UTAH MEDICAL PRODUCTS INC 10-Q

Item 1. Financial Statements UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS AS OF MARCH 31, 2024 AND DECEMBER 31, 2023 (in thousands) (unaudited) (audited) MARCH 31, 2024 DECEMBER 31, 2023 ASSETS Current assets: Cash & Investments $ 93,808 $ 92,868 Accounts & other receivables, net 3,591 3,391 Inventories 9,240 9,582 Other current assets 510 428 Total current assets 107,149 106,269 Property and equipment, net 10,266 10,551 Goodwill 13,638 13,692 Other intangible assets 54,029 54,296 Other intangible assets - accumulated amortization ( 49,641 ) ( 49,350 ) Other intangible assets, net 4,388 4,946 Total assets $ 135,441 $ 135,458 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 998 $ 769 Accrued expenses 4,476 3,941 Total current liabilities 5,474 4,710 Deferred tax liability – Femcare IIA 986 1,120 Other long term liabilities 698 698 Long-term lease liability 285 295 Deferred income taxes 256 322 Total liabilities 7,699 7,145 Stockholders' equity: Common stock - $ 0.01 par value; authorized - 50,000 shares; issued and outstanding - March 31, 2024, 3,588 shares and December 31, 2023, 3,628 shares 36 36 Accumulated other comprehensive loss ( 11,289 ) ( 10,658 ) Additional paid-in capital 0 594 Retained earnings 138,995 138,341 Total stockholders' equity 127,742 128,313 Total liabilities and stockholders' equity $ 135,441 $ 135,458 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, 2024 AND MARCH 31, 2023 (in thousands, except per share amounts - unaudited) THREE MONTHS ENDED MARCH 31, 2024 2023 Sales, net $ 11,340 $ 12,520 Cost of goods sold 4,574 4,677 Gross profit 6,766 7,843 Operating expense Selling, general and administrative 2,617 3,260 Research & development 266 144 Total operating expenses 2,883 3,404 Operating income 3,883 4,439 Other income 915 680 Income before provision for income taxes 4,798 5,119 Provision for income taxes 842 905 Net income $ 3,956 $ 4,214 Earnings per common share (basic) $ 1.09 $ 1.16 Earnings per common share (diluted) $ 1.09 $ 1.16 Shares outstanding (basic) 3,618 3,628 Shares outstanding (diluted) 3,618 3,636 Other comprehensive income (loss): Foreign currency translation net of taxes of $ 0 in all periods $ ( 631 ) $ 549 Total comprehensive income $ 3,325 $ 4,763 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, 2024 AND MARCH 31, 2023 (in thousands - unaudited) THREE MONTHS ENDED MARCH 31, 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 3,956 $ 4,214 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 156 155 Amortization 513 1,596 Provision for losses on/(recovery of) accounts receivable ( 8 ) 1 Amortization of right-of-use assets 14 13 Deferred income taxes ( 192 ) ( 3 ) Stock-based compensation expense 79 50 Tax benefit attributable to exercise of stock options 9 2 Changes in operating assets and liabilities: Accounts receivable and other receivables ( 214 ) 1,789 Inventories 271 ( 1,084 ) Prepaid expenses and other current assets ( 87 ) 25 Accounts payable 230 ( 193 ) Accrued expenses 549 350 Total adjustments 1,320 2,701 Net cash provided by operating activities 5,276 6,915 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures for: Property and equipment ( 22 ) ( 43 ) Proceeds from sale of equipment 27 - Net cash provided by/(used in) investing activities 5 ( 43 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock - options 96 21 Common stock purchased and retired ( 2,990 ) - Payment of dividends ( 1,089 ) ( 1,070 ) Net cash used in financing activities ( 3,983 ) ( 1,049 ) Effect of exchange rate changes on cash ( 358 ) 37 Net increase in cash and cash equivalents 940 5,860 Cash at beginning of period 92,868 75,052 Cash at end of period $ 93,808 $ 80,912 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for income taxes $ 105 $ 129 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, 2024 AND MARCH 31, 2023 (in thousands - unaudited) Accumulated Additional Other Total Common Stock Paid-in Comprehensive Retained Stockholders' Shares Amount Capital Income Earnings Equity Balance at December 31, 2023 3,630 $ 36 $ 593 $ ( 10,658 ) $ 138,341 $ 128,313 Shares issued upon exercise of employee stock options for cash 2 - 96 - - 96 Stock option compensation expense - - 79 - - 79 Common stock purchased and retired ( 43 ) - ( 769 ) - ( 2,221 ) ( 2,990 ) Foreign currency translation adjustment - - - ( 631 ) - ( 631 ) Common stock dividends - - - - ( 1,081 ) ( 1,081 ) Net income - - - - 3,956 3,956 Balance at March 31, 2024 3,588 $ 36 $ - $ ( 11,289 ) $ 138,995 $ 127,742 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 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, 2023. 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, 2024 and December 31, 2023 consisted of the following: March 31, 2024 December 31, 2023 Finished goods $ 1,634 $ 1,685 Work-in-process 1,302 1,503 Raw materials 6,304 6,394 Total $ 9,240 $ 9,582 (4) Stock-Based Compensation. At March 31, 2024, 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, 2024 and March 31, 2023, the Company recognized $ 79 and $ 50 , 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, 2023 or March 31, 2024. (6) 1Q 2024 global revenues (USD) by product category: Domestic Outside US Total Obstetrics $ 803 $ 222 $ 1,025 Gynecology/Electrosurgery/Urology 2,353 3,108 5,461 Neonatal 1,247 395 1,642 Blood Pressure Monitoring and Accessories 1,788 1,424 3,212 Total $ 6,191 $ 5,149 $ 11,340 5 Table of Contents (7) Exclusive U.S. Filshie Distribution Agreement Purchase. UTMD completed the purchase of exclusive U.S. distribution and use of intellectual property rights for the Filshie® Clip System from CooperSurgical, Inc. (CSI) effective February 1, 2019. The $ 21,000 purchase price represented an identifiable intangible asset which was straight-line amortized and recognized as part of G&A expenses over the 4.75 year remaining life of the CSI Agreement with Femcare ended in October 2023. (8) Earnings Per Share. Basic earnings per share were calculated by dividing net income attributable to the common stockholders of the company by the weighted average number of common shares outstanding during each applicable period. Diluted earnings per share were calculated by assuming the exercise of stock options at the closing price of stock at the end of first quarter 2024 and 2023, as applicable. 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, 2024 2023 Numerator Net income 3,956 4,214 Denominator Weighted average shares, basic 3,618 3,628 Dilutive effect of stock options - 8 Diluted shares 3,618 3,636 Earnings per share, basic $ 1.09 $ 1.16 Earnings per share, diluted $ 1.09 $ 1.16 (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 March 31, 2024 financial statements. After March 31, 2024 through May 3, 2024, the Company made additional repurchases of 63,985 shares of its stock in the open market for $ 4,323 , at an average price of $ 67.57 per share. 6 Table of Contents