PRESS RELEASE
UTMD
Reports Financial Performance for
Fourth Quarter
and Year 2005
January
24, 2006
Contact: Paul Richins
(801) 566-1200
Salt Lake City, Utah - In the fourth quarter
(4Q) of 2005, Utah Medical Products, Inc.’s (Nasdaq: UTMD) consolidated
sales were up 10%, gross profits up 14%, operating profits up 22%, net
income up 36% and earnings per share (eps) up 45%, compared to 4Q 2004.
The increase in sales and gross profits reflected improved activity in
UTMD’s organic business after a favorable conclusion of the trial with the
Food & Drug Administration (FDA), and a favorable 4Q 2005 to 4Q 2004
comparison due to the loyalty discount given customers in 4Q 2004, but not
in 4Q 2005. 4Q 2005 sales were up 7% excluding the discount provided in 4Q
2004 to encourage customers to remain with UTMD during its defense of FDA
allegations which have now been dismissed on all counts. Operating profits
were up substantially because the Company’s operating expenses, which
included the expenses associated with the FDA lawsuit, were only $94,000
higher in 4Q 2005 compared with 4Q 2004, allowing most of the gains achieved
in gross profits to translate to operating income.
4Q 2005 net income was up dramatically because the substantial improvement
in operating income, enhanced by slightly higher non-operating income, was
taxed at a substantially lower income tax provision. The income tax
provision in 4Q 2005 was 23.4% of income before tax (EBT), compared to 32.4%
in 4Q 2004. The lower income tax provision resulted primarily from The
American Jobs Creation Act of 2004 (the Act) enacted in October 2004. The
Act allows a temporary tax deduction on accumulated foreign earnings
repatriated in 2005 resulting in a permanent deferred tax liability
adjustment related to foreign earnings in prior years, as well as a domestic
tax deduction on manufacturing related income. The 45% increase in 4Q 2005
earnings per share (eps) resulted from all of the above factors plus a
continued reduction in outstanding shares as a result of open market share
repurchases.
Comparing year 2005 financial results with 2004, sales and gross profits
were both up 5%, but operating profits, net income and eps were down, 40%,
26% and 18%, respectively. In 1Q 2004, UTMD recognized $5,710,000 (net
damages) in operating income from patent infringement damages net of related
expenses, which did not recur in 2005. In 2004, this was reported as
non-operating income. In 2005, UTMD reclassified the patent infringement
damages received in 1Q 2004 as part of its operating income. Another
significant difference between 2005 and 2004 results was the amount of
litigation expense included in operating expenses, which was $1,627,060 and
$830,000, respectively. Subtracting the net damages from 2004 operating
income prior to litigation costs, and comparing to 2005 operating income
prior to litigation costs, yields a 4% increase. The major tax benefit
obtained in 2005 from the Act virtually offset the higher litigation
expenses, allowing 2005 eps to be approximately the same as without the
expense of the FDA lawsuit and the one-time benefit of the Act.
Because of the Act, UTMD was able to repatriate Ireland subsidiary earnings
generated since the 1996 inception of its Ireland operations, resulting in a
net savings of about $1,000,000 after all expenses associated with the
repatriation. One of those expenses is the present and future estimated
interest cost associated with the loan undertaken by subsidiary UTMD, Ltd.
in Ireland in order to repatriate its accrued earnings to the U.S. The
appearance of a note payable on UTMD’s balance sheet is the loan balance in
Ireland required to facilitate repatriation of the accumulated earnings.
UTMD estimates that this loan will be repaid by funds generated in Ireland
in about five years.
According to CEO Kevin Cornwell,
“We are pleased with
achieving the $1.80 eps which we had projected in April. Setting aside the
unusual events of the patent infringement damages received in 1Q 2004, the
one-time tax savings in 2005 and the expenses of the FDA lawsuit, UTMD’s
operating performance comparisons with the prior year are positive, and
remain on a consistent upward slope. The excellent 2005 results are due to
the dedication and determination of our employees, and the continued
recognition of many clinicians of the quality and value of our products to
the public health. We look forward to focusing on managing and growing our
business in 2006, allowing continued excellent shareholder returns.”
Financial ratios which may be of interest to
shareholders follow:
1) Current Ratio = 8.1
2) Days in Accounts Receivable (based on 4Q sales activity) = 45
3) Average Inventory Turns (based on 4Q CGS) = 3.8
4) 2005 ROE = 22%
UTMD's dilution from unexercised option shares
added to actual weighted average outstanding shares for purposes of
calculating diluted eps was 246,300 in 4Q 2005 compared to 223,300 in 4Q
2004, and 230,200 in year 2005 compared to 276,100 in 2004. The actual
number of outstanding shares at the end of 2005 was 3,856,340 which included
4Q employee/director option exercises of 123,400 shares and 4Q share
repurchases of 73,500. In 4Q 2005, UTMD repurchased 73,500 shares in the
open market at an average cost including commissions of $28.58 per share.
The total number of outstanding unexercised options at December 31, 2005 was
548,600 shares at an average exercise price of $13.89/ share, including
shares awarded but not vested. This compares to 755,500 option shares
outstanding at the end of 2004.
Investors are cautioned that this press release may contain forward looking
statements and that actual events may differ from those projected. Risk
factors that could cause results to differ materially from those projected
include market acceptance of products, timing of regulatory approval of new
products, regulatory intervention in current operations, a negative outcome
in the current FDA lawsuit, the Company’s ability to efficiently
manufacture, market, and sell its products, among other factors that have
been outlined in UTMD's public disclosure filings
with the SEC. The SEC Form 10-K for 2005 will be filed with the SEC by March
16.
Utah Medical Products, Inc., with particular interest in health care for
women and their babies, develops, manufactures, assembles and markets a
broad range of disposable and reusable specialty medical devices designed
for better health outcomes for patients and their care-providers. For more
information about Utah Medical Products, Inc., visit UTMD's
website at www.utahmed.com.
|
Net Sales
Gross Profit
Operating Income
Income Before Tax
Net Income
Earnings Per Share (EPS)
Shares Outstanding (diluted) |
4Q
2005
$7,011
3,983
2,177
2,483
1,903
$0.436
4,109
|
4Q
2004
$6,372
3,503
1,791
2,067
1,397
$.319
4,385 |
Percent
Change
+10.0%
+13.7%
+21.5%
+20.1%
+36.2%
+45.3% |
|
|
Net Sales
Gross Profit
Operating Income
Income Before Tax
Net Income
Earnings Per Share (EPS)
Shares Outstanding (diluted) |
2005
$27,692
15,753
9,237
10,214
7,547
$1.800
4,192
|
2004
$26,485
15,066
15,320
16,117
10,220
$2.186
4,675 |
Percent
Change
+4.6%
+4.6%
(39.7%)
(36.6%)
(26.2%)
(17.7%) |
|
|
|
(audited) |
(unaudited) |
(audited) |
|
DEC
31, 2005 |
SEP
30, 2005 |
DEC 31, 2004 |
Assets |
|
|
|
Cash &
Investments |
$
17,453 |
$
13,580 |
$
16,928 |
Accounts Receivable, Net |
4,418 |
3,467 |
3,730 |
Inventories |
3,305 |
3,117 |
2,859 |
Other Current Assets |
596 |
923 |
1,013 |
Total Current Assets |
25,772 |
21,087 |
24,530 |
Property and Equipment,
Net |
8,160 |
8,301 |
9,058 |
Intangible Assets, Net |
7,624 |
7,637 |
7,674 |
Deferred
Income Taxes, Long Term |
86 |
0 |
0 |
Total Assets |
$ 41,642 |
$ 37,025 |
$ 41,262 |
|
|
|
|
Liabilities
&
Stockholders’ Equity |
|
|
|
Total Current Liabilities |
$
3,175 |
$
3,169 |
$
4,336 |
Note Payable |
5,336 |
0 |
0 |
Deferred Income Taxes |
274 |
316 |
769 |
Stockholders’ Equity |
32,857 |
33,540 |
36,157 |
Total Liabilities
&
|
$ 41,642 |
$ 37,025 |
$ 41,262 |
Stockholders’ Equity |
|