(a) of the Securities Exchange Act
   ITEM 11  EXECUTIVE COMPENSATION
  Compliance with Section 162(m)
  20




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SUMMARY COMPENSATION TABLE
  Option
    
    All OtherName and Principal Position
    
    Year
    
    Salary
    
    Awards(2)
    
    Compensation(1)
    
    TotalLouis LeCalsey, III
    
    
    2009
    
    
    $
    267,881
    
    
    $
    
    
    
    $
    11,287
    
    
    $
    279,168Director, President
    
    
    2008
    
    
    $
    286,500
    
    
    $
    28,813
    
    
    $
    17,429
    
    
    $
    332,742and CEOMichael B. Wheeler
    
    
    2009
    
    
    $
    188,770
    
    
    $
    7,829
    
    
    $
    14,874
    
    
    $
    211,473Executive Vice President,
    
    
    2008
    
    
    $
    202,500
    
    
    $
    4,574
    
    
    $
    13,994
    
    
    $
    221,068CFO, COO, Secretary
and TreasurerMichele M. Cherney
    
    
    2009
    
    
    $
    159,736
    
    
    $
    3,914
    
    
    $
    21,655
    
    
    $
    185,305Sr. Vice President,
    
    
    2008
    
    
    $
    170,500
    
    
    $
    2,287
    
    
    $
    18,586
    
    
    $
    191,373Sales and Marketing
 
 (1)
    
    The compensation reported represents contributions to the Companys 401(k) Plan, car allowances
and country club dues.(2)
    
    For awards of options, the dollar amount recognized for financial statement reporting purposes
with respect to the fiscal year in accordance with FASB ASC 718 (formerly SFAS No. 123(R)). Employment Agreements
   21




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Employment Agreements (Continued)
  Outstanding Equity Awards at Fiscal Year-End
  Number of SecuritiesNumber of Securities
    
    Underlying Unexercised
    
    OptionUnderlying Unexercised
    
    Options (#)
    
    Exercise
    
    
    
    
    
    Option ExpirationName
    
    Options (#) Exercisable
    
    Unexercisable
    
    Price($)
    
    Grant Date
    
    DateLouis LeCalsey, III
    
    
    30,000
    
    
    
    
    
    
    $
    7.00
    
    
    
    10/01/01
    
    
    
    10/01/1116,500
    
    
    
    
    
    
    $
    4.92
    
    
    
    10/01/02
    
    
    
    10/01/1215,000
    
    
    
    
    
    
    $
    5.71
    
    
    
    11/26/03
    
    
    
    11/26/1312,000
    
    
    
    
    
    
    $
    7.87
    
    
    
    11/19/04
    
    
    
    11/19/146,000
    
    
    
    4,000
    
    
    $
    7.60
    
    
    
    10/01/07
    
    
    
    10/01/179,000
    
    
    
    6,000
    
    
    $
    5.56
    
    
    
    9/30/08
    
    
    
    9/03/18Michael B. Wheeler
    
    
    15,000
    
    
    
    
    
    
    $
    5.70
    
    
    
    3/27/02
    
    
    
    3/27/1212,500
    
    
    
    
    
    
    $
    4.92
    
    
    
    10/01/02
    
    
    
    10/01/1211,000
    
    
    
    
    
    
    $
    5.71
    
    
    
    11/26/03
    
    
    
    11/26/139,000
    
    
    
    
    
    
    $
    7.87
    
    
    
    11/19/04
    
    
    
    11/19/146,000
    
    
    
    4,000
    
    
    $
    7.60
    
    
    
    10/01/07
    
    
    
    10/01/176,000
    
    
    
    4,000
    
    
    $
    5.56
    
    
    
    9/03/08
    
    
    
    9/03/18Michele M. Cherney
    
    
    4,000
    
    
    
    
    
    
    $
    7.00
    
    
    
    10/01/01
    
    
    
    10/01/114,500
    
    
    
    
    
    
    $
    4.92
    
    
    
    10/01/02
    
    
    
    10/01/124,000
    
    
    
    
    
    
    $
    5.71
    
    
    
    11/26/03
    
    
    
    11/26/133,000
    
    
    
    
    
    
    $
    7.87
    
    
    
    11/19/04
    
    
    
    11/19/143,000
    
    
    
    2,000
    
    
    $
    7.60
    
    
    
    10/01/07
    
    
    
    10/01/173,000
    
    
    
    2,000
    
    
    $
    5.56
    
    
    
    9/03/08
    
    
    
    9/03/18
  22




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POTENTIAL PAYMENT OF TERMINATION OR CHANGE IN CONTROL
  Compensation of Individual ifCompensation Following
    
    Terminated Within 180 DaysName
    
    Termination Without Cause (1)
    
    Following Change in Control(1)Louis LeCalsey, III
    
    $
    286,500
    
    
    $
    573,000Michael B. Wheeler
    
    $
    202,500
    
    
    $
    202,500Michele M. Cherney
    
    $
    170,500
    
    
    $
    170,500
 
 (1)
    
    Some officers would receive a bonus based upon a target for operating income determined by the
Compensation Committee. 23




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Director Compensation
  
    
    an annual fee of $12,000,
    
    a payment of $1,500 for each board meeting attended,
    
    a payment of $1,500 for each committee meeting attended, and
    
    per diem fees for supplemental Audit Committee services.
  DIRECTOR COMPENSATION
 Fees Earned or
    
    OptionName
    
    Paid in Cash
    
    Awards
    
    TotalRobert J. Simon
    
    $
    21,000
    
    
    $
    5,213
    
    
    $
    26,213Samuel J. Bero
    
    $
    21,000
    
    
    $
    5,213
    
    
    $
    26,213C. Hamilton Davison, Jr.
    
    $
    24,000
    
    
    $
    5,213
    
    
    $
    29,213Brian Kelly
    
    $
    24,000
    
    
    $
    5,213
    
    
    $
    29,213Richard M. Segel
    
    $
    18,000
    
    
    $
    5,213
    
    
    $
    23,213William R. Ziemendorf
    
    $
    24,000
    
    
    $
    5,213
    
    
    $
    29,213
 24




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ITEM 12   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 Security Ownership of Certain Beneficial Owners
   AMOUNT AND NATURE OF
    
    PERCENT OFBENEFICIAL OWNERSHIP
    
    CLASSOver 5% StockholdersRobert J. Simon(1)(3)(4)(14)
    
    
    2,661,543
    
    
    
    61.3
    %Barbara M. Henagan(1)(3)
    
    
    2,621,661
    
    
    
    60.8
    %Bradford Venture Partners, L.P. (1)(6)
    
    
    2,619,740
    
    
    
    60.8
    %Overseas Equity Investors Partners(3)(2)
    
    
    2,619,740
    
    
    
    60.8
    %Other Directors And Executive OfficersSamuel J. Bero(7)
    
    
    207,500
    
    
    
    4.8
    %Louis LeCalsey III(8)
    
    
    209,692
    
    
    
    4.8
    %C. Hamilton Davison, Jr. (5)
    
    
    33,842
    
    
    
    *Richard M. Segel (9)
    
    
    8,000
    
    
    
    *Brian Kelly(15)
    
    
    11,000
    
    
    
    *William R. Ziemendorf (16)
    
    
    6,000
    
    
    
    *Michael B. Wheeler(10)
    
    
    54,500
    
    
    
    1.2
    %George Hare (11)
    
    
    833
    
    
    
    *Michele M. Cherney (12)
    
    
    36,000
    
    
    
    *Directors and Executive Officers as a Group (10 persons)(1)(3)(13)
    
    
    3,228,910
    
    
    
    70.5
    %
 
 *
    
    Less than one percent(1)
    
    The amounts shown for Mr. Simon and Ms. Henagan include the shares owned of record by
Bradford Venture Partners, L.P., as to which they may be deemed to share beneficial ownership
due to their having voting and dispositive power over such shares. Bradford Associates, a
general partnership of which such two persons are the partners, is the sole general partner of
Bradford Venture Partners, L.P. and, as such, holds a 1% interest in that partnership. The
business address of each of Mr. Simon and Ms. Henagan is 92 Nassau Street, Princeton, New
Jersey, 08542.(2)
    
    The address of the stockholder is 92 Nassau Street, Princeton, New Jersey 08542. The amount
shown for the stockholder includes 709,870 shares owned of record by Overseas Equity Investors
Partners (Overseas Equity), as to which the stockholder may be deemed to share beneficial
ownership due to the formation of a group comprised of the stockholder and Overseas Equity
for purposes of SEC rules.(3)
    
    The amounts shown for Mr. Simon and Ms. Henagan includes the shares owned of record by
Overseas Equity as to which they may be deemed to share beneficial ownership due to their
having voting power over such shares. Mr. Simon serves as chairman of the board of directors
of the corporation that acts as the managing partner of Overseas Equity. Bradford Associates
holds a 1% partnership interest in Overseas Equity, which may increase upon the satisfaction
of certain contingencies related to the overall performance of Overseas Equitys investment
portfolio, and also acts as an investment advisor for Overseas Equity. 25




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##### 



Security Ownership of Certain Beneficial Owners (Continued)
 (4)
    
    The stockholder is also one of our directors.(5)
    
    The amount shown includes 30,000 shares that may be acquired under options exercisable within
60 days of December 18, 2009.(6)
    
    The address of the stockholder is Clarendon House, Church Street, Hamilton 5-31, Bermuda.
The amount shown for the stockholder includes 1,909,870 shares owned of record by Bradford
Venture Partners, L.P., as to which the stockholder may be deemed to share beneficial
ownership due to the information of a group comprised of the stockholder and Bradford
Venture Partners, L.P. for purposes of SEC rules.(7)
    
    The amount shown includes 30,000 shares that may be acquired under options exercisable within
60 days of December 18, 2009.(8)
    
    The amount shown includes 80,500 shares that may be acquired under options exercisable within
60 days of December 18, 2009.(9)
    
    The amount shown includes 8,000 shares that may be acquired under options exercisable within
60 days of December 18, 2009.(10)
    
    The amount shown includes 53,500 shares that may be acquired under options exercisable within
60 days of December18, 2009.(11)
    
    The amount shown includes 833 shares that may be acquired under options exercisable within 60
days of December 18, 2009.(12)
    
    The amount shown includes 18,500 shares that may be acquired under options exercisable within
60 days of December 18, 2009.(13)
    
    The amount shown includes an aggregate of 268,333 shares that may be acquired under options
exercisable within 60 days of December 18, 2009.(14)
    
    The amount shown includes 30,000 shares that may be acquired under options exercisable
within 60 days of December 18, 2009.(15)
    
    The amount shown includes 11,000 shares that may be acquired under options exercisable
within 60 days of December 18, 2009.(16)
    
    The amount shown includes 6,000 shares that may be acquired under options exercisable within
60 days of December 18, 2009. Equity Compensation Plan Information
  (C)(A)
    
    
    
    
    
    Number of SecuritiesNumber of
    
    (B)
    
    Remaining Available forSecurities to be Issued
    
    Weighted Average
    
    Future Issuance underUpon Exercise of
    
    Exercise Price of
    
    Equity Compensation PlansOutstanding Options,
    
    Outstanding Options,
    
    (Excluding SecuritiesPlan Category
    
    Warrants and Rights
    
    Warrants and Rights
    
    Reflected in Column (A))Equity compensation plans approved
by security holders (1)
    
    
    296,650
    
    
    $
    6.46
    
    
    
    282,350Equity compensation plans not
approved by security holders (2)
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    Plans represent (i) the 1992 Non-Qualified Stock Option Plan, which expired in April 2002,
(ii) the 2003 Non-Qualified
Stock Option Plan, which expires April 2013 and the 1993 Non-Employee Director Stock Option
Plan, which expired March
2004, and (iii) the 2004 Non-Employee Director Stock Option Plan, which expires March 2014.(2)
    
    There are no equity compensation plans not approved by security holders. 26




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##### 



ITEM 13  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
      ITEM 14  PRINCIPAL ACCOUNTING FEES AND SERVICES
  27




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##### 



ITEM 14  PRINCIPAL ACCOUNTING FEES AND SERVICES (Continued)
 McGladrey & Pullen
    
    McGladrey & Pullen
    
    Deloitte & ToucheFY 2009
    
    FY 2008
    
    FY 2008Audit Fees
    
    $
    169,700
    
    
    $
    175,000
    
    
    $
    5,598Audit-Related Fees
    
    
    0
    
    
    
    17,369
    
    
    
    0Tax Fees
    
    
    0
    
    
    
    0
    
    
    
    0All Other Fees
    
    
    0
    
    
    
    0
    
    
    
    0
   28




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##### 



PART IV
 ITEM 15 EXHIBITS, FINANCIAL STATEMENT SCHEDULES
 (a)
    
    
    1.
    
    
    Financial Statements. Financial statements are attached as an Appendix to this Report. The
index to the consolidated financial statements is found on F-1 of the Appendix.2.
    
    
    Financial Statement Schedules. All schedules are omitted or are not required for a
smaller reporting
company because the information required is included in the consolidated financial
statements and
notes thereto.3.
    
    
    Exhibits. See Exhibit Index in Item 15(b), below.
 (b)
    
    ExhibitNumber
    
    Description3.1
    
    
    Restated Certificate of Incorporation (filed as Exhibit 3.1 to the Companys
Registration Statement
as filed with the Commission on December 16, 1992, incorporated by reference herein).3.2
    
    
    Bylaws (filed as Exhibit 3.2 to the Companys Registration Statement as filed with the
Commission
on December 16, 1992, incorporated by reference herein).10.1
    
    
    Stock Purchase and Contribution Agreement, dated as of February 25, 1992, among the
Company, Tufco Industries, Inc. (Tufco), and the Stockholders of Tufco (filed as Exhibit 10.1 to
the Companys Registration Statement as filed with the Commission on December 16, 1992,
incorporated by reference herein).10.2
    
    
    Amended and Restated Consulting Agreement with Bradford Investment Partners,
L.P. (filed as
Exhibit 10 to the Companys Quarterly Report on Form 10-Q for the quarterly period ended March
31, 1995, incorporated by reference herein).10.3
    
    
    1992 Non-Qualified Stock Option Plan (filed as Exhibit 10.12 to the Companys Registration
Statement as filed with the Commission on December 16, 1992, incorporated by reference herein).10.4
    
    
    1993 Non-Employee Director Stock Option Plan (filed as Exhibit 10.19 to the Companys
Amendment No. 1 to the Registration Statement as filed with the Commission on November 23,
1993, incorporated by reference herein).10.5
    
    
    Lease between Bero and McClure Partnership and Tufco, L.P, dated October 15, 2002 (filed as
Exhibit 10.8 to the Companys Annual Report on Form 10-K for the period ended September 30, 2002, incorporated by reference herein).10.6
    
    
    Employment Agreement with Louis LeCalsey, III dated September 19, 1996 (filed as Exhibit
10.18 to the Companys Report on Form 10-K for the period ended September 30, 1997,
incorporated by reference herein).10.7
    
    
    2003 Non-Qualified Stock Option Plan (filed as Exhibit 10.19 to the Companys Annual
Report
on Form 10-K for the period ended September 30, 2003, incorporated by reference
herein).10.9
    
    
    2004 Non-Employee Director Stock Option Plan (incorporated by reference to the
Companys
definitive proxy statement filed on January 29, 2004).10.11
    
    
    Amended lease between Bero and McClure Partnership and Tufco LP dated November 22,
2006
(filed as Exhibit 10.1 to the Companys Current Report on Form 8-K filed on November
22, 2006, incorporated by reference herein).10.14
    
    
    Credit Agreement dated May 13, 2009 (filed as Exhibit 10.1 to the Companys
Current Report on
Form 8-K filed on May 14, 2009, incorporated by reference herein).14.1
    
    
    Code of Ethics (filed as Exhibit 14.1 to the Companys Annual Report on Form 10-K
for the period
ended September 30, 2003, incorporated by reference herein).21.1
    
    
    Subsidiaries of the Company (filed as Exhibit 23.1 to the Companys Annual Report on
Form 10-K
for the period ended September 30, 2006, incorporated by reference herein).23.1
    
    
    *Consent of McGladrey & Pullen, LLP31.1
    
    
    *Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange
Act of 1934 of Louis LeCalsey, III31.2
    
    
    *Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of
 1934 of Michael B. Wheeler32.1
    
    
    **Certification furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 of Louis LeCalsey, III
 29




---



##### 



ITEM 15- EXHIBITS, FINANCIAL STATEMENT SCHEDULES (Continued)
 ExhibitNumber
    
    
    

    Description32.2
    
    
    

    **Certification furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 of Michael B. Wheeler
 
 *
    
    Filed herewith**
    
    Furnished herewith 30




---



##### 



Tufco Technologies, Inc.By:
    /s/ Louis LeCalsey, IIILouis LeCalsey, IIIPresident and Chief Executive Officer  Signature
    
    Title
    
    Date/s/ Louis LeCalsey, III

Louis LeCalsey, III
    
    President, Chief Executive Officer
and Director
(Principal Executive Officer)
    
    December 29, 2009/s/ Robert J. Simon

Robert J. Simon
    
    Chairman of the Board
    
    December 29, 2009/s/ Michael B. Wheeler

Michael B. Wheeler
    
    Executive VP, Chief Financial Officer
and Chief Operating
Officer (Principal Financial Officer
and Principal Accounting Officer)
    
    December 29, 2009/s/ Samuel J. Bero

Samuel J. Bero
    
    Director
    
    December 29, 2009/s/ C. Hamilton Davison, Jr.

C. Hamilton Davison, Jr.
    
    Director
    
    December 29, 2009/s/ Brian Kelly

Brian Kelly
    
    Director
    
    December 29, 2009/s/ Richard M. Segel

Richard M. Segel
    
    Director
    
    December 29, 2009/s/ William R. Ziemendorf

William R. Ziemendorf
    
    Director
    
    December 29, 2009
 31




---



##### 



PageREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    
    
    F-1CONSOLIDATED FINANCIAL STATEMENTS:Balance Sheets as of September 30, 2009 and 2008
    
    
    F-2Statements of Operations for the
Years Ended September 30, 2009 and 2008
    
    
    F-3Statements of Stockholders Equity for the
Years Ended September 30, 2009 and 2008
    
    
    F-4Statements of Cash Flows for the
Years Ended September 30, 2009 and 2008
    
    
    F-5Notes to Consolidated Financial Statements
    
    
    F-6  F-18




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     /s/ McGladrey & Pullen, LLPSchaumburg, IllinoisDecember 29, 2009 F-1




---



##### 



TUFCO TECHNOLOGIES, INC. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS  AS OF SEPTEMBER 30, 2009 AND 2008
 2009
    
    
    2008ASSETSCURRENT ASSETS:Cash
    
    $
    4,092
    
    
    $
    68,397Accounts receivablenet
    
    
    11,077,258
    
    
    
    11,770,981Inventoriesnet
    
    
    10,645,168
    
    
    
    14,939,968Prepaid expenses and other current assets
    
    
    245,534
    
    
    
    420,237Income taxes receivable
    
    
    604,144
    
    
    
    118,991Deferred income taxes
    
    
    381,661
    
    
    
    467,031Total current assets
    
    
    22,957,857
    
    
    
    27,785,605PROPERTY, PLANT, AND EQUIPMENTNet
    
    
    17,892,453
    
    
    
    18,036,764GOODWILL
    
    
    7,211,575
    
    
    
    7,211,575OTHER ASSETSNet
    
    
    128,684
    
    
    
    122,297TOTAL
    
    $
    48,190,569
    
    
    $
    53,156,241LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Current portion of long-term debt
    
    $
    1,270,099
    
    
    $
    Accounts payable
    
    
    6,861,167
    
    
    
    8,320,011Accrued payroll, vacation, and payroll taxes
    
    
    542,534
    
    
    
    562,598Other current liabilities
    
    
    463,736
    
    
    
    700,095Total current liabilities
    
    
    9,137,536
    
    
    
    9,582,704LONG-TERM DEBT
    
    
    
    
    
    
    3,000,000DEFERRED INCOME TAXES
    
    
    2,611,572
    
    
    
    2,791,450COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITY:Common stock, $.01 par value9,000,000 shares authorized;
4,708,741 shares issued
    
    
    47,087
    
    
    
    47,087Non-voting common stock, $.01 par value2,000,000 shares
authorized and unissued
    
    
    
    
    
    
    Preferred stock, $.01 par value1,000,000 shares authorized
and unissued
    
    
    
    
    
    
    Additional paid-in capital
    
    
    25,421,007
    
    
    
    25,374,211Retained earnings
    
    
    13,130,824
    
    
    
    13,981,031Treasury stock399,794 and 252,037 common shares at cost
    
    
    (2,157,457
    )
    
    
    (1,620,242
    )Total stockholders equity
    
    
    36,441,461
    
    
    
    37,782,087TOTAL
    
    $
    48,190,569
    
    
    $
    53,156,241
  F-2




---



##### 



TUFCO TECHNOLOGIES, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF OPERATIONS  FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008
 2009
    
    
    2008NET SALES
    
    $
    86,775,764
    
    
    $
    111,316,250COST OF SALES
    
    
    82,988,739
    
    
    
    104,980,541GROSS PROFIT
    
    
    3,787,025
    
    
    
    6,335,709OPERATING EXPENSES:Selling, general, and administrative
    
    
    5,126,711
    
    
    
    5,198,297Gain on asset sales
    
    
    (37,900
    )
    
    
    OPERATING (LOSS) INCOME
    
    
    (1,301,786
    )
    
    
    1,137,412OTHER (EXPENSE) INCOME:Interest expense
    
    
    (110,166
    )
    
    
    (265,168
    )Interest income and other income
    
    
    13,580
    
    
    
    18,570Total
    
    
    (96,586
    )
    
    
    (246,598
    )(LOSS) INCOME BEFORE INCOME TAXES
    
    
    (1,398,372
    )
    
    
    890,814INCOME TAX (BENEFIT) EXPENSE
    
    
    (548,165
    )
    
    $
    300,482NET (LOSS) INCOME
    
    $
    (850,207
    )
    
    $
    590,332NET (LOSS) INCOME PER SHARE:Basic
    
    $
    (0.20
    )
    
    $
    0.13Diluted
    
    $
    (0.20
    )
    
    $
    0.13WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:Basic
    
    
    4,345,211
    
    
    
    4,500,268Diluted
    
    
    4,345,211
    
    
    
    4,510,992
  F-3




---



##### 



TUFCO TECHNOLOGIES, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008
 Common Stock
    
    
    Non-voting
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    
    
    
    
    TotalVoting
    
    
    Common
    
    
    Preferred
    
    
    Paid-In
    
    
    Retained
    
    
    Treasury
    
    
    StockholdersShares
    
    
    Amount
    
    
    Stock
    
    
    Stock
    
    
    Capital
    
    
    Earnings
    
    
    Stock
    
    
    EquityBALANCESSeptember 30, 2007
    
    
    4,708,741
    
    
    $
    47,087
    
    
    $
    
    
    
    $
    
    
    
    $
    25,304,421
    
    
    $
    13,390,699
    
    
    $
    (1,141,806
    )
    
    $
    37,600,401Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    69,790
    
    
    
    
    
    
    
    
    
    
    
    69,790Purchase of treasury stock
 78,940 common shares at cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (478,436
    )
    
    
    (478,436
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    590,332
    
    
    
    
    
    
    
    590,332BALANCESSeptember 30, 2008
    
    
    4,708,741
    
    
    
    47,087
    
    
    
    
    
    
    
    
    
    
    
    25,374,211
    
    
    
    13,981,031
    
    
    
    (1,620,242
    )
    
    
    37,782,087Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,796
    
    
    
    
    
    
    
    
    
    
    
    46,796Purchase of treasury stock
 147,757 common shares at cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (537,215
    )
    
    
    (537,215
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (850,207
    )
    
    
    
    
    
    
    (850,207
    )BALANCESSeptember 30, 2009
    
    
    4,708,741
    
    
    $
    47,087
    
    
    $
    
    
    
    $
    
    
    
    $
    25,421,007
    
    
    $
    13,130,824
    
    
    $
    (2,157,457
    )
    
    $
    36,441,461
  F-4




---



##### 



TUFCO TECHNOLOGIES, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008
 2009
    
    
    2008OPERATING ACTIVITIES:Net (loss) income
    
    $
    (850,207
    )
    
    $
    590,332Noncash items in net (loss) income:Depreciation and amortization of property, plant, and
equipment
    
    
    2,407,859
    
    
    
    2,176,089Non-monetary reimbursement of cost
    
    
    
    
    
    
    (100,000
    )Deferred income taxes
    
    
    (94,508
    )
    
    
    322,255Gain on sale of property, plant and equipment
    
    
    (37,900
    )
    
    
    Stock-based compensation expense
    
    
    46,796
    
    
    
    69,790Changes in operating working capital:Accounts receivable
    
    
    693,723
    
    
    
    3,530,889Inventories
    
    
    4,294,800
    
    
    
    1,414,848Prepaid expenses and other assets
    
    
    168,316
    
    
    
    418,091Accounts payable
    
    
    (1,458,844
    )
    
    
    (3,360,752
    )Accrued and other current liabilities
    
    
    (256,423
    )
    
    
    32,742Income taxes receivable
    
    
    (485,153
    )
    
    
    (118,991
    )Income taxes payable
    
    
    
    
    
    
    (107,182
    )Net cash provided by operating activities
    
    
    4,428,459
    
    
    
    4,868,111INVESTING ACTIVITIES:Additions to property, plant, and equipment
    
    
    (2,263,548
    )
    
    
    (1,110,452
    )Payment of construction payable
    
    
    
    
    
    
    (25,823
    )Proceeds from disposals of property, plant and equipment
    
    
    37,900
    
    
    
    Net cash used in investing activities
    
    
    (2,225,648
    )
    
    
    (1,136,275
    )FINANCING ACTIVITIES:Repayment of long-term debt
    
    
    (1,729,901
    )
    
    
    (3,191,666
    )Purchase of treasury stock
    
    
    (537,215
    )
    
    
    (478,436
    )Net cash used in financing activities
    
    
    (2,267,116
    )
    
    
    (3,670,102
    )NET (DECREASE) INCREASE IN CASH
    
    
    (64,305
    )
    
    
    61,734CASH:Beginning of year
    
    
    68,397
    
    
    
    6,663End of year
    
    $
    4,092
    
    
    $
    68,397
  F-5




---



##### 



TUFCO TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED SEPTEMBER 30, 2009 AND 2008
 1.
    
    SIGNIFICANT ACCOUNTING POLICIES
 Consolidated Financial StatementsConsolidated financial statements include the accounts of
Tufco Technologies, Inc., and its subsidiaries, Tufco LLC, and Tufco LP and its wholly owned
subsidiary Hamco Manufacturing and Distributing LLC (the Company). Significant intercompany
transactions and balances are eliminated in consolidation. The Company provides integrated
manufacturing services including wide web flexographic printing, wet and dry wipe converting,
hot melt adhesive laminating, folding, integrated downstream packaging and on-site quality
microbiological process management and manufactures and distributes business imaging paper
products.
 Financial Statement PreparationFinancial statement preparation requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingencies at the date of the financial statements and the reported amounts of
revenues and expenses for the period. Actual amounts could differ from the amounts estimated.
Differences from those estimates are recognized in the period they become known.
 Accounts ReceivableManagement estimates allowances for collectability related to
its accounts receivable balances. These allowances are based on the customer relationships, the
aging and turns of accounts receivable, credit worthiness of customers, credit concentrations
and payment history. Managements estimates include providing for 100 percent of specific
customer balances when it is deemed probable that the balance is uncollectable. Management
estimates the allowance for doubtful accounts by analyzing accounts receivable balances by age,
applying historical trend rates to the most recent 12 months sales, less actual write-offs to
date. Although management monitors collections and credit worthiness, the inability of a
particular customer to pay its debts could impact collectability of receivables and could have
an impact on future revenues if the customer is unable to arrange other financing. Management
does not believe these conditions are reasonably likely to have a material impact on the
collectability of its receivables or future revenues. Recoveries of accounts receivables
previously written off are recorded when received. Credit terms to customers in the Contract
Manufacturing segment are generally net 30 days. Credit terms to customers in the Business
Imaging segment are generally discounted net 30 terms.
 InventoriesInventories are carried at the lower of cost or market, with cost determined
under the first-in, first-out (FIFO) method of inventory valuation. The Company estimates
reserves for inventory obsolescence and shrinkage based on its judgment of future realization.
 Property, Plant, and EquipmentProperty, plant, and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation and amortization are provided using the
straight-line method over the following estimated useful lives: 20 to 40 years for buildings, 3
to 10 years for machinery and equipment, 3 to 5 years for computer equipment and software, 5 to
7 years for furniture and fixtures, and the shorter of the estimated useful life or the lease
term for leasehold improvements.
 F-6




---



##### 



Impairment of Long-Lived AssetsImpairment of long-lived assets is reviewed in accordance with
Accounting Standards Codification (ASC) 360-10 (formerly
SFAS No. 144), Accounting for the Impairment or Disposal of Long-lived Assets. The Company evaluates the recoverability of the
recorded amount of long-lived assets whenever events or changes in circumstances indicate that
the recorded amount of an asset may not be fully recoverable. An impairment is assessed when
the undiscounted expected future cash flows derived from an asset are less than its carrying
amount. If an asset is determined to be impaired, the impairment to be recognized is measured
as the amount by which the recorded amount of the asset exceeds its fair value. Assets to be
disposed of are reported at the lower of the recorded amount or fair value less cost to sell.
The Company determines fair value using discounted future cash flow analysis or other accepted
valuation techniques.
 GoodwillGoodwill represents the excess of cost over fair value of net assets acquired in
business combinations. Management has continued to review the carrying values of goodwill for
recoverability on the annual measurement date of June 30. In order to calculate goodwill,
management applies judgment in determining the reporting units, which represent distinct parts
of the business. The annual goodwill impairment analysis involves estimating the fair value of
a reporting unit and comparing it with its carrying amount. If the carrying value of the
reporting unit exceeds its fair value, additional steps are required to calculate a potential
impairment loss. Calculating the fair value of the reporting unit requires significant
estimates and long-term assumptions. Any changes in key assumptions about the business and its
prospects, or any changes in market conditions, interest rates or other externalities, could
result in an impairment charge. Management has continued to review the carrying values of
goodwill for recoverability based on fair market value estimated using estimated future cash
flows and prices of comparable companies in accordance with Accounting Standards Codification
(ASC) 350-10 (formerly SFAS No. 142), Goodwill and Other Intangible Assets. The fair value
of the reporting units was estimated using a combination of valuation techniques, including the
expected present value of future cash flows and prices of comparable businesses. In the event
that valuation multiples decline, discount rates increase, or the projected cash flows of the
individual reporting units decline, the Company may be required to proceed through an analysis
of impairment as provided in ASC 350-10. For example, an increase to the discount rate due to
changes in risk premiums or other factors may suggest that an impairment has occurred under
Step 1 of ASC 350-10 and require the Company to proceed to Step 2 of ASC 350-10 to measure the
fair value of assets and liabilities of the reporting units. The current discount rate would
need to increase 3.7% for Contract Manufacturing and increase 5.6% for Business Imaging before
the Company would be required to proceed to Step 2 of ASC 350-10. The Company recognizes that
its common stock regularly trades below book value per share and will continue to monitor the
relationship of its market capitalization to both its book value and tangible book value.
While management is seeking to return the Companys business fundamentals to levels that
support the book value per share, there is no assurance that it will be successful in doing so,
or that the market price of the common stock will increase to such levels in the foreseeable
future.
 There were no changes in the carrying amount of goodwill by reporting unit for the years ended
September 30, 2009 and 2008. Goodwill by reporting unit is:
 Contract
    
    
    BusinessManufacturing
    
    
    Imaging
    
    
    Total$
    4,281,759
    
    
    $
    2,929,816
    
    
    $
    7,211,575
 F-7




---



##### 



Income TaxesIncome taxes are provided for the tax effects of transactions reported in the
consolidated financial statements and consist of taxes currently due, if any, plus deferred
taxes related primarily to differences between the basis of assets and liabilities for
financial and income tax reporting. Deferred tax assets and liabilities represent the future
tax return consequences of those differences that will either be deductible or taxable when the
assets and liabilities are recovered or settled. Deferred tax assets will include recognition
of operating losses that are available to offset future taxable income and tax credits that are
available to offset future income taxes. When applicable, valuation allowances are recognized
to limit recognition of deferred tax assets where appropriate. Such allowances may be reversed
when circumstances provide evidence that the deferred tax assets will more likely than not be
realized. The Company recognizes in its financial statements, the impact of a tax position,
if that position is more likely than not of being sustained on audit, based on the technical
merits of the position.
 RevenuesRevenues are recognized as sales when title and risk of loss transfers to the
customer and there is evidence of an agreement and collectibility of consideration to be
received is reasonably assured, all of which generally occur at the time of shipment. Sales are
recorded net of sales returns and allowances. Shipping and handling fees billed to customers
are recorded as revenue and costs incurred for shipping and handling are recorded in cost of
sales. Amounts related to raw materials provided by customers are excluded from net sales and
cost of sales.
 Stock-Based CompensationThe Company has an incentive stock plan under which the Board of
Directors may grant non-qualified stock options to employees. Additionally, the Company has a
Non-Qualified Stock Option Plan for Non-Employee Directors, under which shares are available
for grant.
 The options have an exercise price equal to the fair market value of the underlying stock at
the date of grant. Employee stock options vest ratably over a three-year period and
non-employee director stock options vest immediately. Options issued under these plans
generally expire ten years from the date of grant.
 Earnings Per ShareBasic earnings per share is computed using the weighted average number of
common shares outstanding. Diluted earnings per share includes common equivalent shares from
dilutive stock options outstanding during the year, the effect of which was zero and 10,724
shares in fiscal 2009 and 2008, respectively. During fiscal 2009 and 2008, options to purchase
296,650 shares, and 167,350 shares, respectively, were excluded from the diluted earnings per
share computation, as the effects of such options would have been anti-dilutive.
 Financial InstrumentsOn October 1, 2008, the Company adopted Accounting Standards
Codification (ASC) 820-10 (formerly SFAS No. 157), Fair Value Measurements, which defines
fair value, establishes a framework for measuring fair value, and expands disclosures about
fair value measurements. However, the FASB issued FSP ASC 820-10 which deferred until the
beginning of our 2010 fiscal year, the effective date of ASC 820-10 as it relates to fair value
measurement requirements for nonfinancial assets and liabilities that are not remeasured at
fair value on a recurring basis. The Company determined that the adoption of ASC 820-10 did not
have a material effect on its consolidated financial statements.
 F-8




---



##### 



The Company currently does not have any fair value measurements.Financial instruments consist of cash, receivables, payables, debt, and letters of credit.
Their carrying values are estimated to approximate their fair values unless otherwise indicated
due to their short maturities and variable interest rates.Recently Issued Accounting StandardsThe FASB issued SFAS No. 168, The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted Accounting Principles  a
replacement of FASB Statement No. 162. For annual and interim periods ending after September
15, 2009, the FASB Accounting Standards Codification will become the single source of
authoritative generally accepted accounting principles (GAAP) in the United States. Once a
company issues financial statements for the period ending after September 15, 2009, the SEC
Staff believes any references to specific elements of GAAP should use Codification references.In December 2007, the Financial Accounting Standards Board (FASB) issued Accounting Standards
Codification (ASC) 805-10 (formerly SFAS No. 141( R)) Business Combinations. ASC 805-10
revised the requirements of fair value principles, the cost allocation process and together
with other revisions from past practice in business combinations. ASC 805-10 is effective for
fiscal years beginning on or after December 15, 2008. Any business combination in the future
will have an effect on the Companys consolidated financial statements.In December 2007, the FASB issued ASC 810-10 (formerly SFAS No. 160) Noncontrolling Interests
in Consolidated Financial Statements. ASC 810-10 amends ARB 51, Consolidated Financial
Statements, and requires all entities to report noncontrolling (minority) interests in
subsidiaries within equity in the consolidated financial statements, but separate from the
parent shareholders equity. ASC 810-10 also requires any acquisitions or dispositions of
noncontrolling interests that do not result in a change of control to be accounted for as
equity transactions. Further, ASC 810-10 requires that a parent recognize a gain or loss in
net income when a subsidiary is deconsolidated. ASC 810-10 is effective for fiscal years
beginning on or after December 15, 2008, on a retrospective basis and will be adopted by the
Company in the first quarter of fiscal year 2010. The Company has determined that the adoption
of ASC 810-10 will not have a material effect on its consolidated financial statements.In June 2008, the FASB issued ASC 260-10 (formerly FSP EITF 03-6-1) Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating Securities.ASC
260-10 provides that unvested share-based payment awards that contain nonforfeitable rights to
dividends or dividend equivalents (whether paid or unpaid) are participating securities and
shall be included in the computation of earnings per share pursuant to the two-class method.
ASC 260-10 is effective for fiscal years beginning after December 15, 2008, on a retrospective
basis and will be adopted by the Company in the first quarter of fiscal year 2010. The Company
does not expect ASC 260-10 to have a material impact on its financial statements.
 F-9




---



##### 



Subsequent EventsIn May 2009, the Financial Accounting Standards Board (FASB) issued
Accounting Standards Codification (ASC) 855-10 (formerly SFAS No. 165) Subsequent Events.
ASC 855-10 establishes general standards of accounting for and disclosure of events that occur
after the balance sheet date but before financial statements are issued or are available to be
issued. Specifically, this standard sets forth the period after the balance sheet date during
which management of a reporting entity should evaluate events or transactions that may occur
for potential recognition or disclosure in the financial statements, the circumstances under
which an entity should recognize events or transactions occurring after the balance sheet date
in its financial statements, and the disclosures that an entity should make about events or
transactions that occurred after the balance sheet date. The Company has adopted this standard
during the fiscal period ended September 30, 2009 and has evaluated any subsequent events
through December 29, 2009. During the period subsequent to September 30, 2009, the Company did
not have any material recognizable subsequent events.ReclassificationsCertain prior year amounts have been reclassified to conform to the current
year presentation.
 2.
    
    ACCOUNTS RECEIVABLE
 Accounts receivable are stated net of allowances for doubtful accounts of $63,000 and $129,000
at September 30, 2009 and 2008, respectively. Amounts due from two multinational consumer
products customers represent 49% and 58% of total accounts receivable at September 30, 2009 and
2008, respectively.
 3.
    
    INVENTORIES
 Inventories at September 30, 2009 and 2008, consist of the following:
 2009
    
    
    2008Raw materials
    
    $
    8,182,736
    
    
    $
    11,407,472Finished goods
    
    
    2,462,432
    
    
    
    3,532,496Total inventories
    
    $
    10,645,168
    
    
    $
    14,939,968
 Finished goods inventories are stated net of allowance for inventory obsolescence and shrinkage
of $455,000 and $312,000 at September 30, 2009 and 2008, respectively.
 F-10




---



##### 



4.
    
    PROPERTY, PLANT, AND EQUIPMENT
 Property, plant, and equipment at September 30, 2009 and 2008, consist of the following:
 
 2009
    
    
    2008Land and land improvements
    
    $
    647,843
    
    
    $
    631,042Buildings
    
    
    9,897,423
    
    
    
    9,817,231Leasehold improvements
    
    
    762,530
    
    
    
    753,952Machinery and equipment
    
    
    27,110,202
    
    
    
    24,019,694Computer equipment and software
    
    
    5,717,626
    
    
    
    5,571,446Furniture and fixtures
    
    
    564,897
    
    
    
    560,154Vehicles
    
    
    44,206
    
    
    
    44,20644,744,727
    
    
    
    41,397,725Less accumulated depreciation and amortization
    
    
    27,523,818
    
    
    
    25,120,916Net depreciated value
    
    
    17,220,909
    
    
    
    16,276,809Construction in progress
    
    
    671,544
    
    
    
    1,759,955Property, plant, and equipmentnet
    
    $
    17,892,453
    
    
    $
    18,036,764
 5.
    
    LONG-TERM DEBT
 Long-term debt at September 30, 2009 and 2008, consists of the following:
 Current portion of note payable to bank, under a
$10 million unsecured credit agreement
    
    $
    1,270,099
    
    
    $
    Long-term note payable to banks, under a $15 million
unsecured credit agreement
    
    
    
    
    
    
    3,000,000Total Long-term Debt
    
    $
    1,270,099
    
    
    $
    3,000,000
 The Company replaced its credit agreement on May 13, 2009 with a new $10.0 million unsecured
revolving line of credit facility that expires in May 2010. The Company currently intends to
extend or replace the agreement at its expiry. Borrowings under the new credit facility bear
interest at a rate equal to LIBOR plus 2.25%. The Company is required
to pay a non-usage fee of .50% per annum on the unused portion of the facility.
 F-11




---



##### 



Availability under the facility is based upon specified percentages of eligible accounts
receivable and inventory. The credit agreement is unsecured. If the Company fails to meet a
specified funded debt to EBITDA ratio, the Companys lender will have the right to take a
security interest in the Companys accounts receivables and inventory. The credit agreement
contains certain restrictive covenants, including requirements to maintain a minimum tangible
net worth and after tax net income (or loss within specified levels).
 As of December 18, 2009, the Company had approximately
$7.6
million available and
$2.4 million
outstanding under the revolving credit line pursuant to its credit agreement.Tufco LP is the borrower under the credit agreement. Tufco LLC is an affiliated guarantor and
is 100% owned by the parent company, Tufco Technologies, Inc., which is also a guarantor.
Under the credit agreement, Hamco Manufacturing and Distributing LLC, a subsidiary of Tufco LP,
is also a guarantor. All guarantees are full and unconditional, as well as joint and several.
The underlying borrowings are not registered securities.Borrowings under the previous $15 million unsecured credit agreement were made under the base
rate account or the Eurodollar account. Interest on amounts borrowed under the base rate
account were calculated based on the greater of the Federal Funds Effective Rate plus 1/2 of 1%
or the Prime Rate on the date of the borrowing. Interest on amounts borrowed under the
Eurodollar account was calculated based on LIBOR.
 6.
    
    INCOME TAXES
 The tax effects of significant items composing the Companys net deferred tax liability as of
September 30, 2009 and 2008, are as follows:
 2009
    
    
    2008Deferred tax assets:Valuation allowances for accounts receivable
and inventoriesnot currently deductible
    
    $
    193,378
    
    
    $
    168,820Inventory costs capitalized for tax purposes
    
    
    31,015
    
    
    
    44,684Vacation and severance accrualsnot currently deductible
    
    
    85,084
    
    
    
    87,342Other accrualsnot currently deductible
    
    
    72,184
    
    
    
    55,353Net operating loss and tax credit carryforwards
    
    
    533,637
    
    
    
    110,832Stock compensation
    
    
    119,303
    
    
    
    104,552Total gross deferred tax assets
    
    
    1,034,601
    
    
    
    571,583Deferred tax liabilities:Basis difference on property and equipment
    
    
    2,251,060
    
    
    
    1,996,041Basis difference on goodwill
    
    
    1,013,452
    
    
    
    899,961Total gross deferred tax liabilities
    
    
    3,264,512
    
    
    
    2,896,002Net deferred tax liability
    
    $
    2,229,911
    
    
    $
    2,324,419
  2009
    
    
    2008Current deferred tax assets
    
    $
    381,661
    
    
    $
    467,031Noncurrent deferred tax liability
    
    
    2,611,572
    
    
    
    2,791,450Net deferred tax liability
    
    $
    2,229,911
    
    
    $
    2,324,419
  F-12




---



##### 



The components of income tax (benefit) expense are as follows:
 2009
    
    
    2008Current tax (benefit) expense:Federal
    
    $
    (460,805
    )
    
    $
    (30,473
    )State
    
    
    7,148
    
    
    
    8,700Total
    
    
    (453,657
    )
    
    
    (21,773
    )Deferred tax expense:Federal
    
    
    10,459
    
    
    
    296,849State
    
    
    (104,967
    )
    
    
    25,406Total
    
    
    (94,508
    )
    
    
    322,255Income tax (benefit) expense
    
    $
    (548,165
    )
    
    $
    300,482
 Income tax (benefit) expense varies from the amount determined by applying the applicable
statutory income tax rates to pretax income as follows:
 2009
    
    
    2008Federal income taxes computed at
statutory rates
    
    $
    (475,446
    )
    
    $
    302,877State income taxesnet of federal tax benefit
    
    
    (64,560
    )
    
    
    22,510Other nondeductibles
    
    
    6,221
    
    
    
    6,148Other
    
    
    (14,380
    )
    
    
    (31,053
    )Income tax (benefit) expense
    
    $
    (548,165
    )
    
    $
    300,482
 At September 30, 2009 and 2008, the Company had no material unrecognized tax benefits. The
Company files tax returns in all appropriate jurisdictions, which include a federal tax
return and all required state jurisdictions. Open tax years for all jurisdictions are
fiscal years ending September 30, 2008 and 2009.The Company recognizes interest and penalties related to uncertain tax positions as income
tax expense as incurred. No expense for interest and penalties was recognized for the year
ended September 30, 2009 and 2008.
 F-13




---



##### 



7.
    
    COMMITMENTS AND CONTINGENCIES
 LeasesThe Company leases facilities in Green Bay, Wisconsin, from a partnership composed of
certain current and former stockholders. In November 2006, the Company entered into a new lease
with the partnership that expires in March 2013, which is classified as an operating lease and
requires monthly rental payments of $17,070 which increase 1.65% every twelve months. Rental expense under
the lease totaled $209,938 for fiscal 2009 and $206,530 for fiscal 2008, respectively. On the
expiration date there is an option for an additional five-year term to be negotiated.
 The Company also leases other facilities and equipment under operating leases. Office and
warehouse leases expire on varying dates over the next five years.
 Future minimum rental commitments under operating leases with initial or remaining terms in
excess of one year at September 30, 2009, are as follows:
 2010
    
    $
    851,6832011
    
    
    331,1602012
    
    
    317,1812013
    
    
    144,7772014
    
    
    9,848Total
    
    $
    1,654,649
 The Company will purchase for $788,000 in December 2009 one of the presses currently being
leased and has given notice to purchase the second press under lease in June 2010, of which the
amount is unknown.
 Rental expense for all operating leases totaled $1,639,545 and $1,518,363 for the years ended
September 2009 and 2008, respectively.
 LitigationThe Company is subject to lawsuits, investigations, and potential claims arising
out of the ordinary conduct of its business. The Company is not currently involved in any
material litigation.
 8.
    
    PROFIT SHARING SAVINGS AND INVESTMENT PLAN
 The Company has a defined contribution 401(k) plan covering substantially all employees. The
Company makes annual contributions at the discretion of the board of directors. In addition,
the Company matches certain amounts of an employees contribution. Expenses relating to the
defined contribution 401(k) plan totaled $59,411 and $168,553 for fiscal 2009 and 2008,
respectively. The Company has currently suspended contributions to the plan.
 9.
    
    STOCKHOLDERS EQUITY
 Non-voting Common Stock and Preferred StockAt September 30, 2009 and 2008, the Company has
authorized and unissued 2,000,000 shares of $.01 par value non-voting common stock and
1,000,000 shares of $.01 par value preferred stock.
 F-14




---



##### 



Stock Repurchase Plan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
common stock at prevailing market prices after concluding that the Companys cash and debt
position would enable these purchases without impairment to the Companys capital. On October
15, 2008, the Companys Board of Directors approved an extension of its February 2008 stock
repurchase program through June 30, 2009 and an increase in the number of shares from 100,000 to
200,000. On January 22, 2009, the Companys Board of Directors approved a further extension of
its February 2008 stock repurchase program through September 30, 2009 and an increase in the number
of shares from 200,000 to 300,000. A total of 226,697 shares were purchased under the plan
through September 30, 2009.
 Stock Compensation ArrangementsThe 2003 Non-Qualified Stock Option Plan, the (2003 Plan)
currently reserves 282,350 shares of common stock for grants to selected employees through
April 30, 2013, and provides that the price and exercise period be determined by the board of
directors which should be at least equal to fair value at the date of grant. Options vest
primarily over three years and expire 5 to 10 years from date of grant. No options were issued
in fiscal 2009 under the 2003 Plan. During fiscal 2008, options to purchase 38,850 shares of
voting common stock were granted.
 The 2004 Non-Employee Director Stock Option Plan (2004 Plan) for non-employee members of the
board of directors reserves 150,000 shares of common stock for grants through March 2014 and
provides that the exercise price be at least equal to fair value at the date of grant. Options
are exercisable immediately and for a period of 10 years. During fiscal years 2009 and 2008,
options to purchase 18,000 and 20,000 shares, respectively, of voting common stock were granted
under the 2004 Plan.
 The Company estimates fair value on the date of grant using the Black-Scholes option valuation
model. The Company uses historical data regarding stock option exercise behaviors to estimate
the expected term of options granted based on the period of time that options granted are
expected to be outstanding. Compensation expense is recognized only on awards expected to vest.
Expected volatilities are based on the historical volatility of the Companys stock. The
expected dividend yield is based on the Companys historical dividend payments. The risk-free
interest rate is based on the U.S. Treasury yield curve in effect on the grant date for the
length of time corresponding to the expected term of the option.
 For the years ended September 30, 2009 and 2008, the total stock compensation expense
recognized by the Company was $46,796 and $69,790, respectively. There was $22,327 of
unrecognized compensation cost related to 2008 share-based compensation awards as of September
30, 2009, which will be recognized over a remaining weighted average period of two years.
 F-15




---



##### 



WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Term
    
    
    ValueOutstanding at September 30, 2007
    
    
    296,300
    
    
    $
    6.74New grants
    
    
    58,850
    
    
    
    6.64Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    (32,000
    )
    
    
    7.75Outstanding at September 30, 2008
    
    
    323,150
    
    
    $
    6.62New grants
    
    
    18,000
    
    
    
    3.98Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    (44,500
    )
    
    
    6.67Outstanding at September 30, 2009
    
    
    296,650
    
    
    $
    6.46
    
    
    
    5.0
    
    
    $
    0Exercisable at September 30, 2009
    
    
    270,750
    
    
    $
    6.45
    
    
    
    4.6
    
    
    $
    0
  2009
    
    2008Risk-free interest rate
    
    
    0.90
    %
    
    
    2.48% - 4.05
    %Expected volatility
    
    
    113.7
    %
    
    
    49.9% - 61.1
    %Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %Expected option life, standard option
(years)
    
    
    2.0
    
    
    
    3.0
 In fiscal 2009 and 2008, no employee stock options were exercised. The aggregate
intrinsic value in the table above is  based on the Companys closing stock
price of $2.90 on the last business day of the year ended September 30, 2009. The realized tax
benefit is recognized, when material,
as an increase to additional paid-in capital or a decrease to income tax expense with an offset
to deferred tax assets, depending on the accumulation of windfalls and shortfalls.
 10.
    
    RELATED-PARTY TRANSACTIONS
 The Company has an agreement with Bradford Ventures, Ltd., an affiliate of the two largest
stockholders of the Company, under which Bradford Ventures, Ltd. provides various financial and
management consulting services which was initially set to expire in January 2004, and is
thereafter automatically renewable on an annual basis if not terminated by either party. The
agreement calls for an annual fee of $210,000 with annual increases of 5% plus reimbursement of
reasonable out-of-pocket expenses. Consulting expense was $409,192 and $389,706 for fiscal 2009
and 2008, respectively.
 
 F-16




---



##### 



As discussed in footnote 8 Commitments and Contingencies, the Company leases facilities from
a partnership composed of current and former stockholders.
 11.
    
    SUPPLEMENTAL CASH FLOW INFORMATION
 The following is provided as supplemental information to the consolidated statements of cash
flows:
 2009
    
    
    2008Interest paid
    
    $
    109,305
    
    
    $
    283,892Income taxes paid
    
    $
    32,605
    
    
    $
    200,000
 12.
    
    MAJOR CUSTOMER AND SEGMENT INFORMATION
 Two significant customers of the Contract Manufacturing segment are multinational consumer
products companies with whom the Company has confidentiality and non-disclosure agreements,
accounted for the following percentage of total sales:
 2009
    
    2008Contract Manufacturing segmentCustomer A
    
    
    35
    %
    
    
    36
    %Customer B
    
    
    25
    %
    
    
    32
    %
 The manufacturing contract with Customer A expires April 2012 and the manufacturing contract
with Customer B expires June 2013.
 The Company operates in a single industry since it manufactures and distributes custom
paper-based and nonwoven products, and provides contract manufacturing, specialty printing and
related services on these types of products. The Company does, however, separate its operations
and prepares information for management use by the market segment aligned with the Companys
products and services. Corporate costs, such as interest income, interest expense and income
tax (benefit) expense are recorded under the Corporate and Other segment. Such market segment
information is summarized below. The Contract Manufacturing segment provides services to
multinational consumer products companies while the Business Imaging segment manufactures and
distributes printed and unprinted business imaging paper products for a variety of business
needs.
 Substantially all of the Companys revenues are attributed to domestic external customers.
There are no long-lived assets located outside of the United States.
 F-17




---



##### 



Contract
    
    
    Business
    
    
    CorporateFiscal 2009
    
    Manufacturing
    
    
    Imaging
    
    
    and Other
    
    
    ConsolidatedNet sales
    
    $
    63,901,520
    
    
    $
    22,874,244
    
    
    $
    
    
    
    $
    86,775,764Gross profit
    
    
    2,360,286
    
    
    
    1,426,739
    
    
    
    
    
    
    
    3,787,025Operating income (loss)
    
    
    1,049,200
    
    
    
    145,266
    
    
    
    (2,496,252
    )
    
    
    (1,301,786
    )Depreciation and
amortization
expense
    
    
    2,198,440
    
    
    
    207,045
    
    
    
    2,374
    
    
    
    2,407,859Capital expenditures
    
    
    2,228,576
    
    
    
    34,972
    
    
    
    
    
    
    
    2,263,548Assets:Inventories
    
    $
    8,642,397
    
    
    $
    2,002,771
    
    
    $
    
    
    
    $
    10,645,168Property, plant, and
equipmentnet
    
    
    15,969,177
    
    
    
    1,918,400
    
    
    
    4,876
    
    
    
    17,892,453Accounts receivable
and other
(including goodwill)
    
    
    12,334,332
    
    
    
    6,200,035
    
    
    
    1,118,581
    
    
    
    19,652,948Total assets
    
    $
    36,945,906
    
    
    $
    10,121,206
    
    
    $
    1,123,457
    
    
    $
    48,190,569
 Contract
    
    
    Business
    
    
    CorporateFiscal 2008
    
    Manufacturing
    
    
    Imaging
    
    
    and Other
    
    
    ConsolidatedNet sales
    
    $
    86,786,047
    
    
    $
    24,530,203
    
    
    $
    
    
    
    $
    111,316,250Gross profit
    
    
    4,682,739
    
    
    
    1,652,970
    
    
    
    
    
    
    
    6,335,709Operating income (loss)
    
    
    3,255,755
    
    
    
    430,687
    
    
    
    (2,549,030
    )
    
    
    1,137,412Depreciation and
amortization
expense
    
    
    1,956,682
    
    
    
    214,557
    
    
    
    4,850
    
    
    
    2,176,089Capital expenditures
    
    
    972,936
    
    
    
    137,516
    
    
    
    
    
    
    
    1,110,452Assets:Inventoriesnet
    
    $
    12,209,659
    
    
    $
    2,730,309
    
    
    $
    
    
    
    $
    14,939,968Property, plant, and
equipmentnet
    
    
    15,939,041
    
    
    
    2,090,473
    
    
    
    7,250
    
    
    
    18,036,764Accounts receivable
and other
(including goodwill)
    
    
    13,425,593
    
    
    
    5,977,200
    
    
    
    776,716
    
    
    
    20,179,509Total assets
    
    $
    41,574,293
    
    
    $
    10,797,982
    
    
    $
    783,966
    
    
    $
    53,156,241
 F-18