UFP Technologies(UFPT) - 2024 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements The unaudited condensed consolidated financial statements detail the company's financial position and performance for the three and six months ended June 30, 2024 Condensed Consolidated Balance Sheets Total assets grew to $422.4 million, driven by increases in cash and inventories, while total liabilities decreased Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total current assets | $162,161 | $144,633 | | Total assets | $422,396 | $404,136 | | Total current liabilities | $51,787 | $58,209 | | Total liabilities | $112,220 | $118,045 | | Total stockholders' equity | $310,176 | $286,091 | Condensed Consolidated Statements of Comprehensive Income The company shows strong year-over-year growth in revenue and net income for the second quarter and first half of 2024 Statement of Comprehensive Income Summary (in thousands, except per share data) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $110,177 | $100,037 | $215,186 | $197,790 | | Gross profit | $33,031 | $29,645 | $63,114 | $58,346 | | Operating income | $17,951 | $17,042 | $33,876 | $29,882 | | Net income | $13,552 | $11,883 | $26,245 | $21,622 | | Diluted EPS | $1.75 | $1.55 | $3.38 | $2.81 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities more than doubled to $22.4 million for the first half of 2024 Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash from operating activities | $22,368 | $10,600 | | Net cash used in investing activities | ($9,113) | ($4,947) | | Net cash from (used in) financing activities | ($1,673) | ($4,765) | | Net increase in cash | $11,465 | $840 | Notes to Interim Condensed Consolidated Financial Statements Key disclosures include the Marble Medical acquisition, significant customer concentration, and a new $275 million credit agreement - On June 24, 2024, the company acquired Marble Medical, Inc for an aggregate purchase price of $4.5 million in cash, plus up to $0.5 million in contingent payments[17] - For the six months ended June 30, 2024, one major customer represented approximately 33.1% of the company's consolidated revenues[50] - The Medical market continues to be the dominant segment, accounting for 86.2% of total net sales for the first six months of 2024[51] - On June 27, 2024, the company entered into a new $275 million Amended and Restated Credit Agreement, enhancing its financial flexibility[56] - Subsequent to the quarter end, the company completed two significant acquisitions: AJR Enterprises for $110 million on July 1, 2024, and Welch Fluorocarbon for $34.6 million (plus potential earn-outs) on July 15, 2024[62][64] Management's Discussion and Analysis of Financial Condition and Results of Operations Net sales for the first half of 2024 increased 8.8%, driven by medical market growth, with liquidity enhanced by a new credit facility Results of Operations Net sales grew 10.1% in Q2 2024 with improved gross margin, while the effective tax rate for H1 2024 decreased Net Sales Growth vs. Prior Year | Period | Net Sales (in millions) | YoY Growth | | :--- | :--- | :--- | | Q2 2024 | $110.2 | 10.1% | | H1 2024 | $215.2 | 8.8% | - Gross margin for Q2 2024 increased to 30.0% from 29.6% YoY, while the six-month gross margin decreased slightly to 29.3% from 29.5% YoY[77] - The effective tax rate for the six months ended June 30, 2024, was 19.8%, down from 22.4% in the same period of 2023[81] Liquidity and Capital Resources A strong liquidity position is supported by $22.4 million in operating cash flow and a new $275 million credit agreement - Net cash provided by operations for the first six months of 2024 was approximately $22.4 million[83] - On June 27, 2024, the company entered into a new $275 million credit agreement, which includes a $125 million term loan and a $150 million revolving credit facility, maturing in 2029[85][86] - As of June 30, 2024, approximately $9.4 million was available for future repurchases under the company's stock repurchase program[94] Quantitative and Qualitative Disclosures About Market Risk There have been no material changes to the company's market risks since the last annual report - There have been no material changes in market risks as previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2023[97] Controls and Procedures Disclosure controls and procedures were deemed effective as of June 30, 2024, excluding the recently acquired Marble Medical - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2024[98] - The assessment of internal controls excluded the recently acquired Marble Medical, which was purchased on June 24, 2024[99] PART II - OTHER INFORMATION Legal Proceedings The company is not party to any material legal proceedings outside the ordinary course of business - The company is not a party to any material litigation or other material legal proceedings[101] Risk Factors No material updates to risk factors are reported, referencing previous Form 10-K and 10-Q filings - The report refers to the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2024[102] Other Information (Items 2, 3, 4, 5) This section confirms no unregistered equity sales, senior security defaults, or new executive 10b5-1 plans - The company reported no unregistered sales of equity securities, no defaults on senior securities, and no applicable mine safety disclosures[102] - During the second quarter of fiscal 2024, none of the company's directors or executive officers adopted or terminated a Rule 10b5-1 trading plan[102] Exhibits Filed exhibits include the new credit agreement, Sarbanes-Oxley certifications, and XBRL data - Exhibits filed with this report include the Amended and Restated Credit Agreement from June 27, 2024, CEO/CFO certifications, and Inline XBRL data[105]