LEANER
FASTER
SMARTER
STRONGER
2 0 1 5 A N N U A L R E P O R T
2015
ANNUAL
REPORT
UFP Technologies, Inc.
(Nasdaq: UFPT) is a producer of
innovative custom-engineered
components, products,
and specialty packaging.
Using foams, plastics, composites, and natural
fiber materials, we design and manufacture a
vast range of solutions primarily for the medical,
automotive, aerospace and defense, electronics,
consumer and industrial markets. Our team acts
as an extension of customers’ in-house research,
engineering, and manufacturing groups, working
closely with them to solve their most complex
product and packaging challenges.
CONTENTS
CEO’s Letter
2
Selected Financial Data
8
9
Management’s Discussion and
Analysis of Financial Condition
and Results of Operations
Financial Statements
18
Learn more about us at www.ufpt.com.
36
Stockholder Information
1
After this three-year series of investments,
we are a leaner, faster, smarter and
stronger UFP, poised to capture more
business across our target markets.
DEAR FELLOW SHAREHOLDER,
For UFP Technologies, 2015 was an exciting year
• In El Paso, Texas, we purchased a large facility,
of major accomplishment. Three years ago, we
upgraded our foam fabricating operation, and
set in motion an aggressive plan to reshape the
invested $6.5 million in new state-of-the-art
Company, strengthen our operating platform, and
molded fiber equipment.
improve our long-term growth prospects. Our
strategy encompassed virtually every aspect of the
Company – from facilities and equipment to talent
and technology.
• In Massachusetts, we are nearly done
consolidating our Northeast operations into our
newly purchased Newburyport headquarters, with
most personnel and equipment in place at the
Today, almost all of these initiatives are behind us;
new facility.
the last is scheduled to be completed in mid-2016. I
• We implemented our Enterprise Resource
am proud to report that we executed each of them
Planning (ERP) system across all UFP plants
on time and on budget – and paid for them in cash,
and deployed a new Customer Relationship
funding tens of millions of dollars in improvements
Management system as well.
without adding new debt to our balance sheet. As a
result of these initiatives, I believe your Company is
better positioned to succeed than at any point in its
history.
AFTER THREE YEARS OF HARD WORK TO RETOOL
AND RESTRUCTURE, WE ARE POISED TO TAKE
UFP TO THE NEXT LEVEL
Here are some of the key moves we made to
strengthen our business and better serve customers.
• In the Midwest, we consolidated our Illinois
operation into our Grand Rapids, Michigan, facility.
• We added substantial production capabilities and
quality systems for our largest market, medical/
biotech.
• We recruited top talent across the organization,
including senior leadership in areas like
engineering, sales and quality.
A MORE EFFICIENT AND CONNECTED COMPANY,
FOCUSED ON GROWTH
Why is our new national plant footprint so
important? Over the past decade, we acquired
numerous companies that brought critical new
• In California, we consolidated our Costa Mesa
capabilities to UFP. But this also left us with multiple
operation into our Rancho Dominguez plant.
small plants and discrete teams scattered across the
2
REVENUE
REVENUE
NET INCOME
NET INCOME
SHAREHOLDERS’ EQUITY
SHAREHOLDER’S EQUITY
,
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country. As leases have expired, we’ve consolidated
it’s almost always a long-term program with multiyear
our network. Today, we have fewer, larger, better-
production runs.
equipped facilities in strategic locations, and we are
already seeing productivity gains and cost savings.
This focus on more technically advanced, longer-
lasting programs is central to our growth strategy
Our ERP system upgrade is also bringing key
across all markets. Beyond medical/biotech, we are
benefits. It’s helping us to better analyze and
seeing exciting opportunities in the areospace and
manage our business and, more importantly, to be
defense market; automotive sales were also up in
more responsive to our customers. I want to thank
2015. Overall, for any customer that requires superior
our ERP implementation team for their tireless
engineering and absolute quality, we believe we are
efforts to minimize customer disruption, mitigate
in a stronger position than ever to compete and win.
risk, and meet some very tight deadlines.
With these initiatives behind us, we can once again
THE FUTURE IS NOW
focus 100% on growth. It’s all about increasing
our value to customers and delivering more of the
innovations they need to succeed.
STRONG SALES, BRIGHT PROSPECTS IN KEY
MARKETS
For example, in the past year we expanded our
medical capabilities in areas like orthopedic bracing
and bone growth stimulation. Today, medical/
As UFP begins this new chapter, our initiatives are
paying off in new contracts, new project approvals,
and a growing pipeline of new opportunities. We
are also revitalizing our acquisition search efforts.
Although we did end one recent negotiation in
its final stages due to concerns raised by our
due diligence process, we will continue to pursue
opportunities that enhance our value to customers
and shareholders.
biotech is by far our largest and fastest-growing
We’ve reshaped the Company to accelerate growth.
market, with double-digit sales growth in 2015. In
Now it’s time to execute. After this three-year
this market, we have secured or are finalizing several
series of investments, we believe we are a leaner,
new long-term contracts, including a pending
faster, smarter and stronger UFP, poised to capture
five-year deal worth an estimated $45 million that
more business across our target markets. I am very
will more than double annual revenue with a key
excited about where we are and where we’re going,
customer.
and I thank you for your support.
The medical/biotech market is an ideal fit for several
reasons. First, these customers require the highest
level of engineering and materials expertise, which
is our greatest strength. Second, once a medical
Sincerely,
solution earns FDA approval, it’s very difficult to
R. Jeffrey Bailly
change it. So when a UFP component is designed in,
Chairman, Chief Executive Officer, and President
3
LEANER
HOW A MORE EFFICIENT PLANT
NETWORK BENEFITS OUR BUSINESS
AND OUR CUSTOMERS
By the middle of 2016, our three-year plan to consolidate our
Midwest, West, and Northeast operations will be essentially
complete. This footprint optimization strategy involved
significant investments of time and resources across the
organization. But it will provide a much stronger platform from
which to grow. We are already beginning to realize synergies
from our completed consolidations – greater efficiency,
reduced operating costs, better communication, smoother
collaboration, and more.
This is no surprise; our largest factories have performed at a
higher level than our smaller ones. In these major facilities, we
can assemble a critical mass of engineering, manufacturing
and quality resources, so ideas are shared and acted on
more quickly. And key functions are centralized, so resources
can be directed more efficiently toward the best growth
opportunities, and customer problems solved more easily.
With fewer, larger
plants in strategic
locations, we are
working more
efficiently and
delivering greater
value to customers.
Portland, ME
Clinton, IA
Grand Rapids, MI
Newburyport, MA
Rancho Dominguez, CA
Denver, CO
El Paso, TX
Huntsville, AL
Atlanta, GA
Kissimmee, FL
4
FASTER
OUR ERP SYSTEM UPGRADE HELPS
US IDENTIFY AND RESPOND TO
OPPORTUNITIES MORE QUICKLY
Like the plant consolidations, our Enterprise Resource
Planning system upgrade took several years to complete,
but we believe the benefits will be substantial and long
lasting. The new system is providing insights to help us make
more informed decisions on all aspects of the business,
from resource allocation to market segment analysis. It’s
also helping us to break down the silos between different
plants and employee groups, and share knowledge and best
practices more easily.
This will improve our ability to respond quickly to customer
requests, and allocate the right problem-solving resources.
With one centralized database accessible to managers
across the organization, we can quickly find the information
we need (such as inventory and equipment availability) to
create a project plan and get to work. Overall, it’s a powerful
decision-making resource that is helping to increase the
velocity of our business, and unlock more opportunities that
fit our unique skills.
With our ERP
system live across
all plants, we’ve
improved the flow
of information
to respond
more rapidly to
customer needs.
5
Superior engineering
is our greatest asset.
For sophisticated
applications, our
problem-solving
skills offer powerful
benefits.
6
SMARTER
AS CUSTOMER NEEDS GROW MORE
COMPLEX, WE CONTINUE TO EXPAND OUR
INDUSTRY-LEADING TECHNICAL TEAM
How do you make a fantastic engineering team even better?
Share best practices. Add talent. Provide the support they need
to succeed. And turn them loose to do just that. In our business,
we see a constant stream of new materials, new processes,
and new applications that require ever-greater technical
sophistication. For us, these all translate into new ways to grow
and new opportunities to improve our efficiency. So we continue
to make superior engineering an absolute priority.
For years, we have been shifting our business toward more
technically advanced programs, especially in markets like
medical/biotech. While these programs are more challenging,
they also tend to be longer lasting, more profitable, and better
showcases for our unique skills. We will continue to build our
engineering resources to meet these increasingly complex
challenges. In fact, the tougher the problem, the more our
customers need us. That’s a great position to be in.
STRONGER
WITH A REVITALIZED PLATFORM AND
SOLID BALANCE SHEET, OUR FUTURE
LOOKS BRIGHTER THAN EVER
Our investments in facilities, technologies, equipment and
personnel have combined to create a more competitive,
more energized UFP. With the execution risks largely behind
us, we can once again focus all our efforts on growing the
business. Our pipeline of new opportunities is robust, and we
are converting more of them into orders. The outlook for our
largest market, medical/biotech, remains especially strong.
We are also returning our attention to acquisitions. Over
the years, we have become adept at identifying the right
acquisition candidates, integrating them into our culture,
and bringing new capabilities to our customers. As we find
candidates that meet our criteria, our financial strength will
allow us to act quickly. In short, the growth engine is tuned
and ready. As we begin this exciting new chapter in our
history, we can’t wait to see what the coming years will bring.
We’ve reshaped
the company
to improve our
competitive
position and serve
customers better.
Now we’re 100%
focused on growth.
7
SELECTED FINANCIAL DATA
The following table summarizes our consolidated financial data for the periods presented. You should read the following financial
information together with the information under “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and our consolidated financial statements and the notes to those financial statements appearing elsewhere in this Report.
The selected statements of operations data for the fiscal years ended December 31, 2015, 2014 and 2013, and the selected balance
sheet data as of December 31, 2015 and 2014, are derived from our audited consolidated financial statements, which are included
elsewhere in this Report. The selected statements of operations data for the years ended December 31, 2012 and 2011, and the balance
sheet data at December 31, 2012 and 2011 are derived from our audited consolidated financial statements not included in this Report.
SELECTED CONSOLIDATED FINANCIAL DATA
Years Ended December 31
(in thousands, except per share data)
Consolidated statement of operations data
2015
2014
2013
2012
2011
Net sales
Gross profit
Operating income
Net income
Diluted earnings per share
Weighted average number of diluted shares outstanding
$ 138,850
$ 139,307
$ 139,223
$ 130,962
$ 127,244
37,454
36,880
11,714
7,593
1.05
7,219
11,561
7,559
1.05
7,175
41,014
17,398
11,276
1.59
7,105
38,319
16,666
10,895
1.55
7,028
36,245
15,716
10,346
1.48
6,999
Consolidated balance sheet data
2015
2014
2013
2012
2011
As of December 31
(in thousands)
Working capital
Total assets
Short-term debt obligations
Long-term debt, excluding current portion
Total liabilities
Stockholders’ equity
MARKET PRICE
$52,620
$ 55,658
$ 56,398
$ 51,263
$ 48,575
119,950
112,548
104,908
98,617
79,721
1,011
859
993
1,873
976
2,867
1,550
8,314
16,378
17,556
19,318
25,357
581
5,639
17,736
103,572
94,992
85,590
73,260
61,985
From July 8, 1996, until April 18, 2001, the Company’s common stock was listed on the NASDAQ National Market under the symbol
“UFPT.” Since April 19, 2001, the Company’s common stock has been listed on the NASDAQ Capital Market. The following table sets
forth the range of high and low quotations for the common stock as reported by NASDAQ for the quarterly periods from January 1,
2014 to December 31, 2015:
Fiscal Year Ended December 31, 2014
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Fiscal Year Ended December 31, 2015
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High
$ 26.60
27.43
25.92
25.45
High
$ 24.83
23.13
23.25
25.50
Low
$ 23.27
23.12
21.05
20.55
Low
$ 19.89
19.45
17.51
21.23
8
NUMBER OF STOCKHOLDERS
As of March 2, 2016, there were 73 holders of record of the Company’s common stock.
Due to the fact that many of the shares are held by brokers and other institutions on behalf of stockholders, the Company is unable
to estimate the total number of individual stockholders represented by these holders of record.
DIVIDENDS
The Company did not pay any dividends in 2014 or 2015. The Company presently intends to retain all of its earnings to provide
funds for the operation of its business and strategic acquisitions, although it would consider paying cash dividends in the future.
Any decision to pay dividends will be at the discretion of the Company’s board of directors and will depend upon the Company’s
operating results, strategic plans, capital requirements, financial condition, provisions of the Company’s borrowing arrangements,
applicable law and other factors the Company’s board of directors considers relevant.
ISSUER PURCHASES OF EQUITY SECURITIES
On June 16, 2015, the Company issued a press release announcing that its Board of Directors authorized the repurchase of up
to $10.0 million of the Company’s outstanding common stock. There was no share repurchase activity for the Company’s fourth
quarter of 2015. During the year ended December 31, 2015, the Company repurchased 29,559 shares of common stock at a cost of
approximately $587,000. At December 31, 2015, approximately $9.4 million was available for future repurchases of the Company’s
common stock under this authorization.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
UFP Technologies is an innovative designer and custom converter of foams, plastics, composites and natural fiber materials,
providing solutions to customers primarily within the medical, automotive, consumer, electronics, industrial and aerospace and
defense markets. The Company consists of a single operating and reportable segment.
The Company is near completion of multi-year initiatives to optimize its footprint, implement new enterprise resource planning
software and expend its team of engineers. As part of this, the Company expects to incur a total of approximately $2.1 million in
restructuring costs associated with consolidating operations in the Northeast, of which approximately $1.7 million has been incurred
through December 31, 2015. As a result of these consolidations, it anticipates annual cost savings, primarily in reduced real estate
and labor costs, of approximately $1 million per year.
The Company’s current strategy includes further organic growth and growth through strategic acquisitions.
RESULTS OF OPERATIONS
The following table sets forth, for the years indicated, the percentage of revenues represented by the items as shown in the
Company’s consolidated statements of operations:
Net sales
Cost of sales
Gross profit
Selling, general, and administrative expenses
Restructuring costs
(Gain) loss on sale of property, plant and equipment
Operating income
Total other (income) expenses, net
Income before taxes
Income tax expense
Net income from consolidated operations
2015
2014
2013
100.0%
100.0%
100.0%
73.0%
27.0%
17.3%
1.3%
0.0%
8.4%
-0.1%
8.5%
3.0%
5.5%
73.5%
26.5%
17.1%
1.1%
0.0%
8.3%
-0.1%
8.4%
3.0%
5.4%
70.5%
29.5%
17.0%
0.0%
0.0%
12.5%
0.2%
12.3%
4.2%
8.1%
9
2015 COMPARED TO 2014
Sales
Net sales decreased 0.3% to $138.9 million for the year ended December 31, 2015, from net sales of $139.3 million in 2014, primarily
due to decreases in sales to customers in the electronics, industrial and aerospace and defense markets of approximately 16.5%,
16.5% and 13.2%, respectively, primarily offset by an increase in sales to customers in the medical market of approximately 14.6%. The
decline in sales to customers in the electronics market was largely due to the loss of a packaging contract by one of the Company’s
distributor customers. The decline in sales to customers in the aerospace and defense market was primarily due to a large, one-
time order from a single customer in this market in 2014. The decline in sales to customers in the industrial market is comprised
of reductions in sales to many smaller accounts. The increase in sales to customers in the medical market reflects the Company’s
strategy of focusing resources in the area as well as the overall growth of our customers’ products.
Gross Profit
Gross profit as a percentage of sales (“Gross Margin”) increased to 27.0% for the year ended December 31, 2015, from 26.5% in
2014. As a percentage of sales, material and direct labor costs collectively increased approximately 0.2%, while overhead decreased
approximately 0.7%. The increase in material and direct labor costs was primarily the result of a slight increase in overall labor
costs. The decrease in overhead was primarily due to decreased employee health care costs of approximately $900,000 due to
a higher than typical frequency of large claims in 2014 and decreased rent costs of approximately $600,000 due to recent plant
consolidations, offset by higher depreciation costs of $450,000 due largely to a full year of depreciation for our Texas building and
new molded fiber equipment, as well as depreciation for our new building in Newburyport.
Selling, General and Administrative Expenses
Selling, General, and Administrative Expenses (“SG&A”) increased 0.7% to $24.0 million for the year ended December 31, 2015 from
$23.8 million in 2014. The slight increase in SG&A for the year ended December 31, 2015, is primarily due to higher technology-
related costs of approximately $300,000 and higher travel costs of approximately $100,000, primarily due to the Company’s ERP
implementation, partially offset by decreased employee health care costs of approximately $250,000 due largely to a higher than
typical frequency of large claims in 2014.
Restructuring Costs
On March 18, 2015, the Company committed to move forward with a plan to cease operations at its Raritan, New Jersey, plant
and consolidate operations into its Newburyport, Massachusetts, facility and other UFP facilities. The Company’s decision was in
response to a continued decline in business at the Raritan facility and the recent purchase of the 137,000-square-foot facility in
Newburyport. The activities related to this consolidation were substantially complete at December 31, 2015.
The Company also relocated all operations in its Haverhill, Massachusetts, and Byfield, Massachusetts facilities and plans to relocate
certain operations in its Georgetown, Massachusetts facility to Newburyport. The Haverhill and Byfield relocations were complete at
December 31, 2015 and the Georgetown relocation is expected to be complete by June 30, 2016.
The Company expects to incur approximately $2.1 million in one-time expenses in connection with the Massachusetts consolidations.
Included in this amount are approximately $180,000 relating to employee severance payments and relocation costs, approximately
$1.5 million in moving expenses and expenses associated with vacating the Raritan, Haverhill and Byfield properties, and
approximately $360,000 in lease termination costs. Total cash charges are estimated at $2.0 million. The Company expects annual
cost savings of approximately $1.0 million as a result of these consolidations. The actual costs incurred through December 31, 2015
are included in the table below.
On July 16, 2014, the Company committed to move forward with a plan to cease operations at its Costa Mesa, California, plant
and consolidate operations into its Rancho Dominguez, California, facility and other UFP facilities. The Company’s decision was
in response to the December 31, 2014, expiration of the lease on the Costa Mesa facility as well as the close proximity of the two
properties. The California consolidation is complete and the actual costs incurred are included in the table below.
On January 7, 2014, the Company committed to move forward with a plan to cease operations at its Glendale Heights, Illinois plant
and consolidate operations into its Grand Rapids, Michigan, facility. The Company’s decision was in response to a pending significant
increase in lease cost, declining sales at the Illinois facility, and significant anticipated savings as a result of the consolidation. The
consolidation into the Michigan facility is complete and the actual costs incurred are included in the table below.
The Company has recorded the following restructuring costs associated with the consolidations discussed above for the fiscal years
ended December 31, 2015 and 2014 (in thousands):
2015
2014
Restructuring Costs
Massachusetts
California Total
Michigan California
Total
Employee severance
$ 178
$ 18
$ 196
$ 237
$ 10
$ 247
Relocation
Lease termination
Workforce training
Plant infrastructure
1,138
356
-
-
66
1,204
-
-
-
356
-
-
356
-
373
79
501
857
-
-
-
-
373
79
Total restructuring costs
$ 1,672
$ 84 $ 1,756
$ 1,045
$ 511 $ 1,556
10
The 2015 costs were reclassified in the Consolidated Statement of Operations as “Restructuring Costs” as follows: $1,669,000
from Cost of Sales, $36,000 from Selling, General and Administrative expenses and $51,000 from Gain on sales of property, plant
and equipment. The 2014 costs were reclassified in the Consolidated Statement of Operations as “Restructuring Costs” as follows:
$1,385,000 from Cost of Sales, $82,000 from Selling, General and Administrative expenses and $89,000 from Gain on sales of
property, plant and equipment.
Interest Income and Expense
The Company had net interest income of approximately $27,000 for the year ended December 31, 2015, compared to net interest
expense of approximately $108,000 for the year ended December 31, 2014. The increase in net interest income is due primarily to an
increase in interest earned on money market accounts and certificates of deposit along with a nonrecurring interest charge in 2014 to
adjust a contingent note payable to fair value.
Income Taxes
The Company recorded income tax expense as a percentage of income before income tax expense, of 35.3% and 35.8% for the
years ended December 31, 2015 and 2014, respectively. The decrease in the effective tax rate for the year ended December 31, 2015
is primarily attributable to a higher anticipated Domestic Production Deduction on the Company’s 2015 federal tax return. The
Company has deferred tax assets on its books associated with net operating losses generated in previous years. The Company has
considered both positive and negative available evidence in its determination that the deferred tax assets are more likely than not to
be realized, and has not recorded a tax valuation allowance at December 31, 2015. The Company will continue to assess whether the
deferred tax assets will be realizable and, when appropriate, will record a valuation allowance against these assets. The amount of the
net deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during
the carry-forward period are reduced.
2014 COMPARED TO 2013
Sales
Net sales increased 0.1% to $139.3 million for the year ended December 31, 2014, from net sales of $139.2 million in 2013, primarily due
to increases in sales in the aerospace and defense and medical markets of approximately 10% and 2%, respectively, partially offset by
sales decline in the automotive market of approximately 6%. The increase in sales to the aerospace and defense market was largely
due to an increase in sales of approximately $2.1 million for a low-margin contract manufacturing program. Absent this increase,
sales to the aerospace and defense market declined approximately 6% due primarily to cuts in government spending. The decline in
sales to the automotive market was primarily due to the phase-out of an interior trim program coupled with soft demand for parts for
a specific model of car that had weak demand from consumers.
Gross Profit
Gross profit as a percentage of sales (“Gross Margin”) declined to 26.5% for the year ended December 31, 2014, from 29.5% in 2013.
As a percentage of sales, material and direct labor costs collectively increased approximately 1.5% and overhead as a percentage
of sales increased approximately 1.5% or approximately $2.0 million in 2014. The increase in material and direct labor costs was
primarily the result of manufacturing inefficiencies incurred as a result of plant moves in the Midwest, California and Texas as well
as an increase in sales for a low-margin contract manufacturing military program. The increase in overhead was primarily due to
increased employee health care costs of approximately $600,000 due to a higher than typical frequency of large claims, increased
compensation and benefits of approximately $450,000 due to normal inflationary increases as well as higher overtime incurred as
a result of the plant moves, increased plant and equipment maintenance costs of approximately $290,000 due to the various plant
moves and higher depreciation of approximately $220,000 due largely to new molded fiber equipment.
Selling, General and Administrative Expenses
Selling, General, and Administrative Expenses (“SG&A”) increased 1.0% to $23.8 million for the year ended December 31, 2014 from
$23.6 million in 2013. The increase in SG&A for the year ended December 31, 2014, is primarily due to higher depreciation costs of
$160,000, largely associated with the Company’s new ERP software system, increased bad debt expense of approximately $140,000
due largely to a one-time write-off and increased employee health care costs of approximately $184,000 due largely to a higher than
typical frequency of large claims, partially offset by lower sales commissions of approximately $100,000 due to soft sales compared
to the Company’s budgeted sales, lower advertising costs incurred of approximately $70,000 and lower intangibles amortization of
approximately $85,000.
Restructuring Costs
On January 7, 2014, the Company committed to move forward with a plan to cease operations at its Glendale Heights, Illinois plant
and consolidate operations into its Grand Rapids, Michigan, facility. The Company’s decision was in response to a pending significant
increase in lease cost, declining sales at the Illinois facility, and significant anticipated savings as a result of the consolidation. The
consolidation into the Michigan facility is complete and the actual costs incurred are included in the table below.
On July 16, 2014, the Company committed to move forward with a plan to cease operations at its Costa Mesa, California, plant
and consolidate operations into its Rancho Dominguez, California, facility and other UFP facilities. The Company’s decision was
in response to the December 31, 2014, expiration of the lease on the Costa Mesa facility as well as the close proximity of the two
properties. This consolidation is complete and the actual costs incurred through December 31, 2014 are included in the table below.
11
The Company recorded the following restructuring costs associated with the plant consolidations discussed above for the year
ended December 31, 2014 (in thousands):
Restructuring Costs
Michigan
California Total
Employee severance payments
$ 237
$ 10
$ 247
Relocation costs
Workforce training costs
Plant infrastructure costs
356
373
79
501
-
-
857
373
79
Total restructuring costs
$ 1,045
$ 511
$ 1,556
These costs were reclassified in the 2014 Consolidated Statement of Operations as “Restructuring Costs” as follows: $1,385,000 from
Cost of Sales, $82,000 from Selling, General and Administrative expenses and $89,000 from Gain on sales of property, plant and
equipment. The Company also incurred approximately $373,000 and $38,000, in related capital improvements at its Michigan and
California facilities, respectively, for the year ended December 31, 2014
Interest Expense
Interest expense net of interest income decreased to approximately $108,000 for the year ended December 31, 2014 from net
interest expense of approximately $205,000 in 2013. The decrease in interest expense is primarily due to a lower average debt
balance as a result of the Company’s repayment of term loans in conjunction with the execution of a new revolving credit facility in
the fourth quarter of 2013.
Income Taxes
The Company recorded income tax expense as a percentage of income before income tax expense, of 35.8% and 34.4% for the
years ended December 31, 2014 and 2013, respectively. The increase in the effective tax rate for the year ended December 31,
2014 is primarily attributable to permanent differences measured against lower pre-tax income as well as additional reserves of
approximately $150,000 for uncertain tax positions. The Company has deferred tax assets on its books associated with net operating
losses generated in previous years. The Company has considered both positive and negative available evidence in its determination
that the deferred tax assets are more likely than not to be realized, and has not recorded a tax valuation allowance at December 31,
2014. The Company will continue to assess whether the deferred tax assets will be realizable and, when appropriate, will record a
valuation allowance against these assets. The amount of the net deferred tax asset considered realizable, however, could be reduced
in the near term if estimates of future taxable income during the carry-forward period are reduced.
LIQUIDITY AND CAPITAL RESOURCES
The Company generally funds its operating expenses, capital requirements, and growth plan through internally generated cash and
bank credit facilities.
Cash Flows
Net cash provided by operations for the year ended December 31, 2015 was approximately $13.1 million and was primarily a result
of net income generated of approximately $7.6 million, depreciation and amortization of approximately $4.9 million, share-based
compensation of approximately $1.1 million and a decrease in refundable income taxes of approximately $2.4 million. These cash
inflows and adjustments to income were partially offset by an increase in accounts receivable of approximately $1.0 million due
to the timing of customer payments in the ordinary course of business, an increase in inventory of approximately $1.3 million due
to the timing of raw materials purchases and customer shipments and a decrease in accounts payable and accrued expenses of
approximately $600,000 due to the timing of vendor payments in the ordinary course of business.
Net cash used in investing activities during the year ended December 31, 2015, was approximately $16.3 million of which
approximately $11.5 million was the result of the purchase and renovation of our new corporate headquarters and manufacturing
facility in Newburyport, MA and approximately $4.8 million was the result of other additions of technology, manufacturing machinery
and equipment across the Company.
Net cash used in financing activities was approximately $1.1 million for the year ended December 31, 2015, representing cash used
to service term debt of approximately $1.0 million, to repurchase shares of common stock of approximately $600,000 and to pay
statutory withholding for stock options exercised and restricted stock units vested of approximately $200,000, partially offset
by excess tax benefits on share-based compensation of approximately $350,000, and net proceeds received upon stock option
exercises of approximately $350,000.
Outstanding and Available Debt
The Company maintains an unsecured $40 million revolving credit facility with Bank of America, N.A. The credit facility calls for
interest of LIBOR plus a margin that ranges from 1.0% to 1.5% or, at the discretion of the Company, the bank’s prime rate less a margin
that ranges from 0.25% to zero. In both cases the applicable margin is dependent upon Company performance. Under the credit
facility, the Company is subject to a minimum fixed-charge coverage financial covenant as well as a maximum total funded debt to
EBITDA financial covenant. The Company’s $40 million credit facility matures on November 30, 2018.
12
As of December 31, 2015, the Company had no borrowings outstanding under the credit facility and the Company was in compliance
with all covenants under the credit facility.
In 2012, the Company financed the purchase of two molded fiber machines through five-year term loans that mature in September
2017. The annual interest rate is fixed at 1.83% and the loans are secured by the related molded fiber machines. As of December 31,
2015, the outstanding balance of the term loan facility was approximately $1.9 million.
Future Liquidity
The Company requires cash to pay its operating expenses, purchase capital equipment, and to service its contractual obligations.
The Company’s principal sources of funds are its operations and its revolving credit facility. The Company generated cash of
approximately $13.1 million in operations during the year ended December 31, 2015, and cannot guarantee that its operations will
generate cash in future periods. The Company’s longer-term liquidity is contingent upon future operating performance.
Throughout fiscal 2016, the Company plans to continue to add capacity to enhance operating efficiencies in its manufacturing plants.
The Company may also further expand its Newburyport, Massachusetts manufacturing plant. The Company may consider additional
acquisitions of companies, technologies, or products that are complementary to its business. The Company believes that its existing
resources, including its revolving credit facility, together with cash expected to be generated from operations and funds expected to
be available to it through any necessary equipment financings and additional bank borrowings, will be sufficient to fund its cash flow
requirements, including capital asset acquisitions, through the next twelve months.
Stock Repurchase Program
The Company accounts for treasury stock under the cost method, using the first-in, first out flow assumption, and includes treasury
stock as a component of stockholders’ equity. On June 16, 2015, the Company announced that its Board of Directors authorized
the repurchase of up to $10.0 million of the Company’s outstanding common stock. Under the program, the Company is authorized
to repurchase shares through Rule 10b5-1 plans, open market purchases, privately negotiated transactions, block purchases or
otherwise in accordance with applicable federal securities laws, including Rule 10b-18 of the Securities Exchange Act of 1934. The
stock repurchase program will end upon the earlier of the date on which the plan is terminated by the Board or when all authorized
repurchases are completed. The timing and amount of stock repurchases, if any, will be determined based upon our evaluation of
market conditions and other factors. The stock repurchase program may be suspended, modified or discontinued at any time, and
the Company has no obligation to repurchase any amount of its common stock under the program. During the year ended December
31, 2015, the Company repurchased 29,559 shares of common stock at a cost of approximately $587,000.
COMMITMENTS AND CONTRACTUAL OBLIGATIONS
The following table summarizes the Company’s contractual obligations at December 31, 2015 (in thousands):
Payment Due By Period
Less than
Total
1 Year
1-3
Years
3-5
More than
Years
5 Years
Equipment loans
$ 1,870
$ 1,011
$ 859
$ -
$ -
Operating leases
1,264
888
376
Debt interest
Supplemental retirement
32
100
25
25
7
50
-
-
25
-
-
-
Total
$ 3,266
$ 1,949
$ 1,292
$ 25
$ -
The Company requires cash to pay its operating expenses, purchase capital equipment, and to service the obligations listed above.
The Company’s principal sources of funds are its operations and its revolving credit facility. Although the Company generated cash
from operations in the year ended December 31, 2015, it cannot guarantee that its operations will generate cash in future periods.
Subject to the Risk Factors set forth in Part I, Item 1A of the company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2015 (the “10-K”) and the general disclaimers set forth in our Special Note Regarding Forward-Looking Statements at
the outset of the 10-K (and at the end of this report), we believe that cash flow from operations will provide us with sufficient funds in
order to fund our expected operations over the next twelve months.
The Company does not believe inflation has had a material impact on its results of operations in the last three years.
13
OFF-BALANCE-SHEET ARRANGEMENTS
The Company had no off-balance-sheet arrangements in 2015, other than operating leases.
CRITICAL ACCOUNTING POLICIES
The preparation of consolidated financial statements requires the Company to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues, and expenses, and related disclosure of contingent assets and liabilities. On an
ongoing basis, the Company evaluates its estimates, including those related to product returns, bad debts, inventories, intangible
assets, income taxes, warranty obligations, restructuring charges, contingencies, and litigation. The Company bases its estimates on
historical experience and on various other assumptions believed to be reasonable under the circumstances, including current and
anticipated worldwide economic conditions, both in general and specifically in relation to the packaging and component product
industries, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
The Company’s significant accounting policies are described in Note 1 to the consolidated financial statements included in this
Report. The Company believes the following critical accounting policies necessitated that significant judgments and estimates be
used in the preparation of its consolidated financial statements.
The Company has reviewed these policies with its Audit Committee.
• Revenue Recognition The Company recognizes revenue at the time of shipment when title and risk of loss have passed
to the customer, persuasive evidence of an arrangement exists, performance of its obligation is complete, its price to
the buyer is fixed or determinable, and the Company is reasonably assured of collection. If a loss is anticipated on any
contract, a provision for the entire loss is made immediately. Determination of these criteria, in some cases, requires
management’s judgment. Should changes in conditions cause management to determine that these criteria are not met
for certain future transactions, revenue for any reporting period could be adversely affected.
• Goodwill Goodwill is tested for impairment annually, and will be tested for impairment between annual tests if an event
occurs or circumstances change that would indicate that the carrying amount may be impaired. Impairment testing for
goodwill is done at a reporting unit level. Reporting units are one level below the business segment level, but can be
combined when reporting units within the same segment have similar economic characteris-tics. An impairment loss
generally would be recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair
value of the reporting unit. The Company consists of a single reporting unit. We last performed “step 1” of the goodwill
impairment test as of September 30, 2014. We utilized the guideline public company (“GPC”) method under the market
approach and the discounted cash flows method (“DCF”) under the income approach to determine the fair value of the
reporting unit for purposes of testing the reporting unit’s carrying value of goodwill for impairment. The GPC method
derives a value by generating a multiple of EBITDA through the comparison of the Company to similar publicly traded
companies. The DCF approach derives a value based on the present value of a series of estimated future cash flows
at the valuation date by the application of a discount rate, one that a prudent investor would require before making an
investment in our equity securities. The key assumptions used in our approach included:
• The reporting unit’s 2015 estimated financials and five-year projections of financial results, which were based
on our strategic plans and long-range forecasts. Sales growth rates represent estimates based on current and
forecasted sales mix and market conditions. The profit margins were projected based on historical margins,
projected sales mix, current expense structure and anticipated expense modifications.
• The projected terminal value which reflects the total present value of projected cash flows beyond the last
period in the DCF. This value reflects a growth rate for the reporting unit, which is approximately the same
growth rate of expected inflation into perpetuity.
• The discount rate determined using a Weighted Average Cost of Capital method (“WACC”), which considered
market and industry data as well as Company-specific risk factors.
• Selection of guideline public companies which are similar to each other and to the Company
As of September 30, 2014, based on our calculations under the above noted approach, the fair value of the reporting unit
exceeded its carrying value by approximately $69 million or 74%. In performing these calculations, management used
its most reasonable estimates of the key assumptions discussed above. If our actual operating results and/or the key
assumptions utilized in management’s calculations differ from our expectations, it is possible that a future impairment
charge may be necessary.
The Company’s annual impairment testing date is December 31. The Company performed a qualitative assessment (“step
14
0”) as of December 31, 2015, and determined that it was more likely than not that the fair value of its reporting unit exceeded its
carrying amount. As a result, the Company is not required to proceed to a “step 1” impairment assessment. Factors considered
included the 2014 step 1 analysis and the calculated excess fair value over carrying amount, financial performance, forecasts and
trends, market cap, regulatory and environmental issues, macro-economic conditions, industry and market considerations, raw
material costs and management stability.
• Accounts Receivable The Company periodically reviews the collectability of its accounts receivable. Provisions are recorded
for accounts that are potentially uncollectible. Determining adequate reserves for accounts receivable requires management’s
judgment. Conditions impacting the realizability of the Company’s receivables could cause actual asset write-offs to be materially
different than the reserved balances as of December 31, 2015.
•
Inventories Inventories include material, labor, and manufacturing overhead and are valued at the lower of cost or net realizable
value. Cost is determined using the first-in, first-out (FIFO) method.
The Company periodically reviews the realizability of its inventory for potential excess or obsolescence. Determining the net
realizable value of inventory requires management’s judgment. Conditions impacting the realizability of the Company’s inventory
could cause actual asset write-offs to be materially different than the Company’s current estimates as of December 31, 2015.
• Recent Accounting Pronouncements Refer to Note 1, “Summary of Significant Accounting Policies,” in the accompanying notes to
the consolidated financial statements for a discussion of recent accounting pronouncements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
The following discussion of the Company’s market risk includes “forward-looking statements” that involve risk and uncertainties. Actual results
could differ materially from those projected in the forward-looking statements.
Market risk represents the risk of changes in value of a financial instrument caused by fluctuations in interest rates, foreign exchange rates, and
equity prices. At December 31, 2015, the Company’s cash and cash equivalents consisted of bank accounts in U.S. dollars, and their valuation
would not be affected by market risk. Interest under the Company’s credit facility with Bank of America, N.A. is based upon either the Prime rate
or LIBOR and, therefore, future operations could be affected by interest rate changes. However, as of December 31, 2015, the Company had no
borrowings outstanding under the revolving credit facility, and the Company believes the market risk associated with the facility is minimal.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
ASSUMES INITIAL INVESTMENT OF $100
DECEMBER 2015
230
210
190
170
150
130
110
90
70
50
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
UFP Technologies, Inc.
SIC Codes 3080-3089
Miscellaneous Plastic Products
NASDAQ Stock Market
(US Companies)
GICS 15103020 Paper Packaging
15
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To The Board of Directors and Stockholders
of UFP Technologies, Inc.
We have audited the accompanying consolidated balance sheets of UFP Technologies,
Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2015
and 2014, and the related consolidated statements of operations, changes in stockholders’
equity, and cash flows for each of the three years in the period ended December 31, 2015.
Our audits of the basic consolidated financial statements included the financial statement
schedule listed in the index appearing under Item 15(a)(2). These financial statements
and financial statement schedule are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these financial statements and financial
statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in
all material respects, the financial position of UFP Technologies, Inc. and subsidiaries as
of December 31, 2015 and 2014, and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 2015 in conformity with
accounting principles generally accepted in the United States of America. Also in our
opinion, the related financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all material respects,
the information set forth therein.
We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the Company’s internal control over financial
reporting as of December 31, 2015, based on criteria established in the 2013 Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO), and our report dated March 15, 2016 expressed an
unqualified opinion.
GRANT THORNTON LLP
Boston, Massachusetts
March 11, 2016
16
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To The Board of Directors and Stockholders
of UFP Technologies, Inc.
We have audited the internal control over financial reporting of UFP Technologies, Inc.
(a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2015,
based on criteria established in the 2013 Internal Control—Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
The Company’s management is responsible for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal control
over financial reporting, included in the accompanying Management’s Report on Internal
Control Over Financial Reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit included
obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on
the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2015, based on criteria established in the 2013
Internal Control—Integrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated financial statements of the
Company as of and for the year ended December 31, 2015, and our report dated March 15,
2016 expressed an unqualified opinion on those financial statements.
GRANT THORNTON LLP
Boston, Massachusetts
March 11, 2016
17
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
Current assets:
DECEMBER 31
2015
2014
Cash and cash equivalents
$ 29,804
$ 34,052
Receivables, net
Inventories
Prepaid expenses
Refundable income taxes
Total current assets
Property, plant, and equipment
Less accumulated depreciation and amortization
Net property, plant, and equipment
Goodwill
Intangible assets, net
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
Accrued expenses
Current installments of long-term debt
Total current liabilities
Long-term debt, excluding current installments
Deferred income taxes
Other liabilities
Total liabilities
Commitments and contingencies (Note 14)
Stockholders’ equity:
Preferred stock, $.01 par value. Authorized 1,000,000 shares,
zero shares issued or outstanding
Common stock, $.01 par value. Authorized 20,000,000 shares,
issued and outstanding 7,170,377 shares at December 31, 2015
and 7,068,815 shares at December 31, 2014
Additional paid-in capital
Retained earnings
Treasury stock at cost (29,559 shares shares at December 31, 2015
and zero shares at December 31, 2014)
17,481
14,202
930
1,186
63,603
90,564
(44,009)
46,555
7,322
636
1,834
16,470
12,893
664
3,192
67,271
75,823
(40,980)
34,843
7,322
953
2,159
$ 119,950
$ 112,548
$ 4,598
$ 5,398
5,374
1,011
10,983
859
2,883
1,653
16,378
—
72
23,705
80,382
(587)
5,222
993
11,613
1,873
2,446
1,624
17,556
—
71
22,132
72,789
—
Total stockholders’ equity
103,572
94,992
Total liabilities and stockholders’ equity
$ 119,950
$ 112,548
The accompanying notes are an integral part of these consolidated financial statements.
18
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales
Cost of sales
Gross profit
Selling, general, and administrative expenses
Restructuring costs
(Gain) loss on sales of property, plant, and equipment
Operating Income
Other expenses:
Interest (income) expense, net
Other, net
Total other (income) expense
Income before income tax provision
Income tax expense
Net income from consolidated operations
Net income per share:
Basic
Diluted
Weighted average common shares:
Basic
Diluted
Years Ended December 31
2015
2014
$ 138,850
101,396
37,454
$ 139,307
102,427
36,880
24,008
1,756
(24)
11,714
(27)
—
(27)
11,741
4,148
7,593
$ 1.07
$ 1.05
7,115
7,219
23,847
1,556
(84)
11,561
108
(312)
(204)
11,765
4,206
7,559
$ 1.08
$ 1.05
7,028
7,175
2013
$ 139,223
98,209
41,014
23,605
—
11
17,398
205
—
205
17,193
5,917
11,276
$ 1.65
$ 1.59
6,824
7,105
The accompanying notes are an integral part of these consolidated financial statements.
19
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(IN THOUSANDS)
Years Ended December 31, 2015, 2014 and 2013
Common Stock
Additional
Paid-in
Retained
Treasury Stock
Total
Stockholders’
Shares
Amount
Capital
Earnings
Shares Amount
Equity
Balance at December 31, 2012
6,750
$ 67
$ 19,239
$ 53,954
$ —
$ —
$ 73,260
Share-based compensation
Exercise of stock options net
of shares presented for exercise
Net share settlement of restricted stock
units and stock option tax withholding
Excess tax benefits on
share-based compensation
Net income
38
113
—
—
—
1
1
923
190
—
(879)
—
—
818
—
—
—
—
—
11,276
—
—
—
—
—
—
—
—
—
—
924
191
(879)
818
11,276
Balance at December 31, 2013
6,901
$ 69
$ 20,291
$ 65,230
$ —
$ —
$ 85,590
Share-based compensation
Exercise of stock options net
of shares presented for exercise
Net share settlement of restricted stock
units and stock option tax withholding
Excess tax benefits on
share-based compensation
Net income
20
148
—
—
—
1
1
1,118
335
—
(831)
1,219
—
—
—
7,559
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,119
336
(831)
1,219
7,559
Balance at December 31, 2014
7,069
$ 71
$ 22,132
$ 72,789
$ —
$ —
$ 94,992
Share-based compensation
Exercise of stock options net
of shares presented for exercise
Net share settlement of restricted stock
units and stock option tax withholding
Excess tax benefits on
share-based compensation
Repurchase of common stock
Net income
24
77
—
—
—
—
—
1
—
—
—
—
1,069
357
—
—
(209)
—
356
—
—
—
—
7,593
—
—
—
—
30
—
—
—
—
—
(587)
—
1,069
358
(209)
356
(587)
7,593
Balance at December 31, 2015
7,170
$ 72
$ 23,705
$ 80,382
$ 30
$ (587)
$ 103,572
The accompanying notes are an integral part of these consolidated financial statements.
20
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Cash flows from operating activities:
Net income from consolidated operations
$ 7,593
$ 7,559
$ 11,276
Years Ended December 31
2015
2014
2013
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization
Loss on sales of property, plant and equipment
Share-based compensation
Deferred income taxes
Excess tax benefits on share-based compensation
Changes in operating assets and liabilities, net of effects
from acquisition:
Receivables, net
Inventories
Prepaid expenses
Refundable income taxes
Accounts payable
Accrued expenses
Other liabilities
Other assets
4,846
27
1,069
437
(356)
(1, 011)
(1,309)
(266)
2,362
(800)
152
29
325
Net cash provided by operating activities
13,098
Cash flows from investing activities:
4,376
5
1,119
1,232
(1,219)
562
(1,845)
26
(436)
2,317
(2,243)
(181)
(146)
11,126
4,084
11
924
740
(818)
804
(1,353)
(36)
994
(1,007)
1,272
(417)
(368)
16,106
Additions to property, plant, and equipment
(16,321)
(13,436)
(5,830)
Holdback payment related to the acquisition of
Packaging Alternatives Corporation (PAC)
Redemption of cash value life insurance
Proceeds from sale of property, plant and equipment
—
—
53
—
—
112
(600)
37
1
Net cash used in investing activities
(16,268)
(13,324)
(6,392)
Cash flows from financing activities:
Excess tax benefits on share-based compensation
Proceeds from the exercise of stock options, net of attestations
Principal repayment of long-term debt
Payment of statutory withholding for stock options exercised
and restricted stock units vested
Repurchases of common stock
Payment of contingent note payable
Proceeds from long-term borrowings
356
358
(996)
(209)
(587)
—
—
1,219
336
(977)
(831)
—
(800)
—
818
191
(6,601)
(879)
—
—
580
Net cash used in financing activities
(1,078)
(1,053)
(5,891)
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
(4,248)
34,052
(3,251)
37,303
3,823
33,480
Cash and cash equivalents at end of year
$ 29,804
$ 34,052
$ 37,303
The accompanying notes are an integral part of these consolidated financial statements.
21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
UFP Technologies, Inc. (“the Company”) is an innovative designer and custom converter of foams, plastics, composites and
natural fiber products principally serving the medical, automotive, consumer, electronics, industrial and aerospace and defense
markets. The Company was incorporated in the State of Delaware in 1993.
(a) Principles of Consolidation
The consolidated financial statements include the accounts and results of operations of UFP Technologies, Inc., its wholly-
owned subsidiaries, Moulded Fibre Technology, Inc., Simco Industries, Inc. and Stephenson & Lawyer, Inc. and its wholly-
owned subsidiary, Patterson Properties Corporation. All significant intercompany balances and transactions have been
eliminated in consolidation.
(b) Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, including allowance for doubtful accounts and the net realizable value of inventory, and disclosure of
contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those estimates.
(c) Fair Value Measurement
The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. When determining the fair value for assets
and liabilities, which are required to be recorded at fair value, the Company considers the principal or most advantageous
market in which the Company would transact and the market-based risk measurement or assumptions that market
participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions, and credit risk.
The Company has not elected fair value accounting for any financial instruments for which fair value accounting is optional.
(d) Fair Value of Financial Instruments
Cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other liabilities are stated at
carrying amounts that approximate fair value because of the short maturity of those instruments. The carrying amount of
the Company’s long-term debt approximates fair value as the interest rate on the debt approximates the Company’s current
incremental borrowing rate.
(e) Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.
At December 31, 2015 and 2014, cash equivalents primarily consisted of money market accounts and certificates of deposit
that are readily convertible into cash.
The Company maintains its cash in bank deposit accounts, money market funds, and certificates of deposit that at times
exceed federally insured limits. The Company periodically reviews the financial stability of institutions holding its accounts,
and does not believe it is exposed to any significant custodial credit risk on cash. The Company’s main operating account
with Bank of America exceeds federal depository insurance limit by approximately $20.4 million.
(f) Accounts Receivable
The Company periodically reviews the collectability of its accounts receivable. Provisions are recorded for accounts that
are potentially uncollectable. Determining adequate reserves for accounts receivable requires management’s judgment.
Conditions impacting the realizability of the Company’s receivables could cause actual asset write-offs to be materially
different than the reserved balances as of December 31, 2015.
(g) Inventories
Inventories include material, labor, and manufacturing overhead and are valued at the lower of cost or net realizable value.
Cost is determined using the first-in, first-out (FIFO) method.
The Company periodically reviews the realizability of its inventory for potential excess or obsolescence. Determining the
net realizable value of inventory requires management’s judgment. Conditions impacting the realizability of the Company’s
inventory could cause actual asset write-offs to be materially different than the Company’s current estimates as of
December 31, 2015.
(h) Property, Plant, and Equipment
Property, plant, and equipment are stated at cost and are depreciated or amortized using the straight-line method over the
estimated useful lives of the assets or the related lease term, if shorter.
22
Estimated useful lives of property, plant, and equipment are as follows:
Leasehold improvements
Buildings and improvements
Machinery & Equipment
Furniture, fixtures, computers & software
Shorter of estimated useful life or remaining lease term
20 years
7-10 years
3-7 years
Property, plant, and equipment amounts are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when the
carrying amount of an asset exceeds the estimated undiscounted future cash flows expected to result from the use of the
asset and its eventual disposition. The amount of the impairment loss to be recorded is calculated by the excess of the
asset’s carrying value over its fair value.
(i) Goodwill
Goodwill is tested for impairment annually, and will be tested for impairment between annual tests if an event occurs or
circumstances change that would indicate that the carrying amount may be impaired. Impairment testing for goodwill is
done at a reporting unit level. Reporting units are one level below the business segment level, but can be combined when
reporting units within the same segment have similar economic characteristics. An impairment loss generally would be
recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting
unit. The Company consists of a single reporting unit. We last performed “step 1” of the goodwill impairment test as
of September 30, 2014. We utilized the guideline public company (“GPC”) method under the market approach and the
discounted cash flows method (“DCF”) under the income approach to determine the fair value of the reporting unit for
purposes of testing the reporting unit’s carrying value of goodwill for impairment. The GPC method derives a value by
generating a multiple of EBITDA through the comparison of the Company to similar publicly traded companies. The DCF
approach derives a value based on the present value of a series of estimated future cash flows at the valuation date by
the application of a discount rate, one that a prudent investor would require before making an investment in our equity
securities. The key assumptions used in our approach included:
• The reporting unit’s 2015 estimated financials and five-year projections of financial results, which were based
on our strategic plans and long-range forecasts. Sales growth rates represent estimates based on current and
forecasted sales mix and market conditions. The profit margins were projected based on historical margins,
projected sales mix, current expense structure and anticipated expense modifications.
• The projected terminal value which reflects the total present value of projected cash flows beyond the last
period in the DCF. This value reflects a growth rate for the reporting unit, which is approximately the same
growth rate of expected inflation into perpetuity.
• The discount rate determined using a Weighted Average Cost of Capital method (“WACC”), which considered
market and industry data as well as Company-specific risk factors.
• Selection of guideline public companies which are similar to each other and to the Company.
As of September 30, 2014, based on our calculations under the above noted approach, the fair value of the reporting unit
exceeded its carrying value by approximately $69 million or 74%. In performing these calculations, management used
its most reasonable estimates of the key assumptions discussed above. If our actual operating results and/or the key
assumptions utilized in management’s calculations differ from our expectations, it is possible that a future impairment
charge may be necessary.
The Company’s annual impairment testing date is December 31. The Company performed a qualitative assessment
(“step 0”) as of December 31, 2015, and determined that it was more likely than not that the fair value of its reporting unit
exceeded its carrying amount. As a result, the Company is not required to proceed to a “step 1” impairment assessment.
Factors considered included the 2014 step 1 analysis and the calculated excess fair value over carrying amount, financial
performance, forecasts and trends, market cap, regulatory and environmental issues, macro-economic conditions, industry
and market considerations, raw material costs and management stability.
(j)
Intangible Assets
Intangible assets with a definite life are amortized on a straight-line basis, with estimated useful lives ranging from 5 to 14
years. Intangible assets with a definite life are tested for impairment whenever events or circumstances indicate that their
carrying values may not be recoverable.
(k) Revenue Recognition
The Company recognizes revenue at the time of shipment when title and risk of loss have passed to the customer,
persuasive evidence of an arrangement exists, performance of its obligation is complete, its price to the buyer is fixed or
determinable, and the Company is reasonably assured of collection. If a loss is anticipated on any contract, a provision for
the entire loss is made immediately. Determination of these criteria, in some cases, requires management’s judgment.
(l) Share-Based Compensation
When accounting for equity instruments exchanged for employee services, share-based compensation cost is measured
at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employee’s
requisite service period (generally the vesting period of the equity grant).
23
The Company issues share-based awards through several plans that are described in detail in Note 11. The compensation cost
charged against income for those plans is included in selling, general & administrative expenses as follows (in thousands):
Share-based compensation expense
Year Ended December 31
2015
$ 1,069
2014
$ 1,119
2013
$ 924
The compensation expense for stock options granted during the three-year period ended Decem-ber 31, 2015, was
determined as the fair value of the options using the Black Scholes valuation model. 2013 compensation expense for
stock options granted prior to January 1, 2012, was determined as the fair value of the options using a lattice-based option
valuation model. The assumptions are noted as follows:
2015
2014
2013
Year Ended December 31
Expected volatility
31.5% to 32.3%
32.8% to 37.9%
34.0% to 50.0%
Expected dividends
None
None
None
Risk-free interest rate
1.0% to 1.2%
0.7% to 0.9%
0.4% to 0.7%
Exercise price
Expected term
$19.97-$22.36
$22.55-$25.48
$18.85-$21.67
5.0 years
3.8 to 5.0 years
3.3 to 5.0 years
Weighted-average grant-date fair value
$ 6.04
$ 7.24
$ 5.84
The stock volatility for each grant is determined based on a review of the experience of the weighted average of historical
daily price changes of the Company’s common stock over the expected option term, and the risk-free interest rate is based
on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected term of the
option. The expected term is calculated based on the simplified method.
The total income tax benefit recognized in the statement of operations for share-based compensation arrangements was
approximately $312,000, $320,000 and $280,000 for the years ended December 31, 2015, 2014 and 2013, respectively.
(m) Deferred Rent
The Company accounts for escalating rental payments on a straight-line basis over the term of the lease.
(n) Shipping and Handling Costs
Costs incurred related to shipping and handling are included in cost of sales. Amounts charged to customers pertaining to
these costs are included in net sales.
(o) Research and Development
On a routine basis, the Company incurs costs related to research and development activity. These costs are expensed as
incurred. Approximately $1.4 million, $1.2 million and $1.2 million were expensed in the years ended December 31, 2015, 2014
and 2013, respectively.
(p) Income Taxes
The Company’s income taxes are accounted for under the asset and liability method. Under the asset and liability method,
deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and
operating loss and tax credit carryforwards. Deferred tax expense (benefit) results from the net change during the year in
deferred tax assets and liabilities. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
The Company evaluates the need for a valuation allowance to reduce its deferred tax assets to the amount that is more
likely than not to be realized. The Company has considered future taxable income and ongoing prudent and feasible tax
planning strategies in assessing the need for a valuation allowance. Should the Company determine that it would not be
able to realize all or part of its deferred tax assets in the future, an adjustment to the deferred tax assets would be charged
to income in the period such determination was made.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position
will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits
24
recognized in the consolidated financial statements from such positions are then measured based on the largest benefit
that has a greater than 50% likelihood of being realized upon settlement. The Company recognizes interest and penalties
accrued related to unrecognized tax benefits in tax expense.
(q) Segments and Related Information
The Company follows the provisions of ASC 280, Segment Reporting, which establish standards for the way public business
enterprises report information and operating segments in annual financial statements (see Note 17).
(r) Treasury Stock
The Company accounts for treasury stock under the cost method, using the first-in, first out flow assumption, and we
include treasury stock as a component of stockholders’ equity. During the year ended December 31, 2015, the Company
repurchased 29,559 shares of common stock at a cost of approximately $587,000.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue
from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for
the transfer of promised goods or services to customers. This standard will replace most existing revenue recognition guidance when
it becomes effective. The standard permits the use of either the retrospective or cumulative effect transition methods. In August
2015, the FASB issued an update to defer the effective date of this update by one year. The updated standard becomes effective for
the Company in the first quarter of fiscal year 2018, but allows the Company to adopt the standard one year earlier if it so chooses.
The Company is evaluating the effect that the updated standard will have on our Consolidated Financial Statements and related
disclosures. We have not yet selected a transition method nor have we determined the effect of the standard on our consolidated
financial position and results of operations.
In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes. The amendments in this
ASU require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The
amendments in this ASU are effective for financial statements issued for annual periods beginning after December 15, 2016, and
interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or
annual reporting period. The amendments in this ASU may be applied either prospectively to all deferred tax liabilities and assets or
retrospectively to all periods presented. We adopted the amendments in this ASU effective October 1, 2015, on a retrospective basis.
As a result of the adoption, the Company made the following adjustments to the 2014 balance sheet: a $1.1 million decrease to current
deferred tax assets and total current assets; and a $1.1 million decrease to long-term deferred tax liabilities and total liabilities.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The guidance in this ASU supersedes the leasing guidance
in Topic 840, Leases. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet
for those leases previously classified as operating leases. The amendments in ASU No. 2016-02 are effective for annual reporting
periods beginning after December 15, 2018, including interim periods within that reporting period with early adoption permitted. The
Company is evaluating the impact of adopting this ASU on its consolidated financial position and results of operations.
(2) Supplemental Cash Flow Information
Cash paid for interest and income taxes is as follows (in thousands):
Interest, net
Income taxes, net of refunds
Year Ended December 31
2015
$ (29)
$ 1,459
2014
$ 112
$ 3,259
2013
$ 210
$ 4,199
During the years ended December 31, 2015 and 2014, the Company permitted the exercise of stock options with exercise
proceeds paid with the Company’s stock (“cashless” exercises) totaling approximately $36,000 and $372,000, respectively.
(3) Receivables
Receivables consist of the following (in thousands):
Accounts receivable—trade
Less allowance for doubtful receivables
2015
$ 17,980
(499)
$ 17,481
December 31
2014
$ 16,972
(502)
$ 16,470
25
Receivables are written off against these reserves in the period they are determined to be uncollectible, and payments
subsequently received on previously written-off receivables are recorded as a reversal of the bad debt provision. The Company
performs credit evaluations on its customers and obtains credit insurance on a large percentage of its accounts, but does not
generally require collateral. The Company recorded a provision for doubtful accounts of approximately $16,000 and $171,000
for the years ended December 31, 2015 and 2014, respectively.
(4) Inventories
Inventories consist of the following (in thousands):
Raw materials
Work in process
Finished goods
2015
$ 7,506
1,192
5,504
$ 14,202
December 31
2014
$ 7,145
1,142
4,606
$ 12,893
(5) Other Intangible Assets
The carrying values of the Company’s definite-lived intangible assets as of December 31, 2015 and 2014 are as follows (in thousands):
Estimated useful life
Gross amount at December 31, 2015
Accumulated amortization at December 31, 2015
14 years
$ 429
(429)
5 years
$ 512
(387)
5 years
$ 2,046
(1,535)
$ 2,987
(2,351)
Patents
Non-Compete
Customer List
Total
Net balance at December 31, 2015
$ —
$ 125
$ 511
$ 636
Gross amount at December 31, 2014
Accumulated amortization at December 31, 2014
$ 429
(429)
$ 512
(325)
$ 2,046
(1,280)
$ 2,987
(2,034)
Net balance at December 31, 2014
$ —
$ 187
$ 766
$ 953
Amortization expense related to intangible assets was approximately $318,000, $393,000 and $478,000, respectively, for the years
ended December 31, 2015, 2014 and 2013. Future amortization for the years ending December 31 will be approximately (in thousands):
2016
2017
Total
318
318
$ 636
(6) Property, Plant, and Equipment
Property, plant, and equipment consist of the following (in thousands):
Land and improvements
Buildings and improvements
Leasehold improvements
Machinery & Equipment
Furniture, fixtures, computers & software
Construction in progress–equipment
2015
$ 3,191
25,399
2,839
51,016
6,498
1,621
$ 90,564
December 31
2014
$ 1,613
15,988
2,897
47,756
5,291
2,278
$ 75,823
Depreciation and amortization expense for the years ended December 31, 2015, 2014 and 2013, were approximately $4.5 million, $4.0
million, and $3.6 million, respectively.
(7) Indebtedness
On December 2, 2013, the Company entered into an unsecured $40 million revolving credit facility with Bank of America, N.A.
The credit facility calls for interest of LIBOR plus a margin that ranges from 1.0% to 1.5% or, at the discretion of the Company,
the bank’s prime rate less a margin that ranges from 0.25% to zero. In both cases the applicable margin is dependent upon
Company performance. Under the credit facility, the Company is subject to a minimum fixed-charge coverage financial
26
covenant as well as a maximum total funded debt to EBITDA financial covenant. The credit facility was amended effective
December 31, 2014, to modify the definition of “consolidated fixed-charge coverage ratio”. The Company was in compliance
with all covenants at December 31, 2015. The Company’s $40 million credit facility matures on November 30, 2018.
In conjunction with the execution of the credit facility, the Company fully paid approximately $5.1 million in debt previously
outstanding under the Company’s prior credit facility with Bank of America, N.A., which was terminated on December 2, 2013.
As of December 31, 2015, the Company had no borrowings outstanding under the credit facility.
On October 11, 2012, the Company entered into a loan agreement to finance the purchase of two new molded fiber machines.
The annual interest rate is fixed at 1.83%. As of December 31, 2015, approximately $5.0 million had been advanced on the loan
and the outstanding balance was approximately $1.9 million. The loan will be repaid over a five-year term. The loan is secured
by the related molded fiber machines.
Long-term debt consists of the following (in thousands):
Equipment loans
Total long-term debt
Current Installments
December 31
2015
$ 1,870
1,870
(1,011)
Long-term debt, excluding current installments
$ 859
Aggregate maturities of long-term debt are as follows (in thousands):
Year ending December 31:
2016
2017
(8) Accrued Expenses
Accrued expenses consist of the following (in thousands):
Compensation
Benefits/self-insurance reserve
Paid time off
Commissions payable
Unrecognized tax benefits
(including interest and penalties) (see Note 9)
Other
1,011
859
$ 1,870
2015
$ 2,107
250
965
319
315
1,418
December 31
2014
$ 2,866
2,866
(993)
$ 1,873
2014
$ 1,811
411
921
164
425
1,490
(9) Income Taxes
The Company’s income tax provision for the years ended December 31, 2015, 2014 and 2013 consists of the following (in thousands):
$ 5,374
$ 5,222
Current:
Federal
State
Deferred:
Federal
State
Years Ended December 31
2015
$ 3,131
580
3,711
508
(71)
437
2014
$ 2,638
336
2,974
1,262
(30)
1,232
2013
$ 4,353
824
5,177
641
99
740
Total income tax provision
$ 4,148
$ 4,206
$ 5,917
27
At December 31, 2015, the Company had net operating loss carryforwards for federal income tax purposes of approximately
$415,000, which are available to offset future taxable income and expire during the federal tax year ending December 31,
2019. The future benefit of the federal net operating loss carryforwards will be limited to approximately $300,000 per year in
accordance with Section 382 of the Internal Revenue Code.
The approximate tax effects of temporary differences that give rise to significant portions of the deferred tax assets and
liabilities are as follows (in thousands):
December 31
2015
2014
Deferred tax assets:
Reserves
Inventory capitalization
Compensation programs
Retirement liability
Equity-based compensation
Net operating loss carryforwards
Deferred rent
Intangible assets
$ 532
407
501
27
290
141
10
264
$ 428
264
404
35
276
242
36
188
Total deferred tax assets:
$ 2,172
$ 1,873
Deferred tax liabilities:
Excess of book over tax basis of fixed assets
Goodwill
$ (4,186)
(869)
Total deferred tax liabilities
Net long-term deferred tax liabilities
$ (5,055)
$ (2,883)
$ (3,471)
(848)
$ (4,319)
$ (2,446)
The amounts recorded as deferred tax assets as of December 31, 2015, and 2014, represent the amount of tax benefits of
existing deductible temporary differences or carryforwards that are more likely than not to be realized through the generation
of sufficient future taxable income within the carryforward period. The Company has total deferred tax assets of $2.2 million at
December 31, 2015, that it believes are more likely than not to be realized in the carryforward period. Management reviews the
recoverability of deferred tax assets during each reporting period.
The actual tax provision for the years presented differs from the “expected” tax provision for those years, computed by applying
the U.S. federal corporate rate of 34.0% to income before income tax expense as follows:
Computed “expected” tax rate
Increase (decrease) in income taxes resulting from:
State taxes, net of federal tax benefit
Meals and entertainment
R&D credits
Domestic production deduction
Non-deductible ISO stock option expense
Unrecognized tax benefits
Other
Years Ended December 31
2015
34.0%
2.3
0.3
(0.8)
(2.5)
0.4
—
1.6
2014
34.0%
1.1
0.3
(0.7)
(1.4)
0.4
1.3
0.8
2013
34.0%
3.6
0.1
(1.0)
(2.4)
0.2
(0.1)
—
Effective tax rate
35.3%
35.8%
34.4%
The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company has not been
audited by any state for income taxes with the exception of returns filed in Michigan which have been audited through 2004,
income tax returns filed in Massachusetts which have been audited through 2007 and income tax returns filed in Florida which
have been audited through 2009. The Company’s federal tax return for 2008 has been audited. Federal and state tax returns
for the years 2012 through 2014 remain open to examination by the IRS and various state jurisdictions.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (“UTB”) resulting from uncertain tax
positions is as follows (in thousands):
28
Gross UTB balance at beginning of fiscal year
Increases for tax positions of prior years
Reductions for tax positions of prior years
Gross UTB balance at end of fiscal year
2015
$ 230
—
(68)
$ 162
December 31
2014
$ 275
—
(45)
$ 230
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of December 31, 2015
and 2014, are $162,000 and $230,000, respectively.
In addition, the total amount of accrued interest and penalties on uncertain tax positions at December 31, 2015 and 2014 are
$153,000 and $195,000, respectively.
At December 31, 2015, all of the unrecognized tax benefits relate to tax returns of a specific state jurisdiction that are currently
under examination. Accordingly, the Company expects a reduction of this amount during 2016, since the Company expects to
resolve this examination in 2016.
(10) Net Income Per Share
Basic income per share is based upon the weighted average common shares outstanding during each year. Diluted income per
share is based upon the weighted average of common shares and dilutive common stock equivalent shares outstanding during
each year. The weighted average number of shares used to compute both basic and diluted income per share consisted of the
following (in thousands):
Basic weighted average common shares
outstanding during the year
Weighted average common equivalent
shares due to stock options and
restricted stock units
Diluted weighted average common
shares outstanding during the year
Years Ended December 31
2015
2014
2013
7,115
7,028
6,824
104
147
281
7,219
7,175
7,105
The computation of diluted earnings per share excludes the effect of the potential exercise of stock awards, including stock
options, when the average market price of the common stock is lower than the exercise price of the related options during the
period. These outstanding stock awards are not included in the computation of diluted earnings per share because the effect
would have been antidilutive. For the years ended December 31, 2015, 2014 and 2013, the number of stock awards excluded from
the computation was 72,495, 53,651 and 78,908, respectively.
(11) Stock Option and Equity Incentive Plans
Incentive Plan
In June 2003, the Company formally adopted the 2003 Incentive Plan (the “Plan”). The Plan was originally intended to benefit
the Company by offering equity-based incentives to certain of the Company’s executives and employees, thereby giving them
a permanent stake in the growth and long-term success of the Company and encouraging the continuance of their involvement
with the Company’s businesses. The Plan was amended effective June 4, 2008, to permit certain performance-based cash
awards to be made under the Plan. The Plan was further amended on June 8, 2011, to increase the maximum number of shares
of common stock in the aggregate to be issued to 2,250,000. The amendment also added appropriate language so as to
enable grants of stock-based awards under the Plan to continue to be eligible for exclusion from the $1,000,000 limitation on
deductibility under Section 162(m) of the Internal Revenue Code (the “Code”). The Plan was further amended on March 7, 2013,
to (i) prohibit the repricing of stock options or other equity awards without the consent of the Company’s shareholders, and (ii)
prohibit the Company from buying out underwater stock options.
Two types of equity awards may be granted to participants under the Plan: restricted shares or other stock awards. Restricted
shares are shares of common stock awarded subject to restrictions and to possible forfeiture upon the occurrence of specified
events. Other stock awards are awards that are denominated or payable in, valued in whole or in part by reference to, or
otherwise based on or related to, shares of common stock. Such awards may include Restricted Stock Unit Awards (“RSUs”),
unrestricted or restricted stock, incentive and non-qualified stock options, performance shares, or stock appreciation rights. The
Company determines the form, terms, and conditions, if any, of any awards made under the Plan.
29
Through December 31, 2015, 1,178,449 shares of common stock have been issued under the 2003 Incentive Plan, none of which
have been restricted. An additional 40,645 shares are being reserved for outstanding grants of RSUs and other share-based
compensation that are subject to various performance and time-vesting contingencies. The Company has also granted awards
in the form of stock options under this Plan. Through December 31, 2015, 170,000 options have been granted and 105,000 options
are outstanding. At December 31, 2015, 882,156 shares or options are available for future issuance in the 2003 Incentive Plan.
Director Plan
Effective July 15, 1998, the Company adopted the 1998 Director Plan, which was amended and renamed, on June 3, 2009, the
2009 Non-Employee Director Stock Incentive Plan (the “Director Plan”). The Director Plan was amended on March 7, 2013, to
(i) prohibit the repricing of stock options or other equity awards without the consent of the Company’s shareholders, and (ii)
prohibit the Company from buying out underwater stock options. The Director Plan, as amended, provides for the issuance of
stock options and other equity-based securities of up to 975,000 shares to non-employee members of the Company’s board of
directors. Through December 31, 2015, 308,626 options have been granted and 165,205 options are outstanding. For the year
ended December 31, 2015, 5,647 shares of common stock were issued and 153,202 shares remained available to be issued under
the Director Plan.
The following is a summary of stock option activity under all plans:
Weighted Average
Remaining
Aggregate
Shares
Exercise Price
Contractual Life
Intrinsic Value
Under Options
(per share)
(in years)
(in thousands)
Weighted Average
Outstanding December 31, 2014
Granted
Exercised
Cancelled or expired
340,107
18,844
(78,746)
(10,000)
Outstanding December 31, 2015
270,205
Exercisable at December 31, 2015
222,706
Vested and expected to vest at
$ 12.84
20.14
5.03
18.85
$ 15.40
$ 14.20
—
—
—
—
3.80
4.04
—
—
—
—
$ 2,311
$ 2,166
December 31, 2015
270,205
$ 15.40
3.80
$ 2,311
During the years ended December 31, 2015, 2014 and 2013, the total intrinsic value of all options exercised (i.e., the difference
between the market price and the price paid by the employees to exercise the options) was approximately $1.3 million, $3.4 million,
and $2.1 million, respectively, and the total amount of consideration received from the exercise of these options was approximately
$394,000, $709,000, and $416,000, respectively. At its discretion, the Company allows option holders to surrender previously
owned common stock in lieu of paying the exercise price and withholding taxes. During the year ended December 31, 2015,
1,632 shares (1,632 for options and zero for taxes) were surrendered at an average market price of $21.97. During the year
ended December 31, 2014, 32,164 shares (14,931 for options and 17,233 for taxes) were surrendered at an average market price of
$25.42. During the year ended December 31, 2013, 26,662 shares were surrendered at an average market price of $20.54.
During the years ended December 31, 2015, 2014 and 2013, the Company recognized compensation expense related to stock
options granted to directors and employees of approximately $282,000, $354,000 and $214,000, respectively.
On February 24, 2015, the Company’s Compensation Committee approved the award of $400,000 payable in shares of the
Company’s common stock to the Company’s Chairman, Chief Executive Officer, and President under the 2003 Equity Incentive
Plan. The shares were issued on December 22, 2015. The Company has recorded compensation expense of $400,000 for the year
ended December 31, 2015. Stock compensation expense of $400,000 was also recorded in both 2014 and 2013 for similar awards.
On December 16, 2015, the Company issued 391 shares of unrestricted common stock to a non-employee member of the
Company’s Board of Directors as part of their retainer for serving on the Board. Based upon the closing price of $22.36 on
December 16, 2015, the Company recorded compensation expense of $8,750 associated with the stock issuance for the year
ended December 31, 2015.
On June 10, 2015, the Company issued 5,256 shares of unrestricted common stock to the non-employee members of the
Company’s Board of Directors as part of their annual retainer for serving on the Board. Based upon the closing price of $19.97
on June 10, 2015, the Company recorded compensation expense of $105,000 associated with the stock issuance for the year
ended December 31, 2015. The Company recorded compensation expense of $122,000 and $60,000 for similar awards in 2014
and 2013, respectively.
The Company grants RSUs to its executive officers. The stock unit awards are subject to various time-based vesting
30
requirements, and certain portions of these awards are subject to performance criteria of the Company. Compensation expense
on these awards is recorded based on the fair value of the award at the date of grant, which is equal to the Company’s closing
stock price, and is charged, to expense ratably during the service period. No compensation expense is taken on awards that
do not become vested, and the amount of compensation expense recorded is adjusted based on management’s determination
of the probability that these awards will become vested. The following table summarizes information about stock unit award
activity during the year ended December 31, 2015:
Restricted Stock Units
Award Date Fair Value
Weighted Average
Outstanding at December 31, 2014
Awarded
Shares distributed
Forfeited/Cancelled
Outstanding at December 31, 2015
35,088
15,983
(10,426)
—
40,645
$ 17.87
23.46
18.35
—
$ 19.67
The Company recorded approximately $274,000, $237,000, and $250,000 in compensation expense related to these RSUs
during the years ended December 31, 2015, 2014 and 2013, respectively.
At the Company’s discretion, RSU holders are given the option to net-share settle to cover the required minimum withholding tax,
and the remaining amount is converted into the equivalent number of common shares. During the year ended December 31, 2015,
3,405 shares were redeemed for this purpose at an average market price of $23.15. During the years ended December 31, 2014 and
2013, 9,878 and 22,089 shares were redeemed for this purpose at an average market price of $25.88 and $19.29, respectively.
The following summarizes the future share-based compensation expense the Company will record as the equity securities
granted through December 31, 2015, vest (in thousands):
2016
2017
2018
2019
Total
Options
Common Stock
$ 133
44
16
—
—
—
—
—
$ 193
$ —
Restricted
Stock Units
$ 241
195
109
16
$ 561
Total
$ 374
239
125
16
$ 754
Tax benefits totaling approximately $356,000, $1,219,000, and $818,000 were recognized as additional paid-in capital during
the years ended December 31, 2015, 2014 and 2013, respectively, since the Company’s tax deductions exceeded the share-based
compensation charge recognized for stock options exercised and RSUs vested.
(12) Preferred Stock
On March 18, 2009, the Company declared a dividend of one preferred share purchase right (a “Right”) for each
outstanding share of common stock, par value $0.01 per share on March 20, 2009, to the stockholders of record on that
date. Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A
Junior Participating Preferred Stock, par value $0.01 per share (the “Preferred Share”), of the Company, at a price of $25.00
per one one-thousandth of a Preferred Share subject to adjustment and the terms of the Rights Agreement. The rights
expire on March 19, 2019.
(13) Supplemental Retirement Benefits
The Company provides discretionary supplemental retirement benefits for certain retired officers, which will provide
an annual benefit to these individuals for various terms following separation from employment. The Company recorded
an expense of approximately $4,000, $23,000, and $17,000 for the years ended December 31, 2015, 2014 and 2013,
respectively. The present value of the supplemental retirement obligation has been calculated using a 4.0% discount rate,
and is included in retirement and other liabilities. Total projected future cash payments for the years ending December 31,
2016 through 2019, are approximately $25,000 for each year.
(14) Commitments and Contingencies
(a) Leases – The Company has operating leases for certain facilities that expire through 2017. Certain of the leases contain
escalation clauses that require payments of additional rent, as well as increases in related operating costs.
31
Future minimum lease payments under non-cancelable operating leases as of December 31, 2015, are as follows (in
thousands):
Years Ending December 31
Operating Leases
2016
2017
888
376
Total minimum lease payments (a)
$ 1,264
(a) Minimum payments have not been reduced by minimum sublease rentals of approximately $314,000 due in the
future under non-cancelable subleases.
Rent expense amounted to approximately $1.2 million, $1.8 million, and $2.0 million in 2015, 2014 and 2013, respectively.
(b) Legal – The Company is a defendant in various administrative proceedings that are being handled in the ordinary
course of business. In the opinion of management of the Company, these suits and claims should not result in final
judgments or settlements that, in the aggregate, would have a material adverse effect on the Company’s financial
condition or results of operations.
(15) Employee Benefits Plans
The Company maintains a profit sharing plan for eligible employees. Contributions to the Plan are made in the form of
matching contributions to employee 401k deferrals, as well as discretionary profit sharing amounts determined by the
Board of Directors to be funded by March 15 following each fiscal year. Contributions were approximately $750,000,
$750,000 and $800,000 in 2015, 2014 and 2013, respectively.
The Company has a partially self-insured health insurance program that covers all eligible participating employees. The
maximum liability is limited by a stop loss of $200,000 per insured person, along with an aggregate stop loss determined
by the number of participants.
The Company has an Executive, Non-qualified “Excess” Plan (“the Plan”), which is a deferred compensation plan available
to certain executives. The Plan permits participants to defer receipt of part of their current compensation to a later date as
part of their personal retirement or financial planning. Participants have an unsecured contractual commitment from the
Company to pay amounts due under the Plan. There is currently no security mechanism to ensure that the Company will
pay these obligations in the future.
The compensation withheld from Plan participants, together with gains or losses determined by the participants’ deferral
elections is reflected as a deferred compensation obligation to participants, and is classified within other liabilities in the
accompanying balance sheets. At December 31, 2015 and 2014, the balance of the deferred compensation liability totaled
approximately $1.5 million for each period. The related assets, which are held in the form of a Company-owned, variable life
insurance policy that names the Company as the beneficiary, are reported within other assets in the accompanying balance
sheets, and are accounted for based on the underlying cash surrender values of the policies, and totaled approximately $1.7
million and $2.0 million as of December 31, 2015 and 2014, respectively.
(16) Fair Value of Financial Instruments
Financial instruments recorded at fair value in the balance sheets, or disclosed at fair value in the footnotes, are categorized
based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels defined
by ASC 820, Fair Value Measurements and Disclosures, and directly related to the amount of subjectivity associated with
inputs to fair valuation of these assets and liabilities, are as follows:
Level 1 – Valued based on unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement
date. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient
frequency and volume to provide pricing information on an ongoing basis.
Level 2 – Valued based on either directly or indirectly observable prices for the asset or liability through correlation with
market data at the measurement date and for the duration of the instrument’s anticipated life.
Level 3 – Valued based on management’s best estimate of what market participants would use in pricing the asset or
liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent
in the inputs to the model.
The Company has no assets and liabilities that are measured at fair value on a recurring basis.
(17) Segment Data
The Company consists of a single operating and reportable segment.
32
Revenues from customers outside of the United States are not material. No customer comprised more than 10% of the
Company’s consolidated revenues for the year ended December 31, 2015. A vast majority of the Company’s assets are
located in the United States.
The Company’s custom products are primarily sold to customers within the Medical, Automotive, Consumer, Electronics,
Industrial and Aerospace and Defense markets. Sales by market for the fiscal years ended December 31, 2015 and 2014 are as
follows (in thousands):
Market
2015 Net Sales %
2014 Net Sales %
Medical
Automotive
Consumer
Electronics
Aerospace & Defence
Industrial
Net Sales
$ 57,297 41.3%
$ 50,092 36.0%
26,879
19.4%
17,274
12.4%
13,218
13,154
11,028
9.5%
9.5%
7.9%
27,358 19.6%
17,661 12.7%
15,830
11.4%
15,158 10.9%
13,208 9.5%
$ 138,850 100.0%
$ 139,307 100.0%
(18) Quarterly Financial Information (unaudited)
Summarized quarterly financial data is as follows (in thousands, except per share data):
2015
Net sales
Gross profit
Net income
Basic net income per share
Diluted net income per share
2014
Net sales
Gross profit
Net income
Basic net income per share
Diluted net income per share
(19) Plant Consolidation
Q1
Q2
Q3
Q4
$ 33,977
$ 36,499
$ 34,441
$ 33,933
8,638
1,653
0.23
0.23
Q1
10,293
2,272
0.32
0.32
Q2
9,510
1,992
0.28
0.28
Q3
$ 34,609
$ 34,025
$ 35,406
9,177
2,062
0.30
0.29
9,545
1,860
0.27
0.26
9,752
2,066
0.29
0.29
9,013
1,676
0.24
0.23
Q4
$ 35,267
8,406
1,571
0.22
0.22
On March 18, 2015, the Company committed to move forward with a plan to cease operations at its Raritan, New Jersey, plant
and consolidate operations into its Newburyport, Massachusetts, facility and other UFP facilities. The Company’s decision
was in response to a continued decline in business at the Raritan facility and the recent purchase of the 137,000-square-foot
facility in Newburyport. The activities related to this consolidation were substantially complete at December 31, 2015.
The Company also relocated all operations in its Haverhill, Massachusetts, and Byfield, Massachusetts facilities and plans to
relocate certain operations in its Georgetown, Massachusetts facility to Newburyport. The Haverhill and Byfield relocations
were complete at December 31, 2015 and the Georgetown relocation is expected to be complete by June 30, 2016.
The Company expects to incur approximately $2.1 million in one-time expenses in connection with the Massachusetts
consolidations. Included in this amount are approximately $180,000 relating to employee severance payments and relocation
costs, approximately $1.5 million in moving expenses and expenses associated with vacating the Raritan, Haverhill and Byfield
properties, and approximately $360,000 in lease termination costs. Total cash charges are estimated at $2.0 million. The
Company expects annual cost savings of approximately $1.0 million as a result of these consolidations. The actual costs
incurred through December 31, 2015 are included in the table below.
On July 16, 2014, the Company committed to move forward with a plan to cease operations at its Costa Mesa, California, plant
and consolidate operations into its Rancho Dominguez, California, facility and other UFP facilities. The Company’s decision
was in response to the December 31, 2014, expiration of the lease on the Costa Mesa facility as well as the close proximity of
the two properties. The California consolidation is complete and the actual costs incurred are included in the table below.
On January 7, 2014, the Company committed to move forward with a plan to cease operations at its Glendale Heights, Illinois
plant and consolidate operations into its Grand Rapids, Michigan, facility. The Company’s decision was in response to a
pending significant increase in lease cost, declining sales at the Illinois facility, and significant anticipated savings as a result of
33
the consolidation. The consolidation into the Michigan facility is complete and the actual costs incurred are included in the
table below.
The Company has recorded the following restructuring costs associated with the consolidations discussed above for the
fiscal years ended December 31, 2015 and 2014 (in thousands):
2015
2014
Restructuring Costs
Massachusetts
California Total
Michigan California
Total
Employee severance
$ 178
$ 18
$ 196
$ 237
$ 10
$ 247
Relocation
Lease termination
Workforce training
Plant infrastructure
1,138
356
-
-
66
1,204
-
-
-
356
-
-
356
-
373
79
501
857
-
-
-
-
373
79
Total restructuring costs
$ 1,672
$ 84 $ 1,756
$ 1,045
$ 511 $ 1,556
The 2015 costs were reclassified in the Consolidated Statement of Operations as “Restructuring Costs” as follows:
$1,669,000 from Cost of Sales, $36,000 from Selling, General and Administrative expenses and $51,000 from Gain on
sales of property, plant and equipment. The 2014 costs were reclassified in the Consolidated Statement of Operations
as “Restructuring Costs” as follows: $1,385,000 from Cost of Sales, $82,000 from Selling, General and Administrative
expenses and $89,000 from Gain on sales of property, plant and equipment.
(20) Related Party Transactions
On December 16, 2015, Daniel Croteau was appointed to our board of directors. Mr. Croteau is also the Chief Executive
Officer of Vention Medical, Inc., a customer of the Company. Sales to Vention subsequent to Mr. Croteau joining the board
were approximately $5,000. At December 31, 2015, accounts receivable due from Vention were approximately $33,000
and total sales to Vention for the year ended December 31, 2015 were approximately $540,000.
34
Special Note Regarding Forward-Looking Statements
Some of the statements contained in this report are forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are subject to known and unknown risks,
uncertainties, and other factors, which may cause our or our industry’s actual results, performance, or achievements to be materially
different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-
looking statements include, but are not limited to, statements about the Company’s prospects, anticipated trends in the different
markets in which the Company competes, including the medical, automotive, consumer, electronics, industrial and aerospace and
defense markets, statements regarding anticipated new customer contracts and new project approvals, anticipated advantages
relating to the Company’s decisions to consolidate its Midwest, California and Northeast facilities and the expected cost savings and
efficiencies associated therewith, anticipated advantages of maintaining fewer, larger plants, anticipated advantages the Company
expects to realize from its investments and capital expenditures, including the development of and investments in its molded fiber
product lines, anticipated advantages the Company expects to realize as a result of its new enterprise resource planning software
system and its new customer relationship management system, expectations regarding the manufacturing capacity and efficiencies
of the Company’s new production equipment, statements about the Company’s acquisition opportunities and strategies and the
prospect of pursuing new acquisition opportunities, its participation and growth in multiple markets, including the medical/biotech
market, its business opportunities, the Company’s growth potential and strategies for growth, anticipated revenues and the timing
of such revenues, and any indication that the Company may be able to sustain or increase its sales or earnings or sales and earnings
growth rates. Investors are cautioned that such forward-looking statements involve risks and uncertainties, including without
limitation risks and uncertainties associated with plant closures and expected efficiencies from consolidating manufacturing, the
risk that the Company may not be able to finalize anticipated new customer contracts, risks associated with new project approvals,
risks associated with the implementation of new production equipment in a timely, cost-efficient manner, risks that any benefits from
such new equipment may be delayed or not fully realized, or that the Company may be unable to fully utilize its expected production
capacity, and risks and uncertainties associated with the identification of suitable acquisition candidates and the successful, efficient
execution of acquisition transactions, the integration of any such acquisition candidates and the value of those acquisitions to our
customers and shareholders. Accordingly, actual results may differ materially. The forward-looking statements contained herein
speak only of the Company’s expectations as of the date of this report. Except as otherwise required by law, the Company expressly
disclaims any obligation or undertaking to release publicly any updates or revisions to any such statement to reflect any change in
the Company’s expectations or any change in events, conditions, or circumstances on which any such statement is based. We qualify
all of our forward-looking statements by these cautionary statements and those set forth in our other filings with the Securities and
Exchange Commission, including those set forth under Part I, Item 1A in the Company’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2015. We caution you that these risks are not exhaustive. We operate in a continually changing business
environment and new risks emerge from time to time.
Unless the context requires otherwise, the terms “we”, “us”, “our”, or “the Company” refer to UFP Technologies, Inc. and its consolidated
subsidiaries.
35
STOCKHOLDER INFORMATION
TRANSFER AGENT AND REGISTRAR
American Stock Transfer
CORPORATE HEADQUARTERS
UFP Technologies, Inc.
BOARD OF DIRECTORS
AND EXECUTIVE OFFICERS
and Trust Company, LLC
100 Hale Street
6201 15th Avenue, 3rd Floor
Newburyport, MA 01950 USA
R. Jeffrey Bailly
do
Brooklyn, NY 11219
(978) 352-2200 phone
(978) 352-5616 fax
ANNUAL MEETING
The annual meeting of stockholders
will be held at 10:00 a.m. on June 9,
PLANT LOCATIONS
California, Colorado, Florida,
2016, at the Black Swan Country Club,
Georgia, Iowa, Massachusetts,
258 Andover Street, Georgetown, MA
Michigan, Texas
01833 USA.
INDEPENDENT REGISTERED PUBLIC
COMMON STOCK LISTING
UFP Technologies’ common stock
ACCOUNTANTS
Grant Thornton LLP
is traded on Nasdaq under the
symbol UFPT.
125 High Street, 21st Floor
Boston, MA 02110
STOCKHOLDER SERVICES
Stockholders whose shares are held in
CORPORATE COUNSELS
Lynch Brewer Hoffman & Fink, LLP
street names often experience delays
75 Federal Street, 7th Floor
in receiving company communications
Boston, MA 02110
Chairman, CEO and President
Daniel C. Croteau
Chief Executive Officer
Vention Medical, Inc.
Kenneth L. Gestal
President & Managing Partner
Decision Capital, LLC
Marc D. Kozin
Senior Advisor
LEK Consulting, LLC
Ronald J. Lataille
Sr. Vice President, Treasurer,
Secretary and
Chief Financial Officer
Thomas Oberdorf
Chief Financial Officer
SIRVA, Inc.
Robert W. Pierce, Jr.
Chairman, CEO,
and Co-Owner
forwarded through brokerage firms or
financial institutions. Any shareholder
or other interested party who wishes to
receive information directly should call
or write the Company. Please specify
regular or electronic mail:
UFP Technologies, Inc.
Attn: Shareholder Services
100 Hale Street
Newburyport, MA 01950 USA
phone: (978) 352-2200
e-mail: investorinfo@ufpt.com
web: www.ufpt.com
FORM 10-K REPORT
A copy of the Annual Report on
Form 10-K for the fiscal year ended
December 31, 2015, as filed with the
Securities and Exchange Commission,
may be obtained without charge by
writing to the Company, or on the
Company’s website at
www.ufpt.com/investors/filings.html.
36
Brown Rudnick LLP
1 Financial Center
Boston, MA 02111
ABOUT THIS REPORT
The objective of this report is to
Pierce Aluminum Company, Inc.
provide existing and prospective
Lucia Luce Quinn
shareholders a tool to understand
Chief People Officer
our financial results, what we do as a
Forrester Research, Inc.
company, and where we are headed
in the future. We aim to achieve
these goals with clarity, simplicity,
and efficiency. We welcome your
comments and suggestions.
Mitchell C. Rock
Sr. Vice President
Sales and Marketing
Daniel J. Shaw, Jr.
Vice President
WORLD WIDE WEB
In the interest of providing timely, cost-
effective information to shareholders,
press releases, SEC filings, and other
Research and Development
W. David Smith
Sr. Vice President
investor-oriented matters are available
Operations
on the Company’s website at
www.ufpt.com/investors/filings.html.
David K. Stevenson
Director
d Directors
o Officers
d
d
d
o
d
d
d
o
o
o
d
OPERATING
PRINCIPLES
CUSTOMERS
We believe the primary purpose of our company is to serve
our customers. We seek to “wow” our customers with
responsiveness and great products.
ETHICS
We will conduct our business at all times and in all places
with absolute integrity with regard to employees, customers,
suppliers, community, and the environment.
EMPLOYEES
We are dedicated to providing a positive, challenging and
rewarding work environment for all of our employees.
QUALITY
We are dedicated to continuously improving our quality of
service, quality of communications, quality of relationships,
and quality of commitments.
SIMPLIFICATION
We seek to simplify our business process through the constant
re-examination of our methods and elimination of all non-
value-added activities.
ENTREPRENEURSHIP
We strive to create an environment that encourages
autonomous decision-making and a sense of ownership
at all levels of the company.
PROFIT
Although profit is not the sole reason for our existence,
it is the lifeblood that allows us to exist.
100 Hale Street, Newburyport, MA 01950 | 800 372 3172 | ufpt.com