via NewMediaWire -- Because of the aberration in results which
began in March 2020 due to the impact of restrictions on
“nonessential” medical procedures, Utah Medical Products, Inc.
(Nasdaq: UTMD) will report 2021 quarterly income statement results
compared to the same periods in both 2020 and 2019. Please
see the income statement on the last page.
Currencies in this release are denoted as $ or USD = U.S.
Dollars; AUD = Australia Dollars; £ or GBP = UK Pound Sterling; C$
or CAD = Canadian Dollars; and € or EUR = Euros. Currency amounts
throughout this report are in thousands, except per share amounts
and where noted.
Summary of ResultsDespite very weak demand for UTMD’s devices in
January 2021 due to renewed lockdowns after steady improvements in
medical device demand during 2020 after the second calendar quarter
(2Q), first calendar quarter (1Q) 2021 sales, gross profits and
operating profits were all higher for the full quarter compared to
1Q 2020. Stockholders will remember that in 1Q 2020, the
impact of restrictions imposed due to the corona virus pandemic
began in March. Because the negative impact on UTMD was at
its worst in 2Q 2020, UTMD expects substantially better comparative
results for 2Q 2021. The following is a summary comparison of 1Q
2021 with 1Q 2020 income statement measures:
Revenues (Sales): |
+ 1% |
Gross
Profit (GP): |
+ 2% |
Operating Income (OI): |
+ 1% |
Income
Before Tax (EBT): |
(2%) |
Net
Income (NI): |
(4%) |
Earnings Per Share (EPS): |
(2%) |
Sales invoiced in foreign currencies were helped by a weaker
USD. Despite the higher OI, 1Q 2021 EBT was lower as a result
of much less non-operating income, i.e. less interest received on
UTMD’s cash reserves. The NI change was lowered further by a higher
estimated consolidated income tax provision rate, due to a greater
share of EBT coming in higher-taxed sovereignties such as the
U.S. On the other hand, EPS was helped by UTMD share
repurchases during 2020.
Profit margins in 1Q 2021 compared to 1Q 2020 follow:
|
1Q 2021 (JAN – MAR) |
1Q 2020 (JAN – MAR) |
Gross Profit Margin
(GP/ sales): |
63.4% |
62.7% |
Operating Income
Margin (OI/ sales): |
35.5% |
35.4% |
EBT Margin (EBT/
sales): |
35.6% |
36.6% |
Net Income Margin
(NI/ sales): |
27.6% |
28.8% |
UTMD’s March 31, 2021 Balance Sheet, in the absence of debt,
continued to strengthen. Ending Cash and Investments were $56.0
million on March 31, 2021 compared to $51.6 million on December 31,
2020, after paying $1.0 million in cash dividends to stockholders
during 1Q 2021. Stockholders’ Equity (SE) increased $2.1 million in
the three month period from December 31, 2020 despite the fact that
dividends reduce SE. Compared to March 31, 2020, cash
increased $16.4 million and SE increased $10.5 million.
Foreign currency exchange (FX) rates for Balance Sheet purposes
are the applicable rates at the end of each reporting period. The
FX rates from the applicable foreign currency to USD for assets and
liabilities at the end of 1Q 2021 and the end of 1Q 2020
follow:
3-31-21 3-31-20
Change
GBP
1.380
1.245
10.8%
EUR
1.174
1.102
6.5%
AUD
0.761
0.614
24.0%
CAD
0.795
0.708 12.3%
Sales. Total consolidated 1Q 2021 UTMD worldwide (WW)
sales were $62 (+0.6%) higher than in 1Q 2020. Constant currency
sales were $189 (1.7%) lower. U.S. domestic sales were 5% higher
and outside the U.S. (OUS) sales were 6% lower. Because of the
relatively short span of time, results for any given three month
period in comparison with a previous three month period may not be
indicative of comparative results for the year as a whole.
Domestic U.S. sales in 1Q 2021 were $6,783 compared to $6,443 in
1Q 2020. Domestic sales are invoiced in USD and not subject
to FX rate fluctuations. The components of domestic sales include
1) “direct other device sales” of UTMD’s medical devices to user
facilities (and med/surg stocking distributors for hospitals),
excluding Filshie device sales, 2) “OEM sales” of components and
other products manufactured by UTMD for other medical device and
non-medical device companies, and 3) “direct Filshie device sales”.
UTMD separates Filshie device sales from other medical device sales
direct to medical facilities because of their significance, and the
acquisition history. Direct other device sales, representing 50% of
total domestic sales, were $26 (+1%) higher in 1Q 2021 than in 1Q
2020. OEM sales, representing 28% of total domestic sales, were
$520 (+38%) higher. Direct Filshie device sales were $206 (12%)
lower in 1Q 2021 compared to 1Q 2020 due to a significant response
in January to an upsurge in U.S. reported COVID-19 infections. In
January 2021, Filshie device sales were the lowest one month of
sales since May 2020, which was the second lowest month (after
April 2020) during the 2020 pandemic. In the very short most recent
time period of the first half of April 2021, incoming U.S. domestic
medical facility orders for Filshie devices were already greater
than in the entire month of April 2020. Other UTMD
gynecology/ electrosurgery/ urology devices were also considered
“elective” during the early phases of the pandemic, and have shown
similar recent results.
U.S. OEM sales were 38% higher at $1,904 in 1Q 2021 compared to
$1,384 in 1Q 2020. OEM sales depend not only on the success
of other companies, but also on UTMD’s manufacturing
capacity. As part of UTMD’s corporate strategy, the company
does not seek to grow its business by OEM sales, which on their own
have a lower profit margin (GPM) and do not provide long term
intangible value for UTMD stockholders. The benefit of OEM sales
for UTMD is to “back-fill” preexisting manufacturing capabilities
and capacities with work to smooth production, better absorb UTMD’s
critical mass of overhead resources and maximize UTMD’s GP margin.
In 2021, OEM sales are constrained more by the tight market for
production labor in Utah, and the time it takes to fully train
operators, than by demand.
OUS sales in 1Q 2021 were 6% lower at $4,181 compared to $4,459
in 1Q 2020. The decline in USD-denominated OUS sales is understated
as a result of a weaker USD which added $251 to OUS sales that were
invoiced in GBP, EUR, AUD and CAD foreign currencies (in constant
currency terms). “Constant currency” sales means exchanging
foreign currency sales into USD-denominated sales at the same FX
rate as was in the previous period of time being compared. FX rates
for income statement purposes are transaction-weighted averages.
The average FX rates from the applicable foreign currency to USD
during 1Q 2021 and 1Q 2020 for revenue purposes
follow: 1Q
2021 1Q
2020
Change
GBP
1.379
1.283 +
7.4%
EUR
1.203
1.108 +
8.6%
AUD
0.773
0.655
+17.9%
CAD
0.790
0.750 + 5.4%
The weighted average favorable impact on foreign currency OUS
sales was 9.0%, increasing reported USD sales by $251 relative to
the same foreign currency sales in 1Q 2020. In constant
currency terms, OUS sales in 1Q 2021 were 11.9% lower than in 1Q
2020. This was because medical device sales OUS, particularly
in Europe, have not recovered from pandemic-related restrictions as
well as domestically. The portion of OUS sales invoiced in foreign
currencies in USD terms were 28% of total consolidated 1Q 2021
sales compared to 26% in 1Q 2020.
OUS sales invoiced in foreign currencies are due to direct
end-user sales in Ireland, the UK, France, Canada, Australia and
New Zealand, and to shipments to OUS distributors of products
manufactured by UTMD subsidiaries in Ireland or the UK.
Export sales from the U.S. to OUS distributors are invoiced in
USD. Direct to end-user OUS sales in USD terms were 15% lower
in Ireland, 22% lower in Canada, 7% lower in France and 49% lower
in the UK. Direct to end-user sales in Australia, which
included New Zealand in 1Q 2021 but not in 1Q 2020, were 2% higher.
Sales to OUS distributors were 9% higher in 1Q 2021 than in 1Q
2020, primarily because sales to UTMD’s China distributor of blood
pressure monitoring (BPM) devices were 110% higher and Filshie
device sales to OUS distributors were 11% higher.
Recognizing the current high level of uncertainty, management
expects 2Q 2021 consolidated revenues may be 25% higher than in 2Q
2020, leading to perhaps 8% higher sales for the year 2021. What
actually happens depends in large part not only on when hospitals
once again allow so-called elective procedures, but also on when
patients again feel confident in going to the hospital.
Gross Profit (GP). GP results from subtracting the costs
of manufacturing and shipping products to customers. UTMD’s GP was
$110 (1.6%) higher in 1Q 2021 than in 1Q 2020 as a result of
slightly higher sales and an expansion in GP Margin (GPM).
The higher GPM was not achieved because of a change in
“product mix” favoring more profitable devices, or higher customer
prices. Higher than average margin WW sales of Filshie devices in
1Q 2021, still constrained by government COVID-19 restrictions,
were 16% lower than in 1Q 2020. Lower than average margin OEM sales
were 38% higher. UTMD’s price increases since 1Q 2020 have been
much more modest than the inflation experienced in raw materials
costs. Manufacturing overhead (MOH) expenses increased more than
sales as well, due in part to a stronger EUR for converting Ireland
manufacturing expenses to USD and continued increases in regulatory
requirements. Incoming freight costs, captured as part of MOH,
increased substantially. In summary, the GPM improvement resulted
from greater direct labor productivity, despite continued pandemic
restrictions such as wearing personal protective gear and
maintaining hygiene procedures which reduce productivity. It
appears that the 15-year average tenure of UTMD’s experienced
manufacturing personnel continues to be a key to UTMD’s success.
Employees in manufacturing operations throughout the pandemic have
been diligent and committed to work.
Operating Income (OI). OI results from subtracting
Operating Expenses (OE) from GP. OE, comprised of General and
Administrative (G&A) expenses, Sales and Marketing (S&M)
expenses and Product Development (R&D) expenses, were $3,059 in
1Q 2021 (27.9% of sales) compared to $2,973 in 1Q 2020 (27.3% of
sales). Ignoring the Femcare (USD) IIA amortization non-cash
expense which was $38 higher than in 1Q 2020 due to a stronger GBP,
and setting aside the same CSI IIA non-cash amortization expense in
both periods, OE expenses were $1,404 (12.8% of sales) in 1Q 2021,
and $1,356 (12.4% of sales) in 1Q 2020. A weaker USD, in
contrast to helping performance by increasing sales, in this
instance hurt performance by increasing OUS OE in USD terms by $35,
accounting for 73% of the OE increase.
Consolidated G&A expenses were $2,545 (23.2% of sales) in 1Q
2021 compared to $2,419 (22.2% of sales) in 1Q 2020. The G&A
expenses in 1Q 2021 included $550 (5.0% of sales) of non-cash
expense from the amortization of IIA resulting from the 2011
Femcare acquisition, which were $512 (4.7% of sales) in 1Q
2020. The higher USD amortization expense was the result of
the weaker USD, as the Femcare amortization expense in GBP was £399
in both periods. In addition, both 1Q 2021 and 1Q 2020 G&A
expenses included $1,105 (10.1% of sales) IIA amortization expense
resulting from the purchase of the CSI remaining U.S. exclusive
Filshie distribution rights. Excluding both Filshie-related
non-cash IIA amortization expenses, G&A expenses were $890
(8.1% of sales) in 1Q 2021 compared to $802 (7.4% of sales) in 1Q
2020. The change in FX rates increased 1Q 2021 OUS G&A
expenses excluding IIA amortization expense by $27. The $61 higher
1Q 2021 constant currency G&A expenses were due primarily to
higher G&A salaries and accrued bonuses, plus an $18 higher
stock option expense.
S&M expenses were $384 (3.5% of sales) in 1Q 2021 compared
to $419 (3.8% of sales) in 1Q 2020. The change in FX rates
increased 1Q 2021 OUS S&M expenses by $8. The $43 lower 1Q 2021
constant currency S&M expenses were due primarily to a
reduction of outside sales representatives in the UK.
R&D expenses in 1Q 2021 were $130 (1.2% of sales) compared
to $135 (1.2% of sales) in 1Q 2020. Since almost all R&D is
being carried out in the U.S., there was negligible FX rate
impact.
In summary, after subtracting the higher OE from higher GP, OI
in 1Q 2021 was $3,887 (35.5% of sales) compared to $3,863 (35.4% of
sales) in 1Q 2020.
Income Before Tax (EBT). EBT results from subtracting net
non‑operating expense (NOE) or adding net non-operating income
(NOI) from or to, as applicable, OI. Consolidated 1Q 2021 EBT
was $3,898 (35.6% of sales) compared to $3,988 (36.6% of sales) in
1Q 2020. The $90 (2.3%) lower 1Q 2021 EBT compared to 1Q 2020
was due to $114 lower NOI due to less interest received on cash
balances and a difference in the remeasurement of foreign currency
bank balances.
NOE/NOI includes the combination of 1) expenses from loan
interest and bank fees; 2) expenses or income from losses or gains
from remeasuring the value of EUR cash bank balances in the UK, and
GBP cash balances in Ireland, in USD terms; and 3) income from rent
of underutilized property, investment income and royalties received
from licensing the Company’s technology. Negative NOE is NOI.
Net NOI in 1Q 2021 was $11 compared to $125 NOI in 1Q 2020.
Despite higher cash balances in 1Q 2021 compared to 1Q 2020, UTMD
received $60 less in interest income. In addition, instead of
a gain of $44 at the end of 1Q 2020 from remeasurement of foreign
currency bank balances, UTMD realized a $10 loss at the end of 1Q
2021.
EBITDA is a non-US GAAP metric that measures profitability
performance without factoring in effects of financing, accounting
decisions regarding non-cash expenses, capital expenditures or tax
environments. Excluding the noncash effects of depreciation,
amortization of intangible assets and stock option expense, 1Q 2021
consolidated EBT excluding the remeasured bank balance currency
gain or loss and interest expense (“adjusted consolidated EBITDA”)
was $5,776 compared to $5,772 in 1Q 2020. UTMD’s adjusted
consolidated EBITDA as a percentage of sales was 52.7% in 1Q 2021
compared to 52.9% in 1Q 2020. Management believes that this
operating metric provides meaningful supplemental information to
both management and investors and confirms UTMD’s continued
excellent financial operating performance.
UTMD’s non-US GAAP adjusted consolidated EBITDA is the sum of
the elements in the following table, each element of which is a US
GAAP number:
|
1Q 2021 |
1Q 2020 |
EBT |
$3,898 |
$3,988 |
Depreciation
Expense |
164 |
175 |
Femcare IIA
Amortization Expense |
550 |
512 |
CSI IIA Amortization
Expense |
1,105 |
1,105 |
Other Non-Cash
Amortization Expense |
8 |
13 |
Stock Option
Compensation Expense |
41 |
23 |
Interest
Expense |
- |
- |
Remeasured Foreign Currency Balances |
10 |
(44) |
UTMD non-US GAAP EBITDA: |
$5,776 |
$5,772 |
Net Income (NI). NI in 1Q 2021 was $3,024 (27.6% of sales),
which was $116 (3.7%) lower than 1Q 2020 NI of $3,140 (28.8% of
sales). The lower NI was due to the lower NOI and a higher
estimated consolidated income tax provision rate. The average
consolidated income tax provisions (as a percent of EBT) in 1Q 2021
and 1Q 2020 were 22.4% and 21.3%, respectively. The impact of the
higher income tax provision rate for 1Q 2021 was $45 lower NI. The
higher consolidated tax provision rate resulted from a shift in
taxable income among U.S. and foreign subsidiaries with differing
income tax rates. The basic rates in each of the sovereignties were
the same as in the prior year.
Earnings per share (EPS). Diluted EPS in 1Q 2021 were
$0.827 compared to $0.843 in 1Q 2020. EPS were just 1.9%
lower than in 1Q 2020, in contrast to NI being 3.7% lower, due to
fewer diluted shares outstanding. Diluted shares were
3,655,256 in 1Q 2021 compared to 3,724,156 in 1Q 2020. The
lower diluted shares in 1Q 2021 were the result of 87,000 shares
repurchased during 2020, offset by employee option exercises, a new
employee option award of 26,300 shares in late March 2020 offset by
a lower dilution factor for unexercised options. The full EPS
benefit of 2020 share repurchases will be felt as NI increases
during the remainder of 2021.
The number of shares used for calculating EPS was higher than
ending shares because of a time-weighted calculation of average
outstanding shares plus dilution from unexercised employee and
director options. Outstanding shares at the end of 1Q 2021 were
3,645,760 compared to 3,643,035 at the end of calendar year 2020.
The difference was due to 2,725 shares in employee option exercises
during 1Q 2021. For comparison, outstanding shares were 3,642,431
at the end of 1Q 2020. The total number of outstanding unexercised
employee and outside director options at March 31, 2021 was 65,711
at an average exercise price of $68.58, including shares awarded
but not yet vested. This compares to 77,315 unexercised
option shares at the end of 1Q 2020 at an average exercise price of
$64.71/ share, including shares awarded but not vested.
The number of shares added as a dilution factor in 1Q 2021 was
11,168 compared to 17,313 in 1Q 2020. In March 2020, 26,300 option
shares were awarded to 48 employees at an exercise price of $77.05
per share. No options have been awarded to date in 2021. UTMD
paid $1,038 ($0.285/share) in dividends to stockholders in 1Q 2021
compared to $1,042 ($0.280/ share) paid in 1Q 2020. Dividends paid
to stockholders during 1Q 2021 were 34% of
NI.
In March 2020, UTMD repurchased 80,000 of its shares in the open
market at $80.32/ share. In September 2020, UTMD repurchased 7,000
shares at $78.67/ share. No shares have been repurchased to
date in 2021. The Company retains the strong desire and financial
ability for repurchasing its shares at a price it believes is
attractive for remaining stockholders. UTMD’s closing share price
at the end of 1Q 2021 was $86.60, up 3% from the $84.30 closing
price at the end of 2020. The closing share price at the end
of 1Q 2020 was $94.05.
Balance Sheet.At March 31, 2021 compared to three months earlier
at the end of 2020, UTMD’s cash and investments increased $4.4
million to $56.0 million primarily as a result of operating EBITDA
less a $1.0 million payment of cash dividends to stockholders, plus
some changes in working capital including a reduction in
inventories and an increase in current liabilities. At March 31,
2021, net Intangible Assets decreased to 32.1% of total
consolidated assets from 34.1% on December 31, 2020 because the 1Q
2021 amortization of identifiable intangibles offset by a higher
USD value of remaining OUS intangibles and other fixed assets as a
result of a weaker USD at the end of the 1Q 2021 compared to the
end of 2020. UTMD’s 16.4 current ratio at December 31, 2020
declined to 14.6 at March 31, 2021 primarily due to a $725 increase
in accrued liabilities from a $1,036 increase in accrued income
taxes. The average age of trade receivables was 34 days from date
of invoice at March 31, 2021 compared to 31 days at December 31,
2020. Average inventory turns improved to 2.6 in 1Q 2021
compared to 2.5 for the 2020 year.
Financial ratios as of March 31, 2021 which may be of interest
to stockholders follow:1) Current Ratio =
14.62) Days in Trade Receivables (based on 1Q 2021
sales activity) = 343) Average Inventory Turns (based
on 1Q 2021 CGS) = 2.64) 2021 YTD ROE (before dividends)
= 12%
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 global economic conditions,
market acceptance of products, regulatory approvals of products,
regulatory intervention in current operations, government
intervention in healthcare in general, tax reforms, the Company’s
ability to efficiently manufacture, market and sell products,
cybersecurity and foreign currency exchange rates, 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 and markets
a broad range of disposable and reusable specialty medical devices
recognized by clinicians in over one hundred countries around the
world as the standard for obtaining optimal long term outcomes for
their patients. For more information about Utah Medical
Products, Inc., visit UTMD’s website at
www.utahmed.com.
Utah Medical Products, Inc.
INCOME STATEMENT, First Quarter ended March 31
(in thousands except Earnings Per Share)
|
1Q 2021 |
1Q 2020 |
Change |
1Q 2019 |
|
Net Sales |
$10,964 |
$10,902 |
+ 0.6% |
$10,732 |
|
Gross Profit |
6,947 |
6,836 |
+ 1.6% |
6,773 |
|
Operating
Income |
3,887 |
3,863 |
+ 0.6% |
4,102 |
|
Income Before
Tax |
3,898 |
3,988 |
(2.3%) |
4,137 |
|
Net Income |
3,024 |
3,140 |
(3.7%) |
3,139 |
|
Earnings Per
Share |
$0.827 |
$0.843 |
(1.9%) |
$0.840 |
|
Shares Outstanding
(diluted) |
3,655 |
3,724 |
|
3,738 |
|
BALANCE SHEET
(in
thousands) |
(unaudited) MAR 31, 2021 |
(audited)DEC 31, 2020 |
(unaudited)MAR 31, 2020 |
Assets |
|
|
|
Cash &
Investments |
$ 56,033 |
$ 51,590 |
$ 39,613 |
Accounts
& Other Receivables, Net |
4,157 |
4,104 |
4,410 |
Inventories |
5,975 |
6,222 |
6,757 |
Other
Current Assets |
451 |
346 |
443 |
Total Current Assets |
66,616 |
62,262 |
51,223 |
Property &
Equipment, Net |
11,087 |
11,326 |
10,628 |
Intangible
Assets, Net |
36,685 |
38,157 |
41,343 |
Total Assets |
$114,388 |
$111,745 |
$103,194 |
Liabilities &
Stockholders’ EquityAccounts PayableREPAT Tax PayableOther Accrued
Liabilities |
$ 840793,648 |
$ 788792,924 |
$ 1,0571012,643 |
Total Current Liabilities |
4,567 |
3,791 |
3,801 |
Deferred Tax
Liability – IntangiblesLong Term Lease LiabilityLong Term REPAT Tax
Payable |
2,0683291,995 |
2,1513351,995 |
2,0083662,110 |
Deferred Revenue
and Income Taxes |
546 |
651 |
523 |
Stockholders’
Equity |
104,883 |
102,822 |
94,386 |
Total Liabilities &
Stockholders’ Equity |
$114,388 |
$111,745 |
$103,194 |
Contact: Crystal Rios (801) 566-1200
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