Utah Medical Products Correspondence July 19, 2005

UTSD 0001

Confidential Treatment Requested by Greg A. LeClaire

3 July 19, 2005

5 Kate Tillan

6 Assistant Chief Accountant/ Mail Stop 6010

7 Division of Corporation Finance

8 U.S. Securities and Exchange Commission

9 Washington, D.C. 20549-6010

11 VIA EDGAR

13 Re: Utah Medical Products, Inc.

14 Form 10-K for the fiscal year ended December 31, 2004

15 Filed March 16, 2005

16 Form 10-Q for the Fiscal Quarter Ended March 31, 2005

17 Forms 8-K dated April 19, 2005, April 20, 2005 and May 6, 2005

18 File No. 001-12575

20 Dear Ms. Tillan:

21 This letter is UTMD’s detailed response to SEC comments dated June 15, 2005, which will also be filed on

22 EDGAR as private correspondence with the SEC. For ease of reference in the following, I have incorporated

23 the June 15, 2005 comments in italics followed by UTMD’s responses.

24 Draft Form 10-K/A for the Fiscal Year Ended December 31, 2004

25 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 17

26 Critical Accounting Policies and Estimates, page 23

27 1.

Please refer to prior comment 7. We note that your critical accounting policies include an inventory

valuation reserve. Please tell us and revise your filing to discuss the following information related

to this policy:

Include information regarding how you arrive at these estimates;

Discuss how accurate the estimates or assumptions have been in the past;

Discuss whether the estimates or assumptions are reasonably likely to change in the future

33 UTMD Response to Item 1.:

34 Please refer to the first sentence of the last paragraph on page 23 of the Draft 10-K/A which states how UTMD

35 arrived at its estimates; “Management bases its estimates and judgments on historical experience, current

36 economic and industry conditions and on various other factors that are believed to be reasonable under the

37 circumstances.” UTMD has also added the following disclosure to its Draft 10-K/A, “The Company believes

38 its method of reviewing actual and projected demand for its existing inventory allows it to arrive at a fair

39 inventory valuation reserve.”

Since UTMD’s estimates have been accurate in the past, the following disclosure has been added to

UTMD’s Draft 10-K/A “While the Company has historically not had significant inventory write-offs,

the possibility exists that one or more of its products may become unexpectedly obsolete for which a

reserve has not previously been created. The Company’s historical write-offs have not been materially

different from its estimates.”

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Confidential Treatment Requested by Greg A. LeClaire

48 Item 9A. Disclosure Controls and Procedures, page 25

Please refer to prior comment 8. The definition of disclosure controls and procedures is included in

Rule 13a-15(e) of the Exchange Act. The definition of internal controls over financial reporting is

included in Rule 13-a-15(f) of the Exchange Act. Please revise your filing to include the correct

reference to internal controls over financial reporting and disclosure controls and procedures.

53 UTMD Response to Item 2.:

54 UTMD has adjusted its draft 10-K/A to reflect the correct reference.

We note that you did not include the certifications within this draft amendment that were previously filed as

Exhibit 16 and 17 in your Form 10-K. Please include these certifications with your amended Form 10-K.

58 UTMD Response to Item 3.:

59 Exhibits 16 and 17 are included in UTMD’s draft 10-K/A but were apparently not received by you. UTMD will

60 be sure to include in its final amended filing.

62 Consolidated Financial Statements, page F-1

63 Consolidated Balance Sheet, page F-7

Please refer to prior comment 13. Please present the carrying value of your goodwill and do not show

the accumulated amortization related to your goodwill that was previously recognized prior to the

adoption of SFAS 142. See paragraph 43 and Appendix C of SFAS 142. Please also tell us and disclose

whether or not you perform a two-step impairment test of goodwill pursuant to paragraphs 18-41 of

SFAS 142. We note that your response only addresses paragraphs 23-25 of SFAS 142. Please tell us

and disclose when you perform your annual testing and revise your footnotes to include your

accounting policy associated with testing goodwill.

71 UTMD Response to Item 4.:

72 UTMD has made the requested corrections in the draft 10-K/A.

Please refer to prior comment 11. Please tell us and revise your filing to address the following related

to your revenue recognition policy:

Describe how your revenue recognition policy considers whether persuasive evidence of an

arrangement exists and the selling price to the buyer is fixed or determinable.

Tell us the nature and signification terms of the arrangements with distributors, including any

post shipment obligations, acceptance provisions and return provisions that may exist and

how you account for such obligations. Please tell us why it is appropriate to recognize

revenue upon shipment rather than resale to the ultimate customer.

82 UTMD Response to Item 5.:

83 The following has been added to UTMD’s draft 10-K/A: “Revenue recognized by UTMD is based upon

84 documented arrangements and fixed contracts in which the selling price is fixed prior to completion of an

85 order.”

86 UTMD recognizes revenue upon shipment to distributors as this is when title of the product is transferred.

87 UTMD does not sell on consignment basis through distributors. Distributors do not have at-will return

88 privileges. UTMD maintains a relatively small sales return allowance to account for the possible, yet remote

89 chance, of non-resaleable returns.

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100

Please refer to comment 11(d). We do not agree that a sale with shipping terms of FOB Destination is

the same as a sale for which revenue recognition is appropriate due to meeting all of the criteria to

record revenue based upon a bill and hold basis. For example, for a bill and hold sale, you would

continue to hold the product because the buyer, and not you, requested that due to a substantial

business purpose of the buyer they need to order the goods on a bill and hold basis. Please revise your

financial statements for each period presented to properly consider when title transfers in your

recognition of revenue for transactions where the shipping terms are FOB destination, or tell us why it

is appropriate to continue to record these sales upon shipment under U.S. GAAP, including SAB Topic

13. Tell us the amount of revenue recognized in each period including the latest interim period upon

shipment for transactions where the shipping terms are FOB destination.

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102 UTMD Response to Item 6.:

103 [********UTMD’s response to Item 6 is redacted********]

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Please refer to prior comment 11(f). Please revise the notes to the consolidated financial statements to

include the amount of revenues from your external customers for each product and service or each group of

similar products and services unless it is impracticable to do so. Refer to paragraph 37 of SFAS 131.

108 UTMD Response to Item 7.:

109 UTMD has added “Revenues by Product Category” to its notes in its draft 10-K/A.

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111 Note 3 Investments, page F-16

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Please refer to prior comment 14. We note your revised disclosure consists of the aggregate fair value

of your securities, classified as available-for-sale as well as the gross unrealized gains or losses for

your equity securities. We also note your revised disclosure consists of the contractual maturities

related to your debt securities. Please tell us and revise your filing to clarify the type of securities that

comprise your investment balance as of December 31, 2003 and 2004. Please explain to us why you do

not have any unrealized gains or losses related to your debt securities.

118 UTMD Response to Item 8:

119 UTMD held municipal debt securities, and has modified its draft 10-K/A to disclose as such. UTMD’s debt

120 securities are held through equivalent mutual fund brokerage offerings which pay interest in interim periods.

121 The carrying values of these securities have not changed since acquisition which is why UTMD has not

122 reported any unrealized gains or losses on its debt securities.

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Please refer to prior comment 14. We note that you use the first-in first out method to calculate your

realized gains for the sale of securities. We also note your disclosure on page F-12 that you use the

specific identification method to determine your realized gains and losses related to the sale of your

securities. Please revise your filing to clarify the method that use to calculate your realized gains and

losses related to the sales of your available-for-sale securities.

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130 UTMD Response to Item 9.:

131 UTMD has revised its drafted 10-K/A to clarify the method used.

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133 Note 6. Commitments and Contingencies, page F-18

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10.

Please refer to prior comment 12. Please respond to the following:

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Please revise to disclose the nature of the contingency associated with the FDA, as well as an

estimate of the possible loss or range of loss or state that such an estimate cannot be made.

Refer to paragraph 10 of SFAS 5.

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Confidential Treatment Requested by Greg A. LeClaire

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We note that created a litigation cost reserve for costs that will be incurred through June

2005 associated with the FDA litigation . Revise your filing to disclose the amount of the

reserve that you created as well as to clarify the nature of the reserve that you have created

for this litigation. Discuss why the costs only address the period through June 2005.

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Your policy to record a general reserve in case a lawsuit is filed using your previous long-

term experience does not appear to comply with SFAS 5. Please revise or tell us in more

detail why this policy is appropriate under U.S. GAAP.

145 UTMD Response to Item 10.:

146 The nature of the contingency associated with the FDA is an estimate of litigation expenses required through

147 June 2005. There is no contingency regarding possible losses because such an estimate cannot be made.

148 UTMD has revised Note 6 to identify that based on input from legal counsel at the time the original 10-K was

149 issued, UTMD believed that the FDA case would be resolved by the end of June 2005.

150 In reference to UTMD’s response to prior comment 12, “The actual litigation expenses for product liability and

151 other legal costs associated with the normal course of business have been immaterial to financial results. The

152 amount accrued related to continuing operations in 2004 was $100,000. The Company recognizes this ongoing

153 accrual to its litigation reserve that is included as part of G&A expenses, which is part of Operating Expenses.

154 This litigation expense accrual related to continuing operations is set annually by the board of directors based

155 on a risk assessment and actuarial data. As supplemental information for SEC consideration, the company has

156 defended four product liability lawsuits at a cumulative total litigation cost of $160,000 over the last twelve

157 years, which is less than $20,000 per year or about $40,000 per lawsuit, on the average. All four cases were

158 from the same product family, which suggests that all other UTMD products have negligible product liability

159 risk, based on no product liability lawsuits for the last twelve years. Excluding the Tyco patent infringement

160 litigation expenses and FDA litigation expenses, all other litigation-related expenses have averaged less than

161 $50,000 per year for the last five years.” Despite being immaterial to financial results, as demonstrated by

162 actual last 12-year’s history, UTMD’s normal operating litigation expenses are probable and can be estimated.

163 Therefore UTMD believes it is in compliance with SFAS 5. We refer to paragraph 38 of SFAS 5 which

164 substantiates UTMD’s position on unasserted claims.

165 Note 13. Extraordinary Items, page F-23

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11.

Please refer to prior comment 15. From your response it appears that your patent infringement

settlement with Tyco/Kendall and costs of litigation with FDA reflect a normal risk or operating a

business and do not meet the criteria of paragraphs 19-24 of APB 30 for recognizing these litigation

settlements and costs as extraordinary items. Typically, litigation settlement will not meet the

definition of extraordinary items since most of these settlement and claims arise out of product liability

or antitrust suits that reflect a normal risk of operating a business. Types of litigation settlements that

may meet the criteria to be treated as extraordinary would be truly unusual and unrelated to

operations or the normal operating environment. For example, a claim relating to a class action suit

resulting from a tender offer for a company’s stock may meet the criteria for extraordinary treatment

depending on the specific facts and circumstances. Please amend your filing to comply with APB 30.

Revise Item 6 and MD&A accordingly.

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178 UTMD Response to Item 11:

179 UTMD has revised its draft 10-K/A and Form 10-Q for the Quarter Ended March 31, 2005 to reclassify its

180 previously disclosed extraordinary items.

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12.

Please refer to prior comment 15. We note that you recorded $1,337,000 in 2003 for anticipated

additional litigation related to the Tyco/Kendall settlement. Please explain to us the measurement and timing of

these costs and revise to disclose your accounting policy. That is, if you accrue legal costs related to litigation

instead of expensing these costs as incurred, then you should disclose that policy in the notes to your financial

statements and ensure that your policy is consistent for all litigation and periods presented.

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Confidential Treatment Requested by Greg A. LeClaire

187 UTMD Response to Item 12.:

188 In late 2003, UTMD was near the end of its patent infringement lawsuit with Tyco/Kendall. These costs were

189 recorded as UTMD was in the process of further legal action against Tyco/Kendall for shipping product after

190 the jury rendered its verdict of infringement but before the Appellate Court upheld the District Court’s ensuing

191 judgment. The measurement of these costs was based on UTMD’s actual costs to litigate its primary lawsuit

192 against Tyco/Kendall. Because UTMD accrues legal costs related to probable litigation for which it can

193 reasonably estimate the costs we have revised Note 6 accordingly.

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195 Forms 8-K dated April 19, 2005 and April 20, 2005

196 Exhibit 99.1

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13.

Please refer to prior comment 16. Since you have chosen to present a non-GAAP financial measure

related to your income tax provision rate within your press releases filed under 2.02 of Form 8-K,

please revise future filings to address the following matters and provide us with your proposed revised

disclosures:

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Please present the most directly comparable financial measure calculated and presented in

accordance with GAAP; and a reconciliation, by schedule or other clearly understandable

method, which shall be quantitative for historical non-GAAP measures presented, and

quantitative, to the extent available without unreasonable efforts, for forward-looking

information, of the differences between the non-GAAP financial measure disclosed or

released with the most comparable financial measure or measures calculated and presented

in accordance with GAAP identified in paragraph (a)(1) of Item 100 of Regulation G.

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Please include an enhanced discussion, in sufficient detail related to the following: The

substantive reasons why management believes this non-GAAP measure provides useful

information to investors; the specific manner in which management uses this non-GAAP

measure to conduct or evaluate its business; the economic substance behind management’s

decision to use each measure; and the material limitations associated with the use of this non-

GAAP measure and the manner in which management compensates for these limitations when

using the non-GAAP measure.

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Refer to paragraph (e)(1)(i) of Item 10 of Regulation S-K and Question 8 of the FAQ Regarding

the Use of Non-GAAP Financial Measures dated June 13, 2003.

217 UTMD Response to Item 13.:

218 UTMD does not intend to present non-GAAP information in future filings.

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220 Form 8-K dated May 6, 2006

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14.

We note that you accelerated your stock options to employees, officers, and directors. Explain to us

how you considered Question 10 of FIN 44 in your accounting for the acceleration of these options.

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224 UTMD Response to Item 14.:

225 UTMD determined it will have no accounting consequences as a result of this acceleration of stock option

226 vesting. Vesting acceleration was the only change to these options; there were no changes to the exercise

227 prices. Further, since UTMD currently accounts for stock options under the recognition and measurement

228 principles of APB Opinion 25, including the disclosure-only provisions of the original SFAS 123, no

229 compensation cost from issuing equity instruments has been or is currently required to be recognized in the

230 Company’s financial statements.

231 Representations

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15.

We note your statement that “UTMD understands that, in the event of a subsequent enforcement

proceeding, the Company cannot assert that SEC staff have agreed with its amendments.” Please note that you

many not change, qualify or condition the requested representation in this manner. Please provide all three

acknowledgements in the form previously requested.

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Confidential Treatment Requested by Greg A. LeClaire

236 UTMD Response to Item 15.:

237 We have acknowledged the first two bullet points in the form provided. Under review and advice from legal

238 counsel, we believe your purpose for the third bullet point is for UTMD to concede that it cannot assert that

239 SEC has agreed with its disclosure revisions in an enforcement proceeding. We provided a qualified

240 acknowledgement for the third bullet point accordingly. We do, however, believe that SEC’s comments could

241 be material to UTMD’s defense in an enforcement proceeding, and therefore cannot acknowledge the third

242 bullet point as written.

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244 I trust that UTMD’s responses are now complete to the satisfaction of the SEC. Thank you for your review and

245 assistance.

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247 Sincerely,

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/s/ Greg A. LeClaire

Greg A. LeClaire

Chief Financial Officer

/s/ Kevin L. Cornwell

Kevin L. Cornwell

Chairman & CEO