(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

-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

-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

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.

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

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.

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

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.