UTAH MEDICAL PRODUCTS INC 10-Q

Item 1. Financial Statements UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS AS OF MARCH 31, 2023 AND DECEMBER 31, 2022 (in thousands) (unaudited) (audited) MARCH 31, 2023 DECEMBER 31, 2022 ASSETS Current assets: Cash & Investments $ 80,912 $ 75,052 Accounts & other receivables, net 3,818 5,538 Inventories 9,940 8,814 Other current assets 442 515 Total current assets 95,112 89,919 Property and equipment, net 10,241 10,224 Goodwill 13,502 13,354 Other intangible assets 53,443 52,755 Other intangible assets - accumulated amortization ( 44,528 ) ( 42,378 ) Other intangible assets, net 8,915 10,377 Total assets $ 127,770 $ 123,874 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,028 $ 1,218 Accrued expenses 5,046 4,742 Total current liabilities 6,074 5,960 Deferred tax liability – Femcare IIA 1,456 1,514 Other long term liabilities 1,256 1,256 Long-term lease liability 328 341 Deferred income taxes 638 549 Total liabilities 9,752 9,620 Stockholders' equity: Common stock - $ 0.01 par value; authorized - 50,000 shares; issued and outstanding - March 31, 2023, 3,628 shares and December 31, 2022, 3,628 shares 36 36 Accumulated other comprehensive loss ( 11,490 ) ( 12,039 ) Additional paid-in capital 322 251 Retained earnings 129,150 126,006 Total stockholders' equity 118,018 114,254 Total liabilities and stockholders' equity $ 127,770 $ 123,874 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, 2023 AND MARCH 31, 2022 (in thousands, except per share amounts - unaudited) THREE MONTHS ENDED MARCH 31, 2023 2022 Sales, net $ 12,520 $ 12,323 Cost of goods sold 4,677 4,790 Gross profit 7,843 7,533 Operating expense Selling, general and administrative 3,260 2,888 Research & development 144 123 Total operating expenses 3,404 3,011 Operating income 4,439 4,522 Other income 680 8 Income before provision for income taxes 5,119 4,530 Provision for income taxes 905 996 Net income $ 4,214 $ 3,534 Earnings per common share (basic) $ 1.16 $ 0.97 Earnings per common share (diluted) $ 1.16 $ 0.96 Shares outstanding (basic) 3,628 3,655 Shares outstanding (diluted) 3,636 3,665 Other comprehensive income (loss): Foreign currency translation net of taxes of $ 0 in all periods $ 549 $ ( 506 ) Total comprehensive income $ 4,763 $ 3,028 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, 2023 AND MARCH 31, 2022 (in thousands - unaudited) THREE MONTHS ENDED MARCH 31, 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 4,214 $ 3,534 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 155 149 Amortization 1,596 1,646 Provision for losses on accounts receivable 1 8 Amortization of right-of-use assets 13 14 Deferred income taxes ( 3 ) ( 144 ) Stock-based compensation expense 50 43 Tax benefit attributable to exercise of stock options 2 - Changes in operating assets and liabilities: Accounts receivable and other receivables 1,789 ( 578 ) Inventories ( 1,084 ) ( 809 ) Prepaid expenses and other current assets 25 ( 109 ) Accounts payable ( 193 ) 695 Accrued expenses 350 597 Total adjustments 2,701 1,512 Net cash provided by operating activities 6,915 5,046 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures for: Property and equipment ( 43 ) ( 237 ) Net cash used in investing activities ( 43 ) ( 237 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock - options 21 19 Payment of dividends ( 1,070 ) - Net cash provided by/(used in) financing activities ( 1,049 ) 19 Effect of exchange rate changes on cash 37 71 Net increase in cash and cash equivalents 5,860 4,899 Cash at beginning of period 75,052 60,974 Cash at end of period $ 80,912 $ 65,873 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for income taxes $ 129 $ 82 Cash paid during the period for interest - - see notes to consolidated condensed financial statements 3 Table of Contents UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND MARCH 31, 2022 (in thousands - unaudited) Accumulated Additional Other Total Common Stock Paid-in Comprehensive Retained Stockholders' Shares Amount Capital Income Earnings Equity Balance at December 31, 2022 3,628 $ 36 $ 251 $ ( 12,039 ) $ 126,006 $ 114,254 Shares issued upon exercise of employee stock options for cash - - 21 - - 21 Stock option compensation expense - - 50 - - 50 Foreign currency translation adjustment - - - 549 - 549 Common stock dividends - - - - ( 1,070 ) ( 1,070 ) Net income - - - - 4,214 4,214 Balance at March 31, 2023 3,628 $ 36 $ 322 $ ( 11,491 ) $ 129,150 $ 118,018 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 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, 2022. 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, 2023 and December 31, 2022 consisted of the following: March 31, 2023 December 31, 2022 Finished goods $ 1,935 $ 1,896 Work-in-process 1,500 1,193 Raw materials 6,505 5,725 Total $ 9,940 $ 8,814 (4) Stock-Based Compensation. At March 31, 2023, 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, 2023 and 2022, the Company recognized $ 50 and $ 43 , 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, 2022 or March 31, 2023. (6) 1Q 2023 global revenues (USD) by product category: Domestic Outside US Total Obstetrics $ 806 $ 209 $ 1,015 Gynecology/Electrosurgery/Urology 2,520 3,073 5,593 Neonatal 1,385 377 1,762 Blood Pressure Monitoring and Accessories 2,474 1,676 4,150 Total $ 7,185 $ 5,335 $ 12,520 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 7 month remaining life, as of the end of 1Q 2023, 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 2023. 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, 2023 2022 Numerator Net income 4,214 3,534 Denominator Weighted average shares, basic 3,628 3,655 Dilutive effect of stock options 8 10 Diluted shares 3,636 3,665 Earnings per share, basic $ 1.16 $ 0.97 Earnings per share, diluted $ 1.16 $ 0.96 (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