Full Press Release Details
Medical Products, Inc. Reports Financial Performance for Fourth Quarter and Year
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 (October - December) | Year (January - December) | |
| Sales: | ( 2%) | ( 7%) |
| Gross Profit: | +1% | ( 8%) |
| Operating Income: | +8% | ( 9%) |
| Net Income: | ( 2%) | (13%) |
| Earnings Per Share: | +1% | ( 7%) |
measures compared to the same time periods in the prior calendar year were as
| 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% |
to CEO Kevin Cornwell,
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.
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
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."
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%.
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%.
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
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
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.
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.
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