10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)         

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended     MARCH 31, 2023  

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission File Number: 001-12648

UFP Technologies, Inc.

(Exact name of registrant as specified in its charter)

Delaware	04-2314970
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

100 Hale Street, Newburyport, MA 01950, USA

(Address of principal executive offices) (Zip Code)

(978) 352-2200

(Registrant's telephone number, including area code)

_________________________________________

(Former name, former address, and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	UFPT	The NASDAQ Stock Market L.L.C.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒      No ☐ 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒      No ☐ 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☒
Non-accelerated filer ☐	Smaller reporting company ☐
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.         ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐       No ☒

7,614,197 shares of registrant’s Common Stock, $0.01 par value, were outstanding as of May 2, 2023.

UFP Technologies, Inc.

Index

Page

PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements	3
Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022 (unaudited)		3
Condensed Consolidated Statements of Income and Comprehensive Income for the Three Months Ended March 31, 2023 and March 31, 2022 (unaudited)		4
Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2023 and March 31, 2022 (unaudited)		5
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and March 31, 2022 (unaudited)		6
Notes to Interim Condensed Consolidated Financial Statements		7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	23
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	24
Item 1A.	Risk Factors	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3.	Defaults upon Senior Securities	24
Item 4.	Mine Safety Disclosures	24
Item 5.	Other Information	24
Item 6.	Exhibits	25
Signatures		25

PART I:          FINANCIAL INFORMATION

ITEM 1:         FINANCIAL STATEMENTS

UFP Technologies, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share data)

(Unaudited)

	March 31, 2023			December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	6,503		$	4,451
Receivables, net		60,142			55,117
Inventories		56,649			53,536
Prepaid expenses and other current assets		3,622			3,242
Total current assets		126,916			116,346
Property, plant and equipment, net		59,027			58,072
Goodwill		113,159			113,028
Intangible assets, net		67,346			68,361
Non-qualified deferred compensation plan		4,706			4,148
Right of use assets		14,514			13,153
Deferred income taxes		1,547			1,448
Other assets		3,567			3,636
Total assets	$	390,782		$	378,192
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	20,454		$	19,961
Accrued expenses		16,768			23,122
Deferred revenue		3,582			4,679
Lease liabilities		2,938			2,517
Income taxes payable		4,450			1,682
Current portion of long-term debt		4,000			4,000
Total current liabilities		52,192			55,961
Long-term debt, excluding current installments		56,000			51,000
Deferred income taxes		-			448
Non-qualified deferred compensation plan		4,750			4,167
Lease liabilities		11,873			10,851
Other liabilities		19,483			18,220
Total liabilities		144,298			140,647
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized; no shares issued		-			-
Common stock, $.01 par value, 20,000,000 shares authorized; 7,642,529 and 7,612,970 shares issued and outstanding, respectively,  at March 31, 2023; 7,611,244 and 7,581,685 shares issued and  outstanding, respectively, at December 31, 2022		76			76
Additional paid-in capital		34,777			36,070
Retained earnings		212,335			202,596
Accumulated other comprehensive loss		(117	)		(610	)
Treasury stock at cost, 29,559 shares at March 31, 2023 and 29,559 shares at December 31, 2022		(587	)		(587	)
Total stockholders’ equity		246,484			237,545
Total liabilities and stockholders' equity	$	390,782		$	378,192

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

UFP Technologies, Inc.

Condensed Consolidated Statements of Income

and Comprehensive Income

(In thousands, except per share data)

(Unaudited)

	Three Months Ended
	March 31,
	2023		2022
Net sales	$	97,753	$	71,242
Cost of sales		69,052		54,108
Gross profit		28,701		17,134
Selling, general & administrative expenses		13,006		10,011
Acquisition costs		-		775
Change in fair value of contingent consideration		2,853		-
Loss (Gain) on disposal of property, plant & equipment		1		(12	)
Operating income		12,841		6,360
Interest expense, net		869		327
Other expense (income)		77		(52	)
Income before income tax expense		11,895		6,085
Income tax expense		2,156		1,227
Net income	$	9,739	$	4,858
Net income per share:
Basic	$	1.28	$	0.64
Diluted	$	1.27	$	0.64
Weighted average common shares outstanding:
Basic		7,592		7,544
Diluted		7,681		7,630
Comprehensive Income
Net Income	$	9,739	$	4,858
Other comprehensive income:
Foreign currency translation gain		493		381
Other comprehensive gain		493		381
Comprehensive income	$	10,232	$	5,239

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

UFP TECHNOLOGIES, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)

Three Months Ended March 31, 2023
											Accumulated
						Additional					other								Total
	Common Stock					Paid-in			Retained		comprehensive			Treasury Stock					Stockholders'
	Shares			Amount		Capital			Earnings		income (loss)			Shares		Amount			Equity
Balance at December 31, 2022		7,582		$	76	$	36,070		$	202,596	$	(610	)		30	$	(587	)	$	237,545
Share-based compensation		48			-		1,056			-		-			-		-			1,056
Exercise of stock options net of shares presented for exercise		4			-		109			-		-			-		-			109
Net share settlement of RSU's		(21	)		-		(2,522	)		-		-					-			(2,522	)
Issuance of common stock		-			-		64			-		-			-		-			64
Other comprehensive income		-			-		-			-		493			-		-			493
Net income		-			-		-			9,739		-			-		-			9,739
Balance at March 31, 2023		7,613		$	76	$	34,777		$	212,335	$	(117	)		30	$	(587	)	$	246,484

Three Months Ended March 31, 2022
											Accumulated
						Additional					other							Total
	Common Stock					Paid-in			Retained		comprehensive		Treasury Stock					Stockholders'
	Shares			Amount		Capital			Earnings		income		Shares		Amount			Equity
Balance at December 31, 2021		7,535		$	75	$	34,151		$	160,807	$	-		30	$	(587	)	$	194,446
Share-based compensation		46			1		691			-		-		-		-			692
Net share settlement of RSU's		(20	)		-		(1,299	)		-		-		-		-			(1,299	)
Other comprehensive income		-			-		-			-		381		-		-			381
Net income		-			-		-			4,858		-		-		-			4,858
Balance at March 31, 2022		7,561		$	76	$	33,543		$	165,665	$	381		30	$	(587	)	$	199,078

The accompanying notes are an integral part of these consolidated financial statements.

5

UFP Technologies, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Three Months Ended
	March 31,
	2023			2022
Cash flows from operating activities:
Net income	$	9,739		$	4,858
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,777			3,016
Loss (Gain) on disposal of property, plant & equipment		1			(12	)
Share-based compensation		1,056			692
Change in fair value of contingent consideration		2,853			-
Deferred income taxes		(545	)		(440	)
Changes in operating assets and liabilities:
Receivables, net		(4,863	)		(4,467	)
Inventories		(3,054	)		(7,826	)
Prepaid expenses and other current assets		(377	)		(1,712	)
Other assets		(1,850	)		308
Accounts payable		65			4,105
Accrued expenses		(6,197	)		(3,365	)
Deferred revenue		(1,098	)		793
Income taxes payable		2,765			1,130
Non-qualified deferred compensation plan and other liabilities		451			(296	)
Net cash provided by (used in) operating activities		1,723			(3,216	)
Cash flows from investing activities:
Additions to property, plant, and equipment		(2,179	)		(2,334	)
Acquisition of Advant, net of cash acquired		-			(20,768	)
Acquisition of DAS Medical, working capital adjustment		-			115
Proceeds from sale of fixed assets		2			12
Net cash used in investing activities		(2,177	)		(22,975	)
Cash flows from financing activities:
Proceeds from advances on revolving line of credit		6,000			28,000
Payments on revolving line of credit		-			(7,000	)
Principal payments of long-term debt		(1,000	)		(1,000	)
Principal payments on finance lease obligations		(16	)		(16	)
Proceeds from the exercise of stock options		109			-
Payment of statutory withholdings for restricted stock units vested		(2,522	)		(1,299	)
Net cash provided by financing activities		2,571			18,685
Effect of foreign currency exchange rates on cash and cash equivalents		(65	)		41
Net increase (decrease) in cash and cash equivalents		2,052			(7,465	)
Cash and cash equivalents at beginning of period		4,451			11,117
Cash and cash equivalents at end of period	$	6,503		$	3,652

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

Notes to Interim Condensed Consolidated Financial Statements

(1) Basis of Presentation

The interim condensed consolidated financial statements of UFP Technologies, Inc. (the “Company”) presented herein, have been prepared pursuant to the rules of the Securities and Exchange Commission for quarterly reports on Form 10-Q and do not include all the information and note disclosures required by accounting principles generally accepted in the United States of America. These statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2022, included in the Company's 2022 Annual Report on Form 10-K, as filed with the Securities and Exchange Commission.

The condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022, the condensed consolidated statements of income and comprehensive income for the three months ended March 31, 2023 and 2022, the condensed consolidated statements of stockholders’ equity for the three months ended March 31, 2023 and 2022, and the condensed consolidated statements of cash flows for the three months ended March 31, 2023 and 2022 are unaudited but, in the opinion of management, include all adjustments (consisting of normal, recurring adjustments) necessary for a fair presentation of results for these interim periods. The condensed consolidated balance sheet as of December 31, 2022 has been derived from the Company’s annual financial statements that were audited by an independent registered public accounting firm but does not include all of the information and footnotes required for complete annual financial statements.

The preparation of 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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

The results of operations for the three-month period ended March 31, 2023 are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, 2023.

Recent Accounting Pronouncements

There are no newly issued accounting pronouncements that the Company expects to have a material effect on the financial statements.

(2) Acquisition and Divestiture

Molded Fiber

On July 26, 2022, pursuant to a share purchase agreement and related agreements, the Company sold its former wholly owned subsidiary Moulded Fiber Technology, Inc. (“MFT”) and related real estate in Iowa to CKF USA INCORPORATED (“CKF”) (a Delaware Corporation) for approximately $31.5 million (including a working capital adjustment of approximately $0.1 million that decreased the total consideration). The net book value of the assets sold were approximately $15.4 million and the Company recorded a net gain on sale of approximately $15.7 million, which was recorded in the year ended December 31, 2022. $2.6 million of the purchase price is being held in escrow to indemnify CKF against certain claims, losses, and liabilities. The Securities Purchase Agreement contains customary representations, warranties, and covenants customary for transactions of this type. Proceeds from the sale were used to pay down debt on the Company’s revolving credit facility, as well as income tax obligations on the related gain.

Advant Medical

On March 16, 2022 the Company purchased 100% of the outstanding shares of common stock of Advant Medical, Ltd., Advant Medical Inc. and Advant Medical Costa Rica, Limitada, (together Advant), pursuant to a Stock Purchase Agreement and related agreements, for an aggregate purchase price of €19.0 million in cash along with a working capital adjustment at closing. Total consideration in U.S. Dollars amounted to approximately $21.2 million. The purchase price was subject to additional adjustment based upon Advant’s final working capital at closing. A portion of the purchase price is being held in escrow to indemnify the Company against certain claims, losses, and liabilities. The Stock Purchase Agreement contains customary representations, warranties, and covenants customary for transactions of this type.

7

 

Founded in 1993, Advant is headquartered in Galway, Ireland, with operations in Costa Rica and partner manufacturing in Mexico. Advant is a developer and manufacturer of Class I, II, and III medical devices and packaging, primarily for catheters and guide wires.

The following table summarizes the allocation of consideration paid to the acquisition date fair value of the assets acquired and liabilities assumed based on management’s estimates of fair value (in thousands):

Fair value of considerations transferred
Cash paid at closing	$	23,608
Other liability		395
Cash from Advant		(2,840	)
Total consideration	$	21,163
Purchase price allocation
Accounts receivable	$	2,299
Inventory		2,410
Other current assets		213
Property, plant, and equipment		5,704
Customer contracts & relationships		2,925
Intellectual property		2,127
Non-compete agreement		259
Lease right of use assets		289
Other assets		41
Goodwill		7,140
Total identifiable assets	$	23,407
Accounts payable		(772	)
Accrued expenses		(668	)
Income taxes		(66	)
Deferred taxes		(449	)
Lease liabilities		(289	)
Net assets acquired	$	21,163

Acquisition costs associated with the transaction through the first quarter of 2022 were approximately $669 thousand, of which $639 thousand was charged to expense in the quarter ended March 31, 2022 and $30 thousand was charged to expense in the year ended December 31, 2021. These costs were primarily for legal services, valuation services and stamp duty filings and are reflected on the face of the condensed consolidated statements of income and comprehensive income.

The amount of revenue and earnings of Advant recognized since the acquisition date through the first quarter of 2022 was approximately $824 thousand and $63 thousand, respectively, and is included in the condensed consolidated statements of income and comprehensive income for the period ended March 31, 2022.

Pro-forma statements

The following table contains an unaudited pro forma condensed consolidated statement of operations for the three-month period ended March 31, 2022, as if the Advant acquisition had occurred at the beginning of 2022 (in thousands):

8

 

	Three-month Period Ended
	March 31, 2022
	(Unaudited)
Sales	$	75,469
Operating income	$	7,023
Net income	$	5,346
Earnings per share:
Basic	$	0.71
Diluted	$	0.70

The above unaudited pro forma information is presented for illustrative purposes only and may not be indica‐tive of the results of operations that would have occurred had both acquisitions occurred as presented. In addition, future results may vary significantly from the results reflected in such pro forma information.

(3) Revenue Recognition

The Company recognizes revenue when a customer obtains control of a promised good or service. The amount of revenue recognized reflects the consideration that the Company expects to be entitled to in exchange for promised goods or services. The Company recognizes revenue in accordance with the core principles of ASC 606 which include (1) identifying the contract with a customer, (2) identifying separate performance obligations within the contract, (3) determining the transaction price, (4) allocating the transaction price to the performance obligations, and (5) recognizing revenue. The Company recognizes all but an immaterial portion of its product sales upon shipment. The Company recognizes revenue from the sale of tooling and machinery upon customer acceptance. The Company recognizes revenue from engineering services, which are primarily product development services, as the services are performed or as otherwise determined based on the substance of the agreement. The Company recognizes revenue from bill and hold transactions at the time the specified goods are complete and available to the customer. In the ordinary course of business, the Company accepts sales returns from customers for defective goods, such amounts being immaterial. Although only applicable to an insignificant number of transactions, the Company has elected to exclude sales taxes from the transaction price. The Company has elected to account for shipping and handling activities for which the Company is responsible under the terms and conditions of the sale not as performance obligations but rather as fulfillment costs. These activities are required to fulfill the Company’s promise to transfer the good and are expensed when revenue is recognized.

Disaggregated Revenue

The following table presents the Company’s revenue disaggregated by the major types of goods and services sold to the Company’s customers (in thousands):

	Three Months Ended
	March 31,
Net sales of:	2023		2022
Products	$	94,692	$	69,505
Tooling and Machinery		1,294		478
Engineering services		1,767		1,259
Total net sales	$	97,753	$	71,242

Contract balances

Timing of revenue recognition may differ from the timing of invoicing to customers. When invoicing occurs prior to revenue recognition, the Company has contract liabilities included within “deferred revenue” on the condensed consolidated balance sheet.

The following table presents opening and closing balances of contract liabilities for the three-month periods ended March 31, 2023 and 2022 (in thousands):

9

 

	Contract Liabilities
	Three Months Ended March 31,
	2023			2022
Deferred revenue - beginning of period	$	4,679		$	4,247
Increases due to consideration received from customers		999			1,116
Revenue recognized		(2,096	)		(323	)
Deferred revenue - end of period	$	3,582		$	5,040

Revenue recognized during the three-month periods ended March 31, 2023 and 2022 from amounts included in deferred revenue at the beginning of the period were approximately $1.9 million and $273 thousand, respectively.

When invoicing occurs after revenue recognition, the Company has contract assets, included within “receivables, net” on the condensed consolidated balance sheets.

The following table presents opening and closing balances of contract assets for the three-month periods ended March 31, 2023 and 2022 (in thousands):

	Contract Assets
	Three Months Ended March 31,
	2023			2022
Unbilled Receivables - beginning of period	$	270		$	74
Increases due to revenue recognized, not invoiced to customers		1,379			740
Decreases due to customer invoicing		(1,326	)		(412	)
Unbilled Receivables - end of period	$	323		$	402

(4) Supplemental Cash Flow Information

Supplemental cash flow information consists of the following (in thousands):

	Three Months Ended
	March 31,
	2023			2022
Cash paid for:
Interest	$	832		$	314
Income taxes, net of refunds		(50	)		210
Non-cash investing and financing activities:
Capital additions accrued but not yet paid	$	347		$	185
Operating lease right of use assets		1,524			289
Operating lease liabilities		(1,560	)		(289	)

10

(5) Receivables and Allowance for Credit Losses

Receivables consist of the following (in thousands):

	March 31,			December 31,
	2023			2022
Accounts receivable–trade	$	60,868		$	55,850
Less allowance for credit losses		(726	)		(733	)
Receivables, net	$	60,142		$	55,117

The Company is exposed to credit losses primarily through sales of products and services. The Company’s expected loss allowance methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions, and a review of the current status of customers' trade accounts receivables. Due to the short-term nature of such receivables, the estimate of the amount of accounts receivable that may not be collected is based on aging of the accounts receivable balances and the financial condition of customers. Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. The Company’s monitoring activities include timely account reconciliation, dispute resolution, payment confirmation, consideration of customers' financial condition and macroeconomic conditions. Balances are written off when determined to be uncollectible. Estimates based on an assessment of anticipated payment and all other historical, current, and future information that is reasonably available are used to determine the allowance.

The following table provides a roll-forward of the allowance for credit losses that is deducted from accounts receivable to present the net amount expected to be collected for the three months ended March 31, 2023 and 2022 (in thousands):

	Allowance for Credit Losses
	Three Months Ended March 31,
	2023			2022
Allowance - beginning of period	$	733		$	519
Adjustment for expected credit losses		(6	)		(51	)
Amounts written off against the allowance		(1	)		(23	)
Allowance - end of period	$	726		$	445

(6) Fair Value of Financial Instruments

Financial instruments recorded at fair value in the consolidated 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.

11

 

The following table presents the fair value and hierarchy levels, for financial assets that are measured at fair value on a recurring basis (in thousands):

	March 31, 2023		December 31, 2022
Level 3
Purchase price contingent consideration (Note 2):
Accrued contingent consideration (earn-out)	$	17,421	$	14,568
Present value of non-competition payments		7,903		10,043

In connection with the acquisitions of Contech Medical 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 2021 acquisitions combined are up to $25 million, of which $20 million remains to be potentially paid as of March 31, 2023 and December 31, 2022. The fair value of the liabilities 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 this calculation were managements financial forecasts, discount rate and various probability 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 change in fair value of contingent consideration for the acquisition is included in change in fair value of contingent consideration in the condensed consolidated statements of income and comprehensive income.

Also in connection with the DAS Medical acquisition, the Company has entered into Non-Competition Agreements with the beneficiaries and the Company has agreed to pay additional consideration to the parties to the Non-Competition Agreements, including an aggregate of $10.0 million in payments over the ten years following the closing of the DAS Medical acquisition for the 10-year noncompetition covenants of certain key owners. The present value of the Non-Competition Agreements totaled approximately $7.9 million. This liability is considered to be a Level 3 financial liability that is re-measured each reporting period. The change in fair value of contingent consideration for the acquisition is included in change in fair value of contingent consideration in the condensed consolidated statements of income and comprehensive income.

The Company has financial instruments, such as accounts receivable, accounts payable, and accrued expenses, that 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 estimated borrowing rate currently available to the Company.

(7) Share-Based Compensation

Share-based compensation is measured at the grant date based on the fair value of the award and is recognized as an expense over the requisite service period (generally the vesting period of the equity grant).

The Company issues share-based awards through several plans that are described in detail in the notes to the consolidated financial statements for the year ended December 31, 2022. The compensation cost charged against income for those plans is included in selling, general & administrative expenses as follows (in thousands):

	Three Months Ended
	March 31,
Share-based compensation related to:	2023		2022
Common stock grants	$	100	$	100
Stock option grants		94		53
Restricted Stock Unit Awards ("RSUs")		862		539
Total share-based compensation	$	1,056	$	692

12

 

The total income tax benefit recognized in the condensed consolidated statements of income and comprehensive income for share-based compensa‐tion arrangements was approximately $839 thousand and $381 thousand for the three-month periods ended March 31, 2023 and 2022, respectively.

Common stock grants

The compensation expense for common stock granted during the three-month period ended March 31, 2023, was determined based on the market price of the shares on the date of grant.

Stock Option grants

The following is a summary of stock option activity under all plans for the three-month period ended March 31, 2023:

	Shares Under Options			Weighted Average Exercise Price (per share)		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2022		92,075		$	39.98
Granted		7,935			111.54
Exercised		(3,780	)		28.94
Outstanding at March 31, 2023		96,230		$	46.31		5.68	$	8,038
Exercisable at March 31, 2023		78,419		$	35.81		5.31	$	7,374
Vested and expected to vest at March 31, 2023		96,230		$	46.31	$	5.68	$	8,038

During the three-month periods ended March 31, 2023 and 2022, the total intrinsic value of all options exercised was approximately $371 thousand and $0, respectively, and the total amount of consideration received by the Company from the exercised options was approximately $109 thousand and $0, 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 three-month period ended March 31, 2023, 861 shares were surrendered at an average market price of $127.05. Zero shares were surrendered during the same period in 2022.

Restricted Stock Unit awards

The following table summarizes information about RSU activity during the three-month period ended March 31, 2023:

	Restricted Stock Units			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2022		102,048		$	56.02
Awarded		44,154			111.54
Shares vested		(48,244	)		53.39
Shares forfeited		(99	)		97.61
Outstanding at March 31, 2023		97,859		$	67.83

At the Company’s discretion, upon vesting, 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 and issued to the RSU holder. During the three-month periods ended March 31, 2023 and 2022, 20,457 and 19,376 shares were surrendered at an average market price of $117.95 and $67.02, respectively.

As of March 31, 2023, the Company had approximately $8.0 million of unrecognized compensation expense that is expected to be recognized over a period of 3 years.

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(8) Inventories

Inventories are stated at the lower of cost (determined using the first-in, first-out method) or net realizable value, and consist of the following at the stated dates (in thousands):

	March 31,		December 31,
	2023		2022
Raw materials	$	41,106	$	42,475
Work in process		6,113		4,183
Finished goods		9,430		6,878
Total inventory	$	56,649	$	53,536

(9) Property, Plant and Equipment

Property, plant, and equipment consist of the following (in thousands):

	March 31,			December 31,
	2023			2022
Land and improvements	$	4,832		$	4,811
Buildings and improvements		34,525			34,446
Leasehold improvements		7,182			5,503
Machinery & equipment		52,966			52,233
Furniture, fixtures, computers & software		6,416			6,401
Construction in progress		7,377			7,272
Property, plant and equipment	$	113,298		$	110,666
Accumulated depreciation and amortization		(54,271	)		(52,594	)
Net property, plant and equipment	$	59,027		$	58,072

(10) Leases

The Company has operating and finance leases for offices, manufacturing plants, vehicles and certain office and manufacturing equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company accounts for each separate lease component of a contract and its associated non-lease components as a single lease component, thus causing all fixed payments to be capitalized. Variable lease payment amounts that cannot be determined at the commencement of the lease such as increases in lease payments based on changes in index rates or usage, are not included in the right of use (“ROU”) assets or lease liabilities. These are expensed as incurred and recorded as variable lease expense. The Company determines if an arrangement is a lease at the inception of a contract. Operating and finance lease ROU assets and operating and finance lease liabilities are stated separately in the condensed consolidated balance sheet. 

ROU assets represent the Company's right to use an underlying asset during the lease term and lease liabilities represent the Company's obligation to make lease payments pursuant to the lease.  ROU assets and lease liabilities are recognized at commencement date based on the net present value of fixed lease payments over the lease term.  The Company's assumed lease term includes options to extend or terminate the lease when it is reasonably certain that it will exercise that option.  ROU assets are also adjusted for any deferred or accrued rent. As the Company's leases do not typically provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

14

 

ROU assets and lease liabilities consist of the following (in thousands):

	March 31,		December 31,
	2023		2022
Operating lease ROU assets	$	14,318	$	12,942
Finance lease ROU assets		196		211
Total ROU assets	$	14,514	$	13,153
Operating lease liabilities - current	$	2,879	$	2,458
Finance lease liabilities - current		59		59
Total lease liabilities - current	$	2,938	$	2,517
Operating lease liabilities - long-term	$	11,732	$	10,695
Finance lease liabilities - long-term		141		156
Total lease liabilities - long-term	$	11,873	$	10,851

	Three Months Ended
	March 31,
	($ in thousands)
	2023		2022
Lease Cost:
Finance lease cost:
Amortization of right of use assets	$	15	$	15
Interest on lease liabilities		1		1
Operating lease cost		711		652
Variable lease cost		83		70
Short-term lease cost		7		17
Total lease cost	$	817	$	755

Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases	$	683		$	540
Financing cash flows from finance leases		16			16
Weighted-average remaining lease term (years):
Finance		3.29			4.29
Operating		5.06			3.62
Weighted-average discount rate:
Finance		2.10	%		2.10	%
Operating		3.42	%		2.53	%

The aggregate future lease payments for leases as of March 31, 2023 are as follows (in thousands):

	Finance			Operating
Remainder of 2023	$	47		$	2,192
2024		63			2,950
2025		63			2,779
2026		29			2,402
2027		6			2,031
Thereafter		-			3,774
Total lease payments		208			16,128
Less: Interest		(8	)		(1,517	)
Present value of lease liabilities	$	200		$	14,611

15

(11) Income Per Share

Basic income per share is based on the weighted average number of shares of common stock outstanding. Diluted income per share is based upon the weighted average number of common shares outstanding and dilutive common stock equivalent shares outstanding during each period.

The weighted average number of shares used to compute basic and diluted net income per share consisted of the following (in thousands):

	Three Months Ended
	March 31,
	2023		2022
Basic weighted average common shares outstanding		7,592		7,544
Weighted average common equivalent shares due to restricted stock, stock options and RSUs		89		86
Diluted weighted average common shares outstanding		7,681		7,630

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 income per share because the effect would be antidilutive. For both the three-month periods ended March 31, 2023 and 2022, there were no stock awards excluded from the computation of diluted earnings per share for this reason.

(12) Segment Reporting

The Company consists of a single operating and reportable segment.

Revenues shipped to customers outside of the United States comprised approximately 16.6% and 12.0% of the Company’s consolidated revenues for the three months ended March 31, 2023 and 2022, respectively.

One customer comprised approximately 22% and 15% of the Company’s consolidated revenues for the three-month periods ended March 31, 2023 and 2022, respectively. One customer represented approximately 17% and 10% of gross accounts receivable at March 31, 2023 and December 31, 2022, respectively. Approximately 18% of all long-lived assets are located outside of the United States.

The Company’s products are primarily sold to customers within the Medical, Automotive, Aerospace & Defense, and Industrial/Other markets. Net sales by market for the three-month periods ended March 31, 2023 and 2022 are as follows (in thousands):

	Three Months Ended March 31,
	2023					2022
Market	Net Sales		%			Net Sales		%
Medical	$	83,804		85.7	%	$	52,554		73.8	%
Automotive		4,347		4.4	%		4,351		6.1	%
Aerospace & Defense		4,217		4.3	%		3,755		5.3	%
Industrial / Other		5,385		5.6	%		10,582		14.8	%
Net Sales	$	97,753		100.0	%	$	71,242		100.0	%

Certain amounts for the three months ended March 31, 2022 were reclassified between markets to conform to the current year presentation.

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(13) Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill for the three months ended March 31, 2023 are as follows (in thousands):

	Goodwill
December 31, 2022	$	113,028
Foreign currency translation		131
March 31, 2023	$	113,159

The carrying values of the Company’s definite lived intangible assets as of March 31, 2023 are as follows (in thousands):

	Intelletual Property / Tradename & Brand			Non- Compete			Customer List			Total
Weighted-average amortization period	11.9 years			9.3 years			20 years
Gross amount	$	7,103		$	5,502		$	65,228		$	77,833
Accumulated amortization		(879	)		(1,125	)		(8,483	)	$	(10,487	)
Net balance	$	6,224		$	4,377		$	56,745		$	67,346

Amortization expense related to intangible assets was approximately $1.1 million and $1.0 million for the three-month periods ended March 31, 2023 and 2022 . The estimated remaining amortization expense as of March 31, 2023 is as follows (in thousands):

Remainder of 2023	$	3,308
2024		4,401
2025		4,401
2026		4,399
2027		4,397
2028		4,350
Thereafter		42,090
Total	$	67,346

(14) Other Long-Term Liabilities

Other long-term liabilities consist of the following (in thousands):

	March 31,		December 31,
	2023		2022
Accrued contingent consideration (earn-out)	$	12,421	$	9,568
Present value of non-competition payments		6,097		8,155
Other		965		497
	$	19,483	$	18,220

(15) Income Taxes

The determination of income tax expense in the accompanying unaudited condensed consolidated statements of income is based upon the estimated effective tax rate for the year, adjusted for the impact of any discrete items which are accounted for in the period in which they occur. The Company recorded income tax expense of approximately 18.1% and 20.2% of income before income tax expense for the three-month periods ended March 31, 2023 and 2022, respectively.

17

(16) Indebtedness

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.

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 loam requires quarterly principal payments of $1,000,000 commencing on March 31, 2022. The proceeds of the Second Amended and Restated Credit Agreement may be used for general corporate purposes, including funding certain permitted acquisitions. The Company’s obligations under the Second Amended and Restated Credit Agreement are guaranteed by the Subsidiary Guarantors.

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 .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. At March 31, 2023, the Company had approximately $60 million in borrowings outstanding under the Second Amended and Restated Credit Agreement, which were used as partial consideration for the DAS Medical and Advant 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 March 31, 2023, the applicable interest rate was approximately 6.1% and the Company was in compliance with all covenants under the Second Amended and Restated Credit Agreement.

Long-term debt consists of the following (in thousands):

	March 31, 2023
Revolving credit facility	$	25,000
Term loan		35,000
Total long-term debt		60,000
Current portion		(4,000	)
Long-term debt, excluding current portion	$	56,000

Future maturities of long-term debt at March 31, 2023 are as follows (in thousands):

	Term Loan		Revolving credit facility		Total
Remainder of 2023	$	3,000	$	-	$	3,000
2024		4,000		-		4,000
2025		4,000		-		4,000
2026		24,000		25,000		49,000
	$	35,000	$	25,000	$	60,000

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ITEM 2:         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). 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; statements about the potential further impact the novel coronavirus ("COVID-19") pandemic may have on the Company’s business, financial condition and results of operations, including with respect to the different markets in which the Company participates, the demand for its products, the well-being and availability of the Company’s employees, the continuing operation of the Company’s locations, delayed payments by the Company’s customers and the potential for reduced or canceled orders, the Company’s efforts to address the pandemic, including regarding the safety of its employees, the maintenance of its facilities and the sufficiency of the Company’s supply chain, inventory, liquidity and capital resources, including increased costs in connection with such efforts, the impact of the pandemic on the businesses of the Company’s suppliers and customers, and the overall impact the pandemic may have on the Company’s financial results in 2023; statements about the Company’s acquisition strategies and opportunities and the Company’s growth potential and strategies for growth; expectations regarding customer demand; expectations regarding the Company’s liquidity and capital resources, including the sufficiency of its cash reserves and the availability of borrowing capacity to fund operations and/or potential future acquisitions; anticipated revenues and the timing of such revenues; expectations about shifting the Company’s book of business to higher-margin, longer-run opportunities; anticipated trends and potential advantages in the different markets in which the Company competes, including the medical, aerospace and defense, automotive, consumer, electronics, and industrial markets, and the Company’s plans to expand in certain of its markets; statements regarding anticipated advantages the Company expects to realize from its investments and capital expenditures; statements regarding anticipated advantages to improvements and alterations at the Company’s existing plants; expectations regarding the Company’s manufacturing capacity, operating efficiencies, and new production equipment; statements about new product offerings and program launches; statements about the Company’s participation and growth in multiple markets; statements about the Company’s business opportunities; and any indication that the Company may be able to sustain or increase its sales, earnings or earnings per share, or its sales, earnings or earnings per share growth rates.

Investors are cautioned that such forward-looking statements involve risks and uncertainties that could adversely affect the Company’s business and prospects, and otherwise cause actual results to differ materially from those anticipated by such forward-looking statements, or otherwise, including without limitation: the ongoing effects of the COVID-19 pandemic and its impact on the markets in which the Company participates, including its impact on the Company’s customers, suppliers and employees, as well as the U.S. and worldwide economies; risks and uncertainties associated with the ongoing effects of the COVID-19 pandemic and its impact on the Company’s business, financial condition and results of operations, including risks relating to decreased, including substantially decreased, demand for the Company’s products; risks relating to the potential closure of any of the Company’s facilities or the unavailability of key personnel or other employees; risks that the Company’s inventory, cash reserves, liquidity or capital resources may be insufficient; risks relating to delayed payments by our customers and the potential for reduced or canceled orders; risks relating to the increased costs associated with the Company’s efforts to respond to the pandemic; risks associated with the identification of suitable acquisition candidates and the successful, efficient execution of acquisition transactions, the integration of any such acquisition candidates, the value of those acquisitions to our customers and shareholders, and the financing of such acquisitions; risks related to our indebtedness and compliance with covenants contained in our financing arrangements, and whether any available financing may be sufficient to address our needs; risks associated with efforts to shift the Company’s book of business to higher-margin, longer-run opportunities; risks associated with the Company’s entry into and growth in certain markets; risks and uncertainties associated with seeking and implementing manufacturing efficiencies and implementing new production equipment; risks and uncertainties associated with growth of the Company’s business and increases to sales, earnings and earnings per share; and risks associated with new product and program launches. Accordingly, actual results may differ materially.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential,” and similar expressions intended to identify forward-looking statements. Our actual results could be different from the results described in or anticipated by our forward-looking statements due to the inherent uncertainty of estimates, forecasts, and projections, and may be materially better or worse than anticipated. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements represent our current beliefs, estimates and assumptions and are only as of the date of this Report. We expressly disclaim any duty to provide updates to forward-looking statements, and the estimates and assumptions associated with them, after the date of this Report, in order to reflect changes in circumstances or expectations, or the occurrence of unanticipated events, except to the extent required by applicable securities laws. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed above and under “Risk Factors” set forth in Part I Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as well as the risks and uncertainties discussed elsewhere in this Report. We qualify all of our forward-looking statements by these cautionary statements. 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.

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Unless the context requires otherwise, the terms “we”, “us”, “our”, or “the Company” refer to UFP Technologies, Inc. and its consolidated subsidiaries.

Overview

UFP Technologies is a designer and custom manufacturer of comprehensive solutions for medical devices, sterile packaging, and other highly engineered custom products. UFP 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, wound care, wearables, orthopedic soft goods, and orthopedic implants.

The Company’s current strategy includes further organic growth and growth through strategic acquisitions.

Sales for the Company for the three-month period ended March 31, 2023 increased 37.2% to $97.8 million from $71.2 million in the same period last year, primarily due to an increase in organic sales of approximately 35.8%. The organic sales increase was primarily due to organic growth in the medical market of 48.1%. Gross profit as a percentage of sales (“gross margin”) for the three-month period ended March 31, 2023 increased to 29.4% from 24.1% in the same period last year, largely due to improved operating efficiencies and price adjustments in response to inflationary increases in input costs. Operating income and net income increased 101.9% and 100.5%, respectively.

Results of Operations

Sales

Sales for the three-month period ended March 31, 2023 increased approximately 37.2% to $97.8 million from sales of $71.2 million for the same period in 2022. The increase in sales is primarily due to increases in sales to customers in the Medical markets of 59.5%, including $6.0 million of sales from Advant Medical which was acquired on March 16, 2022. Sales to all other markets declined 25.4%, primarily due to the Company’s disposition of its molded fiber business in July, 2022 (see “Note 2. Acquisition and Divestiture” in the notes to our interim condensed consolidated financial statements).

Gross Profit

Gross margin increased to 29.4% for the three-month period ended March 31, 2023, from 24.1% for the same period in 2022. As a percentage of sales, material and labor costs collectively increased 0.9% while overhead costs decreased 6.2%. 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 and price adjustments in response to inflationary increases in input costs.

Selling, General and Administrative Expenses

Selling, general, and administrative expenses (“SG&A”) increased approximately 29.9% to $13.0 million for the three-month period ended March 31, 2023, from $10.0 million for the same period in 2022 largely due to increased compensation, benefits and payroll tax expenses and the additional SG&A expenses from the Advant acquisition. As a percentage of sales, SG&A decreased to 13.3% for the three-month period ended March 31, 2023, from 14.1% for the same three-month period in 2022, primarily due to the leverage of organic sales growth over relatively fixed SG&A.

20

Change in fair value of contingent consideration

In connection with the acquisitions of Contech Medical and DAS Medical in 2021, the Company is required to make contingent payments, subject to the entities achieving certain financial performance thresholds. The potential contingent consideration payments for both the DAS Medical and Contech Medical acquisitions combined are $25 million, of which $20 million remains to potentially be paid as of March 31, 2023 and December 31, 2022. The fair value of the liabilities 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 this calculation were managements 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 March 31, 2023 totaled approximately $17.4 million. The change in fair value of contingent consideration for the DAS Medical acquisition for the three-months ended March 31, 2023, resulted in an expense of approximately $2.9 million, and was included in change in fair value of contingent consideration in the condensed consolidated statements of income and comprehensive income. The Company paid $5 million during the fourth quarter of 2022 to fully satisfy the contingent consideration for the Contech Medical acquisition.

Interest expense, net

Net interest expense was approximately $869 thousand and $327 thousand for the three-month periods ended March 31, 2023 and 2022, respectively. The increase was primarily due to borrowings to fund the Company’s recent acquisitions.

Other expense (income)

Other expense was approximately $77 thousand and other income was approximately $52 thousand for the three-month periods ended March 31, 2023 and 2022, respectively. The increase in other expense was primarily generated by foreign currency transaction losses.

Income Taxes

The Company recorded tax expense of approximately 18.1% and 20.2% of income before income tax expense, respectively, for each of the three-month periods ended March 31, 2023 and 2022. The decrease in the effective tax rate for the current period as compared to the prior period was largely due to increased discrete tax benefits associated with the issuance of stock compensation as well as lower statutory tax rates from foreign taxable income in 2023.

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 three-month period ended March 31, 2023 was approximately $1.7 million and was primarily a result of net income generated of approximately $9.7 million, depreciation and amortization of approximately $2.8 million, share-based compensation of approximately $1.1 million, a change in the fair value of contingent consideration of approximately $2.9 million, an increase in income taxes payable of approximately $2.8 million, and an increase in other liabilities of approximately $0.5 million.

These cash inflows and adjustments to income were offset by a decrease in deferred taxes of approximately $0.5 million, an increase in accounts receivable of approximately $4.9 million due to higher sales in the last two months of the first quarter of 2023 as compared to the same period in the fourth quarter of 2022, an increase in inventory of approximately $3.1 million due to inventory build for upcoming demand and restocking to historical levels, an increase in prepaid expenses of approximately $0.4 million primarily due to the payment of current year insurance policies, an increase in other assets of approximately $1.9 million due to increased right of use lease assets, a decrease in accrued expenses of approximately $6.2 million due primarily to the payment of accrued compensation and a decrease in deferred revenue of approximately $1.1 million to the recognition of deferred tooling and development revenue.

Net cash used in investing activities during the three-month period ended March 31, 2023 was approximately $2.2 million and was primarily the result of additions of manufacturing machinery and equipment and various building improvements across the Company.

21

Net cash provided by financing activities was approximately $2.6 million during the three-month period ended March 31, 2023, representing borrowings under our credit facility of approximately $6.0 million, partially offset by principal payments of long-term debt of approximately $1.0 million, and payments of statutory withholding for stock options exercised and restricted stock units vested of approximately $2.5 million.

Outstanding and Available Debt

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.

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 loam requires quarterly principal payments of $1,000,000 commencing on March 31, 2022. The proceeds of the Second Amended and Restated Credit Agreement may be used for general corporate purposes, including funding certain permitted acquisitions. The Company’s obligations under the Second Amended and Restated Credit Agreement are guaranteed by the Subsidiary Guarantors.

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 .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. At March 31, 2023, the Company had approximately $60 million in borrowings outstanding under the Second Amended and Restated Credit Agreement, which were used as partial consideration for the DAS Medical and Advant 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 March 31, 2023, the applicable interest rate was approximately 6.1% and the Company was in compliance with all covenants under the Second Amended and Restated Credit Agreement.

Long-term debt consists of the following (in thousands):

	March 31, 2023
Revolving credit facility	$	25,000
Term loan		35,000
Total long-term debt		60,000
Current portion		(4,000	)
Long-term debt, excluding current portion	$	56,000

Future maturities of long-term debt at March 31, 2023 are as follows (in thousands):

	Term Loan		Revolving credit facility		Total
Remainder of 2023	$	3,000	$	-	$	3,000
2024		4,000		-		4,000
2025		4,000		-		4,000
2026		24,000		25,000		49,000
	$	35,000	$	25,000	$	60,000

22

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 amended and restated credit facility. The Company generated cash of approximately $1.7 million from operations during the three months ended March 31, 2023; and 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 draws on the revolving credit facility are possible. Further, the continued economic uncertainty resulting from inflation, the Ukraine war and the COVID-19 pandemic 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.

Throughout fiscal 2023, the Company plans to continue to add capacity to enhance operating efficiencies in its manufacturing plants. 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, will be sufficient to fund its cash flow requirements, including capital asset acquisitions, through the next twelve months.

The Company may also require additional capital in the future to fund capital expenditures, acquisitions, or other investments. These capital requirements could be substantial. The Company anticipates that any future expansion of its business will be financed through existing resources, cash flow from operations, the Company's revolving credit facility, or other new financing. The Company cannot guarantee that it will be able to meet existing financial covenants or obtain other new financing on favorable terms, if at all. The Company's liquidity will be impacted to the extent additional stock repurchases are made under the Company's stock repurchase program.

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. The Company did not repurchase any shares of its common stock under this program in the first three months of 2023 and has not repurchased any shares under this program since 2015. At March 31, 2023 approximately $9.4 million was available for future repurchases of the Company’s common stock under this authorization.

Critical Accounting Estimates

There have been no material changes to the Company’s Critical Accounting Estimates, as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

Commitments and Contractual Obligations

There have been no material changes outside the ordinary course of business to our contractual obligations and commitments, as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

ITEM 3:         QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our market risks as previously disclosed in Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2022.

ITEM 4:         CONTROLS AND PROCEDURES

23

As of the end of the period covered by this report (the “Evaluation Date”), the Company’s management, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in Exchange Act Rule 13a-15(e) or 15d-15(e)). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, is (i) recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (ii) accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

An evaluation was also performed under the supervision and with the participation of our management, including the Company’s Chief Executive Officer and Chief Financial Officer, of any change in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. That evaluation did not identify any change in the Company’s internal control over financial reporting that occurred during our latest fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II:         OTHER INFORMATION

ITEM 1:         LEGAL PROCEEDINGS

The Company is not a party to any material litigation or other material legal proceedings. From time to time, the Company may be a party to various suits, claims and complaints arising in the ordinary course of business. In the opinion of management of the Company, these suits, claims and complaints 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.

ITEM 1A:       RISK FACTORS

The Company faces a number of uncertainties and risks that are difficult to predict and many of which are outside of the Company's control. For a detailed discussion of the risks that affect our business, please refer to Part I, Item IA, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and Part II, Item 1A.  There have been no material changes from the risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

ITEM 2:         UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3:         DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4:         MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5:         OTHER INFORMATION

None.

24

ITEM 6:         EXHIBITS

Exhibit No.	Description
3.1	Second Amended and Restated Bylaws of UFP Technologies, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the SEC on April 24, 2023 (SEC File No. 001-12648)).
31.1	Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer.*
31.2	Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer.*
32.1	Certifications pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
101.INS	Inline XBRL Instance Document.*
101.SCH	Inline XBRL Taxonomy Extension Schema Document.*
101.CAL	Inline XBRL Taxonomy Calculation Linkbase Document.*
101.LAB	Inline XBRL Taxonomy Label Linkbase Document.*
101.PRE	Inline XBRL Taxonomy Presentation Linkbase Document.*
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.*
104	Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101)

_______________

*         Filed herewith.

**         Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

UFP TECHNOLOGIES, INC.

Date: May 10, 2023	By: /s/ R. Jeffrey Bailly
	R. Jeffrey Bailly Chairman, Chief Executive Officer, President, and Director (Principal Executive Officer)
Date: May 10, 2023	By: /s/ Ronald J. Lataille
	Ronald J. Lataille Chief Financial Officer (Principal Financial Officer)

25

EX-31.1

EXHIBIT 31.1

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, R. Jeffrey Bailly, President and Chief Executive Officer of UFP Technologies, Inc. certify that:

1. I have reviewed this quarterly report on Form 10-Q of UFP Technologies, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  May 10, 2023	/s/ R. Jeffrey Bailly
	R. Jeffrey Bailly
	Chairman, Chief Executive Officer, President, and Director
	(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Ronald J. Lataille, Chief Financial Officer of UFP Technologies, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of UFP Technologies, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:   May 10, 2023	/s/ Ronald J. Lataille
	Ronald J. Lataille
	Chief Financial Officer
	(Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

Certification

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), the undersigned officers of UFP Technologies, Inc., a Delaware corporation (the “Company”) do hereby certify that, to the best of such officers’ knowledge and belief, that:

(1)    The Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, (the “Form 10‑Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)    The information contained in the Form 10-Q fairly presents, in all materials respects, the financial condition and results of operations of the Company.

Date:  May 10, 2023	/s/ R. Jeffrey Bailly
	R. Jeffrey Bailly
	Chairman, Chief Executive Officer, President, and Director
	(Principal Executive Officer)
Date:   May 10, 2023	/s/ Ronald J. Lataille
	Ronald J. Lataille
	Chief Financial Officer
	(Principal Financial Officer)

A signed original of these written statements required by Section 906 has been provided to UFP Technologies, Inc. and will be retained by UFP Technologies, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2023	May 02, 2023
Document Information [Line Items]
Entity Central Index Key	0000914156
Entity Registrant Name	UFP TECHNOLOGIES INC
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2023
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2023
Document Transition Report	false
Entity File Number	001-12648
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	04-2314970
Entity Address, Address Line One	100 Hale Street
Entity Address, City or Town	Newburyport
Entity Address, State or Province	MA
Entity Address, Postal Zip Code	01950
City Area Code	978
Local Phone Number	352-2200
Title of 12(b) Security	Common Stock
Trading Symbol	UFPT
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		7,614,197

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 6,503	$ 4,451
Receivables, net	60,142	55,117
Inventories	56,649	53,536
Prepaid expenses and other current assets	3,622	3,242
Total current assets	126,916	116,346
Property, plant and equipment, net	59,027	58,072
Goodwill	113,159	113,028
Intangible assets, net	67,346	68,361
Non-qualified deferred compensation plan	4,706	4,148
Right of use assets	14,514	13,153
Deferred income taxes	1,547	1,448
Other assets	3,567	3,636
Total assets	390,782	378,192
Current liabilities:
Accounts payable	20,454	19,961
Accrued expenses	16,768	23,122
Deferred revenue	3,582	4,679
Lease liabilities	2,938	2,517
Income taxes payable	4,450	1,682
Current portion of long-term debt	4,000	4,000
Total current liabilities	52,192	55,961
Long-term debt, excluding current installments	56,000	51,000
Deferred income taxes	0	448
Non-qualified deferred compensation plan	4,750	4,167
Lease liabilities	11,873	10,851
Other liabilities	19,483	18,220
Total liabilities	144,298	140,647
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized; no shares issued	0	0
Common stock, $.01 par value, 20,000,000 shares authorized; 7,642,529 and 7,612,970 shares issued and outstanding, respectively, at March 31, 2023; 7,611,244 and 7,581,685 shares issued and outstanding, respectively, at December 31, 2022	76	76
Additional paid-in capital	34,777	36,070
Retained earnings	212,335	202,596
Accumulated other comprehensive loss	(117)	(610)
Treasury stock at cost, 29,559 shares at March 31, 2023 and 29,559 shares at December 31, 2022	(587)	(587)
Total stockholders’ equity	246,484	237,545
Total liabilities and stockholders' equity	$ 390,782	$ 378,192

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares	Mar. 31, 2023	Dec. 31, 2022
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	1,000,000	1,000,000
Preferred stock, shares issued (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	20,000,000	20,000,000
Common stock, shares issued (in shares)	7,642,529	7,611,244
Common stock, shares outstanding (in shares)	7,612,970	7,581,685
Treasury stock, shares (in shares)	29,559	29,559

XML

Condensed Consolidated Statements of Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Net sales	$ 97,753	$ 71,242
Cost of sales	69,052	54,108
Gross profit	28,701	17,134
Selling, general & administrative expenses	13,006	10,011
Acquisition costs	0	775
Change in fair value of contingent consideration	(2,853)	0
Loss (Gain) on disposal of property, plant & equipment	1	(12)
Operating income	12,841	6,360
Interest expense, net	869	327
Other expense (income)	77	(52)
Income before income tax expense	11,895	6,085
Income tax expense	2,156	1,227
Net income	$ 9,739	$ 4,858
Net income per share:
Basic (in dollars per share)	$ 1.28	$ 0.64
Diluted (in dollars per share)	$ 1.27	$ 0.64
Weighted average common shares outstanding:
Basic (in shares)	7,592	7,544
Diluted (in shares)	7,681	7,630
Comprehensive Income
Net income	$ 9,739	$ 4,858
Other comprehensive income:
Foreign currency translation gain	493	381
Other comprehensive gain	493	381
Comprehensive income	$ 10,232	$ 5,239

XML

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) shares in Thousands, $ in Thousands	Common Stock Outstanding [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Treasury Stock, Common [Member]	Total
Balance (in shares) at Dec. 31, 2021	7,535				30
Balance at Dec. 31, 2021	$ 75	$ 34,151	$ 160,807	$ 0	$ (587)	$ 194,446
Share-based compensation (in shares)	46				0
Share-based compensation	$ 1	691	0	0	$ 0	692
Net share settlement of RSU's (in shares)	(20)				0
Net share settlement of RSU's	$ 0	(1,299)	0	0	$ 0	(1,299)
Other comprehensive income	0	0	0	381	0	381
Net income	$ 0	0	4,858		$ 0	4,858
Balance (in shares) at Mar. 31, 2022	7,561				30
Balance at Mar. 31, 2022	$ 76	33,543	165,665	381	$ (587)	199,078
Balance (in shares) at Dec. 31, 2022	7,582				30
Balance at Dec. 31, 2022	$ 76	36,070	202,596	(610)	$ (587)	237,545
Share-based compensation (in shares)	48				0
Share-based compensation	$ 0	1,056	0	0	$ 0	1,056
Exercise of stock options net of shares presented for exercise (in shares)	4				0
Exercise of stock options net of shares presented for exercise	$ 0	109	0	0	$ 0	109
Net share settlement of RSU's (in shares)	(21)
Net share settlement of RSU's	$ 0	(2,522)	0	0	$ 0	(2,522)
Issuance of common stock (in shares)	0				0
Issuance of common stock	$ 0	64	0	0	$ 0	64
Other comprehensive income	0	0	0	493	0	493
Net income	$ 0	0	9,739		$ 0	9,739
Balance (in shares) at Mar. 31, 2023	7,613				30
Balance at Mar. 31, 2023	$ 76	$ 34,777	$ 212,335	$ (117)	$ (587)	$ 246,484

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) $ in Thousands, € in Millions	3 Months Ended
	Mar. 31, 2023 USD ($)	Mar. 31, 2022 USD ($)
Cash flows from operating activities:
Net income	$ 9,739	$ 4,858
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,777	3,016
Loss (Gain) on disposal of property, plant & equipment	1	(12)
Share-based compensation	1,056	692
Change in fair value of contingent consideration	2,853	0
Deferred income taxes	(545)	(440)
Changes in operating assets and liabilities:
Receivables, net	(4,863)	(4,467)
Inventories	(3,054)	(7,826)
Prepaid expenses and other current assets	(377)	(1,712)
Other assets	(1,850)	308
Accounts payable	65	4,105
Accrued expenses	(6,197)	(3,365)
Deferred revenue	(1,098)	793
Income taxes payable	2,765	1,130
Non-qualified deferred compensation plan and other liabilities	451	(296)
Net cash provided by (used in) operating activities	1,723	(3,216)
Cash flows from investing activities:
Additions to property, plant, and equipment	(2,179)	(2,334)
Proceeds from sale of fixed assets	2	12
Net cash used in investing activities	(2,177)	(22,975)
Cash flows from financing activities:
Proceeds from advances on revolving line of credit	6,000	28,000
Payments on revolving line of credit	0	(7,000)
Principal payments of long-term debt	(1,000)	(1,000)
Principal payments on finance lease obligations	(16)	(16)
Proceeds from the exercise of stock options	109	0
Payment of statutory withholdings for restricted stock units vested	(2,522)	(1,299)
Net cash provided by financing activities	2,571	18,685
Effect of foreign currency exchange rates on cash and cash equivalents	(65)	41
Net increase (decrease) in cash and cash equivalents	2,052	(7,465)
Cash and cash equivalents at beginning of period	4,451	11,117
Cash and cash equivalents at end of period	6,503	3,652
Advant Medical [Member]
Cash flows from investing activities:
Acquisition, net of cash acquired	0	(20,768)
DAS Medical [Member]
Cash flows from investing activities:
Acquisition, net of cash acquired	$ 0	$ 115

XML

Note 1 - Basis of Presentation

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

(1) Basis of Presentation

The interim condensed consolidated financial statements of UFP Technologies, Inc. (the “Company”) presented herein, have been prepared pursuant to the rules of the Securities and Exchange Commission for quarterly reports on Form 10-Q and do not include all the information and note disclosures required by accounting principles generally accepted in the United States of America. These statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2022, included in the Company's 2022 Annual Report on Form 10-K, as filed with the Securities and Exchange Commission.

The condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022, the condensed consolidated statements of income and comprehensive income for the three months ended March 31, 2023 and 2022, the condensed consolidated statements of stockholders’ equity for the three months ended March 31, 2023 and 2022, and the condensed consolidated statements of cash flows for the three months ended March 31, 2023 and 2022 are unaudited but, in the opinion of management, include all adjustments (consisting of normal, recurring adjustments) necessary for a fair presentation of results for these interim periods. The condensed consolidated balance sheet as of December 31, 2022 has been derived from the Company’s annual financial statements that were audited by an independent registered public accounting firm but does not include all of the information and footnotes required for complete annual financial statements.

The preparation of 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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

The results of operations for the three-month period ended March 31, 2023 are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, 2023.

Recent Accounting Pronouncements

There are no newly issued accounting pronouncements that the Company expects to have a material effect on the financial statements.

XML

Note 2 - Acquisitions and Divestiture

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Mergers, Acquisitions and Dispositions Disclosures [Text Block]

(2) Acquisition and Divestiture

Molded Fiber

On July 26, 2022, pursuant to a share purchase agreement and related agreements, the Company sold its former wholly owned subsidiary Moulded Fiber Technology, Inc. (“MFT”) and related real estate in Iowa to CKF USA INCORPORATED (“CKF”) (a Delaware Corporation) for approximately $31.5 million (including a working capital adjustment of approximately $0.1 million that decreased the total consideration). The net book value of the assets sold were approximately $15.4 million and the Company recorded a net gain on sale of approximately $15.7 million, which was recorded in the year ended December 31, 2022. $2.6 million of the purchase price is being held in escrow to indemnify CKF against certain claims, losses, and liabilities. The Securities Purchase Agreement contains customary representations, warranties, and covenants customary for transactions of this type. Proceeds from the sale were used to pay down debt on the Company’s revolving credit facility, as well as income tax obligations on the related gain.

Advant Medical

On March 16, 2022 the Company purchased 100% of the outstanding shares of common stock of Advant Medical, Ltd., Advant Medical Inc. and Advant Medical Costa Rica, Limitada, (together Advant), pursuant to a Stock Purchase Agreement and related agreements, for an aggregate purchase price of €19.0 million in cash along with a working capital adjustment at closing. Total consideration in U.S. Dollars amounted to approximately $21.2 million. The purchase price was subject to additional adjustment based upon Advant’s final working capital at closing. A portion of the purchase price is being held in escrow to indemnify the Company against certain claims, losses, and liabilities. The Stock Purchase Agreement contains customary representations, warranties, and covenants customary for transactions of this type.

Founded in 1993, Advant is headquartered in Galway, Ireland, with operations in Costa Rica and partner manufacturing in Mexico. Advant is a developer and manufacturer of Class I, II, and III medical devices and packaging, primarily for catheters and guide wires.

The following table summarizes the allocation of consideration paid to the acquisition date fair value of the assets acquired and liabilities assumed based on management’s estimates of fair value (in thousands):

Fair value of considerations transferred
Cash paid at closing	$	23,608
Other liability		395
Cash from Advant		(2,840	)
Total consideration	$	21,163
Purchase price allocation
Accounts receivable	$	2,299
Inventory		2,410
Other current assets		213
Property, plant, and equipment		5,704
Customer contracts & relationships		2,925
Intellectual property		2,127
Non-compete agreement		259
Lease right of use assets		289
Other assets		41
Goodwill		7,140
Total identifiable assets	$	23,407
Accounts payable		(772	)
Accrued expenses		(668	)
Income taxes		(66	)
Deferred taxes		(449	)
Lease liabilities		(289	)
Net assets acquired	$	21,163

Acquisition costs associated with the transaction through the first quarter of 2022 were approximately $669 thousand, of which $639 thousand was charged to expense in the quarter ended March 31, 2022 and $30 thousand was charged to expense in the year ended December 31, 2021. These costs were primarily for legal services, valuation services and stamp duty filings and are reflected on the face of the condensed consolidated statements of income and comprehensive income.

The amount of revenue and earnings of Advant recognized since the acquisition date through the first quarter of 2022 was approximately $824 thousand and $63 thousand, respectively, and is included in the condensed consolidated statements of income and comprehensive income for the period ended March 31, 2022.

Pro-forma statements

The following table contains an unaudited pro forma condensed consolidated statement of operations for the three-month period ended March 31, 2022, as if the Advant acquisition had occurred at the beginning of 2022 (in thousands):

	Three-month Period Ended
	March 31, 2022
	(Unaudited)
Sales	$	75,469
Operating income	$	7,023
Net income	$	5,346
Earnings per share:
Basic	$	0.71
Diluted	$	0.70

The above unaudited pro forma information is presented for illustrative purposes only and may not be indica‐tive of the results of operations that would have occurred had both acquisitions occurred as presented. In addition, future results may vary significantly from the results reflected in such pro forma information.

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Note 3 - Revenue Recognition

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

(3) Revenue Recognition

The Company recognizes revenue when a customer obtains control of a promised good or service. The amount of revenue recognized reflects the consideration that the Company expects to be entitled to in exchange for promised goods or services. The Company recognizes revenue in accordance with the core principles of ASC 606 which include (1) identifying the contract with a customer, (2) identifying separate performance obligations within the contract, (3) determining the transaction price, (4) allocating the transaction price to the performance obligations, and (5) recognizing revenue. The Company recognizes all but an immaterial portion of its product sales upon shipment. The Company recognizes revenue from the sale of tooling and machinery upon customer acceptance. The Company recognizes revenue from engineering services, which are primarily product development services, as the services are performed or as otherwise determined based on the substance of the agreement. The Company recognizes revenue from bill and hold transactions at the time the specified goods are complete and available to the customer. In the ordinary course of business, the Company accepts sales returns from customers for defective goods, such amounts being immaterial. Although only applicable to an insignificant number of transactions, the Company has elected to exclude sales taxes from the transaction price. The Company has elected to account for shipping and handling activities for which the Company is responsible under the terms and conditions of the sale not as performance obligations but rather as fulfillment costs. These activities are required to fulfill the Company’s promise to transfer the good and are expensed when revenue is recognized.

Disaggregated Revenue

The following table presents the Company’s revenue disaggregated by the major types of goods and services sold to the Company’s customers (in thousands):

	Three Months Ended
	March 31,
Net sales of:	2023		2022
Products	$	94,692	$	69,505
Tooling and Machinery		1,294		478
Engineering services		1,767		1,259
Total net sales	$	97,753	$	71,242

Contract balances

Timing of revenue recognition may differ from the timing of invoicing to customers. When invoicing occurs prior to revenue recognition, the Company has contract liabilities included within “deferred revenue” on the condensed consolidated balance sheet.

The following table presents opening and closing balances of contract liabilities for the three-month periods ended March 31, 2023 and 2022 (in thousands):

	Contract Liabilities
	Three Months Ended March 31,
	2023			2022
Deferred revenue - beginning of period	$	4,679		$	4,247
Increases due to consideration received from customers		999			1,116
Revenue recognized		(2,096	)		(323	)
Deferred revenue - end of period	$	3,582		$	5,040

Revenue recognized during the three-month periods ended March 31, 2023 and 2022 from amounts included in deferred revenue at the beginning of the period were approximately $1.9 million and $273 thousand, respectively.

When invoicing occurs after revenue recognition, the Company has contract assets, included within “receivables, net” on the condensed consolidated balance sheets.

The following table presents opening and closing balances of contract assets for the three-month periods ended March 31, 2023 and 2022 (in thousands):

	Contract Assets
	Three Months Ended March 31,
	2023			2022
Unbilled Receivables - beginning of period	$	270		$	74
Increases due to revenue recognized, not invoiced to customers		1,379			740
Decreases due to customer invoicing		(1,326	)		(412	)
Unbilled Receivables - end of period	$	323		$	402

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Note 4 - Supplemental Cash Flow Information

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Cash Flow, Supplemental Disclosures [Text Block]

(4) Supplemental Cash Flow Information

Supplemental cash flow information consists of the following (in thousands):

	Three Months Ended
	March 31,
	2023			2022
Cash paid for:
Interest	$	832		$	314
Income taxes, net of refunds		(50	)		210
Non-cash investing and financing activities:
Capital additions accrued but not yet paid	$	347		$	185
Operating lease right of use assets		1,524			289
Operating lease liabilities		(1,560	)		(289	)

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Note 5 - Receivables and Allowance for Credit Losses

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

(5) Receivables and Allowance for Credit Losses

Receivables consist of the following (in thousands):

	March 31,			December 31,
	2023			2022
Accounts receivable–trade	$	60,868		$	55,850
Less allowance for credit losses		(726	)		(733	)
Receivables, net	$	60,142		$	55,117

The Company is exposed to credit losses primarily through sales of products and services. The Company’s expected loss allowance methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions, and a review of the current status of customers' trade accounts receivables. Due to the short-term nature of such receivables, the estimate of the amount of accounts receivable that may not be collected is based on aging of the accounts receivable balances and the financial condition of customers. Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. The Company’s monitoring activities include timely account reconciliation, dispute resolution, payment confirmation, consideration of customers' financial condition and macroeconomic conditions. Balances are written off when determined to be uncollectible. Estimates based on an assessment of anticipated payment and all other historical, current, and future information that is reasonably available are used to determine the allowance.

The following table provides a roll-forward of the allowance for credit losses that is deducted from accounts receivable to present the net amount expected to be collected for the three months ended March 31, 2023 and 2022 (in thousands):

	Allowance for Credit Losses
	Three Months Ended March 31,
	2023			2022
Allowance - beginning of period	$	733		$	519
Adjustment for expected credit losses		(6	)		(51	)
Amounts written off against the allowance		(1	)		(23	)
Allowance - end of period	$	726		$	445

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Note 6 - Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Fair Value Disclosures [Text Block]

(6) Fair Value of Financial Instruments

Financial instruments recorded at fair value in the consolidated 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 following table presents the fair value and hierarchy levels, for financial assets that are measured at fair value on a recurring basis (in thousands):

	March 31, 2023		December 31, 2022
Level 3
Purchase price contingent consideration (Note 2):
Accrued contingent consideration (earn-out)	$	17,421	$	14,568
Present value of non-competition payments		7,903		10,043

In connection with the acquisitions of Contech Medical 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 2021 acquisitions combined are up to $25 million, of which $20 million remains to be potentially paid as of March 31, 2023 and December 31, 2022. The fair value of the liabilities 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 this calculation were managements financial forecasts, discount rate and various probability 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 change in fair value of contingent consideration for the acquisition is included in change in fair value of contingent consideration in the condensed consolidated statements of income and comprehensive income.

Also in connection with the DAS Medical acquisition, the Company has entered into Non-Competition Agreements with the beneficiaries and the Company has agreed to pay additional consideration to the parties to the Non-Competition Agreements, including an aggregate of $10.0 million in payments over the ten years following the closing of the DAS Medical acquisition for the 10-year noncompetition covenants of certain key owners. The present value of the Non-Competition Agreements totaled approximately $7.9 million. This liability is considered to be a Level 3 financial liability that is re-measured each reporting period. The change in fair value of contingent consideration for the acquisition is included in change in fair value of contingent consideration in the condensed consolidated statements of income and comprehensive income.

The Company has financial instruments, such as accounts receivable, accounts payable, and accrued expenses, that 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 estimated borrowing rate currently available to the Company.

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Note 7 - Share-based Compensation

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

(7) Share-Based Compensation

Share-based compensation is measured at the grant date based on the fair value of the award and is recognized as an expense over the requisite service period (generally the vesting period of the equity grant).

The Company issues share-based awards through several plans that are described in detail in the notes to the consolidated financial statements for the year ended December 31, 2022. The compensation cost charged against income for those plans is included in selling, general & administrative expenses as follows (in thousands):

	Three Months Ended
	March 31,
Share-based compensation related to:	2023		2022
Common stock grants	$	100	$	100
Stock option grants		94		53
Restricted Stock Unit Awards ("RSUs")		862		539
Total share-based compensation	$	1,056	$	692

The total income tax benefit recognized in the condensed consolidated statements of income and comprehensive income for share-based compensa‐tion arrangements was approximately $839 thousand and $381 thousand for the three-month periods ended March 31, 2023 and 2022, respectively.

Common stock grants

The compensation expense for common stock granted during the three-month period ended March 31, 2023, was determined based on the market price of the shares on the date of grant.

Stock Option grants

The following is a summary of stock option activity under all plans for the three-month period ended March 31, 2023:

	Shares Under Options			Weighted Average Exercise Price (per share)		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2022		92,075		$	39.98
Granted		7,935			111.54
Exercised		(3,780	)		28.94
Outstanding at March 31, 2023		96,230		$	46.31		5.68	$	8,038
Exercisable at March 31, 2023		78,419		$	35.81		5.31	$	7,374
Vested and expected to vest at March 31, 2023		96,230		$	46.31	$	5.68	$	8,038

During the three-month periods ended March 31, 2023 and 2022, the total intrinsic value of all options exercised was approximately $371 thousand and $0, respectively, and the total amount of consideration received by the Company from the exercised options was approximately $109 thousand and $0, 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 three-month period ended March 31, 2023, 861 shares were surrendered at an average market price of $127.05. Zero shares were surrendered during the same period in 2022.

Restricted Stock Unit awards

The following table summarizes information about RSU activity during the three-month period ended March 31, 2023:

	Restricted Stock Units			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2022		102,048		$	56.02
Awarded		44,154			111.54
Shares vested		(48,244	)		53.39
Shares forfeited		(99	)		97.61
Outstanding at March 31, 2023		97,859		$	67.83

At the Company’s discretion, upon vesting, 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 and issued to the RSU holder. During the three-month periods ended March 31, 2023 and 2022, 20,457 and 19,376 shares were surrendered at an average market price of $117.95 and $67.02, respectively.

As of March 31, 2023, the Company had approximately $8.0 million of unrecognized compensation expense that is expected to be recognized over a period of 3 years.

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Note 8 - Inventories

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Inventory Disclosure [Text Block]

(8) Inventories

Inventories are stated at the lower of cost (determined using the first-in, first-out method) or net realizable value, and consist of the following at the stated dates (in thousands):

	March 31,		December 31,
	2023		2022
Raw materials	$	41,106	$	42,475
Work in process		6,113		4,183
Finished goods		9,430		6,878
Total inventory	$	56,649	$	53,536

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Note 9 - Property, Plant and Equipment

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

(9) Property, Plant and Equipment

Property, plant, and equipment consist of the following (in thousands):

	March 31,			December 31,
	2023			2022
Land and improvements	$	4,832		$	4,811
Buildings and improvements		34,525			34,446
Leasehold improvements		7,182			5,503
Machinery & equipment		52,966			52,233
Furniture, fixtures, computers & software		6,416			6,401
Construction in progress		7,377			7,272
Property, plant and equipment	$	113,298		$	110,666
Accumulated depreciation and amortization		(54,271	)		(52,594	)
Net property, plant and equipment	$	59,027		$	58,072

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Note 10 - Leases

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Lessee, Operating and Finance Leases [Text Block]

(10) Leases

The Company has operating and finance leases for offices, manufacturing plants, vehicles and certain office and manufacturing equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company accounts for each separate lease component of a contract and its associated non-lease components as a single lease component, thus causing all fixed payments to be capitalized. Variable lease payment amounts that cannot be determined at the commencement of the lease such as increases in lease payments based on changes in index rates or usage, are not included in the right of use (“ROU”) assets or lease liabilities. These are expensed as incurred and recorded as variable lease expense. The Company determines if an arrangement is a lease at the inception of a contract. Operating and finance lease ROU assets and operating and finance lease liabilities are stated separately in the condensed consolidated balance sheet. 

ROU assets represent the Company's right to use an underlying asset during the lease term and lease liabilities represent the Company's obligation to make lease payments pursuant to the lease.  ROU assets and lease liabilities are recognized at commencement date based on the net present value of fixed lease payments over the lease term.  The Company's assumed lease term includes options to extend or terminate the lease when it is reasonably certain that it will exercise that option.  ROU assets are also adjusted for any deferred or accrued rent. As the Company's leases do not typically provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

ROU assets and lease liabilities consist of the following (in thousands):

	March 31,		December 31,
	2023		2022
Operating lease ROU assets	$	14,318	$	12,942
Finance lease ROU assets		196		211
Total ROU assets	$	14,514	$	13,153
Operating lease liabilities - current	$	2,879	$	2,458
Finance lease liabilities - current		59		59
Total lease liabilities - current	$	2,938	$	2,517
Operating lease liabilities - long-term	$	11,732	$	10,695
Finance lease liabilities - long-term		141		156
Total lease liabilities - long-term	$	11,873	$	10,851

	Three Months Ended
	March 31,
	($ in thousands)
	2023		2022
Lease Cost:
Finance lease cost:
Amortization of right of use assets	$	15	$	15
Interest on lease liabilities		1		1
Operating lease cost		711		652
Variable lease cost		83		70
Short-term lease cost		7		17
Total lease cost	$	817	$	755

Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases	$	683		$	540
Financing cash flows from finance leases		16			16
Weighted-average remaining lease term (years):
Finance		3.29			4.29
Operating		5.06			3.62
Weighted-average discount rate:
Finance		2.10	%		2.10	%
Operating		3.42	%		2.53	%

The aggregate future lease payments for leases as of March 31, 2023 are as follows (in thousands):

	Finance			Operating
Remainder of 2023	$	47		$	2,192
2024		63			2,950
2025		63			2,779
2026		29			2,402
2027		6			2,031
Thereafter		-			3,774
Total lease payments		208			16,128
Less: Interest		(8	)		(1,517	)
Present value of lease liabilities	$	200		$	14,611

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Note 11 - Income Per Share

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Earnings Per Share [Text Block]

(11) Income Per Share

Basic income per share is based on the weighted average number of shares of common stock outstanding. Diluted income per share is based upon the weighted average number of common shares outstanding and dilutive common stock equivalent shares outstanding during each period.

The weighted average number of shares used to compute basic and diluted net income per share consisted of the following (in thousands):

	Three Months Ended
	March 31,
	2023		2022
Basic weighted average common shares outstanding		7,592		7,544
Weighted average common equivalent shares due to restricted stock, stock options and RSUs		89		86
Diluted weighted average common shares outstanding		7,681		7,630

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 income per share because the effect would be antidilutive. For both the three-month periods ended March 31, 2023 and 2022, there were no stock awards excluded from the computation of diluted earnings per share for this reason.

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Note 12 - Segment Reporting

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

(12) Segment Reporting

The Company consists of a single operating and reportable segment.

Revenues shipped to customers outside of the United States comprised approximately 16.6% and 12.0% of the Company’s consolidated revenues for the three months ended March 31, 2023 and 2022, respectively.

One customer comprised approximately 22% and 15% of the Company’s consolidated revenues for the three-month periods ended March 31, 2023 and 2022, respectively. One customer represented approximately 17% and 10% of gross accounts receivable at March 31, 2023 and December 31, 2022, respectively. Approximately 18% of all long-lived assets are located outside of the United States.

The Company’s products are primarily sold to customers within the Medical, Automotive, Aerospace & Defense, and Industrial/Other markets. Net sales by market for the three-month periods ended March 31, 2023 and 2022 are as follows (in thousands):

	Three Months Ended March 31,
	2023					2022
Market	Net Sales		%			Net Sales		%
Medical	$	83,804		85.7	%	$	52,554		73.8	%
Automotive		4,347		4.4	%		4,351		6.1	%
Aerospace & Defense		4,217		4.3	%		3,755		5.3	%
Industrial / Other		5,385		5.6	%		10,582		14.8	%
Net Sales	$	97,753		100.0	%	$	71,242		100.0	%

Certain amounts for the three months ended March 31, 2022 were reclassified between markets to conform to the current year presentation.

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Note 13 - Goodwill and Other Intangible Assets

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Intangible Assets Disclosure [Text Block]

(13) Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill for the three months ended March 31, 2023 are as follows (in thousands):

	Goodwill
December 31, 2022	$	113,028
Foreign currency translation		131
March 31, 2023	$	113,159

The carrying values of the Company’s definite lived intangible assets as of March 31, 2023 are as follows (in thousands):

	Intelletual Property / Tradename & Brand			Non- Compete			Customer List			Total
Weighted-average amortization period	11.9 years			9.3 years			20 years
Gross amount	$	7,103		$	5,502		$	65,228		$	77,833
Accumulated amortization		(879	)		(1,125	)		(8,483	)	$	(10,487	)
Net balance	$	6,224		$	4,377		$	56,745		$	67,346

Amortization expense related to intangible assets was approximately $1.1 million and $1.0 million for the three-month periods ended March 31, 2023 and 2022 . The estimated remaining amortization expense as of March 31, 2023 is as follows (in thousands):

Remainder of 2023	$	3,308
2024		4,401
2025		4,401
2026		4,399
2027		4,397
2028		4,350
Thereafter		42,090
Total	$	67,346

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Note 14 - Other Long-term Liabilities

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Other Liabilities Disclosure [Text Block]

(14) Other Long-Term Liabilities

Other long-term liabilities consist of the following (in thousands):

	March 31,		December 31,
	2023		2022
Accrued contingent consideration (earn-out)	$	12,421	$	9,568
Present value of non-competition payments		6,097		8,155
Other		965		497
	$	19,483	$	18,220

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Note 15 - Income Tax

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Income Tax Disclosure [Text Block]

(15) Income Taxes

The determination of income tax expense in the accompanying unaudited condensed consolidated statements of income is based upon the estimated effective tax rate for the year, adjusted for the impact of any discrete items which are accounted for in the period in which they occur. The Company recorded income tax expense of approximately 18.1% and 20.2% of income before income tax expense for the three-month periods ended March 31, 2023 and 2022, respectively.

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Note 16 - Indebtedness

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Debt Disclosure [Text Block]

(16) Indebtedness

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.

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 loam requires quarterly principal payments of $1,000,000 commencing on March 31, 2022. The proceeds of the Second Amended and Restated Credit Agreement may be used for general corporate purposes, including funding certain permitted acquisitions. The Company’s obligations under the Second Amended and Restated Credit Agreement are guaranteed by the Subsidiary Guarantors.

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 .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. At March 31, 2023, the Company had approximately $60 million in borrowings outstanding under the Second Amended and Restated Credit Agreement, which were used as partial consideration for the DAS Medical and Advant 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 March 31, 2023, the applicable interest rate was approximately 6.1% and the Company was in compliance with all covenants under the Second Amended and Restated Credit Agreement.

Long-term debt consists of the following (in thousands):

	March 31, 2023
Revolving credit facility	$	25,000
Term loan		35,000
Total long-term debt		60,000
Current portion		(4,000	)
Long-term debt, excluding current portion	$	56,000

Future maturities of long-term debt at March 31, 2023 are as follows (in thousands):

	Term Loan		Revolving credit facility		Total
Remainder of 2023	$	3,000	$	-	$	3,000
2024		4,000		-		4,000
2025		4,000		-		4,000
2026		24,000		25,000		49,000
	$	35,000	$	25,000	$	60,000

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Note 2 - Acquisitions and Divestiture (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

Fair value of considerations transferred
Cash paid at closing	$	23,608
Other liability		395
Cash from Advant		(2,840	)
Total consideration	$	21,163
Purchase price allocation
Accounts receivable	$	2,299
Inventory		2,410
Other current assets		213
Property, plant, and equipment		5,704
Customer contracts & relationships		2,925
Intellectual property		2,127
Non-compete agreement		259
Lease right of use assets		289
Other assets		41
Goodwill		7,140
Total identifiable assets	$	23,407
Accounts payable		(772	)
Accrued expenses		(668	)
Income taxes		(66	)
Deferred taxes		(449	)
Lease liabilities		(289	)
Net assets acquired	$	21,163

Business Acquisition, Pro Forma Information [Table Text Block]

	Three-month Period Ended
	March 31, 2022
	(Unaudited)
Sales	$	75,469
Operating income	$	7,023
Net income	$	5,346
Earnings per share:
Basic	$	0.71
Diluted	$	0.70

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Note 3 - Revenue Recognition (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Disaggregation of Revenue [Table Text Block]

	Three Months Ended
	March 31,
Net sales of:	2023		2022
Products	$	94,692	$	69,505
Tooling and Machinery		1,294		478
Engineering services		1,767		1,259
Total net sales	$	97,753	$	71,242

Contract with Customer, Contract Asset, Contract Liability, and Receivable [Table Text Block]

	Contract Liabilities
	Three Months Ended March 31,
	2023			2022
Deferred revenue - beginning of period	$	4,679		$	4,247
Increases due to consideration received from customers		999			1,116
Revenue recognized		(2,096	)		(323	)
Deferred revenue - end of period	$	3,582		$	5,040

	Contract Assets
	Three Months Ended March 31,
	2023			2022
Unbilled Receivables - beginning of period	$	270		$	74
Increases due to revenue recognized, not invoiced to customers		1,379			740
Decreases due to customer invoicing		(1,326	)		(412	)
Unbilled Receivables - end of period	$	323		$	402

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Note 4 - Supplemental Cash Flow Information (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Schedule of Cash Flow, Supplemental Disclosures [Table Text Block]

	Three Months Ended
	March 31,
	2023			2022
Cash paid for:
Interest	$	832		$	314
Income taxes, net of refunds		(50	)		210
Non-cash investing and financing activities:
Capital additions accrued but not yet paid	$	347		$	185
Operating lease right of use assets		1,524			289
Operating lease liabilities		(1,560	)		(289	)

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Note 5 - Receivables and Allowance for Credit Losses (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

	March 31,			December 31,
	2023			2022
Accounts receivable–trade	$	60,868		$	55,850
Less allowance for credit losses		(726	)		(733	)
Receivables, net	$	60,142		$	55,117

Accounts Receivable, Allowance for Credit Loss [Table Text Block]

	Allowance for Credit Losses
	Three Months Ended March 31,
	2023			2022
Allowance - beginning of period	$	733		$	519
Adjustment for expected credit losses		(6	)		(51	)
Amounts written off against the allowance		(1	)		(23	)
Allowance - end of period	$	726		$	445

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Note 6 - Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Fair Value, Assets Measured on Recurring Basis [Table Text Block]

	March 31, 2023		December 31, 2022
Level 3
Purchase price contingent consideration (Note 2):
Accrued contingent consideration (earn-out)	$	17,421	$	14,568
Present value of non-competition payments		7,903		10,043

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Note 7 - Share-based Compensation (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Schedule of Employee Service Share Based Compensation Allocation of Recognized Period Costs, By Award Type [Table Text Block]

	Three Months Ended
	March 31,
Share-based compensation related to:	2023		2022
Common stock grants	$	100	$	100
Stock option grants		94		53
Restricted Stock Unit Awards ("RSUs")		862		539
Total share-based compensation	$	1,056	$	692

Share-Based Payment Arrangement, Option, Activity [Table Text Block]

	Shares Under Options			Weighted Average Exercise Price (per share)		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2022		92,075		$	39.98
Granted		7,935			111.54
Exercised		(3,780	)		28.94
Outstanding at March 31, 2023		96,230		$	46.31		5.68	$	8,038
Exercisable at March 31, 2023		78,419		$	35.81		5.31	$	7,374
Vested and expected to vest at March 31, 2023		96,230		$	46.31	$	5.68	$	8,038

Share-Based Payment Arrangement, Restricted Stock Unit, Activity [Table Text Block]

	Restricted Stock Units			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2022		102,048		$	56.02
Awarded		44,154			111.54
Shares vested		(48,244	)		53.39
Shares forfeited		(99	)		97.61
Outstanding at March 31, 2023		97,859		$	67.83

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Note 8 - Inventories (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	March 31,		December 31,
	2023		2022
Raw materials	$	41,106	$	42,475
Work in process		6,113		4,183
Finished goods		9,430		6,878
Total inventory	$	56,649	$	53,536

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Note 9 - Property, Plant and Equipment (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Property, Plant and Equipment [Table Text Block]

	March 31,			December 31,
	2023			2022
Land and improvements	$	4,832		$	4,811
Buildings and improvements		34,525			34,446
Leasehold improvements		7,182			5,503
Machinery & equipment		52,966			52,233
Furniture, fixtures, computers & software		6,416			6,401
Construction in progress		7,377			7,272
Property, plant and equipment	$	113,298		$	110,666
Accumulated depreciation and amortization		(54,271	)		(52,594	)
Net property, plant and equipment	$	59,027		$	58,072

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Note 10 - Leases (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Leases, Right-of-Use Assets and Liabilities [Table Text block]

	March 31,		December 31,
	2023		2022
Operating lease ROU assets	$	14,318	$	12,942
Finance lease ROU assets		196		211
Total ROU assets	$	14,514	$	13,153
Operating lease liabilities - current	$	2,879	$	2,458
Finance lease liabilities - current		59		59
Total lease liabilities - current	$	2,938	$	2,517
Operating lease liabilities - long-term	$	11,732	$	10,695
Finance lease liabilities - long-term		141		156
Total lease liabilities - long-term	$	11,873	$	10,851

Lease, Cost [Table Text Block]

	Three Months Ended
	March 31,
	($ in thousands)
	2023		2022
Lease Cost:
Finance lease cost:
Amortization of right of use assets	$	15	$	15
Interest on lease liabilities		1		1
Operating lease cost		711		652
Variable lease cost		83		70
Short-term lease cost		7		17
Total lease cost	$	817	$	755

Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases	$	683		$	540
Financing cash flows from finance leases		16			16
Weighted-average remaining lease term (years):
Finance		3.29			4.29
Operating		5.06			3.62
Weighted-average discount rate:
Finance		2.10	%		2.10	%
Operating		3.42	%		2.53	%

Lessee, Operating and Finance Leases, Liability, Maturity [Table Text Block]

	Finance			Operating
Remainder of 2023	$	47		$	2,192
2024		63			2,950
2025		63			2,779
2026		29			2,402
2027		6			2,031
Thereafter		-			3,774
Total lease payments		208			16,128
Less: Interest		(8	)		(1,517	)
Present value of lease liabilities	$	200		$	14,611

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Note 11 - Income Per Share (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Schedule of Weighted Average Number of Shares [Table Text Block]

	Three Months Ended
	March 31,
	2023		2022
Basic weighted average common shares outstanding		7,592		7,544
Weighted average common equivalent shares due to restricted stock, stock options and RSUs		89		86
Diluted weighted average common shares outstanding		7,681		7,630

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Note 12 - Segment Reporting (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Schedule of Revenue by Major Customers by Reporting Segments [Table Text Block]

	Three Months Ended March 31,
	2023					2022
Market	Net Sales		%			Net Sales		%
Medical	$	83,804		85.7	%	$	52,554		73.8	%
Automotive		4,347		4.4	%		4,351		6.1	%
Aerospace & Defense		4,217		4.3	%		3,755		5.3	%
Industrial / Other		5,385		5.6	%		10,582		14.8	%
Net Sales	$	97,753		100.0	%	$	71,242		100.0	%

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Note 13 - Goodwill and Other Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Schedule of Goodwill [Table Text Block]

	Goodwill
December 31, 2022	$	113,028
Foreign currency translation		131
March 31, 2023	$	113,159

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	Intelletual Property / Tradename & Brand			Non- Compete			Customer List			Total
Weighted-average amortization period	11.9 years			9.3 years			20 years
Gross amount	$	7,103		$	5,502		$	65,228		$	77,833
Accumulated amortization		(879	)		(1,125	)		(8,483	)	$	(10,487	)
Net balance	$	6,224		$	4,377		$	56,745		$	67,346

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

Remainder of 2023	$	3,308
2024		4,401
2025		4,401
2026		4,399
2027		4,397
2028		4,350
Thereafter		42,090
Total	$	67,346

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Note 14 - Other Long-term Liabilities (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Other Noncurrent Liabilities [Table Text Block]

	March 31,		December 31,
	2023		2022
Accrued contingent consideration (earn-out)	$	12,421	$	9,568
Present value of non-competition payments		6,097		8,155
Other		965		497
	$	19,483	$	18,220

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Note 16 - Indebtedness (Tables)

3 Months Ended

Mar. 31, 2023

Notes Tables

Schedule of Debt [Table Text Block]

	March 31, 2023
Revolving credit facility	$	25,000
Term loan		35,000
Total long-term debt		60,000
Current portion		(4,000	)
Long-term debt, excluding current portion	$	56,000

Schedule of Maturities of Long-Term Debt [Table Text Block]

	Term Loan		Revolving credit facility		Total
Remainder of 2023	$	3,000	$	-	$	3,000
2024		4,000		-		4,000
2025		4,000		-		4,000
2026		24,000		25,000		49,000
	$	35,000	$	25,000	$	60,000

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Note 2 - Acquisitions and Divestiture (Details Textual) $ in Thousands, € in Millions				3 Months Ended		12 Months Ended		15 Months Ended
	Mar. 17, 2022 USD ($)	Mar. 16, 2022 USD ($)	Mar. 16, 2022 EUR (€)	Mar. 31, 2023 USD ($)	Mar. 31, 2022 USD ($)	Dec. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)	Mar. 31, 2022 USD ($)	Jul. 26, 2022 USD ($)
Business Combination, Acquisition Related Costs				$ 0	$ 775
Advant Medical [Member]
Business Acquisition, Percentage of Voting Interests Acquired		100.00%	100.00%
Payments to Acquire Businesses, Net of Cash Acquired, Total			€ 19	$ (0)	20,768
Payments to Acquire Businesses, Gross	$ 23,608	$ 21,200
Business Combination, Acquisition Related Costs					639		$ 30	$ 669
Business Combination, Pro Forma Information, Revenue of Acquiree since Acquisition Date, Actual					824
Business Combination, Pro Forma Information, Earnings or Loss of Acquiree since Acquisition Date, Actual					$ 63
molded fiber business (“MFT”) and related real estate in Iowa [Member]
Disposal Group, Including Discontinued Operation, Consideration									$ 31,500
Disposal Group, Including Discontinued Operation, Assets, Noncurrent, Total									15,400
Gain (Loss) on Disposition of Business						$ 15,700
Disposal Group, Including Discontinued Operation, Consideration, Held in Escrow									2,600
molded fiber business (“MFT”) and related real estate in Iowa [Member] | Scenario, Adjustment [Member]
Disposal Group, Including Discontinued Operation, Consideration									$ 100

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Note 2 - Acquisitions - Assets Acquires and Liabilities Assumed (Details) - USD ($) $ in Thousands	Mar. 17, 2022	Mar. 16, 2022	Mar. 31, 2023	Dec. 31, 2022
Goodwill			$ 113,159	$ 113,028
Advant Medical [Member]
Cash paid at closing	$ 23,608	$ 21,200
Other liability	395
Cash from Advant	(2,840)
Total consideration	21,163
Accounts receivable	2,299
Inventory	2,410
Other current assets	213
Property, plant, and equipment	5,704
Lease right of use assets	289
Other assets	41
Goodwill	7,140
Total identifiable assets	23,407
Accounts payable	(772)
Accrued expenses	(668)
Income taxes	(66)
Deferred taxes	(449)
Lease liabilities	(289)
Net assets acquired	21,163
Advant Medical [Member] | Customer Contracts and Relationships [Member]
Finite-Lived Intangibles	2,925
Advant Medical [Member] | Intellectual Property [Member]
Finite-Lived Intangibles	2,127
Advant Medical [Member] | Noncompete Agreements [Member]
Finite-Lived Intangibles	$ 259

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Note 2 - Acquisition - Pro Forma Information (Unaudited) (Details) - Advant Medical [Member] $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2022 USD ($) $ / shares
Sales	$ 75,469
Operating income	7,023
Net income	$ 5,346
Basic (in dollars per share) | $ / shares	$ 0.71
Diluted (in dollars per share) | $ / shares	$ 0.70

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Note 3 - Revenue Recognition (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Deferred Revenue [Member]
Contract with Customer, Liability, Revenue Recognized	$ 1,900	$ 273

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Note 3 - Revenue Recognition - Revenue Disaggregated by the Major Types of Goods and Services Sold (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Net sales	$ 97,753	$ 71,242
Product [Member]
Net sales	94,692	69,505
Tooling and Machinery [Member]
Net sales	1,294	478
Engineering and Development [Member]
Net sales	$ 1,767	$ 1,259

XML

Note 3 - Revenue Recognition - Contract Assets and Liabilities (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Deferred revenue	$ 4,679	$ 4,247
Increases due to consideration received from customers	999	1,116
Revenue recognized	(2,096)	(323)
Deferred revenue	3,582	5,040
Unbilled Receivables - beginning of period	270	74
Increases due to revenue recognized, not invoiced to customers	1,379	740
Decreases due to customer invoicing	(1,326)	(412)
Unbilled Receivables - end of period	$ 323	$ 402

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Note 4 - Supplemental Cash Flow Information - Schedule of Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Cash paid for:
Interest	$ 832	$ 314
Income taxes, net of refunds	(50)	210
Non-cash investing and financing activities:
Capital additions accrued but not yet paid	347	185
Operating lease right of use assets	1,524	289
Operating lease liabilities	$ (1,560)	$ (289)

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Note 5 - Receivables and Allowance for Credit Losses - Receivables (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Accounts receivable–trade	$ 60,868	$ 55,850
Less allowance for credit losses	(726)	(733)
Receivables, net	$ 60,142	$ 55,117

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Note 5 - Receivables and Allowance for Credit Losses - Summary of Allowance for Doubtful Accounts (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Allowance - beginning of period	$ 733	$ 519
Adjustment for expected credit losses	(6)	(51)
Amounts written off against the allowance	(1)	(23)
Allowance - end of period	$ 726	$ 445

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Note 6 - Fair Value of Financial Instruments (Details Textual) - USD ($) $ in Millions				12 Months Ended
	Mar. 31, 2023	Dec. 31, 2022	Dec. 22, 2021	Dec. 31, 2021
Contech Medical, Inc and DAS Medical [Member]
Business Combination, Consideration Transferred, Liabilities Incurred	$ 20.0	$ 20.0		$ 25.0
Business Combination, Contingent Consideration, Liability, Total	9.7
DAS Medical [Member]
Present Value of Non-competition Agreement	$ 7.9
DAS Medical [Member] | Non-Competition Agreements [Member]
Payments to Acquire Businesses, Gross			$ 10.0
Business Combination, Agreement Term (Year)			10 years

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Note 6 - Fair Value of Financial Instruments - Financial Assets Measured at Fair Value on a Recurring Basis (Details) - Fair Value, Recurring [Member] - Fair Value, Inputs, Level 3 [Member] - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Accrued contingent consideration (earn-out)	$ 17,421	$ 14,568
Present value of non-competition payments	$ (7,903)	$ (10,043)

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Note 7 - Share-based Compensation (Details Textual) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Proceeds from Stock Options Exercised	$ 109	$ 0
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount	$ 8,000
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition (Year)	3 years
Share-Based Payment Arrangement [Member]
Share-Based Payment Arrangement, Expense, Tax Benefit	$ 839	381
Employee and Nonemployee Stock Option [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Exercises in Period, Intrinsic Value	371	0
Proceeds from Stock Options Exercised	$ 109	$ 0
Share-Based Payment Arrangement, Shares Withheld for Tax Withholding Obligation (in shares)	861
Shares Paid for Tax Withholding for Share Based Compensation Market Price (in dollars per share)	$ 127.05
Restricted Stock Units (RSUs) [Member]
Share-Based Payment Arrangement, Shares Withheld for Tax Withholding Obligation (in shares)	20,457	19,376
Shares Paid for Tax Withholding for Share Based Compensation Market Price (in dollars per share)	$ 117.95	$ 67.02

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Note 7 - Share-based Compensation - Compensation Cost (Details) - Selling, General and Administrative Expenses [Member] - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Share-based compensation	$ 1,056	$ 692
Common Stock [Member]
Share-based compensation	100	100
Employee and Nonemployee Stock Option [Member]
Share-based compensation	94	53
Restricted Stock Units (RSUs) [Member]
Share-based compensation	$ 862	$ 539

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Note 7 - Share-based Compensation - Summary of Stock Option Activity (Details) - Employee and Nonemployee Stock Option [Member] $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($) $ / shares shares
Outstanding, shares under options (in shares) | shares	92,075
Outstanding, weighted average exercise price (in dollars per share) | $ / shares	$ 39.98
Granted, shares under options (in shares) | shares	7,935
Granted (in dollars per share) | $ / shares	$ 111.54
Exercised, shares under options (in shares) | shares	(3,780)
Granted, weighted average exercise price (in dollars per share) | $ / shares	$ 28.94
Outstanding, shares under options (in shares) | shares	96,230
Outstanding, weighted average exercise price (in dollars per share) | $ / shares	$ 46.31
Outstanding, weighted average remaining contractual life (Year)	5 years 8 months 4 days
Outstanding, aggregate intrinsic value | $	$ 8,038
Exercisable, shares under options (in shares) | shares	78,419
Exercisable, weighted average exercise price (in dollars per share) | $ / shares	$ 35.81
Exercisable, weighted average remaining contractual life (Year)	5 years 3 months 21 days
Exercisable, aggregate intrinsic value | $	$ 7,374
Vested and expected to vest, shares under options (in shares) | shares	96,230
Vested and expected to vest, weighted average exercise price (in dollars per share) | $ / shares	$ 46.31
Vested and expected to vest, weighted average remaining contractual life (Year)	5 years 8 months 4 days
Vested and expected to vest, aggregate intrinsic value | $	$ 8,038

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Note 7 - Share-based Compensation - Restricted Stock Unit Activity (Details) - Restricted Stock Units (RSUs) [Member]	3 Months Ended
	Mar. 31, 2023 $ / shares shares
Outstanding, restricted stock units (in shares) | shares	102,048
Outstanding, weighted average award date fair value (in dollars per share) | $ / shares	$ 56.02
Awarded, restricted stock units (in shares) | shares	44,154
Awarded, weighted average award date fair value (in dollars per share) | $ / shares	$ 111.54
Shares vested, restricted stock units (in shares) | shares	(48,244)
Shares vested, weighted average award date fair value (in dollars per share) | $ / shares	$ 53.39
Shares forfeited, restricted stock units (in shares) | shares	(99)
Shares forfeited, weighted average award date fair value (in dollars per share) | $ / shares	$ 97.61
Outstanding, restricted stock units (in shares) | shares	97,859
Outstanding, weighted average award date fair value (in dollars per share) | $ / shares	$ 67.83

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Note 8 - Inventories - Summary of Inventory (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Raw materials	$ 41,106	$ 42,475
Work in process	6,113	4,183
Finished goods	9,430	6,878
Total inventory	$ 56,649	$ 53,536

XML

Note 9 - Property, Plant and Equipment - Property, Plant, and Equipment (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Property, plant, and equipment	$ 113,298	$ 110,666
Accumulated depreciation and amortization	(54,271)	(52,594)
Net property, plant and equipment	59,027	58,072
Land and Land Improvements [Member]
Property, plant, and equipment	4,832	4,811
Building and Building Improvements [Member]
Property, plant, and equipment	34,525	34,446
Leasehold Improvements [Member]
Property, plant, and equipment	7,182	5,503
Machinery and Equipment [Member]
Property, plant, and equipment	52,966	52,233
Furniture, Fixtures, and Computers [Member]
Property, plant, and equipment	6,416	6,401
Construction in Progress [Member]
Property, plant, and equipment	$ 7,377	$ 7,272

XML

Note 10 - Leases - Right-of-Use Assets and Lease Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Total ROU assets	$ 14,514	$ 13,153
Total lease liabilities - current	2,938	2,517
Total lease liabilities - long-term	11,873	10,851
Right of Use Assets [Member]
Operating lease ROU assets	14,318	12,942
Finance lease ROU assets	196	211
Total ROU assets	14,514	13,153
Lease Liabilities, Current [Member]
Operating lease liabilities - current	2,879	2,458
Finance lease liabilities - current	59	59
Total lease liabilities - current	2,938	2,517
Lease Liabilities, Noncurrent [Member]
Operating lease liabilities - long-term	11,732	10,695
Finance lease liabilities - long-term	141	156
Total lease liabilities - long-term	$ 11,873	$ 10,851

XML

Note 10 - Leases - Lease Cost (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Lease Cost:
Amortization of right of use assets	$ 15	$ 15
Interest on lease liabilities	1	1
Operating lease cost	711	652
Variable lease cost	83	70
Short-term lease cost	7	17
Total lease cost	817	755
Operating cash flows from operating leases	683	540
Financing cash flows from finance leases	$ 16	$ 16
Finance (Year)	3 years 3 months 14 days	4 years 3 months 14 days
Operating (Year)	5 years 21 days	3 years 7 months 13 days
Finance	2.10%	2.10%
Operating	3.42%	2.53%

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Note 10 - Leases - Aggregate Future Lease Payments (Details) $ in Thousands	Mar. 31, 2023 USD ($)
Remainder of 2023, finance	$ 47
Remainder of 2023, operating	2,192
2024, finance	63
2024, operating	2,950
2025, finance	63
2025, operating	2,779
2026, finance	29
2026, operating	2,402
2027, finance	6
2027, operating	2,031
Thereafter, finance	0
Thereafter, operating	3,774
Total lease payments, finance	208
Total lease payments, operating	16,128
Less: Interest, finance	(8)
Less: Interest, operating	(1,517)
Present value of lease liabilities, finance	200
Present value of lease liabilities, operating	$ 14,611

XML

Note 11 - Income Per Share (Details Textual) - shares shares in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares)	0	0

XML

Note 11 - Income Per Share - Weighted Average Number of Shares Used to Compute Net EPS (Details) - shares shares in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Basic weighted average common shares outstanding (in shares)	7,592	7,544
Weighted average common equivalent shares due to restricted stock, stock options and RSUs (in shares)	89	86
Diluted weighted average common shares outstanding (in shares)	7,681	7,630

XML

Note 12 - Segment Reporting (Details Textual)	3 Months Ended		12 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Number of Operating Segments	1
Customer Concentration Risk [Member] | Revenue Benchmark [Member]
Number of Major Customers	1	1
Customer Concentration Risk [Member] | Revenue Benchmark [Member] | One Customer [Member]
Concentration Risk, Percentage	22.00%	15.00%
Customer Concentration Risk [Member] | Revenue Benchmark [Member] | Geographic Distribution, Foreign [Member]
Concentration Risk, Percentage	16.60%	12.00%
Customer Concentration Risk [Member] | Accounts Receivable [Member]
Number of Major Customers	1		1
Customer Concentration Risk [Member] | Accounts Receivable [Member] | One Customer [Member]
Concentration Risk, Percentage	17.00%		10.00%
Customer Concentration Risk [Member] | Long-Lived Assets [Member] | Geographic Distribution, Foreign [Member]
Concentration Risk, Percentage	18.00%		18.00%

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Note 12 - Segment Reporting - Net Sales by Market (Details) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2023	Mar. 31, 2022
Net sales		$ 97,753	$ 71,242
Percentage of concentration risk	[1]	100.00%	100.00%
Medical [Member]
Net sales		$ 83,804	$ 52,554
Percentage of concentration risk	[1]	85.70%	73.80%
Automotive [Member]
Net sales		$ 4,347	$ 4,351
Percentage of concentration risk	[1]	4.40%	6.10%
Aerospace & Defense [Member]
Net sales		$ 4,217	$ 3,755
Percentage of concentration risk	[1]	4.30%	5.30%
Industrial [Member]
Net sales		$ 5,385	$ 10,582
Percentage of concentration risk		5.60%	14.80%

[1] Certain amounts for the three and nine months ended September 30, 2021, were reclassified between markets to conform to the current period presentation.

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Note 13 - Goodwill and Other Intangible Assets (Details Textual) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Amortization of Intangible Assets	$ 1.1	$ 1.0

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Note 13 - Goodwill and Other Intangible Assets - Changes in Carrying Amount of Goodwill (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($)
December 31, 2022	$ 113,028
Foreign currency translation	131
March 31, 2023	$ 113,159

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Note 13 - Goodwill and Other Intangible Assets - Definite-lived Intangible Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Gross amount	$ 77,833
Accumulated amortization	(10,487)
Net balance	67,346	$ 68,361
Intellectual Property/ Tradename and Brand [Member]
Gross amount	7,103
Accumulated amortization	(879)
Net balance	6,224
Noncompete Agreements [Member]
Gross amount	5,502
Accumulated amortization	(1,125)
Net balance	4,377
Customer Lists [Member]
Gross amount	65,228
Accumulated amortization	(8,483)
Net balance	$ 56,745

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Note 13 - Goodwill and Other Intangible Assets - Future Amortization of Intangible Assets (Details) $ in Thousands	Mar. 31, 2023 USD ($)
Remainder of 2023	$ 3,308
2024	4,401
2025	4,401
2026	4,399
2027	4,397
2028	4,350
Thereafter	42,090
Total	$ 67,346

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Note 14 - Other Long-term Liabilities - Other Long-term Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Accrued contingent consideration (earn-out)	$ 12,421	$ 9,568
Present value of non-competition payments	6,097	8,155
Other	965	497
Other Liabilities, Noncurrent	$ 19,483	$ 18,220

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Note 15 - Income Tax (Details Textual)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Effective Income Tax Rate Reconciliation, Percent	18.10%	20.20%

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Note 16 - Indebtedness (Details Textual) - USD ($)	Dec. 22, 2021	Mar. 31, 2023
Long-Term Debt		$ 60,000,000
Subsidiary Guarantors [Member] | Second Amended and Restated Credit Agreement [Member]
Debt Instrument, Face Amount	$ 130,000,000
Long-Term Debt		60,000,000
Letters of Credit Outstanding, Amount		$ 700,000
Debt Instrument, Interest Rate, Stated Percentage		6.10%
Subsidiary Guarantors [Member] | Second Amended and Restated Credit Agreement [Member] | Bloomberg Short-term Bank Yield Index Rate [Member] | Minimum [Member]
Debt Instrument, Basis Spread on Variable Rate	1.25%
Subsidiary Guarantors [Member] | Second Amended and Restated Credit Agreement [Member] | Bloomberg Short-term Bank Yield Index Rate [Member] | Maximum [Member]
Debt Instrument, Basis Spread on Variable Rate	2.00%
Subsidiary Guarantors [Member] | Second Amended and Restated Credit Agreement [Member] | Prime Rate [Member] | Maximum [Member]
Debt Instrument, Basis Spread on Variable Rate	0.25%
Subsidiary Guarantors [Member] | Second Amended and Restated Credit Agreement [Member] | Secured Revolving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity	$ 90,000,000
Debt Instrument, Periodic Payment, Principal	1,000,000
Subsidiary Guarantors [Member] | Second Amended and Restated Credit Agreement [Member] | Secured Term Loan [Member]
Debt Instrument, Face Amount	$ 40,000,000

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Note 16 - Indebtedness - Long-term Debt (Details) - USD ($) $ in Millions	Mar. 31, 2023	Dec. 31, 2022
Total long-term debt	$ 60
Current portion	(4)	$ (4)
Long-term debt, excluding current portion	56	$ 51
Term Loan [Member]
Total long-term debt	35
Revolving Credit Facility [Member] | Line of Credit [Member]
Total long-term debt	$ 25

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Note 16 - Indebtedness - Schedule of Maturity (Details) $ in Thousands	Mar. 31, 2023 USD ($)
Remainder of 2023	$ 3,000
2024	4,000
2025	4,000
2026	49,000
Long-Term Debt	60,000
Line of Credit [Member] | Revolving Credit Facility [Member]
Remainder of 2023	0
2024	0
2025	0
2026	25,000
Long-Term Debt	25,000
Term Loan [Member]
Remainder of 2023	3,000
2024	4,000
2025	4,000
2026	24,000
Long-Term Debt	$ 35,000