UNITED STATES
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: September 30, 2000 Commission File No. 0-11178
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UTAH MEDICAL PRODUCTS, INC.
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(Exact name of Registrant as specified in its charter)
UTAH 87-0342734
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7043 South 300 West
Midvale, Utah 84047
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Address of principal executive offices
Registrant's telephone number: (801) 566-1200
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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
November 7, 2000: 5,026,803
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UTAH MEDICAL PRODUCTS, INC.
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INDEX TO FORM 10-Q
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PART I - FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
Consolidated Condensed Balance Sheets as of
September 30, 2000 and December 31, 1999 .......................... 1
Consolidated Condensed Statements of Income for the three and
nine months ended September 30, 2000 and September 30, 1999 ....... 2
Consolidated Statements of Cash Flows for the nine
months ended September 30, 2000 and September 30, 1999 ............ 3
Notes to Consolidated Condensed Financial Statements .............. 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ................ 6
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ...............................10
SIGNATURES ................................................................10
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARIES
--------------------------------------------
CONSOLIDATED CONDENSED BALANCE SHEETS AS OF
-------------------------------------------
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
----------------------------------------
(in thousands)
(unaudited) (audited)
SEPTEMBER 30, 2000 DECEMBER 31, 1999
------------------ -----------------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash $ 749 $ 647
Accounts receivable - net 3,685 4,077
Inventories 3,234 3,190
Other current assets 706 624
--------- ---------
Total current assets 8,374 8,538
PROPERTY AND EQUIPMENT - NET 9,775 11,013
INTANGIBLE ASSETS - NET 7,790 8,205
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TOTAL $ 25,939 $ 27,756
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 693 $ 544
Accrued expenses 1,849 2,117
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Total current liabilities 2,542 2,661
NOTES PAYABLE 12,100 5,934
DEFERRED INCOME TAXES 424 372
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Total liabilities 15,066 8,967
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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 - September 30, 2000, 5,027 shares
December 31, 1999, 6,453 shares 50 64
Cumulative foreign currency translation adjustment (1,840) (1,250)
Retained earnings 12,663 19,975
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Total stockholders' equity 10,873 18,789
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TOTAL $ 25,939 $ 27,756
========= =========
see notes to consolidated condensed financial statements
</TABLE>
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<TABLE>
<CAPTION>
UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARIES
--------------------------------------------
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS FOR THE
-------------------------------------------------------
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
---------------------------------------------------------------------
(in thousands - unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- ---------------------------
2000 1999 2000 1999
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<S> <C> <C> <C> <C>
NET SALES $ 6,882 $ 7,568 $ 20,503 $ 21,905
COST OF SALES 3,053 3,464 9,130 10,244
---------- ---------- ---------- ----------
GROSS MARGIN 3,829 4,104 11,373 11,661
---------- ---------- ---------- ----------
EXPENSES:
Selling, general and administrative 1,538 1,658 4,775 5,092
Research & development 139 194 439 556
---------- ---------- ---------- ----------
Total 1,677 1,852 5,214 5,648
---------- ---------- ---------- ----------
INCOME FROM OPERATIONS 2,152 2,252 6,159 6,013
OTHER INCOME 53 71 124 293
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAX EXPENSE 2,205 2,323 6,283 6,305
INCOME TAX EXPENSE 795 836 2,264 2,270
---------- ---------- ---------- ----------
NET INCOME $ 1,410 $ 1,487 $ 4,019 $ 4,035
========== ========== ========== ==========
BASIC EARNINGS PER SHARE $ 0.24 $ 0.22 $ 0.64 $ 0.54
========== ========== ========== ==========
DILUTED EARNINGS PER SHARE $ 0.23 $ 0.22 $ 0.64 $ 0.54
========== ========== ========== ==========
SHARES OUTSTANDING - BASIC 5,976 6,727 6,268 7,435
========== ========== ========== ==========
SHARES OUTSTANDING - DILUTED 6,015 6,774 6,293 7,448
========== ========== ========== ==========
</TABLE>
see notes to consolidated condensed financial statements
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<TABLE>
<CAPTION>
UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARIES
--------------------------------------------
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
-----------------------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
-------------------------------------------------------------------
(in thousands - unaudited)
SEPTEMBER 30,
----------------------------------
2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,019 $ 4,035
---------- ----------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,668 1,615
Provision for (recovery of) losses on accounts receivable 22 (20)
(Gain)/Loss on disposal of assets (1) (1)
Deferred income taxes (11) (94)
Tax benefit attributable to exercise and disposition
of incentive stock options and stock purchase rights 7 1
Changes in operating assets and liabilities:
Accounts receivable - trade 278 (312)
Accrued interest and other receivables 7 370
Inventories (61) 754
Prepaid expenses (19) (34)
Accounts payable 172 35
Accrued expenses (246) (88)
Deferred revenue 0 (2)
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Total adjustments 1,816 2,224
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Net cash provided by operating activities 5,835 6,259
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for:
Property and equipment (281) (535)
Intangible assets (250) (2)
Proceeds from sale of property and equipment 11 1
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Net cash used in investing activities (520) (536)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 86 98
Common stock purchased and retired (11,438) (12,058)
Increase in note payable 6,166 5,444
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Net cash used in financing activities (5,186) (6,516)
---------- ----------
Effect of exchange rate changes on cash (27) (4)
---------- ----------
NET INCREASE (DECREASE) IN CASH 102 (798)
CASH AT BEGINNING OF PERIOD 647 1,367
---------- ----------
CASH AT END OF PERIOD $ 749 $ 569
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for income taxes $2,522 $2,247
Interest $277 $167
see notes to consolidated condensed financial statements
</TABLE>
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UTAH MEDICAL PRODUCTS, INC.
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NOTES TO CONSOLIDATED CONDENSED 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 included in the Utah Medical Products, Inc. ("UTMD" or "the
Company") annual report on form 10-K for the year ended December 31, 1999.
Although the accompanying financial statements have not been examined by
independent accountants in accordance with generally accepted auditing
standards, 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.
(2) Inventories at September 30, 2000 and December 31, 1999 (in thousands)
consisted of the following:
September 30, December 31,
2000 1999
------ ------
Finished goods $ 945 $ 846
Work-in-process 960 962
Raw materials 1,329 1,382
------ ------
Total $3,234 $3,190
====== ======
(3) The Company has adopted SFAS No. 130, "Reporting Comprehensive Income." This
standard requires companies to disclose certain changes in equity not
represented in net income such as foreign currency translation adjustments and
unrealized gains/losses on available-for-sale securities. These items are
components of other comprehensive income which, when added to net income,
represent total comprehensive income. The Company translates the currency of its
Ireland subsidiary which comprises the only element of other comprehensive
income. Total comprehensive income for the quarter and nine months ending
September 30, 2000 was (in thousands) $1,073 and $3,429, respectively.
(4) On September 19, 2000, UTMD reported final results of its tender offer
announced August 10, 2000. A total of 1,608,225 shares were validly tendered and
not withdrawn, and 1,118,944 of those shares were purchased by the Company at a
price of $8.20 per share. Transaction costs were about $24,000. The shares
purchased represent about 18% of shares outstanding prior to the tender offer.
(5) In June 1999, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 137, "Accounting for
Derivative Instruments and Hedging Activities- Deferral of the Effective Date of
FASB Statement No. 133." SFAS 133 establishes accounting and reporting standards
for derivative instruments and requires recognition of all derivatives as assets
or liabilities in the statement of financial position and measurement of those
instruments at fair value. SFAS 133 is now effective for fiscal years beginning
after June 15, 2000. UTMD believes that the adoption of SFAS 133 will not have a
material effect on the financial statements of the Company.
(6) 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, and information currently available to, management. When
used in this document, the words "anticipate," "believe," "should," "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 noted 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
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assumptions prove incorrect, actual results may differ materially from those
described herein as anticipated, believed, projected, estimated, expected, or
intended.
General risk factors that may impact the Company's revenues include the
market acceptance of competitive products, obsolescence caused by new
technologies, the possible introduction by competitors of new products that
claim to have many of the advantages of UTMD's products at lower prices, the
timing and market acceptance of UTMD's own new product introductions, UTMD's
ability to efficiently manufacture its products, including the reliability of
suppliers, success in gaining access to important global distribution channels,
marketing success of UTMD's distribution and sales partners, budgetary
constraints, the timing of regulatory approvals for new products, third party
reimbursement, and access to U.S. hospital customers, as that access is
increasingly constrained by group purchasing decisions.
Risk factors, in addition to the risks outlined in the previous paragraph
that may impact the Company's assets and liabilities, as well as cash flows,
include risks inherent to companies manufacturing products used in health care
including claims resulting from the improper use of devices and other product
liability claims, defense of the Company's intellectual property, productive use
of assets in generating revenues, management of working capital including
inventory levels required to meet delivery commitments at a minimum cost, and
timely collection of accounts receivable.
Additional risk factors that may affect non-operating income include the
continuing viability of the Company's technology license agreements, actual cash
and investment balances, asset dispositions, and acquisition activities that may
require external funding.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
UTMD manufactures and markets a well-established range of specialty
medical devices. The general characteristics of UTMD's business have not
materially changed over the last several reporting periods. The Company's Form
10-K Annual Report for the year ended December 31, 1999 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. Dollar amounts in the report are expressed in thousands, except per-
share amounts and where otherwise noted.
Analysis of Results of Operations
a) Overview
Sales in third quarter (3Q) 2000 declined 9% from 3Q 1999, with about half
of the decline coming from lower sales of components to other medical device
companies (OEM sales) which declined 25%, and about half from direct sales to
U.S. hospitals which declined 6%. Operating profits declined just 4% due to
higher gross profit margins and tightly controlled operating expenses. Diluted
earnings per share (EPS) were up 7% compared to 3Q 1999 due to lower number of
outstanding shares. With its strong cash flow, UTMD was able to increase its
long term debt balance by just $7.9 million at the same time it repurchased 1.3
million shares of its stock for $10.4 million in 3Q 2000. Results for the first
nine months (9M) of 2000 compared to 9M 1999 were more favorable than the most
recent quarterly results comparisons detailed above. Sales in 9M 2000 were 6%
lower than in 9M 1999, while operating profits increased 2% and net income was
essentially the same. Improved gross profit margins and tightly controlled
operating expenses yielded the increase in operating income at the same time
sales were down. Diluted EPS increased 18% in 9M 2000 compared to 9M 1999.
During 9M 2000 UTMD's long term debt balance increased $6.2 million while it
repurchased 1,439,000 shares of its stock for $11.4 million.
b) Revenues
Domestic sales, excluding component sales to Baxter, declined 8% in 3Q
2000 compared to 3Q 1999. Sales of components to Baxter declined 90% to $11 in
3Q 2000 from $110 in 3Q 1999. Sales to Baxter in 9M 2000 were $118 compared to
$426 in 9M 1999. Domestic sales of OEM products, excluding sales to Baxter,
declined 31% in 3Q 2000 compared to 3Q 1999. First nine months 2000
international sales increased 7%, while domestic sales, excluding sales to
Baxter, declined 8%. In 3Q 2000 compared to 3Q 1999, combined sales of
obstetric, electrosurgery/gynecology and neonatal products to customers outside
the U.S. grew 3% while blood pressure monitoring (BPM) sales to these same
customers were down 9%.
In the U.S., 3Q and 9M 2000 obstetrics product sales decreased 10% and 11%
respectively, due to increased competition, while electrosurgery/ gynecology/
urology product sales increased 6% and 2% respectively, and neonatal product
sales declined 7% and 2% respectively. Domestic BPM sales excluding Baxter
declined 22% and 14% in 3Q 2000 compared to 3Q 1999, and 9M 2000 compared to 9M
1999, respectively.
Foreign sales of obstetrics products, increased 25% in 3Q 2000 compared to
3Q 1999, while electrosurgery/ gynecology products, neonatal products and blood
pressure monitoring (BPM) components and accessories declined 11%, 8% and 9%,
respectively. First nine months 2000 foreign sales increased 20%, 27%, 55% and
1%, respectively, in these same product groups.
Obstetrics sales were $3,293 in 3Q 2000, compared to $3,614 in 3Q 1999.
First nine months 2000 Obstetrics sales were $9,464 compared to $10,442 in 9M
1999. Gyn/ES/Uro sales were $1,152 in 3Q 2000, compared to $1,111 in 3Q 1999.
First nine months 2000 Gyn/ES/Uro sales were $3,385 compared to $3,229 in 9M
1999. Neonatal product sales were $941 in 3Q 2000, compared to $1,009 in 3Q
1999. First nine months 2000 Neonatal sales were $2,770 compared to $2,774 in 9M
1999. BPM and accessories sales in 3Q 2000 were $1,496, compared to $1,834 in 3Q
1999. First nine months 2000 BPM sales were $4,883 compared to $5,460 in 9M
1999.
Global direct sales were $6,077 and $17,950 in 3Q and 9M 2000,
respectively, compared to $6,489 and $18,850 in the same periods of 1999. Global
OEM sales were $805 and $2,553 in 3Q and 9M 2000, respectively, compared to
$1,079 and $3,055 in the 3Q and 9M 1999, respectively.
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c) Gross Profit
UTMD's gross profit margin (GPM) in 3Q 2000 was 55.6% compared to 54.2% in
3Q 1999. First nine months 2000 GPM was 55.5% compared to 53.2% in 9M 1999.
Gross margin improvements were led by control of manufacturing overhead costs
and lower direct materials costs. During fourth quarter 2000, offsetting
influences are expected to result in GPM of about 55%. Expected favorable
influences include growth in sales activity without a similar increase in
overhead expenses and a continued emphasis on reengineering products to reduce
costs. Unfavorable influences are expected to be continued competitive pressure
on pricing and higher wage rates and other benefits costs for production
employees. UTMD management believes that consistently achieving an average GPM
above 50% is crucial to successfully support the significant sales and
marketing, research and development, and administrative expenses associated with
an innovative medical device company in a highly complex and competitive
marketplace.
d) Operating Profit
Third quarter 2000 operating profits declined 4% to $2,152 from $2,252 in
3Q 1999. Operating profit increased 2% to $6,159 in 9M 2000 from $6,013 in 9M
1999. Total operating expenses, including sales and marketing (S&M) expenses,
research and development (R&D) expenses and general and administrative (G&A)
expenses, were 24.4% of sales in 3Q 2000 compared to 24.5% of sales in 3Q 1999.
Total operating expenses were 25.4% of sales in 9M 2000 compared to 25.8% of 9M
1999 sales. Reducing operating expenses as a percentage of sales with lower
sales is a significant achievement for the quarter.
S&M expenses in 3Q 2000 were $801 or 11.6% of sales compared to $922 or
12.2% of sales in 3Q 1999. First nine months 2000 S&M expenses were $2,519 or
12.3% of sales compared to $2,859 or 13.1% of sales in 9M 1999. S&M expenses are
dominated by the costs of promoting, selling and providing customer support of
UTMD's direct sales of products in the U.S. Total S&M expenses were reduced 10%
in conjunction with managing expenses relative to the actual performance of
UTMD's domestic direct S&M resources.
G&A expenses in 3Q 2000 were $737 compared to $736 in 3Q 1999. First nine
months 2000 G&A expenses were $2,256 compared to $2,233 in 9M 1999. Legal and
amortization of goodwill costs represent a significant portion of G&A expenses.
The decline in R&D expenses in 2000 compared to 1999 was mainly due to
discontinuing the internal development of the fetal tissue pH project. R&D
improvements in materials and configuration of components was evident in UTMD's
improved GPMs. At UTMD, R&D resources are kept involved in the direct support of
manufacturing, as UTMD finds it makes long-term sense to keep its most technical
people involved with products and the processes for making them throughout their
life cycles.
e) Non-operating income
Royalty income from licensing UTMD's technology to other companies was
partially offset by interest expenses and bank fees on the revolving
line-of-credit in 3Q and 9M 2000. Non-operating income in 3Q 2000 was $53,
compared to $71 in 3Q 1999. For first nine months 2000, non-operating income was
$124 compared to $293 in 9M 1999. Royalty income in 3Q and 9M 2000 was $33 and
$110 less, respectively, than in the prior year's periods. Interest expenses and
bank fees associated with the line-of-credit were $84 and $280 in 3Q and 9M 2000
compared to $93 and $176 in 3Q and 9M 1999. Considering the initial high debt
balance as a result of financing the September 2000 tender offer, and assuming
minimal changes in current interest rates and no new borrowing to finance an
extraordinary capital requirement, net non-operating income is expected to be
about -$125 in fourth quarter 2000.
f) Earnings Before Income Taxes
Third quarter and 9M 2000 earnings before income taxes (EBT) were 32.0%
and 30.6% of sales, respectively, compared to 30.6% and 28.8% of sales in 3Q and
9M 1999, respectively. UTMD was able to improve EBT as a percentage of sales in
2000 relative to 1999 because of its excellent operating performance.
g) Net Income and EPS
UTMD's after tax net income expressed as a percentage of sales was 20.5%
for 3Q 2000 compared to 19.6% for 3Q 1999. Net income expressed in dollars was
down 5.1% at $1,410 in 3Q 2000, compared to $1,487 in 3Q 1999. The effective
income tax rate in all four periods was 36.0%. First nine months 2000 net
income was 19.6% of sales compared to 18.4% of sales in 9M 1999.
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Diluted 3Q 2000 earnings per share (EPS) were up 7% to $.23 compared to
$.22 in 3Q 1999. First nine months 2000 EPS increased 18% to $.64 from $.54 in
9M 1999. 3Q 2000 weighted average number of diluted common shares (the number
used to calculate diluted EPS) were 6,015 compared to 6,774 shares in 3Q 1999.
First nine months 2000 diluted shares declined 16% from the same period of 1999.
Actual outstanding common shares as of the end of 3Q 2000 were 5,027. UTMD's
trailing twelve months' EPS were $.86, up 21% from the prior twelve month period
of time.
h) Return on Shareholders' Equity (ROE)
Annualized ROE in both 3Q and 9M 2000 was 36%, compared to 28% and 25% in
3Q and 9M 1999, respectively.
i) Cash flows
EBITDA is a measure of UTMD's ability to generate cash. First nine months
2000 EBITDA was $8,230, up from $8,095 in 9M 1999, or as a ratio of sales, 40%
in 9M 2000 compared to 37% in 9M 1999. Because of its exceptional EBITDA, UTMD
was able to purchase $281 worth of assets to sustain facilities, equipment and
tooling in good working order, invest $250 in new intangible assets, and
repurchase $11,438 worth of it shares, while increasing its bank revolving
line-of-credit balance by just $6,166 during 9M 2000.
Net cash provided by operating activities, including adjustments for
depreciation and other non-cash operating expenses, along with changes in
working capital, totaled $5,835 in 9M 2000, compared to $6,259 in 9M 1999. Net
changes in operating assets and liabilities provided $131 in 9M 2000 cash
compared to providing $723 in 9M 1999, with the largest 2000 changes (adjusted
for exchange rate changes) coming from a $278 decrease in accounts receivable
and a $172 increase in accounts payable, partially offset by a $246 decrease in
accrued expenses. During 3Q 2000, UTMD was able to significantly decrease its
finished goods inventories, which the Company had allowed to increase earlier in
the year in lieu of cutting production rates in order to maintain production
efficiencies during a period of temporary soft demand.
Financing activities in 9M 2000 used cash of $5,186, including the
purchase of 1,439,000 shares of stock at a total cost of $11,438. The $6,166
increase in the bank line-of credit represents just 54% of the cost of share
repurchases. Exercise of employee options resulted in the issuance of 12,524
shares of stock in 9M 2000, compared to 13,950 shares issued in 9M 1999.
Management believes that capital spending in 9M 2000 was at a sufficient
rate to sustain current operations. In addition to sustaining capital
expenditures, UTMD expects to use cash during the rest of 2000 for selective
infusions of technological, marketing or product manufacturing rights to broaden
the Company's product offerings, for continued share repurchases when the price
of the stock remains undervalued, and, if available for a reasonable price,
acquisitions that strategically fit UTMD's business and are accretive to
performance. The revolving credit line will continue to be used for liquidity
when the timing of acquisitions or repurchases of stock require a large amount
of cash in a short period of time.
j) Assets and Liabilities
First nine months 2000 ending total assets were $1,817 less than at
December 31, 1999. Current assets decreased as a result of lower accounts
receivable balances while net fixed assets declined because depreciation
exceeded replacement purchases. Net intangible assets declined because
amortization of goodwill and intellectual property exceeded new acquisitions. 9M
2000 ending net intangible assets represent 30% of total assets.
Average inventory turns increased in 9M 2000 to 3.8 times, compared to 3.7
times in 9M 1999, due to lower inventories in 2000. Inventories declined $240 in
3Q 2000, following a $92 decline in 2Q 2000, and a $376 increase in 1Q 2000.
Inventories were allowed to increase in 1Q 2000 based on UTMD's belief that the
sales decrease was temporary. September 30, 2000 accounts receivable (A/R)
balances declined 10% from 12/31/99, compared to a 6% sales decline. Calculated
days in receivables at 48 for 3Q 2000 decreased slightly from 49 at year-end
1999. The working capital decrease of $45 was largely due to the decrease in
accounts receivable.
At the end of 3Q 2000, UTMD's total debt ratio increased to 58% of total
assets from 32% at the end of 1999, due mainly to the increase in the
line-of-credit balance.
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k) Management's Outlook.
UTMD has built and continues to successfully defend a dominant medical
device market franchise in the most special areas of hospitals caring for
mothers and their babies, with innovative and highly effective products.
UTMD's small direct U.S. sales team continues to evolve as a key resource
for achieving UTMD's objectives to help identify clinician needs, responsively
provide excellent solutions for those needs, and assure timely support for
customers' use of UTMD's solutions. In the remaining part of 2000, UTMD will
investigate ways to expand its U.S. sales coverage through improving its
relationships with national distributors who can access customers in ways not
available to UTMD's direct sales force, through partnering with other
manufacturers where a broader product offering can leverage marketing efforts
and through initiatives to effectively employ Internet technology.
Internationally, UTMD will continue to build on the success of its effective
distribution partners.
R&D efforts have resulted in the recent introduction of two new products,
the EndoCurette(TM), and the Gesco(R) PICC. The EndoCurette, released for
marketing by the FDA in late May, is being tooled for high volume production.
The EndoCurette was developed in conjunction with Dr. Stuart Fowler of the Mayo
Clinic to obtain a more robust tissue sample by physicians trying to rule out
precancerous change of the uterus in women with abnormal bleeding. UTMD
estimates the current annual U.S. market for the device is about $25 million.
The Gesco silicone PICC product family was released by the FDA at the end of
September. UTMD now offers the Neonatal Intensive Care Unit (NICU) the broadest
range of long term indwelling vascular access devices available for specialized
neonatal care. UTMD estimates the current annual U.S. market for the neonatal
PICC to be about $10 million. Both products fit well into UTMD's existing
product lines and call points for its direct sales force, and have significant
potential in overseas markets as well. Internal R&D will continue to be used
primarily to improve and augment existing or acquired product lines.
Consistent with its view of the nature of the medical device industry as a
whole, UTMD believes it can achieve top line growth through selective
acquisitions, and plans to do so without diluting shareholder interest.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits:
SEC
Exhibit # Reference # Title of Document
--------- ----------- ------------------
1 27 Financial data schedule
b) Reports on Form 8-K:
During the quarter ended September 30, 2000, the Company filed no reports
on Form 8-K.
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: 11/8/00 By: /s/ Kevin L. Cornwell
------------------- -------------------------------------------
Kevin L. Cornwell
CEO and CFO
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