UFP TECHNOLOGIES INCUFPT
UFP TECHNOLOGIES INC Fair Value Disclosure
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 hierarchical levels, for financial assets that are measured at fair value on a recurring basis (in thousands):
| Level 3 | December 31, 2025 | December 31, 2024 | |||||||||
| Purchase price contingent consideration (Note 2): | |||||||||||
| Accrued contingent consideration (earn-out) | $ | 5,250 | $ | 10,239 | |||||||
| Present value of non-competition payments | 5,001 | 6,871 | |||||||||
| Total contingent consideration | $ | 10,251 | $ | 17,110 | |||||||
The following table presents the changes in the estimated fair values of the Company’s liabilities for contingent consideration measured using significant unobservable inputs (Level 3) (in thousands):
| December 31, 2023 | $ | 21,570 | |||
| Fair value of earnouts from acquisitions | 1,191 | ||||
| Fair value measurement adjustments | 1,155 | ||||
| Payments | (6,806) | ||||
| December 31, 2024 | $ | 17,110 | |||
| Fair value measurement adjustments | 418 | ||||
| Payments | (7,277) | ||||
| December 31, 2025 | $ | 10,251 | |||
Significant unobservable inputs include revenue and EBITDA projections and risk-free discount rates.
The total potential contingent consideration payments for the Welch, Marble and DAS Medical acquisitions were $6.0 million, $0.5 million, and $20.0 million, respectively, as of each acquisition date. The fair value of the liability for the contingent consideration payments recognized upon the acquisition as part of the purchase accounting opening balance sheets totaled approximately $0.8 million, $0.4 million and $5.2 million for the Welch, Marble and the DAS Medical acquisitions, respectively, and was estimated by discounting to present value the probability-weighted contingent payments expected to be made. Assumptions used in the initial calculation were management’s financial forecasts, discount rate and various volatility factors. The ultimate settlement of contingent consideration could deviate from current estimates based on the actual results of these financial measures. The contingent consideration for the Welch acquisition has no fair value as of December 31, 2025, as Welch did not achieve the
EBITDA targets for the years ended December 31, 2024, and 2025. The Company has also determined that it is not probable that Welch will achieve the EBITDA targets for the year ended December 31, 2026. Contingent consideration is considered to be a Level 3 financial liability that is re-measured each reporting period. The Company paid approximately $5.3 million during the year ended December 31, 2025. The fair value of the liability for the contingent consideration payments recognized at December 31, 2025 totaled approximately $5.3 million out of the remaining potential payments of $7.3 million. The change in fair value of contingent consideration for the Welch, Marble, and DAS Medical acquisitions resulted in an expense of approximately $0.3 million and $1.0 million, respectively, for the years ended December 31, 2025 and 2024. The change in fair value of contingent consideration for the acquisitions is included in change in fair value of contingent consideration in the condensed consolidated statements of comprehensive income.
The Company entered into Non-Competition Agreements with certain previous owners of DAS Medical and Advant Medical which includes an aggregate of $10.0 million in payments to certain previous owners of DAS Medical over a ten-year period, and an aggregate of €0.4 million in payments to the previous owner of Advant Medical over a three-year period. The Company paid approximately $2.0 million during 2025 related to non-competition agreements. The present value of the Non-Competition Agreements at December 31, 2025 totaled approximately $5.0 million. This liability is considered to be a Level 3 financial liability that is re-measured each reporting period.
The Company has financial instruments, such as accounts receivable, accounts payable, and accrued expenses, which 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.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Mar 3, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Mar 16, 2023 | |
| 2021 | Mar 14, 2022 | |
| 2020 | Mar 12, 2021 | |
| 2019 | Mar 13, 2020 | |
| 2018 | Mar 15, 2019 | |
| 2017 | Mar 16, 2018 | |
| 2016 | Mar 10, 2017 | |
| 2015 | Mar 11, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.