<PAGE>
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, 1997
--------------
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 April 25, 1997, 4,652,604 shares of registrant's Common Stock, $.01 par
value, were outstanding.
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UFP TECHNOLOGIES, INC. AND SUBSIDIARY
INDEX
Page
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Financial Statements
<S> <C>
Condensed Consolidated Balance Sheets
March 31, 1997 and December 31, 1996........ 1
Consolidated Statements of Operations
Three Months Ended
March 31, 1997 and 1996..................... 2
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1997 and 1996.. 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
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------- -------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS:
Current Assets
Cash and cash equivalents $ 453,353 143,531
Receivables, net 6,642,952 5,602,202
Inventories 3,121,496 2,585,560
Prepaid expenses & other current assets 626,001 604,093
----------- ----------
Total current assets 10,843,802 8,935,386
Property, plant and equipment 18,168,935 17,201,709
less accumulated depreciation and amortization (7,876,943) (7,486,126)
----------- ----------
Net property, plant and equipment 10,291,992 9,715,583
Goodwill, net 2,646,224 2,577,491
Other assets 1,678,544 1,671,418
----------- ----------
Total assets $25,460,562 22,899,878
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------
Current liabilities:
Notes payable $ 3,700,000 1,400,000
Current installments of long term debt 391,004 394,825
Current capital lease obligations 717,393 660,192
Accounts payable 2,355,877 2,215,030
Accrued expenses and payroll withholdings 1,749,536 1,776,926
----------- ----------
Total current liabilities 8,913,810 6,446,973
Long term debt, excluding current installments 720,273 764,256
Capital lease obligations, excluding current
installments 2,365,088 2,459,261
Retirement liability 514,896 499,896
----------- ----------
Total liabilities 12,514,067 10,170,386
Stockholders' Equity
Preferred stock 0 0
Common stock 46,476 46,369
Additional paid-in capital 9,436,357 9,404,902
Retained earnings 3,463,662 3,278,221
----------- ----------
Total stockholders' equity 12,946,495 12,729,492
----------- ----------
Total liabilities and stockholders' equity $25,460,562 22,899,878
=========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements
1
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UFP TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
MARCH 31, MARCH 31,
1997 1996
----------- ---------
<S> <C> <C>
Net sales $10,951,549 8,693,309
Cost of sales 8,225,769 6,648,676
----------- ---------
Gross profit 2,725,780 2,044,633
Selling, general and administrative
expenses 2,269,803 1,718,449
----------- ---------
Operating income 455,977 326,184
Interest expense 136,537 114,236
----------- ---------
Income before income taxes 319,440 211,948
Incomes taxes 134,000 75,000
----------- ---------
Net income $ 185,440 136,948
=========== =========
Weighted average shares outstanding 4,901,695 4,764,381
Per share:
Net income $0.04 0.03
</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>
THREE MONTHS ENDED
------------------------
MARCH 31, MARCH 31,
1997 1996
------------ ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 185,440 136,948
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 428,753 334,602
Equity in net income of unconsolidated
affiliate and partnership 8,590 -
Stock issued in lieu of compensation 10,000 -
Changes in operating assets and liabilities:
Receivables, net (365,038) (346,969)
Inventories (240,935) (164,502)
Prepaid expenses 34,947 16,731
Accounts payable 29,729 523,054
Accrued expenses and payroll withholdings (120,896) (281,017)
Retirement liability 15,000 15,000
----------- --------
Net cash provided by (used in) operating
activities (14,411) 233,847
Cash flows from investing activities:
Additions to property, plant and equipment (254,016) (888,403)
Acquisition of Foam Cutting Engineers, net of
cash acquired (1,512,879) -
Increase other assets 937 (2,120)
----------- --------
Net cash used in investing activities (1,765,958) (890,523)
Cash flows from financing activities:
Net borrowings under notes payable 2,300,000 633,700
Principal repayments of long-term debt (47,804) (45,299)
Principal repayments of capital lease
obligations (183,569) (72,878)
Net proceeds from sale of common stock 21,563 -
----------- --------
Net cash provided by financing activities 2,090,190 515,523
----------- --------
Net change in cash and cash equivalents 309,822 (141,153)
Cash and cash equivalents, at beginning of period 143,531 524,490
----------- --------
Cash and cash equivalents, at end of period $ 453,353 383,337
=========== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
3
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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, 1996, included in the Company's 1996 Annual Report on
Form 10-K as provided to the Securities and Exchange Commission.
The condensed consolidated balance sheet as of March 31, 1997, the
consolidated statements of operations for the three months ended March 31, 1997
and 1996 and the consolidated statements of cash flows for the three months
ended March 31, 1997 and 1996, 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, 1997, are not
necessarily indicative of the results to be expected for the entire fiscal year
ending December 31, 1997.
(2) Inventory
Inventories are stated at the lower of cost (first-in, first-out) or market
and consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------ ------------
(unaudited) (audited)
<S> <C> <C>
Raw materials......... $2,143,849 1,850,238
Work-in-process....... 389,326 190,553
Finished goods........ 588,321 544,769
---------- ---------
Total Inventory $3,121,496 2,585,560
========== =========
</TABLE>
Work-in-process and finished goods inventories consists of materials, labor
and manufacturing overhead.
(3) Common Stock
At December 31, 1996, 695,250 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 34,000
options issued and 8,750 options exercised in the first quarter of 1997 under
the 1993 Plan, and no options expired. At March 31, 1997, 720,500 options were
outstanding under the plan.
At December 31, 1996, 37,500 options were outstanding under the Company's Non-
Employee Director Plan. No options were issued, exercised or expired in the
first quarter of 1997 under the Director Plan.
4
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(4) Earnings per share disclosure in 10-Q's
In February, 1997 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 128, Earnings per Share (FASB No. 128). FASB
No. 128 supersedes APB No. 15 and specifies the computation, presentation and
disclosure requirements for earnings per share. FASB No. 128 is effective for
financial statements for both interim and annual periods ending after December
15, 1997 and early application is not permitted. Accordingly, the Company will
apply FASB No. 128 for the quarter and year ended December 31, 1997 and restate
prior period information as required under the statement. The Company believes
that if the FASB No. 128 had been applied for the first quarter ending March 31,
1997 the impact on earnings per share as currently stated would have been
immaterial.
(5) Pro forma results of acquisition of Foam Cutting Engineers, Inc. (FCE)
The following table outlines the pro forma financial results of UFP
Technologies, Inc. for the three month period ended March 31, 1996 as if FCE was
purchased on January 1, 1996. Such pro forma financial information reflects
adjustments for amortization of goodwill and interest.
<TABLE>
<CAPTION>
Three month period ended
March 31, 1996
-------------------------
Historical Pro-forma
------------ -------------------------
(unaudited) (unaudited)
<S> <C> <C>
Net Sales $8,693,309 9,685,930
Net income $ 136,948 158,285
Weighted average shares outstanding 4,764,381 4,764,381
Net income per share $ .03 .03
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Three months ended March 31, 1997 and 1996
The Company's net sales increased 26.0% to $10,952,000 in the 1997 period from
$8,693,000 in the 1996 period. The increase was primarily attributable to an
increase in sales volume of the Company's molded fiber products and the addition
of Foam Cutting Engineers division which was acquired effective January 1, 1997.
Costs of sales as a percentage of sales improved to 75.1% in the 1997 period
from 76.5% in the 1996 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 $2,270,000 (20.7% of
net sales) in the 1997 period from $1,718,000 (19.8% of net sales) in the 1995
period. The increase was primarily associated with the additional selling,
general and administrative expenses relating to FCE and
5
<PAGE>
increased selling costs relating to increased sales.
Interest expense increased 19.5% to $137,000 in the 1997 period from $114,000
in the 1996 period. The increase was primarily attributable to the additional
short term borrowings associated with the acquisition of FCE and an increase in
capital lease obligations associated with the Company's purchase of additional
molded fiber equipment.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997 the Company's working capital was approximately $1,930,000,
including $453,000 of cash and cash equivalents. In addition, the Company had a
$4,500,000 bank revolving loan facility, of which $3,700,000 was outstanding at
March 31, 1997. This facility expires on June 30, 1997.
During the quarter ended March 31, 1997, the Company used $14,000 in cash for
operating activities. This was primarily due to increased accounts receivables
and inventories associated with the 26.0% increase in quarterly sales, which
were partially offset by depreciation and amortization charges and net income.
Cash used in investing activities of approximately $1,766,000 was primarily
attributable to the acquisition of FCE.
Net cash generated from financing activities totaled approximately $2,090,000,
due to a $2.3 million increase in short term borrowings, primarily associated
with the purchase of FCE, which was partially offset by principal payments of
long-term debt and capital lease obligations.
At March 31, 1997 the Company had approximately $929,000 outstanding under two
mortgage notes and $182,000 outstanding under two equipment notes. At March 31,
1997 the current portion of these obligations, together with the Company's line
of credit, totaled $4,091,000. The revolving loan facility expires on June 30,
1997. 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 be no assurance that such financing will be available on
favorable terms, if at all.
The Company believes it will continue to have capital expenditure needs
related to the growth of its molded fiber division, including increased
inventory requirements, additional and enhanced manufacturing equipment and,
possibly, establishing a new production site. 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.
6
<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.
(27) Financial Data Schedule
(b) Reports on Form 8-K:
The Company filed a report on Form 8-K, dated February 3, 1997
relating to its acquisition of Foam Cutting Engineers, Inc. No
financial statements were filed in connection with this report.
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)
May 13, 1997 /s/__R. Jeffrey Bailly_____
- ------------ R. Jeffrey Bailly
Date President, Chief Executive
Officer and Director
May 13, 1997 /s/__Paul J. Greenler______
- ------------ Paul J. Greenler
Date Chief Financial Officer
8
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Exhibit 11.0
UFP TECHNOLOGIES, INC.
STATEMENT OF COMPUTATIONOF PER SHARE EARNINGS
Three months ended March 31,
----------------------------
1996 1997
---- ----
Net income $ 136,948 185,440
Primary earnings per share:
Weighted average common shares
outstanding 4,626,854 4,640,437
Dilutive stock options and warrants 137,527 261,258
--------- ---------
4,764,381 4,901,695
========= =========
Income per share $ 0.03 0.04
========= =========
Fully diluted earnings per share:
Weighted average common shares
outstanding 4,626,854 4,640,437
Dilutive stock options and warrants 137,527 261,258
--------- ---------
4,764,381 4,901,695
========= =========
Income per share $ 0.03 0.04
========= =========
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 453
<SECURITIES> 0
<RECEIVABLES> 6,643
<ALLOWANCES> 0
<INVENTORY> 3,121
<CURRENT-ASSETS> 10,844
<PP&E> 18,169
<DEPRECIATION> 7,877
<TOTAL-ASSETS> 25,461
<CURRENT-LIABILITIES> 8,914
<BONDS> 0
0
0
<COMMON> 46
<OTHER-SE> 12,900
<TOTAL-LIABILITY-AND-EQUITY> 25,461
<SALES> 10,951
<TOTAL-REVENUES> 10,951
<CGS> 8,226
<TOTAL-COSTS> 8,226
<OTHER-EXPENSES> 2,270
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 137
<INCOME-PRETAX> 319
<INCOME-TAX> 134
<INCOME-CONTINUING> 185
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 185
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
