UFP TECHNOLOGIES INC
For the period ended Dec 31, 2024. Filed Mar 3, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 3, 2025
UFPT$303.47+1.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-29.
0001171843-24-001078
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-03.
0001171843-25-001192
Item 7. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 48 previous paragraphs and 50 current paragraphs.
24 unchanged; 18 reworded; 8 added; 6 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 3 previous and 3 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (8)
Current report
The Company completed four strategic acquisitions during the year ended December 31, 2024. The acquired operations primarily serve the medical market and contributed to an overall 26.1% increase in net sales for the year. Organic net sales grew 8.5%, fueled by strong sales in the robotic surgery and infection prevention markets. Net sales relating to our largest customer, Intuitive Surgical SARL, were 28.8% of our net sales for the year ended December 31, 2024. This increase in net sales as well as strong margins and the leverage of relatively fixed SG&A costs, allowed the Company to generate a 40.3% and 31.3% increase in operating income and net income, respectively, for the year ended December 31, 2024.
Current report
Net Sales
Current report
Net sales increased 26.1% to $504.4 million for the year ended December 31, 2024, from net sales of $400.1 million for the same period in 2023. We attribute the increase in net sales primarily to increased net sales from newly acquired companies of $70.3 million as well as 8.5% increased organic net sales fueled by increases in the robotic surgery and infection prevention markets. Overall net sales to customers in the medical market increased 30.2% while net sales to customers in other markets were flat. Medical net sales represented 89.4% and 86.6% of overall Company net sales in 2024 and 2023, respectively.
Current report
Acquisition Costs
Current report
The Company incurred approximately $2.5 million in costs associated with acquisition related activities which were charged to expense for the year ended December 31, 2024. These costs were primarily for legal, due diligence and valuation services and are reflected on the face of the consolidated statements of comprehensive income.
Current report
Other (Income) Expense
Current report
Valuation of Intangible Assets and Contingent Consideration Liability
Current report
We base the fair value of identifiable intangible assets acquired in a business combination on detailed valuations that use information and assumptions provided by management, which consider management’s best estimates of inputs and assumptions that a market participant would use. Further, for those arrangements that involve potential future contingent consideration, we record on the date of acquisition a liability equal to the fair value of the estimated additional consideration we may be obligated to pay in the future. We remeasure this liability each reporting period and record changes in the fair value through a separate line item within our consolidated statements of comprehensive income. Increases or decreases in the fair value of the contingent consideration liability can result from changes in discount rates, periods, timing and amount of projected revenue or timing or likelihood of achieving regulatory, revenue or commercialization-based milestones. The use of alternative valuation assumptions, including estimated revenue projections, growth rates, cash flows, discount rates, useful life or probability of achieving clinical, regulatory or revenue-based milestones could result in different purchase price allocations and recognized amortization expense and contingent consideration expense or benefit in current and future periods.
Removed paragraphs (6)
Previous report
The Company is diversified by also providing highly engineered products and components to customers in the automotive, aerospace and defense, and industrial/other markets. Typical applications of its products include military uniform and gear components, automotive interior trim, air filtration, and protective cases and inserts.
Previous report
Net sales for the Company for the year ended December 31, 2023 increased 13.1% to $400.1 million from $353.8 million for the year ended December 31, 2022, primarily due to an increase in organic sales of approximately 15.7%. The organic growth was driven by strong MedTech sales led by the Company’s robotic surgery products in response to increased surgical procedures. Gross profit as a percentage of sales (“gross margin”) for the year ended December 31, 2023 increased to 28.1% from 25.5% in the same period last year, largely due to improved operating efficiencies and strong organic sales growth primarily attributable to the Company’s great progress strengthening its platform and further integrating its three most recent acquisitions. The Company captured synergies by sharing best practices, moving business to best-fit manufacturing locations, and standardizing systems for information technology, quality, and safety.
Previous report
The Company experienced some softening in demand in the latter part of the year due to excess inventory held by some of our customers. The Company believes this is short-term in nature and will soon return to normal levels.
Previous report
Sales
Previous report
Net sales increased 13.1% to $400.1 million for the year ended December 31, 2023, from net sales of $353.8 million in 2022. The increase in sales was primarily due to increased sales to customers in the Medical market of 21.0%, primarily as a result of strong organic sales led by the Company’s robotic surgery products in response to increased surgical procedures . Sales to customers in all other markets decreased 20.6%, largely due to the Company’s disposition of its Molded Fiber business in July 2022.
Previous report
Other Expense (Income)
Reworded paragraphs (18)
Previous wording
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 Income:
Current wording
The following table sets forth, for the years indicated, the percentage of net sales represented by the items as shown in the Company’s Consolidated Statements of Income:
Previous wording
Gross profit as a percentage of sales (“Gross Margin”) increased to 28.1% for the year ended December 31, 2023, from 25.5% in 2022. As a percentage of sales, material and labor costs collectively decreased 0.7%, while overhead decreased 1.9%. The increase in Gross Margin is primarily due to the leverage of organic sales growth over the fixed portion of overhead, as well as improved operating efficiencies, as described above under “Overview.”
Current wording
Gross profit as a percentage of net sales (“Gross Margin”) increased to 29.1% for the year ended December 31, 2024, from 28.1% in 2023. As a percentage of net sales, material costs decreased 1.8% while overhead and labor costs collectively increased 0.8%. We attribute the increase in gross margin primarily to the accretive margins from the Company’s recent acquisitions as well as increased manufacturing efficiencies and the containment of fixed overhead costs. The gross margin increases were achieved despite the absorption of approximately $1.1 million in purchase accounting expenses (step-up of inventory to fair value at acquisition date).
Previous wording
Selling, General, and Administrative Expenses (“SG&A”) increased approximately 11.1% to $50.9 million for the year ended December 31, 2023, from $45.8 million in 2022, largely due to increased performance based compensation, benefits and payroll tax expenses and the additional SG&A expenses from the Advant acquisition (Refer to Note 2, “Acquisitions and Divestiture – Advant Medical,” in the accompanying notes to the consolidated financial statements for a discussion of the acquisition of Advant Medical). As a percentage of sales, SG&A decreased to 12.7% in 2023 from 12.9% in 2022.
Current wording
Selling, General, and Administrative Expenses (“SG&A”) increased approximately 22.3% to $62.2 million for the year ended December 31, 2024, from $50.9 million in 2023, largely due to SG&A from the Company’s recent acquisitions as well as increased performance-based compensation and professional fees. As a percentage of net sales, SG&A decreased to 12.3% for the year ended December 31, 2024, from 12.7% for the same period in 2023 reflecting the leverage of the net sales increase over relatively fixed SG&A. The Company plans on investing in back-office resources in response to the significant acquisitions completed during 2024.
Previous wording
In connection with the acquisition of DAS Medical in 2021, the Company is required to make contingent payments, subject to the acquired entities achieving certain financial performance thresholds. The contingent consideration payments for the DAS Medical acquisition are four, $5 million payments for a total of up to $20 million. The Company paid $5 million during the second quarter of 2023. The fair value of the liability for the contingent consideration payments recognized upon the acquisition as part of the purchase accounting opening balance sheets totaled approximately $9.7 million and was estimated by discounting to present value the probability-weighted contingent payments expected to be made. Assumptions used in the initial calculation were management’s financial forecasts, discount rate and various volatility factors. The ultimate settlement of contingent consideration could deviate from current estimates based on the actual results of these financial measures. This liability is considered to be a Level 3 financial liability that is re-measured each reporting period. The fair value of the liabilities for the contingent consideration payments recognized at December 31, 2023 totaled approximately $13.1 million for the remaining $15 million of potential earnout. The change in fair value of contingent consideration for the DAS Medical acquisition for the year ended December 31, 2023, resulted in an expense of approximately $3.5 million, and was included in change in fair value of contingent consideration in the consolidated statements of comprehensive income.
Current wording
In connection with the acquisitions of Welch and Marble in 2024, and DAS Medical in 2021, the Company is required to make contingent payments, subject to the entities achieving certain financial performance thresholds. The contingent consideration payments for the Welch, Marble and the DAS Medical acquisitions are up to $6 million, $500 thousand and $20 million, respectively. The fair value of the liability for the contingent consideration payments recognized upon the acquisition as part of the opening balance sheets totaled approximately $800 thousand, $400 thousand and $5.2 million for the Welch, Marble and the DAS Medical acquisitions, respectively, and was estimated by discounting to present value the probability-weighted contingent payments expected to be made. Assumptions used in the initial calculation were management’s financial forecasts, discount rate and various volatility factors. The ultimate settlement of contingent consideration could deviate from current estimates based on the actual results of these financial measures. Contingent consideration is considered to be a Level 3 financial liability that is re-measured each reporting period. The fair value of the liability for the contingent consideration payments recognized at December 31, 2024 totaled approximately $10.2 million out of the remaining potential payments of $14.5 million. The change in fair value of contingent consideration for the acquisitions for the year ended December 31, 2024, resulted in an expense of approximately $1.0 million, and is included in change in fair value of contingent consideration in the consolidated statements of comprehensive income.
Previous wording
The Company had net interest expense of approximately $3.6 million and $2.8 million for the years ended December 31, 2023 and 2022, respectively. The increase in net interest expense for the year ended December 31, 2023 was primarily due to higher average interest rates in 2023. Interest income was immaterial.
Current wording
The Company had net interest expense of approximately $8.1 million and $3.6 million for the year ended December 31, 2024 and 2023, respectively. The increase in net interest expense for the year ended December 31, 2024 was primarily due to higher debt related to 2024 acquisitions. Interest income was immaterial.
Previous wording
Other expense was approximately $117 thousand and other income was approximately $81 thousand for years ended December 31, 2023 and 2022, respectively. The changes in other income/expense in both periods are primarily generated by foreign currency transaction gains/losses and, in 2022, changes in the fair value of the swap liability.
Current wording
Other income was approximately $189 thousand and other expense was approximately $117 thousand for the years ended December 31, 2024 and 2023, respectively. The changes in other income/expense are primarily generated by equity method investment income in 2024 and foreign currency transaction gains/losses in both 2024 and 2023.
Previous wording
The Company recorded income tax expense, as a percentage of income before income tax expense, of 16.7% for the year ended December 31, 2023 compared to 20.7% for the same period in 2022. The decrease in the effective tax rate for the current period as compared to the prior period is largely due to higher earnings in low-tax jurisdictions in 2023.
Current wording
The Company recorded income tax expense, as a percentage of income before income tax expense, of 19.2% for the year ended December 31, 2024 compared to 16.7% for the same period in 2023. The increase in the effective tax rate for the current period as compared to the prior period is largely due to the difference in discrete items during the two periods as well as more United States based income in 2024 as a result of the recent acquisitions.
Previous wording
Net cash provided by operations for the year ended December 31, 2023 was approximately $41.3 million and was primarily a result of net income generated of approximately $44.9 million, depreciation and amortization of approximately $11.4 million, a loss on disposal of fixed assets of approximately $0.2 million, share-based compensation of approximately $4.6 million, a change in the fair value of contingent consideration of approximately $3.5 million, a decrease in deferred taxes of approximately $0.8 million, an increase in deferred revenue of approximately $ 1.9 million primarily due to increased customer deposits on tooling and machinery, an increase in accounts payable of approximately $1.6 million due to the building of inventory to meet demand and the timing of vendor payments in the ordinary course of business, a decrease in other assets of approximately $1.6 million due primarily to the current reclassification of a deposit receivable, and an increase in other long-term liabilities of approximately $0.4 million.
Current wording
Net cash provided by operations for the year ended December 31, 2024 was approximately $66.6 million and was primarily a result of net income generated of approximately $59.0 million, depreciation and amortization of approximately $14.7 million, share-based compensation of approximately $6.8 million, a change in the fair value of contingent consideration of approximately $1.0 million, an increase in net deferred income tax liabilities of approximately $ 1.3 million, a decrease in accounts receivable of approximately $1.2 million due to the collection of an escrow receivable, and a decrease in other assets of approximately $0.6 million.
Previous wording
These cash inflows and adjustments to income were partially offset by an increase in inventory of approximately $16.6 million due to inventory build for upcoming demand, an increase in accounts receivable of approximately $9.1 million due to higher sales in the last two months of the fourth quarter of 2023 as compared to the same period in the fourth quarter of 2022, an increase in refundable income taxes of approximately $3.0 million due to higher anticipated tax credits in 2023 compared to 2022, and a decrease in accrued expenses of approximately $0.9 million.
Current wording
These cash inflows and adjustments to income were partially offset by an increase in inventory of approximately $4.7 million due to inventory build for upcoming demand, an increase in prepaid expenses of approximately $0.5, an increase in refundable income taxes of approximately $3.4 million due to conservative estimated tax payments in in 2024, a decrease in accounts payable of approximately $1.1 million due to the timing of vendor payments in the ordinary course of business, a decrease in deferred revenue of approximately $1.9 million due to the recognition of development revenue and a decrease in other long-term liabilities of approximately $6.5 million due primarily to non-compete payments and payments of contingent consideration.
Previous wording
Net cash used in investing activities during the year ended December 31, 2023 was approximately $10.5 million and was primarily the result of additions of manufacturing machinery and equipment and various building improvements across the Company.
Current wording
Net cash used in investing activities for the year ended December 31, 2024 was approximately $210.2 million and was primarily the result of the acquisition of Marble Medical, AJR Enterprises, Welch Fluorocarbon, and AQF Medical, and the additions of manufacturing machinery and equipment and various building improvements across the Company.
Previous wording
Net cash used for financing activities was approximately $30.0 million during the year ended December 31, 2023 and was primarily the result of payments on the revolving line of credit of approximately $28.0 million, payment of contingent consideration of approximately $5.0 million, principal payments of long-term debt of approximately $4.0 million, and payments of statutory withholding for stock options exercised and restricted stock units vested of approximately $2.7 million. These payments were partially offset by borrowings under our credit facility to fund acquisitions of approximately $9.0 million and proceeds from the exercise of stock options of approximately $0.7 million.
Current wording
Net cash provided by financing activities was approximately $152.4 million for the year ended December 31, 2024 and was primarily the result of borrowings under the Company’s Third Amended and Restated Credit Agreement of approximately $284.2 million to recent acquisitions. These borrowings were partially offset by payments on the revolving line of credit of approximately $91.7 million, principal payments of long-term debt of approximately $35.1 million, and payments of statutory withholding for stock options exercised and restricted stock units vested of approximately $5.0 million.
Previous wording
On December 22, 2021, the Company, as the borrower, entered into a secured $130 million Second Amended and Restated Credit Agreement (the “Second Amended and Restated Credit Agreement”) with certain of the Company’s subsidiaries (the “Subsidiary Guarantors”) and Bank of America, N.A., in its capacity as the initial lender, Administrative Agent, Swingline Lender and L/C Issuer, and certain other lenders from time-to-time party thereto. The Second Amended and Restated Credit Agreement amends and restates the Company’s prior credit agreement, originally dated as of February 1, 2018.
Current wording
On June 27, 2024, the Company, as the borrower, entered into a secured $275 million Amended and Restated Credit Agreement (the “Third Amended and Restated Credit Agreement”) with certain of the Company’s subsidiaries (the “Subsidiary Guarantors”) and Bank of America, N.A., in its capacity as the initial lender, Administrative Agent, Swingline Lender and L/C Issuer, and certain other lenders from time-to-time party thereto. The Third Amended and Restated Credit Agreement amends and restates the Company’s prior credit agreement, originally dated as of December 22, 2021.
Previous wording
The credit facilities under the Second Amended and Restated Credit Agreement consist of a $40 million secured term loan to the Company and a secured revolving credit facility, under which the Company may borrow up to $90 million. The Second Amended and Restated Credit Agreement matures on December 21, 2026. The secured term loan requires quarterly principal payments of $1 million that commenced on March 31, 2022. The proceeds of the Second Amended and Restated Credit Agreement may be used for general corporate purposes, including funding the acquisition of DAS Medical, as well as certain other permitted acquisitions. The Company’s obligations under the Second Amended and Restated Credit Agreement are guaranteed by the Subsidiary Guarantors and secured by substantially all assets of the Company.
Current wording
The credit facilities under the Third Amended and Restated Credit Agreement consist of a secured term loan to the Company of $125 million and a secured revolving credit facility, under which the Company may borrow up to $150 million. The Third Amended and Restated Credit Facilities mature on June 27, 2029. This maturity date is subject to acceleration and the Company could be subject to additional fees and expenses in certain circumstances should one or more events of default described in the Third Amended and Restated Credit Agreement occur. The secured term loan requires quarterly principal payments of $3,125,000 that commence on December 31, 2024. The proceeds of the Third Amended and Restated Credit Agreement may be used for general corporate purposes, including funding certain acquisitions (see Note 2 for more information regarding this acquisition), as well as certain other permitted acquisitions. The Company’s obligations under the Third Amended and Restated Credit Agreement are guaranteed by Subsidiary Guarantors and secured by substantially all assets of the Company.
Previous wording
The Second Amended and Restated Credit Agreement calls for interest determined by the Bloomberg Short-Term Bank Yield Index rate (“BSBY”) plus a margin that ranges from 1.25% to 2.0% 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 Second Amended and Restated Credit Agreement, 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 Second Amended and Restated Credit Agreement contains other covenants customary for transactions of this type, including restrictions on certain payments, permitted indebtedness, and permitted investments.
Current wording
The Third Amended and Restated Credit Facilities call for interest at Secured Overnight Financing Rate (“SOFR”) plus a margin that ranges from 1.25% to 2.25% or, at the discretion of the Company, the bank’s prime rate plus a margin that ranges from .25% to 1.25%. In both cases the applicable margin is dependent upon Company performance. Under the Third Amended and Restated Credit Agreement, 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 Third Amended and Restated Credit Agreement contains other covenants customary for transactions of this type, including restrictions on certain payments, permitted indebtedness and permitted investments.
Previous wording
At December 31, 2023, the Company had approximately $32 million in borrowings outstanding under the Second Amended and Restated Credit Agreement, which were used as partial consideration for the DAS Medical and Advant Medical acquisitions, and also had approximately $0.7 million in standby letters of credit outstanding, drawable as a financial guarantee on worker’s compensation insurance policies. At December 31, 2023, the applicable interest rate was approximately 6.7% and the Company was in compliance with all covenants under the Second Amended and Restated Credit Agreement.
Current wording
At December 31, 2024, the Company had approximately $189.4 million in outstanding borrowings under the Third Amended and Restated Credit Agreement, and also had approximately $0.7 million in standby letters of credit outstanding, drawable as a financial guarantee on worker’s compensation insurance policies. At December 31, 2024, the weighted average interest rate was approximately 5.9% and the Company was in compliance with all covenants under the Third Amended and Restated Credit Agreement.
Previous wording
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 Second Amended and Restated Credit Agreement. The Company generated cash of approximately $41.3 million from operations during the year ended December 31, 2023. The Company cannot guarantee that its operations will generate cash in future periods. The Company’s longer-term liquidity is contingent upon future operating performance and availability of draws on its revolving credit facility. Further, the economic uncertainty resulting from events including inflation, bank failures, and other factors beyond the control of the Company could affect the Company’s long-term ability to access the public markets and obtain necessary capital in order to properly capitalize and continue operations.
Current wording
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 Second Amended and Restated Credit Agreement. The Company generated cash of approximately $66.6 million from operations during the year ended December 31, 2024. The Company cannot guarantee that its operations will generate cash in future periods. The Company’s longer-term liquidity is contingent upon future operating performance and the availability of draws on its revolving credit facility. Further, the economic uncertainty resulting from events including inflation, bank failures, and other factors beyond the control of the Company could affect the Company’s long-term ability to access the public markets and obtain necessary capital in order to properly capitalize and continue operations.
Previous wording
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. The Company evaluates its estimates, including those listed below, on an ongoing basis. 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.
Current wording
The preparation of consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, net sales, and expenses, and related disclosure of contingent assets and liabilities. The Company evaluates its estimates, including those listed below, on an ongoing basis. 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.
Previous wording
The Company’s significant accounting policies are described in Note 1 to the consolidated financial statements included in Item 8 of this Report. The Company does not believe that any of the significant accounting policies required significant judgement and estimates in the preparation of its consolidated financial statements.
Current wording
The Company’s significant accounting policies are described in Note 1 to the consolidated financial statements included in Item 8 of this Report. The Company believes the following critical accounting policy necessitated that significant judgments and estimates be used in the preparation of its consolidated financial statements.