UFP Technologies Announces Q2 Results

Rhea-AI Summary

UFP Technologies (UFPT) reported Q2 2020 net income of $2.3 million ($0.31 per share), down from $4.6 million ($0.62 per share) in Q2 2019. Sales decreased 17% to $42.6 million versus $51.4 million in the prior year. For the first half of 2020, net income fell to $6.2 million from $8.3 million, while sales declined 7.9% to $90.9 million. The automotive market saw a significant 70% drop, while medical sales only fell 4.2%. Despite challenges, there was a 35% increase in product development revenue. The company maintains a strong cash position of over $12 million, enhancing its growth potential.

Positive

• Product development revenue increased by 35% year to date.
• Cash balance rose to over $12 million, providing financial stability.
• Company implemented cost-cutting measures effectively.

Negative

• Net income declined by 50% year-over-year in Q2.
• Sales dropped significantly across multiple markets, particularly automotive (down 70%).
• Gross margin fell to 23.3% from 28.0% in Q2 2019.

NEWBURYPORT, Mass., Aug. 04, 2020 (GLOBE NEWSWIRE) -- UFP Technologies, Inc.  (Nasdaq: UFPT), an innovative designer and custom manufacturer of components, subassemblies, products, and packaging primarily for the medical market, today reported net income of $2.3 million or $0.31 per diluted common share outstanding for its second quarter ended June 30, 2020, compared to net income of $4.6 million or $0.62 per diluted common share outstanding for the same period in 2019.  Sales for the second quarter were $42.6 million compared to second quarter sales of $51.4 million in 2019.  Net income for the six-month period ended June 30, 2020 was $6.2 million or $0.82 per diluted common share outstanding compared to $8.3 million or $1.11 per diluted common share outstanding for the same period in 2019.  Sales for the six-month period ended June 30, 2020 were $90.9 million compared to sales of $98.7 million for the same period in 2019.

"I am pleased with our Q2 results given the challenging market conditions caused by COVID-19," said R. Jeffrey Bailly, Chairman and CEO.  "All of our factories are up and running, and safety protocols are working well.  Our product development business, which is a key driver of future manufacturing revenue, is up 35% year to date."

"Revenue for the quarter was down $8.8 million or 17% versus the prior year, while net income declined $2.3 million or 50%," Bailly said.  "Each of our markets has been adversely impacted by the pandemic. Automotive, down 70%, was the hardest hit, while Medical had the smallest decline at 4.2%.  Demand remains strong for personal protective equipment such as face shields, and for infection prevention products and patient surfaces. However, orders related to elective procedures have declined. Although it is difficult to predict the impact of COVID-19 on our future revenue, we anticipate continued near-term softness in elective procedures offsetting the modest gains forecasted in non-medical markets. We have responded with cost-cutting measures, including strategic reductions of our indirect and direct labor staffing.”

"I remain very optimistic about the future of UFP Technologies," Bailly said. "The strong increase in our development business bodes well for revenue growth in 2021 and beyond.  And Q2, despite the reduced operating results, still generated approximately $5 million in cash, bringing our cash balance to over $12 million.  This, combined with our substantial borrowing capacity, enables us to continue to invest in both internal and external growth opportunities as well as efficiency improvements to enhance our competitive position."

Financial Highlights for Q2 and YTD 2020:

• Sales for the second quarter declined 17.0% to $42.6 million, from $51.4 million in the same period of 2019.  Year-to-date sales through June declined 7.9% to $90.9 million, from $98.7 million in the same period of 2019.
• Second quarter sales to the medical market declined 4.2%.  Sales to the aerospace & defense and automotive markets declined 26.3% and 70.7%, respectively. All other sales (consumer, electronics, and industrial) declined 30.0%.
• Year-to-date sales to the medical market grew 5.4%.  Sales to the aerospace & defense and automotive markets declined 24.9% and 43.4%, respectively. All other sales (consumer, electronics, and industrial) declined 25.1%.
• Gross profit as a percentage of sales (“gross margin”) declined to 23.3% for the second quarter, from 28.0% in the same quarter of 2019.  Gross margin for the six-month period ended June 30, 2020 declined to 25.0% from 27.2% in the same period of 2019.
• Selling, general and administrative expenses (“SG&A”) for the second quarter declined 14.5% to $6.7 million in 2020 compared to $7.8 million in the same quarter of 2019.   For the six-month period ended June 30, 2020, SG&A declined 4.2% to $14.4 million from $15.0 million in the same period of 2019.
• For the second quarter, operating income declined to $3.0 million, from $6.6 million in the same quarter of 2019.  For the six-month period ended June 30, 2020, operating income declined to $8.1 million, from $11.8 million in the same period of 2019.
• Net income declined to $2.3 million in the second quarter of 2020, from $4.6 million in the same period of 2019.  For the six-month period ended June 30, 2020 net income declined to $6.2 million, from $8.3 million in the same period of 2019.

UFP Technologies is an innovative designer and custom manufacturer of components, subassemblies, products, and packaging primarily for the medical market.  Utilizing highly specialized foams, films and plastics, UFP converts raw materials through laminating, molding, radio frequency welding and fabricating techniques. The Company is diversified by also providing highly engineered solutions to customers in the aerospace & defense, automotive, consumer, electronics and industrial markets.

This news release contains statements relating to expected financial performance and/or future business prospects, events and plans that are forward-looking statements.  Such statements include, but are not limited to, statements regarding the anticipated effects on the Company of the COVID-19 pandemic, including with respect to the different markets in which the Company participates, demand for the Company’s products, the Company’s product development efforts, the well-being and availability of the Company’s employees, the continuing operation of the Company’s locations, the effects of cost-cutting measures, including direct and indirect labor costs, and the effectiveness of the Company’s safety protocols; statements about the Company’s acquisition strategies and opportunities; statements regarding anticipated trends in the different markets in which the Company competes and expectations regarding customer demand; statements regarding the potential for our product development business (for which we recognize revenue as engineering services in our financial statements) to drive future manufacturing revenue; expectations regarding the manufacturing capacity and efficiencies of the Company; expectations regarding the Company’s liquidity, statements about the Company’s participation and growth in multiple markets and its business opportunities; statements about the Company’s growth potential and strategies for growth; anticipated revenues and the timing of such revenues, and any statements implying that the Company may be able to sustain or increase its sales, earnings and earnings per share or sales, earnings and earnings per share growth rates.  Investors are cautioned that such forward-looking statements involve risks and uncertainties that could adversely affect the Company’s business and prospects, and otherwise cause actual results to differ materially from those anticipated by such forward-looking statements, or otherwise, including without limitation, the 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 relating to decreased, including substantially decreased, demand for our products; risks relating to the potential closure of any of our facilities or the unavailability of key personnel or other employees; risks relating to the success of our safety protocols; risks relating to operating with a decreased labor force; risks relating to the identification of suitable acquisition candidates and the successful, efficient execution of acquisition transactions and integration of any acquisition candidates; risks that revenue from our product development business may not result in future manufacturing revenue; risks and uncertainties associated with maintaining and increasing sales, earnings and earnings per share, as well as other risks and uncertainties that are detailed in the documents filed by the Company with the SEC.  Accordingly, actual results may differ materially.  Readers are referred to the documents filed by the Company with the SEC, specifically the last reports on Forms 10-K and 10-Q.  The forward-looking statements contained herein speak only of the Company’s expecta­tions as of the date of this press release.  The Company express­ly disclaims any obligation or undertaking to release publicly any updates or revi­sions to any such statement to reflect any change in the Company’s expectations or any change in events, conditions, or circumstances on which any such statement is based.

Consolidated Condensed Statements of Income (in thousands, except per share data) (unaudited)
		Three Months Ended						Six Months Ended
		June 30						June 30
		2020			2019			2020			2019
Net sales		$	42,644		$	51,399		$	90,921		$	98,726
Cost of sales			32,695			37,028			68,148			71,859
Gross profit			9,949			14,371			22,773			26,867
Selling, general and administrative expenses			6,665			7,799			14,417			15,043
Loss on disposal of fixed assets			290			-			286			-
Operating income			2,994			6,572			8,070			11,824
Interest expense, net			33			194			49			425
Other expense			35			198			362			437
Income before income tax expense			2,926			6,180			7,659			10,962
Income tax expense			608			1,582			1,450			2,630
Net income		$	2,318		$	4,598		$	6,209		$	8,332
Net income per share outstanding		$	0.31		$	0.62		$	0.83		$	1.12
Net income per diluted share outstanding		$	0.31		$	0.62		$	0.82		$	1.11
Weighted average shares outstanding			7,487			7,423			7,472			7,413
Weighted average diluted shares outstanding			7,532			7,467			7,545			7,473

 

Consolidated Condensed Balance Sheets (in thousands) (Unaudited)
	June 30,			December 31,
	2020			2019
Assets:
Cash and cash equivalents	$	12,266		$	3,743
Receivables, net		27,271			28,648
Inventories		20,959			18,276
Other current assets		3,419			2,583
Net property, plant, and equipment		55,158			56,739
Goodwill		51,838			51,838
Intangible assets, net		20,347			20,975
Other assets		5,961			5,956
Total assets	$	197,219		$	188,758
Liabilities and equity:
Accounts payable		5,415			4,577
Other current liabilities		11,150			12,207
Other liabilities		11,442			9,983
Total liabilities		28,007			26,767
Total equity		169,212			161,991
Total liabilities and stockholders' equity	$	197,219		$	188,758

Ron Lataille
978-234-0926
rlataille@ufpt.com

FAQ

What were UFP Technologies' Q2 2020 earnings?

UFP Technologies reported Q2 2020 net income of $2.3 million, or $0.31 per diluted share.

How did UFP Technologies' sales perform in Q2 2020?

Sales decreased 17% to $42.6 million in Q2 2020, down from $51.4 million in Q2 2019.

What impact did COVID-19 have on UFP Technologies' financials?

COVID-19 adversely affected all markets, especially automotive, leading to a significant decline in sales and net income.

What was the gross margin for UFP Technologies in Q2 2020?

The gross margin for Q2 2020 decreased to 23.3% compared to 28.0% in Q2 2019.

What is UFP Technologies' cash position as of Q2 2020?

The company reported a cash balance of over $12 million, indicating strong liquidity.