Utah Medical Products, Inc. Reports Financial Performance for First Quarter 2014

Utah Medical Products, Inc. Reports Financial Performance for First Quarter 2014 
SALT LAKE CITY, UT -- (Marketwired) -- 04/24/14 --  In the first
calendar quarter (1Q) of 2014, Utah Medical Products, Inc. (NASDAQ:
UTMD) achieved net income consistent with 1Q 2013. This was achieved
with lower sales because profit margins were higher in all income
statement categories, as follows: 


 
                                                                            
                                                       1Q 2014     1Q 2013  
                                                     (JAN - MAR) (JAN - MAR)
                                                     ----------- -----------
Gross Profit Margin (gross profits/ sales):             61.6%       60.5%   
Operating Profit Margin (operating profits/ sales):     39.1%       37.5%   
EBT Margin (profits before income taxes/ sales):        38.5%       36.5%   
Net Profit Margin (profit after taxes/ sales):          27.7%       26.4%   

 
The following is a summary comparison of 1Q 2014 with 1Q 2013 income
statement measures: 


 
                                
Sales:                      (5%)
Gross Profit:               (4%)
Operating Income:           (1%)
Net Income:                   - 
Earnings Per Share:         (1%)

 
As UTMD states in its quarterly SEC Form 10-Q disclosures, 'Because of
the relatively short span of time, results for any given three month
period in comparison with any previous three month period may not be
indicative of comparative results for the year as a whole.'  
Currencies in this report are denoted as $ or USD = U.S. Dollars; AUD
= Australia Dollars; GBP = UK Pound Sterling; and Euro = Euros.
Currency amounts throughout this report are in thousands, except per
share amounts and where noted.  
Sales. 
 As shareholders may recall, in UTMD's 2013 SEC Form 10-K
released last month, the company projected lower sales of blood
pressure monitoring (BPM) kits to its two largest international
customers for BPM kits manufactured in Ireland, as a result of a lack
of usual annual forecasts and lower backlog at the beginning the
year. Backlog is defined as formal orders for devices placed by
customers which have been accepted by UTMD with committed future
delivery dates. UTMD's backlog at the beginning of 2014 with delivery
dates within the first quarter was $384 lower than in the previous
year.  
On the positive side, during 1Q 2014 UTMD received formal orders from
its second largest international BPM distributor, the sum of which
exceed its total demand for UTMD BPM kits in all of 2013. In 1Q 2014,
because of a lack of beginning backlog, actual sales to that
distributor were $219 lower (at the 1Q 2014 average Euro/USD foreign
exchange rate) than in 1Q 2013. This distributor has been reliable in
making payments on time for 20 years.  
Ironically, UTMD Ireland's largest BPM kit customer, located in
China, did have a $396 beginning of year backlog for 1Q 2014, but
UTMD did not make the shipment representing about 4% of total
consolidated 1Q sales. The finished devices were manufactured and
ready for shipment as committed by UTMD. UTMD does not extend credit
to this customer, and ships product only after receipt of payment,
which payment was not made in 1Q 2014 as committed by the
distributor. The distributor has recommitted to make payment within
2Q 2014, but that remains to be seen. This distributor, which
purchased $1.6 million in BPM kits from UTMD Ireland in 2013, has yet
to provide an annual 2014 forecast. This circumstance largely
explains differences in 1Q 2014 compared to 1Q 2013 in three key
financial measures -- lower sales, higher average gross profit margin
and higher ending inventory balance. UTMD management is aware that
its conservative credit policy requiring payment before shipment from
certain foreign distributors allows a risk that those customers may
delay committed delivery schedules, affecting planned revenues.  
Total consolidated 1Q 2014 UTMD sales were $547 lower than in 1Q
2013. Other than sales to the two international BPM distributors
described above, UTMD consolidated sales were higher for the quarter. 
The combined Ireland sales to the two largest international BPM
distributors were $634 lower in 1Q 2014 compared to 1Q 2013. Trade
sales by UTMD Ireland were $604 in 1Q 2014 compared to $1,187 in 1Q
2013, $583 lower (49% lower in USD terms) even though the Euro was
about 5% stronger. In Euro terms, Ireland trade sales were 52% lower. 
Sales by UTMD's UK subsidiary, Femcare-Nikomed Ltd, were $3,610 in 1Q
2014 compared to $3,355 in 1Q 2013 (8% higher in USD terms). A 7%
higher GBP relative to the USD contributed to the increase. However,
UK subsidiary sales to its largest customer, CooperSurgical, Inc
(CSI), are in fixed USD currency. UK subsidiary sales of its Filshie
Clip System to CSI were $1,207 in 1Q 2014 compared to $1,108 in 1Q
2013 (9% higher).  
UTMD's Australia subsidiary, Femcare Australia Pty Ltd, had an
excellent sales quarter in its first full calendar quarter managed by
UTMD's own employees. Sales in 1Q 2014 were 793 AUD compared to 697
AUD in 1Q 2013, 96 AUD higher (14% higher). However, because the AUD
was 13% weaker relative to the USD, the significant AUD increase did
not translate into an increase in USD terms. In USD terms, sales in
1Q 2014 were $713 compared to $723 in 1Q 2013. 
U.S. domestic sales, which include direct sales to U.S. clinical
users, sales of the Filshie Clip System to CSI and sales to U.S. OEM
customers were $4,841 in 1Q 2014 compared to $5,012 in 1Q 2013 (3%
lower). Under Obamacare, the centralization of procurement and
pressure to lower utilization of specialized devices in U.S.
hospitals continues to constrain UTMD's domestic direct distribution. 
Gross Profit. 
 The 1Q 2014 average 61.6% gross profit margin (GPM),
gross profits divided by consolidated sales, was substantially higher
than the 60.5% GPM in 1Q 2013 because the GPM of BPM kits sold to
foreign distributors is low. If BPM kit sales to the China
distributor resume, UTMD still expects its GPM for the full year of
2014 will be consistent with the GPM for the full year of 2013, as
described in UTMD's 2013 SEC 10-K.  
Operating Income. 
 Operating expenses, comprised of general and
administrative (G&A), sales and marketing (S&M) and product
development (R&D) expenses, were $2,207 in 1Q 2014 (22.5% of sales),
compared to $2,392 in 1Q 2013 (23.1% of sales). The lower expenses
were essentially due to UTMD operating its own subsidiary in
Australia instead of through a third party service provider.
Australia operating expenses were $191 lower in 1Q 2014 compared to
1Q 2013, helped by an AUD which was 13% weaker relative to the USD.
Since UTMD is planning on adding more people in Australia and
anticipating that the AUD may strengthen somewhat over the .899
USD/AUD conversion rate of 1Q 2014, the lower Australia subsidiary
operating expense benefit looking forward should be less than it was
in 1Q 2014. 
Consolidated G&A expenses were $1,542 (15.7% of sales) in 1Q 2014
compared to $1,600 (15.4% of sales) in 1Q 2013. The G&A expenses in
1Q 2014 included $668 (6.8% of sales) of non-cash expense from the
amortization of identifiable intangible assets resulting from the
Femcare acquisition, which were $625 (6.0% of sales) in 1Q 2013. The
higher USD amortization expense was the result of a stronger GBP, as
the expense was 404 GBP in both periods. The overall lower G&A
expenses were primarily due to $94 lower G&A expenses in Australia.  
S&M expenses were $542 (5.5% of sales) in 1Q 2014 compared to $669
(6.4% of sales) in 1Q 2013. S&M expenses in 1Q 2014 included $66
MDET, $9 lower than in 1Q 2013 due to lower U.S. domestic sales of
medical devices. The U.S. Medical Device Excise Tax (MDET), imposed
as a component of the Patient Protection and Affordable Care Act
(Obamacare), is levied as 2.3% of domestic sales of medical devices.
The negative effect of the MDET on UTMD's performance declined
consistent with the decline in U.S. domestic direct sales, as U.S.
patients are increasingly restricted from use of UTMD's life-saving
products. Australia S&M expenses were $97 lower than in 1Q 2013.  
R&D expenses were $123 (1.2% of sales) in both 1Q 2014 and 1Q 2013.  
Operating income in 1Q 2014 was $3,843, almost the same as in 1Q 2013
($3,889) despite 5% lower sales, for reasons described above. UTMD's
1Q 2014 operating profit margin (OPM), operating income divided by
sales, improved substantially to 39.1% compared to 37.5% in 1Q 2013.
Without the MDET, UTMD's 1Q 2014 OPM would have been 39.8%.  
Income Before Tax. 
 Income before taxes (EBT) results from
subtracting net non-operating expenses (NOE) from operating income.
Consolidated EBT at $3,782 in 1Q 2014 was practically the same as the
$3,787 in 1Q 2013. NOE includes loan interest and bank fees minus
non-operating income from rent of underutilized property, investment
income and royalties received from licensing the Company's
technology. Net NOE in 1Q 2014 was $61 compared to $102 in 1Q 2013.
The difference was primarily due to lower interest on loans obtained
to help finance the acquisition of Femcare. 1Q 2014 interest expense
was $87. 1Q 2013 interest expense was $122. The EBT of UTMD Ltd.
(Ireland) was 88 Euro in 1Q 2014 compared to 227 Euro in 1Q 2013. The
EBT of Femcare Group Ltd (Femcare-Nikomed, Ltd., UK and Femcare
Australia) was 1,159 GBP in 1Q 2014 compared to 1,030 GBP in 1Q 2013.
The respective EBT margins (EBT divided by sales) of UTMD Ltd.
(Ireland) were 18.6% in 1Q 2014 and 24.5% in 1Q 2013. The respective
EBT margins of Femcare were 41.2% in 1Q 2014 and 36.7% in 1Q 2013.  
Excluding the noncash effects of depreciation, amortization of
intangible assets and stock option expense, 1Q 2014 consolidated EBT
plus interest expense ("EBITDA") were $4,713, higher than the $4,710
EBITDA in 1Q 2013 despite 5% lower sales. Management believes that
this provides investors with evidence of a company focused on a
"bottom line" which allows shareholder returns, rather than just the
"top line."  
Net Income. 
 Net Income in 1Q 2014 of $2,722 was about the same as
the net income of $2,735 in 1Q 2013, despite the lower sales because
UTMD's net profit margin (NPM), net income divided by consolidated
sales, was 27.7% in 1Q 2014 compared to 26.4% in 1Q 2013. The
improvement in 1Q 2014 NPM compared to the prior period was due to
the improvement in OPM described above, and the lower interest
expense as UTMD repaid debt it obtained when financing the Femcare
acquisition. The average consolidated income tax provisions (as a %
of EBT) in 1Q 2014 and 1Q 2013 were 28.0% and 27.8%, respectively.  
UTMD's combined state and federal income tax provision rate in the
U.S. after all allowable deductions was 33.9% in 1Q 2014 compared to
33.1% in 1Q 2013. The corporate income tax rate in the UK was 23% in
1Q 2014 compared to 24% in 1Q 2013. As of April 1, 2014, the UK
corporate tax rate will be reduced again, from 23% to 21%, which will
further benefit UTMD's NPM during the remainder of 2014. The income
tax rate in Australia has been and remains 30%. UTMD Ltd (Ireland)
tax provision rate was 14.5% in 1Q 2014 and 13.2% in 1Q 2013.  
Earnings per share (EPS). 
 Earnings per share for the most recent
twelve months were $3.01. EPS in 1Q 2014 were about one cent lower
than in 1Q 2013 due to the exercise of employee options and the
higher dilution factor applied to unexercised options as a result of
a higher average market price of UTMD stock. Diluted shares used to
calculate EPS increased to 3,786,700 in 1Q 2014 from 3,756,900 in 1Q
2013. The number of shares added as a dilution factor in 1Q 2014 was
37,000 compared to 45,500 in 1Q 2013.  
Outstanding shares at the end of 1Q 2014 were 3,756,300. The number
of shares used for calculating earnings per share was higher than
ending shares because of a time-weighted calculation of average
outstanding shares plus dilution from unexercised employee and
director options. The total number of outstanding unexercised
employee and outside director options at March 31, 2014 was 74,900
shares at an average exercise price of $27.94/ share, including
shares awarded but not vested. This compares to 116,300 unexercised
option shares outstanding at March 31, 2013 at an average exercise
price of $27.04/ share.  
During both 1Q 2014 and 1Q 2013, UTMD did not repurchase its shares
in the open market. The Company retains the financial ability for
repurchasing its shares when they seem undervalued. The closing share
price at the end of 1Q 2014 was $57.83 compared to $57.16 at the end
of calendar year 2013, and $48.77 at the end of 1Q 2013.  
Balance Sheet.
 UTMD's Balance Sheet at March 31, 2014 continued to
strengthen. Compared to a year earlier, cash and investments
increased $4.2 million. The $15.1 million balance of cash and
investments at March 31, 2014 substantially exceeded UTMD's bank debt
balance of $8.1 million (remaining from borrowing $26.9 million to
help finance the acquisition of the Femcare Group, Ltd. in March
2011). In the three years following the Femcare acquisition, UTMD has
repaid 70% of the loan provided by JP Morgan Chase. Over the most
recent one year period, Stockholders' Equity increased $12.2 million
after cash payments of dividends to shareholders of $3.7 million
(which reduce Stockholders' Equity).  
Financial ratios as of March 31, 2014 which may be of interest to
shareholders follow: 
1) Current Ratio = 3.1
 2) Days in Trade Receivables (based on 1Q
2014 sales activity) = 40
 3) Average Inventory Turns (based on 1Q
2014 CGS) = 3.0
 4) 2014 YTD ROE (before dividends) = 18%  
Investors are cautioned that this press release contains forward
looking statements and that actual events may differ from those
projected. Risk factors that could cause results to differ materially
from those projected include market acceptance of products, timing of
regulatory approval of new products, regulatory intervention in
current operations, government healthcare "reforms", the Company's
ability to efficiently manufacture, market, and sell its products,
among other factors that have been and will be outlined in UTMD's
public disclosure filings with the SEC.  
Utah Medical Products, Inc., with particular interest in health care
for women and their babies, develops, manufactures and markets a
broad range of disposable and reusable specialty medical devices
recognized by clinicians in hundreds of countries around the world as
the standard for obtaining optimal long term outcomes for their
patients. For more information about Utah Medical Products, Inc.,
visit UTMD's website at www.utahmed.com. 


 
                                                                            
                         Utah Medical Products, Inc.                        
                                                                            
INCOME STATEMENT, First Quarter ended March 31 (in thousands except earnings
 per share):                                                                
                                                                            
                                            1Q 2014 1Q 2013 Percent Change  
                                            ------- ------- --------------  
Net Sales                                   $ 9,827 $10,374           (5.3%)
Gross Profit                                  6,050   6,281           (3.7%)
Operating Income                              3,843   3,889           (1.2%)
Income Before Tax                             3,782   3,787           (0.1%)
Net Income                                    2,722   2,735           (0.5%)
Earnings Per Share                          $ 0.719 $ 0.728           (1.2%)
Shares Outstanding (diluted)                  3,787   3,757                 
                                                                            
                                                                            
                                                                            
BALANCE SHEET                                                               
(in thousands)                        (unaudited)    (audited)   (unaudited)
                                      MAR 31, 2014 DEC 31, 2013 MAR 31, 2013
                                     ------------- ------------ ------------
Assets                                                                      
  Cash & Investments                 $      15,089 $     14,451 $     10,918
  Accounts & Other Receivables, Net          5,075        4,335        5,363
  Inventories                                5,292        4,704        4,406
  Other Current Assets                         876          796          910
                                     ------------- ------------ ------------
    Total Current Assets                    26,332       24,286       21,597
Property & Equipment, Net                    8,904        8,330        8,203
Intangible Assets, Net                      47,658       48,095       46,562
                                     ------------- ------------ ------------
      Total Assets                   $      82,894 $     80,711 $     76,362
                                                                            
Liabilities & Stockholders' Equity                                          
  A/P & Accrued Liabilities          $       4,478 $      3,559 $      5,193
  Current Portion of Notes Payable           4,068        4,052        3,831
                                     ------------- ------------ ------------
    Total Current Liabilities                8,546        7,611        9,024
Notes Payable (excluding current                                            
 portion)                                    4,067        5,065        7,663
Other LT Liabilities                             -            -          339
Deferred Tax Liability - Intangibles         6,394        6,510        7,733
Deferred Revenue and Income Taxes              949          944          887
Stockholders' Equity                        62,938       60,581       50,716
                                     ------------- ------------ ------------
      Total Liabilities &                                                   
       Stockholders' Equity          $      82,894 $     80,711 $     76,362

  
Contact: 
Paul Richins 
(801) 566-1200 
 
 
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