UTAH MEDICAL PRODUCTS INC 10-Q

Item 1. Financial Statements UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS AS OF JUNE 30, 2024 AND DECEMBER 31, 2023 (in thousands) (unaudited) (audited) JUNE 30, 2024 DECEMBER 31, 2023 ASSETS Current assets: Cash & investments $ 89,219 $ 92,868 Accounts & other receivables, net 3,668 3,391 Inventories 9,058 9,582 Other current assets 377 428 Total current assets 102,322 106,269 Property and equipment, net 10,194 10,551 Goodwill 13,640 13,692 Other intangible assets 54,030 54,296 Other intangible assets - accumulated amortization ( 50,154 ) ( 49,350 ) Other intangible assets, net 3,876 4,946 Total assets $ 130,032 $ 135,458 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 834 $ 769 Accrued expenses 3,105 3,941 Total current liabilities 3,939 4,710 Deferred tax liability – Femcare IIA 860 1,120 Other long term liabilities 698 698 Operating lease liability 275 295 Deferred income taxes 208 322 Total liabilities 5,980 7,145 Stockholders' equity: Common stock - $ 0.01 par value; authorized - 50,000 shares; issued and outstanding - June 30, 2024, 3,499 shares and December 31, 2023, 3,630 shares 35 36 Accumulated other comprehensive loss ( 11,322 ) ( 10,658 ) Additional paid-in capital - 594 Retained earnings 135,339 138,341 Total stockholders' equity 124,052 128,313 Total liabilities and stockholders' equity $ 130,032 $ 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 AND SIX MONTHS ENDED JUNE 30, 2024 AND JUNE 30, 2023 (in thousands, except per share amounts - unaudited) Three Months Ended Six Months Ended June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023 Sales, net $ 10,400 $ 12,866 $ 21,740 $ 25,386 Cost of goods sold 4,147 5,127 8,722 9,805 Gross profit 6,253 7,739 13,018 15,581 Operating expense Selling, general and administrative 2,560 3,181 5,176 6,440 Research & development 255 133 521 277 Total operating expenses 2,815 3,314 5,697 6,717 Operating income 3,438 4,425 7,321 8,864 Other income 773 747 1,689 1,428 Income before provision for income taxes 4,211 5,172 9,010 10,292 Provision for income taxes 758 972 1,601 1,878 Net income $ 3,453 $ 4,200 $ 7,409 $ 8,414 Earnings per common share (basic) $ 0.98 $ 1.16 $ 2.07 $ 2.32 Earnings per common share (diluted) $ 0.98 $ 1.15 $ 2.07 $ 2.31 Shares outstanding - basic 3,532 3,628 3,579 3,628 Shares outstanding - diluted 3,532 3,639 3,579 3,638 Other comprehensive income (loss): Foreign currency translation net of taxes of $ 0 in all periods $ ( 33 ) $ 504 $ ( 664 ) $ 1,053 Total comprehensive income $ 3,420 $ 4,704 $ 6,745 $ 9,467 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 SIX MONTHS ENDED JUNE 30, 2024 AND JUNE 30, 2023 (in thousands - unaudited) Six Months Ended June 30, 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 7,409 $ 8,414 Adjustments to reconcile net income to net cash provided by operating activities Depreciation 327 310 Amortization 1,023 3,207 Provision for (recovery of) losses on accounts receivable ( 6 ) ( 26 ) Amortization of Right-of-Use Assets 26 26 Deferred income taxes ( 364 ) ( 137 ) Stock-based compensation expense 131 100 Tax benefit attributable to exercise of stock options 20 9 Changes in operating assets and liabilities: Accounts receivable and other receivables ( 297 ) 2,044 Inventories 441 ( 1,245 ) Prepaid expenses and other current assets 45 3 Accounts payable 66 114 Accrued expenses ( 783 ) ( 991 ) Total adjustments 629 3,414 Net cash provided by operating activities 8,038 11,828 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures for: Property and equipment ( 132 ) ( 363 ) Intangible assets ( 5 ) - Proceeds from sale of property and equipment 27 - Net cash used in investing activities ( 110 ) ( 363 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock - options 390 81 Common stock purchased and retired ( 9,393 ) - Payment of dividends ( 2,170 ) ( 2,140 ) Net cash used in financing activities ( 11,173 ) ( 2,059 ) Effect of exchange rate changes on cash ( 404 ) 161 Net increase in cash and cash equivalents ( 3,649 ) 9,567 Cash at beginning of period 92,868 75,052 Cash at end of period $ 89,219 $ 84,619 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for income taxes $ 2,791 $ 2,546 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 AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023 (In thousands - unaudited) Accumulated Additional Other Total Common Stock Paid-in Comprehensive Retained Stockholders' Shares Amount Capital Income (Loss) 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 Shares issued upon exercise of employee stock options for cash 6 - 294 - - 294 Stock option compensation expense - - 52 - - 52 Common stock purchased and retired ( 95 ) ( 1 ) ( 346 ) - ( 6,056 ) ( 6,403 ) Foreign currency translation adjustment - - - ( 33 ) - ( 33 ) Common stock dividends - - - - ( 1,052 ) ( 1,052 ) Net income - - - - 3,453 3,453 Balance at June 30, 2024 3,499 $ 35 $ ( 0 ) $ ( 11,322 ) $ 135,339 $ 124,052 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 Shares issued upon exercise of employee stock options for cash 1 - 60 - - 60 Stock option compensation expense - - 50 - - 50 Foreign currency translation adjustment - - - 504 - 504 Common stock dividends - - - - ( 1,071 ) ( 1,071 ) Net income - - - - 4,200 4,200 Balance at June 30, 2023 3,629 $ 36 $ 432 $ ( 10,986 ) $ 132,279 $ 121,761 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 or results of operations or cash flows, or will not apply to its operations. (3) Inventories at June 30, 2024 and December 31, 2023 consisted of the following: June 30, 2024 December 31, 2023 Finished goods $ 1,334 $ 1,685 Work-in-process 1,435 1,503 Raw materials 6,289 6,394 Total $ 9,058 $ 9,582 (4) Stock-Based Compensation. At June 30, 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 June 30, 2024 and 2023, the Company recognized $ 52 and $ 50 , respectively, in stock based compensation cost. In the six months ended June 30, 2024 and 2023, the Company recognized $ 131 and $ 100 , respectively, in stock based compensation expense. (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 June 30, 2024. (6) Global 2Q 2024 revenues (USD) by product category: Domestic Outside US Total Obstetrics $ 852 $ 167 $ 1,019 Gynecology/Electrosurgery/Urology 2,410 3,042 5,452 Neonatal 1,231 315 1,546 Blood Pressure Monitoring and Accessories 1,338 1,045 2,383 Total $ 5,831 $ 4,569 $ 10,400 Global 1H 2024 revenues (USD) by product category: Domestic Outside US Total Obstetrics $ 1,656 $ 388 $ 2,044 Gynecology/Electrosurgery/Urology 4,762 6,150 10,912 Neonatal 2,477 711 3,188 Blood Pressure Monitoring and Accessories 3,127 2,469 5,596 Total $ 12,022 $ 9,718 $ 21,740 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 represented an identifiable intangible asset which is being straight-line amortized and recognized as part of expenses over the 4.75 year remaining life of the CSI distribution agreement with Femcare Ltd which ended in October 2023. (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 on June 30, 2024. The following table reconciles the numerator and the denominator used to calculate basic and diluted earnings per share: (in thousands) Three months ended Six months ended June 30, June 30, 2024 2023 2024 2023 Numerator Net income 3,453 4,200 7,409 8,414 Denominator Weighted average shares, basic 3,532 3,628 3,579 3,628 Dilutive effect of stock options - 11 - 10 Diluted shares 3,532 3,639 3,579 3,638 Earnings per share, basic 0.98 1.16 2.07 2.32 Earnings per share, diluted 0.98 1.15 2.07 2.31 (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 . After June 30, 2024 through August 8, 2024, the Company made additional repurchases of 21,785 shares of its stock in the open market for $ 1,441 , at an average price of $ 66.15 per share. 6 Table of Contents