10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended     MARCH 31, 2017    

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)	(IRS 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)

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   X  ;    No ____

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

Yes   X   ;    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	☐  [Do not check if a smaller reporting company]
Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by checkmark 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   X  

7,231,881 shares of registrant’s Common Stock, $0.01 par value, were outstanding as of May 1, 2017.

UFP Technologies, Inc.

Index

	Page
PART I - FINANCIAL INFORMATION	3
Item 1. Financial Statements	3
Condensed Consolidated Balance Sheets as of March 31, 2017 (unaudited) and December 31, 2016	3
Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2017 and March 31, 2016 (unaudited)	4
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2017 and March 31, 2016 (unaudited)	5
Notes to Interim Condensed Consolidated Financial Statements	6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3. Quantitative and Qualitative Disclosures about Market Risk	15
Item 4. Controls and Procedures	15
PART II - OTHER INFORMATION	16
Item 1A. Risk Factors	16
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	16
Item 6. Exhibit	16
Signatures	17
Exhibit Index	18

2

PART I: FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

UFP Technologies, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share data)

	March 31, 2017			December 31, 2016
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	33,755		$	31,359
Receivables, less allowance for doubtful accounts of $656 at March 31, 2017 and $567 at December 31, 2016		21,923			21,249
Inventories		14,411			14,151
Prepaid expenses		2,869			2,281
Refundable income taxes		-			807
Total current assets		72,958			69,847
Property, plant and equipment		98,657			96,806
Less accumulated depreciation and amortization		(49,601	)		(48,290	)
Net property, plant and equipment		49,056			48,516
Goodwill		7,322			7,322
Intangible assets, net		238			318
Other assets		1,945			1,931
Total assets	$	131,519		$	127,934
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	5,907		$	4,002
Accrued expenses		4,084			4,698
Current installments of long-term debt		600			856
Total current liabilities		10,591			9,556
Deferred income taxes		3,537			3,459
Non-qualified deferred compensation plan		1,839			1,682
Other liabilities		147			184
Total liabilities		16,114			14,881
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized; zero shares issued or outstanding		-			-
Common stock, $.01 par value, 20,000,000 shares authorized; 7,261,440 and 7,231,881 shares issued and outstanding, respectively at March 31, 2017; 7,242,023 and 7,212,464 shares issued and outstanding, respectively at December 31, 2016		72			72
Additional paid-in capital		25,397			25,216
Retained earnings		90,523			88,352
Treasury stock at cost, 29,559 shares at March 31, 2017 and December 31, 2016		(587	)		(587	)
Total stockholders’ equity		115,405			113,053
Total liabilities and stockholders' equity	$	131,519		$	127,934

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

3

UFP Technologies, Inc.

Condensed Consolidated Statements of Income

(In thousands, except per share data)

(Unaudited)

	Three Months Ended
	March 31,
	2017			2016
Net sales	$	37,053		$	34,503
Cost of sales		27,537			26,776
Gross profit		9,516			7,727
Selling, general & administrative expenses		6,316			5,904
Restructuring costs		-			123
Gain on sale of fixed assets		(5	)		(4	)
Operating income		3,205			1,704
Interest income		(42	)		(30	)
Interest expense		14			19
Income before income tax expense		3,233			1,715
Income tax expense		1,062			640
Net income	$	2,171		$	1,075
Net income per share:
Basic	$	0.30		$	0.15
Diluted	$	0.30		$	0.15
Weighted average common shares outstanding:
Basic		7,216			7,173
Diluted		7,297			7,253

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

4

UFP Technologies, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Three Months Ended
	March 31,
	2017			2016
Cash flows from operating activities:
Net income	$	2,171		$	1,075
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		1,395			1,367
Gain on sale of fixed assets		(5	)		(4	)
Share-based compensation		209			201
Deferred income taxes		78			87
Changes in operating assets and liabilities:
Receivables, net		(674	)		(2,895	)
Inventories		(260	)		984
Prepaid expenses		(588	)		(1,496	)
Refundable income taxes		807			604
Other assets		(14	)		(6	)
Accounts payable		1,513			(323	)
Accrued expenses		(614	)		(2,322	)
Non-qualified deferred compensation plan and other liabilities		120			215
Net cash provided by (used in) operating activities		4,138			(2,513	)
Cash flows from investing activities:
Additions to property, plant, and equipment		(1,463	)		(1,497	)
Proceeds from sale of fixed assets		5			4
Net cash used in investing activities		(1,458	)		(1,493	)
Cash flows from financing activities:
Principal repayments of long-term debt		(256	)		(251	)
Proceeds from exercise of stock options, net of attestation		79			-
Payment of statutory withholdings for stock options exercised and restricted stock units vested		(107	)		(88	)
Net cash used in financing activities		(284	)		(339	)
Net increase (decrease) in cash and cash equivalents		2,396			(4,345	)
Cash and cash equivalents at beginning of period		31,359			29,804
Cash and cash equivalents at end of period	$	33,755		$	25,459

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

5

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, 2016, included in the Company's 2016 Annual Report on Form 10-K, as filed with the Securities and Exchange Commission.

The condensed consolidated balance sheet as of March 31, 2017, the condensed consolidated statements of income for the three-month periods ended March 31, 2017 and 2016, and the condensed consolidated statements of cash flows for the three-month periods ended March 31, 2017 and 2016 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, 2016 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, 2017, are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, 2017.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This standard will replace most existing revenue recognition guidance when it becomes effective. The standard permits the use of either the full retrospective or modified retrospective transition methods. In August 2015, the FASB issued an update to defer the effective date of this update by one year. The updated standard becomes effective for the Company in the first quarter of 2018, but allows the Company to adopt the standard one year earlier if it so chooses. The Company expects to adopt the standard in the first quarter of 2018 using the modified retrospective transition method. The Company is continuing to evaluate its revenue sources for potential impact. Based on the work completed to date, the Company expects that for a significant portion of its business, the recognition of revenue under the updated standard will occur at a point in time, which is consistent with current practice.

In February 2016, the FASB issued ASU No. 2016-02, Leases. The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for those leases previously classified as operating leases. The amendments in ASU No. 2016-02 are effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period with early adoption permitted. The Company is evaluating the impact of adopting this ASU on its consolidated financial position and results of operations.

In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share Based Payment Accounting. This ASU simplifies several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards, forfeitures and classification on the statement of cash flows. The provisions of this ASU are effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. The Company adopted this ASU on January 1, 2017. As the Company has not had a significant amount of forfeitures historically, under the provisions of this ASU the Company has elected to account for forfeitures as they occur, rather than estimate expected forfeitures. The impact of adopting this update to the Company’s Consolidated Financial Statements will depend on market factors and the timing and intrinsic value of future share-based compensation award vests and exercises. Subsequent to adoption, the Company notes the potential for volatility in its effective tax rate as any windfall or shortfall tax benefits related to its share-based compensation plans will be recorded directly to income tax expense in the Condensed Consolidated Statement of Income.

6

Revisions

Certain revisions have been made to the 2016 Condensed Consolidated Statement of Cash Flows to conform to the current year presentation relating to a reserve for uncertain tax positions and to cash paid for capital expenditures. The reclassification of a reserve for uncertain tax positions resulted in an increase to the change in refundable income taxes of $315,000 and a decrease to the change in accrued expenses of $315,000. A change in presentation of cash paid for capital expenditures resulted in a decrease of $105,000 in both the change in accounts payable and in additions to property, plant and equipment, net. These revisions had no impact on previously reported net income and are deemed immaterial to the previously issued financial statements.

(2) Supplemental Cash Flow Information

	Three Months Ended
	March 31,
	2017		2016
	(in thousands)
Cash paid for:
Interest	$	14	$	18
Income taxes, net of refunds		79		265
Non-cash investing and financing activities:
Capital additions accrued but not yet paid	$	392	$	105

(3) Fair Value of Financial Instruments

The Company has financial instruments, such as accounts receivable, accounts payable, and accrued expenses, which 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.

(4) 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, 2016. 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:	2017		2016
Stock options granted to directors and employees	$	9	$	36
Common stock granted to the Company's Chief Executive Officer		100		100
Restricted Stock Unit awards to employees		100		65
Total share-based compensation	$	209	$	201

7

The total income tax benefit recognized in the condensed consolidated statements of income for share-based compensation arrangements was approximately $137,000 and $57,000, for the three-month periods ended March 31, 2017 and 2016, respectively.

The following is a summary of stock option activity under all plans for the three-month period ended March 31, 2017:

	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, 2016		232,578		$	16.53
Granted		-			-
Exercised		(10,375	)		7.60
Expired		(3,750	)		18.85
Outstanding at March 31, 2017		218,453		$	16.92		2.85	$	1,767
Exercisable at March 31, 2017		213,453		$	16.74		2.88	$	1,764
Vested and expected to vest at March 31, 2017		218,453		$	16.92		2.85	$	1,767

During the three-month period ended March 31, 2017, the total intrinsic value of all options exercised (i.e., the difference between the market price on the exercise date and the price paid by the employees to exercise the options) was approximately $184,000, and the total amount of consideration received by the Company from the exercised options was approximately $79,000. There were no options exercised during the three-month period ended March 31, 2016. 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 periods ended March 31, 2017 and 2016, there were no shares surrendered for this purpose.

On February 21, 2017, the Company’s Compensation Committee approved the award of $400,000, payable in shares of common stock to the Company’s Chairman, Chief Executive Officer, and President under the 2003 Incentive Plan. The shares will be issued in December, 2017.

The following table summarizes information about Restricted Stock Units (“RSUs”) activity during the three-month period ended March 31, 2017:

	Restricted Stock Units			Weighted Average Award Date Fair Value
Unvested at December 31, 2016		46,558		$	20.05
Awarded		30,360			24.70
Shares vested		(13,419	)		23.54
Unvested at March 31, 2017		63,499		$	20.87

At the Company’s discretion, 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. During the three-month periods ended March 31, 2017 and 2016, 4,377 and 3,889 shares were surrendered at an average market price of $24.50 and $22.82, respectively.

As of March 31, 2017, the Company had approximately $1.0 million of unrecognized compensation expense, which is expected to be recognized over a period of 4 years.

8

(5) Inventories

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

	March 31, 2017		December 31, 2016
Raw materials	$	6,725	$	7,111
Work in process		1,512		1,354
Finished goods		6,174		5,686
Total inventory	$	14,411	$	14,151

(6) Preferred Stock

On March 18, 2009, the Company declared a dividend of one preferred share purchase right (a “Right”) for each outstanding share of common stock, par value $0.01 per share, to the stockholders of record on March 20, 2009. Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Junior Participating Preferred Stock, par value $0.01 per share (the “Preferred Share”) of the Company, at a price of $25 per one one-thousandth of a Preferred Share subject to adjustment and the terms of the Rights Agreement. The Rights expire on March 19, 2019.

(7) 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,
	2017		2016
Weighted average common shares outstanding, basic		7,216		7,173
Weighted average common equivalent shares due to stock options and RSUs		81		80
Weighted average common shares outstanding, diluted		7,297		7,253

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 the three-month periods ended March 31, 2017 and 2016, the number of stock awards excluded from the computation of diluted earnings per share for this reason was 35,193 and 54,969, respectively.

(8) Segment Reporting

The Company consists of a single operating and reportable segment.

Revenues from customers outside of the United States are not material. No customer comprised more than 10% of the Company’s consolidated revenues for the three-month period ended March 31, 2017. All of the Company’s assets are located in the United States.

9

The Company’s products are primarily sold to customers within the Medical, Automotive, Consumer, Aerospace and Defense, Electronics and Industrial markets. Net sales by market for the three -month periods ended March 31, 2017 and 2016 are as follows (in thousands):

	Three Months Ended March 31,
	2017					2016
Market	Net Sales		%			Net Sales		%
Medical	$	17,459		47.1	%	$	15,614		45.3	%
Automotive		6,719		18.1	%		6,089		17.6	%
Consumer		4,692		12.7	%		4,629		13.4	%
Aerospace & Defense		3,041		8.2	%		2,572		7.5	%
Electronics		2,692		7.3	%		2,867		8.3	%
Industrial		2,450		6.6	%		2,732		7.9	%
Net Sales	$	37,053		100.0	%	$	34,503		100.0	%

Certain amounts for the three- months ended March 31, 2016 were reclassified between markets to conform to the current period presentation.

(9) Other Intangible Assets

The carrying values of the Company’s definite lived intangible assets as of March 31, 2017 and December 31, 2016, are as follows (in thousands):

	Patents			Non- Compete			Customer List			Total
Estimated useful life
Gross amount at March 31, 2017	$	429		$	512		$	2,046		$	2,987
Accumulated amortization at March 31, 2017		(429	)		(465	)		(1,855	)	$	(2,749	)
Net balance at March 31, 2017	$	-		$	47		$	191		$	238
Gross amount at December 31, 2016	$	429		$	512		$	2,046		$	2,987
Accumulated amortization at December 31, 2016		(429	)		(449	)		(1,791	)	$	(2,669	)
Net balance at December 31, 2016	$	-		$	63		$	255		$	318

Amortization expense related to intangible assets was approximately $79,000 and $80,000 for each of the three-month periods ended March 31, 2017 and 2016. The estimated remaining amortization expense as of March 31, 2017 is as follows (in thousands):

Remainder of:
2017		238
Total	$	238

(10) Income Taxes

The income tax expense included in the accompanying unaudited condensed consolidated statements of income principally relates to the Company’s proportionate share of the pre-tax income of its wholly-owned subsidiaries. The determination of income tax expense for interim reporting purposes 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 tax expense of approximately 32.8% and 37.3% of income before income tax expense, respectively, for each of the three-month periods ended March 31, 2017 and 2016. The decrease in the effective tax rate for the current period is due to a tax benefit of approximately $69,000 recorded in the three-month period ended March 31, 2017 as a result of the adoption of ASU No. 2016-09 on January 1, 2017 (See Note 1); and a tax assessment of approximately $40,000 from one jurisdiction recorded in the first quarter of 2016. The Company notes the potential for volatility in its effective tax rate, as any windfall or shortfall tax benefits related to its share-based compensation plans will be recorded directly into income tax expense.

10

(11) Plant Consolidations

Restructuring Costs

On March 18, 2015, the Company committed to move forward with a plan to cease operations at its Raritan, New Jersey, plant and consolidate operations into its Newburyport, Massachusetts, facility and other UFP facilities. The Company’s decision was in response to a continued decline in business at the Raritan facility and the recent purchase of the 137,000-square-foot facility in Newburyport. The activities related to this consolidation are complete.

The Company also relocated all operations in its Haverhill, Massachusetts, and Byfield, Massachusetts facilities and plans to relocate certain operations in its Georgetown, Massachusetts facility to Newburyport. The Haverhill and Byfield relocations were complete at December 31, 2015 and the Georgetown relocation is substantially complete.

The Company has incurred approximately $2.1 million in one-time expenses in connection with the Massachusetts consolidations. Included in this amount are approximately $180,000 relating to employee severance payments and relocation costs, approximately $1.5 million in moving expenses and expenses associated with vacating the Raritan, Haverhill and Byfield properties, and approximately $360,000 in lease termination costs. Total cash charges were approximately $2.0 million.

The company recorded the following restructuring costs associated with the Massachusetts consolidations for the three-month periods ended March 31, 2017 and 2016 (in thousands):

	Three Months Ended
	March 31,
Restructuring Costs	2017		2016
Relocation	$	-	$	123
Total	$	-	$	123

Costs for the three months ended March 31, 2016 were reclassified in the Condensed Consolidated Statement of Income as “Restructuring Costs” from Cost of Sales.

(12) Related Party Transactions

Daniel Croteau, who has been a member of the Company’s board of directors since December 16, 2015, was the Chief Executive Officer (through March 2017) of Vention Medical, Inc., a customer of the Company. Sales to Vention for the three-months ended March 31, 2017 were approximately $148,000. Open accounts receivable from Vention were approximately $65,000 at March 31, 2017.

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 (“Securities Act”), 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, anticipated trends in the different markets in which the Company competes, including the medical, automotive, consumer, electronics, industrial and aerospace and defense markets, anticipated new customer and vendor contracts, statements regarding anticipated advantages relating to the Company’s decisions to consolidate its facilities and the expected cost savings and efficiencies associated therewith, anticipated advantages and the timing associated with requalification of parts, anticipated advantages of maintaining fewer, larger plants, anticipated advantages the Company expects to realize from its investments and capital expenditures, including the development of and investments in its molded fiber product lines, expectations regarding the manufacturing capacity and efficiencies of the Company and the expected timing associated therewith, statements regarding the anticipated end of the Company’s automotive door panel program with Mercedes Benz, and the resulting impact to revenues, statements about the Company’s acquisition opportunities and strategies, its participation and growth in multiple markets, its business opportunities, the Company’s growth potential and strategies for growth, anticipated revenues and the timing of such revenues, and any indication that the Company may be able to sustain or increase its sales and earnings or sales and earnings growth rates. Investors are cautioned that such forward-looking statements involve risks and uncertainties, including without limitation risks and uncertainties associated with the identification of suitable acquisition candidates and the successful, efficient execution of acquisition transactions and integration of any such acquisition candidates, risks and uncertainties associated with plant closures and consolidations and expected efficiencies from consolidating manufacturing, risks and uncertainties associated with the requalification of parts, the risk that we may not be able to finalize anticipated new customer contracts, risks associated with the implementation of new production equipment and requalification or recertification of transferred equipment in a timely, cost-efficient manner, and risks that any benefits from such new equipment may be delayed or not fully realized, or that the Company may be unable to fully utilize its expected production capacity. Accordingly, actual results may differ materially.

11

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 estimates and assumptions 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 the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, 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.

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 an innovative designer and custom converter of foams, plastics, composites, and natural fiber products, principally serving the medical, automotive, consumer, aerospace and defense, electronics and industrial markets. The Company consists of a single operating and reportable segment.

The Company had a 7.4% increase in sales in the first quarter of 2017, largely fueled by continued growth in sales to customers in the medical market. Also, the Company improved gross margins for the quarter to 25.7% from 22.4% in the first quarter of 2016 as the Company has become much more efficient in manufacturing in those plants impacted by recent consolidations. The combination of organic sales growth coupled with the gross margin improvement helped the Company more than double net income for the first quarter of 2017 as compared to the first quarter of 2016.

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

Results of Operations

Sales

Sales for the three-month period ended March 31, 2017 increased approximately 7.4% to $37.1 million from sales of $34.5 million for the same period in 2016. The increase in sales was primarily due to increases in sales to customers in the medical, automotive and aerospace and defense markets of approximately 11.8%, 10.3% and 18.2%, respectively, partially offset by decreases in sales to customers in the industrial and electronics markets of approximately 10.3% and 6.1%, respectively. The increase in sales to customers in the medical market was largely due to an overall increase in demand for product from medical customers. The increase in sales to customers in the automotive market was primarily due to longer shutdowns at certain customers in January 2016 as well as disrupted manufacturing at one of the Company’s key customers due to a relocation of production to a new facility in the three-month period ended March 31, 2016. The increase in sales to customers in the aerospace and defense market was primarily due to an overall increase in demand for product stemming from government contracts. The decrease in sales to customers in the industrial and electronics markets was largely due to a decrease in demand for protective packaging. We have been notified that the remaining portion of our Southeast automotive door panel program for Mercedes Benz, that began in 2004, will end in Q4 this year. We estimate sales for the program will total $2.3 million in 2017 and will be $0 in 2018.

12

Gross Profit

Gross profit as a percentage of sales (“gross margin”) increased to 25.7% for the three-month period ended March 31, 2017, from 22.4% for the same period in 2016. As a percentage of sales, material and labor costs collectively decreased 4.1%, while overhead increased 0.8%. The decrease in collective material and labor costs as a percentage of sales is primarily due to gains in manufacturing efficiencies resulting from continuous improvement initiatives, strategic price increases and an improvement in the overall book of business. The increase in overhead is primarily due to an increase in indirect labor costs of approximately $600,000 due largely to hires made in the second half of 2016 to support growth.

Selling, General and Administrative Expenses

Selling, general, and administrative expenses (“SG&A”) increased approximately 7.0% to $6.3 million for the three-month period ended March 31, 2017, from $5.9 million for the same period in 2016. As a percentage of sales, SG&A decreased to 17.0% for the three-month period ended March 31, 2017, from 17.1% for the same three-month period in 2016. The increase in SG&A for the three-month period ended March 31, 2017, is primarily due to increased variable compensation accruals of approximately $300,000 as a result of increased sales and profitability in the three-month period ended March 31, 2017.

Restructuring Costs

For the three-month period ended March 31, 2017, the Company incurred zero restructuring costs as compared to approximately $123,000 for the same period in 2016.

Additional information regarding restructuring costs can be found in Note 11 of the Notes to Interim Condensed Consolidated Financial Statements.

Interest Income and Expense

The Company had net interest income of approximately $28,000 and $11,000 for the three-month periods ended March 31, 2017 and 2016, respectively. The increase in net interest income is primarily due to an increase in interest earned on money market accounts and certificates of deposit and decreasing interest costs on the Company’s term loans.

Income Taxes

The Company’s effective tax rate was approximately 32.8% and 37.3% for the three-month periods ended March 31, 2017 and 2016, respectively. The decrease in the effective tax rate for the current period is due to a tax benefit of approximately $69,000 recorded in the three-month period ended March 31, 2017 as a result of the adoption of ASU No. 2016-09 on January 1, 2017 (See Note 1); and a tax assessment of approximately $40,000 from one jurisdiction recorded in the first quarter of 2016. The Company notes the potential for volatility in its effective tax rate, as any windfall or shortfall tax benefits related to its share-based compensation plans will be recorded directly into income tax expense. The Company has deferred tax assets on its books associated with net operating losses generated in previous years. The Company has considered both positive and negative available evidence in its determination that the deferred tax assets are more likely than not to be realized, and has not recorded a tax valuation allowance at March 31, 2017. The Company will continue to assess whether the deferred tax assets will be realizable and, when appropriate, will record a valuation allowance against these assets. The amount of the net deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carry-forward period are reduced.

13

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, 2017 was approximately $4.1 million and was primarily a result of net income generated of $2.2 million, depreciation and amortization of approximately $1.4 million, share-based compensation of $0.2 million, an increase in deferred taxes of $0.1 million, an increase in accounts payable of approximately $1.5 million due to increased purchases and the timing of vendor payments in the ordinary course of business and a decrease in refundable income taxes of approximately $0.8 million. These cash inflows and adjustments to income were partially offset by an increase in accounts receivable of approximately $0.7 million due in part to strong March sales, an increase in prepaid expenses of approximately $0.6 million due to upfront insurance premium payments, a decrease in accrued expenses of approximately $0.6 million due to the payment of year-end variable compensation and an increase in inventories of approximately $0.2 million.

Net cash used in investing activities during the three-month period ended March 31, 2017 was approximately $1.5 million and was primarily the result of additions of manufacturing machinery and equipment and the expansion of the production and warehouse facility in Massachusetts.

Net cash used in financing activities was approximately $0.3 million during the three-month period ended March 31, 2017, representing cash used to service term debt of approximately $0.3 million and to pay statutory withholding for stock options exercised and restricted stock units vested of approximately $0.1 million, partially offset by net proceeds received upon stock options exercises of approximately $0.1 million.

Outstanding and Available Debt

The Company maintains an unsecured $40 million revolving credit facility with Bank of America, N.A. The credit facility calls for interest of LIBOR plus a margin that ranges from 1.0% to 1.5% or, at the discretion of the Company, the bank’s prime rate less a margin that ranges from 0.25% to zero. In both cases the applicable margin is dependent upon Company performance. Under the credit facility, 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 Company’s $40 million credit facility matures on November 30, 2018.

As of March 31, 2017, the Company had no borrowings outstanding under the credit facility. Included in the credit facility were approximately $0.4 million in standby letters of credit drawable as a financial guarantee on worker’s compensation insurance policies. As of March 31, 2017, the Company was in compliance with all covenants under the credit facility.

In 2012, the Company financed the purchase of two molded fiber machines through five-year term loans that mature in September 2017. The annual interest rate is fixed at 1.83% and the loans are secured by the related molded fiber machines. As of March 31, 2017, the outstanding balance of the term loan facility was approximately $0.6 million.

Future Liquidity

The Company requires cash to pay its operating expenses, purchase capital equipment, and service its contractual obligations. The Company’s principal sources of funds are its operations and its revolving credit facility. The Company generated cash of approximately $4.1 million from operations during the three-month period ended March 31, 2017; however, 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.

Throughout fiscal 2017, the Company plans to continue to add capacity to enhance operating efficiencies in its manufacturing plants. The Company also plans to further expand its Newburyport, Massachusetts, manufacturing plant. 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 and funds expected to be available to it through any necessary equipment financings and additional bank borrowings, will be sufficient to fund its cash flow requirements, including capital asset acquisitions, through the next twelve months.

14

Stock Repurchase Program

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 2017. Through March 31, 2017, the Company had repurchased a total of 29,559 shares of its common stock under this program at a cost of approximately $587,000. At March 31, 2017, approximately $9.4 million was available for future repurchases of the Company’s common stock under this authorization.

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, 2016.

Off-Balance-Sheet Arrangements

In addition to operating leases, the Company’s off-balance-sheet arrangements include standby letters of credit which are included in the Company’s revolving credit facility. As of March 31, 2017, there was approximately $0.4 million in standby letters of credit drawable as a financial guarantee on worker’s compensation insurance policies.

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, 2016.

ITEM 4: CONTROLS AND PROCEDURES

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 SEC 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 Securities Exchange Act of 1934, as amended, 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.

There has been no change in the Company’s internal control over financial reporting during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

15

PART II: OTHER INFORMATION

ITEM 1A: RISK FACTORS

There have been no material changes from the risk factors previously disclosed in Part 1 - Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

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

Issuer’s Purchases of Equity Securities

On June 16, 2015, the Company issued a press release announcing that its Board of Directors authorized the repurchase of up to $10.0 million of the Company’s outstanding common stock. The Company did not repurchase any shares of its common stock under this program in the first three months of 2017. Through March 31, 2017, the Company had repurchased a total of 29,559 shares of its common stock under this program at a cost of approximately $587,000. At March 31, 2017, approximately $9.4 million was available for future repurchases of the Company's common stock under this authorization.

ITEM 6: EXHIBITS

Exhibit No.	Description
10.1	Form of 2017 CEO Stock Unit Award Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on February 27, 2017 (SEC File No. 001-12648)). #
10.2	Form of 2017 Stock Unit Award Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on February 27, 2017 (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	XBRL Instance Document.*
101.SCH	XBRL Taxonomy Extension Schema Document.*
101.CAL	XBRL Taxonomy Calculation Linkbase Document.*
101.LAB	XBRL Taxonomy Label Linkbase Document.*
101.PRE	XBRL Taxonomy Presentation Linkbase Document.*
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.*

__________________

*	Filed herewith.
**	Furnished herewith.
#	Indicates management contract or compensatory plan or arrangement.

16

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 9, 2017	By:    /s/ R. Jeffrey Bailly
	R. Jeffrey Bailly Chairman, Chief Executive Officer, President, and Director (Principal Executive Officer)
Date: May 9, 2017	By:    /s/ Ronald J. Lataille
	Ronald J. Lataille Chief Financial Officer (Principal Financial Officer)

17

EXHIBIT INDEX

Exhibit No.	Description
10.1	Form of 2017 CEO Stock Unit Award Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on February 27, 2017 (SEC File No. 001-12648)). #
10.2	Form of 2017 Stock Unit Award Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on February 27, 2017 (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	XBRL Instance Document.*
101.SCH	XBRL Taxonomy Extension Schema Document.*
101.CAL	XBRL Taxonomy Calculation Linkbase Document.*
101.LAB	XBRL Taxonomy Label Linkbase Document.*
101.PRE	XBRL Taxonomy Presentation Linkbase Document.*
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.*

__________________

*	Filed herewith.
**	Furnished herewith.
#	Indicates management contract or compensatory plan or arrangement.

18

EX-31.1

EXHIBIT 31.1

EXHIBITS

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 9, 2017	/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 9, 2017	/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, 2017, (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 9, 2017	/s/ R. Jeffrey Bailly
	R. Jeffrey Bailly
	Chairman, Chief Executive Officer, President, and Director
	(Principal Executive Officer)
Date: May 9, 2017	/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, 2017	May 01, 2017
Document Information [Line Items]
Entity Registrant Name	UFP TECHNOLOGIES INC
Entity Central Index Key	0000914156
Trading Symbol	ufpt
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		7,231,881
Document Type	10-Q
Document Period End Date	Mar. 31, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Current assets:
Cash and cash equivalents	$ 33,755	$ 31,359
Receivables, less allowance for doubtful accounts of $656 at March 31, 2017 and $567 at December 31, 2016	21,923	21,249
Inventories	14,411	14,151
Prepaid expenses	2,869	2,281
Refundable income taxes		807
Total current assets	72,958	69,847
Property, plant and equipment	98,657	96,806
Less accumulated depreciation and amortization	(49,601)	(48,290)
Net property, plant and equipment	49,056	48,516
Goodwill	7,322	7,322
Intangible assets, net	238	318
Other assets	1,945	1,931
Total assets	131,519	127,934
Current liabilities:
Accounts payable	5,907	4,002
Accrued expenses	4,084	4,698
Current installments of long-term debt	600	856
Total current liabilities	10,591	9,556
Deferred income taxes	3,537	3,459
Non-qualified deferred compensation plan	1,839	1,682
Other liabilities	147	184
Total liabilities	16,114	14,881
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized; zero shares issued or outstanding	0	0
Common stock, $.01 par value, 20,000,000 shares authorized; 7,261,440 and 7,231,881 shares issued and outstanding, respectively at March 31, 2017; 7,242,023 and 7,212,464 shares issued and outstanding, respectively at December 31, 2016	72	72
Additional paid-in capital	25,397	25,216
Retained earnings	90,523	88,352
Treasury stock at cost, 29,559 shares at March 31, 2017 and December 31, 2016	(587)	(587)
Total stockholders’ equity	115,405	113,053
Total liabilities and stockholders' equity	$ 131,519	$ 127,934

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Allowance for doubtful accounts receivable	$ 656	$ 567
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
Preferred stock, shares outstanding (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)	7,261,440	7,242,023
Common stock, shares outstanding (in shares)	7,231,881	7,212,464
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, 2017	Mar. 31, 2016
Net sales	$ 37,053	$ 34,503
Cost of sales	27,537	26,776
Gross profit	9,516	7,727
Selling, general & administrative expenses	6,316	5,904
Restructuring costs		123
Gain on sale of fixed assets	(5)	(4)
Operating income	3,205	1,704
Interest income	(42)	(30)
Interest expense	14	19
Income before income tax expense	3,233	1,715
Income tax expense	1,062	640
Net income	$ 2,171	$ 1,075
Net income per share:
Basic (in dollars per share)	$ 0.30	$ 0.15
Diluted (in dollars per share)	$ 0.30	$ 0.15
Weighted average common shares outstanding:
Basic (in shares)	7,216	7,173
Diluted (in shares)	7,297	7,253

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Cash flows from operating activities:
Net income	$ 2,171	$ 1,075
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	1,395	1,367
Gain on sale of fixed assets	(5)	(4)
Share-based compensation	209	201
Deferred income taxes	78	87
Changes in operating assets and liabilities:
Receivables, net	(674)	(2,895)
Inventories	(260)	984
Prepaid expenses	(588)	(1,496)
Refundable income taxes	807	604
Other assets	(14)	(6)
Accounts payable	1,513	(323)
Accrued expenses	(614)	(2,322)
Non-qualified deferred compensation plan and other liabilities	120	215
Net cash provided by (used in) operating activities	4,138	(2,513)
Cash flows from investing activities:
Additions to property, plant, and equipment	(1,463)	(1,497)
Proceeds from sale of fixed assets	5	4
Net cash used in investing activities	(1,458)	(1,493)
Cash flows from financing activities:
Principal repayments of long-term debt	(256)	(251)
Proceeds from exercise of stock options, net of attestation	79
Payment of statutory withholdings for stock options exercised and restricted stock units vested	(107)	(88)
Net cash used in financing activities	(284)	(339)
Net increase (decrease) in cash and cash equivalents	2,396	(4,345)
Cash and cash equivalents at beginning of period	31,359	29,804
Cash and cash equivalents at end of period	$ 33,755	$ 25,459

XML

Note 1 - Basis of Presentation

3 Months Ended

Mar. 31, 2017

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,

2016,

included in the Company's

2016

Annual Report on Form 

10

-K, as filed with the Securities and Exchange Commission.

The condensed consolidated balance sheet as of

March

31,

2017,

the condensed consolidated statements of income for the

three

-month periods ended

March

31,

2017

and

2016,

and the condensed consolidated statements of cash flows for the

three

-month periods ended

March

31,

2017

and

2016

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,

2016

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,

2017,

are not necessarily indicative of the results to be expected for the entire fiscal year ending

December

 

31,

2017.

Recent Accounting Pronouncements

In

May

2014,

the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2014

-

09,

Revenue from Contracts with Customers

, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This standard will replace most existing revenue recognition guidance when it becomes effective. The standard permits the use of either the full retrospective or modified retrospective transition methods. In

August

2015,

the FASB issued an update to defer the effective date of this update by

one

year. The updated standard becomes effective for the Company in the

first

quarter of

2018,

but allows the Company to adopt the standard

one

year earlier if it so chooses. The Company expects to adopt the standard in the

first

quarter of

2018

using the modified retrospective transition method. The Company is continuing to evaluate its revenue sources for potential impact. Based on the work completed to date, the Company expects that for a significant portion of its business, the recognition of revenue under the updated standard will occur at a point in time, which is consistent with current practice.

In

February

2016,

the FASB issued ASU No. 

2016

-

02,

Leases.

The guidance in this ASU supersedes the leasing guidance in Topic

840,

Leases

. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for those leases previously classified as operating leases. The amendments in ASU No. 

2016

-

02

are effective for annual reporting periods beginning after

December

 

15,

2018,

including interim periods within that reporting period with early adoption permitted. The Company is evaluating the impact of adopting this ASU on its consolidated financial position and results of operations.

In

March

2016,

the FASB issued ASU No.

2016

-

09,

Improvements to Employee Share Based Payment Accounting

. This ASU simplifies several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards, forfeitures and classification on the statement of cash flows. The provisions of this ASU are effective for fiscal years beginning after

December

15,

2016,

and interim periods within those fiscal years. The Company adopted this ASU on

January

1,

2017.

As the Company has not had a significant amount of forfeitures historically, under the provisions of this ASU the Company has elected to account for forfeitures as they occur, rather than estimate expected forfeitures. The impact of adopting this update to the Company’s Consolidated Financial Statements will depend on market factors and the timing and intrinsic value of future share-based compensation award vests and exercises. Subsequent to adoption, the Company notes the potential for volatility in its effective tax rate as any windfall or shortfall tax benefits related to its share-based compensation plans will be recorded directly to income tax expense in the Condensed Consolidated Statement of Income.

Revisions

Certain revisions have been made to the

2016

Condensed Consolidated Statement of Cash Flows to conform to the current year presentation relating to a reserve for uncertain tax positions and to cash paid for capital expenditures. The reclassification of a reserve for uncertain tax positions resulted in an increase to the change in refundable income taxes of

$315,000

and a decrease to the change in accrued expenses of

$315,000.

A change in presentation of cash paid for capital expenditures resulted in a decrease of

$105,000

in both the change in accounts payable and in additions to property, plant and equipment, net. These revisions had no impact on previously reported net income and are deemed immaterial to the previously issued financial statements.

XML

Note 2 - Supplemental Cash Flow Information

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Cash Flow, Supplemental Disclosures [Text Block]

(2) Supplemental Cash Flow Information

	Three Months Ended
	March 31,
	2017		2016
	(in thousands)
Cash paid for:
Interest	$	14	$	18
Income taxes, net of refunds		79		265
Non-cash investing and financing activities:
Capital additions accrued but not yet paid	$	392	$	105

XML

Note 3 - Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Fair Value Disclosures [Text Block]

(3) Fair Value of Financial Instruments

The Company has financial instruments, such as accounts receivable, accounts payable, and accrued expenses, which 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

.

XML

Note 4 - Share-based Compensation

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

(4) 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,

2016.

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:	2017		2016
Stock options granted to directors and employees	$	9	$	36
Common stock granted to the Company's Chief Executive Officer		100		100
Restricted Stock Unit awards to employees		100		65
Total share-based compensation	$	209	$	201

The total income tax benefit recognized in the condensed consolidated statements of income for share-based compensation arrangements was approximately

$137,000

and

$57,000,

for the

three

-month periods ended

March

31,

2017

and

2016

, respectively.

The following is a summary of stock option activity under all plans for the

three

-month period ended

March

31,

2017

:

	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, 2016		232,578		$	16.53
Granted		-			-
Exercised		(10,375	)		7.60
Expired		(3,750	)		18.85
Outstanding at March 31, 2017		218,453		$	16.92		2.85	$	1,767
Exercisable at March 31, 2017		213,453		$	16.74		2.88	$	1,764
Vested and expected to vest at March 31, 2017		218,453		$	16.92		2.85	$	1,767

During the

three

-month period ended

March

31,

2017

, the total intrinsic value of all options exercised (i.e., the difference between the market price on the exercise date and the price paid by the employees to exercise the options) was approximately

$184,000,

and the total amount of consideration received by the Company from the exercised options was approximately

$79,000.

There were no options exercised during the

three

-month period ended

March

31,

2016.

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 periods ended

March

31,

2017

and

2016,

there were no shares surrendered for this purpose.

On

February

2

1,

2017,

the Company’s Compensation Committee approved the award of

$400,000,

payable in shares of common stock to the Company’s Chairman, Chief Executive Officer, and President under the

2003

Incentive Plan. The shares will be issued in

December,

2017.

The following table summarizes information about Restricted Stock Units (“RSUs”) activity during the

three

-month period ended

March

31,

2017:

	Restricted Stock Units			Weighted Average Award Date Fair Value
Unvested at December 31, 2016		46,558		$	20.05
Awarded		30,360			24.70
Shares vested		(13,419	)		23.54
Unvested at March 31, 2017		63,499		$	20.87

At the Company’s discretion, 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. During the

three

-month periods ended

March

31,

2017

and

2016,

4,377

and

3,889

shares were surrendered at an average market price of

$24.50

and

$22.82,

respectively.

As of

March

31,

2017,

the Company had approximately

$1.0

million of unrecognized compensation expense, which is expected to be recognized over a period of

4

years

.

XML

Note 5 - Inventories

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Inventory Disclosure [Text Block]

(5) Inventories

Inventories are stated at the lower of cost

(first

-in,

first

-out) or net realizable value, and consist of the following at the stated dates (in thousands):

	March 31, 2017		December 31, 2016
Raw materials	$	6,725	$	7,111
Work in process		1,512		1,354
Finished goods		6,174		5,686
Total inventory	$	14,411	$	14,151

XML

Note 6 - Preferred Stock

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

(6) Preferred Stock

On

March

18,

2009,

the Company declared a dividend of

one

preferred share purchase right (a “Right”) for each outstanding share of common stock, par value

$0.01

per share, to the stockholders of record on

March

 

20,

2009.

Each Right entitles the registered holder to purchase from the Company

one

one

-thousandth of a share of Series A Junior Participating Preferred Stock, par value

$0.01

per share (the “Preferred Share”) of the Company, at a price of

$25

per

one

one

-thousandth of a Preferred Share subject to adjustment and the terms of the Rights Agreement. The Rights expire on

March

19,

2019.

XML

Note 7 - Income Per Share

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Earnings Per Share [Text Block]

(7) 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,
	2017		2016
Weighted average common shares outstanding, basic		7,216		7,173
Weighted average common equivalent shares due to stock options and RSUs		81		80
Weighted average common shares outstanding, diluted		7,297		7,253

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 the

three

-month periods ended

March

 

31,

2017

and

2016

, the number of stock awards excluded from the computation of diluted earnings per share for this reason was

35,193

and

54,969,

respectively.

XML

Note 8 - Segment Reporting

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

(8) Segment Reporting

The Company consists of a single operating and reportable segment.

Revenues from customers outside of the United States are not material. No customer comprised more than

10%

of the Company’s consolidated revenues for the

three

-month period ended

March

31,

2017.

All of the Company’s assets are located in the United States.

The Company’s products are primarily sold to customers within the Medical, Automotive, Consumer, Aerospace and Defense, Electronics and Industrial markets. Net sales by market for the

three

-month periods ended

March

31,

2017

and

2016

are as follows (in thousands)

:

	Three Months Ended March 31,
	2017					2016
Market	Net Sales		%			Net Sales		%
Medical	$	17,459		47.1	%	$	15,614		45.3	%
Automotive		6,719		18.1	%		6,089		17.6	%
Consumer		4,692		12.7	%		4,629		13.4	%
Aerospace & Defense		3,041		8.2	%		2,572		7.5	%
Electronics		2,692		7.3	%		2,867		8.3	%
Industrial		2,450		6.6	%		2,732		7.9	%
Net Sales	$	37,053		100.0	%	$	34,503		100.0	%

Certain amounts for the

three

- months ended

March

31,

2016

were reclassified between markets to conform to the current period presentation.

XML

Note 9 - Other Intangible Assets

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Intangible Assets Disclosure [Text Block]

(9) Other Intangible Assets

The carrying values of the Company’s definite lived intangible assets as of

March

31,

2017

and

December

 

31,

2016,

are as follows (in thousands):

	Patents			Non- Compete			Customer List			Total
Estimated useful life
Gross amount at March 31, 2017	$	429		$	512		$	2,046		$	2,987
Accumulated amortization at March 31, 2017		(429	)		(465	)		(1,855	)	$	(2,749	)
Net balance at March 31, 2017	$	-		$	47		$	191		$	238
Gross amount at December 31, 2016	$	429		$	512		$	2,046		$	2,987
Accumulated amortization at December 31, 2016		(429	)		(449	)		(1,791	)	$	(2,669	)
Net balance at December 31, 2016	$	-		$	63		$	255		$	318

Amortization expense related to intangible assets was approximately

$79,000

and

$80,000

for each of the

three

-month periods ended

March

31,

2017

and

2016.

The estimated remaining amortization expense as of

March

31,

2017

is as follows (in thousands):

Remainder of:
2017		238
Total	$	238

XML

Note 10 - Income Taxes

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Income Tax Disclosure [Text Block]

(10) Income Taxes

The income tax expense included in the accompanying unaudited condensed consolidated statements of income principally relates to the Company’s proportionate share of the pre-tax income of its wholly-owned subsidiaries. The determination of income tax expense for interim reporting purposes 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 tax expense of approximately

32.8%

and

37.3%

of income before income tax expense, respectively, for each of the

three

-month periods ended

March

31,

2017

and

2016.

The decrease in the effective tax rate for the current period is due to a tax benefit of approximately

$69,000

recorded in the

three

-month period ended

March

31,

2017

as a result of the adoption of

ASU No.

2016

-

09

on

January

1,

2017

(See Note

1);

and a tax assessment of approximately

$40,000

from

one

jurisdiction recorded in the

first

quarter of

2016.

The Company notes the potential for volatility in its effective tax rate, as any windfall or shortfall tax benefits related to its share-based compensation plans will be recorded directly into income tax expense.

XML

Note 11 - Plant Consolidation

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Plant Consolidation Disclosure [Text Block]

(11) Plant Consolidations

Restructuring Costs

On

March

18,

2015,

the Company committed to move forward with a plan to cease operations at its Raritan, New Jersey, plant and consolidate operations into its Newburyport, Massachusetts, facility and other UFP facilities. The Company’s decision was in response to a continued decline in business at the Raritan facility and the recent purchase of the

137,000

-square-foot facility in Newburyport. The activities related to this consolidation are complete.

The Company also relocated all operations in its Haverhill, Massachusetts, and Byfield, Massachusetts facilities and plans to relocate certain operations in its Georgetown, Massachusetts facility to Newburyport. The Haverhill and Byfield relocations were complete at

December

31,

2015

and the Georgetown relocation is substantially complete.

The Company has incurred approximately

$2.1

million in

one

-time expenses in connection with the Massachusetts consolidations. Included in this amount are approximately

$180,000

relating to employee severance payments and relocation costs, approximately

$1.5

million in moving expenses and expenses associated with vacating the Raritan, Haverhill and Byfield properties, and approximately

$360,000

in lease termination costs. Total cash charges were approximately

$2.0

million.

The company recorded the following restructuring costs associated with the Massachusetts consolidations for the

three

-month periods ended

March

31,

2017

and

2016

(in thousands):

	Three Months Ended
	March 31,
Restructuring Costs	2017		2016
Relocation	$	-	$	123
Total	$	-	$	123

Costs for the

three

months ended

March

31,

2016

were reclassified in the Condensed Consolidated Statement of Income as “Restructuring Costs” from Cost of Sales.

XML

Note 12 - Related Party Transactions

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

(12) Related Party Transactions

Daniel Croteau, who has been a member of the Company’s board of directors since

December

16,

2015,

was the Chief Executive Officer (through

March

2017)

of Vention Medical, Inc., a customer of the Company. Sales to Vention for the

three

-months ended

March

31,

2017

were approximately

$148,000.

Open accounts receivable from Vention were approximately

$65,000

at

March

31,

2017.

XML

Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2017

Accounting Policies [Abstract]

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

In

May

2014,

the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2014

-

09,

Revenue from Contracts with Customers

, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This standard will replace most existing revenue recognition guidance when it becomes effective. The standard permits the use of either the full retrospective or modified retrospective transition methods. In

August

2015,

the FASB issued an update to defer the effective date of this update by

one

year. The updated standard becomes effective for the Company in the

first

quarter of

2018,

but allows the Company to adopt the standard

one

year earlier if it so chooses. The Company expects to adopt the standard in the

first

quarter of

2018

using the modified retrospective transition method. The Company is continuing to evaluate its revenue sources for potential impact. Based on the work completed to date, the Company expects that for a significant portion of its business, the recognition of revenue under the updated standard will occur at a point in time, which is consistent with current practice.

In

February

2016,

the FASB issued ASU No. 

2016

-

02,

Leases.

The guidance in this ASU supersedes the leasing guidance in Topic

840,

Leases

. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for those leases previously classified as operating leases. The amendments in ASU No. 

2016

-

02

are effective for annual reporting periods beginning after

December

 

15,

2018,

including interim periods within that reporting period with early adoption permitted. The Company is evaluating the impact of adopting this ASU on its consolidated financial position and results of operations.

In

March

2016,

the FASB issued ASU No.

2016

-

09,

Improvements to Employee Share Based Payment Accounting

. This ASU simplifies several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards, forfeitures and classification on the statement of cash flows. The provisions of this ASU are effective for fiscal years beginning after

December

15,

2016,

and interim periods within those fiscal years. The Company adopted this ASU on

January

1,

2017.

As the Company has not had a significant amount of forfeitures historically, under the provisions of this ASU the Company has elected to account for forfeitures as they occur, rather than estimate expected forfeitures. The impact of adopting this update to the Company’s Consolidated Financial Statements will depend on market factors and the timing and intrinsic value of future share-based compensation award vests and exercises. Subsequent to adoption, the Company notes the potential for volatility in its effective tax rate as any windfall or shortfall tax benefits related to its share-based compensation plans will be recorded directly to income tax expense in the Condensed Consolidated Statement of Income.

Revisions Policy [Policy Text Block]

Revisions

Certain revisions have been made to the

2016

Condensed Consolidated Statement of Cash Flows to conform to the current year presentation relating to a reserve for uncertain tax positions and to cash paid for capital expenditures. The reclassification of a reserve for uncertain tax positions resulted in an increase to the change in refundable income taxes of

$315,000

and a decrease to the change in accrued expenses of

$315,000.

A change in presentation of cash paid for capital expenditures resulted in a decrease of

$

105,000

in both the change in accounts payable and in additions to property, plant and equipment, net. These revisions had no impact on previously reported net income and are deemed immaterial to the previously issued financial statements.

XML

Note 2 - Supplemental Cash Flow Information (Tables)

3 Months Ended

Mar. 31, 2017

Notes Tables

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

	Three Months Ended
	March 31,
	2017		2016
	(in thousands)
Cash paid for:
Interest	$	14	$	18
Income taxes, net of refunds		79		265
Non-cash investing and financing activities:
Capital additions accrued but not yet paid	$	392	$	105

XML

Note 4 - Share-based Compensation (Tables)

3 Months Ended

Mar. 31, 2017

Notes Tables

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table Text Block]

	Three Months Ended
	March 31,
Share-based compensation related to:	2017		2016
Stock options granted to directors and employees	$	9	$	36
Common stock granted to the Company's Chief Executive Officer		100		100
Restricted Stock Unit awards to employees		100		65
Total share-based compensation	$	209	$	201

Share-based Compensation, Stock Options, 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, 2016		232,578		$	16.53
Granted		-			-
Exercised		(10,375	)		7.60
Expired		(3,750	)		18.85
Outstanding at March 31, 2017		218,453		$	16.92		2.85	$	1,767
Exercisable at March 31, 2017		213,453		$	16.74		2.88	$	1,764
Vested and expected to vest at March 31, 2017		218,453		$	16.92		2.85	$	1,767

Schedule of Share-based Compensation, Restricted Stock Units Award Activity [Table Text Block]

	Restricted Stock Units			Weighted Average Award Date Fair Value
Unvested at December 31, 2016		46,558		$	20.05
Awarded		30,360			24.70
Shares vested		(13,419	)		23.54
Unvested at March 31, 2017		63,499		$	20.87

XML

Note 5 - Inventories (Tables)

3 Months Ended

Mar. 31, 2017

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	March 31, 2017		December 31, 2016
Raw materials	$	6,725	$	7,111
Work in process		1,512		1,354
Finished goods		6,174		5,686
Total inventory	$	14,411	$	14,151

XML

Note 7 - Income Per Share (Tables)

3 Months Ended

Mar. 31, 2017

Notes Tables

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

	Three Months Ended
	March 31,
	2017		2016
Weighted average common shares outstanding, basic		7,216		7,173
Weighted average common equivalent shares due to stock options and RSUs		81		80
Weighted average common shares outstanding, diluted		7,297		7,253

XML

Note 8 - Segment Reporting (Tables)

3 Months Ended

Mar. 31, 2017

Notes Tables

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

	Three Months Ended March 31,
	2017					2016
Market	Net Sales		%			Net Sales		%
Medical	$	17,459		47.1	%	$	15,614		45.3	%
Automotive		6,719		18.1	%		6,089		17.6	%
Consumer		4,692		12.7	%		4,629		13.4	%
Aerospace & Defense		3,041		8.2	%		2,572		7.5	%
Electronics		2,692		7.3	%		2,867		8.3	%
Industrial		2,450		6.6	%		2,732		7.9	%
Net Sales	$	37,053		100.0	%	$	34,503		100.0	%

XML

Note 9 - Other Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2017

Notes Tables

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

	Patents			Non- Compete			Customer List			Total
Estimated useful life
Gross amount at March 31, 2017	$	429		$	512		$	2,046		$	2,987
Accumulated amortization at March 31, 2017		(429	)		(465	)		(1,855	)	$	(2,749	)
Net balance at March 31, 2017	$	-		$	47		$	191		$	238
Gross amount at December 31, 2016	$	429		$	512		$	2,046		$	2,987
Accumulated amortization at December 31, 2016		(429	)		(449	)		(1,791	)	$	(2,669	)
Net balance at December 31, 2016	$	-		$	63		$	255		$	318

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

Remainder of:
2017		238
Total	$	238

XML

Note 11 - Plant Consolidation (Tables)

3 Months Ended

Mar. 31, 2017

Notes Tables

Restructuring and Related Costs [Table Text Block]

	Three Months Ended
	March 31,
Restructuring Costs	2017		2016
Relocation	$	-	$	123
Total	$	-	$	123

XML

Note 1 - Basis of Presentation (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Increase (Decrease) in Income Taxes Receivable	$ (807,000)	$ (604,000)
Increase (Decrease) in Accrued Liabilities	(614,000)	(2,322,000)
Increase (Decrease) in Accounts Payable	1,513,000	(323,000)
Payments to Acquire Property, Plant, and Equipment	$ 1,463,000	1,497,000
Restatement Adjustment [Member]
Increase (Decrease) in Income Taxes Receivable		315,000
Increase (Decrease) in Accrued Liabilities		(315,000)
Increase (Decrease) in Accounts Payable		(105,000)
Payments to Acquire Property, Plant, and Equipment		$ (105,000)

XML

Note 2 - Supplemental Cash Flow Information - Schedule of Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Cash paid for:
Interest	$ 14	$ 18
Income taxes, net of refunds	79	265
Non-cash investing and financing activities:
Capital additions accrued but not yet paid	$ 392	$ 105

XML

Note 4 - Share-based Compensation (Details Textual) - USD ($)		3 Months Ended
	Feb. 21, 2017	Mar. 31, 2017	Mar. 31, 2016
Employee Service Share-based Compensation, Tax Benefit from Compensation Expense		$ 137,000	$ 57,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period, Intrinsic Value		184,000
Proceeds from Stock Options Exercised		79,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized		$ 1,000,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition		4 years
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period		10,375	0
Shares Paid for Exercise Price and Tax Withholding for Share Based Compensation		0	0
Restricted Stock Units (RSUs) [Member]
Shares Paid for Tax Withholding for Share Based Compensation		4,377	3,889
Shares Paid for Tax Withholding for Share Based Compensation Market Price		$ 24.50	$ 22.82
The 2003 Incentive Plan [Member] | Chairman Chief Executive Officer and President [Member] | Common Stock [Member]
Stock Issued During Period, Value, Share-based Compensation, Net of Forfeitures	$ 400,000

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Note 4 - Share-based Compensation - Allocation of Share-based Compensation (Details) - Selling, General and Administrative Expenses [Member] - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Total share-based compensation	$ 209	$ 201
Employee Stock Option [Member] | Directors and Employees [Member]
Total share-based compensation	9	36
Common Stock [Member] | Chief Executive Officer [Member]
Total share-based compensation	100	100
Restricted Stock Units (RSUs) [Member] | Employees [Member]
Total share-based compensation	$ 100	$ 65

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Note 4 - Share-based Compensation - Summary of Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Outstanding (in shares)	232,578
Outstanding, weighted average exercise price (in dollars per share)	$ 16.53
Granted (in shares)
Granted, weighted average exercise price (in dollars per share)
Exercised (in shares)	(10,375)	0
Exercised, weighted average exercise price (in dollars per share)	$ 7.60
Expired (in shares)	(3,750)
Expired, weighted average exercise price (in dollars per share)	$ 18.85
Outstanding (in shares)	218,453
Outstanding, weighted average exercise price (in dollars per share)	$ 16.92
Outstanding, weighted average remaining contractual life (Year)	2 years 310 days
Outstanding, aggregate intrinsic value	$ 1,767
Exercisable (in shares)	213,453
Exercisable, weighted average exercise price (in dollars per share)	$ 16.74
Exercisable, weighted average remaining contractual life (Year)	2 years 321 days
Exercisable, aggregate intrinsic value	$ 1,764
Vested and expected to vest (in shares)	218,453
Vested and expected to vest, weighted average exercise price (in dollars per share)	$ 16.92
Vested and expected to vest, weighted average remaining contractual life (Year)	2 years 310 days
Vested and expected to vest, aggregate intrinsic value	$ 1,767

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Note 4 - Share-based Compensation - Restricted Stock Unit Activity (Details) - Restricted Stock Units (RSUs) [Member]	3 Months Ended
	Mar. 31, 2017 $ / shares shares
Unvested (in shares) | shares	46,558
Unvested, weighted average award date fair value (in dollars per share) | $ / shares	$ 20.05
Awarded (in shares) | shares	30,360
Awarded, weighted average award date fair value (in dollars per share) | $ / shares	$ 24.70
Shares vested (in shares) | shares	(13,419)
Shares vested (in dollars per share) | $ / shares	$ 23.54
Unvested (in shares) | shares	63,499
Unvested, weighted average award date fair value (in dollars per share) | $ / shares	$ 20.87

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Note 5 - Inventories - Schedule of Inventory (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Raw materials	$ 6,725	$ 7,111
Work in process	1,512	1,354
Finished goods	6,174	5,686
Total inventory	$ 14,411	$ 14,151

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Note 6 - Preferred Stock (Details Textual)	Mar. 18, 2009 $ / shares shares	Mar. 31, 2017 $ / shares	Dec. 31, 2016 $ / shares
Preferred Stock Dividends Number of Preferred Share Purchase Rights Distributed for each Share of Common Stock Outstanding	1
Common Stock, Par or Stated Value Per Share	$ 0.01	$ 0.01	$ 0.01
Preferred Stock, Par or Stated Value Per Share		$ 0.01	$ 0.01
Series A Junior Participating Preferred Stock [Member]
Preferred Stock, Par or Stated Value Per Share	$ 0.01
Preferred Share Purchase Right [Member]
Class of Warrant or Right, Number of Securities Called by Each Warrant or Right | shares	0.001
Class of Warrant or Right, Exercise Price of Warrants or Rights	$ 25

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Note 7 - Income Per Share (Details Textual) - shares	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	35,193	54,969

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Note 7 - Income Per Share - Weighted Average Number of Shares Used to Compute Net EPS (Details) - shares shares in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Weighted average common shares outstanding, basic (in shares)	7,216	7,173
Weighted average common equivalent shares due to stock options and RSUs (in shares)	81	80
Weighted average common shares outstanding, diluted (in shares)	7,297	7,253

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Note 8 - Segment Reporting - Net Sales by Market (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Net sales	$ 37,053	$ 34,503
Sales Revenue, Net [Member] | Customer Concentration Risk [Member]
Percentage of concentration risk	100.00%	100.00%
Medical [Member]
Net sales	$ 17,459	$ 15,614
Medical [Member] | Sales Revenue, Net [Member] | Customer Concentration Risk [Member]
Percentage of concentration risk	47.10%	45.30%
Automotive [Member]
Net sales	$ 6,719	$ 6,089
Automotive [Member] | Sales Revenue, Net [Member] | Customer Concentration Risk [Member]
Percentage of concentration risk	18.10%	17.60%
Consumer [Member]
Net sales	$ 4,692	$ 4,629
Consumer [Member] | Sales Revenue, Net [Member] | Customer Concentration Risk [Member]
Percentage of concentration risk	12.70%	13.40%
Aerospace & Defense [Member]
Net sales	$ 3,041	$ 2,572
Aerospace & Defense [Member] | Sales Revenue, Net [Member] | Customer Concentration Risk [Member]
Percentage of concentration risk	8.20%	7.50%
Electronics [Member]
Net sales	$ 2,692	$ 2,867
Electronics [Member] | Sales Revenue, Net [Member] | Customer Concentration Risk [Member]
Percentage of concentration risk	7.30%	8.30%
Industrial [Member]
Net sales	$ 2,450	$ 2,732
Industrial [Member] | Sales Revenue, Net [Member] | Customer Concentration Risk [Member]
Percentage of concentration risk	6.60%	7.90%

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Note 9 - Other Intangible Assets (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Amortization of Intangible Assets	$ 79,000	$ 80,000

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Note 9 - Other Intangible Assets - Carrying Value of Definite Lived Intangible Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Gross amount	$ 2,987	$ 2,987
Accumulated amortization	(2,749)	(2,669)
Net balance	238	318
Patents [Member]
Gross amount	429	429
Accumulated amortization	(429)	(429)
Net balance
Noncompete Agreements [Member]
Gross amount	512	512
Accumulated amortization	(465)	(449)
Net balance	47	63
Customer Lists [Member]
Gross amount	2,046	2,046
Accumulated amortization	(1,855)	(1,791)
Net balance	$ 191	$ 255

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Note 9 - Other Intangible Assets - Future Amortization of Intangible Assets (Details) $ in Thousands	Mar. 31, 2017 USD ($)
2017	$ 238
Total	$ 238

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Note 10 - Income Taxes (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	32.80%	37.30%
Income Tax Expense (Benefit)	$ 1,062,000	$ 640,000
Tax Adjustments, Settlements, and Unusual Provisions		$ 40,000
Accounting Standards Update 2016-09 [Member]
Income Tax Expense (Benefit)	$ (69,000)

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Note 11 - Plant Consolidation (Details Textual)		3 Months Ended
	Mar. 18, 2015 USD ($) ft²	Mar. 31, 2017 USD ($)	Mar. 31, 2016 USD ($)
Restructuring Charges			$ 123,000
Newburyport, Massachusetts Facility [Member]
Area of Real Estate Property | ft²	137,000
Restructuring Charges	$ 2,100,000
Payments for Restructuring	2,000,000
Newburyport, Massachusetts Facility [Member] | Employee Severance Payments and Relocation Costs [Member]
Restructuring and Related Cost, Expected Cost	180,000
Newburyport, Massachusetts Facility [Member] | Moving and Vacating Expense [Member]
Restructuring and Related Cost, Expected Cost	1,500,000
Newburyport, Massachusetts Facility [Member] | Lease Termination [Member]
Restructuring and Related Cost, Expected Cost	$ 360,000

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Note 11 - Plant Consolidations - Restructuring Costs (Details) - Newburyport, Massachusetts Facility [Member] - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Relocation		$ 123
Total		$ 123

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Note 12 - Related Party Transactions (Details Textual) - Vention Medical, Inc. [Member] - Non-employee Members of Board of Directors [Member]	3 Months Ended
	Mar. 31, 2017 USD ($)
Revenue from Related Parties	$ 148,000
Accounts Receivable, Related Parties	$ 65,000