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