SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of
The Securities Exchange Act of 1934
For quarter ended: June 30, 1996 Commission File No. 0-11178
UTAH MEDICAL PRODUCTS, INC.
(Exact name of Registrant as specified in its charter)
UTAH 87-0342734
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7043 South 300 West
Midvale, Utah 84047
Address of principal executive offices
Registrant's telephone number: (801) 566-1200
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and; (2) has been subject to such
filing requirements for the past 90 days. Yes X No
The number of shares outstanding of the registrant's common stock as of August
13, 1996: 9,002,017
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UTAH MEDICAL PRODUCTS, INC.
BALANCE SHEETS AS OF JUNE 30, 1996 AND
DECEMBER 31, 1995
(unaudited)
ASSETS JUNE 30, DECEMBER 31,
1996 1995
----------- -----------
CURRENT ASSETS:
Cash $ 2,453,546 $ 5,064,913
Investments 1,643,803 8,173,500
Accounts receivable - net 5,919,177 6,473,810
Accrued interest and other 125,704 221,662
receivables
Inventories 4,008,159 3,277,982
Prepaid expenses and other 203,443 244,675
current assets
Deferred income taxes 430,529 372,899
----------- -----------
Total current assets 14,784,361 23,829,441
PROPERTY AND EQUIPMENT - NET 11,503,037 8,866,359
INTANGIBLE ASSETS - NET 582,430 634,579
----------- -----------
TOTAL $26,869,828 $33,330,379
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,357,003 $ 1,783,840
Accrued expenses:
Payroll and payroll taxes 809,658 1,197,692
Reserve for litigation expenses 527,424 314,619
Other 401,910 325,774
Deferred revenue 185,600 85,600
----------- -----------
Total current liabilities 3,281,595 3,707,525
DEFERRED REVENUE 130,350 173,208
DEFERRED INCOME TAXES 343,693 245,289
----------- -----------
Total liabilities 3,755,638 4,126,022
----------- -----------
STOCKHOLDERS' EQUITY:
Preferred stock - $.01 par value;
authorized - 5,000,000 shares;
no shares issued or outstanding
Common stock - $.01 par value;
authorized - 50,000,000
shares; issued - June 30,
1996, 9,034,230 shares
December 31, 1995, 90,342 97,909
9,790,937 shares
Unrealized gain on investments
available-for-sale, net of tax 26,834 32,707
Retained earnings 22,997,014 29,073,741
----------- -----------
Total stockholders' equity 23,114,190 29,204,357
----------- -----------
TOTAL $26,869,828 $33,330,379
=========== ===========
see notes to financial statements
UTAH MEDICAL PRODUCTS, INC.
STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS
ENDED JUNE 30, 1996 AND JUNE 30, 1995
(unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- ------------------
1996 1995 1996 1995
------ ----- ------ ------
NET SALES $10,089,176 $10,711,974 $20,056,766 $20,466,015
COST OF SALES 5,083,949 5,706,955 10,456,480 11,089,633
----------- ----------- ----------- -----------
GROSS MARGIN 5,005,227 5,005,019 9,600,286 9,376,382
----------- ----------- ----------- -----------
EXPENSES:
Selling, general and
administrative 1,521,835 1,605,968 2,970,181 3,028,846
Research & development 378,540 454,256 737,415 871,591
----------- ----------- ----------- -----------
Total 1,900,375 2,060,224 3,707,596 3,900,437
----------- ----------- ----------- -----------
INCOME FROM OPERATIONS 3,104,852 2,944,795 5,892,690 5,475,945
OTHER INCOME 245,235 271,240 1,343,993 540,885
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAX
EXPENSE 3,350,087 3,216,035 7,236,683 6,016,830
INCOME TAX EXPENSE 1,179,231 1,125,613 2,582,292 2,105,889
----------- ----------- ----------- -----------
NET INCOME $ 2,170,856 $ 2,090,422 $ 4,654,391 $ 3,910,941
=========== =========== =========== ===========
EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE $ 0.23 $ 0.21 $ 0.47 $ 0.39
=========== =========== =========== ===========
EARNINGS PER COMMON SHARE
ASSUMING FULL DILUTION $ 0.23 $ 0.21 $ 0.47 $ 0.39
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON
EQUIVALENT SHARES 9,559,673 9,939,592 9,802,124 10,002,182
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES ASSUMING
FULL DILUTION 9,559,673 9,997,762 9,802,124 10,081,155
=========== =========== =========== ===========
see notes to financial statements
UTAH MEDICAL PRODUCTS, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND JUNE 30, 1995
(unaudited)
JUNE 30,
-----------------------------
1996 1995
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,654,391 $ 3,910,940
------------- ------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 671,876 831,006
Provision for losses on accounts
receivable 17,574 5,209
Loss on disposal of assets 370,576 7,926
Deferred income taxes 44,349 (59,307)
Tax benefit attributable to exercise and
disposition of incentive stock
options and stock purchase rights 70,887 69,477
Changes in operating assets and liabilities:
Accounts receivable - trade 537,059 1,079,979
Accrued interest and other receivables 59,303 (68,009)
Inventories (730,176) 312,074
Prepaid expenses 77,886 (68,708)
Accounts payable (426,838) (29,742)
Accrued expenses (99,091) (224,450)
Deferred revenue 57,142 (42,498)
------------- ------------
Total adjustments 650,547 1,812,957
------------- -------------
Net cash provided by operating activities 5,304,938 5,723,897
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for:
Property and equipment (3,357,540) (827,789)
Intangible assets (258,039) (23,304)
Purchases of investments (3,315,186) (607,641)
Proceeds from sale of:
Investments 9,802,283 1,394,223
Property and equipment 21,750
------------- ------------
Net cash provided by (used in) investing 2,893,268 (64,511)
------------- ------------
activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 171,813 326,277
Common stock purchased and retired (10,981,386) (2,306,466)
------------ ------------
Net cash used in financing activities (10,809,573) (1,980,189)
------------ ------------
NET INCREASE (DECREASE) IN CASH (2,611,367) 3,679,197
CASH AT BEGINNING OF PERIOD 5,064,913 1,579,121
------------- -------------
CASH AT END OF PERIOD $ 2,453,546 $ 5,258,318
============= ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Income taxes $ 2,643,631 $ 2,147,767
see notes to financial statements
UTAH MEDICAL PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
(1) The unaudited financial statements presented herein 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 generally accepted accounting
principles. These statements should be read in conjunction with the financial
statements and notes thereto included in the Utah Medical Products, Inc.
("UTMD", or "the Company") annual report on form 10-K for the year ended
December 31, 1995. The accompanying financial statements have not been examined
by independent accountants in accordance with generally accepted auditing
standards, but in the opinion of management such financial statements include
all adjustments (consisting only of normal recurring adjustments) necessary to
summarize fairly the Company's financial position and results of operations.
The results of operations for the three and six months ended June 30, 1996 may
not be indicative of the results that may be expected for the year ending
December 31, 1996.
(2) Inventories at June 30, 1996 and December 31, 1995 consisted of the
following:
June 30, December 31,
1996 1995
----------- -----------
Finished goods $ 1,017,095 $ 872,419
Work-in-process 963,981 687,746
Raw materials 2,027,083 1,717,817
----------- -----------
Total $ 4,008,159 $ 3,277,982
----------- -----------
(3) In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation," which defines a fair value based
method of accounting for stock based employee compensation plans. Under SFAS
No. 123, companies are encouraged, but are not required, to adopt the fair value
method for fiscal years beginning after December 15, 1995 for all employee
awards granted after the beginning of such year. Companies are permitted to
account for such transactions under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," (APB No. 25), but must, in future
years, disclose in a note to the financial statements proforma net income and
earnings per share as if SFAS No. 123 had been applied. The Company has
determined it will not adopt the fair value method and therefore will continue
to account for stock-based compensation under APB No. 25.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Because of the relatively short span of time, results for any given
three or six month period in comparison with a previous three or six month
period may not be indicative of comparative results for the year as a whole.
a) Overview
Second quarter (2Q) 1996 gross profit dollars equalled those of 2Q 1995,
despite the fact that sales declined 5.8% in 2Q 1996 from the same period of
1995. Operating profits, EBIT, and net income were 5.4%, 4.2% and 3.8% higher,
respectively, than in 2Q 1995. Earnings per share (EPS) were 8.6% higher than
in 2Q 1996. The decline in sales in 2Q 1996 is due primarily to a decrease in
Baxter (UTMD's largest customer) sales of about $700,000 (19%) from the same
period of 1995. Gross margins jumped to 49.6% from 46.7% , due mainly to a
changing product sales mix.
b) Revenues
UTMD divides revenues into three product-line categories: 1) critical care,
which is comprised primarily of components used in invasive blood pressure
monitoring, but also includes components for other types of pressure
monitoring, as well as disposable respiratory products used in hospitals; 2)
obstetrics, which is comprised mainly of devices for monitoring intrauterine
pressure during labor and delivery, although to a lesser extent electrodes for
fetal heart rate monitoring as well as other labor and delivery supplies, and a
product which unifies and improves clinician safety in the multiple step
procedure of clamping, cutting, and drawing blood samples from the umbilical
cord immediately following childbirth; and 3) gynecology, which is comprised of
an electrosurgery system used in a procedure called LETZ(R), tools used in other
minimally invasive surgical procedures including diagnostic laparoscopies, a
device for the conservative treatment of urinary incontinence, and a new, unique
ceramic electrosurgical scalpel. In these three areas, UTMD's primary revenue
contributors generally: 1) are the accepted standard of care, 2) enjoy a number
one or number two market share, and 3) have important product features
protected by patents.
In the second quarter, due to the drop in revenue from Baxter, the Company
experienced a drop in sales but an improvement in overall profitability.
Critical care product revenues represented 51% of total revenue in 2Q 1996,
compared with 54% of both 2Q 1995 and total 1995 revenues.
UTMD's Baxter OEM revenue (all of which are included in the critical care
category) declined to about 58% of critical care revenue in 2Q 1996, compared to
66% in 2Q 1995. As a percentage of total sales, Baxter revenue declined to
about 30% in 2Q 1996, compared to 38% in the same period of 1995. Sales of
critical care products in 2Q 1996 were $5,148,000, compared with $5,778,000 in
2Q 1995. Sales to Baxter in 2Q 1996 were $2,995,000 compared to $3,696,000 in
2Q 1995. During the first half (1H) of 1996, total critical care sales were
$10,938,000 compared with $11,448,000 in 1H 1995. Sales to Baxter were
$6,789,000 in 1H 1996, compared to $7,439,000 in 1H 1995. If , as previously
announced, Baxter purchases what its forecasts currently indicate for the
remainder of 1996, shipments to Baxter in all of 1996 will be about $11 million,
down from $15 million in 1995. This is a forward looking statement, the
accuracy of which is subject to risks and uncertainty. Actual results may
differ materially from those projected. Past Baxter orders have changed
abruptly relative to forecasts, which implies future risks relative to actual
sales volume to Baxter.
In June, the Company announced that it had reached a definitive agreement
with Vital Signs, Inc.(VSI), of Totowa, New Jersey, to market its Deltran(R)IV
disposable blood pressure transducer in the U.S. Although UTMD will continue to
support Baxter requests for Deltran II under its 1995 Agreement, the newer
automated, and therefore lower cost, version called Deltran IV will be marketed
on a co-exclusive basis by Vital Signs, Inc., UTMD's direct representatives and
distributors, and possibly one other medical monitoring equipment company in the
U.S. Risk factors that may impact the critical care product line include actual
sales to Baxter and the uncertainty of sales volume to VSI, UTMD's ability to
efficiently manufacture its products, the speed and success in getting the new
Ireland plant to manufacture efficiently, UTMD's success in gaining access to
important global distribution channels, budgetary constraints, market acceptance
of products, regulatory approvals for new or newly introduced products, third
party reimbursement, competitive products offered by others, and other factors
set forth in the Company's other Securities and Exchange Commission filings,
including UTMD's 10-K for the year ended December 31, 1995.
The obstetrics revenue category declined about 3% in both 2Q and 1H 1996
from the same periods in 1995. Obstetrics sales continue to be dominated by
INTRANTM, UTMD's sensor-tipped intrauterine pressure catheter. Because Intran
is a mature product, revenue growth in this category is less than in prior
years. Obstetrics revenue represented 40% of total sales in 2Q 1996, and 37% of
total sales in 1H 1996. Sales of obstetrics products in 2Q 1996 were
$4,051,000 compared to $4,197,000 in 2Q 1995. For the first half of the year,
obstetric sales were $7,497,000 in 1996 compared to $7,696,000 in 1995. Risk
factors for the obstetrics product line include the possible introduction by
competitors of similar products that claim to have many of the features of
INTRAN at lower prices, and the timing of committing effective resources to new
product introductions, along with the risks outlined in the previous paragraph.
The third product line, gynecology products, includes Liberty(R), a system
for conservatively treating urinary incontinence, LuminTM, a unique tool used in
laparoscopic procedures to manipulate the uterus, and EpitomeTM, a unique
ceramic scalpel, in addition to UTMD's LETZ system of electrosurgery equipment
and disposable electrodes. Gynecology revenues increased 21% to $890,000 in 2Q
1996 from $737,000 in 2Q 1995, and represented 9% of total revenues. First
half gynecology sales were $1,622,000 in 1996, compared to $1,331,000 in 1995.
Effective marketing of new products launched in the past year represents
significant challenges for UTMD's marketing resources, and will require
innovative distribution approaches. Because this product line is in markets
characterized by many competitors with numerous products, it is subject to a
number of risk factors, including the pricing strategies of competitors and the
impact of new technologies, along with the risks outlined in the two previous
paragraphs.
Second quarter and first half 1996 foreign sales were $2,601,000 and
$5,350,000, respectively, compared to $2,675,000 and $5,237,000, respectively,
in the same periods of 1995. Although combined obstetrics and gynecology
international sales grew by 167% in 1H 1996 from 1H 1995, international sales
continue to be dominated by critical care products, for which sales the Company
has relied heavily on the efforts of other medical device companies. Critical
care products represented 92% of international sales in 2Q 1996 compared to 98%
in 2Q 1995. UTMD believes it has substantial sales potential for its products
in international markets, and therefore plans to continue to commit its
resources to international business expansion, including a new manufacturing
facility in Ireland, which should be ready for operation in October of this
year. This is a forward looking statement, the accuracy of which is subject to
risks and uncertainty. Start of Irish operations could be delayed if the
contractor is unable to complete the building as scheduled due to any number of
factors including weather, labor or material difficulties, or due to delays in
getting the manufacturing equipment installed or in hiring and training
employees.
c) Gross Profit
Gross margins (profit after subtracting costs of manufacturing products from
revenues) in 2Q 1996, were 49.6% compared to 46.7% in 2Q 1995. For the first
half, gross margins were 47.9% in 1996 compared to 45.8% in 1995. Although the
Company anticipates sales growth in the obstetrics and gynecology product lines
(which have higher margins than critical care products), and a decline in
critical care sales, gross margins may not continue to increase during the
remainder of 1996 for two reasons: new VSI Deltran IV business may replace the
Baxter business at similar margins, and until new Ob/Gyn products sell in
sufficient volumes to achieve economies of scale and allow for improved
manufacturing processes, new product sales may lower average margins. This is a
forward looking statement, the accuracy of which is subject to risks and
uncertainty. Actual results may differ materially from those projected, and may
be affected by, among other things, actual sales volume to Baxter and to VSI,
actual sales of new products, UTMD's ability to efficiently manufacture its
products, and the speed and success in getting the Ireland plant to manufacture
efficiently, in addition to the risks outlined in previous paragraphs of this
report.
d) Income from Operations
Operating profit, or income from operations, is the profit achieved after
subtracting operating expenses from gross profit. Operating expenses are
subdivided into sales, general and administrative (SG&A) expenses and research
and development (R&D) expenses.
As a percentage of sales, operating expenses declined to 18.8% in 2Q 1996
compared to 19.2% in 2Q 1995, and declined to 18.5% in 1H 1996 compared to 19.1%
in 1H 1995. Operating expenses for 2Q and 1H, in dollars, were up 5% and 8%,
respectively, in 1996 from 1995. Selling, general and administrative (SG&A)
expenses were the same percent of sales for 2Q and 1H in both 1996 and 1995 -
15%. The Company's goal for 1996 for operating expenses is 19% or less of
sales.
R&D expenses were 3.8% of second quarter sales compared to 4.2% in 1995, and
were 3.7% of 1H sales compared to 4.3% in 1995. Many R&D expenses are external
costs relating to both process and product validations, which costs can vary
from period to period. The Company employs its R&D resources not only to
internally develop its own new product ideas, but also, through joint
development agreements, licensing of technology, acquisitions and other
arrangements, to enhance and complete commercialization projects initiated by
others. R&D expenses as a percentage of sales will likely continue in 1996 at a
rate similar to 1H 1996. Evidence that R&D efforts over the recent past have
been productive is becoming apparent, as UTMD has launched, or is in the process
of launching, the following six significant new products: Cordguard(R), Lumin,
Liberty, FiltresseTM, Epitome and Deltran IV. The FDA approved for marketing
three new products during 2Q 1996, one each in the areas of electrosurgery,
female incontinence therapy and fetal monitoring. In addition, the FDA is
currently reviewing another submission for a product yet unannounced. Second
quarter 1996 new line extensions include a neonatal ICU torso length respiratory
hood, generic loop electrodes for overseas markets and fetal monitoring chart
paper.
Second quarter 1996 income from operations was $3,105,000 compared to
$2,945,000 in 2Q 1995. Second quarter 1996 operating margins were 30.8%
compared to 27.5% for the same quarter in 1995. First half 1996 operating
income was $5,893,000 compared to $5,476,000 in 1995, while operating margins
were 29.4% and 26.8% for the same periods, respectively.
e) Non-operating Income
Non-operating income for UTMD includes royalties from licensing UTMD's
technology to other companies, interest and capital gains from investing the
Company's cash, and gains or losses from the sale of other assets. Second
quarter 1996 non-operating income declined to $245,000 from $271,000 in 2Q 1995.
For 1H 1996, non-operating income was $1,344,000 compared to $541,000 in 1H
1995. The major contributor to non-operating income in 1H 1996 was a one-time
extraordinary payment for the use of UTMD's pressure monitoring technology
received in the first quarter. Royalties from other medical device companies
and investment income from cash balances continue to make substantial
contributions to non-operating income. Excluding the first quarter one-time
payment, royalty income during 1996 should be about the same as in 1995.
However, because of lower cash balances starting in 2Q 1996 in comparison to
1995, interest and dividend income during the remainder of 1996 should be lower
than in the same period of 1995. This paragraph contains forward looking
statements, the accuracy of which is subject to risks and uncertainty. Actual
results may differ materially from those projected, and may be affected by,
among other things, the continuing validity and enforceability of the Company's
royalty agreements, actual cash and investment balances (which are dependant on
continued profitability as well as by uses such as capital spending and stock
repurchases), in addition to the risks outlined in previous paragraphs of this
report.
f) Net Income and EPS
After income taxes, 2Q 1996 net income was $2,170,856, compared to
$2,090,422 in 2Q 1995. Net income for 1H 1996 was $4,654,391 compared to
$3,910,941 for 1H 1995. The tax rate in 1H 1996 was higher (35.7%) than in 1H
1995 (35.0%) due mainly to a higher mix of taxable income due to the large one-
time non-operating income item in first quarter 1996.
Shareholder value is improved by increasing EPS. EPS is net income divided
by the weighted number of shares of stock outstanding (fully-diluted to include
stock options awarded which have exercise prices below the current market
value). Future EPS can be increased by investing current net income to increase
future net profits through marketable new product offerings and profitable
business operations, or by repurchasing stock from the marketplace, thereby
reducing the number of outstanding shares.
Fully diluted 2Q 1996 EPS were up 8.6% to $.227 compared to $.209 in 2Q
1995. Second quarter 1996 ending weighted average number of common shares
assuming full dilution (the number used to calculate EPS) were 9,559,673 shares
compared to 9,997,762 in 2Q 1995. For the first half, EPS were up 22.4% in 1996
over 1995 to $.475 from $.388. First half 1996 fully diluted shares outstanding
were 279,031 less than in first half 1995. Actual outstanding shares as of June
30, 1996 were 9,034,230. The dilution calculation added about 194,000 and
226,000 shares to weighted actual shares outstanding for 2Q 1996 and 1H 1996,
respectively, compared to about 195,000 for both periods in 1995. UTMD was
aggressive during 2Q 1996 in repurchasing its own stock, resulting in declining
outstanding shares.
g) Return on Equity
Return on shareholders' equity (ROE) is the portion of net income retained
by UTMD to internally finance its growth, divided by average accumulated
shareholders' equity during the period. The ROE ratio determines how fast the
Company can grow without external financing. For example, a 30% ROE would
support 30% growth in revenues. Achieving growth in revenues and EPS without
diluting shareholder interests maximizes shareholders' value. ROE in 1H 1996
(annualized) was 36%, compared to 32% in 1H 1995, and has averaged about 30%
during the last 8 years. It is management's objective to maintain ROE in excess
of the 25% per annum EPS growth target so that UTMD can afford to grow at a 25%
rate without diluting shareholders' interests. External equity financing would
only be considered if an exceptional business growth opportunity presents
itself that would allow long term increased EPS at the same time that the number
of shares are also expanded.
h) Cash Flows
Cash and investments balances were $4.1 million at the end of 1H 1996, a
decrease of $9.1 million from December 31, 1995. The decrease is due to the use
of nearly $11.0 million for share repurchases, along with over $3.3 million used
for purchasing property and equipment (primarily in construction of the Ireland
manufacturing plant).
Cash provided by operating activities, including adjustments for
depreciation and other non-cash operating expenses, along with changes in
working capital, totaled $5,304,938 in 1H 1996, down from $5,723,897 in 1H 1995.
Despite an increase of $743,000 in net income (which contributed 88% of the 1H
1996 total), relative increases of over $1,042,000 in inventories and over
$540,000 in accounts receivable caused total cash provided by operating
activities to decline compared to 1H 1995. As of June 30, 1996, net accounts
receivable balances were $5.9 million which equates to 53 days in receivables
(based on 2Q sales), compared to end-of-year accounts receivable of $6.5 million
which equates to about 55 days in receivables. Inventory balances are $730,000
higher than at the end of 1995, with inventory turns now at 5.2 times based on
1H cost of sales.
Cash of $3.4 million was used for capital expenditures in property and
equipment, with an additional $260,000 used to purchase intangible assets.
Capital expenditures during 1H 1996 were made, primarily, in the new Ireland
facility, but also in automation of key assembly operations, and in new product
tooling and equipment. Net purchases and sales of investments provided
$6,487,000 to 1H 1996 cash.
First half 1996 financing activities used cash of $10.8 million after
repurchases of shares are netted against sales of shares from option exercises,
compared to $2.0 million in the same period of 1995. The Company repurchased
its own common stock during 1H 1996 in the amount of $10,981,000, up from
$2,306,000 used in 1H 1995. To the end of June 1996, UTMD had spent about $31.8
million in repurchasing 3,220,000 of its common shares since November 1992.
Over one-third of the total dollars spent and nearly one-fourth of the total
shares repurchased occurred in 1H 1996. In 1H 1996, the Company received
$172,000 from issuing stock (on exercise of employee options), compared to
$326,000 in 1H 1995. The Company did not enter into any long-term debt
agreements during the first half of 1996.
Management believes that current cash balances plus future income from
operations will provide the liquidity needed to finance growth plans. In
addition to the capital expenditures outlined above, UTMD plans to use cash
during the remainder of 1996 for completion of the manufacturing plant in
Ireland, for continued share repurchases and for selective infusions of
technological, marketing or product manufacturing rights to broaden the
Company's product offerings. These are forward looking statements, the accuracy
of which are subject to a high degree of risk, including actual cash and
investment balances (which are dependant on continued profitability), unforseen
acquisition opportunities that may require greater funding than anticipated, and
changing market conditions, in addition to the risks outlined in the previous
paragraphs of this report.
Other
On July 26, the Board of Directors authorized employees with existing 1996
Stock Option awards representing a total of 190,000 shares to exchange their
options exercisable at $20.50 per share for new options representing 186,500
shares, but at a $14.25 exercise price and extended vesting schedules. The
$14.25 exercise price is higher that the average price paid by the Company in
repurchasing 832,100 shares to date in 1996. The right to exercise the new
options will vest over four years. Senior managers, with awards representing
95,000 shares, elected to participate in the exchange.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 17, 1996, at the annual meeting, shareholders of the Company approved
the following matter submitted to them for consideration:
Elected Stephen W. Bennett and Ernst Hoyer as directors of the Company.
Stephen W. Bennett: For 8,575,853
Ernst Hoyer: For 8,569,678
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits: None
b) Reports on Form 8-K: None
SIGNATURES
Pursuant to the requirements of the Securities Exchanges Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UTAH MEDICAL PRODUCTS, INC.
REGISTRANT
Date: August 13, 1996 By /s/ Kevin L. Cornwell
President,CEO, and CFO