-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, mLef6IWF6cweBFK5JAkV2VhhemqQhpxFRLCboVvL+4nd+erarWAtL9V6+7x4JnA9 Ueq3ZbJI+3DNSYtHUkGVMA== 0000914233-95-000010.txt : 19950516 0000914233-95-000010.hdr.sgml : 19950516 ACCESSION NUMBER: 0000914233-95-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: UTAH MEDICAL PRODUCTS INC CENTRAL INDEX KEY: 0000706698 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 870342734 STATE OF INCORPORATION: UT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11178 FILM NUMBER: 95538499 BUSINESS ADDRESS: STREET 1: 7043 S 300 WEST CITY: MIDVALE STATE: UT ZIP: 84047 BUSINESS PHONE: 8015661200 10-Q 1 QUARTERLY REPORT FOR FIRST QUARTER SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report under Section 13 or 15(d) of The Securities Exchange Act of 1934 For quarter ended: March 31, 1995 Commission File No. 0-11178 UTAH MEDICAL PRODUCTS, INC. (Exact name of Registrant as specified in its charter) UTAH 87-0342734 (State or other jurisdiction IRS Employer incorporation or organization) Identification No. 7043 South 300 West Midvale Utah 84047 (Address of principal executive offices) Registrant's telephone number:(801) 566-1200 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes (X) No ( ) The number of shares outstanding of the registrant's common stock as of May 12, 1995: 9,785,135 UTAH MEDICAL PRODUCTS, INC. INDEX TO FORM 10-Q PAGE PART I - FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets as of March 31, 1995 and December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . 1 Statements of Operations for the three months ended March 31, 1995 and March 31, 1994 . . . . . . . . 3 Statements of Cash Flows for the three months ended March 31, 1995 and March 31, 1994 . . . . . . . . 5 Notes to Financial Statements . . . . . . . . . . . . . . . . . 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . 7 PART II - OTHER INFORMATION Item 6. Exhibits and reports on Form 8-K . . . . . . . . . . . 12 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 PART I - FINANCIAL INFORMATION Item 1. Financial Statements UTAH MEDICAL PRODUCTS, INC. BALANCE SHEETS AS OF MARCH 31, 1995 AND DECEMBER 31, 1994 (unaudited)
ASSETS MARCH 31, DECEMBER 31, 1995 1994 - ------ -------------- ------------- CURRENT ASSETS: Cash $ 4,187,291 $ 1,579,121 Investments 5,148,636 5,572,048 Accounts receivable - net 5,402,509 6,389,357 Accrued interest and other 245,811 213,030 Inventories 3,906,877 4,023,939 Prepaid expenses 313,779 113,173 Deferred income taxes 390,788 390,941 __________ ___________ Total current assets 19,595,691 18,281,609 PROPERTY AND EQUIPMENT - NET 8,208,263 8,137,248 INTANGIBLE ASSETS - NET 867,913 946,326 ___________ ___________ TOTAL $28,671,867 $27,365,183 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ CURRENT LIABILITIES: Accounts payable $ 1,532,711 $ 1,821,302 Accrued expenses: Payroll and payroll taxes 878,180 1,000,946 Income taxes payable 751,045 7,074 Other 252,463 495,517 Deferred revenue 85,600 85,600 _____________ ____________ Total current liabilities 3,499,999 3,410,439 DEFERRED REVENUE 236,955 258,204 DEFERRED INCOME TAXES 365,412 256,220 _____________ ____________ Total liabilities 4,102,366 3,924,863 _____________ ____________ STOCKHOLDERS' EQUITY: Preferred stock - $.01 par value; authorized - 5,000,000 shares; no shares issued or outstanding Common stock - $.01 par value; authorized - 50,000,000 shares; issued - March 31, 1995, 9,919,303 shares - December 31, 1994, 9,993,559 shares 99,193 99,935 Unrealized loss on investments available-for-sale, net of tax (36,199) (101,815) Retained earnings 24,506,507 23,442,200 _____________ _____________ Total stockholders' equity 24,569,501 23,440,320 _____________ _____________ TOTAL $ 28,671,867 $ 27,365,183 ============= ============= (see notes to financial statements)
UTAH MEDICAL PRODUCTS, INC. STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND MARCH 31, 1994 (unaudited)
THREE MONTHS ENDED MARCH 31, 1995 1994 ____________ ___________ NET SALES $ 9,754,041 $ 9,357,530 COST OF SALES 5,382,678 5,184,487 ____________ ___________ GROSS MARGIN 4,371,363 4,173,043 ____________ ___________ EXPENSES: Selling, general and administrative 1,422,878 1,450,593 Research & development 417,337 331,875 ____________ ___________ Total 1,840,215 1,782,468 ____________ ___________ INCOME FROM OPERATIONS 2,531,148 2,390,575 OTHER INCOME 269,646 172,752 ____________ ___________ INCOME BEFORE INCOME TAX EXPENSE 2,800,794 2,563,327 INCOME TAX EXPENSE 980,277 909,981 ____________ ___________ NET INCOME $ 1,820,517 $ 1,653,346 =========== =========== EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE $ 0.18 $ 0.15 =========== =========== EARNINGS PER COMMON SHARE ASSUMING FULL DILUTION $ 0.18 $ 0.15 =========== =========== WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES 10,069,086 10,973,188 =========== =========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES ASSUMING FULL DILUTION 10,069,086 10,973,188 =========== =========== (see notes to financial statements)
UTAH MEDICAL PRODUCTS, INC. STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND MARCH 31, 1994 (unaudited)
MARCH 31, 1995 1994 ____________ ____________ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,820,517 $ 1,653,346 ____________ ____________ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 408,678 289,480 Provision for losses on accounts receivable 5,621 2,000 Deferred income taxes 74,013 50,622 Loss on disposal of assets 5,171 - Tax benefit attributable to exercise and disposition of of incentive stock options and stock purchase rights 18,978 1,333 Changes in operating assets and liabilities: Accounts receivable - trade 981,226 106,136 Accrued interest and other receivables (32,780) (57,878) Inventories 117,062 (378,297) Prepaid expenses (200,606) 22,577 Accounts payable (288,591) 121,471 Accrued expenses 378,152 447,861 Deferred revenue (21,249) (21,400) ____________ ___________ Total adjustments 1,445,675 583,905 ____________ ___________ Net cash provided by operating activities 3,266,192 2,237,251 ____________ ___________ CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures for: OB Tech acquisition - (500,000) Property and equipment (384,335) (230,599) Intangible assets (7,754) (22,213) Purchases of investments (500,000) (1,160,943) Proceeds from sale of Investments 1,010,000 1,573,448 ___________ ___________ Net cash provided by (used in) investing activities 117,911 (340,307) ___________ ___________ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock 105,148 42,362 Common stock purchased and retired (881,081) (1,656,276) ___________ ___________ Net cash used in financing activities (775,933) (1,613,914) ___________ ___________ NET INCREASE IN CASH 2,608,170 283,030 CASH AT BEGINNING OF PERIOD 1,579,121 830,724 ___________ ___________ CASH AT END OF PERIOD $ 4,187,291 $ 1,113,754 =========== =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Income taxes $ 143,436 $ 82,563 (see notes to financial statements)
UTAH MEDICAL PRODUCTS, INC. NOTES TO FINANCIAL STATEMENTS (unaudited) (1) The unaudited financial statements presented herein have been prepared in accordance with the instructions to form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles. These statements should be read in conjunction with the financial statements and notes thereto included in the Utah Medical Products, Inc. ("UTMD", or "the Company") annual report on form 10 K for the year ended December 31, 1994. The accompanying financial statements have not been examined by independent accountants in accordance with generally accepted auditing standards, but in the opinion of management such financial statements include all adjustments (consisting only of normal recurring adjustments) necessary to summarize fairly the Company's financial position and results of operations. The results of operations for the three months ended March 31, 1995 may not be indicative of the results that may be expected for the year ending December 31, 1995. (2) Inventories at March 31, 1995 and December 31, 1994 consisted of the following:
March 31, December 31, 1995 1994 --------- ------------ Finished goods $ 823,751 $ 789,924 Work in process 792,562 822,102 Raw materials 2,290,564 2,411,913 ---------- ---------- Total $3,906,877 $4,023,939
(3) The Company adopted SFAS No. 115 Accounting for Certain Investments in Debt and Equity Securities in 1994. All investments are classified as available-for-sale, and resulting adjustments are included in the accompanying financial statements. (4) In January 1995, the Company entered into two new purchase and distribution agreements with Baxter Healthcare Corporation. The new agreements supersede previous agreements with Baxter and are designed to increase the predictability of orders and to lower administrative costs for both companies. (5) Events subsequent to March 31, 1995: On May 5, 1995, the Company announced that it will build a manufacturing facility in Athlone, Ireland. The capital commitment, which will be funded from current cash, is $4 million. The new facility will be ready for production in early 1996. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Because of the relatively short span of time, results for any given three month period in comparison with a previous three month period may not be indicative of comparative results for the year as a whole. a) Overview First quarter (1Q) 1995 revenues were up 4.2% from 1Q 1994, while net income increased 10.1% over the same period. Net income growth out-paced revenue growth due to higher gross and operating margins, as well as higher non-operating income. Margin improvements demonstrate that the Company continues to be successful at reducing and controlling costs. Higher non-operating income was due more to 1Q of 1994 being unusually low than 1Q of 1995 being exceptionally strong. Earnings per share (EPS) continue to benefit from the Company's share repurchase program. EPS in 1Q 1995 grew 20.0% compared with 1Q 1994. b) Revenues UTMD divides revenues into three product-line categories: 1) critical care, which is comprised primarily of components used in invasive blood pressure monitoring, but also includes components for PTCA inflation pressure monitoring and intercranial pressure monitoring, as well as respiratory products; 2) obstetrics, which is comprised mainly of devices for monitoring intrauterine pressure during labor and delivery, although to a lesser extent electrodes for fetal heart rate monitoring as well as other labor and delivery supplies; and 3) gynecology, currently limited to an electrosurgery system used in a procedure called LETZ. In these three areas, UTMD's primary products sold in the U.S.: 1) are the accepted standard of care, 2) enjoy a number one or number two market share, and 3) have important product features protected by patents. Critical care product revenues represented 58% of total revenue in 1Q 1995, compared with 57% of 1Q 1994 revenue, an increase of 4%. In the U.S., this is a mature business dominated by two large suppliers, Baxter and Abbott. About a third of the blood pressure monitoring market is for the disposable pressure transducer (DPT) and accessories which UTMD manufactures and two thirds is for catheters. UTMD does not presently make or sell the catheters. Overseas, the market is much more fragmented with DPT's still growing in acceptance. UTMD's Baxter OEM revenue (all of which are included in the critical care category) represented about 66% of critical care revenue (about 38% of total revenues), and grew by 7% in 1Q 1995 over 1Q 1994. Sales of critical care products in 1Q 1995 were $5,662,000, compared with $5,459,000 in 1Q 1994. Sales to Baxter in 1Q 1995 were $3,743,000 compared to $3,490,000 in 1Q 1994. The obstetrics revenue category grew 7% in 1Q 1995 over the same quarter of 1994 and represented 36% of total sales. Market acceptance for electronic intrauterine pressure (IUP) monitoring continues to expand. Fetal monitoring sales have been dominated by INTRAN, UTMD's sensor tipped intrauterine pressure catheter. Sales of obstetrics products in 1Q 1995 were $3,498,000 compared to $3,269,000 in 1Q 1994. The third category, gynecology products, currently limited to electrosurgical generators and disposable loop electrodes required to perform a cervical neoplasia loop excision procedure called "LETZ", declined 6% in 1Q 1995 from 1Q 1994, and represented 6% of total revenues. Despite the decline, this product line remains a very profitable and promising area of focus for the Company. LETZ product sales in 1Q 1995 were $594,000 compared to $630,000 in 1Q 1994. UTMD's success and estimated number one market share position with LETZ is due to our ability to provide equipment that is custom designed for that important gynecological procedure. First quarter 1995 foreign sales were $2,562,000 compared to $2,203,000 in 1Q 1994. Practically all international sales have been critical care products, for which sales the Company has relied heavily on the efforts of other medical device companies. Critical care products represented 96% of international sales in 1Q 1995 compared to 95% in 1Q 1994. UTMD believes it has substantial sales potential for its products in international markets, and therefore plans to continue to commit its resources to international business expansion. c) Gross Profit Gross margins (profit after subtracting costs of manufacturing products from revenues) in 1Q 1995, were 44.8% compared to 44.6% in 1Q 1994. The slight improvement in 1Q 1995 is primarily due to a difference in product mix relative to 1Q 1994. Because of anticipated faster sales growth in the obstetrics and gynecology product lines, which have higher margins relative to UTMD's other products, and because of more sales productivity from its directly employed sales representatives, the Company foresees continued gross margin improvements. d) Income from Operations Operating profit, or income from operations, is the profit achieved after subtracting operating expenses from gross profit. As a percentage of sales, operating expenses declined to 18.8% in 1Q 1995 compared to 19.0% in 1Q 1994. Operating expenses for 1Q, in dollars, were up 3% in 1995 from 1994. Despite the modest increase, the portion allocated to R&D was up 26% relative to 1Q 1994. Evidence that R&D efforts over the recent past have been productive is becoming apparent, as UTMD has received three FDA 510(k) concurrences in the first four months of 1995. In contrast to R&D, 1Q 1995 selling, general and administrative (SG&A) expenses were less than the amounts spent in 1994. Due to costs associated with the planned 1995 product launches of Cordguard, Liberty and Lumin (a product which will improve gynecologic surgeons' ability to reliably perform certain minimally invasive procedures), along with adding direct sales reps to replace certain distributors, operating expenses will likely increase as a percentage of sales, particularly in the second half of the year. The Company intends to manage its operating expenses to a level consistent with past years. First quarter 1995 R&D expenses were 4.2% of sales compared to 3.5 in 1994. The increase in R&D expenses was offset by a decrease in SG&A expenses to 14.6% of sales in 1Q 1995 from 15.5% of sales in 1994. First quarter 1995 income from operations was $2,531,000 compared to $2,391,000 in 1Q 1994. First quarter 1995 operating margins were 25.9% compared to 25.5% for the same quarter in 1994. e) Non-operating Income Non-operating income, or other income, for UTMD includes principally royalties from licensing UTMD's technology to other companies, interest and capital gains from investing the Company's cash, and gains from the sale of other assets. Non operating income increased nearly $100,000 in 1Q 1995 from 1Q 1994. First quarter 1994 other income was much lower than that for the other quarters of 1994. Average 1994 quarterly other income was $229,000. The increase in 1Q 1995 non-operating income from the average of $229,000 achieved per quarter in 1994 was due primarily to interest and dividends on slightly higher average cash and investment balances at higher interest rates. f) Net Income and EPS Net income, which is retained by the Company to internally finance UTMD's EPS growth, divided by average accumulated shareholders' equity during the period, is return on shareholders' equity (ROE). This ratio determines how fast the Company can afford to grow without any external financing. ROE in 1Q 1995 (annualized) was 30%, and has averaged 30% the last 7 years. It is management's objective to maintain ROE in excess of the 25% per annum EPS growth target so that UTMD can afford to grow at least at a 25% rate without diluting its shareholders' interests. External equity financing would only be considered if an exceptional business growth opportunity presented itself that would allow long term increased EPS at the same time that the number of shares are also expanded. After income taxes, 1Q 1995 net income was $1,820,517, compared to $1,653,346 in 1Q 1994. The effective income tax rate in 1Q 1995 was 35.0% compared to 35.5% in 1Q 1994. Period to period fluctuations in the tax rate result from the use of a foreign sales corporation starting in mid-1992 and differing balances in tax-exempt securities investments. Fully diluted 1Q 1995 EPS were up 20.0% to $.18 compared to $.15 in 1Q 1994. First quarter 1995 ending weighted average number of common shares assuming full dilution (the number used to calculate EPS) were 10,069,086 shares compared to 10,973,188 in 1Q 1994. Actual outstanding common shares as of March 31, 1995 were 9,919,303. g) Cash Flows Cash and investments balances were $9.3 million at the end of 1Q 1995, an increase of $2.2 million from December 31, 1994. The increase was achieved despite continuation of the share repurchase program which used $881,000 during the quarter. Although this is a substantial sum, it is about half of the $1.66 million used for share repurchase in 1Q 1994, and just 41% of the $2.13 million per quarter used, on average, during 1994. Cash provided by operating activities, including adjustments for depreciation and other non-cash operating expenses, along with changes in working capital, totaled $3,266,192 in 1Q 1995, up from $2,237,251 in 1Q 1994. Apart from net income, which contributed over half of the 1Q 1995 total, a decrease of nearly $1 million in accounts receivable was responsible for a major portion of the improvement compared to 1Q 1994. Cash of $384,335 was used for capital expenditures in property and equipment. Net purchases and sales of investments provided $510,000 to 1Q 1995 cash. Capital expenditures for property and equipment during 1Q were made, in part, in automation of key assembly operations, new product tooling and equipment, and in implementing a new computer system at the end of the quarter. First quarter 1995 financing activities used cash of $778,933, compared to $1,613,914 in the same period of 1994. Stock repurchases continued to comprise the largest use of cash from all categories. The Company repurchased its own common stock during 1Q 1995 in the amount of $881,000, down from $1,656,000 used in 1Q 1994. To the end of 1Q 1995, UTMD had spent about $17.6 million in repurchasing 2,168,000 of its common shares since November 1992. In 1Q 1995, the Company more than doubled, to $105,000, the amount received from issuing stock (on exercise of employee options), compared to 1Q 1994. The Company did not enter into any long term debt agreements. Management believes that current cash balances plus future income from operations will provide the liquidity needed to finance growth plans. In addition to the capital expenditures outlined above, UTMD plans to use cash during the remainder of 1995 for construction of a manufacturing plant in Ireland, for continued share repurchases and for selective infusions of technological, marketing or product manufacturing rights to broaden the Company's product offerings. Other On January 26, 1995, the Board of Directors approved stock option awards representing a total of 165,000 shares to 77 employees. Of this total, 68,000 were awarded to senior management. An objective of the ongoing share repurchase program is to reduce or eliminate any dilutive effect that may result from awarding employee stock options. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K a) Exhibits: Exhibit 27. Financial Data Schedule b) Reports on Form 8-K: None SIGNATURES Pursuant to the requirements of the Securities Exchanges Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. UTAH MEDICAL PRODUCTS, INC. REGISTRANT Date:May 12, 1995 By:/s/Kevin L. Cornwell Kevin L. Cornwell President and CEO Date:May 12, 1995 By:/s/Kevin L. Cornwell Kevin L. Cornwell Secretary and CFO EX-27 2 FINANCIAL DATA SCHEDULES WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 DEC 31 JAN 01 1995 MAR 31 1995 3-MOS 4,187,291 5,148,636 5,485,792 (83,283) 3,906,877 19,595,691 13,359,455 (5,151,191) 28,671,867 3,499,999 0 99,193 0 0 24,470,308 28,671,867 9,754,041 9,754,041 5,382,678 1,840,215 (161,275) 0 (108,371) 2,800,794 980,277 1,820,517 0 0 0 1,820,517 0.18 0.18
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