PART I: FINANCIAL INFORMATION

ITEM 1:FINANCIAL STATEMENTS

~~PART I:~~

~~FINANCIAL INFORMATION~~

~~ITEM 1:~~

~~FINANCIAL STATEMENTS~~

UFP Technologies, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share data)

(Unaudited)

	March 31, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	3,652		$	11,117
Receivables, net		46,182			39,384
Inventories		43,295			33,436
Prepaid expenses and other current assets		5,311			3,383
Total current assets		98,440			87,320
Property, plant and equipment		135,245			126,837
Less accumulated depreciation and amortization		(71,963	)		(70,268	)
Net property, plant and equipment		63,282			56,569
Goodwill		115,570			107,905
Intangible assets, net		71,567			67,585
Non-qualified deferred compensation plan		4,425			4,327
Finance lease right of use assets		256			271
Operating lease right of use assets		8,639			9,053
Other assets		1,167			1,102
Total assets	$	363,346		$	334,132

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	15,668		$	10,611
Accrued expenses		9,955			12,700
Deferred revenue		5,040			4,247
Finance lease liabilities		58			58
Operating lease liabilities		1,994			2,181
Income taxes payable		2,109			909
Current installments of long-term debt		4,000			4,000
Total current liabilities		38,824			34,706
Long-term debt, excluding current installments		91,000			71,000
Deferred income taxes		3,440			3,263
Non-qualified deferred compensation plan		4,457			4,337
Finance lease liabilities		200			215
Operating lease liabilities		6,788			6,903
Other liabilities		19,559			19,262
Total liabilities		164,268			139,686
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized; no shares issued		0			0
Common stock, $.01 par value, 20,000,000 shares authorized; 7,591,054 and 7,561,495 shares issued and outstanding, respectively, at March 31, 2022; 7,564,645 and 7,535,086 shares issued and outstanding, respectively, at December 31, 2021		76			75
Additional paid-in capital		33,543			34,151
Retained earnings		165,665			160,807
Accumulated other comprehensive income		381			0
Treasury stock at cost, 29,559 shares at March 31, 2022 and 29,559 shares at December 31, 2021		(587	)		(587	)
Total stockholders’ equity		199,078			194,446
Total liabilities and stockholders' equity	$	363,346		$	334,132

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

September 30,
2017
December 31,
2016
Assets (Unaudited)
Current assets:
Cash and cash equivalents $ 37,246 $ 31,359
Receivables, less allowance for doubtful accounts of $602 at September 30, 2017 and $567 at December 31, 2016 22,044 21,249
Inventories 13,136 14,151
Prepaid expenses 2,234 2,281
Refundable income taxes 979 807
Total current assets 75,639 69,847
Property, plant and equipment 103,797 96,806
Less accumulated depreciation and amortization (51,815 ) (48,290 )
Net property, plant and equipment 51,982 48,516
Goodwill 7,322 7,322
Intangible assets, net 79 318
Other assets 2,069 1,931
Total assets $ 137,091 $ 127,934

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 4,958 $ 4,002
Accrued expenses 5,356 4,698
Short-term debt 84 856
Total current liabilities 10,398 9,556
Deferred income taxes 3,713 3,459
Non-qualified deferred compensation plan 1,949 1,682
Other liabilities 118 184
Total liabilities 16,178 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; 7,299,721 and 7,270,162 shares issued and outstanding, respectively at September 30, 2017; and 7,242,023 and 7,212,464 shares issued and outstanding, respectively at December 31, 2016 73 72
Additional paid-in capital 26,580 25,216
Retained earnings 94,847 88,352
Treasury stock at cost, 29,559 shares at September 30, 2017 and December 31, 2016 (587 ) (587 )
Total stockholders’ equity 120,913 113,053
Total liabilities and stockholders' equity $ 137,091 $ 127,934

UFP Technologies, Inc.

Condensed Consolidated Statements of Income

and Comprehensive Income

(In thousands, except per share data)

(Unaudited)

	Three Months Ended
	March 31,
	2022			2021
Net sales	$	71,242		$	48,599
Cost of sales		54,108			35,990
Gross profit		17,134			12,609
Selling, general & administrative expenses		10,011			7,309
Acquisition costs		775			0
Gain on disposal of property, plant & equipment		(12	)		0
Operating income		6,360			5,300
Interest income		(12	)		0
Interest expense		339			16
Other income		(52	)		(10	)
Income before income tax expense		6,085			5,294
Income tax expense		1,227			1,131
Net income	$	4,858		$	4,163

Net income per share:
Basic	$	0.64		$	0.55
Diluted	$	0.64		$	0.55
Weighted average common shares outstanding:
Basic		7,544			7,507
Diluted		7,630			7,570

Comprehensive Income
Net Income	$	4,858		$	4,163
Other comprehensive income:
Foreign currency translation gain		381			0
Other comprehensive gain		381			0
Comprehensive income	$	5,239		$	4,163

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

UFP TECHNOLOGIES, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)

Three Months Ended March 31, 2022
											Accumulated
						*Additional*					*other*							*Total*
	*Common Stock*					*Paid-in*			*Retained*		*comprehensive*		*Treasury Stock*					*Stockholders'*
	*Shares*			*Amount*		*Capital*			*Earnings*		*income*		*Shares*		*Amount*			*Equity*
Balance at December 31, 2021		7,535		$	75	$	34,151		$	160,807	$	0		30	$	(587	)	$	194,446
Share-based compensation		46			1		691			0		0		0		0			692
Net share settlement of RSU's		(20	)		0		(1,299	)		0		0		0		0			(1,299	)
Other comprehensive income		-			0		0			0		381		-		0			381
Net income		-			0		0			4,858		-		-		0			4,858
Balance at March 31, 2022		7,561		$	76	$	33,543		$	165,665	$	381		30	$	(587	)	$	199,078

Three Months Ended March 31, 2021
											Accumulated
						*Additional*					*other*							*Total*
	*Common Stock*					*Paid-in*			*Retained*		*comprehensive*		*Treasury Stock*					*Stockholders'*
	*Shares*			*Amount*		*Capital*			*Earnings*		*income*		*Shares*		*Amount*			*Equity*
Balance at December 31, 2020		7,500		$	75	$	32,484		$	144,921	$	0		30	$	(587	)	$	176,893
Share-based compensation		34			0		501			0		0		0		0			501
Net share settlement of RSU's		(14	)		0		(738	)		0		0		0		0			(738	)
Net income		-			0		0			4,163		-		-		0			4,163
Balance at March 31, 2021		7,520		$	75	$	32,247		$	149,084	$	0		30	$	(587	)	$	180,819

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

UFP Technologies, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Three Months Ended
	March 31,
	2022			2021
Cash flows from operating activities:
Net income	$	4,858		$	4,163
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,016			2,069
Gain on disposal of property, plant & equipment		(12	)		0
Share-based compensation		692			501
Interest expense on finance leases		1			1
Deferred income taxes		(440	)		279
Changes in operating assets and liabilities:
Receivables, net		(4,467	)		(3,590	)
Inventories		(7,826	)		(1,374	)
Prepaid expenses and other current assets		(1,712	)		(70	)
Other assets		308			(219	)
Accounts payable		4,105			1,656
Accrued expenses		(3,366	)		(1,083	)
Deferred revenue		793			(124	)
Income taxes payable		1,130			847
Non-qualified deferred compensation plan and other liabilities		(296	)		278
Net cash (used in) provided by operating activities		(3,216	)		3,334
Cash flows from investing activities:
Additions to property, plant, and equipment		(2,334	)		(1,449	)
Acquisition of Advant, net of cash acquired		(20,768	)		0
Acquisition of DAS Medical, working capital adjustment		115			0
Proceeds from sale of fixed assets		12			0
Net cash used in investing activities		(22,975	)		(1,449	)
Cash flows from financing activities:
Proceeds from advances on revolving line of credit		28,000			0
Payments on revolving line of credit		(7,000	)		0
Principal payments of long-term debt		(1,000	)		0
Principal payments on finance lease obligations		(16	)		(4	)
Payment of statutory withholdings for restricted stock units vested		(1,299	)		(738	)
Net cash provided by (used in) financing activities		18,685			(742	)
Effect of foreign currency exchange rates on cash and cash equivalents		41			0
Net (decrease) increase in cash and cash equivalents		(7,465	)		1,143
Cash and cash equivalents at beginning of period		11,117			24,234
Cash and cash equivalents at end of period	$	3,652		$	25,377

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

~~UFP Technologies, Inc.~~

~~Condensed Consolidated Statements of Income~~

~~(In thousands, except per share data)~~

~~(Unaudited)~~

Three Months Ended
September 30 Nine Months Ended
September 30
2017 2016 2017 2016
Net sales $ 35,684 $ 37,220 $ 110,623 $ 109,626
Cost of sales 27,491 28,768 82,973 83,161
Gross profit 8,193 8,452 27,650 26,465
Selling, general & administrative expenses 5,693 6,027 18,070 18,402
Restructuring costs - 25 63 203
Material overcharge settlement - (1,681 ) (121 ) (2,114 )
Loss (Gain) on sale of fixed assets - - 3 (4 )
Operating income 2,500 4,081 9,635 9,978
Interest income 63 42 147 104
Interest expense (12 ) (17 ) (39 ) (53 )
Income before income tax expense 2,551 4,106 9,743 10,029
Income tax expense 856 1,437 3,248 3,550
Net income $ 1,695 $ 2,669 $ 6,495 $ 6,479

Net income per share:
Basic $ 0.23 $ 0.37 $ 0.90 $ 0.90
Diluted $ 0.23 $ 0.37 $ 0.89 $ 0.89
Weighted average common shares outstanding:
Basic 7,264 7,195 7,240 7,183
Diluted 7,353 7,282 7,326 7,265

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

~~UFP Technologies, Inc.~~

~~Condensed Consolidated Statements of Cash Flows~~

~~(In thousands)~~

~~(Unaudited)~~

Nine Months Ended
September 30
2017 2016
Cash flows from operating activities:
Net income $ 6,495 $ 6,479
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 4,171 4,109
Loss (Gain) on sale of fixed assets 3 (4 )
Share-based compensation 842 871
Excess tax benefit on share-based compensation - (126 )
Deferred income taxes 254 224
Changes in operating assets and liabilities:
Receivables, net (795 ) (4,826 )
Inventories 1,015 (366 )
Prepaid expenses 47 (1,231 )
Refundable income taxes (172 ) 1,146
Other assets (138 ) (93 )
Accounts payable 429 197
Accrued expenses 658 (317 )
Non-qualified deferred compensation plan and other liabilities 201 205
Net cash provided by operating activities 13,010 6,268
Cash flows from investing activities:
Additions to property, plant and equipment (6,880 ) (5,766 )
Proceeds from sale of fixed assets 6 4
Net cash used in investing activities (6,874 ) (5,762 )
Cash flows from financing activities:
Principal repayments of long-term debt (772 ) (758 )
Proceeds from exercise of stock options, net of attestation 630 529
Excess tax benefit on share-based compensation - 126
Payment of statutory withholdings for stock options exercised and restricted stock units vested (107 ) (89 )
Net cash used in financing activities (249 ) (192 )
Net increase in cash and cash equivalents 5,887 314
Cash and cash equivalents at beginning of period 31,359 29,804
Cash and cash equivalents at end of period $ 37,246 $ 30,118

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

Notes to Interim Condensed Consolidated Financial Statements

(1)

~~(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~~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,~~ 2021, included in the Company's ~~2016~~2021 Annual Report on Form ~~10-K,~~10-K, as filed with the Securities and Exchange Commission.

The condensed consolidated balance ~~sheet~~sheets as of ~~September 30, 2017,~~ March 31, 2022 and December 31, 2021, the condensed consolidated statements of income for the ~~three-~~ three months ended March 31, 2022 and ~~nine-month periods~~2021, the condensed consolidated statements of stockholders’ equity for the three months ended ~~September 30, 2017~~ March 31, 2022 and ~~2016,~~2021, and the condensed consolidated statements of cash flows for the ~~nine-month periods~~three months ended ~~September 30, 2017~~ March 31, 2022 and ~~2016~~2021 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~~ 2021 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- and nine-months periods~~three-month period ended ~~September 30, 2017,~~ March 31, 2022 are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, ~~2017.~~2022.

New Accounting Policy

The Company translates all assets and liabilities of its foreign subsidiaries, where the U.S. dollar is not the functional currency, at the period-end exchange rate and translates income and expenses at the average exchange rates in effect during the period. The net effect of this translation is recorded in the consolidated financial statements as a component of AOCI. Translation adjustments are not adjusted for income taxes as they relate to permanent investments in the Company’s foreign subsidiaries.

Recent Accounting Pronouncements

~~In May 2014,~~There are no newly issued accounting pronouncements that the ~~Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09,~~ ~~Revenue from Contracts~~Company expects to have a material effect on the financial statements.

(2)

Acquisitions

Advant Medical

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

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

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

Fair value of considerations transferred
Cash paid at closing	$	23,608
Other liability		457
Cash from Contech		(2,840	)
Total consideration	$	21,225

Purchase price allocation
Accounts receivable	$	2,299
Inventory		2,410
Other current assets		213
Property, plant, and equipment		6,089
Customer contracts & relationships		2,550
Intellectual property		2,127
Non-compete agreement		260
Lease right of use assets		289
Other assets		42
Goodwill		7,358
Total identifiable assets	$	23,637
Accounts payable		(772	)
Accrued expenses		(668	)
Income taxes		(66	)
Deferred taxes		(617	)
Lease liabilities		(289	)
Net assets acquired	$	21,225

Acquisition costs associated with the transaction were approximately $669 thousand, of which ~~requires an entity~~$639 thousand were charged to ~~recognize~~expense in the quarter ended March 31, 2022 and $30 thousand were charged to expense in the year ended December 31, 2021. These costs were primarily for legal services, valuation services and stamp duty filings and are reflected on the face of the income statement.

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

Pro-forma statements

The following table contains an unaudited pro forma condensed consolidated statement of operations for the three-month periods ended March 31, 2022 and 2021, as if the Advant acquisition had occurred at the beginning of the respective periods (in thousands):

	Three-month Period Ended March 31,
	2022		2021
	(Unaudited)		(Unaudited)
Sales	$	75,469	$	53,876
Operating income	$	7,023	$	5,916
Net income	$	5,346	$	4,614
Earnings per share:
Basic	$	0.71	$	0.61
Diluted	$	0.70	$	0.60

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

DAS Medical

On December 22, 2021 the Company purchased 100% of the outstanding membership interests of DAS Medical Holdings, LLC, (DAS Medical) pursuant to a Securities Purchase Agreement, for a net purchase price of $66.7 million in cash. The purchase price is subject to adjustment based upon DAS Medical’s final working capital at closing, and the purchase price may be increased by up to $20.0 million in earn-out payments based upon the performance of the business during the four-year period following the closing. A portion of the purchase price is being held in escrow to indemnify the Company against certain claims, losses, and liabilities, as well as to provide for liquidated damages in the event that the Sellers’ representative fails to deliver to the Company certain audited financial statements of DAS Medical for pre-closing periods. The Securities Purchase Agreement contains customary representations, warranties, and covenants customary for transactions of this type. As a result of the final working capital adjustment, the total consideration was reduced by approximately $115 thousand.

In connection with its entry into the Purchase Agreement, the Company also entered into an Agreement for the Purchase and Sale of Personal Goodwill (the “Goodwill Agreement”) with the purchase price beneficiaries. Pursuant to the terms of the Goodwill Agreement, on December 22, 2021, the Company purchased from the beneficiaries their personal goodwill, including business relationships, trade secrets and knowledge in connection with DAS Medical’s business, for a purchase price of $20 million in cash.

The Company has also entered into Non-Competition Agreements with the beneficiaries and the Company has agreed to pay additional consideration to the parties to the Non-Competition Agreements, including an aggregate of $10.0 million in payments over the ten years following the closing of the DAS Medical acquisition for the 10-year noncompetition covenants of certain key owners.

Founded in 2010, DAS Medical is headquartered in Atlanta, Georgia, with manufacturing in the Dominican Republic. DAS Medical is a medical device contract manufacturer specializing in the design, development and production of single-use surgical equipment covers, robotic draping systems and fluid control pouches.

Cash paid at closing	$	95,000
Contingent liability (Earn-out)		5,188
Non-compete agreements		8,855
Cash from DAS		(8,316	)
Working capital adjustment		(115	)
Total consideration	$	100,612

Purchase price allocation
Accounts receivable	$	2,351
Inventory		7,570
Other current assets		68
Property, plant, and equipment		3,314
Customer contracts & relationships		36,730
Intellectual property		2,380
Non-compete agreement		4,697
Lease right of use assets		1,221
Goodwill		51,985
Total identifiable assets	$	110,316
Accounts payable		(5,238	)
Accrued expenses		(3,238	)
Deferred revenue		(7	)
Lease liabilities		(1,221	)
Net assets acquired	$	100,612

Acquisition costs associated with the transaction were approximately $356 thousand, of which it$58 thousand were charged to expense in the quarter ended March 31, 2022 and $298 thousand were charged to expense in the year ended December 31, 2021. These costs were primarily for legal and valuation services and are reflected on the face of the income statement.

Contech Medical

On October 12, 2021 the Company purchased 100% of the outstanding shares of common stock of Contech Medical, Inc., pursuant to a stock purchase agreement and related agreements, for an aggregate purchase price of $9.5 million in cash, the assumption of a contingent liability of $0.5 million plus up to an additional $5 million in purchase price based upon the achievement of certain EBITDA targets of Contech for the 12-month period ended June 30, 2022. The purchase price was subject to adjustment based upon Contech’s working capital at closing. A portion of the purchase price is being held in escrow to indemnify the Company against certain claims, losses, and liabilities. The Stock Purchase Agreement contains customary representations, warranties, and covenants customary for transactions of this type.

Founded in 1987, Contech is based in Providence, Rhode Island with partner manufacturing in Costa Rica. Contech is a global leader in the design, development, and manufacture of Class III medical device packaging primarily for catheters and guide wires. The Company has leased the Providence location from a realty trust owned by the selling shareholders and affiliates. The lease is for five years with one five-year renewal option.

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

Fair value of considerations transferred
Cash paid at closing	$	9,766
Contingent liability (Earn-out)		4,543
Other liability		500
Cash from Contech		(266	)
Total consideration	$	14,543

Purchase price allocation
Accounts receivable	$	2,851
Inventory		2,320
Other current assets		37
Property, plant, and equipment		1,170
Customer contracts & relationships		3,043
Intellectual property		2,247
Non-compete agreement		86
Lease right of use assets		1,523
Goodwill		4,278
Total identifiable assets	$	17,555
Accounts payable		(1,015	)
Accrued expenses		(414	)
Deferred revenue		(60	)
Lease liabilities		(1,523	)
Net assets acquired	$	14,543

Acquisition costs associated with the transaction were approximately $118 thousand, of which $78 thousand were charged to expense in the quarter ended March 31, 2022 and $40 thousand were charged to expense in the year ended December 31, 2021. These costs were primarily for legal and valuation services and are reflected on the face of the income statement.

Pro-forma statements

The following table contains an unaudited pro forma condensed consolidated statement of operations for the three-month period ended March 31, 2021, as if both the DAS Medical and Contech Medical acquisitions had occurred at the beginning of the period (in thousands):

	Three-month Period Ended March 31, 2021
	(Unaudited)
Sales	$	63,862
Operating income	$	6,888
Net income	$	4,739
Earnings per share:
Basic	$	0.63
Diluted	$	0.62

(3)

Revenue Recognition

The Company recognizes revenue when a customer obtains control of a promised good or service. The amount of revenue recognized reflects the consideration that the Company expects to be entitled to in exchange for ~~the transfer of~~ promised goods or ~~services~~services. The Company recognizes revenue in accordance with the core principles of ASC 606 which include (1) identifying the contract with a customer, (2) identifying separate performance obligations within the contract, (3) determining the transaction price, (4) allocating the transaction price to ~~customers. This standard will replace most existing~~the performance obligations, and (5) recognizing revenue. The Company recognizes all but an immaterial portion of its product sales upon shipment. The Company recognizes revenue ~~recognition guidance when it becomes effective. The standard permits~~from the sale of tooling and machinery primarily upon customer acceptance, with the exception of certain tooling where control does not transfer to the customer, resulting in revenue being recognized over the estimated time for which parts are produced with the use of ~~either the full retrospective or modified retrospective transition methods.~~each respective tool. The Company ~~expects to adopt~~recognizes revenue from engineering services, which are primarily product development services, as the ~~standard in~~services are performed or as otherwise determined based on the ~~first quarter~~substance of ~~2018 using~~ the ~~modified retrospective transition method.~~agreement. The Company ~~has identified its primary~~recognizes revenue ~~streams, completed a preliminary review~~from bill and hold transactions at the time the specified goods are complete and available to the customer. In the ordinary course of a representative sample of contracts with its customers and is in the process of evaluating the impact of this ASU on its revenue streams and accounting policies. Based on the procedures completed to date,business, the Company ~~expects that~~accepts sales returns from customers for ~~a significant portion~~defective goods, such amounts being immaterial. Although only applicable to an insignificant number of its business, the recognition of revenue under the updated standard will occur at a point in time, which is consistent with current practice. The Company has identified certain revenue streams for which the recognition of revenue may occur over time, which is a change from current practice. These revenue streams include certain customer stocking commitments. Additionally,transactions, the Company has ~~identified certain revenue streams for which~~elected to exclude sales taxes from the ~~recognition of revenue may be deferred, which is also a change from current practice. These revenue streams include certain tooling sales.~~transaction price. The Company does not expect that the impact of these changes in the timing of revenue recognition for these items to be significant to the financial statements. The Company is also in the process of updating its internal controls and drafting the expanded disclosures as required by this ASU. ~~The Company does not expect significant changes to its systems or internal controls. As the Company continues through the adoption process, it is possible that these preliminary conclusions may change.~~

~~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 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~~shipping and handling activities for which the Company is responsible under the terms and conditions of the sale not as ~~they occur,~~performance obligations but rather ~~than estimate expected forfeitures.~~ as fulfillment costs. These activities are required to fulfill the Company’s promise to transfer the good and are expensed when revenue is recognized.

Disaggregated Revenue

The ~~impact~~following table presents the Company’s revenue disaggregated by the major types of ~~adopting this update~~goods and services sold 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.customers (in thousands):

	Three Months Ended
	March 31,
Net sales of:	2022		2021
Products	$	69,505	$	47,323
Tooling and Machinery		478		412
Engineering services		1,259		864
Total net sales	$	71,242	$	48,599

~~Revisions~~Contract balances

~~Certain revisions have been made~~Timing of revenue recognition may differ from the timing of invoicing to customers. When invoicing occurs prior to revenue recognition, the ~~2016 Condensed Consolidated Statement~~Company has contract liabilities included within “deferred revenue” on the condensed consolidated balance sheet.

The following table presents opening and closing balances of ~~Cash Flows to conform to~~contract liabilities for the ~~current year presentation relating to a reserve for uncertain tax positions~~ three-month periods ended March 31, 2022 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 $311,000 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.2021 (in thousands):

	Contract Liabilities
	Three Months Ended March 31,
	2022			2021
Deferred revenue - beginning of period	$	4,247		$	1,887
Increases due to consideration received from customers		1,116			441
Revenue recognized		(323	)		(374	)
Deferred revenue - end of period	$	5,040		$	1,954

Revenue recognized during the three-month periods ended March 31, 2022 and 2021 from amounts included in deferred revenue at the beginning of the period were approximately $273 thousand and $302 thousand, respectively.

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

The following table presents opening and closing balances of contract assets for the three-month periods ended March 31, 2022 and 2021 (in thousands):

	Contract Assets
	Three Months Ended March 31,
	2022			2021
Unbilled Receivables - beginning of period	$	74		$	271
Increases due to revenue recognized, not invoiced to customers		740			531
Decreases due to customer invoicing		(412	)		(578	)
Unbilled Receivables - end of period	$	402		$	224

(4)

~~(2)~~

Supplemental Cash Flow Information

Nine Months Ended
September 30
2017 2016
(in thousands)
Cash paid for:
Interest $ 37 $ 51
Income taxes, net of refunds 3,167 2,178

Non-cash investing and financing activities:
Capital additions accrued but not yet paid $ 527 $ 311

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

	Three Months Ended
	March 31,
	2022		2021
Cash paid for:
Interest	$	314	$	13
Income taxes, net of refunds		210		6

Non-cash investing and financing activities:
Capital additions accrued but not yet paid	$	185	$	200

(5)

Receivables and Allowance for Credit Losses

Receivables consist of the following (in thousands):

	March 31,			December 31,
	2022			2021
Accounts receivable–trade	$	46,627		$	39,903
Less allowance for credit losses		(445	)		(519	)
Receivables, net	$	46,182		$	39,384

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

The following table provides a roll-forward of the allowance for credit losses that is deducted from accounts receivable to present the net amount expected to be collected for the three months ended March 31, 2022 and 2021 (in thousands):

	Allowance for Credit Losses
	Three Months Ended March 31,
	2022			2021
Allowance - beginning of period	$	519		$	484
Provision (adjustment) for expected credit losses		(51	)		48
Amounts written off against the allowance		(23	)		(8	)
Allowance - end of period	$	445		$	524

~~(3)~~(6)

Fair Value of Financial Instruments

Financial instruments recorded at fair value in the consolidated balance sheets, or disclosed at fair value in the footnotes, are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels defined by ASC 820,Fair Value Measurements and Disclosures, and directly related to the amount of subjectivity associated with inputs to fair valuation of these assets and liabilities, are as follows:

Level 1

Valued based on unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2

Valued based on either directly or indirectly observable prices for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

Level 3

Valued based on management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

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

Level 2	March 31, 2022			March 31, 2021
Liabilities:
Derivative financial instruments	$	(61	)	$	(385	)

Derivative financial instruments consist of an interest rate swap for which fair value is determined through the use of a pricing model that utilizes verifiable inputs such as market interest rates that are observable at commonly quoted intervals for the full term of the swap agreement.

The Company has financial instruments, such as accounts receivable, accounts payable, and accrued expenses, ~~which~~that are stated at carrying amounts that approximate fair value because of the short maturity of those instruments. The carrying amount of the Company’s long-term debt approximates fair value as the interest rate on the debt approximates the estimated borrowing rate currently available to the ~~Company~~.

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.~~ 2021. The compensation cost charged against income for those plans is included in selling, general & administrative expenses as follows (in thousands):

The total income tax benefit recognized in the condensed consolidated statements of income for share-based ~~compensation~~compensa‐tion arrangements was approximately ~~$106,000~~$381 thousand and ~~$67,000, respectively,~~$242 thousand for the ~~three-month~~three-month periods ended ~~September 30, 2017~~ March 31, 2022 and ~~2016, and approximately $441,000 and $264,000, respectively,~~2021, respectively.

The compensation expense for common stock granted during the ~~nine-month periods~~three-month period ended ~~September 30, 2017 and 2016~~.March 31, 2022, was determined based on the market price of the shares on the date of grant.

The following is a summary of stock option activity under all plans for the ~~three-month~~three-month period ended ~~September 30, 2017~~:

On June 6, 2017, the Company granted options to its directors for the purchase of 12,336 shares of common stock at that day’s closing price of $27.05. The compensation expense related to these grants was determined as the fair value of the options using the Black Scholes option pricing model based on the following assumptions:March 31, 2022:

During ~~the nine-month~~both three-month periods ended ~~September 30, 2017~~ March 31, 2022 and ~~2016, the total intrinsic value of all~~2021, there were 0 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 $577,000 and $564,000, respectively, and the total amount of consideration received by the Company from the exercised options was approximately $802,000 and $529,000, respectively.exercised. 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 both the ~~nine-month period~~three-month periods ended ~~September 30, 2017 there~~March 31,2022 and 2021,no shares were ~~6,511 shares~~ ~~surrendered at an average market price of $26.45.~~ ~~During the nine-month period ended September 30, 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.~~Restricted Stock Unit awards

The following table summarizes information about ~~Restricted Stock Units (“RSUs”)~~RSU activity during the ~~nine-month~~three-month period ended ~~September 30, 2017:~~March 31, 2021:

At the Company’s discretion, upon vesting, RSU holders are given the option to net-share settle to cover the required minimum withholding tax and the remaining amount is converted into the equivalent number of common ~~shares.~~shares and issued to the RSU holder. During the ~~nine-month~~three-month periods ended ~~September 30, 2017~~ March 31, 2022 and ~~2016, 4,377~~2021, 19,376 and ~~3,889~~14,074 shares were surrendered at an average market price of ~~$24.50~~$67.02 and ~~$22.82,~~$52.46, respectively.

As of ~~September 30, 2017,~~ March 31, 2022, the Company had approximately ~~$754,000~~$4.8 million of unrecognized compensation expense ~~which~~that is expected to be recognized over a period of ~~3.5 years~~.

~~(5)~~

Inventories

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

September 30,
2017
December 31,
2016
Raw materials $ 6,660 $ 7,111
Work in process 1,161 1,354
Finished goods 5,315 5,686
Total inventory $ 13,136 $ 14,151

	March 31,		December 31,
	2022		2021
Raw materials	$	25,184	$	22,184
Work in process		9,388		4,205
Finished goods		8,723		7,047
Total inventory	$	43,295	$	33,436

(9)

~~(6)~~

~~Preferred Stock~~

Leases

~~On March 18, 2009,~~The Company has operating and finance leases for offices, manufacturing plants, vehicles and certain office and manufacturing equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company accounts for each separate lease component of a contract and its associated non-lease components as a single lease component, thus causing all fixed payments to be capitalized. Variable lease payment amounts that cannot be determined at the commencement of the lease such as increases in lease payments based on changes in index rates or usage, are not included in the right of use (“ROU”) assets or lease liabilities. These are expensed as incurred and recorded as variable lease expense. The Company determines if an arrangement is a lease at the inception of a contract. Operating and finance lease ROU assets and operating and finance lease liabilities are stated separately in the condensed consolidated balance sheet.

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

lease payments.

	Three Months Ended
	March 31,
	($ in thousands)
	2022			2021
Lease Cost:
Finance lease cost:
Amortization of right of use assets	$	15		$	4
Interest on lease liabilities		1			1
Operating lease cost		652			300
Variable lease cost		70			60
Short-term lease cost		17			7
Total lease cost	$	755		$	372

Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases	$	540		$	305
Financing cash flows from finance leases		16			4
Weighted-average remaining lease term (years):
Finance		4.29			6.08
Operating		3.62			1.87
Weighted-average discount rate:
Finance		2.10	%		2.26	%
Operating		2.53	%		4.36	%

The aggregate future lease payments for leases as of March 31, 2022 are as follows (in thousands):

	Finance			Operating
Remainder of 2022	$	47		$	1,661
2023		63			1,375
2024		63			1,328
2025		63			1,123
2026		28			831
Thereafter		6			3,298
Total lease payments		270			9,616
Less: Interest		(12	)		(834	)
Present value of lease liabilities	$	258		$	8,782

(10)

~~(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
September 30,
Nine Months Ended
September 30,
2017 2016 2017 2016
Weighted average common shares outstanding, basic 7,264 7,195 7,240 7,183
Weighted average common equivalent shares due to stock options and RSUs 89 87 86 82
Weighted average common shares outstanding, diluted 7,353 7,282 7,326 7,265

	Three Months Ended
	March 31,
	2022		2021
Basic weighted average common shares outstanding		7,544		7,507
Weighted average common equivalent shares due to restricted stock, stock options and RSUs		86		63
Diluted weighted average common shares outstanding		7,630		7,570

The computation of diluted earnings per share excludes the effect of the potential exercise of stock awards, including stock options, when the average market price of the common stock is lower than the exercise price of the related options during the period. These outstanding stock awards are not included in the computation of diluted income per share because the effect would be antidilutive. For both the ~~three- and nine-month~~three-month periods ended ~~September 30, 2017, the number of~~March 31, 2022 and 2021, there were 0 stock awards excluded from the computation of diluted earnings per share for this ~~reason was zero and 27,336, respectively. For the three- and nine-month periods ended~~ ~~September 30, 2016, the number of stock awards excluded from the computation of diluted earnings per share for this reason was 35,193 and 52,377, respectively.~~

reason.

(11)

~~(8)~~

Segment Reporting

The Company consists of a single operating and reportable segment.

Revenues from customers outside of the United States are not material. NoOne customer comprised ~~more than 10%~~approximately 15.1% of the Company’s consolidated revenues for the ~~three- and nine-month periods~~three-month period ended ~~September 30, 2017. All~~March 31, 2022. No customer comprised more than 10% of the Company’s ~~assets are located in~~consolidated revenues for the ~~United States.~~three-month period ended March 31, 2021. At March 31, 2022 and December 31, 2021, no customer represented more than 10% of gross accounts receivable.

The Company’s products are primarily sold to customers within the Medical, Consumer, Automotive, Aerospace ~~and~~& Defense, Industrial, and Electronics markets. Net sales by market for the ~~three- and nine-month~~three-month periods ended ~~September 30, 2017~~ March 31, 2022 and ~~2016, respectively,~~2021 are as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Market Net Sales % Net Sales % Net Sales % Net Sales %

Medical $ 16,712 46.8 % $ 16,548 44.5 % $ 52,822 47.7 % $ 48,953 44.7 %
Consumer 6,006 16.8 % 5,648 15.2 % 15,713 14.2 % 15,303 14.0 %
Automotive 5,174 14.5 % 6,942 18.7 % 18,018 16.3 % 20,485 18.7 %
Aerospace & Defense 2,682 7.5 % 2,516 6.8 % 8,290 7.5 % 7,929 7.2 %
Industrial 2,591 7.3 % 2,792 7.5 % 7,629 6.9 % 8,441 7.7 %
Electronics 2,519 7.1 % 2,774 7.5 % 8,151 7.4 % 8,515 7.8 %
Net Sales $ 35,684 100.0 % $ 37,220 100.0 % $ 110,623 100.0 % $ 109,626 100.0 %

	Three Months Ended March 31,
	2022					2021
Market	Net Sales		%			Net Sales		%

Medical	$	52,718		74.0	%	$	30,115		62.0	%
Consumer		5,743		8.1	%		5,596		11.5	%
Automotive		4,351		6.1	%		4,646		9.6	%
Aerospace & Defense		3,755		5.3	%		4,379		9.0	%
Industrial		2,401		3.4	%		2,098		4.3	%
Electronics		2,274		3.2	%		1,765		3.6	%
Net Sales	$	71,242		100.0	%	$	48,599		100.0	%

Certain amounts for the ~~three- and nine-month periods~~three months ended ~~September 30, 2016~~ March 31, 2021 were reclassified between markets to conform to the current period presentation.

(12)

~~(9)~~

Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill for the three months ended March 31, 2022 were are follows (in thousands):

	Goodwill

December 31, 2021	$	107,905
Acquired in Advant Medical business combination (See Note 2)		7,358
DAS working capital adjustment		196
Foreign currency translation		111
March 31, 2022	$	115,570

The carrying values of the Company’s definite lived intangible assets as of ~~September 30, 2017 and December~~March 31, ~~2016,~~ 2022 are as follows (in thousands):

Patents Non-
Compete Customer
List Total
Estimated useful life (in years) 14 5 5
Gross amount at September 30, 2017 $ 429 $ 512 $ 2,046 $ 2,987
Accumulated amortization at September 30, 2017 (429 ) (496 ) (1,983 ) $ (2,908 )
Net balance at September 30, 2017 $ - $ 16 $ 63 $ 79

Estimated useful life (in years) 14 5 5
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

	Intelletual Property / Tradename & Brand			Non- Compete			Customer List			Total
Weighted-average amortization period (years)		11.9			9.3			20
Gross amount	$	7,154		$	5,509		$	64,916		$	77,579
Accumulated amortization		(281	)		(510	)		(5,221	)	$	(6,012	)
Net balance	$	6,873		$	4,999		$	59,695		$	71,567

Amortization expense related to intangible assets was approximately ~~$79,000~~$1.0 million and $0.3 million for ~~each of~~ the ~~three-month~~three-month periods ended ~~September 30, 2017~~ March 31, 2022 and ~~2016, and was approximately $239,000 for each of the nine-month periods ended September 30, 2017 and 2016. As of September 30, 2017, the~~2021. The estimated remaining amortization expense ~~for 2017~~ as of March 31, 2022 is ~~$79,000.~~

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,~~prospects; statements about the potential further impact the novel coronavirus ("COVID-19") pandemic may have on the Company’s business, financial condition and results of operations, including with respect to the different markets in which the Company participates, the demand for its products, the well-being and availability of the Company’s employees, the continuing operation of the Company’s locations, delayed payments by the Company’s customers and the potential for reduced or canceled orders, the Company’s efforts to address the pandemic, including regarding the safety of its employees, the maintenance of its facilities and the sufficiency of the Company’s supply chain, inventory, liquidity and capital resources, including increased costs in connection with such efforts, the impact of the pandemic on the businesses of the Company’s suppliers and customers, and the overall impact the pandemic may have on the Company’s financial results in 2021; statements about the Company’s acquisition strategies and opportunities and the Company’s growth potential and strategies for growth; expectations regarding customer demand; expectations regarding the Company’s liquidity and capital resources, including the sufficiency of its cash reserves and the availability of borrowing capacity to fund operations and/or potential future acquisitions; anticipated revenues and the timing of such revenues; expectations about shifting the Company’s book of business to higher-margin, longer-run opportunities; anticipated trends and potential advantages in the different markets in which the Company competes, including the medical, aerospace and defense, automotive, consumer, electronics, and industrial markets, and ~~aerospace and defense markets, anticipated new customer and vendor contracts,~~the Company’s plans to expand in certain of its markets; statements regarding anticipated advantages relating to the Company’s decisions to consolidate or expand certain facilities, including the ongoing expansion of its Newburyport facility, 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~~expenditures; statements regarding anticipated advantages to improvements and alterations at the ~~development of and investments in its molded fiber product lines,~~Company’s existing plants; expectations regarding the Company’s manufacturing capacity, operating efficiencies, and ~~efficiencies of the Company~~new production equipment; statements about new product offerings and ~~the expected timing associated therewith, statements regarding the end of the Company’s automotive door panel~~ program ~~with Mercedes Benz, and the resulting impact to revenues,~~launches; statements about the Company’s ~~acquisition opportunities and strategies, its~~ participation and growth in multiple ~~markets, its business opportunities,~~markets; statements about the Company’s ~~growth potential and strategies for growth, anticipated revenues and the timing of such revenues,~~business opportunities; and any indication that the Company may be able to sustain or increase its sales, ~~and~~ earnings or earnings per share, or its sales, ~~and~~ earnings or earnings per share growth rates.

Investors are cautioned that such forward-looking statements involve risks and uncertainties that could adversely affect the Company’s business and prospects, and otherwise cause actual results to differ materially from those anticipated by such forward-looking statements, or otherwise, including without ~~limitation~~limitation: the severity and duration of the COVID-19 pandemic and its impact on the markets in which the Company participates, including its impact on the Company’s customers, suppliers and employees, as well as the U.S. and worldwide economies; the timing, scope and effect of further governmental, regulatory, fiscal, monetary and public health responses to the COVID-19 pandemic; risks and uncertainties associated with the COVID-19 pandemic and its impact on the Company’s business, financial condition and results of operations, including risks relating to decreased, including substantially decreased, demand for the Company’s products; risks relating to the potential closure of any of the Company’s facilities or the unavailability of key personnel or other employees; risks that the Company’s inventory, cash reserves, liquidity or capital resources may be insufficient; risks relating to delayed payments by our customers and the potential for reduced or canceled orders; risks relating to the increased costs associated with the Company’s efforts to respond to the pandemic; risks associated with the identification of suitable acquisition candidates and the successful, efficient execution of acquisition transactions, ~~and~~the integration of any such acquisition candidates, the value of those acquisitions to our customers and shareholders, and the financing of such acquisitions; risks related to our indebtedness and compliance with covenants contained in our financing arrangements, and whether any available financing may be sufficient to address our needs; risks associated with efforts to shift the Company’s book of business to higher-margin, longer-run opportunities; risks associated with the Company’s entry into and growth in certain markets; risks and uncertainties associated with ~~plant closures~~seeking and ~~consolidations~~implementing manufacturing efficiencies and ~~expected efficiencies from consolidating manufacturing,~~implementing new production equipment; risks and uncertainties associated with growth of the ~~requalification of parts, the risk that we may not be able~~Company’s business and increases to ~~finalize anticipated new customer contracts,~~sales, earnings and earnings per share; and risks associated with ~~the implementation of~~ new ~~production equipment~~product 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.program launches. Accordingly, actual results may differ materially.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential,” and similar expressions intended to identify forward-looking statements. Our actual results could be different from the results described in or anticipated by our forward-looking statements due to the inherent uncertainty of estimates, forecasts, and projections, and may be materially better or worse than anticipated. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements represent our current beliefs, estimates and assumptions and are only as of the date of this Report. We expressly disclaim any duty to provide updates to forward-looking statements, and the estimates and assumptions associated with them, after the date of this Report, in order to reflect changes in circumstances or expectations, or the occurrence of unanticipated events, except to the extent required by applicable securities laws. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed above and under “Risk Factors” set forth in Part I Item 1A of ~~the Company’s~~our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016,~~2021, 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.

~~UFP Technologies~~The Company is an innovative designer and custom ~~converter~~manufacturer of components, subassemblies, products, and packaging primarily for the medical market. Utilizing highly specialized foams, films and plastics, the Company converts raw materials through laminating, molding, radio frequency welding and ~~natural fiber materials, principally serving~~fabricating techniques. The Company is diversified by also providing highly engineered solutions to customers in the ~~Medical, Consumer, Automotive, Aerospace~~aerospace & defense, automotive, consumer, electronics, and ~~Defense, Industrial and Electronics~~industrial markets. The Company consists of a single operating and reportable segment.

The Company had a slight increase in sales through the first nine months of 2017, largely fueled by continued growth in sales to customers in the medical market, partially offset by declined sales to customer in the automotive market. The Company improved gross margins for the nine-month period ended September 30, 2017 to 25.0% from 24.1% in the first nine months of 2016 as the Company has become much more efficient in manufacturing particularly in those plants impacted by recent consolidations. Absent non-recurring restructuring and material overcharge items, operating income increased by 19% in the first nine months of 2017.

The Company’s previously announced consolidation and relocation efforts were complete as of June 30, 2017. The Company is in the process of further expanding its Newburyport, Massachusetts, manufacturing plant. The Company constantly evaluates ways to enhance operating efficiencies and will consider additional expansions, consolidations, or relocations of operations from time to time.

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

Sales for the Company for the three-month period ended March 31, 2022 increased 46.6% to $71.2 million from $48.6 million in the same period last year, largely due to the Company’s acquisitions of Contech Medical, DAS Medical and Advant Medical. Organic sales increased approximately 9.6%. Gross margins for the three-month period ended March 31, 2022 decreased to 24.1% from 25.9% in the same period last year, largely due to continued supply chain challenges. Operating income and net income increased 20.0% and 16.8%, respectively.

Through much of 2020, COVID-19 spread across the country to areas in which our products are designed, manufactured, distributed, or sold. The spread of COVID-19 and the response to it negatively impacted operating conditions for our business in 2020 and 2021, and to a lesser extent, the beginning of 2022. Although we expect COVID-19 will continue to have negative impacts on our operating results in future periods, the magnitude and duration of the continuing impact is uncertain.

To stall the spread of COVID-19, authorities in states in which we do business implemented numerous measures, including social distancing guidelines, travel bans and restrictions, quarantines, curfews, stay-at-home orders, and business shutdowns. These measures have largely been lifted, but if they are reinstated, they could further impact us, our customers, consumers, employees, suppliers and other third parties with whom we do business. It is uncertain how these and any future measures in response to the pandemic will impact our business, including whether and to what extent they will result in further changes in demand for our products or further increases in operating costs. The timing of distribution and the effectiveness of vaccines is also uncertain. Our top priorities continue to be ensuring the health and safety of our workforce and serving our various constituencies with as little disruption as possible.

Our operations expose us to risks associated with the COVID-19 pandemic. The COVID-19 pandemic has impacted the cost of manufacturing our goods, including higher labor costs, maintenance costs and manufacturing inefficien‐cies due to employee absenteeism and significantly enhanced cleaning and sterilization. Elective medical procedures and exams had been delayed or canceled, there had been a significant reduction in physician office visits, and hospitals had postponed or canceled capital purchases. We believe that these responses negatively impacted demand for the Company’s components for medical devices in 2020 and portions of 2021. Additionally, many of our customers in the automotive markets experienced closures of their businesses in connection with the pandemic. Such closures negatively impacted the demand for our automobile component products particularly in the second quarter of 2020. Any continued reduced demand for our products, including reduced need for components for medical devices as well as continued economic uncertainty, could adversely and materially affect our business, financial condition, and results of operations, as well as those of our customers.

To ensure the health and safety of our employees, in a portion of 2020 and all of 2021, we required or enabled certain employees to work from home or remotely where practicable, and expanded IT and communication support to enhance their productivity. We have begun to encourage employees to return to work.

Although the impact of the pandemic on our business and financial results will depend on future developments that are highly uncertain and cannot be predicted, and which may vary by market, we have a strong liquidity position, solid balance sheet, and access to capital which we expect will enable us to continue to effectively manage through the COVID-19 pandemic.

Sales for the three-month period ended September 30, 2017 decreased approximately 4.1% to $35.7 million compared to $37.2 million in the same period in 2016. The decrease in sales during the three-month period ended September 30, 2017 was primarily due to decreases in sales to customers in the automotive and electronics markets of approximately 25.5% and 9.2%, respectively. These decreases were partially offset by increases in sales to customers in the aerospace and defense and consumer markets of approximately 6.6% and 6.3%, respectively. The decline in sales to customers in the automotive market was primarily due to soft demand for interior trim components in certain legacy programs. The Company has been notified that the remaining portion of its southeast automotive door panel program for Mercedes Benz, which began in 2004, will end with modest sales anticipated into the first quarter of 2018. The Company estimates sales for the program will total approximately $3.0 million in 2017 and will be modest in 2018. The decline in sales to customers in the electronics market was primarily due to reduced demand for protective packaging. The increase in sales to customers in the aerospace and defense market was primarily due to increased demand for components from our government contractor customers. The increase in sales to customers in the consumer market was primarily due to higher demand for molded fiber protective packaging. Sales to customers in the medical market grew at 1% for the quarter—a rate slower than recent historical levels—as two large customers in this market added second suppliers to meet their internal risk mitigation requirements and certain customers ordered less due to storm related disruptions to their business.

~~Sales for the nine-month period ended September 30, 2017~~March 31, 2022 increased approximately ~~0.9%~~46.6% to ~~$110.6~~$71.2 million from sales of ~~$109.6~~$48.6 million for the same period in ~~2016.~~2021. The increase in sales ~~for the nine-month period ended September 30, 2017 was~~is primarily due to increases in sales to customers in the ~~medical market of approximately 7.9% partially offset by decreases in sales to customers in the automotive and industrial~~Medical markets of ~~approximately 12.0% and 9.6% respectively.~~75.1%. The increase in sales to ~~customers in~~ the medical market ~~was~~is primarily due to ~~strong demand for our customers’ products~~increased sales of $18.0 million, due to the acquisitions of Contech Medical, DAS Medical and Advant Medical, as well as ~~selective price increases. The decline in~~organic sales to customers in the automotive market was primarily due to soft demand for interior trim components in certain legacy programs. The decline in sales to customers in the industrial market was primarily due to a credit issue at onegrowth of ~~our customers within this market.~~$4.6 million or 9.6%.

Gross profit as a percentage of sales (“gross margin”) ~~increased~~decreased to ~~23.0%~~24.1% for the three-month period ended ~~September 30, 2017,~~March 31, 2022, from ~~22.7%~~25.9% for the same period in ~~2016.~~2021. As a percentage of sales, material costs increased 6.8%, while labor and ~~labor~~overhead costs collectively decreased ~~0.8%, while overhead increased 0.5%~~4.9%. The ~~decrease~~decline in ~~collective material and labor costs as a percentage of sales~~gross margin is primarily due to ~~gains in manufacturing efficiencies resulting from continuous improvement initiatives. The increase in overhead as a percentage~~the impact of ~~sales is primarily due to fixed overhead costs measured against reduced sales.~~

Gross margin increased to 25.0% for the nine-month period ended September 30, 2017, from 24.1% for the same period in 2016. As a percentage of sales, material and labor costs collectively decreased 1.6%, while overhead increased 0.7%. 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 priceinflationary cost 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 $700,000 due~~that largely ~~to hires made~~commenced in the second half of ~~2016~~2021 and, to ~~support growth.~~a lesser extent, Q1 of 2022.

Selling, general, and administrative expenses (“SG&A”) ~~decreased~~increased approximately ~~5.5%~~37.0% to ~~$5.7~~$10.0 million for the three-month period ended ~~September 30, 2017~~March 31, 2022, from ~~$6.0~~$7.3 million for the same period in ~~2016.~~2021 largely due to the additional SG&A expenses from our newly acquired operations. Absent the SG&A from newly acquired operations, SG&A increased approximately 4.3%, primarily due to increased compensation and travel expenses. As a percentage of sales, SG&A decreased to ~~16.0%~~14.1% for the three-month period ended ~~September 30, 2017~~March 31, 2022, from ~~16.2%~~15.0% for the same three-month period in ~~2016. The decrease in SG&A for the three-month period ended September 30, 2017 is primarily due to reductions in general and administrative payroll and recruiting costs.~~2021.

SG&A decreased approximately 1.8% to $18.1 million for the nine-month period ended September 30, 2017 from $18.4 million for the same period in 2016. As a percentage of sales, SG&A decreased to 16.3% for the nine-month period ended September 30, 2017 from 16.8% for the same nine-month period in 2016. The decrease in SG&A for the nine-month period ended September 30, 2017 is primarily due to reductions in consulting and recruiting expenses. The decrease in SG&A as a percentage of sales is primarily due to reductions in general and administrative payroll, consulting and recruiting expenses measured against higher sales.

~~For the three-month period ended September 30, 2017 the Company did not incur any restructuring costs compared to approximately $25,000 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.~~

The Company ~~was a participant~~incurred approximately $775 thousand in ~~a class action lawsuit against a number of polyurethane foam suppliers (“Defendants”) that was settled during~~costs associated with acquisition related activities which were charged to expense for the ~~second quarter of 2016. The suit was filed to recover damages~~period ended March 31, 2022. These costs were primarily for legal services, valuation services and ~~obtain injunctive relief for Defendants’ alleged violations~~stamp duty filings and are reflected on the face of the federal antitrust laws with respect to the fixing of prices of polyurethane foam sold from January 1, 1999 through August 2010. During the three- and nine-month periods ended September 30, 2017, the Company received settlement amounts of $0 and approximately $121,000, respectively. During the three- and nine-month periods ended September 30, 2016, the Company received settlement amounts of approximately $1.7 million and $2.1 million, respectively. The settlement amounts for the three- and nine-month periods ended September 30, 2017 and 2016 are recorded as “Material overcharge settlement” in the operating income ~~section of the Condensed Consolidated Statements of Income.~~statement.

~~The Company had net~~Net interest ~~income of~~expense was approximately ~~$51,000~~$327 thousand and ~~$25,000~~$16 thousand for the three-month periods ended ~~September 30, 2017~~March 31, 2022 and ~~2016, respectively. The Company had net interest income of approximately $108,000 and $51,000 for the nine-month periods ended September 30, 2017 and 2016,~~2021, respectively. The increase ~~in net interest income is~~was primarily due to ~~an increase in interest earned on money market accounts and certificates of deposit and decreasing interest costs on~~borrowings to fund the Company’s ~~term loans.~~recent acquisitions.

Other income was approximately $52 thousand and $10 thousand for the three-month periods ended March 31, 2022 and 2021, respectively. Other income was primarily generated by changes in the fair value of the swap liability, which is driven by anticipated future interest rate changes, offset by net cash settlement amounts related to the swap.

The Company recorded tax expense of approximately ~~33.6%~~20.2% and ~~35.0%~~21.4% of income before income tax expense, respectively, for each of the three-month periods ended ~~September 30, 2017~~March 31, 2022 and ~~2016.~~2021. The decrease in the effective tax rate for the current period isas compared to the prior period was largely due to aincreased discrete tax ~~benefit~~benefits associated with the issuance of ~~approximately $37,000 recorded in the three-month period ended September 30, 2017~~stock compensation as a result of the adoption of ASU No. 2016-09 on January 1, 2017 (See Note 1). The Company recorded a tax expense of approximately 33.3% and 35.4% of income before income tax expense for each of the nine-month periods ended September 30, 2017 and 2016. The decrease in thewell as lower effective tax rate for the current period is due to a tax benefit of approximately $162,000 recorded in the nine-month period ended September 30, 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 $40,000rates 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 September 30, 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.foreign income.

The Company generally funds its operating expenses, capital requirements, and growth plan through internally generated cash and bank credit facilities.

Net cash ~~provided~~used by operations for the ~~nine-month~~three-month period ended ~~September 30, 2017~~March 31, 2022 was approximately ~~$13.0~~$3.2 million and was primarily a result of net income generated of ~~$6.5~~approximately $4.9 million, depreciation and amortization of approximately ~~$4.2~~$3.0 million, share-based compensation of ~~$0.8~~approximately $0.7 million, an increase in ~~deferred~~income taxes ~~of $0.3 million, a decrease in inventory~~payable of approximately ~~$1.0~~$1.1 million, ~~due primarily to management initiatives,~~ an increase in accounts payable of approximately ~~$0.4~~$4.1 million due to the timing of vendor payments in the ordinary course of business, an increase in ~~accrued expenses~~other assets of approximately ~~$0.7~~$0.3 million ~~due to compensation accruals~~ and an increase in ~~other long-term liabilities~~deferred revenue of ~~$0.2~~approximately $0.8 million.

These cash inflows and adjustments to income were ~~partially~~ offset by a decrease in deferred taxes of approximately $0.4 million, an increase in accounts receivable of approximately ~~$0.8~~$4.5 million due to higher sales in the last two months of the first quarter of 2022 as compared to the same period in the fourth quarter of 2021 and the addition of Advant receivables, an increase in inventory of approximately $7.8 million due to inventory build for upcoming demand, restocking to historical levels and the addition of Advant inventory, an increase in prepaid expenses of approximately $1.7 million primarily due to the payment of current year insurance policies, a decrease in accrued expenses of approximately $3.4 million due to the ~~timing~~payment of ~~customer collections, an increase~~accrued compensation and a decrease in ~~refundable income taxes~~other long-term liabilities of approximately ~~$0.2 million and an increase in other assets of approximately $0.1~~$0.3 million.

Net cash used in investing activities during the ~~nine-month~~three-month period ended ~~September 30, 2017~~March 31, 2022 was approximately ~~$6.9~~$23.0 million and was primarily the result of the acquisition of Advant, as well as additions of manufacturing machinery and equipment and various building improvements across the ~~expansion of the Newburyport, Massachusetts plant.~~Company.

Net cash ~~used in~~provided by financing activities was approximately ~~$0.2~~$18.7 million during the ~~nine-month~~three-month period ended ~~September 30, 2017,~~March 31, 2022, representing ~~cash used~~borrowings under our credit facility to ~~service term~~fund acquisitions of approximately $28.0 million, partially offset by payments on revolving line of credit of approximately $7.0 million, principal payments of long-term debt of approximately ~~$0.7~~$1.0 million, and ~~to pay~~payments of 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 $0.6~~$1.3 million.

On December 22, 2021, the Company, as the borrower, entered into a secured $130 million Second Amended and Restated Credit Agreement (the “Second Amended and Restated Credit Agreement”) with certain of the Company’s subsidiaries (the “Subsidiary Guarantors”) and Bank of America, N.A., in its capacity as the initial lender, Administrative Agent, Swingline Lender and L/C Issuer, and certain other lenders from time-to-time party thereto. The ~~Company maintains an unsecured~~Second Amended and Restated Credit Agreement amends and restates the Company’s prior credit agreement, originally dated as of February 1, 2018.

The credit facilities under the Second Amended and Restated Credit Agreement consist of a $40 million secured term loan to the Company and a secured revolving credit facility, ~~with Bank~~under which the Company may borrow up to $90 million. The Second Amended and Restated Credit Agreement matures on December 21, 2026. The secured term loam requires quarterly principal payments of ~~America, N.A.~~$1,000,000 commencing on March 31, 2022. The ~~credit facility~~proceeds of the Second Amended and Restated Credit Agreement may be used for general corporate purposes, including funding the acquisition of DAS Medical, as well as certain other permitted acquisitions. The Company’s obligations under the Second Amended and Restated Credit Agreement are guaranteed by the Subsidiary Guarantors.

The Second Amended and Restated Credit Agreement calls for interest ~~of LIBOR~~determined by the Bloomberg Short-Term Bank Yield Index rate (“BSBY”) plus a margin that ranges from ~~1.0%~~1.25% to ~~1.5%~~2.0% or, at the discretion of the Company, the bank’s prime rate less a margin that ranges from ~~0.25%~~.25% to zero. In both cases the applicable margin is dependent upon Company performance. Under the ~~credit facility,~~Second Amended and Restated Credit Agreement, the Company is subject to a minimum fixed-charge coverage financial covenant as well as a maximum total funded debt to EBITDA financial covenant. The ~~Company’s $40 million credit facility matures~~Second Amended and Restated Credit Agreement contains other covenants customary for transactions of this type, including restrictions on ~~November 30, 2018.~~

~~As of September 30, 2017,~~certain payments, permitted indebtedness, and permitted investments. At March 31, 2022, the Company had noapproximately $95 million in borrowings outstanding under the ~~credit facility. Included in~~Second Amended and Restated Credit Agreement, which were used as partial consideration for the ~~credit facility were~~DAS Medical and Advant acquisitions, and also had approximately ~~$300,000~~$0.7 million in standby letters of credit outstanding, drawable as a financial guarantee on worker’s compensation insurance policies. ~~As of September 30, 2017,~~At March 31, 2022, the applicable interest rate was approximately 1.91% and the Company was in compliance with all covenants under the ~~credit facility.~~Second Amended and Restated Credit Agreement.

Future maturities of long-term debt at March 31, 2022 are as follows (in thousands):

~~In 2012,~~The Company used interest-rate-related derivative instruments to manage its exposure related to changes in interest rates on certain of its variable-rate debt instruments. The Company does not enter into derivative instruments for any purpose other than cash flow hedging. Derivative financial instruments expose the Company ~~financed~~to credit risk and market risk. Credit risk is the ~~purchase~~failure of ~~two molded fiber machines through five-year term loans~~the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, creating credit risk for the Company. When the fair value of a derivative contract is negative, the Company owes the counterparty and, therefore, in these circumstances the Company is not exposed to the counterparty’s credit risk. The Company minimizes counterparty credit risk in derivative instruments by entering into transactions with carefully selected major financial institutions based upon their credit profile. Market risk is the adverse effect on the value of a derivative instrument that ~~mature~~results from a change in ~~October 2017.~~ interest rates.

The ~~annual~~Company assesses interest rate risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities. The Company’s debt obligations exposed the Company to variability in interest payments due to changes in interest rates. The Company believed that it was prudent to limit the variability of a portion of its interest payments. To meet this objective, in connection with the first Amended and Restated Credit Agreement, the Company entered into a $20 million, 5-year interest rate swap agreement under which the Company receives three-month LIBOR plus the applicable margin and pays a 2.7% fixed rate plus the applicable margin. The swap modified the Company’s interest rate exposure by converting the previous term loan from a variable rate to a fixed rate in order to hedge against the possibility of rising interest rates during the term of the loan. The notional amount was approximately $7.9 million at March 31, 2022. The fair value of the swap as of March 31, 2022 was approximately $(61) thousand and is ~~fixed at 1.83%~~included in other liabilities. Changes in the fair value and net cash settlement amounts related to the ~~loans~~swap are ~~secured by~~recorded in other income of approximately $62 thousand and other expense of approximately $10 thousand during the ~~related molded fiber machines.~~ three months ended March 31, 2022 and 2021, respectively.

As ~~of September 30, 2017,~~ the ~~outstanding~~Company has paid the remaining balance of the term loan ~~facility~~that was ~~approximately $84,000.~~associated with the swap in its entirety, there is no longer underlying debt to hedge against with the swap. The changes in the fair value of the swap will continue to be accounted for as a financial instrument until the sooner of the time that the Company elects to cancel it or until its maturity.

The Company requires cash to pay its operating expenses, purchase capital equipment, and to service its contractual obligations. The Company’s principal sources of funds are its operations and its ~~revolving~~amended and restated credit facility. The Company ~~generated~~used cash of approximately ~~$13.0~~$4.9 million ~~from~~in operations during the ~~nine-month period~~three months ended ~~September 30, 2017; however,~~March 31, 2022; and the Company cannot guarantee that its operations will generate cash in future periods. The Company’s longer-term liquidity is contingent upon future operating ~~performance.~~performance and draws on the revolving credit facility are possible. Further, the continued economic uncertainty resulting from the COVID-19 pandemic could affect the Company’s long-term ability to access the public markets and obtain necessary capital in order to properly capitalize and continue operations.

Throughout fiscal ~~2017,~~2022, the Company plans to continue to add capacity to enhance operating efficiencies in its manufacturing plants. ~~The Company is in the process of further expanding 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.

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

The Company accounts for treasury stock under the cost method, using the first-in, first-out flow assumption, and includes treasury stock as a component of stockholders’ equity. On June 16, 2015, the Company announced that its Board of Directors authorized the repurchase of up to $10.0 million of the Company’s outstanding common stock. Under the program, the Company is authorized to repurchase shares through Rule 10b5-1 plans, open market purchases, privately negotiated transactions, block purchases or otherwise in accordance with applicable federal securities laws, including Rule 10b-18 of the Securities Exchange Act of 1934. The stock repurchase program will end upon the earlier of the date on which the plan is terminated by the Board or when all authorized repurchases are completed. The timing and amount of stock repurchases, if any, will be determined based upon our evaluation of market conditions and other factors. The stock repurchase program may be suspended, modified, or discontinued at any time, and the Company has no obligation to repurchase any amount of its common stock under the program. The Company did not repurchase any shares of its common stock under this program in the first ~~nine~~three months of ~~2017. Through September 30, 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.~~2022. At ~~September 30, 2017,~~March 31, 2022 approximately $9.4 million was available for future repurchases of the Company’s common stock under this authorization.

There have been no material changes to the Company’s Critical Accounting Estimates, as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.

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.~~2021.

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 September 30, 2017, there was approximately $300,000 in standby letters of credit drawable as a financial guarantee on worker’s compensation insurance policies.

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.~~2021.

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~~Exchange Act Rule 13a-15(e) or 15d-15(e)). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the ~~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.

The Company closed the acquisitions of Contech, DAS Medical and Advant Medical on October 12, 2021, December 22, 2021 and March 17, 2022, respectively. The new acquisitions’ total assets and revenues constituted approximately 43.7% and 25.2%, respectively, of the Company’s consolidated total assets and revenues as shown on our consolidated financial statements as of and for the period ended March 31, 2022. As the acquisitions occurred in the fourth quarter of fiscal 2021and the first quarter of fiscal 2022, the Company excluded all of the acquired businesses internal control over financial reporting from the scope of the assessment of the effectiveness of the Company’s disclosure controls and procedures. This exclusion is in accordance with the general guidance issued by the Staff of the Securities and Exchange Commission that an assessment of a recently-acquired business may be omitted from the scope within the first year of acquisition if specified conditions are satisfied.

An evaluation was also performed under the supervision and with the participation of our management, including the Company’s Chief Executive Officer and Chief Financial Officer, of any change in our internal control over financial reporting that occurred during our last fiscal quarter that has ~~been no~~materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. Except as described above, that evaluation did not identify any change in the Company’s internal control over financial reporting that occurred during ~~the most recent~~our latest fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

~~There have been no material changes from~~From time to time, the ~~risk factors previously disclosed~~Company may be a party to various suits, claims and complaints arising in ~~Part 1 - Item 1A~~the ordinary course of business. In the opinion of management of the Company, these suits, claims and complaints should not result in final judgments or settlements that, in the aggregate, would have a material adverse effect on the Company’s financial condition or results of operations.

The Company faces a number of uncertainties and risks that are difficult to predict and many of which are outside of the Company's control. For a detailed discussion of the risks that affect our business, please refer to Part I, Item IA, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2021. There have been no material changes from the risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 with the exception of the additional Risk Factor noted below.

~~Issuer’s Purchases~~Economic and social volatility and geopolitical instability outside of ~~Equity Securities~~the U.S. due to large-scale conflicts, including warfare among countries, may adversely impact us, the U.S., and global economies.

~~On June 16, 2015,~~From time to time, tensions between countries may erupt into warfare and may adversely affect neighboring countries and those who conduct trade or foreign relations with those affected regions. Such acts of war may cause widespread and lingering damage on a global scale, including, but not limited to: (i) safety and cyber security, (ii) the ~~Company issued a press release announcing~~economy, and (iii) global relations.

In February 2022, Russia invaded Ukraine following years of strained diplomatic relations between the two countries, which was heightened in 2021 when Russia amassed large numbers of military ground forces and support personnel on the Ukraine-Russia border. In response to the invasion and ensuing war, many countries, including the U.S., imposed significant economic and other sanctions against Russia. The war has created the largest refugee crisis in Europe since World War II and has inflicted significant damage to Ukraine’s infrastructure and economy. Both countries’ economies may be significantly affected, which may also adversely impact the global economy, including that ~~its Board of Directors authorized the repurchase of up to $10.0 million~~ of the ~~Company’s outstanding~~U.S. The humanitarian crisis that has resulted from the war is likely to have pronounced and enduring impact on Ukraine, as well as a significant impact to neighboring countries that have accepted refugees. Further, Russia has launched an onslaught of cyberwarfare against Ukraine following its invasion, targeting the country’s critical infrastructure, government agencies, media organizations, and related think tanks in the U.S. and EU.

The current administration has cautioned Americans on the possibility of Russia targeting the U.S. with cyber attacks in retaliation for sanctions that the U.S. has imposed and has urged both the public and private sectors to strengthen their cyber defenses and protect critical services and infrastructure. Additionally, President Biden directed government bodies to mandate cybersecurity and network defense measures within their respective jurisdictions and has initiated action plans to reinforce cybersecurity within the electricity, pipeline, and water sectors. The current administration also launched joint efforts with the Cybersecurity and Infrastructure Security Agency (“CISA”) through its “Shields Up” campaign to defend the U.S. against possible cyber attacks. CISA recently published advisories warning of Russian state-sponsored threat actors targeting “COVID-19 research, governments, election organizations, healthcare and pharmaceutical, defense, energy, video gaming, nuclear, commercial facilities, water, aviation, and critical manufacturing” sectors in the U.S. and other Western nations. While we have not experienced such cyber attacks to date, it is yet unknown whether Russia will be successful in breaching our network defenses or, more broadly, those within the areas listed above, which, if successful, may cause disruptions to critical infrastructure required for our operations and livelihoods, or those of our tenants, communities, and business partners.

Further, international sanctions against Russia have led to many nations in the EU, the U.S., and Canada closing their airspace to Russia, with Russia retaliating by restricting its airspace to these nations and their allies, resulting in increased transport costs and logistical challenges for shipment of goods, which have exacerbated an already strained global supply chain previously disrupted by the COVID-19 pandemic. The rising costs and uncertain supply of commodities, coupled with additional pressure on supply chains, may lead to increases in operating expenses, construction costs, and wages in the near term, as discussed in the preceding risk factor. These factors may also continue to drive inflation upward, creating further economic uncertainty and loss of investor confidence, which may also negatively impact the capital markets, investments, and asset prices.

Russia is a large supplier of natural gas and oil, particularly to European countries. During 2021, Europe purchased approximately 49% and 74% of Russia’s supply of oil and natural gas, respectively. As Russia’s largest customer of oil and natural gas, Europe may be severely impacted if there is a shortage or if Russia withholds supplies of energy resources in retaliation for sanctions imposed on Russia. Adverse impacts on the businesses and economies of European countries may also adversely impact those of other countries, including the U.S., who conduct trade with Europe.

The scale and extent of the impact from Russia-Ukraine war are not yet fully known. Disruption, instability, volatility, and decline in economic activity, regardless of where it occurs, whether caused by acts of war, other acts of aggression, or terrorism, could in turn also harm the demand for, and the value of our products. As a result of the factors discussed above, we may be unable to operate our business as usual, which may adversely affect our cash flows, financial condition, and results of operations.

Any or all of the foregoing could have a material adverse effect on our financial condition, results of operations, and cash flows, or the market price of our common stock. ~~The Company did~~Additional risks and uncertainties not ~~repurchase any shares~~currently known to us, or that we presently deem to be immaterial, may also have potential to materially adversely affect our business, financial condition, and results of its common stock under this program in the first nine months of 2017. Through September 30, 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 September 30, 2017, approximately $9.4 million was available for future repurchases of the Company’s common stock under this authorization.operations.

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.

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

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

	Large accelerated filer ☐	Accelerated filer ☒
Non-accelerated filer ☐	Smaller reporting company ☐
	~~Accelerated filer~~		☒
	~~Non–accelerated filer~~		~~☐ [Do not check if a smaller reporting company]~~
	~~Smaller reporting company~~		☐
	Emerging growth company ☐		☐

		~~Page~~

PART I - FINANCIAL INFORMATION	3

Item 1.	Financial Statements	3

Condensed Consolidated Balance Sheets as of ~~September 30, 2017 (unaudited)~~March 31, 2022 and December 31, ~~2016~~2021 (unaudited)	3

Condensed Consolidated Statements of Income and Comprehensive Income for the Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2022 and ~~September 30, 2016~~March 31, 2021 (unaudited)	4
Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2022 and March 31, 2021 (unaudited)		5
Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2022 and ~~September 30, 2016~~March 31, 2021 (unaudited)		56

Notes to Interim Condensed Consolidated Financial Statements	67

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1221

Item 3.	Quantitative and Qualitative Disclosures ~~about~~About Market Risk	1727

Item 4.	Controls and Procedures	1727

PART II - OTHER INFORMATION	1728

Item ~~1A. Risk Factors~~1.	Financial Statements	1728

Item ~~2. Unregistered Sales of Equity Securities and Use of Proceeds~~1A.	Risk Factors	1728

Item 6.	Exhibits	1729

Signatures	1830

~~Exhibit Index~~	18

	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		12,336			27.05
Exercised		(51,285	)		26.88
Expired		(3,750	)		18.85
Outstanding at September 30, 2017		189,879		$	17.41		3.55	$	2,029
Exercisable at September 30, 2017		184,879		$	17.23		3.60	$	2,011
Vested and expected to vest at September 30, 2017		189,879		$	17.41		3.55	$	2,029

	September 30, 2017			December 31, 2016
Assets	(Unaudited)
Current assets:
Cash and cash equivalents	$	37,246		$	31,359
Receivables, less allowance for doubtful accounts of $602 at September 30, 2017 and $567 at December 31, 2016		22,044			21,249
Inventories		13,136			14,151
Prepaid expenses		2,234			2,281
Refundable income taxes		979			807
Total current assets		75,639			69,847
Property, plant and equipment		103,797			96,806
Less accumulated depreciation and amortization		(51,815	)		(48,290	)
Net property, plant and equipment		51,982			48,516
Goodwill		7,322			7,322
Intangible assets, net		79			318
Other assets		2,069			1,931
Total assets	$	137,091		$	127,934

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	4,958		$	4,002
Accrued expenses		5,356			4,698
Short-term debt		84			856
Total current liabilities		10,398			9,556
Deferred income taxes		3,713			3,459
Non-qualified deferred compensation plan		1,949			1,682
Other liabilities		118			184
Total liabilities		16,178			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; 7,299,721 and 7,270,162 shares issued and outstanding, respectively at September 30, 2017; and 7,242,023 and 7,212,464 shares issued and outstanding, respectively at December 31, 2016		73			72
Additional paid-in capital		26,580			25,216
Retained earnings		94,847			88,352
Treasury stock at cost, 29,559 shares at September 30, 2017 and December 31, 2016		(587	)		(587	)
Total stockholders’ equity		120,913			113,053
Total liabilities and stockholders' equity	$	137,091		$	127,934

	Three Months Ended September 30						Nine Months Ended September 30
	2017			2016			2017			2016
Net sales	$	35,684		$	37,220		$	110,623		$	109,626
Cost of sales		27,491			28,768			82,973			83,161
Gross profit		8,193			8,452			27,650			26,465
Selling, general & administrative expenses		5,693			6,027			18,070			18,402
Restructuring costs		-			25			63			203
Material overcharge settlement		-			(1,681	)		(121	)		(2,114	)
Loss (Gain) on sale of fixed assets		-			-			3			(4	)
Operating income		2,500			4,081			9,635			9,978
Interest income		63			42			147			104
Interest expense		(12	)		(17	)		(39	)		(53	)
Income before income tax expense		2,551			4,106			9,743			10,029
Income tax expense		856			1,437			3,248			3,550
Net income	$	1,695		$	2,669		$	6,495		$	6,479

Net income per share:
Basic	$	0.23		$	0.37		$	0.90		$	0.90
Diluted	$	0.23		$	0.37		$	0.89		$	0.89
Weighted average common shares outstanding:
Basic		7,264			7,195			7,240			7,183
Diluted		7,353			7,282			7,326			7,265

	Three Months Ended September 30,				Nine Months Ended September 30,
Share-based compensation related to:	2017		2016		2017		2016
Common stock granted to the Board of Directors	$	-	$	-	$	105	$	105
Common stock granted to the Chief Executive Officer		100		100		300		300
Stock options granted to directors		-		-		105		105
Stock options granted to employees		4		34		25		107
Restricted Stock Unit awards to employees		102		95		307		254
Total share-based compensation	$	206	$	229	$	842	$	871

	Three Months Ended
	March 31,
Share-based compensation related to:	2022		2021
Common stock grants	$	100	$	100
Stock option grants		53		53
Restricted Stock Unit Awards ("RSUs")		539		348
Total share-based compensation	$	692	$	501

~~Expected volatility~~			~~29.1%~~
~~Expected dividends~~			~~None~~
~~Risk-free interest rate~~			~~1.84%~~
~~Exercise price~~			~~$27.05~~
~~Expected term (in years)~~			~~5.8~~
~~Weighted-average grant date fair value~~			~~$8.51~~

	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, 2021		98,671	$	33.53
Granted		0
Exercised		0
Outstanding at March 31, 2022		98,671	$	33.53		5.57	$	3,221
Exercisable at March 31, 2022		87,955	$	30.63		5.12	$	3,126
Vested and expected to vest at March 31, 2022		98,671	$	33.53	$	5.57	$	3,221

	Restricted Stock Units			Weighted Average Award Date Fair Value
Unvested at December 31, 2016		46,558		$	20.05
Awarded		22,770			24.70
Shares vested		(13,419	)		23.54
Unvested at September 30, 2017		55,909		$	20.96

	Restricted Stock Units			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2021		101,168		$	41.78
Awarded		48,099			74.75
Shares vested		(45,785	)		39.75
Shares forfeited		(21	)		74.75
Outstanding at March 31, 2022		103,461		$	49.19

	Three Months Ended September 30,										Nine Months Ended September 30,
	2017					2016					2017					2016
Market	Net Sales		%			Net Sales		%			Net Sales		%			Net Sales		%

Medical	$	16,712		46.8	%	$	16,548		44.5	%	$	52,822		47.7	%	$	48,953		44.7	%
Consumer		6,006		16.8	%		5,648		15.2	%		15,713		14.2	%		15,303		14.0	%
Automotive		5,174		14.5	%		6,942		18.7	%		18,018		16.3	%		20,485		18.7	%
Aerospace & Defense		2,682		7.5	%		2,516		6.8	%		8,290		7.5	%		7,929		7.2	%
Industrial		2,591		7.3	%		2,792		7.5	%		7,629		6.9	%		8,441		7.7	%
Electronics		2,519		7.1	%		2,774		7.5	%		8,151		7.4	%		8,515		7.8	%
Net Sales	$	35,684		100.0	%	$	37,220		100.0	%	$	110,623		100.0	%	$	109,626		100.0	%

	Patents			Non- Compete			Customer List			Total
Estimated useful life (in years)		14			5			5
Gross amount at September 30, 2017	$	429		$	512		$	2,046		$	2,987
Accumulated amortization at September 30, 2017		(429	)		(496	)		(1,983	)	$	(2,908	)
Net balance at September 30, 2017	$	-		$	16		$	63		$	79

Estimated useful life (in years)		14			5			5
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

Remainder of 2022
2022		3,360
2023		4,395
2024		4,388
2025		4,388
2026		4,386
Thereafter		50,650
Total	$	71,567

	March 31, 2022
Revolving credit facility	$	56,000
Term loan		39,000
Total long-term debt		95,000
Current portion		(4,000	)
Long-term debt, excluding current portion	$	91,000

	Term Loan		Revolving credit facility		Total
Remainder of 2022	$	3,000	$	0	$	3,000
2023	$	4,000	$	0	$	4,000
2024	$	4,000	$	0	$	4,000
2025	$	4,000	$	0	$	4,000
2026	$	24,000	$	56,000	$	80,000
	$	39,000	$	56,000	$	95,000

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
Restructuring Costs	2017		2016		2017		2016
Relocation	$	-	$	25	$	63	$	203
Total	$	-	$	25	$	63	$	203

Exhibit No.	Description

31.1	Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer.*
31.2	Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer.*
32.1	Certifications pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
101.INS	Inline XBRL Instance Document.*
101.SCH	Inline XBRL Taxonomy Extension Schema Document.*
101.CAL	Inline XBRL Taxonomy Calculation Linkbase Document.*
101.LAB	Inline XBRL Taxonomy Label Linkbase Document.*
101.PRE	Inline XBRL Taxonomy Presentation Linkbase Document.*
101.DEF 104	Inline XBRL Taxonomy Extension Definition Linkbase Document.* Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101)

Date: May 10, 2022	~~Date: November 9, 2017~~	By: /s/ R. Jeffrey Bailly
		R. Jeffrey Bailly
		Chairman, Chief Executive Officer, President, and Director
		(Principal Executive Officer)

	~~Date: November 9, 2017~~	~~By: /s/ Ronald J. Lataille~~
		~~Ronald J. Lataille~~
		~~Chief Financial Officer~~
		~~(Principal Financial Officer)~~

~~Exhibit No.~~	~~Description~~

~~31.1~~ Date: May 10, 2022	Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer.* By: /s/ Ronald J. Lataille
~~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.*