UTAH MEDICAL PRODUCTS INC 10-Q

Item 1. Financial Statements UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS AS OF MARCH 31, 2022 AND DECEMBER 31, 2021 (in thousands) (unaudited) (audited) MARCH 31, 2022 DECEMBER 31, 2021 ASSETS Current assets: Cash & Investments $ 65,873 $ 60,974 Accounts & other receivables, net 5,720 5,132 Inventories 7,367 6,596 Other current assets 520 456 Total current assets 79,480 73,158 Property and equipment, net 10,562 10,618 Operating lease – right-of-use assets, net 435 449 Goodwill 13,903 14,098 Other intangible assets 54,942 55,865 Other intangible assets - accumulated amortization ( 39,519 ) ( 38,552 ) Other intangible assets, net 15,423 17,313 Total assets $ 119,803 $ 115,636 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,454 $ 761 Accrued expenses 4,644 2,984 Total current liabilities 6,098 3,745 Deferred tax liability – Femcare IIA 1,675 2,105 Other long term liabilities 1,946 1,675 Operating lease liability 382 396 Deferred income taxes 534 577 Total liabilities 10,635 8,498 Stockholders' equity: Common stock - $ 0.01 par value; authorized - 50,000 shares; issued and outstanding - March 31, 2022, 3,655 shares and December 31, 2021, 3,655 shares 37 37 Accumulated other comprehensive loss ( 9,560 ) ( 9,054 ) Additional paid-in capital 903 841 Retained earnings 117,788 115,314 Total stockholders' equity 109,168 107,138 Total liabilities and stockholders' equity $ 119,803 $ 115,636 see notes to consolidated condensed financial statements 1 Table of Contents UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND MARCH 31, 2021 (in thousands, except per share amounts - unaudited) THREE MONTHS ENDED MARCH 31, 2022 2021 Sales, net $ 12,323 $ 10,964 Cost of goods sold 4,790 4,017 Gross profit 7,533 6,947 Operating expense Selling, general and administrative 2,888 2,929 Research & development 123 130 Total operating expenses 3,011 3,059 Operating income 4,522 3,888 Other income 8 10 Income before provision for income taxes 4,530 3,898 Provision for income taxes 996 874 Net income $ 3,534 $ 3,024 Earnings per common share (basic) $ 0.97 $ 0.83 Earnings per common share (diluted) $ 0.96 $ 0.83 Shares outstanding (basic) 3,655 3,644 Shares outstanding (diluted) 3,665 3,655 Other comprehensive income (loss): Foreign currency translation net of taxes of $ 0 in all periods $ ( 506 ) $ ( 54 ) Total comprehensive income $ 3,028 $ 2,970 see notes to consolidated condensed financial statements 2 Table of Contents UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND MARCH 31, 2021 (in thousands - unaudited) THREE MONTHS ENDED MARCH 31, 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 3,534 $ 3,024 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 149 163 Amortization 1,646 1,664 Provision for losses on accounts receivable 8 2 Amortization of right-of-use assets 14 10 Deferred income taxes ( 144 ) ( 208 ) Stock-based compensation expense 43 41 Tax benefit attributable to exercise of stock options - 5 Changes in operating assets and liabilities: Accounts receivable and other receivables ( 578 ) ( 71 ) Inventories ( 809 ) 207 Prepaid expenses and other current assets ( 109 ) ( 109 ) Accounts payable 695 51 Accrued expenses 597 754 Total adjustments 1,512 2,509 Net cash provided by operating activities 5,046 5,533 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures for: Property and equipment ( 237 ) ( 10 ) Net cash used in investing activities ( 237 ) ( 10 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock - options 19 89 Payment of dividends - ( 1,038 ) Net cash provided by/(used in) financing activities 19 ( 949 ) Effect of exchange rate changes on cash 71 ( 131 ) Net increase in cash and cash equivalents 4,899 4,443 Cash at beginning of period 60,974 51,590 Cash at end of period $ 65,873 $ 56,033 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for income taxes $ 82 $ 153 Cash paid during the period for interest - - see notes to consolidated condensed financial statements 3 Table of Contents UTAH MEDICAL PRODUCTS, INC. CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND MARCH 31, 2021 (in thousands - unaudited) Accumulated Additional Other Total Common Stock Paid-in Comprehensive Retained Stockholders' Shares Amount Capital Income Earnings Equity Balance at December 31, 2021 3,655 $ 37 $ 841 $ ( 9,054 ) $ 115,314 $ 107,138 Shares issued upon exercise of employee stock options for cash - - 19 - - 19 Stock option compensation expense - - 43 - - 43 Foreign currency translation adjustment - - - ( 506 ) - ( 506 ) Common stock dividends - - - - ( 1,060 ) ( 1,060 ) Net income - - - - 3,534 3,534 Balance at March 31, 2022 3,655 $ 37 $ 903 $ ( 9,560 ) $ 117,788 $ 109,168 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 see notes to consolidated condensed financial statements 4 Table of Contents UTAH MEDICAL PRODUCTS, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited) (1) The unaudited financial statements 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 accounting principles generally accepted in the United States. 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, 2021. In the opinion of management, the accompanying financial statements include all adjustments (consisting only of normal recurring adjustments) necessary to summarize fairly the Company's financial position and results of operations. Currency amounts are in thousands except per-share amounts and where noted. (2) Recent Accounting Standards. The Company has determined that recently issued accounting standards will either have no material impact on its consolidated financial position, results of operations or cash flows, or will not apply to its operations. (3) Inventories at March 31, 2022 and December 31, 2021 consisted of the following: March 31, 2022 December 31, 2021 Finished goods $ 1,713 $ 1,468 Work-in-process 1,620 1,398 Raw materials 4,034 3,730 Total $ 7,367 $ 6,596 (4) Stock-Based Compensation. At March 31, 2022, the Company has stock-based employee compensation plans which authorize the grant of stock options to eligible employees and directors. The Company accounts for stock compensation under FASB Accounting Standards Codification (“ASC”) 718, Compensation - Stock Compensation . This statement requires the Company to recognize compensation cost based on the grant date fair value of options granted to employees and directors. In the quarters ended March 31, 2022 and 2021, the Company recognized $ 43 and $ 41 , respectively, in stock based compensation cost. (5) Warranty Reserve. The Company’s published warranty is: “UTMD warrants its products to conform in all material respects to all published product specifications in effect on the date of shipment, and to be free from defects in material and workmanship for a period of thirty (30) days for supplies, or twenty-four (24) months for equipment, from date of shipment. During the warranty period UTMD shall, at its option, replace any products shown to UTMD's reasonable satisfaction to be defective at no expense to the Purchaser or refund the purchase price.” UTMD maintains a warranty reserve to provide for estimated costs which are likely to occur. The amount of this reserve is adjusted, as required, to reflect its actual experience. Based on its analysis of historical warranty claims and its estimate that existing warranty obligations were immaterial, no warranty reserve was made at December 31, 2021 or March 31, 2022. (6) 1Q 2022 global revenues (USD) by product category: Domestic Outside US Total Obstetrics $ 923 $ 126 $ 1,049 Gynecology/Electrosurgery/Urology 2,580 2,522 5,102 Neonatal 1,582 291 1,873 Blood Pressure Monitoring and Accessories 2,899 1,400 4,299 Total $ 7,984 $ 4,339 $ 12,323 5 Table of Contents (7) Distribution Agreement Purchase. UTMD completed the purchase of exclusive U.S. distribution rights for the Filshie® Clip System from CooperSurgical, Inc. (CSI) on February 1, 2019. The $ 21,000 purchase price represents an identifiable intangible asset which is being straight-line amortized and recognized as part of G&A expenses over the now 1.58 year remaining life of the prior CSI agreement with Femcare. (8) Earnings Per Share. Basic earnings per share is calculated by dividing net income attributable to the common stockholders of the company by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated by assuming the exercise of stock options at the closing price of stock at the end of first quarter 2022. The following table reconciles the numerator and the denominator used to calculate basic and diluted earnings per share: ( in thousands ) Three months ended March 31, 2022 2021 Numerator Net income 3,534 3,024 Denominator Weighted average shares, basic 3,655 3,644 Dilutive effect of stock options 10 11 Diluted shares 3,665 3,655 Earnings per share, basic $ 0.97 $ 0.83 Earnings per share, diluted $ 0.96 $ 0.83 (9) Subsequent Events. UTMD has evaluated subsequent events through the date the financial statements were issued, and concluded there were no other events or transactions during this period that required recognition or disclosure in its financial statements. 6 Table of Contents