UFP TECHNOLOGIES INC

The Company is a designer and custom manufacturer of comprehensive solutions for medical devices, sterile packaging, and other highly engineered custom products. The Company believes it is an important link in the medical device supply chain and a valued outsource partner to many of the top medical device manufacturers in the world. The Company’s single-use and single-patient devices and components are used in a wide range of medical devices and packaging for minimally invasive surgery, infection prevention, robotic surgery, patient handling, orthopedic implants, wound care, wearables, and orthopedic soft goods.

The Company was incorporated in the State of Delaware in 1993.

The consolidated financial statements of the Company include the accounts and results of operations of UFP Technologies, Inc. and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Available Information

The Company’s Internet website address is http://www.ufpt.com. Through its website, the Company makes available, free of charge, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the Securities and Exchange Commission (“SEC”). These SEC reports can be accessed through the investor relations section of the Company’s website. The information found on the Company’s website is not incorporated by reference in this or any other report filed with or furnished to the SEC. The SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding the Company and other issuers that file electronically with the SEC. The SEC’s Internet website address is http://www.sec.gov.

Market Overview

The applications for the Company’s products are numerous and diverse. The Company sells its products into distinct markets with its primary focus on the MedTech market:

Products

The Company’s products, which often are custom-made to its customers specifications, are targeted at macro market trends and create specific opportunities in niche segments where the Company’s access to specialty materials, engineering know-how, and processing expertise can be leveraged to create value for its customers. Examples of its custom products targeted to specific markets include:

Regulatory Climate and Environmental Considerations

The Company’s medical customers typically require Food and Drug Administration (“FDA”) approval for their products and therefore sometimes require their suppliers to manufacture in facilities that are FDA registered and comply with the International Organization for Standardization (“ISO”) 13485 quality standard for medical devices. The Company has seventeen manufacturing locations that are ISO 13485 certified and eight that are FDA registered. The Company’s automotive customers sometimes require their suppliers to certify their manufacturing locations to the International Automotive Task Force (“IATF”) 16949 automotive quality standard. The Company’s Grand Rapids, MI facility meets this requirement. The Company designs products to provide optimum performance with minimum material. In addition, the Company bales and disposes certain of its urethane and cross-linked foam scrap for use in various recycled products. The Company’s Newburyport MA facility utilizes solar power to provide approximately 6% of its electricity, with plans to increase capacity in the future. The Company is aware of public support for environmentally responsible packaging and products. Future government action may impose restrictions affecting the industry in which the Company operates. There can be no assurance that any such action will not adversely impact the Company’s products and business.

Marketing and Net Sales

The Company markets to its target customers by promoting specific solutions, materials, and manufacturing capabilities and services. The Company markets through websites, trade shows and expositions, social media, online advertising, emails, and press releases. Its relationships with key material suppliers are also an important part of its marketing and sales efforts. The Company markets and sells its products principally through a direct sales force. The Company’s commercial leaders, in conjunction with Company engineers, collaborate with customers and in-house design and manufacturing experts to develop custom-engineered solutions on a cost-effective basis. For the year ended December 31, 2024, two customers’ net sales were approximately 28.8% and 15.4% of net sales, respectively; no other customer’s net sales exceeded 10% of net sales. For additional information, see “Risk Factors— We depend on a small number of customers for a large percentage of our net sales. The loss of any such customer, a reduction in net sales to any such customer, or the decline in the financial condition of any such customer could have a material adverse effect on our business, financial condition, and results of operations.”

Seasonality is not a major factor in the Company’s net sales. See the Company’s consolidated financial statements contained in Part IV, Item 15, of this Report for net sales by market.

Manufacturing

The Company’s manufacturing operations consist primarily of cutting, routing, compression and injection molding, vacuum-forming, micro-molding, thermoforming, laminating, radio frequency and impulse welding, and assembling. For medical custom-molded foam products and thermoplastic welded devices, the Company’s skilled engineering personnel analyze specific customer requirements to design and build prototype products to determine product functionality. Upon customer approval, prototypes are converted to final designs for commercial production runs. Molded cross-linked foam products are produced in a thermoforming process using heat, pressure, and precision metal tooling. Thin films and other materials are sealed using radio frequency and impulse welding and formed through a thermoforming process. Reticulated polyurethane foam is also used for many high-performance medical products requiring precision fluid or air management. These products are typically fabricated using high speed die-cutting or waterjet cutting. Laminated products for medical, military, and personal comfort and protection are produced through a process whereby the foam medium is heated to the melting point and then bonded to a non-foam material through the application of mechanical pressure.

The Company also engineers components for automotive use as interior trim and structural applications. These components are produced using a compression molding process to create highly functional composites consisting of various materials such as polypropylene/fiberglass panels, nonwovens, and fabrics. Highly specialized polypropylene based nonwoven material is used for automotive interior noise reduction and is fabricated using a die cut process. Foam for filtration, acoustical, and thermal insulation products that do not utilize cross-linked foam are fabricated by cutting shapes from blocks of foam, using specialized cutting tools, routers, water jets, and hot wire equipment, and assembling these shapes into the final product using a variety of foam welding or gluing techniques. Products can be used on a stand-alone basis or bonded to another foam product or other material such as a corrugated medium.

The Company does not manufacture any of the raw materials used in its products. With the exception of certain grades of cross-linked foam, thermoplastic urethane (“TPU”) and technical polyurethane foams, these raw materials are available from multiple supply sources. Although the Company relies upon a limited number of suppliers for cross-linked and technical polyurethane foams, and TPU, the Company’s relationships with its suppliers are good, and the Company expects that these suppliers will be able to meet its requirements for these foams. Any delay or interruption in the supply of raw materials could have a material adverse effect on the Company’s business.

Research and Development

The Company’s engineering personnel continuously explore new design and manufacturing techniques, as well as new and innovative materials to meet the unique demands and specifications of its customers. Research and development is an integral part of the Company’s ongoing cost structure.

Competition

The medical design and contract manufacturing industry is highly competitive as is the foam and plastics converting industry as a whole. While there are several national companies that convert foam and plastics, the Company’s primary competition is from smaller independent regional manufacturing companies. These companies generally market their products in specific geographic areas from neighboring facilities. The Company’s custom engineered products face competition primarily from smaller companies that typically concentrate on the production of products for specific industries or regions. The Company expects to compete effectively in the engineered products market due to its ability to address its customers' primary vendor selection criteria, including inclusion on their preferred supplier lists, price, product performance, product reliability, manufacturing locations, and customer service, as well as its access to a wide variety of materials, its engineering expertise, its ability to combine foams with other materials such as plastics and laminates, and its ability to manufacture products in a clean room environment.

Patents and Other Proprietary Rights

The Company relies upon trade secrets, patents, and trademarks to protect its technology and proprietary rights. The Company believes the improvement of existing products, reliance upon trade secrets and unpatented proprietary know-how, and the development of new products are generally as important as patent protection in establishing and maintaining a competitive advantage. Nevertheless, the Company has obtained patents and may continue to make efforts to obtain patents, when available, although there can be no assurance that any patent obtained will provide substantial protection or be of commercial benefit to the Company, or that its validity will be upheld if challenged. The Company has a total of 23 active patents relating to technologies including foam, packaging, tool control technologies, radio frequency welding, automotive superforming processes and certain nail file technologies. The Company also has patent applications in process. There can be no assurance that any patent or patent application will provide significant protection for the Company’s products and technology or will not be challenged or circumvented by others. The expiration dates for the Company’s patents range from 2025 through 2041. The Company’s U.S. registered trademarks are: UFP Technologies®, Shaping Innovation®, FlexShield®, FirmaLite®, BioShell®, T-Tubes®, T-Tube®, Tri-Covers®, Design Nail®, Pro-Sticks®, Cryoshell® Case Fit®, Alloshell®, Flash Shiner®, Mambo®, EZ-Card®, ControlClean®, United Foam®, and the Company’s U logo. Each trademark, trade name, or service mark of any other company appearing in this Report belongs to its respective holder.

Human Capital Management

As of January 25, 2025, the Company had a total of 4,146 full-time employees (compared to 3,093 full-time employees as of January 27, 2024) and 189 temporary workers (compared to 200 temporary workers at January 27, 2024). The Company is not a party to any collective bargaining agreements. The Company considers its employee relations to be good.

The Company strives to promote a workplace that is professional, provides opportunity for career growth and treats all workers with dignity and respect. The Company does not tolerate unlawful discrimination and harassment in the workplace; it expressly prohibits any form of unlawful discrimination or harassment based on race, color, religion, sex, sexual orientation, gender identity or expression, national origin, ethnicity, age, physical or mental disability, genetic information, military or veteran status, pregnancy, childbirth or related medical conditions, or any other legally protected status under applicable federal, state, or local law.

The Company’s employees are tasked with upholding our Code of Ethics and Business Conduct, which we view as an important component of our operating strategy. This policy covers the conduct of the Company's employees in their work-related dealings with each other, as well as interactions with our customers, vendors, and other business partners. The Company’s compliance hotline is maintained for the confidential reporting of any suspected policy violations or unethical business conduct.

The Company’s commitment to its employees starts at the top with an executive-level officer – Senior Vice President of Human Resources (“SVP of HR”) – reporting to the CEO, attending all board meetings, and having significant involvement with the board’s compensation committee. This commitment is reflected in our efforts to attract, engage, and retain the best people possible.

Compensation and Benefits

The Company’s compensation and benefits offerings are supported by external data services. In addition to competitive compensation practices, the Company offers annual stock award bonus programs to reward and retain executives and key employees. Access to company subsidized health, life and disability insurance; a matching 401(k) plan; and paid time off for vacation, illness and personal reasons, are the highlights of the Company’s benefits available to all eligible full-time employees. For those employees struggling with life’s challenges, the Company offers employee assistance programs.

Growth and Development

The Company supports every employee’s opportunity for career growth. It offers tuition reimbursement for employees to further their industry-related formal education; access to virtual training and education platforms; reimbursement to attend work-related seminars; and on-the-job training and cross-training to improve job skills. Its talent management program provides feedback on performance, identifies employees with potential for advancement, and allows for personalized career development plans. Its summer internship program provides the opportunity for college and technical school students to demonstrate and develop the skills to become valuable members of our team.

The Company’s commitment to its employees has resulted in several national, regional, and local “Best in Class” awards.

Safety

As an essential manufacturing company, the Company takes its responsibility for our employees’ health and safety seriously. Its corporate safety officer reports directly to the Vice President, Chief Operating Officer, Medtech and works with dedicated safety officers at each of our plants to implement safety programs and training. Safety audits are conducted regularly to ensure compliance.