FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996 OR
-------------------
[ ] 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: 1-12648
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UFP Technologies, Inc.
---------------------
(Exact name of registrant as specified in its charter)
Delaware 04-2314970
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
172 East Main Street, Georgetown, Massachusetts 01833
-----------------------------------------------------
(Address of principal executive offices) (Zip Code)
(508) 352-2200
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(Registrant's telephone number, including area code)
-----------------------------------------
(Former name, former address and former
fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filings
requirements for the past 90 days.
Yes _X_ No ___
As of November 10, 1996, 4,636,854 shares of registrant's Common Stock, $.01 par
value, were outstanding.
<PAGE>
UFP TECHNOLOGIES, INC. AND SUBSIDIARY
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance sheets
September 30, 1996 and December 31, 1995 1
Consolidated Statements of Operations
Three months ended and Nine months ended
September 30, 1996 and 1995 2
Consolidated Statements of Cash Flows
Nine months September 30, 1996 and 1995 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
PART II - OTHER INFORMATION 7
SIGNATURES 8
<PAGE>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
UFP Technologies, Inc. and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
(Unaudited) (Audited)
<S> <C> <C>
Assets:
Current Assets
Cash $ 603,899 524,490
Receivables, net 5,768,460 4,944,541
Inventories 2,511,005 2,432,686
Prepaid expenses 154,268 322,627
Deferred income tax 228,900 228,900
--------- ---------
Total current assets 9,266,532 8,453,244
Property, plant and equipment 15,760,161 13,825,563
less accumulated depreciation and amortization (7,139,631) (6,203,543)
---------- ----------
Net property, plant and equipment 8,620,530 7,622,020
Cash surrender value of officers life insurance, net 343,990 343,990
Investments in and advances to affiliated partnership 213,950 227,950
Deferred income taxes 113,110 113,110
Goodwill, net 3,584,441 3,740,321
Other assets 312,685 293,888
---------- ----------
Total assets $22,455,238 20,794,523
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 2,200,000 2,775,000
Current installments of long term debt 187,713 183,919
Current capital lease obligations 580,151 297,536
Accounts payable 2,187,300 1,814,807
Accrued expenses and payroll withholdings 1,909,598 1,430,396
---------- ----------
Total current liabilities 7,064,762 6,501,658
Long term debt, excluding current installments 1,020,095 1,161,369
Capital lease obligations, excluding current installments 1,744,885 1,253,340
Retirement liability 484,896 439,896
---------- ----------
Total liabilities 10,314,638 9,356,263
Stockholders' Equity
Preferred stock, $.01 par value. Authorized
1,000,000 shares; no shares issued 0 0
Common stock, $.01 par value. Authorized
20,000,000 shares; issued and
outstanding 4,636,854 shares at September 30, 1996
and 4,626,854 shares at December 31, 1995 46,369 46,269
Additional paid-in capital 9,404,902 9,376,227
Retained earnings 2,689,329 2,015,764
---------- ----------
Total stockholders' equity 12,140,600 11,438,260
---------- ----------
Total liabilities and stockholders' equity $22,455,238 20,794,523
=========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
1
<PAGE>
UFP Technologies, Inc. and Subsidiary
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
------------------ -----------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1996 1995 1996 1995
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $10,095,026 8,431,395 28,872,206 25,282,151
Cost of sales 7,458,925 6,372,646 21,712,658 19,437,660
----------- ---------- ---------- ----------
Gross profit 2,636,101 2,058,749 7,159,548 5,844,491
Selling, general and administrative expenses 1,997,396 1,712,983 5,701,464 5,184,789
----------- ---------- ---------- ----------
Operating income 638,705 345,766 1,458,084 659,702
Other deductions:
Interest expense 135,984 110,768 356,519 322,785
----------- ---------- ---------- ----------
Income before income taxes 502,721 234,998 1,101,565 336,917
Incomes taxes 201,000 0 428,000 20,000
----------- ---------- ---------- ----------
Net income $ 301,721 234,998 673,565 316,917
=========== ========== ========== ==========
Weighted average shares outstanding 4,961,728 4,722,591 4,958,043 4,729,506
Per share:
Net income $ 0.06 0.05 0.14 0.07
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements
2
<PAGE>
UFP Technologies, Inc. and Subsidiary
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
-----------------
Sept. 30, Sept. 30,
1996 1995
------------ ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 673,565 316,917
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,091,968 984,073
Net loss in affiliated partnership 14,000 15,750
Stock issued in lieu of compensation 16,875 16,250
Changes in operating assets and liabilities:
Receivables, net (823,919) (563,583)
Inventories (78,319) (292,976)
Prepaid expenses 168,359 108,825
Accounts payable 372,493 (305,342)
Accrued expenses and payroll withholdings 479,202 67,602
Retirement liability 45,000 45,000
----------- ---------
Net cash provided by operating activities 1,959,224 392,516
Cash flows from investing activities:
Additions to property, plant and equipment (1,934,598) (1,288,427)
Decrease in cash surrender value of officers life
insurance - 234,914
Increase other assets (18,797) (51,815)
----------- ---------
Net cash used in investing activities (1,953,395) (1,105,328)
Cash flows from financing activities:
Net borrowings (repayment) under notes payable (575,000) 540,600
Principal repayments of long-term debt (137,480) (74,398)
Principal repayments of capital leases (266,840) (135,780)
Proceeds from long term debt borrowings 0 400,000
Proceeds from capital lease obligation 1,041,000 0
Proceeds from sale of common stock 11,900 0
----------- ---------
Net cash provided by financing activities 73,580 730,422
----------- ---------
Net change in cash 79,409 17,610
Cash, at beginning of period 524,490 406,225
----------- ---------
Cash, at end of period $ 603,899 423,835
=========== =========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements
3
<PAGE>
UFP TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The interim consolidated financial statements of UFP Technologies, Inc. (the
Company) presented herein, without audit, have been prepared pursuant to the
rules of the Securities and Exchange Commission for quarterly reports on Form
10-Q and do not include all the information and note disclosures required by
generally accepted accounting principles. These statements should be read in
conjunction with the consolidated financial statements and notes thereto for the
year ended December 31, 1995, included in the Company's 1995 Annual Report to
Stockholders as provided to the Securities and Exchange Commission on May 2,
1996.
The consolidated balance sheet as of September 30, 1996, the consolidated
statements of operations for the three months ended and nine months ended
September 30, 1996 and 1995 and the consolidated statements of cash flows for
the nine months ended September 30, 1996 and 1995, are unaudited but, in the
opinion of management, include all adjustments (consisting of normal, recurring
adjustments) necessary for fair presentation of results for these interim
periods.
The results of operations for the three months ended and nine months ended
September 30, 1996, are not necessarily indicative of the results to be expected
for the entire fiscal year ending December 31, 1996.
(2) Inventory
Inventories are stated at the lower of cost (first-in, first-out) or market
and consist of the following:
Sept. 30, December 31,
1996 1995
(unaudited) (audited)
----------- ------------
Raw materials $1,919,797 1,724,537
Work-in-process 287,249 193,185
Finished goods 303,959 383,449
Contract-in-process - 131,515
---------- ---------
Total Inventory $2,511,005 2,432,686
========== =========
Work-in-process and finished goods inventories consists of materials, labor
and manufacturing overhead.
(3) Common Stock
At December 31, 1995, options to purchase 668,500 shares of common stock were
outstanding under the Company's 1993 Stock Option Plan ("1993 Plan"). The
purpose of these options are to provide long-term rewards and incentives to the
Company's key employees, officers, employee directors, consultants and advisors.
During the first nine months of 1996, 51,500 options to purchase shares were
issued, 5,000 options to purchase shares were exercise, and 16,000 options to
purchase shares expired. At September 30, 1996, there were options to purchase
699,000 shares of common stock outstanding under the plan.
4
<PAGE>
At December 31, 1995, options to purchase 22,500 shares of common stock were
outstanding under the Company's Non-Employee Director Plan. During the first
nine months of 1996, 15,000 options to purchase shares were issued, none were
exercised and none expired under the Director Plan. At September 30, 1996, there
were options to purchase 37,500 shares of common stock outstanding under this
plan.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Three months ended September 30, 1996 and 1995
The Company's net sales increased 19.7% to $10,095,000 in the 1996 period
from $8,431,000 in the 1995 period. The increase was primarily attributable to
an increase in sales volume of the Company's molded fiber products and specialty
foam plastics products.
Costs of sales as a percentage of sales improved to 73.8% in the 1996 period
from 75.6% in the 1995 period. The improvement in the cost of sales margin was
primarily attributable to continued volume and manufacturing efficiency
improvements associated with the Company's molded fiber products.
Selling, general and administrative expenses increased to $1,997,000
(19.8% of net sales) in the 1996 period from $1,713,000 (20.3% of net sales) in
the 1995 period. The increase was associated primarily to the Company's efforts
to increase sales at all three of their divisions, while the improvement in the
percentage of net sales primarily relates to the fixed cost absorption over a
higher sales level.
Interest expense increased during these respective periods primarily due to
capital lease obligations associated with the Company's purchase of additional
molded fiber equipment.
Nine months ended September 30, 1996 and 1995
The Company's net sales increased 14.2% to $28,872,000 in the 1996 period
from $25,282,000 in the 1995 period. The increase was primarily attributable to
an increase in sales volume of the Company's molded fiber products and
specialty foam plastics products.
Costs of sales as a percentage of sales improved to 75.2% in the 1996
period from 76.9% in the 1995 period. The improvement in the cost of sales
margin was primarily attributable to continued volume and manufacturing
efficiency improvements associated with the Company's molded fiber products.
Selling, general and administrative expenses increased to $5,701,000
(19.8% of net sales) in the 1996 period from $5,185,000 (20.5% of net sales) in
the 1995 period. The increase was associated primarily to the Company's efforts
to increase sales at all
5
<PAGE>
three of their divisions, while the improvement in the percentage of net sales
primarily relates to the fixed cost absorption over a higher sales level.
Interest expense increased during these respective periods primarily due to
capital lease obligations associated with the Company's purchase of additional
molded fiber equipment.
Liquidity and Capital Resources
At September 30, 1996 the Company's working capital was approximately
$2,202,000, including $604,000 of cash and cash equivalents. In addition, the
Company had a $4,500,000 bank revolving loan facility, of which $2,200,000 was
outstanding at September 30, 1996.
During the nine months ended September 30, 1996, operating activities
provided the Company with approximately $1,959,000 of cash, primarily due to net
income, depreciation and amortization and an increase in accounts payables and
accrued expenses, which were partially offset by an increase in accounts
receivables. The increases in accounts receivables, accounts payables was
primarily due to the increase in product demand and sales.
Cash used in investing activities of approximately $1,953,000 was attributable
to additions of property, plant and equipment. This amount was primarily
attributable to the purchase of molded fiber manufacturing equipment which was
installed late in the second quarter of 1996 at the Company's new Iowa facility.
Net cash generated from financing activities totaled approximately $74,000,
primarily due to an increase in long term capital lease obligations related to
the new molded fiber manufacturing equipment which was partially offset by
principal repayments of long term debt and capital lease obligations. In the
first nine months of 1996, the Company borrowed $941,000 under a 48 month
capital lease arrangement and entered into another $1,000,000 capital lease
obligation associated with the purchase of an additional molded fiber
manufacturing machine scheduled to be installed in late 1996. At September 30,
1996 $100,000 has been committed in progress payments.
At September 30, 1996 the Company had approximately $963,000 outstanding
under two mortgage notes and $244,000 outstanding under two equipment notes. At
September 30, 1996 the current portion of these obligations, together with the
Company's line of credit, totaled $2,388,000.
On June 30, 1996 the Company renewed its lending arrangement with
BayBank of Boston. Under the terms of the renewal the revolving loan facility
limit was increased from $3,500,000 to $4,500,000. Additionally, BayBank agreed
to extend the Company an additional $2,000,000 equipment line of credit. The
term of the agreement expires on June 30, 1997.
On July 8, 1996 the Company announced plans to increase the manufacturing
capacity of its Iowa Moulded Fibre Technology plant by 50% by purchasing a
second molded
6
<PAGE>
pulp packaging machine for the facility. The Company anticipates
financing this obligation with its equipment line of credit.
Although at some point in the future the Company may seek additional debt
or equity financing to fund its growth needs, management believes that cash
generated from operations together with its existing resources, including its
revolving loan facility and its new $2,000,000 equipment line, will be
sufficient to fund its cash flow requirements through at least the next 12
months.
Additionally on July 8, 1996 the Company announced that it had been
approved for listing on the Nasdaq National Market, and its stock began trading
there effective July 8th.
PART II - OTHER INFORMATION
Item 1 Legal Proceedings.
No Material Litigation
Item 2 Changes in Securities.
None
Item 3 Defaults Upon Senior Securities.
None
Item 4 Submission of Matters to a Vote of Security Holders.
None
Item 5 Other Information.
None
Item 6 Exhibits and Reports on Form 8-K.
(a) Exhibits furnished:
(11) Statement Re: Computation of Earnings Per Share.
(27) Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Company during the
quarter ended September 30, 1996.
7
<PAGE>
UFP TECHNOLOGIES, INC. AND SUBSIDIARY
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UFP TECHNOLOGIES, INC.
(Registrant)
November 10, 1996 /s/ R. Jeffrey Bailly
- ----------------- ---------------------
Date R. Jeffrey Bailly
President, Chief Executive
Officer and Director
November 10, 1996 /s/ Paul J. Greenler
- ----------------- ---------------------
Date Paul J. Greenler
Chief Financial Officer
8
Exhibit 11.0
UFP Technologies, Inc.
Statement of Computation of Per Share Earnings
<TABLE>
<CAPTION>
Three months ended Nine months ended
Sept 30, Sept 30, Sept 30, Sept 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net income $ 301,721 234,998 673,565 316,917
Primary earnings per share:
Weighted average common shares
outstanding 4,636,854 4,626,854 4,633,169 4,625,151
Dilutive stock options and warrants 275,837 95,737 237,055 104,355
---------- ---------- ---------- -----------
4,912,691 4,722,591 4,870,224 4,729,506
========== ========== ========== ==========
Income per share $ 0.06 0.05 0.14 0.07
========== ========== ========== ==========
Fully diluted earnings per share:
Weighted average common shares
outstanding 4,636,854 4,626,854 4,633,169 4,625,151
Dilutive stock options and warrants 324,874 95,737 324,874 104,355
========== ========== ========== ==========
4,961,728 4,722,591 4,958,043 4,729,506
========== ========== ========== ==========
Income per share $ 0.06 0.05 0.14 0.07
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 604
<SECURITIES> 0
<RECEIVABLES> 5,768
<ALLOWANCES> 0
<INVENTORY> 2,511
<CURRENT-ASSETS> 9,267
<PP&E> 15,760
<DEPRECIATION> 7,140
<TOTAL-ASSETS> 22,455
<CURRENT-LIABILITIES> 7,065
<BONDS> 0
0
0
<COMMON> 46
<OTHER-SE> 12,094
<TOTAL-LIABILITY-AND-EQUITY> 22,455
<SALES> 28,872
<TOTAL-REVENUES> 28,872
<CGS> 21,713
<TOTAL-COSTS> 21,713
<OTHER-EXPENSES> 5,701
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 357
<INCOME-PRETAX> 1,102
<INCOME-TAX> 428
<INCOME-CONTINUING> 674
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 674
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
