PRESS RELEASE
UTMD
Reports Financial Performance for
Third Quarter
2004
October
19,
2004
Contact: Paul Richins
(801) 566-1200
Salt Lake City,
Utah - In the third calendar quarter of 2004 (3Q 2004), Utah Medical
Products, Inc. (Nasdaq:UTMD) achieved 2% higher earnings per share (eps)
compared to the same quarter in the prior year. Year-to-date (9M) eps from
regular operations were $1.15 compared to $1.13 in the first 9 months of
2003. Eps from regular operations for the most recent four calendar quarters
(LTM) were $1.52. Including “extraordinary” income, 9M eps were $1.85 and
LTM eps were $4.95. (Extraordinary income after taxes of $16,775,000 was
recorded during 4Q 2003 and 1Q 2004 relating to a patent infringement
judgment.)
UTMD’s consolidated 3Q 2004 sales were down 1% compared to 3Q 2003. In
response to an August 10 press release from the U.S. Food & Drug
Administration (FDA), UTMD introduced a ten percent (10%) discount from its
regular established U.S. hospital prices provided to loyal customers who
continue to use UTMD’s unrestricted high quality products. Ignoring the
effect of the 10% discount, UTMD’s 3Q 2004 sales were 1% higher than 3Q
2003, the same quarter in the prior year, and about the same as in the prior
quarter, 2Q 2004. According the CEO Kevin Cornwell, “We’re pleased with
third quarter sales results after the unjustified shock that UTMD customers
received from the August 10 FDA press release. I believe that 3Q sales
results validate the high confidence that users have in our safe and
effective specialty products.” Year-to-date 2004 sales (9 months) were down
2% compared to 9M 2003.
Comparing 3Q 2004 sales (before applying the 10% discount) to 3Q 2003 sales
in product categories, neonatal product sales were up 5%, obstetrics product
sales were up 1%, gynecology/ electrosurgery product sales were up 1%, and
blood pressure monitoring/ components sales were down 3%. 3Q 2004
international sales were up 9% while domestic sales (after the discount was
applied) were down 4% compared to 3Q 2003. Even though overall international
sales were up, trade shipments by UTMD Ltd. (Ireland) were down 2% in US
Dollar terms, and 10% in EURO terms. The decline in domestic sales was
mitigated by the ABCorp acquisition in 2Q 2004. Domestic OEM sales were down
13% as the CMI molding operation had another weak OEM sales quarter. CEO
Kevin Cornwell further states, “Of course, the 10% discount for domestic
direct hospital sales was effective for about half of 3Q 2004. If the
discount continues for a full quarter, the negative financial impact on 4Q
2004 will be more substantial.”
In 3Q 2004, UTMD achieved a gross profit margin (GPM) of 56.6%, operating
profit margin of 38.4% and net profit margin of 27.1%. Profit margins for 3Q
2003 were 58.9%, 39.9% and 27.5%, respectively. The negative $152,700 effect
of the discount was more pronounced on gross profits than on sales. Without
the discount, UTMD’s 3Q 2004 GPM would have been 57.6% and gross profits
would have been 4% higher. Mr. Cornwell states, “The negative impact of the
discount on third quarter profits could have been larger. In addition to the
loyalty demonstrated by our customers, the excellent financial results
demonstrate diligence, determination and commitment of UTMD’s employees.
With average tenure over 8 years with the Company, our employees understand
the consistent proven quality of our products, and have worked harder and
confidently in this highly stressful time for our company.”
Non-operating income in 3Q 2004 was $189,400 compared $107,100 in 3Q 2003.
Year-to-date non-operating income was $521,400 for 9M 2004 compared to
$272,500 for 9M 2003, excluding the Tyco patent infringement damages
recorded in 1Q 2004. In 3Q 2003 and 9M 2003, UTMD paid $4,600 and $46,800,
respectively, in interest because of a line of credit balance. The line of
credit balance was reduced to zero at the end of 3Q 2003, and has not been
used in 2004. In contrast, UTMD received $62,500 in 3Q 2004, and $178,000 in
9M 2004, in interest and dividend income and capital gains from investing
its cash balances.
UTMD’s earnings before interest and income tax expenses and before non-cash
depreciation/ amortization expenses (EBITDA), were $2,937,200 in 3Q 2004
(44.0% of sales), compared to $3,047,800 in 3Q 2003 (45.1% of sales). UTMD
set profitability records in 3Q 2003.
Initiating a quarterly cash dividend, UTMD paid $678,400 to shareholders in
3Q 2004. No dividends were paid in 2003. In addition, in 3Q 2004 UTMD
repurchased 176,200 shares in the open market for $3,080,100, an average
cost including commissions of $17.48 per share.
UTMD’s dilution from unexercised option shares added to actual weighted
average outstanding shares for purposes of calculating eps was 246,600 in 3Q
2004 compared to 340,700 in 3Q 2003, and 291,600 in 9M 2004 compared to
368,000 in 9M 2003. The lower dilution was due mainly to fewer outstanding
option shares. The actual number of outstanding UTMD shares at the end of 3Q
2004 was 4,350,200. The total number of outstanding unexercised options at
September 30, 2004 was about 741,000 shares at an average exercise price of
$13.06/ share, including shares awarded but not vested.
Compared to a year earlier, September 30 cash and investment balances were
$20,627,000 versus $925,000. Compared to the end of the prior quarter (June
30, 2004), cash and investment balances were down only $1.4 million even
though 3Q dividends and share repurchases consumed $3.8 million in cash.
In 3Q 2004, UTMD reduced inventories $310,000, a significant
accomplishment. Net accounts receivable were down $290,000 and other current
assets were down $89,000. Total current assets were down $2.1 million
compared to June 30. Since current liabilities were down $512,000, primarily
due to payment of income taxes on extraordinary income, working capital was
down $1.6 million compared to June 30, 2004. Compared to a year earlier,
working capital was up $16.3 million.
Financial ratios which may be of interest to shareholders follow. All of the
following measures meet or exceed management targets:
1) Current Ratio = 6.5
2) Days in Receivables (based on 3Q sales activity) = 45.6
3) Average Inventory Turns (based on 3Q CGS) = 3.6
4) Year-to-Date ROE (excluding extraordinary income and equity) = 32%
Despite $9.3 million reduction in Shareholders’ Equity resulting from share
repurchases and shareholder dividends, UTMD’s Shareholders’ Equity is up
$16.8 million from one year ago.
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 the effect of the August 2004 FDA press release, market acceptance
of products, timing of regulatory approval of new products, UTMD’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 3Q 2004 10-Q will be filed with the SEC by November 9.
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.
For purposes of comparison with the prior year, UTMD has separated the
additional “extraordinary” income and associated expenses from augmented
damages and interest received from Tyco in 1Q 2004 from its “normal” first
nine months (9M) 2004 operating results (“regular” column in the results
table).
|
INCOME STATEMENT,
Third
Quarter ended September 30, 2004
(in thousands except earnings per share) |
|
|
Total
3Q 2004 |
Extraordinary
3Q 2004 |
Regular
3Q 2004 |
3Q 2003 |
Percent Change |
Net Sales |
$ 6,670 |
- |
$ 6,670 |
$ 6,761 |
(1.3%) |
Gross Profit |
3,779 |
- |
3,779 |
3,979 |
(5.0%) |
Operating Income |
2,561 |
- |
2,561 |
2,696 |
(5.0%) |
Income Before Tax |
2,750 |
- |
2,750 |
2,803 |
(1.9%) |
Net Income |
1,807 |
- |
1,807 |
1,861 |
(2.9%) |
Earnings Per Share |
$ .386 |
- |
$ .386 |
$ .378 |
+2.2% |
Shares Outstanding
(diluted) |
4,674 |
|
4,674 |
4,920 |
|
|
|
|
|
|
|
|
INCOME STATEMENT, First Nine Months ended
September 30,
2004
(in thousands except earnings per share) |
|
|
Total
9M 2004 |
Extraordinary
9M 2004 |
Regular
9M 2004 |
9M 2003 |
Percent Change |
Net Sales |
$
20,113 |
- |
$
20,113 |
$
20,478 |
(1.8%) |
Gross Profit |
11,563 |
- |
11,563 |
11,990 |
(3.6%) |
Operating Income |
7,469 |
(350) |
7,819 |
8,120 |
(3.7%) |
Income Before Tax |
14,050 |
5,710 |
8,340 |
8,393 |
(0.6%) |
Net Income |
8,823 |
3,349 |
5,474 |
5,486 |
(0.2%) |
Earnings Per Share |
$
1.850 |
$ .702 |
$
1.148 |
$
1.127 |
+1.9% |
Shares Outstanding
(diluted) |
4,770 |
4,770 |
4,770 |
4,870 |
|
|
|
|
|
|
|
|
BALANCE
SHEETS
(in thousands) |
|
(unaudited)
SEP 30,
2004 |
(unaudited)
JUN 30,
2004 |
(audited)
DEC 31, 2003 |
(unaudited)
SEP 30,
2003 |
Assets |
|
|
|
|
Cash &
Investments |
$
20,627 |
$
22,044 |
$
1,484 |
$
925 |
Accounts Receivable - net |
3,210 |
3,500 |
3,326 |
3,705 |
Tyco Receivable |
- |
- |
24,884 |
- |
Inventories |
3,046 |
3,356 |
3,268 |
3,657 |
Other Current Assets |
870 |
959 |
940 |
813 |
Total Current Assets |
27,753 |
29,859 |
33,902 |
9,100 |
Property and Equipment - net |
8,719 |
8,737 |
9,005 |
8,781 |
Intangible Assets - net |
7,691 |
7,709 |
6,787 |
6,750 |
Total Assets |
$
44,163 |
$
46,305 |
$
49,694 |
$ 24,631 |
|
|
|
|
|
Liabilities and
Stockholders' Equity |
|
|
|
|
Total Current Liabilities |
$
4,303 |
$
4,815 |
$
12,497 |
$
1,934 |
Note Payable |
- |
- |
- |
- |
Deferred Income Taxes/Other Liab. |
707 |
641 |
665 |
383 |
Stockholders' Equity |
39,153 |
40,849 |
36,532 |
22,314 |
Total Liabilities and
Stockholders' Equity |
$
44,163 |
$
46,305 |
$
49,694 |
$ 24,631 |
|