UTAH MEDICAL PRODUCTS INC 10-Q

Item 1. Financial Statements UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS AS OF SEPTEMBER 30, 2024 AND DECEMBER 31, 2023 (in thousands) (unaudited) (audited) SEPTEMBER 30, 2024 DECEMBER 31, 2023 ASSETS Current assets: Cash & investments $ 88,452 $ 92,868 Accounts & other receivables, net 3,720 3,391 Inventories 9,107 9,582 Other current assets 377 428 Total current assets 101,656 106,269 Property and equipment, net 10,419 10,551 Goodwill 14,027 13,692 Other intangible assets 55,899 54,296 Other intangible assets - accumulated amortization ( 52,307 ) ( 49,350 ) Other intangible assets, net 3,592 4,946 Total assets $ 129,694 $ 135,458 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 999 $ 769 Accrued expenses 2,436 3,941 Total current liabilities 3,435 4,710 Deferred tax liability – Femcare IIA 779 1,120 Other long term liabilities 698 698 Operating lease liability 299 295 Deferred income taxes 286 322 Total liabilities 5,497 7,145 Stockholders' equity: Common stock - $ 0.01 par value; authorized - 50,000 shares; issued - September 30, 2024, 3,441 shares and December 31, 2023, 3,630 shares 34 36 Accumulated other comprehensive income (loss) ( 9,890 ) ( 10,658 ) Additional paid-in capital - 594 Retained earnings 134,053 138,341 Total stockholders' equity 124,197 128,313 Total liabilities and stockholders' equity $ 129,694 $ 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 NINE MONTHS ENDED SEPTEMBER 30, 2024 AND SEPTEMBER 30, 2023 (in thousands, except per share amounts - unaudited) Three Months Ended Nine Months Ended September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Sales, net $ 10,005 $ 12,505 $ 31,745 $ 37,891 Cost of goods sold 4,203 5,146 12,925 14,951 Gross profit 5,802 7,359 18,820 22,940 Operating expense Selling, general and administrative 2,287 3,252 7,464 9,693 Research & development 172 138 692 414 Total operating expense 2,459 3,390 8,156 10,107 Operating income 3,343 3,969 10,664 12,833 Other income 836 812 2,524 2,239 Income before provision for income taxes 4,179 4,781 13,188 15,072 Provision for income taxes 616 846 2,216 2,723 Net income $ 3,563 $ 3,935 $ 10,972 $ 12,349 Earnings per common share (basic) $ 1.02 $ 1.08 $ 3.10 $ 3.40 Earnings per common share (diluted) $ 1.02 $ 1.08 $ 3.10 $ 3.39 Shares outstanding - basic 3,478 3,629 3,542 3,629 Shares outstanding - diluted 3,478 3,639 3,542 3,638 Other comprehensive income (loss): Foreign currency translation net of taxes of $ 0 in all periods $ 1,432 $ ( 1,012 ) $ 769 $ 41 Total comprehensive income $ 4,995 $ 2,923 $ 11,741 $ 12,390 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 NINE MONTHS ENDED SEPTEMBER 30, 2024 AND SEPTEMBER 30, 2023 (in thousands - unaudited) Nine Months Ended September 30, 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 10,972 $ 12,349 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 530 465 Amortization 1,548 4,824 Provision for (recovery of) losses on accounts receivable ( 6 ) ( 31 ) Amortization of right of use assets 38 39 Deferred income taxes ( 417 ) ( 284 ) Stock-based compensation expense 184 153 Tax benefit attributable to exercise of stock options 20 12 Changes in operating assets and liabilities: Accounts receivable and other receivables ( 306 ) 2,133 Inventories 508 ( 925 ) Prepaid expenses and other current assets 54 19 Accounts payable 229 ( 712 ) Accrued expenses ( 1,460 ) ( 1,093 ) Total adjustments 922 4,600 Net cash provided by operating activities 11,894 16,949 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures for: Property and equipment ( 221 ) ( 549 ) Intangible assets ( 5 ) - Proceeds from sale of property and equipment 27 - Net cash used in investing activities ( 199 ) ( 549 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock - options 390 117 Common stock purchased and retired ( 13,259 ) - Payment of dividends ( 3,222 ) ( 3,211 ) Net cash used in financing activities ( 16,091 ) ( 3,094 ) Effect of exchange rate changes on cash ( 20 ) ( 149 ) Net increase/(decrease) in cash and cash equivalents ( 4,416 ) 13,157 Cash at beginning of period 92,868 75,052 Cash at end of period $ 88,452 $ 88,209 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for income taxes $ 3,713 $ 3,489 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 AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND SEPTEMBER 30, 2023 (In thousands - unaudited) Accumulated Additional Other Total Common Stock Paid-in Comprehensive Retained Stockholders' Shares Amount Capital Income Earnings Equity Balance at June 30, 2024 3,499 $ 35 $ - $ ( 11,322 ) $ 135,339 $ 124,052 Stock option compensation expense - - 53 - - 53 Common stock purchased and retired ( 58 ) ( 1 ) ( 53 ) - ( 3,812 ) ( 3,866 ) Foreign currency translation adjustment - - - 1,432 - 1,432 Common stock dividends - - - - ( 1,038 ) ( 1,038 ) Net income - - - - 3,563 3,563 Balance at September 30, 2024 3,441 $ 34 $ - $ ( 9,890 ) $ 134,053 $ 124,197 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 8 - 390 - - 390 Stock option compensation expense - - 184 - - 184 Common stock purchased and retired ( 197 ) ( 2 ) ( 1,168 ) - ( 12,090 ) ( 13,259 ) Foreign currency translation adjustment - - - 769 - 769 Common stock dividends - - - - ( 3,171 ) ( 3,171 ) Net income - - - - 10,972 10,972 Balance at September 30, 2024 3,441 $ 34 $ - $ ( 9,890 ) $ 134,053 $ 124,197 Balance at June 30, 2023 3,629 $ 36 $ 432 $ ( 10,986 ) $ 132,279 $ 121,762 Shares issued upon exercise of employee stock options for cash 1 - 36 - - 36 Stock option compensation expense - - 53 - - 53 Foreign currency translation adjustment - - - ( 1,012 ) - ( 1,012 ) Common stock dividends - - - - ( 1,071 ) ( 1,071 ) Net income - - - - 3,935 3,935 Balance at September 30, 2023 3,630 $ 36 $ 521 $ ( 11,999 ) $ 135,144 $ 123,702 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 2 - 117 - - 117 Stock option compensation expense - - 153 - - 153 Foreign currency translation adjustment - - - 41 - 41 Common stock dividends - - - - ( 3,212 ) ( 3,212 ) Net income - - - - 12,349 12,349 Balance at September 30, 2023 3,630 $ 36 $ 521 $ ( 11,999 ) $ 135,144 $ 123,702 see notes to consolidated condensed financial statements 4 Table of Contents UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARIES 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 other 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 September 30, 2024, and December 31, 2023, consisted of the following: September 30, 2024 December 31, 2023 Finished goods $ 1,356 $ 1,685 Work-in-process 1,441 1,503 Raw materials 6,310 6,394 Total $ 9,107 $ 9,582 (4) Stock-Based Compensation. At September 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 September 30, 2024, and 2023, the Company recognized $ 53 and $ 53 , respectively, in stock based compensation cost. In the nine months ended September 30, 2024, and 2023, the Company recognized $ 184 and $ 153 , 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 September 30, 2024. (6) Global 3Q 2024 revenues (USD) by product category: Domestic Outside US Total Labor & Delivery $ 894 $ 159 $ 1,053 Gynecology/Electrosurgery/Urology 2,298 2,795 5,093 Neonatal 1,371 342 1,713 Blood Pressure Monitoring and Accessories* 1,124 1,022 2,146 Total: $ 5,687 $ 4,318 $ 10,005 Global 9M 2024 revenues (USD) by product category: Domestic Outside US Total Labor & Delivery $ 2,550 $ 547 $ 3,097 Gynecology/Electrosurgery/Urology 7,060 8,945 16,005 Neonatal 3,848 1,053 4,901 Blood Pressure Monitoring and Accessories* 4,251 3,491 7,742 Total: $ 17,709 $ 14,036 $ 31,745 *includes assemblies and molded components sold to OEM customers. 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) as of 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 distribution agreement with Femcare Ltd. (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 3rd quarter 2024. The following table reconciles the numerator and the denominator used to calculate basic and diluted earnings per share: ( in thousands ) Three months ended Nine months ended September 30, September 30, 2024 2023 2024 2023 Numerator Net income 3,563 3,935 10,972 12,349 Denominator Weighted average shares, basic 3,478 3,629 3,542 3,629 Dilutive effect of stock options - 10 - 9 Diluted shares 3,478 3,639 3,542 3,638 Earnings per share, basic 1.02 1.08 3.10 3.40 Earnings per share, diluted 1.02 1.08 3.10 3.39 (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 September 30, 2024 through November 11, 2024, the Company made additional repurchases of 48,905 shares of its stock in the open market for $ 3,164 , at an average price of $ 64.70 per share. 6 Table of Contents