Forward-looking Statements
Some of the statements contained in this Report are forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act").
Management and representatives of UFP Technologies, Inc. (the "Company") also
may from time to time make forward-looking statements. 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; statements about the potential 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 2020; 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 regarding the potential impact of the proposed phase out
of LIBOR by the end of 2021; 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 the Company's plans to expand in certain of its
markets; anticipated advantages the Company expects to realize from its
investments and capital expenditures; anticipated advantages to improvements and
alterations at the Company's existing plants; expectations regarding the
Company's manufacturing capacity, operating efficiencies, and new production
equipment; statements about new product offerings and program launches;
statements about the Company's acquisition and integration of Dielectrics and
the synergies and other benefits anticipated in connection with the Dielectrics
business; the Company's participation and growth in multiple markets; its
business opportunities; and any indication that the Company may be able to
sustain or increase its sales, earnings or earnings per share, or its sales,
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:
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 relating to the Company's acquisition and integration of
Dielectrics; risks associated with the identification of suitable acquisition
candidates and the successful, efficient execution of acquisition transactions,
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 related to the proposed phase out of
LIBOR by the end of 2021; 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 seeking and implementing manufacturing
efficiencies and implementing new production equipment; risks and uncertainties
associated with growth of the Company's business and increases to sales,
earnings and earnings per share; and risks associated with new product and
program launches. Accordingly, actual results may differ materially.
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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 the forward-looking statements are
qualified in their entirety by reference to the factors discussed above and
under "Risk Factors" set forth in Part I Item 1A of the Company's Annual Report
on Form 10-K for the year ended December 31, 2019, and "Risk Factors" set forth
in Part II, Item 1A of the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2020, as well as the risks and uncertainties discussed
elsewhere in this Report, including without limitation any risks and
uncertainties included elsewhere in this "Management's Discussion and Analysis
of Financial Condition and Results Of Operations" portion of this Report, or
under "Risk Factors" in Part II Item 1A of this report. We qualify all of our
forward-looking statements by these cautionary statements. We caution you that
these risks are not exhaustive. We operate in a continually changing business
environment and new risks emerge from time to time.
Unless the context requires otherwise, the terms "we", "us", "our", or "the
Company" refer to UFP Technologies, Inc. and its consolidated subsidiaries.
Overview
UFP Technologies, Inc. (the "Company") 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, the
Company 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. The Company consists of a single
operating and reportable segment.
Sales for the Company for the six-month period ended June 30, 2020 decreased
7.9% to $90.9 million from $98.7 million in the same period last year largely
due to the impact in demand for product as a result of the COVID-19 pandemic.
Gross margins for the six-month period ended June 30, 2020 decreased to 25.0%
from 27.2% in the same period last year. Operating income and net income
decreased 31.7% and 25.5%, respectively.
The Company's current strategy includes further organic growth and growth
through strategic acquisitions.
Recent Developments
COVID-19
COVID-19 has spread across the country to areas in which our products are
designed, manufactured, distributed or sold. Authorities in states in which we
do business have implemented numerous measures to stall the spread of COVID-19,
including travel bans and restrictions, quarantines, curfews, stay-at-home
orders, and business shutdowns. These measures have impacted and will likely
further impact us, our customers, consumers, employees, suppliers and other
third parties with whom we do business. There is considerable uncertainty
regarding 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 (whether as a result of changes to our supply chain or increases in
employee or manufacturing costs).
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Our operations expose us to risks associated with the COVID-19 pandemic.
Although the COVID-19 pandemic did not materially impact our first quarter
results, it has since more significantly impacted our operations. While all of
our factories are deemed essential, not all of our customers' operations are
essential and, therefore, demand for our products and our customers' products
has been negatively impacted, especially in the automotive and consumer markets,
where the impact has been substantial. Partially mitigating this are increased
orders from certain customers in the medical market. The COVID-19 pandemic has
also impacted the cost of manufacturing our goods, including higher labor costs,
maintenance costs and manufacturing inefficiencies due to employee absenteeism
and significantly enhanced cleaning and sterilization. With regard to our supply
chain, there has thus far been minimal disruption in the availability of raw
materials, as most of our major suppliers have also been deemed to be essential
businesses. Due to similar concerns regarding supply and shipping challenges at
the beginning of the COVID-19 pandemic, we understand that certain of our
customers increased their purchasing requirements, as well. We believe this
partially mitigated the sales decline for the second quarter of 2020. We
anticipate that our customers' increased supply levels may lead to decreased
demand for our products.
In light of the COVID-19 pandemic, elective medical procedures and exams have
been delayed or canceled, there has been a significant reduction in physician
office visits, and hospitals have postponed or canceled capital purchases. We
believe that these responses have had a negative impact on the demand for the
Company's components for medical devices. Additionally, many of our customers in
the automotive markets have experienced closures of their businesses in
connection with the pandemic. Such closures have negatively impacted the demand
for our automobile component products. Any continued reduced demand for our
products, including reduced need for components for medical devices, packaging
for consumer and electronic goods, or reduced need for automobile components, 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, potentially resulting in customers' inability to pay for our
products and reduced or canceled orders of our products. Such adverse changes in
our customers' financial condition may also result in our recording impairment
charges for our inability to recover or collect any accounts receivable or owned
or leased assets.
We have been notified by several customers that they would be extending payment
terms. We anticipate that these extended payment terms will be short-term in
nature, but they may continue for a longer duration. In the beginning of April,
we drew down $5.5 million from our revolving credit facility to maintain cash
reserves in the event we experienced a substantial shut down of operations,
further or extended increase in manufacturing costs, or significant exposure to
our ability to timely collect receivables. The Company repaid the $5.5 million
in full prior to the end of June.
The COVID-19 pandemic and associated economic disruptions have had, and we
believe they will continue to have, negative effects on our operating results,
cash flows and financial condition. While we began to experience these negative
effects towards the end of March, they increased markedly during the second
quarter. We expect these negative effects on our financial results will continue
in the third quarter, in particular due to continued decreased product demand.
As of the date of this report, we anticipate that the negative effects of the
pandemic on our business and financial results may start to wane during the
fourth quarter of 2020, but the situation is highly dependent on facts unknown
at this time, and therefore uncertain, so this may not be the case. In any
event, the negative effects of the COVID-19 pandemic on our business and
financial results are likely to continue to be significant through the end of
2020.
To ensure the health and safety of our employees and to comply with governmental
orders, since March, 2020, we have required or enabled certain employees to work
from home or remotely where practicable, and expanded IT and communication
support to enhance their productivity; adjusted work spaces and shifted
schedules to facilitate social distancing and sterilization for those who
continue to work in our facilities; enhanced cleaning and disinfecting
procedures at our facilities; required face coverings and worked to procure and
distributed personal protective equipment; implemented health checks and visitor
protocols and restricted travel.
Additionally, in response to the economic uncertainties resulting from the
COVID-19 pandemic, we have initiated cost-cutting measures, including
restrictions on travel and direct and indirect labor cost reduction measures,
including employee terminations. Terminated employees were provided with
severance pay and accordingly such terminations have not materially affected our
results of operations for the second quarter of fiscal 2020. We expect that the
impact of these cost-cutting measures will occur primarily starting in the third
quarter of fiscal 2020, but they will not likely offset the negative impacts of
the COVID-19 pandemic.
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While we have developed and implemented and continue to develop and implement
health and safety protocols, business continuity plans and crisis management
protocols in an effort to try to mitigate the negative impact of COVID-19 on our
employees and our business, we believe the extent of 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,
including the duration and scope of the pandemic, its severity, economic
conditions during and after the pandemic, governmental actions that have or may
be taken in response to the pandemic, changes in customer behavior in response
to the pandemic, and how quickly and to what extent more predictable economic
and operating conditions can resume. As a result, we anticipate that COVID-19
driven demand disruptions and related events will negatively affect our
financial results in 2020.
Coronavirus Aid, Relief, and Economic Security Act ("CARES Act")
The CARES Act was enacted on March 27, 2020 in the United States. The CARES Act
and related notices include several significant provisions, including delaying
certain payroll tax payments and estimated income tax payments that we expect to
defer to future periods. Accordingly, the Company has deferred social security
payments in an amount of $443,000 as of June 30, 2020, which will continue to
accrue thereafter. We do not currently expect the CARES Act to have a material
impact on our financial results, including on our annual estimated effective tax
rate, or on our liquidity. We will continue to monitor and assess the impact the
CARES Act may have on our business and financial results.
Results of Operations
Sales
Sales for the three-month period ended June 30, 2020 decreased approximately
17.0% to $42.6 million from sales of $51.4 million for the same period in 2019.
We attribute the decrease in sales primarily to the impact on demand for product
as a result of the COVID-19 pandemic. We believe that the cancellation or delay
of elective medical procedures in connection with the COVID-19 pandemic has had
a negative impact on the demand for the Company's components for medical
devices. Additionally, many of our customers in the automotive markets have
experienced closures of their businesses in connection with the pandemic. Such
closures have negatively impacted the demand for our automobile component
products.
Sales for the six-month period ended June 30, 2020 decreased approximately 7.9%
to $90.9 million from sales of $98.7 million for the same period in 2019. We
attribute the decrease in sales primarily to the impact on demand for product as
a result of the COVID-19 pandemic, as described in the preceding paragraph. We
refer you to "Recent Developments-Covid-19" above for additional discussion of
product demand.
Gross Profit
Gross profit as a percentage of sales ("gross margin") decreased to 23.3% for
the three-month period ended June 30, 2020, from 28.0% for the same period in
2019. As a percentage of sales, material and labor costs collectively decreased
1.9%, while overhead increased 6.6% The decrease in collective material and
labor costs as a percentage of sales was primarily due to gains in manufacturing
efficiencies resulting from continuous improvement initiatives and an
improvement in the overall book of business. The increase in overhead as a
percentage of sales was primarily due to fixed overhead costs against decreased
sales.
Gross margin decreased to 25.0% for the six-month period ended June 30, 2020,
from 27.2% for the same period in 2019. As a percentage of sales, material and
labor costs collectively decreased 1.2%, while overhead increased 3.4%. The
decrease in collective material and labor costs as a percentage of sales was
primarily due to gains in manufacturing efficiencies resulting from continuous
improvement initiatives and an improvement in the overall book of business. The
increase in overhead as a percentage of sales was primarily due to fixed
overhead costs against decreased sales.
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Selling, General and Administrative Expenses
Selling, general, and administrative expenses ("SG&A") decreased approximately
14.5% to $6.7 million for the three-month period ended June 30, 2020, from $7.8
million for the same period in 2019. As a percentage of sales, SG&A increased
slightly to 15.6% for the three-month period ended June 30, 2020, from 15.2% for
the same three-month period in 2019. The decrease in SG&A for the three-month
period ended June 30, 2020 was primarily due to decreases in
compensation-related reserves and company-wide travel and entertainment.
SG&A decreased approximately 4.2% to $14.4 million for the six-month period
ended June 30, 2020, compared to $15.0 million in the same period in 2019. As a
percentage of sales, SG&A increased to 15.9% from 15.2% for the same three-month
period in 2019. The decrease in SG&A for the six-month period ended June 30,
2020 was primarily due to decreases in compensation-related reserves and
company-wide travel and entertainment.
We refer you to "Recent Developments-Covid-19" above for additional discussion
of cost-reduction measures.
Interest Income and Expense
Net interest expense was approximately $33 thousand for the three-month period
ended June 30, 2020, compared to net interest expense of $194 thousand in the
same period of 2019. The decrease in net interest expense was primarily due to
lower debt levels.
Net interest expense was approximately $49 thousand for the six-month period
ended June 30, 2020, compared to net interest expense of $425 thousand in the
same period of 2019. The decrease in net interest expense was primarily due to
lower debt levels.
Other Expense
Other expense was approximately $35 thousand and $198 thousand for the
three-month periods ended June 30, 2020 and 2019, respectively and approximately
$362 thousand and $437 thousand for the six-month periods ended June 30, 2020
and 2019, respectively. Other expense was primarily generated by changes in the
fair value of the swap liability, which is driven by anticipated future interest
rate changes. Should we choose to keep the swap for the full five-year term, the
cumulative net impact to the income statement due to changes in fair value will
be zero.
Income Taxes
The Company recorded tax expense of approximately 20.8% and 25.6% of income
before income tax expense, respectively, for each of the three-month periods
ended June 30, 2020 and 2019. The decrease in the effective tax rate for the
current period was largely due to a lower anticipated effective tax rate due to
credits available for increased research activities as well as share-based
payment related tax benefits recorded in the current period. The Company
recorded tax expense of approximately 18.9% and 24.0% of income before income
tax expense, respectively, for each of the six-month periods ended June 30, 2020
and 2019. The decrease in the effective tax rate for the current period was
largely due to a lower anticipated effective tax rate due to credits available
for increased research activities as well as share-based payment related tax
benefits recorded in the current period. 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.
Liquidity and Capital Resources
The Company generally funds its operating expenses, capital requirements, and
growth plan through internally generated cash and bank credit facilities.
Cash Flows
Net cash provided by operations for the six-month period ended June 30, 2020 was
approximately $10.7 million and was primarily a result of net income generated
of approximately $6.2 million, depreciation and amortization of approximately
$4.2 million, loss on sale of fixed assets of approximately $0.3 million,
share-based compensation of approximately $1.1 million, an increase in deferred
taxes of approximately $0.7 million, a decrease in accounts receivable of
approximately $1.4 million due to reduced sales, a decrease in refundable income
taxes of approximately $0.5 million, an increase in accounts payable of
approximately $0.7 million, due to the timing of vendor payments in the ordinary
course of business, and an increase of other long-term liabilities of
approximately $0.8 million due primarily to an increase in the fair value of the
interest rate swap and the deferral of employer social security tax payments in
connection with the CARES Act. These cash inflows and adjustments to income were
partially offset by an increase in inventory of approximately $2.7 million due
to restocking to historical levels and for expected safety stock needs, an
increase in prepaid expenses of approximately $1.1 million due primarily to
insurance and progress payments on machinery, and a decrease in accrued expenses
of approximately $1.4 million due to the payment of 2019 accrued compensation.
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Net cash used in investing activities during the six-month period ended June 30,
2020 was approximately $2.1 million and was primarily the result of additions of
manufacturing machinery and equipment across the Company.
Net cash used in financing activities was approximately $0.1 million during the
six-month period ended June 30, 2020, resulting from borrowings and repayments
on the Company's credit facility of approximately $5.5 million and payments of
statutory withholding for stock options exercised and restricted stock units
vested of approximately $0.6 million, partially offset by net proceeds received
upon stock options exercises of approximately $0.5 million.
Outstanding and Available Debt
On February 1, 2018, the Company, as the borrower, entered into an unsecured $70
million Amended and Restated Credit Agreement (the "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 Amended and Restated Credit Agreement
amends and restates the Company's prior credit agreement.
The credit facilities under the Amended and Restated Credit Agreement (the
"Amended and Restated Credit Facilities") consist of a $20 million unsecured
term loan to the Company and an unsecured revolving credit facility, under which
we may borrow up to $50 million. In the beginning of April, we drew down $5.5
million from our revolving credit facility to maintain cash reserves in the
event we experienced a substantial shut down of operations, further or extended
increase in manufacturing costs or significant exposure to our ability to timely
collect receivables. The Company repaid in full the $5.5 million of the
outstanding principal amount, together with interest, under the revolving credit
facility prior to the end of June. The Amended and Restated Credit Facilities
mature on February 1, 2023. The proceeds of the Amended and Restated Credit
Agreement may be used for general corporate purposes, as well as permitted
acquisitions. Our obligations under the Amended and Restated Credit Agreement
are guaranteed by the Subsidiary Guarantors.
The Amended and Restated Credit Facilities call for interest of LIBOR plus a
margin that ranges from 1.0% to 1.5% or, at the discretion of the Company, the
bank's prime rate less a margin that ranges from 0.25% to zero. In both cases
the applicable margin is dependent upon Company performance. Under the 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 Amended and Restated Credit Agreement contains other
covenants customary for transactions of this type, including restrictions on
certain payments, permitted indebtedness and permitted investments. As of June
30, 2020, there were $0.7 million in standby letters of credit outstanding
drawable as a financial guarantee on worker's compensation insurance policies.
As of June 30, 2020, the applicable interest rate was approximately 1.16% and
the Company was in compliance with all covenants under the Amended and Restated
Credit Agreement.
Derivative Financial Instruments
The Company uses interest-rate-related derivative instruments to manage its
exposure related to changes in interest rates on 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 to credit risk and market risk. Credit risk is the failure of 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, which creates credit risk for the Company. When the fair value of a
derivative contract is negative, the Company owes the counterparty and,
therefore, the Company is not exposed to the counterparty's credit risk in those
circumstances. 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 results from a
change in interest rates. The Company assesses interest rate risk by 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 expose the Company to variability in interest
payments due to changes in interest rates. The Company believes that it is
prudent to limit the variability of a portion of its interest payments. To meet
this objective, in connection with the term loan under the 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 agreement was established to modify the Company's interest rate exposure by
converting interest on the term loan from a variable rate to a fixed rate to
hedge against the possibility of rising interest rates during the term of the
loan. Because the Company repaid its term loan in full, the swap agreement no
longer serves this purpose and may be canceled by the Company prior to its
expiration date. The notional amount was approximately $12.9 million at June 30,
2020. The fair value of the swap as of June 30, 2020 and December 31, 2019 was
approximately $(616) thousand and $(325) thousand, respectively, and is included
in other liabilities. Changes in the fair value of the swap are recorded in
other expense on the condensed consolidated statements of income and resulted in
income of $8 thousand and expense of $292 thousand during the three- and
six-months ended June 30, 2020. In the same periods in 2019, change in the fair
value of the swap resulted in expense of $198 thousand and $437 thousand,
respectively.
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--------------------------------------------------------------------------------The Financial Conduct Authority (the authority that regulates LIBOR) announced
in 2017 that it intends to phase out LIBOR by the end of 2021. If changes are
made to the method of calculating LIBOR or LIBOR ceases to exist, we may need to
amend certain contracts, including our Amended and Restated Credit Agreement and
related interest rate swap agreement, and we cannot guarantee what alternative
rate or benchmark would be negotiated or the extent to which this would
adversely affect our interest rate and the effectiveness of our interest rate
hedging activity. We cannot assure that we will be able to amend any of these
agreements in a timely manner or at all.
Future Liquidity
We require cash to pay our operating expenses, purchase capital equipment, and
to service our contractual obligations. Our principal sources of funds are cash
from operations and our $50 million revolving credit facility. We generated cash
of approximately $10.7 million from operations during the six months ended June
30, 2020; however, we cannot guarantee that our operations will generate cash in
future periods. As indicated above, we have been notified by several customers
that they intend to extend payment terms due to COVID-19 and, therefore, we
anticipate short-term lower operating cash and higher working capital needs. Our
longer-term liquidity is contingent upon future operating performance and
further draws on our revolving credit facility are possible. Further, the
continued economic uncertainty resulting from the COVID-19 pandemic could affect
our long-term ability to access the public markets and obtain necessary capital
in order to properly capitalize and continue our operations.
Throughout fiscal 2020, we plan to continue to add capacity to enhance operating
efficiencies in our manufacturing plants. We may consider additional
acquisitions of companies, technologies, or products that are complementary to
our business. We believe that our existing resources, including our revolving
credit facility, together with cash expected to be generated from operations and
funds expected to be available to us through any necessary equipment financings
and additional bank borrowings, will be sufficient to fund our cash flow
requirements, including capital asset acquisitions, through the next twelve
months.
Stock Repurchase Program
On June 16, 2015, the Company announced that its Board of Directors authorized
the repurchase of up to $10.0 million of the Company's outstanding common stock.
Under the program, the Company is authorized to repurchase shares through Rule
10b5-1 plans, open market purchases, privately negotiated transactions, block
purchases or otherwise in accordance with applicable federal securities laws,
including Rule 10b-18 of the Exchange Act. 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. We did not
repurchase any shares of our common stock under this program in the first six
months of 2020. Through June 30, 2020, the Company repurchased a total of 29,559
shares of its common stock under this program at a cost of approximately $587
thousand. At June 30, 2020, approximately $9.4 million was available for future
repurchases of the Company's common stock under this authorization.
Commitments and Contractual Obligations
There have been no material changes outside the ordinary course of business to
our contractual obligations and commitments, as disclosed in our Annual Report
on Form 10-K for the year ended December 31, 2019.
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Off-Balance-Sheet Arrangements
In addition to operating leases, the Company's off-balance-sheet arrangements
include standby letters of credit which are included in the Company's revolving
credit facility. As of June 30, 2020, there was approximately $0.7 million in
standby letters of credit drawable as a financial guarantee on worker's
compensation insurance policies.
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UFP TECHNOLOGIES, INC. 
