UFP TECH., INC. designs and manufactures a range of high-performance cushion packaging and specialty foam and plastic prods. for the industrial and consumer markets. UFP also designs precision moulded fibre packaging prods. made from recycled paper. Ufp Technologies Inc. has a market cap of $39.6 million; its shares were traded at around $6.74 with a P/E ratio of 9.9 and P/S ratio of 0.4. Highlight of Business Operations: September 30, 2009, were $70.2 million or 16.4% below sales of $84.0 million for the same period in 2008. Had the Company not purchased selected assets from Foamade, ENM, and AMI, the sales decline for the three- and nine-month periods ended September 30, 2009, would have been 15.8% and 23.3%, respectively. When excluding sales generated from newly acquired companies, the decline in sales for both periods is due largely to a decline in sales of interior trim parts to the automotive industry (Component Products segment), as well as a general softening in demand for packaging parts (Engineered Packaging segment). Sales of automotive trim parts declined by $1.4 million and $9.5 million during the three- and nine-month periods ended September 30, 2009, respectively, in comparison to the same two periods in 2008.
Selling, General and Administrative Expenses Selling, General, and Administrative expenses (SG&A) increased 2.7% to $5.1 million for the three-month period ended September 30, 2009, from $4.9 million in the same period of 2008. SG&A declined 6.5% to $13.9 million for the nine-month period ended September 30, 2009, from $14.8 million in the same period of 2008. As a percentage of sales SG&A increased to 18.4% for the three-month period ended September 30, 2009, from 17.9% in the same period of 2008. As a percentage of sales SG&A increased to 19.8% for the nine-month period ended September 30, 2009, from 17.7% in the same period of 2008.
The increase in SG&A for the three-month period ended September 30, 2009, is primarily due to SG&A from newly acquired companies of approximately $535,000 (Component Products segment), partially offset by reduced administrative variable compensation of approximately $150,000 (both business segments). The decline in SG&A for the nine-month period ended September 30, 2009, is primarily due to reduced administrative variable compensation of approximately $760,000 (both business segments) and reduced selling expenses of approximately $200,000 (due largely to the reduction in salesboth business segments), partially offset by SG&A associated with newly acquired companies of approximately $535,000 (Component Products segment).
Net interest expense declined for the three- and nine-month periods ended September 30, 2009, to approximately $53,000 and $189,000, respectively, from $72,000 and $270,000, respectively, in the same 2008 periods. This decline is primarily due to lower average borrowings and interest earned on an increased cash position.
Net cash provided by operations for the nine-month periods ended September 30, 2009, and 2008, was approximately $6.9 million and $4.3 million, respectively. The increase in cash provided by operations was primarily attributable to 2009 reductions in inventories of approximately $1.4 million, compared to an increase in inventories of approximately $1.6 million in 2008. This change reflects the Companys objective to lower inventory levels. These increases were partially offset by lower net income of approximately $946,000.
On January 29, 2009, the Company amended and extended its credit facility with Bank of America, NA. The facility comprises: (i) a revolving credit facility of $17 million; (ii) a term loan of $2.1 million with a seven-year straight-line amortization; (iii) a term loan of $1.8 million with a 20-year straight-line amortization; and (iv) a term loan of $4.0 million with a 20-year straight-line amortization. Extensions of credit under the revolving credit facility are based in part upon accounts receivable and inventory levels. Therefore, the entire $17 million may not be available to the Company. The credit facility calls for interest of LIBOR plus a margin that ranges from 1.0% to 1.5% or, at the option of the Company, the banks prime rate less a margin that ranges from 0.25% to zero. In both cases the applicable margin is dependent upon Company performance. The loans are collateralized by a first priority lien on all of the Companys assets, including its real estate located in Georgetown, Massachusetts, and in Grand Rapids, Michigan. Under the credit facility, the Company is subject to a minimum fixed-charge coverage financial covenant with which it was in compliance at September 30, 2009. The Companys $17 million revolving credit facility expires November 30, 2013; the term loans are all due on January 29, 2016.
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