PRESS RELEASE
UTMD
Reports Financial Performance for
Fourth Quarter
and Year 2009
January
28, 2010
Contact: Paul Richins
(801) 566-1200
Salt Lake City, Utah - In the fourth calendar
quarter (4Q) 2009 and year of 2009, Utah Medical Products, Inc.’s
(Nasdaq: UTMD) changes in financial results compared to the same time
period in the prior calendar year were as follows:
|
4Q
|
Year
|
|
(October
- December) |
(January
- December) |
Sales: |
( 2%) |
( 7%) |
Gross Profit: |
+1% |
( 8%) |
Operating Income: |
+8% |
( 9%) |
Net Income: |
( 2%) |
(13%) |
Earnings Per Share: |
+1% |
( 7%) |
Profitability measures compared
to the same time periods in the prior calendar year were as follows:
|
4Q09 |
4Q08 |
2009 |
2008 |
Gross Profit Margin (GPM): |
53.2% |
51.7% |
53.2% |
54.1% |
Operating Profit Margin (OPM): |
36.6% |
33.5% |
36.4% |
37.4% |
Net Profit Margin (NPM): |
23.8% |
23.9% |
24.1% |
25.9% |
According to CEO Kevin Cornwell,
“Despite the 7% decline in
sales and eps in 2009, UTMD’s profitability demonstrated continued
excellent overall performance. In the 4Q 2009, we experienced some
improvement after a year of declines, e.g. the first order for custom
blood pressure monitoring kits from our largest international customer
in 2008. The $1,588 (in thousands throughout this report unless
indicated otherwise) decline in 2009 shipments to this customer
represented 85% of UTMD’s total sales decline for the year
compared with 2008.
In order to ensure profitability,
a number of actions were taken later in the year, including overhead
reductions in the U.S., plans for consolidation of Oregon operations
into Utah in early 2010, expansion of the U.S. sales force through
third party representatives, distribution relationships with other
medical device manufacturers and investment in equipment and new
technology.
We invite shareholders to read UTMD’s
SEC Form 10-K which will be published before March 16 to obtain
more details regarding 2009 performance and projections for 2010.
UTMD’s focus remains on creating excellent long term shareholder
value through providing highly reliable devices that help clinicians
improve care and lower overall health care costs. We appreciate
the continued confidence that our shareholders have demonstrated
in the Company’s prospects for future success.” |
Sales.
Compared to 4Q 2008, total 4Q 2009 domestic sales were slightly higher
by $20, and total international sales were $124 lower, or down about 6%.
Domestic sales include domestic direct sales (sales to U.S. end users)
and domestic OEM sales (sales to other companies where products are components
of their finished product offerings). For 4Q 2009 compared to 4Q 2008,
domestic direct sales were essentially the same and OEM sales were up
2%. For the year of 2009, total domestic sales were down $488, or about
2.6%. Domestic direct sales were down 3% from reduced prices and group
purchasing organization restrictions of clinician choice in U.S. hospitals.
OEM sales were down 2% because sales of molded parts to non-medical device
firms by UTMD’s Oregon facility were down 18%. OEM sales from UTMD’s
Utah facility were up 4%.
Sales to UTMD’s largest 2008 international
customer were $300 lower in 4Q 2009 than in 4Q 2008, more than twice the
total international sales decline. Due to resumption of orders in 4Q 2009,
UTMD expects sales of custom kits to that customer will be higher by several
hundred thousand dollars in 2010, but still not reach the sales level
achieved in prior years. Total international sales were down $1,377 in
2009 compared to 2008, or about 16%. Omitting its largest customer in
2008 from the international sales, UTMD’s 2009 total international
sales were up $211, or about 3%.
Gross Profit.
After noting that declining utilization rates of specialty medical devices
in U.S. hospitals may be a more permanent phenomenon for the foreseeable
future, UTMD did reduce its manufacturing workforce in Utah in 2H 2009
by about 6%. 2009 trade shipments from UTMD’s Utah facility were
down 4% in 2009. That decline excludes intercompany sales of components
to UTMD Ltd. in Ireland for finished devices for international customers.
After severance benefits, the financial benefit of the Utah reduction
began to be realized in GPM in late 4Q 2009. Near the end of 2009, UTMD
also reduced its Ireland workforce by about 16%. Trade shipments in EUROs
from UTMD Ltd in Ireland were down 16% in 2009, primarily because the
custom kits for UTMD’s largest international customer in 2008 had
been manufactured and shipped by the UTMD Ltd. subsidiary. Although the
Company is expecting increased Ireland sales in 2010 relative to 2009,
the Ireland subsidiary accumulated a substantial stock of WIP/FG inventory
in 2009 keeping its excess people busy. Looking forward, UTMD will consolidate
its Oregon injection molding operations into its Utah molding operations
during 1H 2010. The financial benefit of this substantial reduction in
duplicate U.S. manufacturing overhead expenses will begin to be felt in
2H 2010 GPM. UTMD also increased its capital spending for manufacturing
tooling and equipment in 2009 by about $200 relative to 2008, which will
help lower manufacturing costs in 2010.
Operating Profit.
UTMD tightly managed its operating expenses in 2009 to less than 17% of
sales, primarily by reducing lower productivity selling resources in S&M
expense as well as legal and other professional services in G&A expense.
UTMD management does not foresee the need to reduce R&D (research
and development), S&M (sales and marketing) or G&A (general and
administrative) resources from current levels in 2010 in order to maintain
its OPM around 36%.
Net Profit.
The NPM in 2009 was squeezed by $240 lower non-operating income, and a
higher income tax provision rate which was more than one and a half percentage
points of EBT (earnings before taxes) higher than in 2008. The lower non-operating
income resulted primarily from lower interest rates on UTMD’s excess
cash deposits and lack of royalty income, although there were other factors
which were explained in more detail earlier in the year. The higher tax
provision rate was due primarily to a smaller portion of consolidated
taxable income generated in Ireland at lower income tax rates. Due to
a slow economic recovery, UTMD expects that its non-operating income may
be even lower in 2010, but still targets a NPM of about 24% of sales in
2010.
Earnings Per Share (EPS).
UTMD’s 2009 EPS met the guidance provided shareholders after 2Q
2009, as did sales, gross profits and net profits. The number of shares
used for calculating earnings per share was higher than ending shares
because of a time-weighted calculation of average outstanding shares plus
dilution from unexercised employee and director options. The total number
of outstanding unexercised employee and outside director options at December
31, 2009 was 241,700 shares at an average exercise price of $23.93/ share,
including shares awarded but not vested. This compares to 208,300 unexercised
option shares outstanding at the end of 2008. UTMD=s dilution from unexercised
option shares added to actual weighted average outstanding shares for
purposes of calculating eps was 36,700 in 4Q 2009 compared to 20,700 in
4Q 2008, and 22,300 in 2009 compared to 34,800 in 2008. The number of
2009 year-end outstanding shares were 3,611,700. UTMD’s dividends
paid to shareholders during 2009 were 54% of eps.
As UTMD shareholders are undoubtedly aware,
UTMD’s share price substantially rebounded in 2009 from trading
levels during 4Q 2008, during which time UTMD repurchased more than 6%
of its outstanding shares (254,100 shares) at an average price of $23.15
including commissions and fees. Except for a very brief period of time
in 2Q 2009, during which time UTMD was able to repurchase 5,400 shares
at an average cost of $21.58 per share, the Company did not repurchase
shares in 2009. However, the Company retains the financial ability for
repurchasing its shares when they seem undervalued. The closing share
price at the end of 2009 was $29.32, up 34% from $21.95 at the end of
2008.
Highlights regarding changes in UTMD’s
Balance Sheet during 2009 include:
1) Cash and investments balances increased by $3.2 million after the Company
spent $3.3 million making four dividend payments to shareholders, and
$0.1 million repurchasing shares in the open market.
2) The Ireland loan balance declined $0.4 million or 20% in U.S. Dollar
terms. The loan obligation is held in EURO currency. In EURO terms, 22%
of the 12-31-08 loan balance was repaid in 2009.
3) In a difficult year for the liquidity of customers, UTMD incurred less
than $18 in bad debt write-offs from hospital bankruptcies, and simultaneously
reduced its year-end aged over-90 days A/R balances to 2.0% of total receivables.
Financial ratios as of December 31, 2009
which may be of interest to shareholders follow:
1) Current Ratio = 14.9
2) Days in Receivables (based on 4Q sales activity) = 43
3) Average Inventory Turns (based on 2009 CGS) = 3.6
4) 2009 ROE = 8% (after subtracting dividends); 17% (prior to payment
of dividends)
Investors are cautioned that this press
release contains 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, government health care “reforms”, the
Company’s ability to efficiently manufacture, market, and sell its
products, among other factors that have been and will be outlined in UTMD's
public disclosure filings with the SEC.
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.
|
|
(audited) |
(unaudited) |
(audited) |
|
DEC
31, 2009 |
SEP
30, 2009 |
DEC
31, 2008 |
Assets |
|
|
|
Cash &
Investments |
$19,255 |
$18,970 |
$16,025 |
Receivables, Net |
3,157 |
3,183 |
3,517 |
Inventories |
3,407 |
3,862 |
3,275 |
Other Current Assets |
414 |
449 |
463 |
Total Current Assets |
26,233 |
26,464 |
23,280 |
Property & Equipment,
Net |
8,133 |
8,317 |
8,127 |
Intangible Assets, Net |
7,388 |
7,397 |
7,414 |
Total Assets |
$41,754 |
$42,178 |
$38,821 |
|
|
|
|
Liabilities
&
Stockholders’ Equity |
|
|
|
A/P & Accrued Liabilities |
$1,497 |
$2,733 |
$1,503 |
Current Portion of Note Payable |
264 |
262 |
265 |
Total Current Liabilities |
$1,761 |
$2,995 |
$1,768 |
Note Payable |
1,403 |
1,465 |
1,828 |
Deferred Income Taxes |
609 |
429 |
420 |
Stockholders’ Equity |
37,981 |
37,289 |
34,805 |
Total Liabilities
&
Stockholders’ Equity |
$41,754 |
$42,178 |
$38,821 |
|
|
|
|
|