10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

x     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

OR

o     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                to  

Commission File No. 001-12575

UTAH MEDICAL PRODUCTS INC

(Exact name of Registrant as specified in its charter)

UTAH	87-0342734
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

7043 South 300 West

Midvale, Utah  84047

(Address of principal executive offices) (Zip Code)

(801) 566-1200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class:	Trading Symbol:	Name of each exchange on which registered:
Common stock, $0.01 par value	UTMD	NASDAQ

 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 o 

 Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes x   No o 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated fi ler, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.   

Large accelerated filer o	Accelerated filer x
Non-accelerated filer o	Smaller reporting company o
	Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o   No x 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of May 7, 2020: 3,642,431. 

UTAH MEDICAL PRODUCTS, INC.

INDEX TO FORM 10-Q

PART I - FINANCIAL INFORMATIONPAGE 

Item 1.Financial Statements 

Consolidated Condensed Balance Sheets as of 

March 31, 2020 and December 31, 2019    2 

Consolidated Condensed Statements of Income for the    

three months ended March 31, 2020 and March 31, 2019    3 

Consolidated Condensed Statements of Cash Flows for 

three months ended March 31, 2020 and March 31, 2019    4 

Consolidated Statement of Stockholders’ Equity 

three months ended March 31, 2020 and March 31, 2019    5 

Notes to Consolidated Condensed Financial Statements    6 

Item 2.Management’s Discussion and Analysis of  

Financial Condition and Results of Operations    9 

Item 3.Quantitative and Qualitative Disclosures About Market Risk    17 

Item 4.Controls and Procedures    17 

PART II – OTHER INFORMATION

Item 1.Legal Proceedings  18 

Item 1A.Risk Factors  18 

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds  19 

Item 6.Exhibits    20 

SIGNATURES    20 

PART I  -  FINANCIAL INFORMATION
Item 1.  Financial Statements
UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS AS OF
MARCH 31, 2020 AND DECEMBER 31, 2019
(in thousands)
			(unaudited)	(audited)
ASSETS			MARCH 31, 2020	DECEMBER 31, 2019
Current assets:
	Cash & Investments		$ 39,613	$ 42,787
	Accounts & other receivables, net		4,410	4,742
	Inventories		6,757	6,913
	Other current assets		443	444
		Total current assets	51,223	54,886
Property and equipment, net			10,224	10,314
Operating Lease - Right of Use Assets, net			404	414
Goodwill			13,547	13,961
	Other intangible assets		53,245	55,205
	Other intangible assets - accumulated amortization		(25,449)	(24,993)
Other intangible assets, net			27,796	30,212
		Total assets	$ 103,194	$ 109,787
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable		$ 1,057	$ 1,098
	Accrued expenses		2,744	2,350
		Total current liabilities	3,801	3,448
Deferred tax liability - Femcare IIA			2,110	2,110
Other long term liabilities			2,008	2,239
Operating Lease Liability			366	376
Deferred income taxes			523	521
		Total liabilities	8,808	8,694
Stockholders' equity:
	Preferred stock - $.01 par value; authorized - 5,000
	shares; no shares issued or outstanding		-	-
	Common stock - $.01 par value; authorized - 50,000
	shares; issued - March 31, 2020, 3,642 shares and
	December 31, 2019, 3,722 shares		36	37
	Accumulated other comprehensive loss		(12,232)	(9,782)
	Additional paid-in capital		-	18
	Retained earnings		106,582	110,820
		Total stockholders' equity	94,386	101,093
		Total liabilities and stockholders' equity	$ 103,194	$ 109,787
see notes to consolidated condensed financial statements

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UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND MARCH 31, 2019
(in thousands, except per share amounts)
(unaudited)
			THREE MONTHS ENDED
			MARCH 31,
			2020	2019
Sales, net			$ 10,902	$ 10,732
Cost of goods sold			4,066	3,959
	Gross profit		6,836	6,773
Operating expense
	Selling, general and administrative		2,838	2,557
	Research & development		135	115
		Total operating expenses	2,973	2,672
	Operating income		3,863	4,101
Other income			125	36
	Income before provision for income taxes		3,988	4,137
Provision for income taxes			848	998
		Net income	$ 3,140	$ 3,139
Earnings per common share (basic)			$ 0.85	$ 0.84
Earnings per common share (diluted)			$ 0.84	$ 0.84
Shares outstanding (basic)			3,707	3,722
Shares outstanding (diluted)			3,724	3,738
Other comprehensive income (loss):
	Foreign currency translation net of taxes of   $0 in all periods		$ (2,449)	$ 948
		Total comprehensive income	$ 691	$ 4,087
see notes to consolidated condensed financial statements

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UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND MARCH 31, 2019
(in thousands - unaudited)
				MARCH 31,
				2020	2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income				$ 3,140	$ 3,139
Adjustments to reconcile net income to net
cash provided by operating activities:
	Depreciation			175	179
	Amortization			1,630	1,271
	Provision for (recovery of) losses on accounts receivable			(14)	-
	Amortization of Right of Use Assets			9	10
	Deferred income taxes			(97)	(142)
	Stock-based compensation expense			23	28
	Tax benefit attributable to exercise of stock options			3	13
Changes in operating assets and liabilities:
		Accounts receivable and other receivables		261	(940)
		Inventories		158	(2,255)
		Prepaid expenses and other current assets		(12)	(23)
		Accounts payable		(31)	1,868
		Accrued expenses		429	212
			Total adjustments	2,534	221
			Net cash provided by operating activities	5,674	3,360
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for:
	Property and equipment			(454)	(12)
	Intangible assets			-	(21,000)
			Net cash used in investing activities	(454)	(21,012)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock - options				48	97
Common stock purchased and retired				(6,426)	-
Payment of dividends				(1,042)	(1,027)
			Net cash used in financing activities	(7,420)	(930)
Effect of exchange rate changes on cash				(974)	135
Net decrease in cash and cash equivalents				(3,174)	(18,447)
Cash at beginning of period				42,787	51,112
Cash at end of period				$ 39,613	$ 32,665
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
	Cash paid during the period for income taxes			$ 285	$ 406
	Cash paid during the period for interest			-	-
see notes to consolidated condensed financial statements

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UTAH MEDICAL PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Three Months Ended March 31, 2020 and 2019
(In thousands - unaudited)
				Accumulated
			Additional	Other		Total
	Common Stock		Paid-in	Comprehensive	Retained	Stockholders'
	Shares	Amount	Capital	Income	Earnings	Equity
Balance at December 31, 2019	3,722	$ 37	$ 18	$ (9,783)	$ 110,820	$ 101,092
Shares issued upon exercise of employee  stock options for cash	1	-	47	-	-	47
Stock option compensation expense	-	-	23	-	-	23
Common stock purchased and retired	(80)	(1)	(89)	-	(6,336)	(6,426)
Foreign currency translation adjustment	-	-	-	(2,449)	-	(2,449)
Common stock dividends	-	-	-	-	(1,042)	(1,042)
Net income	-	-	-	-	3,140	3,140
Balance at March 31, 2020	3,642	$ 36	$ 0	$ (12,232)	$ 106,582	$ 94,386
Balance at December 31, 2018	3,720	$ 37	$ 121	$ (11,290)	$ 100,124	$ 88,992
Shares issued upon exercise of employee  stock options for cash	3	-	97	-	-	97
Stock option compensation expense	-	-	28	-	-	28
Foreign currency translation adjustment	-	-	-	948	-	948
Common stock dividends	-	-	-	-	(1,028)	(1,028)
Net income	-	-	-	-	3,139	3,139
Balance at March 31, 2019	3,723	$ 37	$ 246	$ (10,343)	$ 102,235	$ 92,176
see notes to consolidated condensed financial statements

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UTAH MEDICAL PRODUCTS, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(unaudited)

(1)The unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by accounting principles generally accepted in the United States.  These statements should be read in conjunction with the financial statements and notes included in the Utah Medical Products, Inc. ("UTMD" or "the Company") annual report on Form 10-K for the year ended December 31, 2019.  In the opinion of management, the accompanying financial statements include all adjustments (consisting only of normal recurring adjustments) necessary to summarize fairly the Company's financial position and results of operations. Currency amounts are in thousands except per-share amounts and where noted. 

(2) Recent Accounting Standards.

The Company has determined that recently issued accounting standards will either have no material impact on its consolidated financial position, results of operations or cash flows, or will not apply to its operations.

(3)Inventories at March 31, 2020 and December 31, 2019 consisted of the following: 

	March 31, 2020	December 31, 2020
Finished goods	$ 1,437	$ 1,708
Work-in-process	1,237	1,022
Raw materials	4,083	4,183
Total	$ 6,757	$ 6,913

(4)Stock-Based Compensation. At March 31, 2020, the Company has stock-based employee compensation plans which authorize the grant of stock options to eligible employees and directors.  The Company accounts for stock compensation under FASB Accounting Standards Codification (“ASC”) 718, Compensation - Stock Compensation.  This statement requires the Company to recognize compensation cost based on the grant date fair value of options granted to employees and directors.  In the quarters ended March 31, 2020 and 2019, the Company recognized $23 and $28, respectively, in stock based compensation cost. 

(5) 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 were immaterial, no warranty reserve was made at December 31, 2019 or March 31, 2020.

(6)  1Q 2020 global revenues (USD) by product category:

		Domestic		Outside US		Total
Obstetrics	$	909	$	249	$	1,158
Gynecology/Electrosurgery/Urology		2,817		3,075		5,892
Neonatal		1,141		443		1,584
Blood Pressure Monitoring and Accessories		1,576		692		2,268
Total	$	6,443	$	4,459	$	10,902

(7)  Leases

UTMD has operating leases for a portion of its parking lot at its Midvale facility and an automobile at its Ireland facility.  The remaining lease term on the parking lot is 12 years and on the automobile it is 3 years.  There are no options to extend or terminate the leases.  UTMD has no other leases yet to commence.  As neither lease contains

6

implicit rates, UTMD’s incremental borrowing rate, based on information available at adoption date, was used to determine the present value of the leases.

The components of lease cost were as follows:	Three Months Ended March 31, 2020
Operating Lease Cost (in thousands)	$15
Right-of-Use Assets in exchange for new operating lease obligations	0
Other Information	Three Months Ended March 31, 2020
Weighted Average Remaining Lease Term  - Operating Leases	11 years
Weighted Average Discount Rate – Operating Leases	5.4%

Operating lease liabilities/ payments	(in thousands)
Operating lease payments, 2020	$60
Operating lease payments, 2021	60
Operating lease payments, 2022	45
Operating lease payments, 2023	45
Operating lease payments, 2024	45
Thereafter	299

Reconciliation of operating lease liabilities/ payments to operating lease liabilities	(in thousands)
Total operating lease liabilities/ payments	$536
Operating lease liabilities	404
Present value adjustment	$132

Maturities of lease liabilities were as follows:	(in thousands)
Year ending December 31,
2020	$38
2021	40
2022	27
2023	29
2024	30
Thereafter	248

(8)  Distribution Agreement Purchase. UTMD completed the purchase of exclusive U.S. distribution rights for the Filshie® Clip System from CooperSurgical, Inc. (CSI) on February 1, 2019. The $21,000 purchase price represents an identifiable intangible asset which is being straight-line amortized and recognized as part of G&A expenses over the now 3.58 year remaining life of the prior CSI agreement with Femcare.

9) Earnings Per Share. Basic earnings per share is calculated by dividing net income attributable to the common stockholders of the company by the weighted average number of common shares outstanding during the period.  Diluted earnings per share is calculated by assuming the exercise of stock options at the closing price of stock at the end of first quarter 2020.

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The following table reconciles the numerator and the denominator used to calculate basic and diluted earnings per share:

(in thousands)	Three months ended
	March 31,
	2020	2019
Numerator
Net income	3140	3139
Denominator
Weighted average shares, basic	3707	3722
Dilutive effect of stock options	17	16
Diluted shares	3724	3738
Earnings per share, basic	0.85	0.84
Earnings per share, diluted	0.84	0.84

(10) Subsequent Events.  UTMD has evaluated subsequent events through the date the financial statements were issued, and concluded there were no other events or transactions during this period that required recognition or disclosure in its financial statements.  The COVID-19 pandemic itself was not a subsequent event.  However, the negative impact of the pandemic in the ensuing 2Q 2020 to date has been substantially greater than in 1Q 2020.  More detail is provided in Item 2. 

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Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

General

Utah Medical Products, Inc. (UTMD) manufactures and markets a well-established range of specialty medical devices.  The Company’s Form 10-K Annual Report for the year ended December 31, 2019 provides a detailed description of products, technologies, markets, regulatory issues, business initiatives, resources and business risks, among other details, and should be read in conjunction with this report.  Because of the relatively short span of time, results for any given three month period in comparison with a previous three month period may not be indicative of comparative results for the year as a whole.  Currency amounts in the report are in thousands, except per share amounts or where otherwise noted.  Currencies in this report are denoted as $ or USD = U.S. Dollars; AUD = Australia Dollars; £ or GBP = UK Pound Sterling; C$ or CAD = Canadian Dollars; and € or EUR = Euros.  

Analysis of Results of Operations

a)Overview 

Income statement results in the first quarter (1Q) of 2020 compared to 1Q 2019 were as follows:

	1Q 2020	1Q 2019	change
Net Sales	$ 10,902	$ 10,732	+1.6 %
Gross Profit	6,836	6,773	+0.9 %
Operating Income	3,863	4,102	(5.8%)
Income Before Tax	3,988	4,137	(3.6%)
Net Income	3,140	3,139	-
Earnings per Share	$ 0.843	$ 0.840	+0.4 %

Profit margins in 1Q 2020 compared to 1Q 2019 follow:

	1Q 2020 (JAN – MAR)	1Q 2019 (JAN – MAR)
Gross Profit Margin (Gross Profit/ sales):	62.7%	63.1%
Operating Income Margin (Operating Income/ sales):	35.4%	38.2%
EBT Margin (Profits before Income Taxes/ sales):	36.6%	38.5%
Net Income Margin (Profit after Taxes/ sales):	28.8%	29.2%

Although sales and gross profits were higher in 1Q 2020 than in 1Q 2019, the corona virus (COVID-19) pandemic substantially hampered financial results beginning in March.  UTMD’s gynecology/ electrosurgery/ urology (GYN) product category is primarily comprised of devices used in procedures which are considered “elective” in the current pandemic. Sales of the Filshie® Clip System (Filshie devices), which are included in the GYN product category, were $764 (+83%) higher in 1Q 2020 than in 1Q 2019 because UTMD first began selling Filshie devices directly to domestic end-users in February 2019 (part way through 1Q 2019), after acquiring the exclusive distribution rights from CooperSurgical Inc.  Although a very short span of time, a better comparison might be that domestic Filshie device sales were 25% lower in March 2020 compared to the January/February 2020 monthly average.  Outside the U.S. (OUS), Filshie device sales, which were for the full quarter in each year, were $513 (19%) lower. On a constant currency basis (foreign currency sales converted to USD at the same foreign currency exchange (FX) rate as in the prior year’s 1Q), OUS Filshie device sales were $440 (17%) lower.  In other words, at least 14% of the decline in OUS Filshie device sales was due to a stronger USD in 1Q 2020 compared to 1Q 2019.

Because 26% of consolidated sales and 32% of consolidated operating expenses (in USD terms) are in foreign currencies, the change in FX rates for sales and expenses OUS had an impact on period-to-period relative financial results. FX rates for income statement purposes are transaction-weighted averages. The average FX rates from the applicable foreign currency to USD during 1Q 2020 and 1Q 2019 follow:

	1Q 2020	1Q 2019	Change
GBP	1.283	1.304	(1.6%)
EUR	1.108	1.134	(2.3%)
AUD	0.655	0.713	(8.1%)
CAD	0.750	0.753	(0.5%)

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The weighted average negative impact on all foreign currency sales was 2.6%, reducing reported USD sales by $78 relative to the same foreign currency sales in 1Q 2019.  In constant currency terms, total consolidated 1Q 2020 sales were up $247 (+2.3%).

UTMD’s 1Q 2020 Gross Profit Margin was squeezed by higher direct materials costs. The productivity of UTMD’s direct labor and manufacturing overhead expenses were consistent with the prior year.

UTMD’s Operating Income in 1Q 2020 was $238 lower than in 1Q 2019 because of a $368 higher expense from amortizing the purchase price that UTMD paid CSI to acquire the exclusive U.S. Filshie distribution rights.  The purchase price is an identifiable intangible asset (IIA) that will be amortized at a rate of $1,105 per quarter until October 2023 (14.3 more quarters), as part of General and Administrative (G&A) expenses.  Excluding the CSI IIA amortization expense, UTMD’s Operating Income margin was 45.6% in 1Q 2020 compared to 45.1% in 1Q 2019.

Income Before Tax (EBT) was down less than Operating Income because 1Q 2020 non-operating income was $89 higher compared to 1Q 2019.  The higher non-operating income was due to a $44 gain in the USD-remeasured value of foreign currency bank balances instead of a $50 loss reported in 1Q 2019.  Net Income and Earnings Per Share (EPS) were essentially the same in both periods as the 21.3% consolidated income tax provision rate in 1Q 2020 was lower than the 24.1% rate in 1Q 2019.  The 80,000 UTMD shares repurchased by UTMD in 1Q 2020 had only a small impact on diluted shares for calculating EPS as the shares were purchased in March and the formula for calculating diluted shares is time-weighted.

UTMD’s March 31, 2020 Balance Sheet, in the absence of debt, remained strong.  Ending Cash and Investments were $39.6 million on March 31, 2020 compared to $42.8 million on December 31, 2019, after using $6.4 million

to repurchase 80,000 UTMD shares in the open market in March, and paying $1.0 million in cash dividends to stockholders during 1Q 2020. Stockholders’ Equity (SE) declined $6.7 million in the three month period from December 31, 2019 because the $7.4 million in stock repurchases and dividends reduced SE.  The lower converted USD value of fixed assets outside the U.S. (OUS) also helped reduce SE.  FX rates for Balance Sheet purposes are the applicable rates at the end of each reporting period. The FX rates from the applicable foreign currency to USD for assets and liabilities at the end of 1Q 2020 and the end of 2019 follow:

	3-31-20	12-31-19	Change
GBP	1.245	1.327	(6.1%)
EUR	1.102	1.123	(1.8%)
AUD	0.614	0.703	(12.6%)
CAD	0.708	0.771	(8.2%)

b)Revenues 

Terms of sale are established in advance of UTMD’s acceptance of customer orders.  In the U.S., Ireland, UK and Australia prior to 2017, UTMD generally accepted orders directly from and shipped directly to end user clinical facilities, as well as third party medical/surgical distributors, under UTMD’s Standard Terms and Conditions (T&C) of Sale. The same was true in 2017 with the addition of direct shipments to end user facilities in Canada and France. About 14% of UTMD’s domestic end user sales, excluding Femcare’s Filshie Clip System sales to its exclusive U.S. distributor, CooperSurgical Inc. (CSI), go through third party med/surg distributors which contract separately with clinical facilities to provide purchasing, storage and scheduled delivery functions for the applicable facility.  UTMD’s T&C of Sale to end user facilities are substantially the same in the U.S., Canada, Ireland, UK, France and Australia.

UTMD may have separate discounted pricing agreements with a specific clinical facility or group of affiliated facilities based on volume of purchases.  Pricing agreements which are documented arrangements with clinical facilities, or groups of affiliated facilities, if applicable, are established in advance of orders accepted or shipments made. For existing customers, past actual shipment volumes typically determine the fixed price by part number for the next agreement period of one year. For new customers, the customer’s best estimate of volume is usually accepted by UTMD for determining the ensuing fixed prices for the agreement period. Prices are not adjusted after an order is accepted. For the sake of clarity, the separate pricing agreements with clinical facilities based on volume of purchases disclosure is not inconsistent with UTMD’s disclosure that the selling price is fixed prior to the acceptance of a specific customer order.  

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Total consolidated 1Q 2020 UTMD sales were $169 (+1.6%) higher than in 1Q 2019. Constant currency sales were $247 (+2.3%) higher. U.S. domestic sales were 11% higher and OUS sales were 10% lower in USD terms. Because of the relatively short span of time, results for any given three month period in comparison with a previous three month period may not be indicative of comparative results for the year as a whole. Furthermore, sales activity changed dramatically during the quarter due to the COVID-19 pandemic. Forward-looking statements in the current challenging economic environment resulting from the COVID-19 pandemic have a much higher level of uncertainty.

Domestic sales in 1Q 2020 were $6,443 compared to $5,794 in 1Q 2019.  The components of domestic sales include 1) “direct other device sales” of UTMD’s medical devices to user facilities (and med/surg stocking distributors for hospitals), excluding Filshie device sales, 2) “OEM sales” of components and other products manufactured by UTMD for other medical device and non-medical device companies, and 3) “direct Filshie device sales”, which beginning in February 2019 were by UTMD direct to U.S. clinical users. Direct other device sales, representing 52% of total domestic sales, were $125 (4%) lower in 1Q 2020 than in 1Q 2019. OEM sales, representing 21% of total domestic sales, were just $9 (+1%) higher. Direct Filshie device sales were $764 (+83%) higher in 1Q 2020 compared to 1Q 2019.  However, the average daily rate of direct U.S. Filshie device sales was 30% lower in March than in the first two months of 1Q 2020.  

In the short time period during April ensuing the end of 1Q 2020, at possibly the height of concern regarding COVID-19, incoming U.S. orders for  Filshie devices have been 63% lower than in the first two months of the year.  Assuming April sales rate continues through June would yield just $700  in 2Q 2020 direct U.S. Filshie device sales compared to $1,979 in 2Q 2019.  A number of UTMD’s other gynecology/ electrosurgery/ urology devices are also considered “elective” in the current environment, but unless economic conditions deteriorate to the point where the quality of essential care in general continues to suffer, demand for UTMD’s critical care devices, including devices used in L&D and the NICU, should remain consistent.

OUS sales in 1Q 2020 were $4,459 compared to $4,938 in 1Q 2019. OUS sales invoiced in GBP, EUR, AUD and CAD currencies were $78 lower solely as a result of changes in FX rates.  In other words, at least 16% of the lower OUS sales was due to a stronger USD.  Foreign currency OUS sales in 1Q 2020 were $2,866, which was 64% of all OUS sales and 26% of total consolidated sales.  Foreign currency OUS sales in 1Q 2019 were $3,206, which was 65% of all OUS sales and 30% of total consolidated sales.  In USD terms, OUS Filshie device sales were $513 (19%) lower.  OUS direct end-user sales in USD terms were 26% lower in Ireland, 22% lower in Canada, 12% lower in France, 11% lower in the UK and 9% lower in Australia.  Because all of the OUS direct end-user sales were in foreign currencies, a portion of the decline was due to the stronger USD as noted in the FX rate table above. Although Filshie device sales to OUS distributors were 36% lower in 1Q 2020 compared to 1Q 2019, some of the difference was just uneven order pattern as distributors order larger quantities of devices in less frequent intervals compared to direct users.  

Recognizing a high level of uncertainty, a projection of the ensuing 2Q 2020 consolidated revenues at the current April incoming order rate extrapolates to 40% lower 2Q 2020 consolidated revenues compared to 2Q 2019 revenues.  What happens after 2Q 2020 depends in large part not only on when hospitals once again allow so-called elective procedures, but also on when patients again feel confident in going to the hospital without significant risk of contracting an unwanted disease.  

Trade sales are sales to third parties, excluding sales from one UTMD entity to another, which are called intercompany sales. Intercompany sales and profits are eliminated from consolidated financial results. Ireland subsidiary 1Q 2020 trade sales were $185 (14%) lower than in 1Q 2019 helped in part by an average 2.3% weaker EUR.  Ireland EUR sales were €142 (12%) lower. Trade sales in 1Q 2020 by UTMD’s UK subsidiary, Femcare Ltd, were $183 (13%) lower, while in GBP terms, UK trade sales were £126 (12%) lower than in 1Q 2019. Femcare Ltd trade sales include Filshie device sales directly to France medical facilities where the elective procedure restriction effects of COVID-19 may have exhibited earlier than in the UK. Trade sales in 1Q 2020 by UTMD’s Australia subsidiary to Australian end user facilities were $37 (9%) lower than in 1Q 2019, but only AUD 4 (less than 1%) lower as the AUD was the weakest foreign currency relative to the USD, down in value more than 8%.  Trade sales by UTMD’s Canada subsidiary to Canadian end user facilities in 1Q 2020 were $123 (22%) lower than in 1Q 2019, representing the poorest sales results of UTMD’s foreign direct Filshie device sales, leveraged down only slightly by a weaker CAD. Canada subsidiary sales were CAD 160 (21%) lower. Because of the relatively short span of time, sales results for any given three month period in comparison with a previous three month period may not be indicative of comparative results for the year as a whole.  

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The following table provides USD sales amounts divided into general product categories for total sales and the subset of OUS sales:

Global revenues (USD) by product category:

	1Q 2020	%	1Q 2019	%
Obstetrics	$ 1,158	11	$ 1,339	12
Gynecology/ Electrosurgery/ Urology	5,892	54	5,582	52
Neonatal	1,584	14	1,510	14
Blood Pressure Monitoring and Accessories*	2,268	21	2,301	22
Total:	$10,902	100	$ 10,732	100

OUS revenues (USD) by product category:

	1Q 2020	%	1Q 2019	%
Obstetrics	$    249	6	$    312	6
Gynecology/ Electrosurgery/ Urology	3,075	69	3,504	71
Neonatal	443	10	340	7
Blood Pressure Monitoring and Accessories*	692	15	782	16
Total:	$ 4,459	100	$ 4,938	100

*includes molded components sold to OEM customers. 

c)Gross Profit (GP) 

GP results from subtracting the costs of manufacturing and shipping products to customers. UTMD’s GP was $63 (0.9%) higher in 1Q 2020 than in 1Q 2019 because of higher revenues.  However, UTMD’s GP Margin was slightly lower at 62.7% in 1Q 2020 compared to 63.1% in 1Q 2019 due to higher direct material costs. Otherwise, the Company maintained the productivity of its direct labor and manufacturing overhead costs in its manufacturing operations consistent with the prior 1Q 2019 period.  

d)Operating Income  

Operating Income results from subtracting Operating Expenses from GP. Operating Expenses, comprised of G&A expenses, sales and marketing (S&M) expenses and product development (R&D) expenses, were $2,973 in 1Q 2020 (27.3% of sales) compared to $2,671 in 1Q 2019 (24.9% of sales). Ignoring the CSI IIA amortization expense which was $368 higher than in 1Q 2019, Operating Expenses were $1,868 (17.1% of sales) in 1Q 2020, and $1,935 (18.0% of sales) in 1Q 2019.  A stronger USD in this instance helped Operating Income performance by reducing OUS Operating Expenses in USD terms by $20, the reduction split by Femcare GBP IIA amortization expense of $8 and all other OUS Operating Expenses of $12.  

Consolidated G&A expenses were $2,419 (22.2% of sales) in 1Q 2020 compared to $2,140 (19.9% of sales) in 1Q 2019. The G&A expenses in 1Q 2020 included $512 (4.7% of sales) of non-cash expense from the amortization of IIA resulting from the 2011 Femcare acquisition, which were $520 (4.8% of sales) in 1Q 2019.  The lower USD amortization expense was the result of the stronger USD, as the Femcare amortization expense in GBP was £399 in both periods. In addition, 1Q 2020 G&A expenses included $1,105 (10.1% of sales) IIA amortization expense resulting from the purchase of the CSI remaining U.S. exclusive Filshie distribution rights, which was $737 (6.9% of sales) in 1Q 2019.  Excluding both Filshie-related non-cash IIA amortization expenses, G&A expenses were $802 (7.4% of sales) in 1Q 2020 compared to $883 (8.2% of sales) in 1Q 2019.  The change in FX rates reduced 1Q 2020 OUS G&A expenses excluding IIA amortization expense by $8. The lower 1Q 2020 constant currency G&A expenses were due to lower U.S. G&A salaries including stock option expense, and lower regulatory consulting expenses in Australia.

S&M expenses were $419 (3.8% of sales) in 1Q 2020 compared to $416 (3.9% of sales) in 1Q 2019.  The change in FX rates reduced 1Q 2020 OUS S&M expenses by $4.   

R&D expenses in 1Q 2020 were $135 (1.2% of sales) compared to $115 (1.1% of sales) in 1Q 2019. Since almost all R&D is being carried out in the U.S., there was negligible FX rate impact.   

In summary, Operating Income in 1Q 2020 was $3,863 (35.4% of sales) compared to $4,102 (38.2% of sales) in 1Q 2019.  The additional $368 CSI IIA amortization expense accounted for the lower Operating Income and Operating Income Margin.

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Summary comparison of (USD) consolidated Operating Expenses:

	1Q 2020	1Q 2019
S&M Expense	419	416
R&D Expense	135	115
G&A Expense:
CSI IIA amortization	1,105	737
Femcare IIA amortization	512	520
All Other G&A Expenses	802	883
Total Operating Expenses:	2,973	2,671

e)Non-operating expense/ Non-operating income 

Non-operating expense/ Non-operating income includes the combination of 1) expenses from loan interest and bank fees; 2) expenses or income from losses or gains from remeasuring the value of EUR cash bank balances in the UK, and GBP cash balances in Ireland, in USD terms; and 3) income from rent of underutilized property, investment income and royalties received from licensing the Company’s technology. Non-operating expense is negative Non-operating income.  Net Non-operating income in 1Q 2020 was $125 compared to $36 in 1Q 2019.  The difference was due to remeasured USD value of foreign currency bank balances.  In 1Q 2020, UTMD realized a $44 gain from remeasuring the value of EUR cash bank balances in the UK, and GBP cash balances in Ireland, in USD terms.  In 1Q 2019, UTMD realized a $50 loss from remeasuring the value of EUR cash bank balances in the UK, and GBP cash balances in Ireland, in USD terms.

f)Income Before Income Taxes (EBT) 

Income before income taxes (EBT) results from adding net Non-operating income to Operating Income.  Consolidated 1Q 2020 EBT was $3,988 (36.6% of sales) compared to $4,137 (38.5% of sales) in 1Q 2019.  The $149 (3.6%) lower 1Q 2020 EBT compared to 1Q 2019 was due to the $368 higher CSI IIA amortization expense included in G&A Operating Expense.     

The EBT of Utah Medical Products, Inc. in the U.S. was $2,497 in 1Q 2020 compared to $2,628 in 1Q 2019. The EBT of Utah Medical Products, Ltd (Ireland) was EUR 1,116 in 1Q 2020 compared to EUR 814 in 1Q 2019. The EBT of Femcare Group Ltd (Femcare Ltd., UK and Femcare Australia Pty Ltd) was GBP 148 in 1Q 2020 compared to GBP 585 in 1Q 2019. The 1Q 2020 EBT of Utah Medical Products Canada, Inc. (dba Femcare Canada) was CAD 257 compared to CAD 355 in 1Q 2019.  The lower Femcare Group and Femcare Canada EBT was primarily the result of lower Filshie device sales.  The higher UTMD Ireland EBT was primarily due to consistent international trade sales of pressure monitoring kits combined with higher intercompany shipments of Filshie Sterishot kits to Australia and Filshie clips to the U.S. after depletion of the inventory that UTMD acquired from CSI in 2019.

EBITDA is a non-US GAAP metric that measures profitability performance without factoring in effects of financing, accounting decisions regarding non-cash expenses, capital expenditures or tax environments.  Excluding the noncash effects of depreciation, amortization of intangible assets and stock option expense, 1Q 2020 consolidated EBT excluding the remeasured bank balance currency gain or loss and interest expense (“adjusted consolidated EBITDA”) were $5,772 (+1.9%) compared to $5,665 in 1Q 2019.  UTMD’s adjusted consolidated EBITDA as a percentage of sales was 52.9% in 1Q 2020 compared to 52.8% in 1Q 2019.  Management believes that this operating metric provides meaningful supplemental information to both management and investors and confirms UTMD’s continued excellent financial performance.

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UTMD’s non-US GAAP adjusted consolidated EBITDA is the sum of the following elements in the table below, each of which is a US GAAP number:  

	1Q 2020	1Q 2019
EBT	$3,988	$4,137
Depreciation Expense	175	179
Femcare IIA Amortization Expense	512	520
CSI IIA Amortization Expense	1,105	737
Other Non-Cash Amortization Expense	13	14
Stock Option Compensation Expense	23	28
Interest Expense	-	-
Remeasured Foreign Currency Balances	(44)	50
UTMD non-US GAAP EBITDA:	$5,772	$5,665

g)Net Income 

Net Income in 1Q 2020 of $3,140 was essentially the same as Net Income of $3,139 in 1Q 2019. The average consolidated income tax provisions (as a percent of EBT) in 1Q 2020 and 1Q 2019 were 21.3% and 24.1%, respectively. The income tax provision for 1Q 2020 was $114 lower than it would have been using the 1Q 2019 rate. The lower combined tax provision rate resulted from a lower U.S. GILTI tax estimate on foreign earnings (included by Congress in the December 2017 TCJA), and a shift in taxable income of foreign subsidiaries with differing income tax rates. The income tax provision rate for the full year of 2019 at 20.9% was closer to the 1Q 2020 provision rate.

h)  Earnings Per Share (EPS) 

EPS are consolidated Net Income divided by the weighted average number of shares of stock outstanding (diluted to take into consideration stock option awards which are “in the money,” i.e., have exercise prices below the applicable period’s weighted average market value). EPS in 1Q 2020 were practically the same as in 1Q 2019, consistent with NI because diluted shares used to calculate EPS were only slightly lower.  Diluted shares were 3,724,156 in 1Q 2020 compared to 3,738,373 in 1Q 2019.  The lower diluted shares in 1Q 2020 were the combined result of 5,000 shares repurchased in May 2019 and 80,000 shares repurchased in March 2020, offset by employee option exercises, a new employee option award of 26,300 shares in late March 2020 and a higher dilution factor for unexercised options due to a higher share price. The number of shares used for calculating EPS was higher than ending shares because of a time-weighted calculation of average outstanding shares plus dilution from unexercised employee and director options. In other words, the main benefit to EPS from the March share repurchase will not occur until 2Q 2020.

Outstanding shares at the end of 1Q 2020 were 3,642,431 compared to 3,721,757 at the end of calendar year 2019. The difference was due to the 80,000 share repurchase less 674 shares in employee option exercises during 1Q 2020. For comparison, outstanding shares were 3,722,706 at the end of 1Q 2019. The total number of outstanding unexercised employee and outside director options at March 31, 2020 was 77,315 at an average exercise price of $64.71, including shares awarded but not yet vested.  This compares to 57,350 unexercised option shares at the end of 1Q 2019 at an average exercise price of $57.90/ share, including shares awarded but not vested.

The number of shares added as a dilution factor in 1Q 2020 was 17,313 compared to 16,326 in 1Q 2019. In March 2020, 26,300 option shares were awarded to 48 employees at an exercise price of $77.05 per share. No options were awarded in 2019.  UTMD paid $1,042 ($0.280/share) in dividends to stockholders in 1Q 2020 compared to $1,027 ($0.275/ share) paid in 1Q 2019. Dividends paid to stockholders during 1Q 2020 were 33% of NI.    

In March 2020, UTMD repurchased 80,000 of its shares in the open market at $80.32/ share. In May 2019, UTMD repurchased 5,000 shares at $79.52/ share.  No other shares were repurchased in 2019. The Company retains the strong desire and financial ability for repurchasing its shares at a price it believes is attractive for remaining stockholders. UTMD’s closing share price at the end of 1Q 2020 was $94.05, down 13% from the $107.90 closing price at the end of 2019.  The closing share price at the end of 1Q 2019 was $88.25.

i) Return on Equity (ROE) 

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ROE is the portion of Net Income retained by UTMD to internally finance its growth, divided by the average accumulated stockholders’ equity for the applicable time period.  Annualized ROE (before stockholder dividends) in 1Q 2020 was 13% and in 1Q 2019 was 17%. Because Net Income was the same in both periods, the lower ROE in 1Q 2020 was due to much higher average Stockholders’ Equity. Targeting a high ROE of 20% remains a key financial objective for UTMD management. ROE can be increased by increasing Net Income, or by reducing stockholders’ equity by paying cash dividends to stockholders or by repurchasing shares.  

Liquidity and Capital Resources

j)Cash flows 

Net cash provided by operating activities, including adjustments for depreciation and amortization and other non-cash expenses along with changes in working capital, totaled $5,674 in 1Q 2020 compared to $3,360 in 1Q 2019.  Since Net Income was the same in both periods, the substantial difference was due to greater amortization expense along with changes in working capital. The most significant differences in cash provided during the two periods were the $158 lower ending inventories in 1Q 2020 compared to $2,255 higher inventories in 1Q 2019 due to the purchase of CSI Filshie device inventory in 1Q 2019, a $231 decrease in trade accounts receivable (A/R) in 1Q 2020 compared to a $940 increase in 1Q 2019 A/R, a $218 higher increase in accrued expenses and a $359 higher increase in non-cash amortization expense.  

Capital expenditures for property and equipment (PP&E) were $454 in 1Q 2020 compared to $12 in 1Q 2019 as UTMD invested in a state-of-art testing machine for its specialized pressure transducers for its bio-pharmaceutical OEM customer, and a new molding machine for increased capacity. Depreciation of PP&E was $175 in 1Q 2020 compared to $179 in 1Q 2019.  Both capital expenditures and depreciation are expected to increase during the balance of 2020 as the Company needs a new roof for its Midvale facility and depreciation for the PPE just put in service in 1Q 2020 kicks in.   

Cash dividends paid to stockholders in 1Q 2020 were $1,042 compared to $1,027 in 1Q 2019.

In 1Q 2020, UTMD received $47 and issued 674 shares of its stock upon the exercise of employee stock options.  Option exercises in 1Q 2020 were at an average price of $70.47 per share.  In comparison, in 1Q 2019 UTMD received $97 and issued 2,991 shares of its stock upon the exercise of employee stock options.  Option exercises in 1Q 2019 were at an average price of $32.33 per share.  

Management believes that current cash balances, income from operations and effective management of working capital will provide the liquidity needed to survive the COVID-19 pandemic shutdown of the U.S. economy. As it did in 1Q 2019, the Company may utilize cash not needed to support normal operations in one or a combination of the following:  1) in general, to continue to invest at an opportune time in ways that will enhance future profitability; 2) to make additional investments in new technology and/or processes; and/or 3) to acquire a product line or company that will augment revenue and EPS growth and better utilize UTMD’s existing infrastructure.  If there are no better strategic uses for UTMD’s cash, the Company will continue to return cash to stockholders in the form of dividends and share repurchases when the stock appears undervalued.

k)Assets and Liabilities 

March 31, 2020 total consolidated assets declined $6,593 from December 31, 2019 to $103,193. The decline was due to a $3,174 decrease in cash and investments, a $489 decrease in current assets other than cash, and $2,830 lower net intangible assets. In addition to the decrease in cash which resulted from $7,468 use of cash for share repurchases and payment of stockholder dividends, significant changes in current assets from the end of 2019 included a $332 decrease in consolidated net trade receivables and a $157 decrease in consolidated inventories.

The 1Q 2020 ending lower net intangible assets resulted from amortization expense of $1,630 and a 4.4% lower GBP/USD exchange rate on remaining Femcare IIA.  At March 31, 2020, net intangible assets including goodwill were 40% of total consolidated assets compared to 40% at year-end 2019 (because of the large reduction in cash during 1Q 2020), and 46% at March 31, 2019.

The Net Book Value (NBV) of consolidated property, plant and equipment (PP&E) fixed assets decreased $100 as a combined result of $454 in new purchases, $175 in depreciation and $379 in lower USD NBV due to ending FX rate changes.  PP&E assets in the U.S. increased $162 as investment in new manufacturing equipment exceeded

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depreciation. But the NBV of PP&E OUS in USD at March 31, 2020 declined $262 in the aggregate, affected by the change in FX rates which changed significantly near the end of the quarter as a result of the COVID-19 pandemic. FX rates for Balance Sheet purposes are the applicable rates at the end of each reporting period. UTMD’s Femcare subsidiary PP&E assets in the UK and Australia were $320 lower as, in addition to the UK GBP-denominated assets translated into USD at an FX rate 6.1% lower than the FX rate at the end of 2019, Australia AUD-denominated assets translated into USD at an FX rate 12.6% lower than the FX rate at the end of 2019. Because UTMD’s Canada subsidiary CAD-denominated assets were translated into USD at an FX rate 8.2% lower than the FX rate at the end of 2019 in addition to depreciation, PP&E in Canada was $62 lower than at the end of 2019. Ireland PP&E NBV increased $119 despite a 1.8% lower EUR as a result of investment in new manufacturing capabilities.  

Working capital (current assets minus current liabilities) was $47,422 at March 31, 2020 compared to $51,438 at December 31, 2019, and $38,625 at March 31, 2019.  Current assets declined $3,662 and current liabilities increased $354 from the end of 2019. UTMD management believes that its working capital remains sufficient to meet normal operating needs, new capital investments and projected cash dividend payments to stockholders.

The deferred tax liability balance for the Femcare Ltd IIA ($9,084 on the date of the 2011 acquisition) was $2,008 at March 31, 2020 compared to $2,239 at December 31, 2019 and $2,496 at March 31, 2019.  Reduction of the deferred tax liability occurs as the book/tax difference of amortization is eliminated over the remaining useful life of the Femcare Ltd IIA. UTMD’s total debt ratio (total liabilities/total assets) as of March 31, 2020 was 9% compared to 8% as of December 31, 2019 (again, because of the 1Q 2020 reduction in cash).  UTMD’s total debt ratio as of March 31, 2019 was 12%.  

l)Management's Outlook 

Even though the COVID-19 pandemic has significantly changed UTMD’s financial outlook as outlined in its December 31, 2019 SEC 10-K report, UTMD’s operating plan for 2020 remains to

1)  exploit distribution and manufacturing synergies by further integrating capabilities and resources in its multinational operations;  

2)  focus on effectively direct marketing of the benefits of the Filshie Clip System in the U.S.; 

3)  introduce additional products helpful to clinicians through internal new product development; 

4)  continue to achieve profitable overall financial operating performance and a stable working environment for employees;

5)  utilize positive cash generation to continue providing cash dividends to stockholders and make open market share repurchases if/when the UTMD share price seems undervalued; and

6)  be vigilant for accretive acquisition opportunities which may be brought about by the current challenging economic environment on companies with more limited resources.

m)Accounting Policy Changes 

None.

Forward-Looking Information.   This report contains certain forward-looking statements and information relating to the Company that are based on the beliefs of management as well as assumptions made by management based on information currently available.  When used in this document, the words “anticipate,” “believe,” “project,” “estimate,” “expect,” “intend” and similar expressions, as they relate to the Company or its management, are intended to identify forward-looking statements.  Such statements reflect the current view of the Company respecting future events and are subject to certain risks, uncertainties and assumptions, including the risks and uncertainties stated throughout the document.  Although the Company has attempted to identify important factors that could cause the actual results to differ materially, there may be other factors that cause the forward statement not to come true as anticipated, believed, projected, expected, or intended.  Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may differ materially from those described herein as anticipated, believed, projected, estimated, expected or intended.  Financial estimates are subject to change and are not intended to be relied upon as predictions of future operating results, and the Company assumes no obligation to update or disclose revisions to those estimates.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

UTMD has manufacturing and trading operations, including related assets, in the U.S. denominated in the U.S. Dollar (USD), in Ireland denominated in the Euro (EUR), in England denominated in the British Pound (GBP), in Australia denominated in the Australia Dollar (AUD), and, starting in 2017, in Canada denominated in the Canadian Dollar (CAD).  The currencies are subject to exchange rate fluctuations that are beyond the control of UTMD.  The exchange rates were .9071, .8907 and .8906 EUR per USD as of March 31, 2020, December 31, 2019 and March 31, 2019, respectively.  Exchange rates were .8029, .7537, and .7672 GBP per USD as of March 31, 2020, December 31, 2019 and March 31, 2019, respectively.  Exchange rates were 1.6285, 1.4226 and 1.4083 AUD per USD on March 31, 2020, December 31, 2019 and March 31, 2019, respectively.  Exchange rates were 1.4118, 1.2962, and 1.3644 CAD per USD on March 31, 2020, December 31, 2019, and March 31, 2019 respectively. UTMD manages its foreign currency risk without separate hedging transactions by either invoicing customers in the local currency where costs of production were incurred, by converting currencies as transactions occur, and by optimizing global account structures through liquidity management accounts.

Item 4. Controls and Procedures

The Company’s management, under the supervision and with the participation of the Chief Executive Officer and the Principal Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of March 31, 2020. Based on this evaluation, the Chief Executive Officer and Principal Financial Officer concluded that, as of March 31, 2020, the Company’s disclosure controls and procedures were effective.

There were no changes in the Company’s internal controls over financial reporting that occurred during the quarter ended March 31, 2020, that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

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PART II - OTHER INFORMATION

Item 1.Legal Proceedings 

The Company may be a party from time to time in litigation incidental to its business.  Presently, there is no litigation.

Item 1A.Risk Factors 

In addition to the other information set forth in this report, investors should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in UTMD’s Annual Report on Form 10-K for the year ended December 31, 2019, which could materially affect its business, financial condition or future results.  The risks described in the Annual Report on Form 10-K are not the only risks facing the Company.  Additional risks and uncertainties not currently known to UTMD or currently deemed to be immaterial also may materially adversely affect the Company’s business, financial condition and/or operating results.

Legislative or executive order healthcare reform in the United States, particularly as suggested by leading candidates in a presidential election year, have the potential to render the U.S. medical device marketplace unpredictable. A fully government-run healthcare system would likely eliminate healthcare consumer choice as well as commercial incentives for innovation.

Increasing regulatory burdens, including premarketing approval delays, may result in significant loss of revenue, unpredictable costs and loss of management focus on developing and marketing products that improve the quality of healthcare:

Thousands of small focused medical device manufacturers including UTMD that do not have the overhead structure that the few large medical device companies can afford are increasingly burdened with bureaucratic and underqualified regulator demands that are not reasonably related to assuring the safety or effectiveness of the devices that they provide.  Premarketing submission administrative burdens, and substantial “user fees” or notified body review fees, represent a significant non-clinical and/or non-scientific barrier to new product introduction, resulting in lack of investment or delays to revenues from new or improved devices.  The risks associated with such circumstances relate not only to substantial out-of-pocket costs, including potential litigation in millions of dollars, but also loss of business and a diversion of attention of key employees for an extended period of time from managing their normal responsibilities, particularly in new product development and routine quality assurance activities.   

The growth of Group Purchasing Organizations (GPOs) adds non-productive costs, typically weakens the Company’s marketing and sales efforts and may result in lower revenues:  

GPOs, theoretically acting as bargaining agents for member hospitals, but actually collecting revenues from the companies that they are negotiating with, have made a concerted effort to turn medical devices that convey special patient safety advantages and better health outcomes, like UTMD’s, into undifferentiated commodities. GPOs have been granted an antitrust exemption by the U.S. Congress. Otherwise, their business model based on “kickbacks” would be a violation of law.  These bureaucratic entities do not recognize or understand the overall cost of care as it relates to safety and effectiveness of devices, and they create a substantial administrative burden that is primarily driven by collection of their administrative fees.   

The Company’s business strategy may not be successful in the future:

As the level of complexity and uncertainty in the medical device industry increases, evidenced, for example, by the unpredictable and overly cumbersome regulatory environment, the Company’s views of the future and product/ market strategy may not yield financial results consistent with the past.  

As the healthcare industry becomes increasingly bureaucratic it puts smaller companies like UTMD at a competitive disadvantage:  

The length of time and number of administrative steps required in adopting new products for use in hospitals has grown substantially in recent years.  Smaller companies like UTMD typically do not have the administrative resources to deal with broad new administrative requirements, resulting in either loss of revenue or increased costs.  As UTMD introduces new products it believes are safer and more effective, it may find itself excluded from certain clinical users because of the existence of long term supply agreements for preexisting products, particularly from competitors which offer hospitals a broader range of products and services.  Restrictions used by hospital  

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administrators to limit clinician involvement in device purchasing decisions makes communicating UTMD’s clinical advantages much more difficult.

A product liability lawsuit could result in significant legal expenses and a large award against the Company:

UTMD’s devices are frequently used in inherently risky situations to help physicians achieve a more positive outcome than what might otherwise be the case.  In any lawsuit where an individual plaintiff suffered permanent physical injury, the possibility of a large award for damages exists whether or not a causal relationship exists.    

The Company’s reliance on third party distributors in some markets may result in less predictable revenues:

UTMD’s distributors have varying expertise in marketing and selling specialty medical devices.  They also sell other devices that may result in less focus on the Company’s products.  In some countries, notably China, Pakistan and India not subject to similarly rigorous standards, a distributor of UTMD’s products may eventually become a competitor with a cheaper but lower quality version of UTMD’s devices.   

The loss of one or more key employees could negatively affect UTMD performance:

In a small company with limited resources, the distraction or loss of key personnel at any point in time may be disruptive to performance.  The Company’s benefits programs are key to recruiting and retaining talented employees.  An increase in UTMD’s employee healthcare plan costs, for example, may cause the Company to have to reduce coverages which in turn represents a risk to retaining key employees. 

Fluctuations in foreign currencies relative to the USD can result in significant differences in period to period financial results:

Since a significant portion of UTMD’s sales are invoiced in foreign currencies and consolidated financial results are reported in USD terms, a stronger USD can have negative revenue effects. Conversely, a weaker USD would increase foreign subsidiary operating costs in USD terms. For the portion of sales to foreign entities made in fixed USD terms, a stronger USD makes the devices more expensive and weakens demand.  For the portion invoiced in a foreign currency, not only USD-denominated sales are reduced, but also gross profits may be reduced because finished distributed devices and/or U.S. made raw materials and components are likely being purchased in fixed USD. 

Trade restrictions and /or tariffs resulting from changing government trade policies have the potential to disrupt UTMD’s supply chain.

The economic effects of government intervention in the private sector economy due to the COVID-19 pandemic has created a high level of uncertainty.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds 

During 1Q 2020, UTMD purchased 80,000 of its shares in the open market for $6,426 including commissions and fees ($80.32/ share). UTMD did not purchase any of its own securities during 1Q 2019, but purchased 5,000 shares for $398 ($79.52/share) in 2Q 2019, which was the total number of shares repurchased  in 2019.

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Item 6.  Exhibits

Exhibit #	SEC Reference #	Title of Document
1	31	Certification of CEO pursuant to Rule 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
2	31	Certification of Principal Financial Officer pursuant to Rule 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
3	32	Certification of CEO pursuant to 18 U.S.C. §1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
4	32	Certification of Principal Financial Officer pursuant to 18 U.S.C. §1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
5	101 ins	XBRL Instance
6	101.sch	XBRL Schema
7	101.cal	XBRL Calculation
8	101.def	XBRL Definition
9	101.lab	XBRL Label
10	101.pre	XBRL Presentation

SIGNATURES

Pursuant to the requirements of the Securities Exchanges Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 

UTAH MEDICAL PRODUCTS, INC. 

REGISTRANT 

Date:        5/8/20                             By:       /s/ Kevin L. Cornwell                          

    Kevin L. Cornwell 

    CEO 

Date:        5/8/20                              By:       /s/ Brian L. Koopman                            

    Brian L. Koopman 

Principal Financial Officer 

20

EX-1

Exhibit 1

CERTIFICATION OF CEO

PURSUANT TO RULE 13a-14(a) AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Kevin L. Cornwell, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Utah Medical Products, Inc.;   

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: 

(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; 

(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; 

(c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and  

(d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): 

(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and 

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. 

Date: May 8, 2020

   /s/ Kevin L. Cornwell      

Kevin L. Cornwell

Chief Executive Officer

EX-2

Exhibit 2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO RULE 13a-14(a) AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Brian L. Koopman, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Utah Medical Products, Inc.;   

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: 

(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; 

(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; 

(c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and  

(d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): 

(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and 

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. 

Date: May 8, 2020

      /s/ Brian L. Koopman

Brian L. Koopman

Principal Financial Officer

EX-3

Exhibit 3

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Utah Medical Products, Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kevin L. Cornwell, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:

(1)the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and  

(2)the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. 

    /s/ Kevin L. Cornwell      

Kevin L. Cornwell

Chief Executive Officer

May 8, 2020

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.  

EX-4

Exhibit 4 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Utah Medical Products, Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Brian L. Koopman, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:

(1)the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and  

(2)the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. 

 /s/ Brian L. Koopman

Brian L. Koopman

Principal Financial Officer

May 8, 2020

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.  

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New Accounting Pronouncements and Changes in Accounting Principles: New Accounting Pronouncements, Policy (Policies)

3 Months Ended

Mar. 31, 2020

Policies

New Accounting Pronouncements, Policy

The Company has determined that other recently issued accounting standards will either have no material impact on its consolidated financial position, results of operations or cash flows, or will not apply to its operations.

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Inventories

3 Months Ended

Mar. 31, 2020

Notes

Inventories

(3) Inventories at March 31, 2020 and December 31, 2019 consisted of the following:

		March 31, 2020		December 31, 2019
Finished goods	$	1,437	$	1,708
Work-in-process		1,237		1,022
Raw materials		4,083		4,183
Total	$	6,757	$	6,913

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Leases

3 Months Ended

Mar. 31, 2020

Notes

Leases

(7)  Leases

UTMD has operating leases for a portion of its parking lot at its Midvale facility and an automobile at its Ireland facility.  The remaining lease term on the parking lot is 12 years and on the automobile it is 3 years.  There are no options to extend or terminate the leases.  UTMD has no other leases yet to commence.  As neither lease contains implicit rates, UTMD’s incremental borrowing rate, based on information available at adoption date, was used to determine the present value of the leases.

The components of lease cost were as follows:	Three Months Ended March 31, 2020
Operating Lease Cost (in thousands)	$15
Right-of-Use Assets in exchange for new operating lease obligations	0
Other Information	Three Months Ended March 31, 2020
Weighted Average Remaining Lease Term  - Operating Leases	11 years
Weighted Average Discount Rate – Operating Leases	5.4%

Operating lease liabilities/ payments (in thousands)
Operating lease payments, 2020	$60
Operating lease payments, 2021	60
Operating lease payments, 2022	45
Operating lease payments, 2023	45
Operating lease payments, 2024	45
Thereafter	299

Reconciliation of operating lease liabilities/ payments to operating lease liabilities	(in thousands)
Total operating lease liabilities/ payments	$536
Operating lease liabilities	404
Present value adjustment	$132

Maturities of lease liabilities were as follows:	(in thousands)
Year ending December 31,
2020	$38
2021	40
2022	27
2023	29
2024	30
Thereafter	248

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Leases: Reconciliation of operating lease liabilities (Details) $ in Thousands	Mar. 31, 2020 USD ($)
Details
Lessee, Operating Lease, Liability, to be Paid	$ 536
Operating Lease, Liability	404
Lessee, Operating Lease, Liability, Undiscounted Excess Amount	$ 132

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UTAH MEDICAL PRODUCTS, INC. CONSOLIDATED STATEMENT OF INCOME - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Details
Sales, net	$ 10,902	$ 10,732
Cost of goods sold	4,066	3,959
Gross profit	6,836	6,773
Operating expense
Selling, general and administrative	2,838	2,557
Research & development	135	115
Total operating expenses	2,973	2,672
Operating income	3,863	4,101
Other income	125	36
Income before provision for income taxes	3,988	4,137
Provision for income taxes	848	998
Net income	$ 3,140	$ 3,139
Earnings per common share (basic)	$ 0.85	$ 0.84
Earnings per common share (diluted)	$ 0.84	$ 0.84
Shares outstanding (basic)	3,707	3,722
Shares outstanding (diluted)	3,724	3,738
Other comprehensive income (loss):
Foreign currency translation net of taxes of $0 in all periods	$ (2,449)	$ 948
Total comprehensive income	$ 691	$ 4,087

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Basis of Presentation

3 Months Ended

Mar. 31, 2020

Notes

Basis of Presentation

(1) The unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by accounting principles generally accepted in the United States.  These statements should be read in conjunction with the financial statements and notes included in the Utah Medical Products, Inc. ("UTMD" or "the Company") annual report on Form 10-K for the year ended December 31, 2019.  In the opinion of management, the accompanying financial statements include all adjustments (consisting only of normal recurring adjustments) necessary to summarize fairly the Company's financial position and results of operations.  Currency amounts are in thousands except per-share amounts and where noted.

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Leases: Schedule of Future Minimum Rental Payments for Operating Leases (Tables)

3 Months Ended

Mar. 31, 2020

Tables/Schedules

Schedule of Future Minimum Rental Payments for Operating Leases

Operating lease liabilities/ payments (in thousands)
Operating lease payments, 2020	$60
Operating lease payments, 2021	60
Operating lease payments, 2022	45
Operating lease payments, 2023	45
Operating lease payments, 2024	45
Thereafter	299

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Inventories: Schedule of Inventory, Current (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Details
Finished goods	$ 1,437	$ 1,708
Work-in-process	1,237	1,022
Raw materials	4,083	4,183
Total	$ 6,757	$ 6,913

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New Accounting Pronouncements and Changes in Accounting Principles

3 Months Ended

Mar. 31, 2020

Notes

New Accounting Pronouncements and Changes in Accounting Principles

(2) Recent Accounting Standards.

The Company has determined that other recently issued accounting standards will either have no material impact on its consolidated financial position, results of operations or cash flows, or will not apply to its operations.

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UTAH MEDICAL PRODUCTS, INC. CONSOLIDATED STATEMENT OF INCOME - Parenthetical - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Details
Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Tax	$ 0	$ 0

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Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2020	May 07, 2020
Details
Entity Registrant Name	UTAH MEDICAL PRODUCTS INC
Entity Central Index Key	0000706698
Document Type	10-Q
Document Period End Date	Mar. 31, 2020
Current Fiscal Year End Date	--12-31
Trading Symbol	utmd
Entity Tax Identification Number	87-0342734
Entity Common Stock, Shares Outstanding		3,642,431
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Shell Company	false
Entity Small Business	false
Entity Emerging Growth Company	false
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	001-12575
Entity Incorporation, State or Country Code	UT
Entity Address, Address Line One	7043 South 300 West
Entity Address, City or Town	Midvale
Entity Address, State or Province	UT
Entity Address, Postal Zip Code	84047
City Area Code	801
Local Phone Number	566-1200
Title of 12(b) Security	Common stock, $0.01 par value
Security Exchange Name	NASDAQ
Entity Interactive Data Current	Yes
Amendment Flag	false
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q1

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Leases: Reconciliation of operating lease liabilities (Tables)

3 Months Ended

Mar. 31, 2020

Tables/Schedules

Reconciliation of operating lease liabilities

Reconciliation of operating lease liabilities/ payments to operating lease liabilities	(in thousands)
Total operating lease liabilities/ payments	$536
Operating lease liabilities	404
Present value adjustment	$132

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Stock-Based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Details
Allocated Share-based Compensation Expense	$ 23	$ 28

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2020

Notes

Stock-Based Compensation

(4) Stock-Based Compensation. At March 31, 2020, the Company has stock-based employee compensation plans which authorize the grant of stock options to eligible employees and directors.  The Company accounts for stock compensation under FASB Accounting Standards Codification (“ASC”) 718, Compensation - Stock Compensation.  This statement requires the Company to recognize compensation cost based on the grant date fair value of options granted to employees and directors.  In the quarters ended March 31, 2020 and 2019, the Company recognized $23 and $28, respectively, in stock based compensation cost.

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CSI Distribution Agreement Purchase Disclosure

3 Months Ended

Mar. 31, 2020

Notes

CSI Distribution Agreement Purchase Disclosure

(8) Distribution Agreement Purchase. UTMD completed the purchase of exclusive U.S. distribution rights for the Filshie® Clip System from CooperSurgical, Inc. (CSI) on February 1, 2019. The $21,000 purchase price represents an identifiable intangible asset which is being straight-line amortized and recognized as part of G&A expenses over the now 3.58 year remaining life of the prior CSI agreement with Femcare.

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Inventories: Schedule of Inventory, Current (Tables)

3 Months Ended

Mar. 31, 2020

Tables/Schedules

Schedule of Inventory, Current

		March 31, 2020		December 31, 2019
Finished goods	$	1,437	$	1,708
Work-in-process		1,237		1,022
Raw materials		4,083		4,183
Total	$	6,757	$	6,913

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Earnings Per Share: Schedule of Earnings Per Share, Basic and Diluted (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Details
Net income	$ 3,140	$ 3,139
Weighted average shares, basic	3,707	3,722
Dilutive effect of stock options	17	16
Diluted shares	3,724	3,738
Earnings per share, basic	$ 0.85	$ 0.84
Earnings per share, diluted	$ 0.84	$ 0.84

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Leases: Schedule of Future Minimum Rental Payments for Operating Leases (Details) $ in Thousands	Mar. 31, 2020 USD ($)
Details
Operating Leases, Future Minimum Payments Due, Next Twelve Months	$ 60
Operating Leases, Future Minimum Payments, Due in Two Years	60
Operating Leases, Future Minimum Payments, Due in Three Years	45
Operating Leases, Future Minimum Payments, Due in Four Years	45
Operating Leases, Future Minimum Payments, Due in Five Years	45
Operating Leases, Future Minimum Payments, Due Thereafter	$ 299

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UTAH MEDICAL PRODUCTS, INC. CONSOLIDATED CONDENSED STATEMENT OF CASH FLOW - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 3,140	$ 3,139
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	175	179
Amortization	1,630	1,271
Provision for (recovery of) losses on accounts receivable	(14)	0
Amortization of Right of Use Assets	9	10
Deferred income taxes	(97)	(142)
Stock-based compensation expense	23	28
Tax benefit attributable to exercise of stock options	3	13
Changes in operating assets and liabilities:
Accounts receivable and other receivables	261	(940)
Inventories	158	(2,255)
Prepaid expenses and other current assets	(12)	(23)
Accounts payable	(31)	1,868
Accrued expenses	429	212
Total adjustments	2,534	221
Net cash provided by operating activities	5,674	3,360
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment	(454)	(12)
Intangible assets	0	(21,000)
Net cash used in investing activities	(454)	(21,012)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock - options	48	97
Common stock purchased and retired	(6,426)	0
Payment of dividends	(1,042)	(1,027)
Net cash used in financing activities	(7,420)	(930)
Effect of exchange rate changes on cash	(974)	135
Net decrease in cash and cash equivalents	(3,174)	(18,447)
Cash at beginning of period	42,787	51,112
Cash at end of period	39,613	32,665
Cash paid during the period for income taxes	285	406
Cash paid during the period for interest	$ 0	$ 0

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UTAH MEDICAL PRODUCTS, INC. CONSOLIDATED BALANCE SHEET - Parenthetical - $ / shares	Mar. 31, 2020	Dec. 31, 2019
Details
Preferred Stock, Par or Stated Value Per Share	$ 0.01	$ 0.01
Preferred Stock, Shares Authorized	5,000	5,000
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0
Common Stock, Par or Stated Value Per Share	$ 0.01	$ 0.01
Common Stock, Shares Authorized	50,000	50,000
Common Stock, Shares, Issued	3,642	3,722
Common Stock, Shares, Outstanding	3,642	3,722

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Revenue Recognition: Schedule Of Revenues By Product Category (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Sales, net	$ 10,902	$ 10,732
Obstetrics
Sales, net	1,158
Gynecology/Electrosurgery/Urology
Sales, net	5,892
Neonatal
Sales, net	1,584
Blood Pressure Monitoring and Accessories
Sales, net	2,268
DomesticUsMember
Sales, net	6,443
DomesticUsMember | Obstetrics
Sales, net	909
DomesticUsMember | Gynecology/Electrosurgery/Urology
Sales, net	2,817
DomesticUsMember | Neonatal
Sales, net	1,141
DomesticUsMember | Blood Pressure Monitoring and Accessories
Sales, net	1,576
OutsideUsMember
Sales, net	4,459
OutsideUsMember | Obstetrics
Sales, net	249
OutsideUsMember | Gynecology/Electrosurgery/Urology
Sales, net	3,075
OutsideUsMember | Neonatal
Sales, net	443
OutsideUsMember | Blood Pressure Monitoring and Accessories
Sales, net	$ 692

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Leases: Lease, Cost (Tables)

3 Months Ended

Mar. 31, 2020

Tables/Schedules

Lease, Cost

The components of lease cost were as follows:	Three Months Ended March 31, 2020
Operating Lease Cost (in thousands)	$15
Right-of-Use Assets in exchange for new operating lease obligations	0
Other Information	Three Months Ended March 31, 2020
Weighted Average Remaining Lease Term  - Operating Leases	11 years
Weighted Average Discount Rate – Operating Leases	5.4%

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Earnings Per Share: Schedule of Earnings Per Share, Basic and Diluted (Tables)

3 Months Ended

Mar. 31, 2020

Tables/Schedules

Schedule of Earnings Per Share, Basic and Diluted

The following table reconciles the numerator and the denominator used to calculate basic and diluted earnings per share:

(in thousands)	Three months ended
	March 31,
	2020	2019
Numerator
Net income	3,140	3,139
Denominator
Weighted average shares, basic	3,707	3,722
Dilutive effect of stock options	17	16
Diluted shares	3,724	3,738
Earnings per share, basic	.85	.84
Earnings per share, diluted	.84	.84

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Leases: Lessee, Operating Lease, Liability, Maturity (Details) $ in Thousands	Mar. 31, 2020 USD ($)
Details
Lessee, Operating Lease, Liability, to be Paid, Year One	$ 38
Lessee, Operating Lease, Liability, to be Paid, Year Two	40
Lessee, Operating Lease, Liability, to be Paid, Year Three	27
Lessee, Operating Lease, Liability, to be Paid, Year Four	29
Lessee, Operating Lease, Liability, to be Paid, Year Five	30
Lessee, Operating Lease, Liability, to be Paid, after Year Five	$ 248

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Leases (Details)	3 Months Ended
	Mar. 31, 2020
Details
Lessee Operating Lease for Parking Lot Term of Contract	12 years
Lessee Operating Lease for Automobile Term of Contract	3 years

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Revenue Recognition

3 Months Ended

Mar. 31, 2020

Notes

Revenue Recognition

(6)  1Q 2020 global revenues (USD) by product category:

		Domestic		Outside US		Total
Obstetrics	$	909	$	249	$	1,158
Gynecology/Electrosurgery/Urology		2,817		3,075		5,892
Neonatal		1,141		443		1,584
Blood Pressure Monitoring and Accessories		1,576		692		2,268
Total	$	6,443	$	4,459	$	10,902

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Subsequent Events

3 Months Ended

Mar. 31, 2020

Notes

Subsequent Events

(10) Subsequent Events.  UTMD has evaluated subsequent events through the date the financial statements were issued, and concluded there were no other events or transactions during this period that required recognition or disclosure in its financial statements. The COVID-19 pandemic itself was not a subsequent event.  However, the negative impact of the pandemic in the ensuing 2Q 2020 to date has been substantially greater than in 1Q 2020.  More detail is provided in Item 2.

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CSI Distribution Agreement Purchase Disclosure (Details) - CooperSurgical Inc $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019 USD ($)
Finite-lived Intangible Assets Acquired		$ 21,000
Remaining years of exclusive U.S. distribution rights for Femcare's Filshie Clip System	3.58

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Leases: Lease, Cost (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2020 USD ($)
Details
Operating Lease, Cost	$ 15
Right-of-Use Asset Obtained in Exchange for Operating Lease Liability	$ 0
Operating Lease, Weighted Average Remaining Lease Term	11 years
Operating Lease, Weighted Average Discount Rate, Percent	5.40%

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Warranty Reserve

3 Months Ended

Mar. 31, 2020

Notes

Warranty Reserve

(5) 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 were immaterial, no warranty reserve was made at December 31, 2019, or March 31, 2020.

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Earnings Per Share

3 Months Ended

Mar. 31, 2020

Notes

Earnings Per Share

(9) Earnings Per Share. Basic earnings per share is calculated by dividing net income attributable to the common stockholders of the company by the weighted average number of common shares outstanding during the period.  Diluted earnings per share is calculated by assuming the exercise of stock options at the closing price of stock at the end of first quarter 2020.

The following table reconciles the numerator and the denominator used to calculate basic and diluted earnings per share:

(in thousands)	Three months ended
	March 31,
	2020	2019
Numerator
Net income	3,140	3,139
Denominator
Weighted average shares, basic	3,707	3,722
Dilutive effect of stock options	17	16
Diluted shares	3,724	3,738
Earnings per share, basic	.85	.84
Earnings per share, diluted	.84	.84

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UTAH MEDICAL PRODUCTS, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands	Common Stock	Additional Paid-in Capital	Comprehensive Income	Retained Earnings	Total
Equity Balance, value at Dec. 31, 2018	$ 37	$ 121	$ (11,290)	$ 100,124	$ 88,992
Equity Balance, shares at Dec. 31, 2018	3,720
Common stock issued upon exercise of employee stock options	$ 0	97	0	0	97
Common stock issued upon exercise of employee stock options, shares	3
Stock option compensation expense	$ 0	28	0	0	28
Foreign currency translation adjustment	0	0	948	0	948
Common stock dividends	0	0	0	(1,028)	(1,028)
Net income	0	0	0	3,139	3,139
Equity Balance, value at Mar. 31, 2019	$ 37	246	(10,343)	102,235	92,176
Equity Balance, shares at Mar. 31, 2019	3,723
Equity Balance, value at Dec. 31, 2019	$ 37	18	(9,783)	110,820	101,092
Equity Balance, shares at Dec. 31, 2019	3,722
Common stock issued upon exercise of employee stock options	$ 0	47	0	0	47
Common stock issued upon exercise of employee stock options, shares	1
Stock option compensation expense	$ 0	23	0	0	23
Common stock purchased and retired	$ (1)	(89)	0	(6,336)	(6,426)
Common stock purchased and retired, shares	(80)
Foreign currency translation adjustment	$ 0	0	(2,449)	0	(2,449)
Common stock dividends	0	0	0	(1,042)	(1,042)
Net income	0	0	0	3,140	3,140
Equity Balance, value at Mar. 31, 2020	$ 36	$ 0	$ (12,232)	$ 106,582	$ 94,386
Equity Balance, shares at Mar. 31, 2020	3,642

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UTAH MEDICAL PRODUCTS, INC. CONSOLIDATED BALANCE SHEET - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Current assets:
Cash & Investments	$ 39,613	$ 42,787
Accounts & other receivables, net	4,410	4,742
Inventories	6,757	6,913
Other current assets	443	444
Total current assets	51,223	54,886
Property and equipment, net	10,224	10,314
Operating Lease - Right of Use Assets, net	404	414
Goodwill	13,547	13,961
Other intangible assets	53,245	55,205
Other intangible assets - accumulated amortization	(25,449)	(24,993)
Other intangible assets, net	27,796	30,212
Total assets	103,194	109,787
Current liabilities:
Accounts payable	1,057	1,098
Accrued expenses	2,744	2,350
Total current liabilities	3,801	3,448
Deferred tax liability - Femcare IIA	2,110	2,110
Other long term liabilities	2,008	2,239
Operating Lease Liability	366	376
Deferred income taxes	523	521
Total liabilities	8,808	8,694
Stockholders' equity:
Preferred stock - $.01 par value; authorized - 5,000 shares; no shares issued or outstanding	0	0
Common stock - $.01 par value; authorized - 50,000 shares; issued - March 31, 2020, 3,642 shares and December 31, 2019, 3,722 shares	36	37
Accumulated other comprehensive loss	(12,232)	(9,782)
Additional paid-in capital	0	18
Retained earnings	106,582	110,820
Total stockholders' equity	94,386	101,093
Total liabilities and stockholders' equity	$ 103,194	$ 109,787

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Revenue Recognition: Schedule Of Revenues By Product Category (Tables)

3 Months Ended

Mar. 31, 2020

Tables/Schedules

Schedule Of Revenues By Product Category

		Domestic		Outside US		Total
Obstetrics	$	909	$	249	$	1,158
Gynecology/Electrosurgery/Urology		2,817		3,075		5,892
Neonatal		1,141		443		1,584
Blood Pressure Monitoring and Accessories		1,576		692		2,268
Total	$	6,443	$	4,459	$	10,902

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Leases: Lessee, Operating Lease, Liability, Maturity (Tables)

3 Months Ended

Mar. 31, 2020

Tables/Schedules

Lessee, Operating Lease, Liability, Maturity

Maturities of lease liabilities were as follows:	(in thousands)
Year ending December 31,
2020	$38
2021	40
2022	27
2023	29
2024	30
Thereafter	248

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Warranty Reserve (Details) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Details
Standard and Extended Product Warranty Accrual	$ 0	$ 0