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 March 31, 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
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
--------------
(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 May 4, 1996, 4,631,854 shares of registrant's Common Stock, $.01 par
value, were outstanding.
<PAGE>
UFP TECHNOLOGIES, INC. AND SUBSIDIARY
INDEX
<TABLE>
<CAPTION>
Page
<S> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance sheets
March 31, 1996 and December 31, 1995.............................. 1
Consolidated Statements of Operations
Three Months Ended
March 31, 1996 and 1995........................................... 2
Consolidated Statements of Cash Flows
Three Months Ended March 31, 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
</TABLE>
<PAGE>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
UFP Technologies, Inc. and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---- ----
(Unaudited) (Audited)
<S> <C> <C>
Assets:
Current Assets
Cash and cash equivalents $ 383,337 524,490
Receivables, net 5,291,510 4,944,541
Inventories 2,597,188 2,432,686
Prepaid expenses 305,896 322,627
Deferred income tax 228,900 228,900
----------- -----------
Total current assets 8,806,831 8,453,244
Property, plant and equipment 14,713,966 13,825,563
less accumulated depreciation and amortization (6,486,185) (6,203,543)
----------- -----------
Net property, plant and equipment 8,227,781 7,622,020
Cash surrender value of officers life insurance, net 343,990 343,990
Investments in and advances to affiliated partnership 227,950 227,950
Deferred income taxes 113,110 113,110
Goodwill, net 3,688,361 3,740,321
Other assets 296,008 293,888
----------- -----------
Total assets $ 21,704,031 20,794,523
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Notes payable $ 3,408,700 2,775,000
Current installments of long term debt 185,380 183,919
Current capital lease obligations 305,398 297,536
Accounts payable 2,337,861 1,814,807
Accrued expenses and payroll withholdings 1,149,379 1,430,396
----------- -----------
Total current liabilities 7,386,718 6,501,658
Long term debt, excluding current installments 1,114,609 1,161,369
Capital lease obligations, excluding current installments 1,172,600 1,253,340
Retirement liability 454,896 439,896
----------- -----------
Total liabilities 10,128,823 9,356,263
Stockholders' Equity
Preferred stock, $.01 par value. Authorized 0 0
1,000,000 shares; no shares issued
Common stock, $.01 par value. Authorized 46,269 46,269
10,000,000 shares; issued and outstanding
4,626,854 shares at March 31, 1996 and
December 31, 1995
Additional paid-in capital 9,376,227 9,376,227
Retained earnings 2,152,712 2,015,764
----------- -----------
Total stockholders' equity 11,575,208 11,438,260
----------- -----------
Total liabilities and stockholders' equity $ 21,704,031 20,794,523
----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
UFP Technologies, Inc. and Subsidiary
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
------------------
March 31, March 31,
1996 1995
---- ----
<S> <C> <C>
Net sales $ 8,693,309 8,587,209
Cost of sales 6,648,676 6,676,794
--------- ---------
Gross profit 2,044,633 1,910,415
Selling, general and administrative expenses 1,718,449 1,776,401
--------- ---------
Operating income 326,184 134,014
Other deductions:
Interest expense 114,236 107,171
--------- ---------
Income before income taxes 211,948 26,843
Incomes taxes 75,000 20,000
--------- ---------
Net income $ 136,948 6,843
--------- ---------
Weighted average shares outstanding 4,764,381 4,717,142
Per share:
Net income $ 0.03 0.00
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
UFP Technologies, Inc. and Subsidiary
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
------------------
March 31, March 31,
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 136,948 6,843
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 334,602 312,571
Net loss in affiliated partnership 0 5,250
Changes in operating assets and liabilities:
Receivables, net (346,969) (346,146)
Inventories (164,502) (141,175)
Prepaid expenses 16,731 (127,563)
Accounts payable 523,054 163,734
Accrued expenses and payroll withholdings (281,017) 182,442
Retirement liability 15,000 15,000
----------- ---------
Net cash provided by operating activities 233,847 70,956
Cash flows from investing activities:
Additions to property, plant and equipment (888,403) (227,123)
Decrease in cash surrender value of officers life
insurance - 169,694
Increase other assets (2,120) (6,193)
----------- ---------
Net cash used in investing activities (890,523) (63,622)
Cash flows from financing activities:
Net borrowings (repayment) under notes payable 633,700 (45,900)
Principal repayments of long-term debt (45,299) (16,008)
Principal repayments of capital leases (72,878) (35,218)
----------- ---------
Net cash provided (used) by financing activities 515,523 (97,126)
----------- ---------
Net change in cash and cash equivalents (141,153) (89,792)
Cash and cash equivalents, at beginning of period 524,490 406,225
----------- ---------
Cash and cash equivalents, at end of period $ 383,337 316,433
----------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<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 March 31, 1996, the consolidated
statements of operations for the three months ended March 31, 1996 and 1995 and
the consolidated statements of cash flows for the three months ended March 31,
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 March 31, 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:
March 31, December 31,
1996 1995
---- ----
(unaudited) (audited)
Raw materials................... $ 1,820,987 1,724,537
Work-in-process................. 289,448 193,185
Finished goods.................. 444,014 383,449
Contract-in-process............. 42,739 131,515
--------- ---------
Total Inventory $ 2,597,188 2,432,686
Work-in-process and finished goods inventories consists of materials, labor
and manufacturing overhead.
(3) Common Stock
At December 31, 1995, 668,500 options 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. There were 6,500 options
issued and none exercised in the first quarter of 1996 under the 1993 Plan, and
6,000 options expired. At March 31, 1996, 668,000 options were outstanding under
the plan.
<PAGE>
At December 31, 1995, 22,500 options were outstanding under the Company's
Non-Employee Director Plan. No options were issued, exercised or expired in the
first quarter of 1996 under the Director Plan.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Three months ended March 31, 1996 and 1995
The Company's net sales increased 1.2% to $8,693,000 in the 1996 period from
$8,587,000 in the 1995 period. The increase was primarily attributable to an
increase in sales volume of the Company's molded fiber products, which was
offset by a decrease in sales volume in the Company's foam and plastic packaging
business. Sales in the 1996 period were impacted by a two-week planned shut down
of the California molded fiber plant for installation of additional capacity, by
increased seasonality associated with sales of molded fiber products for
computer peripherals and other consumer products, and by adverse weather
conditions, particularly in January 1996.
Costs of sales as a percentage of sales improved to 76.5% in the 1996 period
from 77.8% 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 decreased 3.3% to $1,718,000
(19.8% of net sales) in the 1996 period from $1,776,000 (20.7% of net sales) in
the 1995 period. The decrease was primarily attributable to a reduction in
payroll costs associated with the Company's realignment of its management
structure during fiscal during fiscal 1994.
Interest expense increased 6.5% to $114,000 in the 1996 period from $107,000
in the 1995 period. The increase was primarily attributable to an increase in
capital lease obligations associated with the Company's purchase of additional
molded fiber equipment.
Liquidity and Capital Resources
At March 31, 1996 the Company's working capital was approximately
$1,420,000, including $383,000 of cash and cash equivalents. In addition, the
Company had a $3,500,000 bank revolving loan facility, of which $2,750,000 was
outstanding at March 31, 1996. This facility expires on June 30, 1996.
During the quarter ended March 31, 1996, operating activities provided the
Company with approximately $234,000 of cash, primarily due to the quarterly
profit, depreciation and amortization and an increase in accounts payables,
which were partially offset by an increase in accounts receivables and inventory
and a decrease in accrued expenses. The increases in accounts receivables,
accounts payables and inventory was primarily due to the increase in product
demand and sales.
<PAGE>
Cash used in investing activities of approximately $891,000 was attributable
to additions of property, plant and equipment. This amount was primarily
attributable to the purchase of molded fiber manufacturing equipment which is
being constructed and ins scheduled to be installed late in the second quarter
of 1996 at the Company's new Iowa facility.
Net cash generated from financing activities totaled approximately $516,000,
due to an increase in short term debt related financing for the new molded fiber
manufacturing equipment which was partially offset by principal repayments of
long term debt and capital lease obligations. In the first quarter of 1996, the
Company borrowed $634,000 under a short term note payable arrangement in
connection with the molded fiber equipment purchase. Under this arrangement,
upon completion of equipment installation, the short-term note will be converted
in a 4 year capital lease obligation.
At March 31, 1996 the Company had approximately $993,000 outstanding under
two mortgage notes and $921,000 outstanding under two equipment notes. At March
31, 1996 the current portion of these obligations, together with the Company's
line of credit and short term equipment note, totaled $3,899,000. The revolving
loan facility expires on June 30, 1996. The Company believes that it will be
able to renew this current obligation or obtain alternative financing, and that
such financing will be available on terms no less favorable than the Company's
current arrangements. However, there can no assurance that such financing will
be available on favorable terms, if at all.
The Company continues with plans to open a new molded fiber manufacturing
facility in Clinton, IA during the second quarter of 1996. Associated with this
new plant, the Company anticipates that it will incur capital expenditures of at
least $1.5 million for equipment and leasehold improvements for this facility,
including equipment progress payments already made. The Company plans to invest
in equipment for its specialty products and foam and plastic packaging
divisions. The Company expects to finance this expansion from cash flow from
operations, a $350,000 grant from the Iowa Department of Natural Resources
Landfill Alternatives Financial Assistance Program and an increase in equipment
financing. Although the Company believes that it will be able to obtain the
necessary financing for this expansion, there can be no assurance that such
financing will be available on favorable terms, if at all.
<PAGE>
PART II - OTHER INFORMATION
UFP TECHNOLOGIES, INC. AND SUBSIDIARY
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.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Company during the
quarter ended March 31, 1996.
<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)
May 3, 1996 /s/__R. Jeffrey Bailly_____
- - - -----------
Date R. Jeffrey Bailly
President, Chief Executive
Officer and Director
May 3, 1996 /s/__Paul J. Greenler______
- - - -----------
Date Paul J. Greenler
Chief Financial Officer
Exhibit 11.0
UFP Technologies, Inc.
Statement of Computation of Per Share Earnings
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1995 1996
---- ----
<S> <C> <C>
Net income $ 6.843 136.948
Primary earnings per share:
Weighted average common shares
outstanding 4.621.854 4.626.854
Dilutive stock options and warrants 95.288 137.527
----------- ---------
4.717.142 4.764.381
=========== =========
Income per share $ 0.00 0.03
=========== =========
Fully diluted earnings per share:
Weighted average common shares
outstanding 4.621.854 4.626.854
Dilutive stock options and warrants 95.288 137.527
----------- ---------
4.717.142 4.764.381
=========== =========
Income per share $ 0.00 0.03
=========== =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
"This schedule contains summary financial information extracted from the
financial statements in the Company's Quarterly Report on Form 10-Q for the
period ended March 31, 1996 and is qualified in its entirety by reference to
such financial statements."
</LEGEND>
<CIK> 0000914156
<NAME> UFP TECHNOLGIES, INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 383
<SECURITIES> 0
<RECEIVABLES> 5,292
<ALLOWANCES> 0
<INVENTORY> 2,597
<CURRENT-ASSETS> 8,807
<PP&E> 14,714
<DEPRECIATION> 6,486
<TOTAL-ASSETS> 21,704
<CURRENT-LIABILITIES> 7,387
<BONDS> 0
0
0
<COMMON> 46
<OTHER-SE> 11,529
<TOTAL-LIABILITY-AND-EQUITY> 21,704
<SALES> 8,693
<TOTAL-REVENUES> 8,693
<CGS> 6,649
<TOTAL-COSTS> 6,649
<OTHER-EXPENSES> 1,718
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 114
<INCOME-PRETAX> 212
<INCOME-TAX> 75
<INCOME-CONTINUING> 137
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 137
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
