What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2020-11-09 compared with 2005-07-19 · 331 added, 361 removed, 1 unchanged (100% of the section changed)

Discussion and Analysis of Financial Condition and Results of

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, 2004

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

a previous three month period may not be indicative of comparative results

the year as a whole.

Dollar amounts in the report are expressed in thousands,

except per-share amounts or where otherwise noted.

of Results of Operations

2005, UTMD’s consolidated global sales increased 1% compared to 1Q 2004.

achieved the following profitability measures for 1Q 2005, in comparison with

Profit Margin (gross profits/ sales):

Profit Margin (operating profits/ sales):

earnings per share (EPS) of $.46 decreased 57% compared to 1Q 2004.

Company believes that revenue should be recognized at the time of shipment

title generally passes to the customer at the time of shipment.

product and service sales is generally recognized at the time the product is

shipped or service completed and invoiced, and collectibility is reasonably

There are circumstances under which revenue may be recognized when

product is not shipped, all of which meet the criteria of SAB 104 :

Company provides engineering services, for example, design and production of

manufacturing tooling that may be used in subsequent UTMD manufacturing of

custom components for other companies.

This revenue is recognized when UTMD’s

service has been completed according to a fixed contractual agreement.

Company manufactures products for other companies (OEM customers) according

fixed longer term supply contracts which are not cancelable or changeable.

Occasionally, an OEM customer will request to bill completed products according

to the contract, but hold shipment for some business purpose of the customer

awaiting some mating component from another supplier).

Company manufactures products for foreign companies according to fixed contracts

which are not cancelable or changeable.

Occasionally, a foreign customer under

prepay obligation will request to bill completed products according to the

contract, but hold shipment until payment will be made.

1Q 2005 increased 1% compared to 1Q 2004.

Although sales increased, they

continue to be negatively affected by the August 10, 2004 FDA press release

announcing an injunction lawsuit against UTMD.

Domestic direct sales were

essentially the same in both quarters.

Domestic OEM sales (sales of components

to other companies) were down 20% compared to 1Q 2004.

The primary component

the weaker OEM sales was Deltran accessories (BPM components), which were down

The OEM sales pattern is uneven quarter-to-quarter because customers tend

to purchase several months’ worth of components at a time to minimize costs.

International

sales increased 8% in 1Q 2005 compared to 1Q 2004.

International sales were

$1,623 in 1Q 2005 compared to $1,501 in 1Q 2004.

Trade shipments from UTMD’s

Ireland facility were up 4% in US Dollar terms, and down 2% in EURO terms.

International sales were up more than shipments from the Ireland facility due

product mix, as the Ireland plant manufactured and shipped products in 1Q 2005

with a higher labor component than in the prior-year period.

revenues by product category:

Electrosurgery/ Urology

Pressure Monitoring and Accessories (BPM)

includes molded components sold to OEM

average gross profit margin (GPM), gross profits as a percentage of sales,

56.1% in 1Q 2005, compared to 58.2% 1Q 2004.

UTMD’s prices for its products have

remained consistent with the prior year, but 1Q 2005 product mix favored lower

margin products.

Because of UTMD’s small size and period-to-period fluctuations

in OEM business activity, allocations of fixed manufacturing overheads cannot

meaningfully allocated between direct and OEM sales.

Therefore, UTMD does not

report GPM by sales channels.

targets an average GPM greater than or equal to 55%, which it believes is

necessary to successfully support the significant operating expenses required

a complex and competitive medical device industry.

Management expects to

continue to achieve its GPM target during the remainder of 2005.

favorable influences include a more favorable absorption of fixed overhead

expenses after the significant inventory reduction in third quarter 2004.

Expected unfavorable influences are expected increases in direct labor-related

and direct materials-related costs, and a continued increase in proportion

sales of lower margin products relative to the same period in the prior year.

Profit is the profit remaining after subtracting operating expenses from gross

Operating expenses in 1Q 2005 were lower than 1Q 2004 by $389.

primary factor in the difference was $350 in 1Q 2004 bonuses and litigation

expenses related to the Tyco patent infringement.

Management's Discussion and Analysis of Financial Condition and Results of Operations

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.

A$ or AUD = Australia Dollars;

£ or GBP = UK Pound Sterling;

C$ or CAD = Canadian Dollars;

and € or EUR = Euros.

Analysis of Results of Operations

Income statement results in 3Q and 9M 2020 compared to the same periods of 2019 were as follows:

Operating Income

Income Before Tax

Net Income (NI)

Earnings per Diluted Share (EPS)

UTMD management believes that the presentation of sequential 2020 quarterly results provides meaningful supplemental information to both management and investors.

Keeping in mind that 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, the following table shows the percent changes in 2020 quarterly results compared to the same periods of time in 2019:

Consolidated Income Statement

Worldwide Revenues

Operating Income

Earnings Before Income Tax

Earnings Per Share

Revenues [USD denominated]

domestic (excluding OEM)

Canada domestic

Ireland domestic

France domestic

Australia domestic

Subtotal, Direct to End User:

All Other OUS (Sales to Int’l Distributors)

Worldwide Revenues

UTMD subsidiary direct domestic sales in Canada, Ireland, the United Kingdom, France and Australia are invoiced in foreign currencies.

Foreign currency exchange (FX) rates for income statement purposes are transaction-weighted averages.

The average rates from the applicable foreign currency to USD during 3Q 2020 and 9M 2020 compared to the same periods in 2019 follow:

Although the volatility of FX rates for OUS sales when consolidated in USD terms continues to impact period-to-period relative financial results because of UTMD’s significant percentage of foreign currency sales, the FX rate impact in 9M 2020 was less significant than in the recent past.

Except for the CAD FX rate which had not changed as significantly as other currencies, a healthy 3Q 2020 decline in the USD offset its strengthening during the first half of the year.

Foreign currency revenues in 3Q 2020 were increased by $85 as a result of a weaker USD compared to 3Q 2019.

In contrast, the difference in period-to-period FX rates reduced revenues by $36 in 9M 2020.

Foreign currency sales as a percentage of total sales were 21.0% of total sales in 3Q 2020 and 22.0% of total sales in 9M 2020.

UTMD’s 3Q 2019 and 9M 2019 revenues invoiced in foreign currencies represented 23.6% and 27.2% of total consolidated USD sales respectively.

Other factors that affected period-to-period revenue comparisons included

1) International distributors’ quarter-to-quarter orders fluctuate more than domestic end user orders.

2) 1Q 2019 was a partial quarter of U.S.

domestic Filshie Clip System (Filshie device) sales, as the UTMD acquisition of the Cooper Surgical Inc.

(CSI) exclusive Filshie device distribution rights took effect February 1, 2019.

UTMD profit margins in 3Q 2020 and 9M 2020 compared to 3Q 2019 and 9M 2019 follow:

Gross Profit Margin (gross profits/ sales):

Operating Income Margin (operating profits/ sales):

Net Income Margin (profit after taxes/ sales):

Gross Profit in 3Q 2020 declined less than the sales decline primarily as a result of sales mix.

The 9M 2020 gross profit margin (GPM), gross profit divided by sales, was lower than in 9M 2019 despite the better 3Q GPM because 14% lower sales during 9M 2020 absorbed marginally less of UTMD’s fixed critical mass of manufacturing overhead.

Because UTMD believes that the lower sales are transitory, knows it can remain very profitable even at the lower sales levels experienced during the pandemic and has a significant cash reserve relative to operational needs, management will not cut important resources and sacrifice future capabilities just to maintain short term profit margins.

Operating Income declined more than gross profit in both 3Q 2020 and 9M 2020 because UTMD’s non-cash identifiable intangible asset (IIA) amortization expense included in operating expenses was 15.5% of sales in 3Q 2020 compared to 12.8% of sales in 3Q 2019, and 16.0% in 9M 2020 compared to 12.7% in 9M 2019.

This was due not only to the lower sales in 2020 (less absorption of a fixed expense) but also the GBP FX rate difference in the 3Q and the timing of beginning the CSI IIA amortization in 2019.

Earnings before tax (EBT) declined more than operating income simply because UTMD did not receive interest on its cash balances in 2020 like it did in 2019, although average cash balances were about 20% higher during 9M 2020.

Net Income declined slightly more than EBT as a result of the sovereignty mix of taxable profits in 2020 compared to 2019.

The lowest tax regimes of Ireland and the UK had the greatest declines in EBT.

Finally, Earnings Per Share (EPS) declined less than net income as a result of the benefit of share repurchases in 2020.

UTMD’s 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 September 2020 and the end of September 2019 follow:

UTMD’s September 30, 2020 Balance Sheet remained strong with an absence of debt.

During 2020, inventories declined $0.6 million despite much lower sales, which is an indication of good manufacturing planning and control.

Due to the increase in value of the GBP, EUR and AUD noted above, despite depreciation of fixed assets, the USD net book value of fixed assets in the UK, Ireland and Australia increased $0.6 million as of September 30, 2020 from September 30, 2019.

Over the one year period of time, the intangible asset balance declined $5.5 million, about 12%.

Ending cash and investments were $46.3 million on September 30, 2020 compared to $42.8 million on December 31, 2019, after paying $3.1 million in cash dividends to stockholders and repurchasing $7.0 million in UTMD stock during 9M 2020.

After reducing stockholders’ equity a combined $10.1 million in 9M 2020 stockholder dividends and share repurchases, September 30, 2020 stockholders’ equity was down only $2.7 million from December 31, 2019.

Beginning on January 1, 2018, the Company adopted ASU 2014-09, the new revenue recognition accounting standard.

Management completed an extensive assessment and implementation of the standard, including UTMD’s various contracts with customers and associated performance obligations and the Company’s conclusions regarding its revenue recognition practices and procedures.

Other items like commissions and rights of return were also evaluated by the Company.

Management is confident that the Company has properly evaluated the standard’s requirements and has arrived at appropriate conclusions in recognizing revenue in accordance with the new standard.

Those practices and procedures the Company will use to recognize revenue under the new standard are not significantly different than the methods used previously since UTMD has traditionally recognized revenue upon shipping a physical product to a customer, which is also when the Company has met its performance obligations under contracts it has with its customers that represent over 99% of its revenue.

While the Company’s revenue not associated with shipping a physical product is immaterial, management believes the Company’s practices in recognizing that revenue is also in accordance with ASU 2014-09.

Terms of sale are established in advance of UTMD’s acceptance of customer orders.

In the U.S., Ireland, UK, France, Canada and Australia, UTMD generally accepts orders directly from and ships 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.

About 14% of UTMD’s domestic end user sales, excluding Filshie device sales, 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., Ireland, UK, France, Canada 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.

Total consolidated 3Q 2020 UTMD sales were $2,016 (16.1%) lower than in 3Q 2019.

Constant currency sales were $2,101 (16.8%) lower.

Total consolidated 9M 2020 UTMD sales were $4,905 (14.0%) lower than in 9M 2019.

Constant currency sales in 9M 2020 were $4,869 (13.9%) lower than in 9M 2019.

In 3Q 2020 compared to 3Q 2019, U.S.

domestic sales were 8% lower and OUS sales were 28% lower.

In 9M 2020 compared to 9M 2019, U.S.

domestic sales were 7% lower and OUS sales were 23% lower.

Domestic sales in 3Q 2020 were $6,950 compared to $7,575 in 3Q 2019.

Domestic sales in 9M 2020 were $18,906 compared to $20,366 in 9M 2019.

The components of domestic sales include 1) “direct sales” of UTMD’s medical devices to user facilities (and med/surg stocking distributors for hospitals), excluding Filshie Clip System (“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) Filshie device sales direct to U.S.

medical facilities starting in February 2019.

Domestic direct sales in 3Q 2020 excluding Filshie devices, representing 50% of total domestic sales, were $178 (5%) lower than in 3Q 2019.

Domestic direct sales in 9M 2020 excluding Filshie devices, representing 51% of total domestic sales, were $1,078 (10%) lower than in 9M 2019.

OEM sales in 3Q 2020, representing 25% of total domestic sales, were $172 (9%) lower than in 3Q 2019.

OEM sales in 9M 2020, also representing 25% of total domestic sales, were $27 (1%) lower than in 9M 2019.

Filshie device sales direct to U.S.

domestic end-user facilities were $275 (14%) lower in 3Q 2020 compared to sales in 3Q 2019.

Filshie device sales direct to U.S.

domestic end-user facilities were $355 (7%) lower in 9M 2020 compared to Filshie device sales in 9M 2019.

Because Filshie device sales are a significant portion of UTMD’s domestic business and a UTMD device most affected by the COVID-19 pandemic, management believes the following table might help to see the overall 2020 pandemic impact and recovery trend:

Filshie device sequential quarterly USD domestic direct sales in the U.S.

OUS sales in 3Q 2020 were $3,528 compared to $4,919 in 3Q 2019.

OUS sales in 9M 2020 were $11,262 compared to $14,707 in 9M 2019.

OUS sales invoiced in GBP, EUR, AUD and CAD currencies were $85 higher in 3Q 2020 and $36 lower in 9M 2020 as a result of changes in FX rates.

Foreign currency OUS sales in 3Q 2020 were $2,205, which was 62% of all OUS sales and 21% of total consolidated sales.

In comparison, foreign currency OUS sales in 3Q 2019 were $2,944, which was 60% of all OUS sales and 24% of total consolidated sales.

The foreign currency OUS sales in 9M 2020 were $6,653, which was 59% of all OUS sales and 22% of total consolidated sales.

In comparison, foreign currency OUS sales in 9M 2019 were $9,534, which was 65% of all OUS sales and 27% of total consolidated sales.

Because Filshie device sales are also a significant portion of UTMD’s OUS business and an implanted device most affected by the COVID-19 pandemic, management believes the following table might help to see the overall 2020 pandemic impact and recovery trend:

Filshie device OUS sequential quarterly USD-denominated sales:

OUS Filshie sales obviously took a deeper hit from the pandemic than in the U.S.

UTMD segments sales into the following general product categories:

gynecology/ electrosurgery, labor & delivery, neonatal, and miscellaneous including blood pressure monitoring kits and accessories as well as related OEM products.

In 3Q 2020 compared to 3Q 2019, worldwide gynecology/ electrosurgery device sales were down 21%, worldwide labor & delivery device sales were essentially the same, worldwide neonatal device sales were down 6% and worldwide blood pressure monitoring and related OEM product sales were down 18%.

Devices in the gynecology/ electrosurgery category were mostly classified as “nonessential” during the pandemic.

In the blood pressure monitoring category, UTMD’s largest OUS distributor took a double quarterly shipment in 3Q 2019.

In 9M 2020 compared to 9M 2019, worldwide gynecology/ electrosurgery device sales were down 22%, worldwide labor & delivery device sales were down 13%, worldwide neonatal device sales were down 2% and worldwide blood pressure monitoring and related OEM product sales were down 3%.

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

Global 3Q 2020 revenues (USD) by product category:

Gynecology/Electrosurgery/Urology

Blood Pressure Monitoring and Accessories*

Global 9M 2020 revenues (USD) by product category:

Gynecology/Electrosurgery/Urology

Blood Pressure Monitoring and Accessories*

*includes molded components sold to OEM customers.

Looking forward, although an increase in COVID-19 infections is likely in the winter months of 4Q 2020 in the northern hemisphere, assuming no significant new lockdowns or prohibitions of “nonessential procedures” are imposed by governments, UTMD expects that its 4Q 2020 sales will continue to recover and be higher than in 3Q 2020.

c) Gross Profit

Gross Profit results from subtracting the costs of manufacturing and shipping products to customers from revenues.

Gross Profit was $883 (12.0%) lower in 3Q 2020 than in 3Q 2019, and $3,369 (15.6%) lower in 9M 2020 than in 9M 2019.

UTMD’s 3Q 2020 GPM improved to 62.0% compared to 59.1% in 3Q 2019 so that the decline in 3Q Gross Profit was not as significant as the 3Q decline in sales.

Sales to international distributors are at lower prices for the same devices because the distributor incurs direct marketing expenses instead of UTMD.

Sales to international distributors were only 18% of total sales in 3Q 2020 compared to 23% in 3Q 2019.

The 3Q 2019 GPM was also exceptionally low because of a “double” shipment of blood pressure monitoring kits to UTMD’s China distributor.

For 9M 2020 compared to 9M 2019, Gross Profit declined slightly more than the sales decline as a result of UTMD not cutting critical manufacturing overhead resources, and providing special incentives in 2Q 2020 for employees to come to work.

Nevertheless, the 60.6% GPM for the 2020 year to date has met management’s long term objective.

d) Operating Income

Operating Income results from subtracting Operating Expenses from Gross Profit.

Operating Expenses, comprised of general and administrative (G&A) expenses, sales and marketing (S&M) expenses and product development (R&D) expenses, were 27.8% of sales in 3Q 2020 compared to 24.1% of sales in 3Q 2019.

Operating Expenses were 29.4% of sales in 9M 2020 compared to 24.8% of sales in 9M 2019.

Although the operating expense percentage of sales increased due to the 2020 short term pandemic reduction in sales, management continued to tightly manage operating expenses without sacrificing resources needed for longer term growth.

Summary comparison of (USD) consolidated operating expenses:

Total Operating Expenses:

including sales and marketing (S&M), research and development (R&D) and

general and administrative (G&A) expenses, were 17.8% of sales in 1Q 2005,

compared to 23.7% in 1Q 2004.

Operating profits increased to $2,552 in 1Q 2005

from $2,280 in 1Q 2004.

The 1Q 2005 operating profit margin was 38.4%, compared

to 34.5% of sales in 1Q 2004.

expenses in 1Q 2005 were $501 or 7.5% of sales compared to $562, or 8.5% of

sales in 1Q 2004.

Because UTMD sells internationally through third party

distributors, its S&M expenses are predominantly for U.S.

business activity.

Looking forward to the rest of 2005, UTMD intends to manage S&M expenses to

remain less than 9% of total consolidated sales.

expenses in 1Q 2005 were $64 or 1.0% of sales compared to $65 or 1.0% of sales

UTMD will continue to opportunistically employ R&D resources to

invest where management anticipates it can get a significant return with future

new products.

Management expects R&D expenses during 2005 as a whole to be

approximately 1% of sales.

expenses in 1Q 2005 were $617 or 9.3% of sales compared to $944 or 14.3% of

In 1Q 2004, $350 in G&A expenses were associated with the

completion of the patent infringement lawsuit with Tyco.

In addition to

litigation costs, G&A expenses include the cost of outside auditors and

corporate governance activities relating to the implementation of SEC rules

resulting from the Sarbanes-Oxley Act of 2002.

Management expects G&A

expenses not including litigation expenses during 2005 to remain about 9% of

If resolution of the current lawsuit with FDA extends beyond June, then

G&A expenses as a percentage of sales will increase substantially, as

litigation expenses are time-related and were accrued in 2004 expecting a June

2005 resolution.

e) Non-operating

Non-operating

income in 1Q 2005 was $254 compared to $6,214 in 1Q 2004.

In 1Q 2004, UTMD

recognized $6,060 in non-operating income due the the completion of the patent

infringement lawsuit with Tyco.

UTMD paid no interest during either period

because its line of credit balance has been zero since late 2003.

UTMD received

$148 in 1Q 2005 compared to $48 in 1Q 2004 in interest, dividends and capital

gains income from investing cash balances.

Royalty income, which UTMD receives

from licensing its technology to other companies, was approximately the same

the same periods in both years.

Before Income Taxes

earnings before income taxes (EBT) decreased to $2,806 compared to $8,494 in

1Q 2005 EBT margin was 42.2% of sales compared to 128.4% in 1Q 2004.

Income and Earnings per Share

net income (after taxes) decreased to $1,969 in 1Q 2005 compared to $5,175

Net profit margins (NPM), net income (after tax) expressed as a percentage

of sales, was 29.6% in 1Q 2005 compared to 78.2% in 1Q 2004.

The net profit

margin in 1Q 2004 was unusual because the recognition of $6,060 in non-operating

income from patent infringement damages was unrelated to sales during the

The income tax provision rate in 1Q 2005 was 29.8% compared to 39.1%

1Q 2005 net income relative to EBT was aided by a significantly

income tax provision as a result of The American Jobs Creation Act of 2004

Act) enacted in October 2004 which allows a temporary tax deduction on

repatriated foreign earnings, which must be accomplished in 2005.

previously included a deferred tax liability in reported results, anticipating

that profits generated in Ireland would eventually be repatriated triggering

additional U.S.

income taxes.

Because the Act provides a temporary deduction

repatriated foreign earnings, the tax provision on 1Q 2005 earnings was reduced

by about $125, following guidance provided by FASB Staff Position No.

For the whole year 2005, UTMD estimates that the Act may allow about a $500,000

reduction in taxes on income.

Although UTMD expects that the lower income

provision resulting from the Act will impact all calendar quarters in 2005,

is a non-recurring tax benefit limited to the year 2005.

1Q 2005 Earnings per Share (EPS) decreased to $.46 from $1.07 in 1Q 2004.

2005 weighted average number of diluted common shares (the number used to

calculate diluted EPS) were 4,326,000 compared to 4,845,000 shares in 1Q

The Company repurchased 53,124 shares in 1Q 2005.

Exercises of employee options

in 1Q 2005 added 17,745 shares (net of shares swapped by employees as payment

for the option exercise cost).

Increases and decreases in UTMD’s stock price

impact EPS growth as a result of the dilution calculation for unexercised

options with exercise prices below the average stock market value during

The dilution calculation added 230,000 shares to actual weighted

shares outstanding in 1Q 2005, compared to 329,000 in 1Q 2004.

2004 dilution is primarily due to fewer unexercised options outstanding.

outstanding common shares as of the end of 1Q 2005 were 4,070,100 compared

4,488,700 at the end of 1Q 2004.

ROE is equal to net profits divided by average shareholder equity during a

specific time period.

Annualized ROE in 1Q 2005 was 22%, compared to 57% in

The significantly higher ROE in 1Q 2004 was due primarily to non-operating

income resulting from resolution of the Tyco patent infringement.

repurchases have a beneficial impact on ROE as long as the Company sustains

profit performance because shareholder equity is reduced by the cost of the

shares repurchased.

and Capital Resources

cash provided by operating activities, including adjustments for depreciation

and other non-cash operating expenses, along with changes in working capital,

totaled $1,432 in 1Q 2005 compared to $24,689 in 1Q 2004.

The two major changes

in operating assets and liabilities in 1Q 2004 were related to the accrual

receipt of about $31 million from Tyco International for patent infringement,

and taxes on that income.

The largest change in 1Q 2005 was a $392 decrease

accrued expenses, due mainly to a decrease in the litigation accrual as legal

expenses related to the FDA lawsuit were paid.

Company’s use of cash for investing activities was primarily as a result of

purchases of short-term investments, in an effort to make prudent use of excess

UTMD expended $2,100 in 1Q 2005 on such transactions compared to purchases

of $21,903 in 1Q 2004.

In 1Q 2005, UTMD received $1,168 from selling short-term

UTMD invested $127 and $189 in 1Q 2005 and 1Q 2004, respectively,

in property and equipment purchases.

This rate of investing in new property

equipment is required to keep facilities, equipment and tooling in good working

1Q 2005, UTMD received $131 and issued 17,745 shares of stock upon the exercise

of employee stock options.

Employees exercised a total of 20,130 option shares

in 1Q 2005, with 2,385 shares immediately being retired as a result of the

individual trading the shares in payment of the exercise price of the options.

UTMD repurchased 53,124 shares of stock in the open market at a cost of $1,141

during 1Q 2005.

Option exercises in 1Q 2005 were at an average price of $9.13

Share repurchases in the open market were at an average cost of

$21.47 per share, including commissions and fees.

In 1Q 2004, the Company

received $199 from issuing 20,715 shares of stock on the exercise of employee

stock options, including 1,200 shares retired upon an employee trading those

shares in payment of the stock option exercise price.

UTMD repurchased 110,247

shares of stock in the open market at a cost of $2,690 during 1Q

not utilize its bank line of credit during either period.

UTMD paid $616 in

dividends during 1Q 2005.

Management believes that future

income from operations and effective management of working capital will provide

the liquidity needed to finance growth plans.

Planned capital expenditures

during the remainder of 2005 are expected to be approximately $500 to keep

facilities, equipment and tooling in good working order.

In addition to capital

expenditures, UTMD plans to use cash in 2005 for selective infusions of

technological, marketing or product manufacturing rights to broaden the

Company's product offerings;

for litigation expenses related to the FDA lawsuit;

for continued share repurchases if the price of the stock remains undervalued;

and if available for a reasonable price, acquisitions that may strategically

UTMD’s business and are accretive to performance.

The revolving line of credit

will continue to be available for liquidity when the timing of acquisitions

repurchases of stock require a large amount of cash in a short period of time

not otherwise available from existing cash and investment balances.

and Liabilities

total assets were $604 lower than at December 31, 2004, while current assets

decreased $308.

The decreases resulted primarily from a $405 decrease in cash

and investments and a $284 decrease in net property and equipment.

investments declined slightly due to share repurchases and dividend payments,

despite continued strong cash generation from operating activities.

capital was $20,402 at March 31, 2005, a $208 increase from 2004 year-end.

Working capital continues to be far in excess of UTMD’s normal operating needs.

On the liabilities side, total liabilities were $532 lower and current

liabilities $516 lower, due to decreases in accrued expenses related to the

payment in 1Q 2005 of legal expenses related to the FDA lawsuit.

UTMD’s current

ratio increased to 6.3 during 1Q 2005, from 5.7 at year-end.

decreased $24 during 1Q 2005, and are now close to management’s targets for

current sales activity.

Average inventory turns improved to 4.1 times in 1Q

from 3.9 times in the prior quarter, and 3.2 times in 1Q 2004.

balances as of March 31, 2005 were $186 higher than at the beginning of the

1Q 2005 ending receivables yielded average “days in receivables” of 49

days, well within management’s target of 55 days.

At the end of 2004 and at

March 31, 2004, days in receivables were 51 and 46, respectively.

and equipment decreased $284 in 1Q 2005 because depreciation of $166 exceeded

new equipment purchases of $127, but mainly due to a $324 decrease in the

dollar-denominated value of Ireland P&E.

dollar increased about 5%

relative to the EURO during 1Q 2005.

Goodwill remained the same.

Net intangible

assets, excluding goodwill, decreased $12 as a result of amortization of patents

and other intellectual property.

At March 31, 2005, net intangible assets

including goodwill were 19% of total assets, the same as at year-end 2004.

31, 2005, UTMD’s total debt ratio (total liabilities/ total assets) decreased to

11% from 12% on December 31, 2004.

k) Management's

its December 31, 2004 10-K/A Report, UTMD’s plan for 2005 is to

up its unresolved QSR status with the U.S.

FDA that has hindered international

sales, slowed new product development, stymied business development, clouded

UTMD’s previously excellent reputation for quality products and consumed an

inordinate amount of human and financial capital since 2001;

continue outstanding operating performance;

actively look for new acquisitions to facilitate sales growth;

utilize current cash balances in shareholders’ best long-term interest.

performance demonstrated progress toward achieving the above 2005 plan.

II Item 1of this report describes the legal proceedings regarding UTMD’s dispute

with the FDA.

Court will determine if UTMD is violating any provisions

The FDA has the burden to prove its allegations.

UTMD and its highly

reputable independent experts maintain that UTMD has been and is in substantial

compliance with all applicable government regulations.

agrees with any of the FDA allegations, the Company’s responsibility would be to

implement procedures that satisfy the Court’s determination.

Because the FDA is

not claiming that the Company’s devices are unsafe or ineffective, or do not

meet predetermined specifications, UTMD and its lawyers believe that an

injunction to cease manufacturing and shipping products is not a realistic

possibility, even if the Court agrees with FDA allegations.

Because of this

because UTMD does not understand the factual basis for FDA’s allegations, the

Company has not spent resources analyzing the potential financial impact of

relief being sought by the FDA.

is not and never has been

an imminent public health risk relating to use of UTMD’s products.

The FDA has a

variety of remedies to address device risks without any resort to the courts.

None of those remedies has ever been applied to any UTMD device, because none

has been justified.

The FDA Denver District Office shut off communication with

UTMD after 2001 while it performed inspection after inspection in an attempt

build a case.

The case that was finally filed involves alleged QSR violations

that the agency has been unable to substantiate, despite an effort coordinated

by the CDRH including four comprehensive inspections, some involving “national

expert” FDA inspectors.

An independent expert, a nearly thirty year FDA

compliance veteran and former District Director, retained by UTMD, has alleged

misconduct within FDA, which will be adjudicated by the Court as part of the

present lawsuit.

to be no FDA restrictions on UTMD’s production and distribution of its products,

the clinical acceptance and differentiation of which have been clearly

demonstrated by continued customer demand through 1Q 2005.

l) Accounting

Policy Changes.

2004, the Financial Accounting Standards Board (FASB) issued SFAS 123 (revised

2004), “Accounting for Stock Based Compensation.” This statement supersedes APB

25, “Accounting for Stock Issued to Employees.” This revised

statement establishes standards for the accounting of transactions in which

entity exchanges its equity instruments for goods and services, including the

grant of stock options to employees and directors.

The revised Statement is

effective for UTMD starting in 1Q 2006, and will require the Company to

recognize compensation cost based on the grant date fair value of the equity

instruments it awards.

The Company currently accounts for those instruments

under the recognition and measurement principles of APB Opinion 25, including

the disclosure-only provisions of the original SFAS 123.

Accordingly, no

compensation cost from issuing equity instruments has been recognized in the

Company’s financial statements.

The Company estimates that the required adoption

of SFAS 123 (R) in first quarter 2006 will have a negative impact on its

consolidated financial statements.

See note 3, above for an estimate of the

impact this Statement would have had on the Company’s net income for the periods

covered by this report.

The Company estimates that adoption of this Statement

will result in about $100 additional compensation expense during the year 2006

related to options outstanding on the date of this report.

The Company intends

to continue granting stock options or other equity instruments, although at

lower level than in the past, which will increase the amount of stock based

compensation in 2006 and beyond.

The Board of Director’s action on May 6, 2005

to accelerate the vesting of under water options substantially reduced the

financial statement impact of this accounting policy change.

Lower S&M expenses were due primarily to the lack of trade show expenses during the pandemic.

S&M expenses were 3.4% of sales in both 3Q 2020 and 3Q 2019.

S&M expenses were 4.0% of sales in 9M 2020 compared to 3.7% of sales in 9M 2019.

R&D expenses were consistent with the prior year’s same periods of time, varying only by specific project expenses.

R&D expenses were 1.2% of sales in 3Q 2020 compared to 1.0% of sales in 3Q 2019.

R&D expenses in 9M 2020 were also 1.2% of sales compared to 1.0% of sales in 9M 2019.

The higher G&A expense in 9M 2020 was due to amortization expense of the CSI IIA for a full quarter in 1Q 2020 compared to a partial quarter in 1Q 2019.

Consolidated G&A expenses were 23.2% of sales in 3Q 2020 compared to 19.7% of sales in 3Q 2019.

Consolidated G&A expenses were 24.1% of sales in 9M 2020 compared to 20.1% of sales in 9M 2019.

G&A expenses included non-cash expense from the amortization of IIA resulting from the March 2011 Femcare Group Ltd (UK) acquisition and the amortization of IIA from the purchase of the CSI U.S.

exclusive Filshie devices distribution rights effective in February 2019.

The initial amount of IIA for the 2011 Femcare UK purchase was £23,998.

After 9.5 years of amortization, the IIA balance is £8,686.

For both years of 2020 and 2019, the amortization expense rate was a constant £399 per calendar quarter.

The USD amortization expense amount in each period, however, varied according to the USD/GBP FX rate.

The initial amount of IIA for the 2019 acquisition of 4.75 years’ remaining exclusive U.S.

Filshie device distribution rights from CSI was $21,000.

The straight-line amortization of this IIA is $1,105/ calendar quarter over the remaining 4.75 years of the prior distribution agreement.

After 20 months of amortization, the CSI IIA balance as of September 30, 2020 is $13,632.

The difference in 9M CSI IIA amortization expense is due to the start of the amortization in February 2019, i.e.

9 months of expense in 2020 through September versus 8 months in 2019.

Because the IIA amortization expenses represent a significant portion of UTMD’s G&A expenses, UTMD provides the following table that separates the IIA amortization expenses from all other G&A expenses:

IIA amortization expense

All other G&A expense

Total G&A Expenses:

Percent of Sales:

IIA amortization expense

All other G&A expense

Total G&A Expenses:

Eventually, when the two Filshie-related IIA balances are fully amortized, stockholders can look forward to a substantial increase in EBT.

The Femcare acquisition IIA amortization expense has 5.5 more years to run at about $516 per quarter using the same 1.295 USD/GBP FX rate as in 3Q 2020.

The CSI IIA amortization expense has 3.1 more years to run at $1,105 per quarter.

Stockholders will appreciate that, although cash flow will not be affected, annualized reported EPS will increase $.90 after another 3.1 years, based on current shares outstanding and if current U.S.

and Utah income tax rates remain the same.

Similarly, after another 5.5 years annualized EPS would be $1.36 higher based on current shares outstanding and unchanged income tax rates.

Other G&A expenses were lower in both periods primarily because UTMD’s CEO has taken 50% salary in 2020 compared to 2019, and 2020 management bonuses based on the projected 2020 annual EBT have been accrued at a lower rate than in 2019.

In summary, Operating Income in 3Q 2020 was $3,588 (34.2% of sales) compared to $4,371 (35.0% of sales) in 3Q 2019.

Operating Income in 9M 2020 was $9,428 (31.3% of sales) compared to $12,954 (36.9% of sales) in 9M 2019.

Lower gross profits in 2020 were leveraged down further by higher IIA amortization expense absorbed by fewer sales.

In any event, the operating income margins achieved in 2020 were excellent compared to industry peers.

e) Non-operating expense/ Non-operating income

Non-operating expense includes 1) bank fees;

2) losses from remeasuring the value of EUR cash bank balances in the UK, and GBP cash balances in Ireland, in USD terms;

and 3) losses from disposition of assets.

Non-operating income includes 1) investment income from cash deposit balances;

2) rent of underutilized property;

3) royalties received from licensing the Company’s technology;

4) gains from dispositions of assets;

and 5) gains from remeasuring the value of EUR cash bank balances in the UK, and GBP cash balances in Ireland, in USD terms.

UTMD’s net non-operating income in 3Q 2020 was less than $1 compared to $76 in 3Q 2019.

Net non-operating income in 9M 2020 was $126 compared to $196 in 9M 2019.

In 3Q 2020 and 3Q 2019, gains or losses from remeasurement of the value of foreign currency bank balances were negligible.

In 9M 2020, UTMD recognized a $41 gain from remeasurement of the value of foreign currency bank balances compared to a $44 loss in 9M 2019.

Royalties received were $5 in 3Q 2020 compared to $0 in 3Q 2019, and $10 in 9M 2020 compared to $6 in 9M 2019.

Interest earned on cash balances were $2 and $64 in 3Q and 9M 2020 respectively, compared to interest of $61 and $199 in 3Q and 9M 2019 respectively.

f) Income Before Income Taxes (EBT)

EBT results from subtracting net non-operating expense or adding net non-operating income from or to, as applicable, Operating Income.

Consolidated 3Q 2020 EBT was $3,588 (34.2% of sales) compared to $4,448 (35.6% of sales) in 3Q 2019.

Consolidated 9M 2020 EBT was $9,553 (31.7% of sales) compared to $13,150 (37.5% of sales) in 9M 2019.

The EBT of Utah Medical Products, Inc.

was $6,469 in 9M 2020 compared to $8,674 in 9M 2019.

The EBT of Utah Medical Products, Ltd (Ireland) was EUR 2,393 in 9M 2020 compared to EUR 2,157 in 9M 2019.

The EBT of Femcare Group Ltd (Femcare Ltd., UK and Femcare Australia Pty Ltd) was GBP (297) in 9M 2020 compared to GBP 1,449 in 9M 2019.

The 9M 2020 EBT of Utah Medical Products Canada, Inc.

(dba Femcare Canada) was CAD 565 in 9M 2020 compared to CAD 926 in 9M 2019.

The EBT of UTMD’s manufacturing subsidiaries varies as a result of intercompany shipments which are eliminated in the consolidation of results.

EBITDA is a non-US GAAP metric that UTMD management believes is of interest to investors because it provides meaningful supplemental information to both management and investors that represents profitability performance without factoring in effects of financing, accounting decisions regarding non-cash expenses, capital expenditures or tax environments.

Although the U.S.

Securities and Exchange Commission advises that EBITDA is a non-GAAP metric, UTMD’s non-US GAAP EBITDA is the sum of the following elements in the table below, each of which is a US GAAP number:

Component of EBITDA

Depreciation of fixed assets

Amortization of patent expenses

Amortization of Femcare IIA

Amortization of CSI distribution agreement IIA

Stock option compensation expense

Remeasured currency (gains) or losses

Adjusted Consolidated EBITDA:

Management believes that the non-US GAAP EBITDA decline is more indicative of the COVID-19 negative impact on UTMD’s 2020 operating results than the change represented by EBT.

g) Net Income

Net Income is EBT minus a provision for income taxes.

Net Income in 3Q 2020 was $2,933 (28.0% of sales) compared to $3,705 (29.7% of sales) in 3Q 2019.

The average consolidated income tax provision (as a % of EBT) in 3Q 2020 was 18.3% compared to 16.7% in 3Q 2019.

Net Income in 9M 2020 was $7,386 (24.5% of sales) compared to Net Income of $10,369 (29.6% of sales) in 9M 2019.

Net Income in 9M 2020 included a 2Q 2020 unfavorable $225 tax provision increase for a future UK income tax increase on non-deductible IIA amortization expense over the next six years.

The average consolidated income tax provisions (as a % of EBT) in 9M 2020 and 9M 2019 were 22.7% and 21.1%, respectively.

h) Earnings Per Share (EPS)

EPS are consolidated Net Income divided by the 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).

Diluted EPS in 3Q 2020 were $.803 compared to $.991 in 3Q 2019.

Diluted EPS in 9M 2020 were $2.008 compared to $2.774 in 9M 2019.

According to U.S.

GAAP, the UK tax law change in 2Q 2020 which increased UTMD’s deferred tax liability, to be amortized over the next six years, was recognized as an income tax provision increase in the 2Q 2020 income statement.

Without the 2Q 2020 $225 tax provision adjustment, 9M 2020 EPS were $2.069.

Diluted shares were 3,653,500 in 3Q 2020 compared to 3,737,335 in 3Q 2019, and 3,678,210 in 9M 2020 compared to 3,738,056 in 9M 2019.

The lower diluted shares in 9M 2020 were the combined result of 80,000 shares repurchased in 1Q 2020, 7,000 shares repurchased in 3Q 2020, 5,614 employee option exercises in 9M 2020 and an employee option award of 26,300 shares in March 2020.

Outstanding shares at the end of 3Q 2020 were 3,640,371 compared to 3,721,757 at the end of calendar year 2019.

The difference was due to employee option exercises of 5,614 during 9M 2020 offset by 87,000 shares repurchased in the open market.

Outstanding shares were 3,720,344 one year ago at the end of 3Q 2019.

The number of shares used for calculating diluted EPS 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 September 30, 2020 was 71,700 at an average exercise price of $65.80, including shares awarded but not yet vested.

This compares to 51,690 unexercised option shares at the end of 2019 at an average exercise price of $58.50/ share, including shares awarded but not yet vested.

The number of shares added as a dilution factor in 3Q 2020 was 11,130 compared to 17,588 in 3Q 2019.

The number of shares added as a dilution factor in 9M 2020 was 14,514 compared to 16,435 in 9M 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 $1,020 ($0.280/share) in dividends to stockholders in 3Q 2020 compared to $1,028 ($0.275/ share) paid in 3Q 2019.

Dividends paid to stockholders during 3Q 2020 were 35% of 3Q 2020 Net Income.

UTMD paid $3,097 ($0.280/share) in dividends to stockholders in 9M 2020 compared to $3,083 ($0.275/ share) paid in 9M 2019.

Dividends paid to stockholders during 9M 2020 were 41% of 9M 2020 Net Income.

In March 2020, UTMD repurchased 80,000 of its shares in the open market at $80.32/ share.

In September 2020, UTMD repurchased 7,000 of its shares in the open market at $78.67/ share.

The total 87,000 shares repurchased in 9M 2020 were at an average price of $80.19/ 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.

i) Return on Stockholder Equity (ROE) and Stock Value

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.

After payment of cash dividends to stockholders, annualized ROE in 9M 2020 was 6% compared to annualized ROE of 11% in 9M 2019.

Before the payment of dividends, annualized ROE in 9M 2020 was 10% compared to 15% in 9M 2019.

The lower ROE before dividends in 9M 2020 was due to an 8% increase in average accumulated stockholders’ equity together with a 29% decrease in Net Income.

Targeting a high ROE of 20% (before dividends) remains a key financial objective for UTMD management.

UTMD’s closing share price at the end of 3Q 2020 was $79.87, down 26% from the $107.90 closing price at the end of 2019.

The closing share price at the end of 3Q 2019 was $95.84.

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 $14,359 in 9M 2020 compared to $11,415 in 9M 2019.

The $2,944 higher cash provided by operating activities in 9M 2020 was due primarily to a $6,187 difference from 1) 1,184 decreased trade accounts receivable and inventories compared to a $2,588 increase in 9M 2019, yielding a significant $3,772 working capital change difference in the two periods, 2) a $651 increase in accrued expenses compared to a $1,023 decrease in 9M 2019, yielding another $1,674 working capital change difference in the two periods, 3) $363 higher intangible asset amortization expense, and 4) $378 lower decrease in deferred income taxes, minus 1) $2,983 lower net income and 2) $251 higher decrease in accounts payable.

Capital expenditures for property and equipment (PP&E) were $806 in 9M 2020 compared to $251 in 9M 2019.

The higher capital expenditures were due to a new roof on the Midvale facility and investment in new manufacturing capabilities in Ireland.

There were no capital expenditures for intangible assets in 9M 2020 compared to $21,000 in 9M 2019 for the purchase of the remaining life of CSI’s exclusive U.S.distribution rights for the Filshie Clip System.

UTMD made cash dividend payments of $3,097 in 9M 2020 compared to $3,083 in 9M 2019.

The Company used $6,976 of its cash to repurchase 87,000 of its own shares in 9M 2020 compared to using $398 of its cash to repurchase 5,000 of its own shares during 9M 2019.

In 9M 2020, UTMD received $282 and issued 5,614 shares of its stock upon the exercise of employee and director stock options.

Option exercises in 9M 2020 were at an average price of $50.15 per share.

In comparison, in 9M 2019 the Company received $222 and issued 5,629 shares of stock on the exercise of employee and director stock options.

Option exercises in 9M 2019 were at an average price of $39.53 per share.

Management believes that current cash balances, income from operations and effective management of working capital will provide the liquidity needed to finance internal growth plans.

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

September 30, 2020 total consolidated assets were $107,072, a net decrease of $2,715 from December 31, 2019.

Net intangible assets declined by $5,397, inventories declined by $609 and receivables declined by $466.

Offsetting that combined $6,472 asset decline was a $3,507 increase in cash and a $308 increase in PP&E net of $495 in depreciation.

As a result of the increase in cash, consolidated current assets increased $2,375.

UTMD’s Ireland subsidiary EUR-denominated assets and liabilities on September 30, 2020 were translated into USD at an FX rate 4.4% higher (stronger EUR relative to the USD) than the FX rate at the end of 2019.

UTMD’s UK subsidiary GBP-denominated assets were translated into USD at an FX rate 2.6% lower (weaker GBP) than the FX rate at the end of 2019.

UTMD’s Australia subsidiary AUD-denominated assets were translated into USD at an FX rate 1.9% higher (stronger AUD) than the FX rate at the end of 2019.

UTMD’s Canada subsidiary CAD-denominated assets were translated into USD at an FX rate 2.7% lower (weaker CAD) than the FX rate at the end of 2019.

The net book value of consolidated property, plant and equipment increased $308 at September 30, 2020 from the end of 2019 due to period-ending changed FX rates, $806 in new asset purchases and $495 in depreciation.

Working capital (current assets minus current liabilities) was $53,632 at September 30, 2020 compared to $51,438 at December 31, 2019.

Consolidated receivables and inventories declined $466 and $609, respectively, but cash increased $3,507.

Accrued liabilities increased $649, primarily from $550 higher income taxes payable as UTMD had over-accrued income taxes payable by $514 at the end of 2019, and $244 higher customer deposits as a result of the timing of international distributor shipments in 4Q 2020 requiring prepayment.

UTMD management believes that its working capital remains sufficient to meet normal operating needs, new capital expenditures and continued cash dividend payments to stockholders.

September 30, 2020 net intangible assets (goodwill plus other intangible assets less amortization) declined $5,397 from the end of 2019.

No new intangible assets were acquired in 9M 2020.

At September 30, 2020, net intangible assets including goodwill were 36% of total consolidated assets compared to 40% at year-end 2019, and 42% at September 30, 2019.

The long term deferred tax liability (DTL) balance for Femcare IIA ($9,084 on the date of the acquisition) was $2,132 (£1,650) at September 30, 2020, compared to $2,239 (£1,688) at December 31, 2019, and $2,170 (£1,764) at September 30, 2019.

Reduction of the DTL occurs as the book/tax difference of IIA amortization is eliminated over the remaining useful life of the Femcare IIA (because the amortization expense is not tax deductible in the UK).

The DTL only declined $107 at September 30, 2020 from December 31, 2019, despite 9M 2020 amortization expense of $1,523, which reduced the DTL balance by $289.

The difference was due to a 2Q 2020 UK tax law change which increased the DTL balance by $225 (£182) plus the change in ending FX rates.

The UK decided to not reduce its corporate income tax rate from 19% to 17% beginning in 2Q 2020, as previously enacted.

(The $225 increase in deferred UK taxes over the following six years was also booked in the 2Q 2020 tax provision, reducing 9M 2020 net income $225.)

UTMD’s total debt ratio (total liabilities/ total assets) as of September 30, 2020 was 8%, including a remaining $2,074 REPAT tax liability payable over another five years.

The total debt ratio as of December 31, 2019 was also 8%, and as of September 30, 2019 was 9%.

The $2,715 decrease in total liabilities and equity (same as total assets) was primarily due to a $2,677 September 30, 2020 ending decrease in stockholders’ equity compared to December 31, 2019.

Stockholders’ equity was reduced during 9M 2020 by $10,074 from share repurchases and dividends paid to stockholders, offset by $7,386 net profit accumulated during 9M 2020.

l) Management's Outlook

As outlined in its December 31, 2019 SEC 10-K report, UTMD’s general plan for 2020 was to

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

2) focus on effective 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 excellent overall financial operating performance;

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;

6) be vigilant for accretive acquisition opportunities which may be brought about by difficult burdens on small, innovative companies.

Although not on its plan relative to specific financial numbers due to the COVID-19 pandemic, the Company continues to effectively execute its general plan outlined above.

m) Accounting Policy Changes

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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q/A

Item 2. Management’s Discussion and Analysis