UFP Technologies(UFPT) - 2023 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements This section presents UFP Technologies, Inc.'s unaudited condensed consolidated financial statements as of September 30, 2023, and for the periods then ended Condensed Consolidated Balance Sheets Total assets increased to $399.8 million by September 30, 2023, with liabilities decreasing and equity growing Balance Sheet Highlights (in thousands) | Account | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $140,467 | $116,346 | | Total Assets | $399,810 | $378,192 | | Total Current Liabilities | $56,588 | $55,961 | | Long-term debt | $39,000 | $51,000 | | Total Liabilities | $127,427 | $140,647 | | Total Stockholders' Equity | $272,383 | $237,545 | Condensed Consolidated Statements of Comprehensive Income Net sales increased for both Q3 and nine-month periods; Q3 net income decreased due to a prior-year gain, while nine-month net income remained stable Income Statement Highlights (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $100,784 | $96,970 | $298,575 | $262,555 | | Gross Profit | $27,750 | $25,523 | $86,096 | $66,980 | | Operating Income | $15,045 | $25,965 | $44,928 | $44,525 | | Net Income | $11,694 | $19,540 | $33,316 | $33,327 | | Diluted EPS | $1.52 | $2.56 | $4.33 | $4.37 | Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity increased to $272.4 million by September 30, 2023, primarily driven by net income for the nine-month period - Stockholders' equity grew by $34.8 million in the first nine months of 2023, mainly due to retained earnings from net income[13] Condensed Consolidated Statements of Cash Flows Operating activities generated $28.6 million in cash for the nine months ended September 30, 2023, a significant improvement year-over-year Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $28,633 | $(144) | | Net cash (used in) provided by investing activities | $(7,732) | $4,255 | | Net cash used in financing activities | $(18,780) | $(5,171) | | Net increase (decrease) in cash | $1,925 | $(1,180) | Notes to Interim Condensed Consolidated Financial Statements The notes explain accounting policies, revenue recognition, acquisitions, and other key financial statement items - In July 2022, the company sold its Molded Fiber business for approximately $31.5 million, resulting in a net gain of $15.7 million[23] - The company operates as a single segment, with one major customer accounting for 30.3% of Q3 2023 consolidated revenues and 24.7% for the nine-month period[63][64] Net Sales by Market (Nine Months Ended Sep 30, in thousands) | Market | 2023 Net Sales | % of Total | 2022 Net Sales | % of Total | | :--- | :--- | :--- | :--- | :--- | | Medical | $257,092 | 86.1% | $208,464 | 79.4% | | Aerospace & Defense | $12,828 | 4.3% | $11,097 | 4.2% | | Automotive | $12,821 | 4.3% | $13,383 | 5.1% | | Industrial / Other | $15,834 | 5.3% | $29,611 | 11.3% | | Total Net Sales | $298,575 | 100.0% | $262,555 | 100.0% | - As of September 30, 2023, the company had $43 million in borrowings outstanding under its credit agreement, with an interest rate of approximately 6.6%[74] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, highlighting increased nine-month net sales, improved gross margin, and liquidity Results of Operations Nine-month net sales increased 13.7% to $298.6 million, driven by the Medical market, and gross margin improved to 28.8% - Nine-month net sales increased 13.7% to $298.6 million, driven by a 16.9% increase in organic sales[83] - Gross margin for the nine-month period improved to 28.8% from 25.5% year-over-year, attributed to operating efficiencies and a higher margin business mix[83][87] - SG&A expenses for the nine-month period increased 11.4% to $37.8 million, but decreased as a percentage of sales to 12.7% from 12.9%[89] Liquidity and Capital Resources The company funds operations through internal cash and credit facilities, reporting $28.6 million in operating cash flow - Net cash provided by operations for the nine-month period was $28.6 million, a significant improvement from the prior year[100] - The company has a $130 million credit facility, comprising a $40 million term loan and a $90 million revolving credit facility, maturing in December 2026[104][105] - Management believes existing resources are sufficient to fund requirements for the next twelve months, including planned capital expenditures for growth and efficiency[110] Quantitative and Qualitative Disclosures About Market Risk No material changes in market risks were reported compared to the 2022 Annual Report on Form 10-K disclosures - No material changes in market risks were reported compared to the 2022 Form 10-K[116] Controls and Procedures Management concluded disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2023[117] - No material changes in internal control over financial reporting occurred during the last fiscal quarter[118] PART II - OTHER INFORMATION Legal Proceedings The company is not a party to any material legal proceedings, with ongoing matters considered ordinary course of business - The company is not involved in any material legal proceedings[119] Risk Factors No material changes to risk factors were reported compared to the 2022 Annual Report on Form 10-K disclosures - No material changes from the risk factors disclosed in the 2022 Form 10-K have been reported[121] Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the reporting period - None[122] Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO/CFO certifications and Inline XBRL documents - Exhibits filed include CEO/CFO certifications (31.1, 31.2), Section 906 certifications (32.1), and various Inline XBRL files[123] Signatures - The report was signed on November 9, 2023, by R. Jeffrey Bailly (CEO) and Ronald J. Lataille (CFO)[128]