Note 8 - Commitments and Contingencies

12 Months Ended

Dec. 31, 2018

Notes

Note 8 - Commitments and Contingencies

Note 8 – Commitments and Contingencies

Operating Leases

The Company has a lease agreement for land adjoining its Utah facility for a term of forty years commencing on September 1, 1991.  On September 1, 2001 and subsequent to each fifth lease year, the basic rental was and will be adjusted for published changes in a price index.  The Company also leases an automobile for an employee in Ireland, and prior to late 2017, leased its UK facility. Rent expense charged to operations under these operating lease agreements was approximately $59, $160 and $175 for the years ended December 31, 2018, 2017 and 2016, respectively.

Future minimum lease payments under its lease obligations as of December 31, 2018 were as follows:

Years ending December 31:		Amount
2019	$	61
2020		61
2021		61
2022		46
2023		45
Thereafter		344
Total future minimum lease payments	$	618

Purchase Obligations

On December 31, 2018, the Company entered into a definitive agreement with CSI to purchase CSI’s remaining 4.75 years of exclusive U.S. distribution rights for Femcare’s Filshie Clip System for $21 million, along with approximately $2 million in CSI resaleable inventory.  The closing date occurred on February 1, 2019.

In addition, the Company has obligations to purchase raw materials for use in its manufacturing operations.  The Company has the right to make changes in, among other things, purchase quantities, delivery schedules and order acceptance.

Product Liability

The Company is self-insured for product liability risk. “Product liability” is an insurance industry term for the cost of legal defense and possible damages awarded as a result of use of a company’s product during a procedure which results in an injury of a patient.  The Company maintains a reserve for product liability litigation and damages consistent with its previous long-term experience.  Actual product liability litigation costs and damages during the last three reporting years have been immaterial, which is consistent with the Company’s overall history.  

The Company absorbs the costs of clinical training and trouble-shooting in its on-going operating expenses.

Warranty Reserve

The Company’s published warranty is: “UTMD warrants its products to conform in all material respects to all published product specifications in effect on the date of shipment, and to be free from defects in material and workmanship for a period of thirty (30) days for supplies, or twenty-four (24) months for equipment, from date of shipment.  During the warranty period UTMD shall, at its option, replace any products shown to UTMD's reasonable satisfaction to be defective at no expense to the Purchaser or refund the purchase price.”

UTMD maintains a warranty reserve to provide for estimated costs which are likely to occur. The amount of this reserve is adjusted, as required, to reflect its actual experience. Based on its analysis of historical warranty claims and its estimate that existing warranty obligations are immaterial, no warranty reserve was made at December 31, 2018 or December 31, 2017.

Litigation

The Company has been involved in lawsuits which are an expected consequence of its operations and in the ordinary course of business.  Presently, there is no litigation or threatened litigation for which the Company believes the outcome may be material to its financial results.  The Company applies its accounting policy to accrue legal costs that can be reasonably estimated.