-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PQytGD2tIEabbKutZQBxU36Jj9I4YPFpR9DSvDMkixaIOjzyFHalL2ltYLN9Bzdm FtBhDLRI0HREWRtQqmWOlg== 0000914233-96-000019.txt : 19960405 0000914233-96-000019.hdr.sgml : 19960405 ACCESSION NUMBER: 0000914233-96-000019 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960401 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: UTAH MEDICAL PRODUCTS INC CENTRAL INDEX KEY: 0000706698 STANDARD INDUSTRIAL CLASSIFICATION: 3841 IRS NUMBER: 870342734 STATE OF INCORPORATION: UT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-11178 FILM NUMBER: 96542120 BUSINESS ADDRESS: STREET 1: 7043 S 300 WEST CITY: MIDVALE STATE: UT ZIP: 84047 BUSINESS PHONE: 8015661200 10KSB 1 ANNUAL REPORT FOR YEAR ENDED 12/31/95 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 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 of (I.R.S. Employer incorporation or organization) Identification No.) 7043 South 300 West Midvale, UT 84047 ----------------- (Address of principal executive offices) Registrant's telephone number: (801) 566-1200 ---------------- Securities registered pursuant to Section 12(b) of the Act: None ---- Securities registered pursuant to Section 12(g) of the Act: Title of Class -------------- (Common Stock, $.01 par value) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 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 - --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ---- The aggregate market value of the voting stock held by non-affiliates of the registrant as of March 15, 1996, based on NASDAQ/NMS closing price:$145,910,115. ------------ The number of shares outstanding of the registrant's common stock as of March 15, 1996: 9,727,341. --------- DOCUMENTS INCORPORATED BY REFERENCE List herein the documents incorporated by reference: The Company's definitive proxy statement for the Annual Meeting of Shareholders is incorporated by reference into Part III, Items 10, 11, 12, and 13 of this Form 10-K. PART I. ITEM I - BUSINESS. Utah Medical Products, Inc. ("UTMD" or "the Company") is in the business of producing cost-effective devices for the health care industry which are predominantly proprietary, disposable and for hospital use. Success depends on 1) recognizing needs of clinicians and patients, 2) rapidly designing economic solutions which gain regulatory approval, 3) reliably producing products that meet those clinical needs, and then 4) selling through: a) UTMD's own direct channels into markets where the Company enjoys an established reputation and has a critical mass of sales and support resources, or b) establishing relationships with other medical companies that have the proper resources to effectively introduce and support the Company's products. UTMD's success in rapidly producing solutions comes from its proven ability to integrate a number of engineering and technical disciplines in electronics, software, mechanical packaging, instrumentation, optics and materials. The resulting proprietary products represent incremental, but significant, improvements over existing clinical techniques. UTMD's experience is that, in the case of labor-saving devices, the improvement in cost-effectiveness of clinical procedures also leads to an improvement in overall health care. Historically, UTMD has marketed a broad range of medical devices used in the critical care areas and the labor and delivery department in the hospital, as well as products sold to outpatient clinics and physician's offices. The skill of applying solutions to recognized needs results from an excellent core of practicing clinicians who feed ideas to the Company and key employees who are both clinical applications savvy and development engineering adept. The Company's critical care products include devices used for invasive monitoring of patient blood pressure; the administration of intravenous fluids, drugs and anesthetics; and oxygen therapy. Obstetrics products include catheters and electrodes used to monitor intrauterine pressure and fetal heart rate during labor, and a device which clamps, cuts, and collects blood from the umbilical cord. Gynecology products include a minimally-invasive surgery system for removing precancerous tissue from the cervix and lower genital tract, a system for conservatively treating urinary incontinence, and a tool used in laparoscopic procedures to manipulate the uterus. Critical care products are sold in the U.S. domestic market primarily through other medical device companies, and to a lesser degree by UTMD's own direct sales representatives. Ob/Gyn products are sold in the U.S. primarily by UTMD's own direct sales representatives, and through a network of specialty distributors. Internationally, products are sold through other medical device companies and through separate country-by-country medical products distributors. Negative factors that may adversely impact future performance include managed care reforms that may limit clinicians' discretion in spending on certain products or procedures, innovative new products introduced by other companies that displace UTMD's products, regulatory approval delays, changes in the Company's relationships with its distribution partners, and loss of key personnel. The Company was formed as a Utah corporation in 1978 and went public in 1982. The Company's offices are located at 7043 South 300 West, Midvale, Utah 84047. The corporate telephone number is (801) 566-1200. PRODUCTS - - -------- Obstetrics Market: - - ----------------- Fetal Monitoring. About 60% of births are considered "high risk" due to lack of prenatal care, among other factors. In many of these births, labor may become complicated and does not progress normally. The obstetrician must assess progression of labor to be able to intervene with drug therapy, infusion of a solution to augment amniotic fluid, or ultimately if necessary, Caesarean section; or be prepared for complications following childbirth. In addition to products already offered, the Company intends to continue to develop and introduce tools that enhance fetal monitoring techniques, a core area of focus. To assist the physician in assessing fetal well being, changes in fetal heart rate (FHR) in conjunction with trends in intrauterine pressure exerted on the fetus are often electronically monitored. UTMD's intrauterine pressure catheter product line provides for clinician choices from a traditional fluid-filled system to INTRAN(R) PLUS, the state-of-the-art sensor-tipped system. In addition, adjunct standard FHR electrodes and chart paper are offered by UTMD to complete a package of fetal monitoring supplies. - IUP-075 and other custom catheter kits utilize a saline-filled catheter, connected to a separate reusable or disposable transducer, that is placed within the uterine cavity. This product package, utilizing double lumen catheters, was the traditional mode of intrauterine monitoring prior to the introduction of INTRAN. An intrauterine pressure waveform is generated through transmission of a signal to the external pressure transducer. - Introduced in 1987, INTRAN I was the first intrauterine pressure catheter that placed the pressure sensor at the source within the uterine cavity. This design eliminated the complicated setup of fluid-filled systems and provided more accurate pressure waveforms. INTRAN I was discontinued in 1995 in favor of the more preferred INTRAN PLUS, which is also covered under UTMD's original INTRAN patent. - INTRAN PLUS was introduced in 1991 and has replaced INTRAN I as the state- of-the-art sensor-tipped IUP catheter. The INTRAN PLUS catheter combines the transducer tip concept of INTRAN I with a refined tip design. A re-zero feature allows the clinician to verify the accuracy of the generated pressure waveform. The dedicated amnio lumen provides immediate access to the amniotic fluid environment which may be essential in the diagnosis and intervention of certain fetal conditions. Other Obstetrics Tools. CORDGUARD(R) is a unique product released for marketing in 1995 which unifies the multiple steps of clamping the neonate's cord close to the umbilicus, severing the cord without splattering blood, drawing a clean blood sample for diagnostic or therapeutic purposes, and assisting in the removal of the placenta. Neonatal blood is generally hard to safely and cleanly obtain, and is gaining in perceived value to clinicians. UTMD has and will continue to commit substantial resources to the area of umbilical cord management. Gynecology Market: - - ----------------- LETZ(TM) System: FINESSE(R) Generator, Disposable Loop Electrodes and Other Supplies. The LETZ System is a complete line of products and supplies used to treat cervical intraepithelial neoplasia (CIN) and other lower genital tract lesions related to human papilloma virus (HPV) infections. This procedure of using electrosurgical excision with hemostasis has rapidly replaced cold knife scalpel, laser and cryotherapy procedures because it is economical, safe, effective, quick and easy to perform, has fewer potential side effects, and requires little physician training. In contrast to laser and cryotherapy, LETZ provides an important tissue specimen for a pathological assessment. In addition, the procedure may be performed by using only local anesthesia in the physician's office, eliminating the time and expense of hospital or surgical center admittance. In 1991 the Company introduced an entire line of products necessary to perform this electrosurgical procedure including the Prendiville disposable loop, the FINESSE electrosurgical generator and other miscellaneous components. The FINESSE electrosurgical generator is the only generator on the market that contains an integral smoke evacuator. The smoke evacuator is required to filter smoke and vapors which contain potentially hazardous particulate material produced during electrosurgery. The disposable loop, the electrode used to excise the tissue specimen, is a pencil-like tube with a thin tungsten wire loop attached. The loop is available in varying sizes and includes a Safe-T-Gauge(R) that can be positioned so the physician can more accurately colposcopically monitor the amount of tissue being excised. In 1995, UTMD received FDA clearance to market its electrosurgical system in general surgery applications. In addition, UTMD received FDA clearance to market FILTRESSE(TM), a newly developed stand-alone surgical smoke filtration system which combines high filtration efficiency, low cost and convenient use. The Company will continue to develop and introduce specialty tools for specific electrosurgical procedures. LIBERTY(TM) System. LIBERTY, a device for the conservative treatment and effective control of urinary incontinence in women was also released for marketing by the FDA in 1995. LIBERTY consists of a battery operated stimulator unit and an intravaginal electrode probe. This physiotherapy technique, which can be done in the privacy of home, involves passive strengthening of the periurethral muscles. Pulsed, low voltage, high frequency current is applied primarily to the pudendal nerve causing the pelvic area muscles to contract, leading to better muscle tone. Because electrical stimulation has no known side effects, Liberty provides women suffering from mild to moderate incontinence an effective, low risk alternative to more traumatic treatments such as surgery and drug therapy. Tools for Gynecologic Laparoscopy. LUMIN(TM) is a proprietary tool developed by UTMD for reliably and safely manipulating the uterus in gynecological laparoscopic procedures. The product was released for marketing by the FDA in 1995. LUMIN combines the strength, range of motion and versatility of the higher end reusable instruments with the lower cost and cleanliness of the cheaper disposable instruments presently on the market, while at the same time reducing the number of tools needed to move and secure the uterus. Neonatal Critical Care Market: - - ----------------------------- DISPOSA-HOOD. The DISPOSA-HOOD is an infant oxygen hood that is used in infant intensive care to administer oxygen to neonates. The Disposa-Hood, which is placed over the infant's head, incorporates a round diffusor connection specifically designed to disperse the incoming gases along the inner surfaces of the hood, rather than allowing them to blow directly on the infant's head. The design allows more precise FIO2 (fractional inspired oxygen) control, minimizes convective heat loss from the head and provides optimum flows for elimination of CO2 (carbon dioxide) by ventilation. The DISPOSA-HOOD is also designed to prevent cross-contamination, to allow axial rotation of the infant's head without contact with the DISPOSA-HOOD and to aid in the maintenance of the neutral thermal and humidity conditions that are necessary in the care of premature infants. Critical Care Market: - - -------------------- Blood Pressure Monitoring Products. DELTRAN(R) Disposable Transducer. A transducer converts one form of energy to another. In pressure monitoring, it is used to convert physiological (mechanical) pressure into an electrical signal that can be displayed on electronic monitoring equipment. In medical applications, transducers had previously been reusable, fragile, subject to declining accuracy with repeated use and had a cost of about $1,000. The development of integrated circuit technology and guided laser technology led to the introduction of the first disposable transducer in the medical market approximately eleven years ago. The Company has developed and is now distributing its disposable transducer as a stand-alone product, and as a component in pressure monitoring kits, through its direct representatives and independent distributors, as well as to other medical companies, in the U.S. and internationally. Although several other medical companies manufacture disposable pressure transducers ("DPTs"), the Company believes that the DELTRAN DPT which it has developed is the state-of-the-art model in terms of reliability and ease of use. Recently, UTMD has qualified an automated assembly line which will substantially lower DELTRAN manufacturing costs. Other Products and Components. The Company sells products specifically designed for other medical companies which incorporate UTMD's proprietary technologies. In addition, UTMD sells plastic molded parts to a number of medical companies, including its competitors. The Company believes that this practice has not affected its competitive position and extends the benefit that shareholders realize from UTMD's manufacturing capabilities and technologies. BAXTER HEALTHCARE CORPORATION AGREEMENTS. - - ---------------------------------------- In December 1987, the Company first entered into a purchase and distribution agreement with Baxter Healthcare Corporation for UTMD's line of invasive disposable blood pressure transducers used in hospitals. In January, 1995 new Summit and Deltran Purchase and Distribution Agreements were executed. These new agreements superseded the previous agreements. The new agreements assure Baxter a continued reliable supply of DELTRAN II (name branded for Baxter as UNIFLOW) through the year 2000, provided they purchase certain minimum quantities, and SUMMIT, an exclusive design for Baxter, through June 1998, subject to certain maximum amounts and other terms of purchase. The agreements are exclusive only with respect to distribution of DELTRAN II in Japan, and with respect to the SUMMIT product worldwide. DELTRAN IV, UTMD's automated version of DELTRAN/UNIFLOW, is not covered under the existing agreements. Sales of other critical care components to Baxter, including stopcocks, flush devices, cables, and miscellaneous molded parts, which are not covered by a formal purchase agreement, accounted for approximately $1.1 million of the total $15 million in 1995 sales to Baxter. Total sales to Baxter represented about 36% of UTMD's sales in 1995. Despite the significant revenues, gross profits generated by sales of DPTs to Baxter represented less than 15% of UTMD's gross profits in 1995. In mid-1994, Baxter introduced its own internally assembled DPT product to the marketplace in direct competition with DELTRAN/UNIFLOW. (Baxter and UTMD have agreed to phase out the SUMMIT product independent of availability of any other products.) Although UTMD's 1995 DELTRAN/UNIFLOW sales to Baxter appeared unaffected by the availability of the new Baxter DPT product offering, UTMD believes it remains Baxter's longer term objective to convert as many of its customers as possible to its own assembled product. Recently in March 1996, Baxter indicated in its latest forecasts, required on a quarterly basis per agreement, that its DELTRAN/UNIFLOW demand for the remainder of 1996 would be much lower than previously forecasted and as actually shipped in 1995. Although difficult to predict exactly what will occur relative to Baxter's timing of conversion of products, or success of conversion efforts relative to end user preferences, Baxter's recent abrupt action, combined with its apparent lack of interest in DELTRAN IV, increases UTMD's uncertainty about the reliability of Baxter's forecasts. Given the broad clinical acceptance and use of DELTRAN/UNIFLOW, UTMD intends to investigate other distribution means, especially in light of the lower cost of DELTRAN IV. Even though UTMD believes its DELTRAN products have excellent continued market potential, given UTMD's concentration of Baxter revenues, Baxter's recent unilateral and seemingly illogical actions create a significant negative short term factor for UTMD's business. MARKETING. - - --------- UTMD competes in the marketplace on the basis of its proprietary value-added technologies and cost effective solutions. Its future success will depend upon its ability to innovate and introduce new products into specialized market niches consistent with cost control pressures under a changing health care environment. Speed is a critical success factor in that future performance depends on UTMD's ability to innovate, develop, test and commercialize new products faster than other medical device companies who possess significantly more resources than UTMD. With new products that are unique, the Company must be prepared for extensive user training and support. The Company currently competes within four distinct product/market arenas, each with differing competitive circumstances from the other: 1) Critical Care/Blood Pressure Monitoring. --------------------------------------- This is a large, commodity-oriented intensive care/anesthesia monitoring market dominated by two major U.S. suppliers who bundle disposable transducers and accessories with venous and arterial catheters. The products used in monitoring human vital signs have features that are practically undifferentiated among the major competitors. Consequently, hospital purchasing decisions tend to be based on price and delivery. The risk of lack of a significant distribution partner for this product line, such as Baxter, represents a negative factor that may adversely impact the future. UTMD's sales of its blood pressure monitoring products through other than Baxter distribution means, although significantly lower in revenues, have historically generated approximately the same magnitude of gross profit dollars. UTMD's end-user sales through its distribution partners including Baxter, independent U.S. and international distributors and limited U.S. direct sales team represent about one-third of the total annual worldwide end-user market of approximately $115 million. 2) Obstetrics/Fetal Monitoring. --------------------------- UTMD markets its intrauterine pressure catheters ("IUPC") and its fetal heart rate electrodes to hospital labor and delivery departments. Almost exclusively limited to the United States where electronic monitoring is accepted practice, the potential annual market for existing fetal monitoring supplies exceeds $35 million. The Company's IUPC sales control over 60% of total IUPC unit sales with a mixture of traditional "fluid-filled" catheters together with sensor-tipped catheters, where three other suppliers compete. The differentiating features of UTMD's INTRAN PLUS IUPC, educational programs, and breadth of line (which includes both types of IUPCs), have helped UTMD secure more than a 90% share of the sensor tipped segment, which represents about 60% of total IUPC units used. Because UTMD's IUPC customers are part of U.S. hospitals which are experiencing consolidation and group purchasing pressures, a negative factor which may adversely affect future IUPC sales is the possibility of a new IUPC supplier that could bundle a viable but inferior and cheaper IUPC with broad product lines as part of a group supplies contract. The hospital labor and delivery department will continue to offer an excellent opportunity where UTMD's established dominant position in fetal monitoring allows receptiveness for evaluating new obstetrics product concepts. An excellent example is CORDGUARD, the device that clamps, cuts, and collects blood from the umbilical cord. CORDGUARD is being marketed and sold through UTMD's existing sales resources to labor and delivery hospital customers, leveraging current resources where INTRAN has a well-accepted market position. Blood samples are routinely collected in about 50% of births in the U.S. now, and are expected to increase with the greater emphasis being placed on the collection of neonatal blood for both diagnostic and therapeutic purposes. There are no known competitors with products that possess CORDGUARD's proprietary features. Hospital budgetary constraints represent the most significant obstacle to CORDGUARD's initial acceptance. As with any new product that is unique, the ultimate acceptance of the product in the marketplace is subject to many customer preference variables that could result in actual sales performance materially different from current Company projections. 3) Gynecological Electrosurgery. ---------------------------- Since 1991, the office and outpatient market for the electrosurgical cervical loop excision treatment has attracted over ten competitors offering either electrosurgery generators or disposable loop electrodes, or both. The current worldwide annual market exceeds $20 million. UTMD has continued to utilize its direct sales organization to promote educational and clinician support programs. Consequentially, UTMD improved its market share as gynecologists became informed about the advantages of the better equipment and disposables offered by UTMD. The Company believes that it has established superior cutting and hemostasis capabilities in its FINESSE generators, and an improved safety and "quality tissue specimen" provided by its patented disposable loop line. The Company believes that similar surgical procedures will gain wide acceptance in a number of other specialized areas, including dermatology and family practice, and plans to develop and introduce products for these areas based on its electrosurgery expertise. The ultimate adoption of new specialized products is uncertain because they require a high level of user education and require purchasers to work against the trend of standardized general-purpose tool acquisitions. In addition, sales may be limited by the Company's lack of access to important distribution channels. 4) Conservative Incontinence Therapy. --------------------------------- Urinary incontinence is an under diagnosed and under reported but prevalent condition in women, especially physically active ones over the age of forty. In the United States, at least ten million women suffer from time to time from some form of urinary incontinence: stress, urge or mixed. Clinical studies have shown that chances are good that the problem can be improved or cured by strengthening and toning the pelvic floor muscles, especially in women with mild to moderate stress incontinence. The use of electrical stimulation to help strengthen muscles is an approach that is scientifically well-understood and is an area of engineering expertise at UTMD. Planned adjunct therapy devices and diagnostic tools will become important to developing a system of tools for cost-effective urinary incontinence treatment. The aging of the population and increased interest in more conservative and non-surgical therapeutic approaches to solving health problems are two important U.S. trends which will help drive patient adoption of UTMD's new product, LIBERTY. UTMD believes that its recognition with gynecologists as an innovator of high quality and cost-effective devices like its "LETZ(TM)" product line will aid in the market acceptance of this approach. Market acceptance may be limited by a number of negative factors including the fact that the electrostimulation therapy approach is not a "quick fix" and requires patient discipline to continue a treatment regimen over an extended time span, as well as the fact that the approach may require a greater time commitment with less revenue dollars than alternative surgical approaches for gynecologists prescribing it. DISTRIBUTION. - - ------------ Another important success factor in a changing health care industry is "access" to customers. In particular, the U.S. hospital supplier environment has been consolidating as a result of group purchasing decisions and product bundling by large suppliers with broad product lines. The number of channels and length of time required in evaluating new products for use in hospitals has grown dramatically in recent years. A potential risk to future performance is that as UTMD introduces its new products, it may find itself limited to its current distribution channels or unable to establish viable relationships with other medical companies who have adequate access to users. Historically, UTMD has sold its products, especially those relating to critical care, through independent distributors and other medical companies in both domestic and international markets. However, since 1991 the Company has developed a more focused direct sales organization in the United States with specialized distributors and its own directly employed sales force. The network of specialty distributors is employed to concentrate on select market applications for UTMD products in geographic territories where they can provide proper customer training and support. In March 1996, the U.S. direct sales force consisted of 20 territory representatives and managers. Especially through the use of closely-controlled clinical education programs, the direct sales force positions UTMD to gain market leadership with its value-added products within certain niche market applications in obstetrics and gynecological procedures which are trending toward outpatient clinics and physician offices. The Company also sells products into commodity markets (see Baxter Agreements discussion on pages 4-5), or for applications which do not generate enough business to justify a direct selling effort, to other medical companies. Additionally, the Company sells component parts to medical companies for use in their product lines. This effort is simply an optimal utilization of manufacturing resources that are needed for UTMD's main businesses and does not affect the Company's marketing programs. The Company sells its products internationally through distributors or through OEM (other medical manufacturers) relationships. RESEARCH AND NEW PRODUCT DEVELOPMENT. - - ------------------------------------ New product development is a key to UTMD's growth plans. UTMD's current new product development projects are in three areas of focus: 1) obstetrics/ fetal monitoring, 2) female incontinence, and 3) specialized electrosurgical procedures. In terms of R&D output, UTMD has filed eleven new patent applications in the last three years. In the medical device industry, FDA premarketing approval submissions are one indicator of new product development activities for a given company. In that regard, in the last two years, thirteen FDA premarketing approval submissions have been completed compared to one submission in the three prior years. Because of UTMD's reputation as a successful innovator, its financial strength, and its established clinician user base, it enjoys a substantial flow of new product ideas. Senior management comprises a steering committee which continuously screens ideas and investigates new product opportunities. Internal development, joint development, product acquisitions, and licensing arrangements are all included as viable options in the investigation of opportunities. Only a small percentage of ideas survive steering committee feasibility screening. For internal development purposes, upon steering committee approval, projects are assigned to a project manager who assembles an interdisciplinary, cross- functional development team. The team's objective is to have a clinically proven, manufacturable, and FDA released product ready for marketing by a specific date. Approximately twelve projects, on the average, depending on the level of resources required, are underway at UTMD at any given time. More than 50% of assigned projects do not succeed in attaining a product which meets all of the Company's criteria, which includes in particular: a product that is highly reliable, easy to use, cost-effective, safe, useful and differentiated from the competition. Once a product is developed, tooled, fully tested and cleared for marketing by the FDA, there remains a reasonable probability it cannot be successfully marketed for any number of reasons, not the least of which is being beaten to the market by a competitor with a better solution or not having access to users because of limitations in marketing and distribution resources. During 1995, the Company spent $1,789,167 on new product development, which was 4.3% of sales. Included in these expenses were amounts paid to outside entities for activities required for the conduct of clinical evaluations. During 1994 and 1993, new product development expenses were $1,528,476 (3.9% of sales) and $1,229,155 (3.3% of sales), respectively. Expenditures for R&D projects are expected to continue at similar rates, limited more by the Company's ability to process new ideas, as well as organize and integrate the speciality skills necessary to develop innovative products, than by the availability of funds or new product ideas. EMPLOYEES. - - --------- At December 31, 1995, the Company had 379 employees. The Company's continued success will depend to a large extent upon its ability to retain its skilled employees. No assurances can be given that the Company will be able to retain or attract such employees in the future, although management is committed to providing an attractive environment in which creative and high achieving people want to work. To the best of the Company's knowledge, none of the Company's officers or directors is bound by restrictive covenants from prior employers. All employees sign a standard form confidentiality agreement as a condition of employment. None of the Company's employees is represented by labor unions or other collective bargaining groups. All employees participate in performance-based bonus programs. PATENTS AND TECHNOLOGY LICENSES. - - ------------------------------- The Company owns twenty-nine unexpired patents and is the licensee of certain other technology. Sixteen of the Company's patents apply in Critical Care markets, and thirteen in OB/GYN/Neonatal Care markets. In addition, the Company has applied for other patents. There can be no assurance, however, that patents will be issued with respect to the pending applications or that the issued patents can be successfully defended. The ability of the Company to differentiate itself is enhanced by the protection afforded by its patents, but the Company does not feel that its business success is significantly dependent on any one or more of its patents. In any case, UTMD believes that patents are of less significance in its industry than such factors as innovative skills, technological experience, excellent marketing programs and the management ability of its personnel. The Company owns certain proprietary information and obtains a Confidentiality Agreement from its technical and sales employees, key management and consultants. As a matter of policy, UTMD has acquired and will continue to acquire the use of technology from third parties that can be synergistically combined with UTMD proprietary product ideas. During 1995, royalty expenses were $108,731. Also as a matter of policy, UTMD licenses its proprietary technology to others in circumstances where that licensing does not directly compete with UTMD's own marketing direction. During 1995, the Company received $652,894 in royalty income, compared to $650,992 in 1994, and $628,515 in 1993. This income remains a material portion of UTMD's earnings and therefore UTMD's future performance also depends on the performance of other companies who license its technology. The Company has historically vigorously and successfully defended its proprietary intangible assets in an industry where patent infringement lawsuits are frequent. No patent infringement lawsuits are currently pending. GOVERNMENT REGULATION. - - --------------------- The Company's products are subject to regulation by the U.S. Food & Drug Administration ("FDA"), as well as other regulatory bodies globally. The FDA has authority to regulate the marketing, manufacturing, labeling, packaging and distribution of medical products. In addition, requirements exist under other federal laws and under state, local and foreign statutes that may apply to the manufacturing and marketing of the Company's products. The Medical Device Amendments of 1976 (the "Amendments") significantly extended the jurisdiction of the FDA to regulate medical devices. Until the adoption of the Amendments, medical devices were subject only to general labeling and purity requirements. The Amendments established three classifications of medical devices, Class I, Class II, and Class III. All manufacturers of medical devices must register with the FDA and, with their initial registration, list all medical devices produced by them. This listing must be updated annually. In addition, prior to commercial distribution of devices for human use, the manufacturer must file a notice with the FDA, setting forth certain information about the device, including the classification into which the manufacturer believes it falls. Devices which are classified in Class I are subject only to the general controls concerning adulteration, misbranding, good manufacturing practices, record keeping and reporting requirements. Devices classified in Class II must, in addition, comply with performance standards promulgated by the FDA. The Company believes all of its current products are Class I or Class II products and that the Company is in full compliance with all applicable performance standards as well as good manufacturing practices, record keeping and reporting. In 1994, UTMD received certification of its quality system under the ISO 9001/EN 46001 standards ("ISO" stands for "International Organization of Standardization"). EN 46001 is the European Community's effort to harmonize different national regulatory requirements for the development, sale, and manufacture of medical products. Because the ISO standards are in continuous modification, UTMD remains on a perpetual periodic audit schedule by its independent notified body in order to stay abreast of international regulatory standards. In 1995, UTMD received formal product certification allowing the use of the CE Mark (demonstrates proof of compliance with the European Community's product standards) for its blood pressure monitoring kits, electrosurgical generators and disposable loop electrodes, representing virtually all of its current product sales overseas. UTMD intends to continue to expand its ability to use the CE Mark in all of its product lines. SOURCES AND AVAILABILITY OF RAW MATERIALS. - - ----------------------------------------- Most of the component parts which the Company purchases from various vendors are readily available from a number of sources. Alternative sourcing of various components is continually underway. Vendors are qualified by Corporate Quality Assurance. The Company has a vendor quality monitoring program that routinely checks all incoming material. UTMD recognizes outstanding performance in vendor quality and service through annual awards. EXPORTS. - - ------- Revenues from foreign customers in 1995 were about $10,343,000 (25% of total sales), as compared to $10,757,000 (27% of total sales) in 1994, and $8,112,000 (22% of total sales) in 1993. Critical care products represented 96% of international sales in 1995, compared to 97% in 1994 and 96% in 1993. UTMD has developed distinct tactics for each of its European markets in the form of pricing, distribution and new product introduction. UTMD is keenly aware that not only are international markets different from the U.S. market, but also that each country has its own set of driving influences that affects the dynamics of the nature of care given and medical devices used. UTMD sees the international marketplace as one of the cornerstones of its growth strategy. During 1995, UTMD broke ground for a new manufacturing facility in Athlone, Ireland. The facility, which is planned to be operational in the third quarter of 1996, will offer a number of advantages: 1) from a marketing point of view, faster response to European Union customers, including a better understanding of customized needs, less costly distribution and duty- free access to over 350 million patients; 2) from a regulatory point of view, faster new product introductions; and 3) from a manufacturing point of view, reduced dependence on one manufacturing site and increased capacity at existing Utah facilities. BACKLOG. - - ------- Being a marketer of primarily disposable products, the nature of UTMD's business necessitates being very responsive to customer orders, and delivering products quickly. Thus an objective of UTMD is to minimize its shippable backlog. Backlog shippable in less than 60 days, including blanket orders from Baxter, as of January 1, 1996 was approximately $2.6 million compared to $1.8 million as of January 1, 1995. Backlog excluding all Baxter orders was approximately $0.4 million and $1.0 million on January 1, 1996 and January 1, 1995, respectively. SEASONAL ASPECTS. - - ---------------- The Company's business is generally not affected by seasonal factors. PRODUCT LIABILITY RISK MANAGEMENT. - - --------------------------------- No product liability lawsuits have been filed against the Company for any of its products in four years, despite substantially higher usage rates over that time. The risk of product liability lawsuits is a negative factor in UTMD's business because UTMD's products are frequently used in inherently life threatening procedures to help physicians manage higher risk patients. Although UTMD's products are proven to be extremely safe over millions of uses, positive outcomes cannot always occur in the procedures where UTMD's products are used. In litigious cultures (like that in the U.S.) frequently driven by attorneys looking for windfalls, patients may look for scapegoats. In any lawsuit against a company where an individual plaintiff has a permanent physical injury, a small probability of a large award always exists whether or not a causal relationship exists. UTMD reserves funds against its current performance on an ongoing basis to provide for its future defense should any lawsuits be filed. No product liability lawsuits are currently pending. SIGNIFICANT CUSTOMER. - - -------------------- Baxter Healthcare is the Company's most significant customer, representing 36% and 39% of total revenues in 1995 and 1994, respectively. Revenues of $14,996,000 in 1995 and $15,299,000 in 1994 were made up primarily of disposable pressure transducers for blood pressure monitoring, and accessories. Gross margins in this segment are significantly less than other segments of UTMD's business. UTMD expects that Baxter's share of its business will continue to decline due to lower sales to Baxter and higher growth rates in other UTMD segments. ITEM 2 - PROPERTIES. Office and Manufacturing Facilities. The Company's current operations are located in one 100,000 square foot facility in Midvale, Utah, a suburb of Salt Lake City. UTMD owns its property and facilities, with the exception of a long-term lease on one section of its Midvale parking lot. In addition, the Company owns a building in Lehi, Utah which previously housed its molding operations and is currently being leased to an unrelated party. A new 70,000 square foot facility is under construction in Athlone, Ireland which is intended to eventually support marketing, manufacturing and product development for all product lines sold in European markets. The facility will operate as a wholly-owned subsidiary under the name Utah Medical Products Ltd. UTMD is a vertically-integrated manufacturing company. Capabilities include a machine shop for mold-making and building assembly tools and fixtures; plastics- forming including thermoplastic forming, injection molding and extrusion; sensor production; assembly of mechanical, electrical and electronic components; testing; and advanced packaging in clean room conditions. Facilities also include a well-equipped R&D lab and administrative offices. ITEM 3 - LEGAL PROCEEDINGS. The Company may be a party from time to time in ordinary routine litigation incidental to its business. The outcomes of lawsuits which are currently pending will not have a materially adverse effect on UTMD's financial condition or results of operations. ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matter was submitted to a vote of security holders through the solicitation of proxies or otherwise during the fourth quarter of the fiscal year covered by this report. [Remainder of Page Intentionally Left Blank] PART II. ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. Market Information The Registrant's common stock (symbol: UTMD) is traded on the National Market System of the National Association of Securities Dealers Automated Quotation System (NASDAQ -NMS). The following table sets forth the high and low sales price information as reported by NASDAQ for the periods indicated: 1995 1994 High Low High Low ---- --- ---- --- 1st Quarter $11.00 $ 8.50 $ 8.25 $ 6.875 2nd Quarter 13.625 9.50 8.00 6.875 3rd Quarter 17.50 11.625 10.00 6.375 4th Quarter 21.375 13.375 9.75 7.875 Stockholders: The approximate number of beneficial stockholders of the Registrant's common stock as of March 10, 1996 was 10,000. Dividends. In January 1994, the board of directors suspended UTMD's cash dividends in favor of continued stock repurchases, following the payment of dividends in 1993. Dividends were not paid prior to 1993. No dividends were paid on UTMD common stock in 1994 or 1995. [Remainder of Page Intentionally Left Blank] ITEM 6 - SELECTED FINANCIAL DATA. Year Ended December 31 ---------------------- 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- Net Sales $42,038,082 $39,644,684 $36,999,059 $36,129,459 $29,777,395 Net Income 8,353,738 7,109,360 7,012,285 6,869,720 5,448,046 Earnings Per Common Share Assuming Full Dilution .82 .68 .60 .57 .46 Total Assets 33,330,379 27,365,183 28,344,113 27,969,840 21,379,147 Long-term Debt None None None None None Cash Dividends Per Common Share None None $.06 None None Quarterly Data for 1995 ----------------------- First Quarter Second Quarter Third Quarter Fourth Quarter ------------- -------------- ------------- -------------- Net Sales $9,754,041 $10,711,974 $10,715,736 $10,856,330 Gross Margin 4,371,363 5,005,019 5,015,850 5,096,811 Net Income 1,820,517 2,090,422 2,160,299 2,282,498 Earnings Per Common Share Assuming Full Dilution .18 .21 .21 .23 Quarterly Data for 1994 ----------------------- First Quarter Second Quarter Third Quarter Fourth Quarter ------------- -------------- ------------- -------------- Net Sales $9,357,530 $10,110,800 $10,018,705 $10,157,649 Gross Margin 4,173,043 4,511,565 4,428,671 4,552,767 Net Income 1,653,346 1,794,599 1,847,895 1,813,521 Earnings Per Common Share Assuming Full Dilution .15 .17 .18 .18 ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION. The following comments should be read in conjunction with accompanying consolidated financial statements. Productivity of Assets and Working Capital. a) Assets. UTMD maintained total asset turns (ratio of sales to total assets) in 1995 consistent with 1994, despite an increase in cash (and investments) of $6.1 million, resulting from profitable operations. Consequently, non-cash assets were more productive in generating revenues than the previous year. By reinvesting cash from profitable operations in the development or acquisition of new products and expanded manufacturing capabilities, UTMD will strive to maintain total asset productivity consistent with the 1995 turn rate. Net (after accumulated depreciation) property, plant and equipment assets (PP&E) decreased in 1995 after subtracting the $825,000 initial investment made in Ireland real estate and architectural planning assets. PP&E asset turns (excluding new Ireland assets not yet placed in service) were 5.2, an excellent ratio for a vertically-integrated manufacturing company. Total PP&E asset turns were 4.7 and will continue to decline in the near term as the investment in Ireland continues, and until the facility becomes fully operational. 1996 will only be a partial year of operation for the new Ireland facility. Inventory turns improved in 1995 due to better materials management, faster manufacturing cycle times and conservative inventory valuations. Average inventory balances in 1995 declined $466,000, and year-ending inventory balances declined $746,000 from 1994. The year-ending accounts receivable (A/R) balance grew a modest $84,000 in 1995, allowing an improvement in days in receivables to 54, based on fourth quarter 1995 shipments' volume, and meeting management's objective of maintaining A/R in the 50-55 days target range. At the end of 1995, aged A/R over 90 days from invoice date were down to less than 1% of total accounts receivable from the prior year's balance of less than 4% of total receivables. In dollar value, working capital increased about $5.3 million in 1995, primarily because of the increase in cash. Accounts receivable were up only 1.3% despite the 6% increase in sales. Inventories were down substantially. Current liabilities were up slightly, due to increased year-end accruals of commissions, bonuses and other short term obligations as a result of the higher sales activity in 1995 relative to the previous year. The cash (and investments) increase in 1995 improved UTMD's current ratio to an exceptionally strong 6.4. Through its excellent profitability, the Company will continue to internally finance its non-cash working capital growth, as well as fixed asset increases, that are needed to support new sales growth. In 1996, operations should continue to generate after-tax cash at a rate in excess of $700,000 per month. b) Liabilities. UTMD has no long term debt obligations. Current liabilities are growing in conjunction with the increase in expenses associated with higher sales. The total debt ratio (which is made up almost entirely of current liabilities) declined to less than 13%. Results of Operations. a) Revenues. 1995 revenues were up 6.0% from 1994. On a quarter-to-previous-year's quarter basis, 1995 revenues were up, respectively, 4.2%, 5.9%, 7.0% and 6.9%. 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 other types of pressure monitoring, as well as disposable respiratory products used in hospitals; 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 a new product which unifies, and improves clinician safety in, the multiple step procedure of cutting, clamping and drawing blood samples from the umbilical cord immediately following childbirth; and 3) gynecology, which is comprised of an electrosurgery system used in a procedure called LETZ(R), tools used in other minimally invasive surgical procedures including diagnostic laparoscopies, and a device for the conservative treatment of urinary incontinence. In these three areas, UTMD's primary revenue contributors generally : 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. In 1996, UTMD will look to expand sales of its new products CORDGUARD(R), LIBERTY and LUMIN which were launched in 1995, as well as introduce other products in its areas of focus including fetal monitoring, electrosurgery and incontinence therapy. Critical care revenues represented 54.3% of total 1995 sales, and declined 3.2% from 1994. In the U.S., critical care blood pressure monitoring is a mature business dominated by two large suppliers, Baxter and Abbott. About a third of the blood pressure monitoring market is for disposable pressure transducers ("DPT") and accessories, and the other two-thirds is for catheters. UTMD participates only in the DPT and accessories niche. Overseas, the market is much more fragmented with DPT's still growing in acceptance. Baxter purchased 2.7 million DPT's from UTMD in 1995. UTMD's Baxter OEM revenues (all of which are included in UTMD's critical care category) represented 66% of critical care revenues (or 36% of total revenues), and declined by 2% in 1995 over 1994. Sales of critical care products in 1995 were $22,827,753 compared to $23,559,239 in 1994 and $22,131,891 in 1993. Revenues from Baxter in 1995 were $14,996,246 compared to $15,299,369 in 1994 and $14,842,300 in 1993. In 1995 and 1994, Baxter revenues included no marketing rights, compared to $393,000 included in 1993 revenues. The obstetrics revenue category grew 20.8% in 1995 and represented 38.6% of total sales. Market acceptance for sensor-tipped electronic intrauterine pressure (IUP) monitoring dominated by INTRAN(R) continues to expand, and sales of CORDGUARD began in December. Sales of obstetrics products in 1995 were $16,228,061 compared to $13,429,690 in 1994 and $11,872,830 in 1993. Beginning in 1995 the third category, gynecology products, includes LIBERTY, a system for conservatively treating urinary incontinence, and LUMIN, a unique tool used in laparoscopic procedures to manipulate the uterus, in addition to UTMD's product line of electrosurgery equipment and disposable electrodes required to perform a cervical neoplasia excision procedure called LETZ. Gynecology revenues grew 12.3% in 1995, and represented 7.1% of total revenues. Gynecology product sales in 1995 were $2,982,268 compared to $2,655,755 in 1994 and $2,994,338 in 1993. UTMD's past successes with its gynecology products resulted from providing physician training along with the equipment and tools designed for specific procedures. Other applications for UTMD's electrosurgery capabilities offer additional future business opportunities. Effective marketing of the new products launched in 1995 represent significant challenges for UTMD's marketing resources, and will require innovative distribution approaches. UTMD divides its sales channels into "direct" and "OEM" channels. "Direct sales" are sales of UTMD's products by its own employed sales representatives, by independent commissioned representatives, or by stocking distributors in a particular geographic region. "OEM sales" are sales of UTMD products by other medical device manufacturers either as a component of a kit, or as a stand-alone product into markets not served by UTMD's own direct sales resources. In 1995, direct sales represented about 58% of global sales compared to about 52% in the previous two years. In the U.S., 1995 direct sales represented 68% of sales compared to 64% in 1994 and 61% in 1993. Dividing global sales into the two channels of direct sales and OEM sales for the respective product categories of 1) critical care products, 2) obstetrics products and 3) gynecology products, yields the following split: direct sales represented 23%, 100% and 96%, respectively, in 1995 compared to 20%, 100%, and 97% in 1994 and 20%, 100%, and 100% in 1993. 1995 foreign sales were $10,343,192 compared to $10,756,552 in 1994 and $8,112,470 in 1993. 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 (OEM sales channel). Critical care products represented 96% of international sales in 1995 compared to 97% in 1994 and 96% in 1993. Sales through Baxter represented 58% of international sales in 1995 compared to 56% in 1994 and 62% in 1993. Sales through other (than Baxter) OEM companies represented 16% of total international sales in 1995 compared to 23% in 1994 and 18% in 1993. UTMD believes it has substantial sales potential for its existing products in international markets, and therefore plans to continue to commit its resources to international business expansion. b) Gross profit. Gross profit margins (profit after subtracting costs of manufacturing products from revenues) in 1995 were 46.4% compared to 44.6% in 1994 and 44.5% in 1993. The 1995 improvement in average gross profit margin was achieved because of a 19% increase in sales of UTMD's Ob/Gyn products, combined with a 25% decrease in sales of UTMD's least profitable product, the Baxter Summit DPT. The Company expects these trends to accelerate in 1996. UTMD has improved its gross margins as a percentage of sales every year for the last ten years. In recent years, the improvement has come from improved manufacturing efficiencies and increased direct sales through UTMD's own employed representatives in favor of distributors. 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 declining business with Baxter, the Company foresees continued gross margin improvements. c) Operating Profit. Operating profits, or income from operations, are the profits achieved after subtracting operating expenses from gross profits. Operating expenses are subdivided into sales, general and administrative (SG&A) expenses and research and development (R&D) expenses. UTMD further divides SG&A into the two categories of sales and marketing (S&M) expenses and general and administrative (G&A) expenses. In 1995, operating profits increased 16.5% to $11,693,377 from $10,041,372 in 1994, and compared to $8,917,904 in 1993. Operating expenses declined to 18.5% of sales in 1995 compared to 19.2% in 1994 and 20.4% in 1993. The reason for the 1995 improvement in operating expenses as a percentage of sales was the fact that SG&A expenses declined from 15.4% of 1994 revenues to 14.3% of 1995 revenues. The G&A expenses portion declined from $2.6 million in 1994 to $2.4 million in 1995 due to the Company's internal cost control programs, and continued tight management of legal costs. In 1996 G&A expenses as a percentage of sales are expected to increase as a result of starting up new Ireland operations. UTMD's S&M expenses pertain primarily to the "direct sales" portion of its business (see previous page). Global direct sales increased 16.9% in 1995 while S&M expenses increased only 3.7%, producing financial leverage in the use of S&M resources. During 1995, the Company shut down its independent sales office in Holland, anticipating integrating the direct international sales and sales support effort into its new Ireland operations in 1996. Because of anticipated 1996 sales growth coming mainly from direct sales, and anticipating continued declining OEM sales through Baxter, 1996 S&M expenses as a percentage of sales are expected to increase. 1995 R&D expenses were 4.3% of sales compared to 3.9% and 3.3% in 1994 and 1993, respectively. R&D expenses increased 17% over 1994, which had increased 24% over 1993. As a measure of its product development activity, UTMD made eleven new product approval 510(k) premarketing submissions to the FDA in 1994 and 1995, in contrast to only one in the previous three years. The Company employs its R&D resources not only to internally develop its own new product ideas, but also, through joint development agreements, licensing of technology, acquisitions and other arrangements, to enhance and complete to commercialization projects initiated by others. Growth of R&D expenses as a percentage of sales will not continue in 1996 as UTMD expects to realize the benefit of its recent investment in R&D in the form of new product sales. d) Non-operating income. Non-operating 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/losses from the sale of other assets. Non-operating income increased $243,413 in 1995 from 1994. The increase was due to increased investment income from higher average cash balances in 1995. Royalties remained about the same as the prior year. Non-operating income in 1993 was substantially higher than either 1994 or 1995 because of two major one time items in 1993: 1) sale of the PARAGRAPH product line to Vital Signs, Inc. for a net gain of about $387,000, and 2) about $237,000 in capital gains realized from shifting cash investments from longer-term to shorter-term securities. Assuming 1996 interest rates remain about the same as 1995, and given that no extraordinary investment opportunities arise that are presently unknown, 1996 investment income on cash balances should be about the same as 1995 since planned investments in new facilities, equipment and tooling, intangible assets, and share repurchases will be funded from cash generated from 1996 operations. Royalties received vary from period to period depending on the desire and/or success of other companies in selling products licensed by UTMD. Royalties in 1996 should remain about the same as 1995, except for an extraordinary payment in the first quarter related to the use of UTMD's pressure monitoring technology. e) Earnings before income taxes. Earnings before income taxes (EBIT) result from adding UTMD's non-operating income to its operating profits. In 1995, EBIT, as a percentage of sales, were 30.6% compared to 27.6% and 28.7% in 1994 and 1993, respectively. Gross margin improvements, lower operating expenses as a percentage of sales, and higher non- operating income as a percentage of sales all contributed to the improved EBIT ratio. f) Net income and earnings per share. Net (after-tax) income is EBIT less income taxes. UTMD's net income ranks in the top tier of all U.S. publicly-traded companies at 20%, 18% and 19% of revenues for 1995, 1994 and 1993, respectively. Shareholder value is improved by increasing EPS. EPS is net income divided by the number of shares of stock outstanding (fully-diluted to include stock options awarded which have exercise prices below the current market value). Future EPS can be increased by investing current net income to increase future net profits through expanded marketable new product offerings and profitable business operations, or also by repurchasing stock from the marketplace, thereby reducing the number of outstanding shares. Return on shareholders' equity (ROE) is the portion of net income retained by UTMD to internally finance its EPS growth, divided by average accumulated shareholders' equity during the period. The ROE ratio determines how fast the Company can grow without any external financing. For example, a 30% ROE would support 30% growth in revenues. Achieving growth in revenues and EPS without diluting shareholder interests maximizes shareholders' value. ROE in 1995 was almost 32%, and has averaged over 30% for the last 8 years. It is management's objective to retain ROE in excess of the 25% per annum EPS growth target. External equity financing would only be considered if an exceptional business growth opportunity presents itself that would allow long term increased EPS at the same time that the number of shares are also expanded. After income taxes, 1995 net income was $8,353,738, a new record for the Company, compared to $7,109,360 in 1994 and $7,012,285 in 1993. The effective income tax rate in 1995 was 35.0% compared to 35.1% in 1994 and 34.0% in 1993. Year to year fluctuations in the tax rate have resulted from: 1) the use of a foreign sales corporation, 2) differing balances in tax-exempt securities investments, and 3) differing numbers of exercised employee options which result in a tax benefit to the Company. Fully diluted 1995 EPS were up 21% to $.82 compared to $.68 in 1994. 1994 EPS were up 13% from $.60 in 1993. Year ending 1995 weighted average number of common shares assuming full dilution (the number used to calculate fully-diluted EPS) were 10,172,329 shares compared to 10,453,583 and 11,686,035 in 1994 and 1993, respectively. Actual outstanding common shares as of December 31, 1995 were 9,790,937. Primary-diluted 1995 EPS were $.83 compared to $.68 in 1994 and $.60 in 1993. The difference in primary-diluted versus fully-diluted EPS occurred as a result of the rapid increase in market price per share of UTMD's stock in 1995, ending at a price of $19.8125 per share, a new year-end high in the history of the Company, and an increase of 133% from the 1994 ending price of $8.50 per share. In contrast, the Dow Jones Industrial Average increased 33%, the S&P 500 Index increased 34%, the NASDAQ Composite Index increased 40%, and the MDDI Index of medical device companies increased 51% in 1995. Cash Flows and Capital Resources. Cash (and investment) balances were $13.2 million at the end of 1995, an increase of $6.1 million from December 31, 1994, primarily due to accumulation of cash from profitable operations. Cash provided by operating activities, including adjustments for depreciation and other non-cash operating expenses, along with changes in working capital, totaled $11,108,155 in 1995, up from $8,831,152 in 1994, and $7,445,027 in 1993. Depreciation and amortization in 1995 increased by about $462,000 to more than $1.7 million, due to recent investments in facilities and improved manufacturing capabilities, as well as amortization of acquired patents and licensing rights. Cash of $2,075,000 was used for capital expenditures in property and equipment. $62,000 was used for the purchase of intangible assets, principally new patent filings. Remaining investing activities were the purchases and sales of investments which reduced cash by a net $2,406,000 in 1995. Capital expenditures that occurred during 1995 will help the Company maintain its competitive position and provide the cost-effectiveness needed to support growth in new markets. Projects included: i) the first $825,000 investment, principally in land, for the new Ireland manufacturing facility, ii) the completion of Phase I of assembly automation of DELTRAN(R), the Company's DPT product which enjoys a dominant worldwide market share, in the amount of $567,000 in addition to amounts previously invested in 1994, iii) enhancements to the computer system, new in 1994, of about $101,000, which has begun to enhance UTMD's ability to responsively communicate with customers, provide timely and accurate manufacturing information, and streamline distribution capabilities, and iv) about $582,000 to maintain and continuously upgrade pre- existing facilities, equipment and tooling. In 1996, capital expenditures for property and equipment are planned in the following areas: 1) completion of the 70,000 square foot facility shell and first phase 25,000 square foot fit-out of the Ireland manufacturing facility, 2) continued automation of key assembly operations, 3) investment in tooling and equipment for manufacturing new products, and 4) continued maintenance and upgrading of existing assets. 1995 financing activities used cash of $3,080,000, compared to $8,393,000 in 1994, and $7,258,000 in 1993. Stock repurchases continued to comprise by far the largest use of cash from all categories. After paying out $694,193 during 1993 for cash dividends to shareholders, in January 1994 the board of directors discontinued the dividend in favor of continued stock repurchases. The Company repurchased its own common stock during 1995 in the amount of $4,154,000, compared to $8,532,000 and $7,165,000 in 1994 and 1993, respectively. In the three years of 1993 through 1995, UTMD has invested $19,851,000 in repurchasing 2,349,109 of its common shares. In 1995, UTMD received $1,074,000 from the issuance of 164,422 shares of stock due to exercises of employee options. In the three years of 1993 through 1995, the Company has issued 291,431 new shares previously awarded under option plans, for which it has received $1,814,000. UTMD did not enter into any long term debt agreements in 1995. 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 in 1996 for continued share repurchases and for selective infusions of technological, marketing or product manufacturing rights to broaden the Company's product offerings. Management's Outlook. The trends in UTMD's business which became more apparent to outside investors during 1995, namely, rapid growth in Ob/Gyn product sales through direct sales channels, and decline in blood pressure monitoring component sales through Baxter and other OEMs, should both accelerate in 1996. As a result, management expects 1996 total sales will grow modestly or may remain about the same, depending the impact of lower sales to Baxter, while gross profit margins, net profits and EPS should continue to grow, similar to the performance demonstrated in 1995. Despite the Baxter negative sales trend, with the soundness of UTMD's market position in critical care applications for disposable pressure transducers, management believes its critical care product offerings will remain an important contributor to the Company's overall profitability, especially internationally with the start-up of a new manufacturing facility in Ireland. Revenues from fetal monitoring (FM) should continue to grow at a good rate, especially if UTMD's product enhancements and clinical outcomes programs successfully identify important driving influences for the use of proprietary FM products. The addition of new products, such as CORDGUARD, using existing sales resources will provide significant distribution leverage. UTMD's growing number of gynecology practice tools will leverage its sales opportunities to physicians outside of the hospital. For example, LIBERTY, which addresses a massively prevalent and under diagnosed disease state in women, is just a beginning in a potentially broad incontinence product line family. In addition, the Company's competence in electrosurgery should lead to new market opportunities in other clinical areas where a specialized approach will provide excellent benefits. Clearly, the global healthcare market's recognition, adoption and ultimate purchase at a reasonable price of UTMD's new Ob/Gyn product solutions are the most important factors in management's growth projections. UTMD will continue to position itself in specialized high value-added market niches and license its product ideas in recognized commodity product/markets to larger marketing companies. The value of UTMD's technology to other medical device companies should continue to enhance shareholder returns. A number of the forward looking factors discussed in this filing are subject to a high degree of uncertainty, particularly in light of the Company's high growth objectives and a rapidly changing healthcare environment. Investors are encouraged to consider all of these factors in that actual results may differ materially from those projected by management. Accounting Policy Changes - - ------------------------- In October 1995, the Financial Accounting Standards Board issued SFAS No. 123, "Accounting for Stock-Based Compensation". SFAS No. 123 encourages, but does not require, companies to adopt the fair value method defined by this standard for fiscal years beginning after December 15, 1995. Companies are permitted to continue to account for such transactions under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", (APB No. 25), but must, in future years, disclose in a note to the financial statements proforma net income and earnings per share as if SFAS No. 123 had been applied. The Company has determined it will not adopt the fair value method, and therefore will continue to account for stock-based compensation using the intrinsic value method prescribed by APB No. 25. Effective January 1, 1994 the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities". Under SFAS No. 115, the Company's investments are classified as available-for-sale which results in an adjustment to stockholders' equity for unrealized gains and losses. ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. See index to financial statements and financial statement schedule at page F-1. ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III. -------- ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information from the definitive proxy statement of the registrant under the caption, "PROPOSAL NO. 1. ELECTION OF DIRECTORS: General," "Directors and Nominees," "Executive Officers," and "Compliance with Exchange Act Requirements," is incorporated herein by reference, expressly excluding the material set forth under the subcaptions "Report of the Compensation and Option Committee" and "Stock Performance Chart." ITEM 11 - EXECUTIVE COMPENSATION. The information from the definitive proxy statement of the registrant under the caption, "PROPOSAL NO. 1. ELECTION OF DIRECTORS: Executive Compensation," "Compensation and Option Committee Interlocks and Insider Participation," "Employment Agreements, Termination of Employment, and Change in Control," and "Director's Compensation" is incorporated herein by reference, expressly excluding the material set forth under the subcaptions "Report of the Compensation and Option Committee" and "Stock Performance Chart." ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information from the definitive proxy statement of the registrant under the caption, "PROPOSAL NO. 1. ELECTION OF DIRECTORS: Security Ownership of Management and Certain Persons" is incorporated herein by reference. ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. None. PART IV. ------- ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) The following documents are filed as part of this report or incorporated herein by reference. 1. Financial Statements. (See Index to Financial Statements and Supplemental Schedule at page F1.) 2. Supplemental Schedule. (See Index to Financial Statements and Supplemental Schedule at page F1.) 3. Exhibits. SEC SEC Ref- erence No. No. Title of Document Location - - --- --- ----------------- -------- 1 3 Articles of Restatement of the Articles of Incorporated by Incorporation Reference(1) 2 3 Bylaws Incorporated by Reference(1) 3 4 Rights Agreement dated as of October 28, 1994, Incorporated by between Utah Medical Products, Inc., and Atlas Reference(1) Stock Transfer Corporation 4 4 Designation of Rights, Privileges, and Incorporated by Preferences of Series "A" Preferred Stock Reference(1) 5 10 Deltran II (Uniflow) exclusivity Agreement for Incorporated by Baxter Limited Japan, dated April 27, 1990 Reference(2) 6 10 Employment Agreement dated December 21, 1992, Incorporated by with Kevin L. Cornwell* Reference(2) 7 10 Utah Medical Products, Inc., 1986 Incentive Incorporated by Stock Option Plan* Reference(2) 8 10 Letter dated August 31, 1992 to David D. Chase Incorporated by respecting stock option Reference(1) 9 10 Asset Purchase Agreement with OB Tech, Inc., Incorporated by dated January 4, 1994 Reference(3) 10 10 Utah Medical Products, Inc., 1994 Employee Incorporated by Incentive Stock Option Plan* Reference(1) 11 10 Utah Medical Products, Inc., 1993 Directors' Incorporated by Stock Option Plan Reference(1) 12 10 Utah Medical Products, Inc., Performance Option Incorporated by Plan* Reference(1) 13 10 Deltran Purchase and Distribution Agreement, Incorporated by effective January 1, 1995 Reference(4) 14 10 Summit Purchase and Distribution Agreement, Incorporated by effective January 1, 1995 Reference(4) 15 10 Amendment to Asset Purchase Agreement This Filing effective February 8, 1996 16 21 Subsidiaries of Utah Medical Products, Inc. This Filing 17 23 Consent of Deloitte & Touche LLP, Company's This Filing independent auditors 18 27 Financial Data Schedule This Filing * Management contract or compensatory plan or arrangement required to be filed pursuant to Item 14(c). (1) Incorporated by reference from the Company's registration statement on form S-8 filed with the Commission effective February 10, 1995. (2) Incorporated by reference from the Company's annual report on form 10-K filed with the Commission for the year ended December 31, 1992. (3) Incorporated by reference from the Company's annual report on form 10-K filed with the Commission for the year ended December 31, 1993. (4) Incorporated by reference from the Company's annual report on form 10-K filed with the Commission for the year ended December 31, 1994. (b) Reports on Form 8-K. None SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned this 28th day of March, 1996. UTAH MEDICAL PRODUCTS, INC. By:/s/ Kevin L. Cornwell --------------------- Kevin L. Cornwell President and CEO By:/s/ Kevin L. Cornwell --------------------- Kevin L. Cornwell Secretary and CFO Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on this 28th day of March, 1996. By:/s/ Perry L. Lane ----------------------- Perry L. Lane, Director By: /s/ Stephen W. Bennett ----------------------- Stephen W. Bennett, Director By:/s/ David D. Chase ----------------------- David D. Chase, Director By:/s/ Kevin L. Cornwell ----------------------- Kevin L. Cornwell, Director By:/s/ Ernst G. Hoyer ----------------------- Ernst G. Hoyer, Director By: /s/ Lori A. Sessions ----------------------- Lori A. Sessions, Director UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARY INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE PAGE CONSOLIDATED FINANCIAL STATEMENTS: Independent Auditors' Report F-2 Consolidated Balance Sheets,December 31, 1995 and 1994 F-3 - F-4 Consolidated Statements of Operations for the Years Ended December 31, 1995, 1994, and 1993 F-5 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1995, 1994, and 1993 F-6 Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1994, and 1993 F-7 - F-8 Notes to Consolidated Financial Statements F-9 - F-16 FINANCIAL STATEMENT SCHEDULE: Financial Statement Schedule for the Years Ended December 31, 1995, 1994, and 1993: Schedule II - Valuation and Qualifying Accounts F-17 Financial statement schedules other than those listed above are omitted because of the absence of conditions under which they are required or because the information is shown in the financial statements. INDEPENDENT AUDITORS' REPORT Utah Medical Products, Inc.: We have audited the accompanying balance sheets of Utah Medical Products, Inc. and subsidiary as of December 31, 1995 and 1994, and the related statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1995. Our audits also included the financial statement schedule listed in the preceding index to financial statements and financial statement schedule. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of Utah Medical Products, Inc. and subsidiary as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /S/ Deloitte & Touche LLP January 24, 1996 (February 8, 1996 as to Note 10)
UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS, DECEMBER 31, 1995 AND 1994 ASSETS 1995 1994 CURRENT ASSETS: Cash $5,064,913 $1,579,121 Investments (cost: 1995, $8,121,001 and 1994, $5,735,475) Notes 1 and 2) 8,173,500 5,572,048 Accounts receivable: Trade (less allowance for doubtful accounts: 1995 $83,021 and 1994 $77,662) 6,473,810 6,389,357 Accrued interest and other 221,662 213,030 Inventories (Notes 1 and 3) 3,277,982 4,023,939 Prepaid expenses and other current assets 244,675 113,173 Deferred income taxes (Notes 1 and 5) 372,899 390,941 ---------- ---------- Total current assets 23,829,441 18,281,609 ----------- ----------- PROPERTY AND EQUIPMENT (Note 1): Land 1,113,478 678,447 Building and improvements 3,458,829 3,421,642 Furniture and equipment 7,281,403 6,356,447 Multi-cavity molds and dies 1,587,058 1,417,298 Construction-in-progress 1,456,837 1,135,707 ---------- ---------- Total 14,897,605 13,009,541 Less accumulated depreciation and amortization (6,031,246) (4,872,293) ----------- ----------- Property and equipment - net 8,866,359 8,137,248 ----------- ----------- OTHER ASSETS - Intangible assets (less accumulated amortization: 1995, $443,561 and 1994, $102,078) (Note 1) 634,579 946,326 ----------- ----------- TOTAL $33,330,379 $27,365,183 =========== =========== (Continued) UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS, DECEMBER 31, 1995 AND 1994 LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994 CURRENT LIABILITIES: Accounts payable $1,783,840 $1,821,302 Accrued expenses: Payroll and payroll taxes 1,197,692 1,000,946 Reserve for litigation expenses 314,619 315,003 Income taxes payable (Notes 1 and 5) 105,024 7,074 Other 220,750 180,514 Deferred revenue (Notes 1 and 7) 85,600 85,600 ----------- ---------- Total current liabilities 3,707,525 3,410,439 DEFERRED INCOME TAXES (Notes 1 and 5) 245,289 256,220 DEFERRED REVENUE (Notes 1 and 7) 173,208 258,204 ---------- ----------- Total liabilities 4,126,022 3,924,863 --------- --------- COMMITMENTS AND CONTINGENCIES (Notes 4, 6, 7, and 10) STOCKHOLDERS' EQUITY (Note 6): 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 - 9,790,937 shares in 1995 and 9,993,559 shares in 1994 97,909 99,935 Unrealized gain (loss) on investments available-for-sale,net of tax (Notes 1 and 2) 32,707 (101,815) Retained earnings 29,073,741 23,442,200 ----------- ---------- Stockholders' equity - net 29,204,357 23,440,320 ----------- ----------- TOTAL $33,330,379 $27,365,183 ----------- -----------
See notes to consolidated financial statements. (Concluded)
UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993 1995 1994 1993 NET SALES (Notes 7 and 9) $42,038,082 $39,644,684 $36,999,059 COST OF SALES (Note 7) 22,549,039 21,978,638 20,528,218 ---------- ---------- ---------- GROSS MARGIN 19,489,043 17,666,046 16,470,841 ---------- ---------- ---------- EXPENSES: Selling, general, and administrative 6,006,499 6,096,198 6,323,782 Research and development 1,789,167 1,528,476 1,229,155 ----------- ----------- ----------- Total 7,795,666 7,624,674 7,552,937 ----------- ----------- ----------- INCOME FROM OPERATIONS 11,693,377 10,041,372 8,917,904 ----------- ----------- ----------- OTHER INCOME (EXPENSE): Dividend and interest income 584,960 352,406 462,324 Royalty income 652,894 650,992 628,515 Other (79,326) (88,283) 617,359 ---------- ---------- ----------- Total 1,158,528 915,115 1,708,198 ----------- ----------- ----------- INCOME BEFORE INCOME TAX EXPENSE 12,851,905 10,956,487 10,626,102 INCOME TAX EXPENSE (Notes 1 & 5) 4,498,167 3,847,127 3,613,817 ----------- ----------- ----------- NET INCOME $ 8,353,738 $7,109,360 $ 7,012,285 =========== ========== =========== EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE (Notes 1 & 6) $ .83 $ .68 $ .60 =========== ========== =========== EARNINGS PER COMMON SHARE ASSUMING FULL DILUTION (Notes 1 and 6) $ .82 $ .68 $ .60 =========== ========== ===========
See notes to consolidated financial statements.
UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993 Unrealized Gain (Loss) on Invest- ments Available Additional -for-Sale, Common Stock Paid-in Net (Note 6) Capital of Retained Shares Par (Note 6) Tax (Note Earnings Value 2) BALANCE, JANUARY 1, 1993 11,848,647 $118,486 $4,399,867 $20,393,281 Net income 7,012,285 Cash dividend paid ($.06 per share) (694,193) Shares issued upon exercise of employee stock options for cash (Note 6) 71,450 715 412,993 Shares issued upon exercise of employee purchase rights (Note 6) 32,404 324 187,276 Tax benefit attributable to appreciation of common stock related to stock options and pur- chase rights (Note 6) 148,317 Common stock purchased and retired (847,265) (8,473) (5,148,453) (2,008,449) --------- ------- ----------- ------- ----------- BALANCE, DECEMBER 31, 1993 11,105,236 111,052 None 24,702,924 Net income 7,109,360 Shares issued upon exercise of employee stock options for cash (Note 6) 19,785 198 74,416 Shares issued upon exer- cise of employee pur- chase rights (Note 6) 3,338 33 64,242 Change in unrealized gain (loss) on investments available- for-sale (Note 2) (101,815) Tax benefit attributable to appreciation of common stock related to stock options and purchase rights (Note 6) 11,761 Common stock purchased and retired (1,134,800) (11,348) (11,761) (8,508,742) ----------- ------- --------- --------- ----------- BALANCE, DECEMBER 31, 1994 9,993,559 99,935 None (101,815) 23,442,200 Net income 8,353,738 Shares issued upon exercise of employee stock options for cash (Note 6) 124,840 1,248 811,179 Shares issued upon exercise of employee purchase rights (Note 6) 39,668 397 260,736 Change in unrealized gain (loss) on investments available- for-sale (Note 2) 134,522 Tax benefit attributable to appreciation of common stock related to stock options and purchase rights (Note 6) 355,779 Common stock purchased and retired (367,130) (3,671) (355,779) (3,794,112) --------- ------- --------- -------- ----------- BALANCE, DECEMBER 31, 1995 9,790,937 $97,909 None $32,707 $29,073,741 =========== ======= =========== ======= ===========
See notes to consolidated financial statements.
UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993 1995 1994 1993 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $8,353,738 $7,109,360 $7,012,285 ---------- ---------- ---------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,714,906 1,252,666 1,015,328 Provision for (recovery of) losses on accounts receivable 5,359 30,266 (13,562) Loss on disposal of assets 24,563 41,064 6,360 Deferred income taxes (74,293) (79,369) 269,027 Tax benefit attributable to exercise and disposition of incentive stock options and stock purchase rights 355,779 11,761 148,317 Changes in operating assets and liabilities: Accounts receivable - trade (89,813) (502,373) (751,936) Accrued interest and other receivables (8,632) 8,537 6,226 Inventories 745,957 186,399 (1,125) Prepaid expenses (131,502) 333,933 (410,348) Accounts payable (37,462) 353,873 232,721 Accrued expenses 334,551 170,631 410,334 Deferred revenue (84,996) (85,596) (478,600) -------- -------- --------- Total adjustments 2,754,417 1,721,792 432,742 --------- --------- ------- Net cash provided by operating activities 11,108,155 8,831,152 7,445,027 ---------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures for: Property and equipment (2,074,745) (1,821,030) (1,500,411) Intangible assets (62,144) (521,751) (62,102) Purchases of investments (6,888,832) (3,506,743) (14,977,720) Proceeds from sale of: Investments 4,483,010 6,150,586 15,539,306 Property and equipment 350 9,145 41,220 ---------- ---------- ----------- Net cash provided by (used in) investing activities (4,542,361) 310,207 (959,707) ----------- ------- --------- (Continued) UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993 1995 1994 1993 CASH FLOWS FROM FINANCING ACTIVITIES: Dividends paid $ (694,193) Proceeds from issuance of common stock $ 1,073,560 $ 138,889 601,308 Common stock purchased and retired (4,153,562) (8,531,851) (7,165,375) ----------- ----------- ------------ Net cash used in financing activities (3,080,002) (8,392,962) (7,258,260) ----------- ----------- ----------- NET INCREASE (DECREASE) IN CASH 3,485,792 748,397 (772,940) CASH AT BEGINNING OF YEAR 1,579,121 830,724 1,603,664 ----------- ---------- ------------ CASH AT END OF YEAR $ 5,064,913 $ 1,579,121 $ 830,724 =========== =========== ============ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION - Cash paid during the year for income taxes $ 4,156,894 $ 3,831,487 $ 3,311,230
See notes to consolidated financial statements. (Concluded) UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Utah Medical Products, Inc. and its wholly owned subsidiary, Utah Medical Products Ltd., (the Company) are in the business of producing cost-effective devices for the health care industry. The Company's broad range of products includes those used in critical care areas and the labor and delivery department of hospitals, as well as outpatient clinics and physician's offices. Products are sold in both domestic U.S. and international markets. The accounting policies of the Company conform to generally accepted accounting principles (GAAP). The preparation of financial statements in conformity with GAAP requires management to make estimates that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities and reported amounts of revenues and expenses. Actual amounts could differ from these estimates. The following is a summary of the more significant of the Company's accounting policies: PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include those of the Company and its subsidiary. All intercompany accounts and transactions have been eliminated in consolidation. INVESTMENTS - Investments consist of mutual funds, bonds, and equities. Effective January 1, 1994 the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity Securities. Under SFAS No. 115, the Company's investments are classified as available-for-sale which results in an adjustment to stockholders' equity for unrealized gains and losses (see Note 2). INVENTORIES - Finished products, work-in-process, and raw materials and supplies inventories are stated at the lower of cost (computed on a first-in, first-out method) or market (see Note 3). PROPERTY AND EQUIPMENT - Property and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method over estimated useful lives as follows: Building and improvements 30-40 years Furniture and equipment 3-10 years Multi-cavity molds and dies 5 years INTANGIBLE ASSETS - Costs associated with the acquisition of patents, trademarks, goodwill, and license rights are capitalized and amortized using the straight-line method over periods ranging from 5 to 17 years. INCOME TAXES - The Company accounts for income taxes under SFAS No. 109, Accounting for Income Taxes, whereby deferred taxes are computed under the liability method (see Note 5). DEFERRED REVENUE - Amounts received in advance from customers for the sale of product rights and price reductions are recognized as revenue as the related products are sold considering the future marketability of the products. EARNINGS PER SHARE - Earnings per share are based on the following weighted average number of shares outstanding: 1995 1994 1993 Weighted average number of common common and ccommon equivalent shares 10,042,430 10,436,094 11,686,035 Weighted average number of common shares assuming full dilution 10,172,329 10,453,583 11,686,035 The computation of earnings per common and common equivalent share is based on the weighted average number of shares outstanding during each year plus the common stock equivalent which would arise from the exercise of stock options and warrants outstanding using the treasury stock method and the average market price per share during the year. The computation of earnings per common share assuming full dilution is based on the weighted average number of shares outstanding during the year plus the common stock equivalents which would arise from the exercise of stock options and warrants outstanding using the treasury stock method and the market price per share at the end of the year. STATEMENTS OF CASH FLOWS - For purposes of the consolidated statements of cash flows, the Company considers cash on deposit and short-term investments with original maturities of three months or less to be cash and cash equivalents. FOREIGN OPERATIONS - Included in the Company's consolidated balance sheet at December 31, 1995 are the assets of its manufacturing facility under construction in Ireland totaling approximately $825,000. 2. INVESTMENTS The amortized cost and estimated market values of investment securities as of December 31, 1995 were as follows: GROSS GROSS ESTIMATED AMORTIZED UNREALIZED UNREALIZED MARKET COST GAINS LOSSES VALUE Municipal bonds $5,646,994 $13,620 $(961) $5,659,653 Taxable bonds 1,499,844 466 1,500,310 Equities and other 974,163 7,634 (28,260) 1,013,537 ----------- ----------- ----------- ----------- Total $8,121,001 $81,720 $29,221) $8,173,500 ========== ======= ======== ========== The amortized cost and estimated market value of investments at December 31, 1994 were as follows: GROSS GROSS ESTIMATED AMORTIZED UNREALIZED UNREALIZED MARKET COST GAINS LOSSES VALUE Municipal bonds $ 3,696,268 $ (50,365) $ 3,645,903 Equities and other 2,039,207 $ 5,391 (118,453) 1,926,145 ----------- ---------- ----------- ----------- Total $ 5,735,475 $ 5,391 $ (168,818) $ 5,572,048 =========== ========== =========== =========== The amortized cost and estimated market value of debt securities at December 31, 1995, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. ESTIMATED AMORTIZED MARKET COST VALUE Due in one year or less $ 6,242,557 $6,248,957 Due after one year through five years 904,281 911,006 ----------- ---------- Total $ 7,146,838 $ 7,159,963 =========== =========== During the years ended December 31, 1995 and 1994, there were $4,483,010 and $6,150,586, respectively, in proceeds from the sale of investment securities resulting in gross realized losses of $8,328 and $33,602, respectively, and gross realized gains of $59,187 and $3,785, respectively, computed based on the specific identification method. The net unrealized gain (loss) on investment securities available-for-sale included in stockholders' equity for the years ended December 31, 1995 and 1994 is $32,707 and $(101,815), respectively, which are net of the deferred tax asset (liability) of $(19,792) and $61,612, respectively (see Note 5). 3. INVENTORIES Inventories at December 31, 1995 and 1994 consisted of the following: 1995 1994 Finished products $ 872,419 $ 789,924 Work-in-process 687,746 822,102 Raw materials 1,717,817 2,411,913 ---------- ---------- Total $3,277,982 $4,023,939 ========== ========== 4. COMMITMENTS AND CONTINGENCIES OPERATING LEASES - The Company has an operating lease agreement for land adjoining the Company's facilities for a term of forty years commencing on September 1, 1991 at a basic rent of $32,400 each year for the first five years. Subsequent to the fifth lease year, the basic rental will be adjusted for published changes in a price index. Rent expense under the operating lease agreement was $32,400 for each of the years ended December 31, 1995, 1994, and 1993. Future minimum lease payments under the operating lease obligation as of December 31, 1995 were as follows: Year ending December 31: 1996 $ 32,400 1997 32,400 1998 32,400 1999 32,400 2000 32,400 Thereafter 993,600 ----------- Total minimum lease payments $ 1,155,600 =========== LITIGATION - The Company is involved in lawsuits which are an expected consequence of its operations and in the ordinary course of business. The Company believes that pending litigation will not have a materially adverse effect on its financial condition or results of operations. 5. INCOME TAXES Deferred tax assets and liabilities as of December 31, 1995 and 1994 consisted of the following temporary differences: 1995 1994 LONG- LONG- ASSETS CURRENT TERM CURRENT TERM Inventory write-downs not currently deductible for tax purposes $102,038 $42,151 Allowance for doubtful accounts not deductible for tax purposes until written off 31,382 29,278 Accrued liabilities not deductible for tax purposes until paid 226,915 225,630 Deferred revenue previously recognized for tax purposes 32,356 $ 65,473 32,270 $ 97,344 Unrealized loss on investments available for-sale 61,612 Other 65,026 58,714 ------- --------- ------- --------- Total 392,691 130,499 390,941 156,058 LIABILITIES Unrealized gain on investments available for-sale (19,792) Accelerated depreciation and amortization for tax purposes (375,788) (412,278) -------- --------- ------- --------- Deferred income taxes - $372,899 $(245,289) $390,941 $(256,220) net -------- ---------- -------- ---------- The components of income tax expense for the years ended December 31, 1995, 1994, and 1993 were as follows: 1995 1994 1993 Current $4,572,460 $3,926,496 $3,344,790 Deferred (74,293) (79,369) 269,027 ---------- ---------- ---------- Total $4,498,167 $3,847,127 $3,613,817 ========== ========== ========== Income tax expense differed from amounts computed by applying the statutory Federal rate to pretax income as follows: 1995 1994 1993 Computed Federal income tax expense at the statutory rate of 34% $4,369,648 $3,725,206 $3,612,874 Non-taxable investment income (124,604) (94,266) (132,835) State income taxes 642,638 561,967 324,142 Foreign sales corporation (228,760) (251,262) (134,386) Other (160,755) (94,518) (55,978) ---------- --------- ---------- Total $4,498,167 $3,847,127 $3,613,817 ========== ========== ========== 6. STOCKHOLDERS' EQUITY OPTIONS - The Company has stock option plans which provide for the grant of stock options to eligible employees, directors, and other individuals to purchase up to 4,722,500 shares of common stock at a price not less than fair market value (110% of fair market value for shareholders owning more than 10% of the outstanding common shares) on the date of grant. All options granted under the plans may be exercised from between one and ten years following the date of grant. The plans are intended to advance the interest of the Company by attracting and ensuring retention of competent directors, employees, and executive personnel, and to provide incentives to those individuals to devote their utmost efforts to the advancement of the Company. Changes in stock options were as follows: PRICE RANGE 1995 SHARES PER SHARE Granted 200,000 $9.50 - $10.63 Expired or cancelled 39,517 6.58 - 10.00 Exercised 124,840 6.33 - 10.00 Outstanding at December 31 586,319 7.25 - 11.33 Exercisable 198,500 7.25 - 11.33 1994 Granted 325,000 $ 7.25 - $10.00 Expired or cancelled 73,836 6.58 - 10.00 Exercised 19,785 5.25 - 6.58 Outstanding at December 31 550,676 6.33 - 11.33 Exercisable 184,605 6.33 - 11.33 1993 Granted 208,000 $10.00 - $11.33 Expired or cancelled 240,650 6.58 - 15.00 Exercised 71,450 1.50 - 6.58 Outstanding at December 31 319,297 5.25 - 11.33 Exercisable 179,998 5.25 - 10.00 PURCHASE RIGHTS - The Company adopted an Employees' Stock Purchase Program in December 1990 whereby employees of record on December 21, 1990 were granted rights to purchase a maximum of 120,000 shares of common stock at the grant date market value of $6.58. These purchase rights were exercised or expired prior to December 21, 1995. Changes in stock purchase rights were as follows: PRICE RANGE SHARES PER SHARE 1995 Granted None Expired or cancelled 1,054 $6.58 Exercised 39,668 6.58 Outstanding at December 31 None Exercisable None 1994 Granted None Expired or cancelled 1,945 $6.58 Exercised 3,338 6.58 Outstanding at December 31 40,722 6.58 Exercisable 40,722 6.58 1993 Granted None Expired or cancelled 1,293 $2.67 - 6.58 Exercised 32,404 2.67 - 6.58 Outstanding at December 31 46,005 6.58 Exercisable 46,005 6.58 For the years ended December 31, 1995, 1994, and 1993, the Company reduced current income taxes payable and increased additional paid-in capital by $355,779, $11,761, and $148,317, respectively, for the income tax benefit attributable to appreciation of common stock related to stock options and purchase rights. ACCOUNTING STANDARD - In October 1995, the Financial Accounting Standards Board issued SFAS No. 123, Accounting for Stock-Based Compensation, which defines a fair value based method of accounting for stock based employee compensation plans. Under SFAS No. 123, companies are encouraged, but are not required, to adopt the fair value method for fiscal years beginning after December 15, 1995 for all employee awards granted after the beginning of such year. Companies are permitted to continue to account for such transactions under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, (APB No. 25), but must, in future years, disclose in a note to the financial statements proforma net income and earnings per share as if SFAS No. 123 had been applied. The Company has determined it will not adopt the fair value method and therefore will continue to account for stock-based compensation under APB No. 25. 7. PRODUCT SALE AND PURCHASE COMMITMENTS The Company has exclusive and nonexclusive agreements to sell certain products to Baxter Healthcare Corporation (Baxter) under license agreements and had sales to Baxter of approximately $14,996,000, $15,299,000, and $14,449,000 during the years ended December 31, 1995, 1994, and 1993, respectively. In addition, the Company recognized income from prepaid license fees (which are included in net sales) of approximately $393,000 during the year ended December 31, 1993. The Company has license agreements with other unrelated companies (Licensees) to provide exclusive and non-exclusive rights to purchase, market, distribute, or manufacture the Company's products. The Company received royalties and license fees, some of which were received in advance and have been deferred and amortized over the terms of the respective agreements. The Company has license agreements for the rights to develop and market certain products owned by unrelated parties. Under the terms of such agreements, the Company is required to pay royalties ranging from 1.5% to 5.0% of sales over the terms of the agreements. 8. EMPLOYEE BENEFIT PLAN The Company has a contributory 401(k) savings plan for employees who work 30 hours or more each week, who are at least 21 years of age, and have a minimum of one year of service with the Company. The Company's contribution is determined annually by the Board of Directors and was approximately $57,200, $52,100, and $36,300 for the years ended December 31, 1995, 1994, and 1993, respectively. 9. EXPORT SALES Sales to customers in foreign countries were approximately $10,343,000, $10,757,000, and $8,112,000 for the years ended December 31, 1995, 1994, and 1993, respectively. 10.ACQUISITIONS In January 1994, the Company acquired substantially all of the tangible and intangible assets of OB Tech, Inc. (OB Tech), developer of the CordguardTM disposable umbilical blood sampling system, for $500,000 cash, a market acceptance payment to be made when the product is verifiably accepted in the market place, and up to three additional payments to OB Tech contingent upon the product achieving certain annual revenue thresholds. On February 8, 1996, the agreement was amended to $250,000 for the market acceptance payment and $250,000 each for the three contingent payments. In addition, the Company will pay a royalty on products sold that are covered by the OB Tech patent. In conjunction with this purchase, the Company recorded in its financial statements the fair value of assets acquired (principally patents and a trademark) in exchange for cash paid of $500,000. * * * * * * SCHEDULE II UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARY VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993 BALANCE ADDITIONS AT CHARGED TO BALANCE AT BEGINNING COSTS AND END OF DESCRIPTION OF YEAR EXPENSES DEDUCTIONS YEAR ACCUMULATED AMORTIZATION OF INTANGIBLE ASSETS: 1995 $102,078 $342,333 $ 850 $443,561 ======== ======== ======== ======== 1994 $ 55,208 $ 46,870 $102,078 ======== ======== ======== ======== 1993 $ 48,735 $ 9,733 $ 3,260(1) $ 55,208 ======== ======== ======== ======== ALLOWANCE FOR DOUBTFUL ACCOUNTS: 1995 $ 77,662 $ (5,359)(3) $ 83,021 ======== ======== ======== ========= 1994 $ 47,396 $ 32,665 $ 2,399 $ 77,662 ======== ======== ======== ========= 1993 $197,420 $ 150,024(2) $ 47,396 ======== ======== ========= ========= ALLOWANCE FOR SALES RETURNS: 1995 $ 24,545 $ 24,545 ======== ======== ======== ========= 1994 $ 12,545 $ 12,000 $ 24,545 ======== ======== ======== ========= 1993 $122,886 $ 110,341(2) $ 12,545 ======== ======== ========= ========= (1) Deduction relates to patents sold. (2) Deductions represent accounts written off against the allowance. (3) Amount represents recoveries which increased the allowance EXHIBIT INDEX ------------- SEC Ref- erence No. No. Title of Document Location - - --- --- ----------------- -------- 15 10 Amendment to Asset Purchase Agreement, Filed in effective February 8, 1996 Electronic Format 16 21 Subsidiaries of Utah Medical Filed in Products, Inc. Electronic Format 17 23 Consent of Deloitte & Touche LLP, Filed in Company's independent auditors Electronic Format 18 27 Financial Data Schedule Filed in Electronic Format EX-10 2 AMENDMENT TO ASSET PURCHASE AGREEMENT AMENDMENT TO ASSET PURCHASE AGREEMENT THIS AMENDMENT TO ASSET PURCHASE AGREEMENT (this "Amendment") is entered into as of February 8, 1996, by and among Utah Medical Products, Inc., a Utah corporation ("Purchaser"), OB Tech Liquidating Company, L.L.C., a Delaware limited liability company (the "Company") and the successor in interest to O.B. Tech, Inc., a California Corporation ("O.B. Tech"), and James J. Bochnowski (the "Agent"). R E C I T A L S A. Purchaser, O.B. Tech, and the individuals and other entities identified on the signature pages to the Agreement (as defined below) entered into an Asset Purchase Agreement dated January 4, 1994 (the "Agreement"). Pursuant to Section 3.7 of the Agreement, among other things, the Agent was irrevocably appointed as the agent and attorney-in-fact of the shareholders of O.B. Tech that executed the Agreement to act in the name of such shareholders for purposes of executing any documents and taking any actions that the Agent, in his sole discretion, may deem necessary or desirable in connection with Agreement or any of the transactions contemplated thereby. B. The parties now wish to amend the Agreement pursuant to Section 14.7 thereof, as set forth in this Amendment. All capitalized terms used in the Amendment and not otherwise defined herein shall have the respective meanings assigned to them in the Agreement. NOW, THEREFORE, the parties agree as follows: 1. The product described on Exhibit A hereto as approved by the FDA under submission number K954619 shall be deemed to constitute "Cordguard I" in place of the product identified as "Cordguard I" in the Agreement. 2. The parties acknowledge and agree that Purchaser has satisfied all of its obligations under Section 2.1 of the Agreement and Section 2.1 is of no further force or effect. 3. Section 2.2 of the Agreement is hereby amended and restated in its entirety to read as follows: 2.2 Exclusivity. Purchaser shall retain exclusive ownership rights in, and exclusive rights to exploit, U.S. Patent No. 5,190,556 included in the Assets (the "Patent") and any other patents included in the Assets or otherwise arising out of the Assets (the "Additional Patents"), and have no obligation to grant the Company any rights therein. 4. The parties acknowledge and agree that Purchaser has satisfied all of its obligations under Section 2.3 of the Agreement and Section 2.3 of the Agreement is of no further force or effect. 5. Section 3.2 of the Agreement is hereby amended and restated in its entirety to read as follows: 3.2 Acceptance Payment. On or before February 15, 1996, Purchaser shall pay to the Company in cash or other immediately available funds Two Hundred Fifty Thousand Dollars ($250,000) (the "Acceptance Payment"). Amendment to Asset Purchase Agreement Page 2 6. Section 3.3 of the Agreement is hereby amended and restated in its entirety to read as follows: 3.3 Incremental Payments. Purchaser shall make up to three additional payments (the "Incremental Payments") to the Company of Two Hundred Fifty Thousand Dollars ($250,000) each (or up to an additional aggregate amount of Seven Hundred Fifty Thousand Dollars ($750,000)) in the event Gross Revenues from the sale of Cordguard I equal or exceed in a calendar year during the remaining validity of the Patent any of the following three benchmarks (with only one payment being due for achievement of each benchmark): (i) Gross Revenues exceed Ten Million Dollars ($10,000,000); (ii) Gross Revenues exceed Twenty Million Dollars ($20,000,000); or (iii) after achieving benchmark (ii), Gross Revenues exceed Twenty Million Dollars ($20,000,000) in a subsequent calendar year. To illustrate Purchaser's obligation to make the Incremental Payments: (A) in the event Gross Revenues exceed Ten Million Dollars ($10,000,000) in one or more calendar years but never exceed Twenty Million Dollars ($20,000,000) in a calendar year, the Company shall only be entitled to the first Incremental Payment of Two Hundred Fifty Thousand Dollars ($250,000); (B) in the event Gross Revenues exceed Twenty Million Dollars ($20,000,000) in a calendar year without having previously exceeded Ten Million Dollars ($10,000,000), the Company shall be entitled to the first and second Incremental Payments of Two Hundred Fifty Thousand Dollars ($250,000) each for Cordguard I having achieved benchmarks (i) and (ii) in such calendar year; and (C) in the event Gross Revenues exceed Twenty Million Dollars ($20,000,000) in two calendar years, the Company shall be entitled to receive the third and final Two Hundred Fifty Thousand Dollars ($250,000) Incremental Payment with respect to such second calendar year. Any Incremental Payment which become due shall be paid within thirty (30) days of the end of the year for which such payment is due. 7. Section 3.4.1 of the Agreement is hereby amended and restated in its entirety to read as follows: 3.4.1 Cordguard I. Five percent (5%) of Gross Revenues relating to Cordguard I for the remaining validity of the Patent; 8. Except as expressly provided herein, the Agreement shall remain unmodified and in full force and effect and, in the event of any inconsistency between the terms of the Amendment and the Agreement, the terms of the Amendment shall be controlling. 9. This Amendment may be executed in several counterparts, each of which shall constitute and original and all of which, when taken together, shall constitute one amendment. 10. This Amendment shall be binding upon and inure to the benefit of the parties and their respective permitted successors and assigns. Amendment to Asset Purchase Agreement Page 3 IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date specified above. PURCHASER: THE COMPANY: ----------- UTAH MEDICAL PRODUCTS, INC. OB TECH LIQUIDATING COMPANY, L.L.C. By /s/ Kevin L. Cornwell By /s/ James J. Bochnowski ------------------------- ----------------------- Kevin L. Cornwell James J. Bochnowski President & CEO Manager THE AGENT: - - --------- /s/ James J. Bochnowski - - ------------------------------- James J. Bochnowski Exhibit A: [Graphical information omitted} Description: Exhibit A to the "Amendment to Asset Purchase Agreement" is a copy of Utah Medical Products part number 5950 which is a printed brochure. The brochure includes a photograph of a device identified as Cordguard II, brief descriptions of product features, and gives the catalog number as CRD-200. The brochure says that Cordguard II is "The Closed System for Umbilical Cord Clamping, Cutting & Blood Collection". Identified product features include "Integrated cord clamp", "Designed to minimize splashing and spraying of blood", "Designed for Single-handed use", "2 five cc vacuum tubes", and "Protective sheath to keep tubes clean". EX-21 3 SCHEDULE OF SUBSIDIARY Subsidiaries of Utah Medical Products, Inc.: Name Juristiction of Incorporation Business Name - - ---- ----------------------------- ------------- Utah Medical Products, Ltd. Bermuda Utah Medical Products, Ltd. EX-23 4 CONSENT OF AUDITORS INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement Nos. 33- 24781, 33-44100, 33-89394, and 33-89434 of Utah Medical Products, Inc. on Forms S-8 of our report dated January 24, 1996, appearing in this Annual Report on Form 10-K of Utah Medical Products, Inc. for the year ended December 31, 1995. /s/ DELOITTE & TOUCHE LLP March 27, 1996 Salt Lake City, Utah EX-27 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE SHEETS AS OF DECEMBER 31, 1995, AND STATEMENTS OF OPERATIONS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS DEC-31-1995 JAN-01-1995 DEC-31-1995 12-MOS 5,064,913 8,173,500 6,556,831 (83,021) 3,277,982 23,829,441 14,897,605 (6,031,246) 33,330,379 3,707,525 0 97,909 0 0 29,106,448 33,330,379 42,038,082 42,038,082 22,549,039 7,795,666 (627,433) 0 (531,095) 12,851,905 4,498,167 8,353,738 0 0 0 8,353,738 0.83 0.82
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