UTAH MEDICAL PRODUCTS INC - Form 10-Q SEC filing

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2021

☐ 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 ☒ No ☐

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 ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, 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 ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☐

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. ☐

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of May 10, 2021: 3,645,798.

		PAGE
PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Condensed Balance Sheets as of March 31, 20 21 and December 31, 20 20	1

	Consolidated Condensed Statements of Income for the three months ended March 31, 20 21 and March 31, 20 20	2

	Consolidated Condensed Statements of Cash Flows for the three months ended March 31, 20 21 and March 31, 20 20	3

	Consolidated Condensed Statement s of Stockholders’ Equity for the three months ended March 31, 20 21 and March 31, 20 20	4

	Notes to Consolidated Condensed Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	15

Item 4.	Controls and Procedures	15

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	16

Item 1A.	Risk Factors	16

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	17

Item 6.	Exhibits	17

SIGNATURES		18

UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS AS OF
MARCH 31, 2021 AND DECEMBER 31, 2020
(in thousands)
	(unaudited)	(audited)
	MARCH 31, 2021	DECEMBER 31, 2020
ASSETS
Current assets:
Cash & Investments	$ 56,033	$ 51,590
Accounts & other receivables, net	4,157	4,104
Inventories	5,975	6,222
Other current assets	451	346
Total current assets	66,616	62,262
Property and equipment, net	10,721	10,949
Operating Lease – Right of Use Assets, net	366	377
Goodwill	14,232	14,164
Other intangible assets	56,490	56,159
Other intangible assets - accumulated amortization	(34,037)	(32,166)
Other intangible assets, net	22,453	23,993
Total assets	$ 114,388	$ 111,745

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$ 839	$ 788
Accrued expenses	3,728	3,003
Total current liabilities	4,567	3,791
Deferred tax liability – Femcare IIA	1,995	1,995
Other long term liabilities	2,068	2,151
Operating lease liability	329	335
Deferred income taxes	546	651
Total liabilities	9,505	8,923

Stockholders' equity:
Common stock - $0.01 par value; authorized - 50,000 shares; issued and outstanding - March 31, 2021, 3,646 shares and December 31, 2020, 3,643 shares	36	36
Accumulated other comprehensive loss	(8,335)	(8,281)
Additional paid-in capital	245	115
Retained earnings	112,937	110,952
Total stockholders' equity	104,883	102,822

Total liabilities and stockholders' equity	$ 114,388	$ 111,745

see notes to consolidated condensed financial statements

UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME FOR THE
THREE MONTHS ENDED MARCH 31, 2021 AND MARCH 31, 2020
(in thousands, except per share amounts - unaudited)
	THREE MONTHS ENDED MARCH 31,
	2021	2020
Sales, net	$ 10,964	$ 10,902

Cost of goods sold	4,017	4,066
Gross profit	6,947	6,836

Operating expense
Selling, general and administrative	2,929	2,838
Research & development	130	135
Total operating expenses	3,059	2,973
Operating income	3,888	3,863

Other income	10	125
Income before provision for income taxes	3,898	3,988

Provision for income taxes	874	848
Net income	$ 3,024	$ 3,140

Earnings per common share (basic)	$ 0.83	$ 0.85

Earnings per common share (diluted)	$ 0.83	$ 0.84

Shares outstanding (basic)	3,644	3,707

Shares outstanding (diluted)	3,655	3,724

Other comprehensive income (loss):
Foreign currency translation net of taxes of $0 in all periods	$ (54)	$ (2,449)
Total comprehensive income	$ 2,970	$ 691

see notes to consolidated condensed financial statements

UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND MARCH 31, 2020
(in thousands - unaudited)
	THREE MONTHS ENDED MARCH 31,
	2021	2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 3,024	$ 3,140
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	163	175
Amortization	1,664	1,630
Provision for (recovery of) losses on accounts receivable	2	(14)
Amortization of Right of Use Assets	10	9
Deferred income taxes	(208)	(97)
Stock-based compensation expense	41	23
Tax benefit attributable to exercise of stock options	5	3
Changes in operating assets and liabilities:
Accounts receivable and other receivables	(71)	261
Inventories	207	158
Prepaid expenses and other current assets	(109)	(12)
Accounts payable	51	(31)
Accrued expenses	754	429
Total adjustments	2,509	2,534
Net cash provided by operating activities	5,533	5,674

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for:
Property and equipment	(10)	(454)
Net cash used in investing activities	(10)	(454)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock - options	89	48
Common stock purchased and retired	-	(6,426)
Payment of dividends	(1,038)	(1,042)
Net cash used in financing activities	(949)	(7,420)

Effect of exchange rate changes on cash	(131)	(974)
Net increase (decrease) in cash and cash equivalents	4,443	(3,174)
Cash at beginning of period	51,590	42,787
Cash at end of period	$ 56,033	$ 39,613

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for income taxes	$ 153	$ 285
Cash paid during the period for interest	-	-

see notes to consolidated condensed financial statements

UTAH MEDICAL PRODUCTS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY FOR THE
THREE MONTHS ENDED MARCH 31, 2021 AND MARCH 31, 2020
(in thousands - unaudited)
				Accumulated
			Additional	Other		Total
	Common Stock		Paid-in	Comprehensive	Retained	Stockholders'
	Shares	Amount	Capital	Income	Earnings	Equity
Balance at December 31, 2020	3,643	$ 36	$ 115	$ (8,281)	$ 110,952	$ 102,822
Shares issued upon exercise of employee stock options for cash	3	-	89	-	-	89
Stock option compensation expense	-	-	41	-	-	41
Foreign currency translation adjustment	-	-	-	(54)	-	(54)
Common stock dividends	-	-	-	-	(1,039)	(1,039)
Net income	-	-	-	-	3,024	3,024
Balance at March 31, 2021	3,646	$ 36	$ 245	$ (8,335)	$ 112,937	$ 104,883

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	-	48	-	-	48
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	3,643	$ 36	$ -	$ (12,232)	$ 106,582	$ 94,386

see notes to consolidated condensed financial statements

		March 31, 2021		December 31, 2020
Finished goods	$	1,361	$	1,363
Work-in-process		1,172		1,375
Raw materials		3,442		3,484
Total	$	5,975	$	6,222

		Domestic		Outside US		Total
Obstetrics	$	904	$	114	$	1,018
Gynecology/Electrosurgery/Urology		2,614		2,513		5,127
Neonatal		1,173		414		1,587
Blood Pressure Monitoring and Accessories		2,092		1,140		3,232
Total	$	6,783	$	4,181	$	10,964

The components of lease cost were as follows:	Three Months Ended March 31, 2021
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, 2021
Weighted Average Remaining Lease Term – Operating Leases	10 years
Weighted Average Discount Rate – Operating Leases	5.4%

Operating lease liabilities/ payments	(in thousands)
Operating lease payments, 2021	$60
Operating lease payments, 2022	$45
Operating lease payments, 2023	$45
Operating lease payments, 2024	$45
Operating lease payments, 2025	$45
Thereafter	$254

Reconciliation of operating lease liabilities/ payments to operating lease liabilities	(in thousands)
Total operating lease liabilities/ payments	$481
Operating lease liabilities – current (included in Accrued Expenses)	$37
Operating lease liabilities – long term	$329
Present value adjustment	$115

	1Q 2021 (JAN – MAR)	1Q 2020 (JAN – MAR)
Gross Profit Margin (Gross Profit/ sales):	63.4%	62.7%
Operating Income Margin (Operating Income/ sales):	35.5%	35.4%
EBT Margin (Profits before Income Taxes/ sales):	35.6%	36.6%
Net Income Margin (Profit after Taxes/ sales):	27.6%	28.8%

	1Q 2021	1Q 2020	Change
GBP	1.379	1.283	+7.4%
EUR	1.203	1.108	+8.6%
AUD	0.773	0.655	+17.9%
CAD	0.790	0.750	+5.4%

	1Q 2021	1Q 2020
S&M Expense	$ 384	$ 419
R&D Expense	130	135
G&A Expense:
CSI IIA amortization	1,105	1,105
Femcare IIA amortization	550	512
All Other G&A Expenses	890	802
Total Operating Expenses:	$ 3,059	$ 2,973

	1Q 2021	1Q 2020
EBT	$ 3,898	$ 3,988
Depreciation Expense	163	175
Femcare IIA Amortization Expense	550	512
CSI IIA Amortization Expense	1,105	1,105
Other Non-Cash Amortization Expense	9	13
Stock Option Compensation Expense	41	23
Interest Expense	-	-
Remeasured Foreign Currency Balances	10	(44)
UTMD non-US GAAP EBITDA:	$ 5,776	$ 5,772

Maturities of lease liabilities were as follows:	(in thousands)
Year ending December 31,
2021	$41
2022	$27
2023	$29
2024	$30
2025	$32
Thereafter	$218

(in thousands)	Three months ended
	March 31,
	2021	2020
Numerator
Net income	3,024	3,140

Denominator
Weighted average shares, basic	3,644	3,707
Dilutive effect of stock options	11	17
Diluted shares	3,655	3,724

Earnings per share, basic	0.83	0.85
Earnings per share, diluted	0.83	0.84

	3-31-21	12-31-20	Change
GBP	1.380	1.366	1.0%
EUR	1.174	1.223	(4.0%)
AUD	0.761	0.771	(1.2%)
CAD	0.795	0.784	1.5%

Exhibit #	Title of Document

31.1	Certification of CEO pursuant to Rule 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1	Certification of CEO pursuant to 18 U.S.C. §1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2	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

101	The following financial information from the Utah Medical Products, Inc. quarterly report on Form 10-Q for the quarter ended March 31, 2021, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) Consolidated Condensed Balance Sheets, (ii) Consolidated Condensed Statements of Income, (iii) Consolidated Condensed Statements of Cash Flows, (iv) Consolidated Condensed Statements of Stockholders’ Equity, and (v) related Notes to the Consolidated Condensed Financial Statements, tagged in detail.

104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

SEC Form 10-Q filed by Utah Medical Products, Inc.