Full Press Release Details
City, Utah - Utah Medical Products, Inc.'s (Nasdaq: UTMD) financial results for
2007 were dragged down by a weak fourth quarter (4Q). A comparison of 4Q 2007
results to 4Q 2006 is accentuated by the fact that 4Q 2006 was the best quarter
of 2006 in both sales and earnings per share (eps) performance, whereas 4Q
was the lowest quarter in sales and second lowest quarter in eps in
2007. The primary difference in sales was due to a $182,000 shipment
to China of blood pressure monitoring kits in 4Q 2006 that did not repeat in
2007, and a decline in shipments of Intran7
Plus intrauterine pressure catheters to U.S. hospitals of about $223,000. About
25% of the Intran Plus 4Q 2007 sales decline was due to unit price
reductions. For the year, U.S. Intran Plus sales declined $926,000 or
about 14%, while consolidated total UTMD sales declined only about
$251,000. The decline in U.S. Intran Plus sales is primarily due to
increased competition, including administrative restrictions of hospital group
purchasing organizations (GPOs). In contrast, international sales of
Intran Plus catheters in 2007 increased 33%.
in financial results compared to the same time period in the prior calendar
| 4Q (October - December) | Year (January - December) | |||
| Sales: | (4%) | (1%) | ||
| Gross Profit: | (5%) | (2%) | ||
| Operating Income: | (8%) | (1%) | ||
| Net Income: | (6%) | (3%) | ||
| Earnings Per Share: | (4%) | (2%) |
the negative comparisons to same periods in the record year of 2006, overall
2007 financial performance remained strong, and UTMD's 2007 performance exceeded
its 2005 performance in all income statement categories. On an
absolute basis, although UTMD missed its earlier $1.99 eps projection for 2007,
it met its profitability target for net profit margin.
2007 and 2007 as a whole, UTMD achieved the following profit
| 4Q 2007 (OCT - DEC) | 2007 (JAN - DEC) | |||
| Gross Profit Margin (gross profits/ sales): | 54.7% | 55.4% | ||
| Operating Profit Margin (operating income/ sales): | 37.1% | 37.7% | ||
| Net Profit Margin (net income/ sales): | 27.6% | 27.7% |
sales in 4Q 2007 were down 8%, while international sales were up 8% compared
4Q 2006. Trade shipments from UTMD Ireland were down 10% in EURO
terms, but up 2% in US Dollar terms because of a much weaker U.S. dollar. UTMD
believes the decline in EURO terms was due to quarter-to-quarter fluctuations
international distributor stocking orders. New products introduced in
2007 and UTMD's new distributor in Japan have not yet contributed in a
significant way to sales. Comparing 4Q 2007 sales to 4Q 2006 sales in product
categories, neonatal product sales were up 3%, obstetrics product sales were
down 10%, gynecology/ electrosurgery product sales were down 8% and blood
pressure monitoring/ components sales were up 2%. The decline in the
obstetrics category is explained by the change in Intran Plus
sales. More than half of the lower gyn/ electrosurgery 4Q 2007 sales
were due to a large China distributor order which had to be held back for lack
gross profit margin (GPM) in 4Q 2007 was lower compared to 4Q 2006 for
three reasons: 1) manufacturing overhead expenses were about the same
in magnitude while sales were 4% lower, resulting in lower absorption; 2) the
current quarter's sales mix was more weighted toward international shipments at
lower than average prices, i.e. 30% international sales compared to 27% in
2006; and 3) the domestic price reductions for Intran Plus, which accounted
about a half percentage point in total GPM. For the year, gross
profits were down 2.2% (while sales were down less than one percent) for the
operating profits declined disproportionately compared to 4Q 2006 because of
one-time $130,000 favorable adjustment in R&D expense in 4Q
2006. A write-off of intellectual property rights in 2Q 2006 was
recouped in 4Q 2006, making 4Q 2006 operating expenses disproportionately
low. This anomaly did not affect 2007 year as a whole compared to
2006 as a whole, where the operating profit margin remained the same at
37.7%. For 2007 as a whole, operating profits declined less than one
percent even though gross profits declined more than two percent because UTMD
was able to reduce overall operating expenses in proportion to the decline
sales, primarily in domestic sales and marketing expenses.
earnings before taxes (EBT) and Net Income were down more than operating income
in comparison to the prior year, because non-operating income was $300,000
in 2007. In early 2006, UTMD received $500,000 in capital gains from
investments that did not recur in 2007. Eps for 2007 at $1.98
compared to $2.02 in 2006 was down less than the decline in net income because
of continued share repurchases.
several highlights regarding changes in UTMD's Balance Sheet during
Cash and investments balance increased by $1.3 million even though the Company
spent $3.4 million in paying dividends to shareholders and $2.0 million in
repurchasing shares in the open market. The dividend paid to
shareholders in 2007 was $.87/ share compared to $.74/ share in 2006,
representing an 18% increase.
The Ireland loan balance declined $0.7 million or 15% in U.S. Dollar terms
despite the fact that the loan obligation is held in EUROs. In EURO terms,
of the loan was repaid in 2007.
The increase in PP&E (fixed assets) was due to currency exchange, i.e. the
increase in U.S. Dollar-denominated value of property, plant & equipment in
Ireland. From the end of 2006 to the end of 2007, the EURO increased
in value relative to the dollar by about 12%. In EURO terms, the net fixed
value in Ireland decreased 2%.
ratios as of December 31, 2007 which may be of interest to shareholders
in Receivables (based on 4Q sales activity) = 47
Inventory Turns (based on 2007 CGS) = 4.1
ROE = 12% (after dividends); 21% (prior to payment of dividends)
dilution from unexercised option shares added to actual weighted average
outstanding shares for purposes of calculating eps was 54,000 in 4Q 2007
compared to 87,100 in 4Q 2006, and 61,900 in 2007 compared to 99,400 in
2006. Diluted shares declined from 2006 to 2007 by 1.3%. The actual
number of outstanding shares at the end of 2007 was 3,905,300 which included
2007 option exercises of 35,100 shares and 2007 share repurchases of
65,800. The average price paid by the Company to repurchase shares in
the open market during 2007 was $30.73 including commissions. UTMD repurchased
15,100 shares at $29.95 in 4Q 2007. The total number of outstanding unexercised
employee and outside director options at December 31, 2007 was 212,200 shares
an average exercise price of $21.70/ share, including shares awarded but not
vested. This compares to 227,900 unexercised option shares outstanding at the
to CEO Kevin Cornwell,
Ireland subsidiary had a record year, meeting all of its goals measured in
terms. Although we did not meet our financial goals as a consolidated
corporation, UTMD's 2007 results demonstrated continued excellent overall
performance. UTMD's plans for 2008 include modest growth domestically due to
increased acceptance of new products offsetting any continued decline in the
mature products facing significant competition. We also expect continued strong
growth in international demand aided by a continuing weak U.S. dollar and