via NewMediaWire -- The second calendar quarter (2Q) of 2021
financial results were dramatically different from 2Q 2020 because
2Q 2020 results were the low point of Utah Medical Products, Inc.’s
(Nasdaq: UTMD) performance during the COVID-19 pandemic, during a
time when there were restrictions on so-called nonessential medical
procedures. Therefore, UTMD management reports quarterly income
statement results compared to the same periods not only in 2021
compared to 2020, but also compared to 2019. The Company’s stated
objective in 2021 has been to try to fully recover back to its 2019
financial performance. Please see the income statements for all
three years 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.
Overview of ResultsThe following summary comparison of 2Q and
first half (1H) 2021 with 2Q and 1H 2020 income statement measures
demonstrates UTMD’s excellent recovery, despite many new
challenges:
|
2Q (April – June) |
1H(January-June) |
|
Revenues
(Sales): |
+ 43% |
+
20% |
|
Gross Profit
(GP): |
+ 57% |
+
25% |
|
Operating Income
(OI): |
+ 141% |
+
48% |
|
Income Before Tax
(EBT): |
+ 144% |
+
46% |
|
Net Income
(NI): |
+ 161% |
+
45% |
|
Earnings Per Share
(EPS): |
+ 161% |
+
46% |
|
The above increases in NI and EPS according to U.S. Generally
Accepted Accounting Principles (US GAAP) were affected by long term
deferred tax liability (DTL) increases on the balance of Femcare
identifiable intangible assets (IIA) in both 2Q 2020 and 2Q 2021.
As stockholders may remember, the DTL was initiated as of the 2011
acquisition of Femcare because the expense from amortizing Femcare
IIA, most of which is occurring over a fifteen year time span from
the acquisition date, is not tax-deductible in the UK. According to
US GAAP, the future tax impact of a change in DTL must be
recognized in the quarter in which a tax law change is enacted. In
2Q 2020, a $225 increase in deferred UK taxes over the next six
years occurred because the UK decided to not reduce its corporate
income tax rate from 19% to 17% beginning in 2Q 2020, as was
previously enacted. This year in 2Q 2021, another $390 increase in
DTL over the remaining five years occurred because in June 2021, UK
parliament ratified the Finance Minister’s plan to increase the UK
corporate income tax rate from 19% to 25% beginning on April 1,
2023, which affects the deferred taxes for IIA to be amortized
after April 1, 2023 until fully amortized as of 1Q 2026.
UTMD management believes that the presentation of results
excluding the unfavorable deferred tax liability adjustments to its
2Q and 1H 2021 and 2Q and 1H 2020 income tax provisions provide
meaningful supplemental information to both management and
investors that is more clearly indicative of UTMD’s operating
results. The non-US GAAP exclusion only affects Net Income and
Earnings Per Share.
Excluding the 2Q 2020 and 2Q 2021 deferred tax liability
increases and resulting “one-time” tax provision increases due to
the UK income tax rate changes, the resulting non-US GAAP NI and
EPS changes follow:
2Q
1H (April
– June) (January-June)
NI (non-US
GAAP): |
+ 148% |
+ 46% |
EPS (non-US
GAAP): |
+ 148% |
+
48% |
Setting aside the abnormal year of 2020, a comparison of 2Q and
1H 2021 with 2Q and 1H 2019 income statement measures prior to the
COVID-19 pandemic follows:
2Q
1H (April
– June) (January-June)
Revenues
(Sales): |
+ 6% |
+ 4% |
|
Gross Profit
(GP): |
+ 4% |
+ 3% |
|
Operating Income
(OI): |
+ 6% |
+ 1% |
|
Income Before Tax
(EBT): |
+ 6% |
+ 0% |
|
Net Income
(NI): |
( 3%) |
( 3%) |
|
Earnings Per Share
(EPS): |
( 1%) |
( 1%) |
|
Since there was no UK tax law change enacted in 2019, a negative
comparison of NI and EPS per US GAAP resulted. Excluding the
2Q 2021 enacted future tax rate change and DTL impact, a comparison
of 2Q and 1H 2021 with 2Q and 1H 2019 NI and EPS
follows:
2Q
1H (April
– June) (January-June)
NI (non-US
GAAP): |
+
8% |
+ 3% |
EPS (non-US
GAAP): |
+ 11% |
+
5% |
In brief, the 2Q and 1H 2021 financial results confirm that,
after surviving a depression in its business in 2020, UTMD may be
back on track, notwithstanding possible future restrictions on
healthcare which benefits from the use of UTMD’s medical devices,
or other consequences of government policies that may have a
negative impact on the free market, medical device industry and
small businesses in particular.
Sales in all product categories and almost all distribution
channels were up substantially in 2Q and 1H 2021 compared to the
same periods in 2020. Sales invoiced in foreign currencies, which
represented 27% of total consolidated sales (when expressed in USD)
during both 2Q 2021 and 1H 2021, were helped by a weaker USD.
USD sales in 2Q and 1H 2021 were approximately 3% higher to
that which would have resulted using the same foreign currency
exchange (FX) rates as in the prior year’s same periods (“constant
currency sales”).
Profit margins in 2Q and 1H 2021 compared to 2Q and 1H 2020
follow:
|
2Q 2021 (Apr – Jun) |
2Q 2020(Apr – Jun) |
1H 2021(Jan – Jun) |
1H 2020(Jan – Jun) |
Gross Profit
Margin (GP/ sales): |
61.8% |
56.3% |
62.5% |
59.9% |
Operating Income
Margin (OI/ sales): |
37.8% |
22.5% |
36.7% |
29.7% |
Net Income Margin (US GAAP) |
27.2% |
14.9% |
27.4% |
22.6% |
Net Income Margin
(Non-US GAAP, B4 DTL Adj): |
30.3% |
17.5% |
29.0% |
23.8% |
Note: The Net Income Margin is NI, after subtracting a
provision for taxes, divided by sales.
In 2020, because the Company did not make drastic cuts to its
operating overheads to try to match the lower sales activity,
profit margins suffered relative to UTMD’s performance in prior
years, but still remained very solid in regard to UTMD’s ability to
remain viable during the pandemic. The decision to not cut back was
based on management’s belief that most overhead expenses
represented critical resources needed to support the business as it
was expected to recover, together with the comfort of UTMD’s cash
reserves. Profit margins in 2021 have returned to levels more
consistent with longer term management expectations.
UTMD’s June 30, 2021 Balance Sheet, in the absence of debt,
continued to strengthen. Ending Cash and Investments were $59.5
million on June 30, 2021 compared to $51.6 million on December 31,
2020, after paying $2.1 million in cash dividends to stockholders
during 1H 2021. Stockholders’ Equity (SE) increased $4.5 million in
the six month period from December 31, 2020 despite the fact that
dividends reduce SE. Compared to June 30, 2020, one year
earlier, cash increased $17.2 million and SE increased $12.1
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 2Q 2021 compared to the end of calendar
year 2020 and the end of 2Q 2020 follow:
|
6-30-21 |
12-31-20 |
Change |
6-30-20 |
Change |
GBP |
1.38065 |
1.36631 |
1.0% |
1.23685 |
11.6% |
EUR |
1.18514 |
1.22281 |
(3.1%) |
1.12346 |
5.5% |
AUD |
0.74952 |
0.77079 |
(2.8%) |
0.68897 |
8.8% |
CAD |
0.80619 |
0.78406 |
2.8% |
0.73437 |
9.8% |
Revenues (sales) -2Q 2021Total consolidated 2Q 2021 UTMD
worldwide (WW) sales were $3,817 (+43.4%) higher than in 2Q 2020.
Constant currency sales were $3,487 (+39.7%) higher. U.S. domestic
sales were 46% higher and outside the U.S. (OUS) sales were 40%
higher. Without the help of a weaker USD in converting foreign
currency sales, OUS sales were 30% higher (i.e. constant currency
sales). Despite the WW excellent double-digit percentage recovery
in sales, 2Q U.S. domestic sales continued to improve faster than
OUS sales. 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 2Q 2021 were $8,023 compared to $5,513 in
2Q 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 47% of
total domestic sales, were $926 (+33%) higher in 2Q 2021 than in 2Q
2020. OEM sales, representing 33% of total domestic sales, were
$1,126 (+72%) higher. Direct Filshie device sales, representing 20%
of total domestic sales, were $457 (+40%) higher in 2Q 2021
compared to 2Q 2020.
OUS sales in 2Q 2021 were 40% higher at $4,581 compared to
$3,274 in 2Q 2020. The increase in USD-denominated OUS sales is
overstated as a result of a weaker USD which added $329 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 2Q 2021 and 2Q 2020 for
revenue purposes
follow:
2Q 2021 2Q
2020
Change
GBP
1.3986
1.2416
+12.6%
EUR
1.2043 1.1100
+
8.5%
AUD
0.7696 0.6638
+15.9%
CAD
0.8119 0.7231
+12.3%The weighted average favorable impact on 2Q
2021 foreign currency OUS sales was 10.8%, increasing reported USD
sales by $329 relative to the same foreign currency sales in 2Q
2020. In constant currency terms, foreign currency sales in
2Q 2021 were 92.9% higher than in 2Q 2020. The portion of OUS sales
invoiced in foreign currencies in USD terms were 27% of total
consolidated 2Q 2021 sales compared to 18% in 2Q 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 and the UK.
Export sales from the U.S. to OUS distributors are invoiced in
USD. Direct to end-user OUS 2Q 2021 sales in USD terms were
101% higher in Ireland, 71% higher in Canada, 146% higher in France
and 247% higher in the UK. Direct to end-user sales in Australia,
which included New Zealand in 2Q 2021 but not in 2Q 2020, were 80%
higher. Sales to OUS distributors were 9% higher in 2Q 2021 than in
2Q 2020.
Sales -1H 2021Total consolidated 1H 2021 UTMD worldwide (WW)
sales were $3,879 (+19.7%) higher than in 1H 2020. Constant
currency sales were $3,298 (+16.8%) higher. U.S. domestic sales
were 24% higher and OUS sales were 13% higher. Without the help of
a weaker USD in converting foreign currency sales, OUS sales were
6% higher.
Domestic U.S. sales in 1H 2021 were $14,805 compared to $11,956
in 1H 2020. Direct other device sales, representing 48% of
total domestic sales, were $952 (+15%) higher in 1H 2021 than in 1H
2020. OEM sales, representing 31% of total domestic sales, were
$1,646 (+56%) higher. Direct Filshie device sales, representing 21%
of total domestic sales, were $251 (+9%) higher in 1H 2021 compared
to 1H 2020.
OUS sales in 1H 2021 were 13% higher at $8,762 compared to
$7,733 in 1H 2020. The increase in USD-denominated 1H 2021 OUS
sales is overstated as a result of a weaker USD which added $581 to
OUS sales that were invoiced in GBP, EUR, AUD and CAD foreign
currencies (in constant currency terms). FX rates for income
statement purposes are transaction-weighted averages. The average
FX rates from the applicable foreign currency to USD during 1H 2021
and 1H 2020 for revenue purposes
follow:
1H 2021 1H
2020
Change
GBP
1.3908
1.2718 +
9.4%
EUR
1.2037
1.1089 +
8.5%
AUD
0.7711
0.6585
+17.1%
CAD
0.8009
0.7409 + 8.1%
The weighted average favorable impact on 1H 2021 foreign
currency OUS sales was 10.0%, increasing reported USD sales by $581
relative to the same foreign currency sales in 1H 2020. In
constant currency terms, OUS sales in 1H 2021 were 5.8% higher than
in 1H 2020. The portion of OUS sales invoiced in foreign currencies
in USD terms were 27% of total consolidated 1H 2021 sales compared
to 23% in 1H 2020. Direct to end-user OUS 1H 2021 sales in USD
terms were 26% higher in Ireland, 8% higher in Canada, 27% higher
in France and 17% higher in the UK. Direct to end-user sales
in Australia, which included New Zealand in 1H 2021 but not in 1H
2020, were 32% higher. Sales to OUS distributors were 9% higher in
1H 2021 than in 1H 2020.
Gross Profit (GP) GP results from subtracting the costs of
manufacturing, quality assurance and receiving materials from
suppliers. UTMD’s GP was $2,835 (+57.3%) higher in 2Q 2021 than in
2Q 2020, and $2,946 (+25.0%) higher in 1H 2021 than in 1H
2020. The primary contribution to an expanded GP Margin (GPM)
was much greater dilution of fixed manufacturing overhead costs by
43% higher sales in 2Q 2021, and 20% higher sales in 1H 2021. The
greater percentage increase in GP than in sales is due to the
ability to leverage fixed costs. Incremental direct labor costs did
increase as a result of competition for a limited number of people
currently seeking work. Also during 2Q 2021, UTMD experienced
double-digit percentage cost increases in a number of raw
materials, as well as in the freight cost to receive the materials.
The growing administrative burden of compliance with regulatory
requirements, particularly OUS, continues to pressure UTMD’s GPM.
Managing variable manufacturing costs will continue to be a
significant challenge for the rest of 2021.
Operating Income (OI)
OI results from subtracting Operating Expenses (OE) from GP.
After subtracting OE from substantially higher 2Q and 1H 2021 GP,
OI in 2Q 2021 was $4,765 compared to $1,977 in 2Q 2020, an increase
of 141%, and was $8,652 in 1H 2021 compared to $5,840 in 1H 2020,
an increase of 48%. Despite OE in USD being slightly higher in 2021
than in the same 2020 time periods, as shown in the table below,
the period-to-same period increases in 2021 GP were further
leveraged as a result of better OE absorption (lower percentage of
sales).
OE are comprised of Sales and Marketing (S&M) expenses,
General and Administrative (G&A) expenses and Product
Development (R&D) expenses. The following table summarizes OE
in 2Q and 1H 2021 compared to the same periods in 2020 by OE
category:
OE Category |
2Q 2021 |
% of sales |
2Q 2020 |
% of sales |
1H 2021 |
% of sales |
1H 2020 |
% of sales |
S&M: |
$ 364 |
2.9 |
$ 424 |
4.8 |
$ 748 |
3.2 |
$ 844 |
4.3 |
G&A: |
2,528 |
20.1 |
2,433 |
27.7 |
5,073 |
21.5 |
4,852 |
24.6 |
R&D: |
128 |
1.0 |
116 |
1.3 |
259 |
1.1 |
250 |
1.3 |
Total OE: |
3,020 |
24.0 |
2,973 |
33.8 |
6,080 |
25.8 |
5,946 |
30.2 |
Although a weaker USD helped increase consolidated USD sales in
2021, it also helped increase the USD-denominated OE of UTMD’s
foreign subsidiaries by $109 in 2Q 2021 and $169 in 1H 2021. The
following table summarizes “constant currency” OE in 2Q and 1H 2021
compared to the same periods in 2020 by OE category:
OE Category |
2Q 2021 const FX |
|
2Q 2020 |
|
1H 2021 const FX |
|
1H 2020 |
|
S&M: |
$ 352 |
|
$ 424 |
|
$ 729 |
|
$ 844 |
|
G&A: |
2,432 |
|
2,433 |
|
4,924 |
|
4,852 |
|
R&D: |
127 |
|
116 |
|
258 |
|
250 |
|
Total OE: |
2,911 |
|
2,973 |
|
5,911 |
|
5,946 |
|
In other words, 2021 OE converted to USD at the same FX rate
were actually lower than in 2020. Holding OE constant while
dramatically increasing revenues with a higher GPM had a huge
favorable impact on OI.
The change in FX rates increased 2Q 2021 OUS S&M expenses by
$12, and 1H 2021 OUS S&M expense by $19. The lower constant
currency S&M expenses were due primarily to a reduction of
outside sales representatives in the UK.
A division of G&A expenses by location follows. G&A
expenses include non-cash expenses from the amortization of IIA
associated with the Filshie Clip System, which is also separated
out below:
G&A Exp
Category |
2Q 2021 |
% of sales |
2Q 2020 |
% of sales |
1H 2021 |
% of sales |
1H 2020 |
% of sales |
IIA Amort-
UK: |
$ 556 |
4.4 |
$ 495 |
5.6 |
$1,106 |
4.7 |
$1,007 |
5.1 |
IIA Amort–
CSI:Other– UK:Other– US:IRE:AUS:CAN: |
1,105 155 552
77 42 41 |
8.8 |
1,105 149 546
68 35 35 |
12.6 |
2,210 312 1,113
161 88 83 |
9.4 |
2,210 293 1,054
126 88 73 |
11.2 |
Total
G&A: |
2,528 |
20.1 |
2,433 |
27.7 |
5,073 |
21.5 |
4,852 |
24.6 |
About two-thirds of G&A expenses in all periods above were
from the non-cash expense of amortizing IIA related to the Filshie
Clip System. OUS G&A expenses were $871 in 2Q 2021 compared to
$782 in 2Q 2020. OUS G&A expenses were $1,750 in 1H 2021
compared to $1,587 in 1H 2020. Per the table below which
identifies “constant currency” OUS G&A expenses for 2Q and 1H
2021 compared to the same periods in 2020, virtually all of the
increases in OUS G&A expenses in both periods were due to FX
rate changes:
G&A Exp
Category |
2Q 2021 const FX |
|
2Q 2020 |
|
1H 2021 const FX |
|
1H 2020 |
|
IIA Amort-
UK: |
$ 493 |
|
$ 495 |
|
$1,014 |
|
$1,007 |
|
Other–
UK:IRE:AUS:CAN:Total G&A: |
137 71
37 36 774 |
|
149 68
35 35 782 |
|
285
149 75
77 1,600 |
|
293
126 88 731,587 |
|
Period to period product development (R&D) expenses varied
slightly depending on specific project costs. Since almost all
R&D is being carried out in the U.S., there was negligible FX
rate impact.
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 2Q 2021 EBT
was $4,825 (38.3% of sales) compared to $1,977 (22.5% of sales) in
2Q 2020. Consolidated 1H 2021 EBT was $8,723 (37.0% of sales)
compared to $5,965 (30.3% of sales) in 1H 2020.
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 2Q 2021 was $60 compared to essentially zero NOI in 2Q
2020. Net NOI in 1H 2021 was $71 compared to $125 NOI in 1H
2020. Despite higher cash balances in 2021 compared to 2020,
UTMD received less in interest income. In addition, instead of a
gain of $42 at the end of 1H 2020 from remeasurement of foreign
currency bank balances, UTMD realized a $5 loss at the end of 1H
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, 2Q 2021
consolidated EBT excluding the remeasured bank balance currency
gain or loss and interest expense (“adjusted consolidated EBITDA”)
was $6,695 compared to $3,800 in 2Q 2020. Adjusted
consolidated EBITDA was $12,471 in 1H 2021 compared to $9,572 in 1H
2020. Adjusted consolidated EBITDA for the previous four calendar
quarters (TTM) was $24,024 as of June 30, 2021. Based on the
better than expected 2Q 2021 operating results, management expects
that adjusted consolidated EBITDA of $25 million is likely
achievable for the full year 2021. UTMD’s adjusted consolidated
EBITDA as a percentage of sales was 53.1% in 2Q 2021 compared to
43.2% in 2Q 2020. UTMD’s adjusted consolidated EBITDA as a
percentage of sales was 52.9% in 1H 2021 compared to 48.6% in 1H
2020. Achieving substantially higher revenues with an expanded GPM
while keeping operating expenses about the same obviously had a
very positive effect on this key profitability metric.
Management believes that this operating performance metric provides
meaningful supplemental information to both management and
investors and confirms UTMD’s ongoing excellent financial operating
performance, as well as its substantial recovery from 2020.
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:
|
2Q 2021 |
2Q 2020 |
1H 2021 |
1H 2020 |
|
|
EBT |
$4,825 |
$1,977 |
$8,723 |
$5,965 |
|
|
Depreciation
Expense |
162 |
161 |
326 |
335 |
|
|
Femcare IIA
Amortization Expense |
556 |
495 |
1,106 |
1,007 |
|
|
CSI IIA Amortization
Expense |
1,105 |
1,105 |
2,211 |
2,211 |
|
|
Other Non-Cash
Amortization Expense |
10 |
12 |
18 |
24 |
|
|
Stock Option
Compensation Expense |
41 |
49 |
82 |
72 |
|
|
Interest
Expense |
- |
- |
- |
- |
|
|
Remeasured Foreign Currency Balances |
(4) |
1 |
5 |
(42) |
|
|
UTMD non-US GAAP EBITDA: |
$6,695 |
$3,800 |
$12,471 |
$9,572 |
|
|
NoteAll UTMD income statement measures from GP through EBT (and
including non-US GAAP adjusted consolidated EBITDA above) for both
2021 and 2020 time periods were unaffected by the enacted changes
in the UK corporate income rate.
Net Income (NI) US GAAP NI in 2Q 2021 of $3,426 (27.2% of sales)
was 161.0% higher than the US GAAP NI of $1,313 (14.9% of sales) in
2Q 2020. Obviously, 2Q 2020 was the low point for UTMD during the
COVID-19 pandemic. NI in both periods was affected by an additional
tax provision expense required to be recorded in the quarter in
which a tax change is enacted, as a result of an adjustment to
UTMD’s deferred tax liability (DTL). The DTL results from the
tax effect of not being able to deduct the remaining future
amortization expense of Femcare IIA. In 2Q 2020, because the
UK reset its corporate tax rate from 17% to 19% going forward, it
caused UTMD to have to book an additional $225 in income taxes that
represented the additional tax which would be paid in the UK over
the remaining six year life of the 2011 Femcare acquisition IIA,
based on a 19% rate. In 2Q 2021, because the UK reset its corporate
tax rate from 19% to 25% beginning with 2Q 2023, it caused UTMD to
have to book an additional $390 in its 2Q 2021 income tax provision
that represents the additional tax which will be paid in the UK
over the now remaining five year life of the 2011 Femcare
acquisition IIA. Excluding the $390 DTL increase in 2Q 2021 and the
$225 DTL increase in 2Q 2020, both of which reduced NI by those
same amounts, non-US GAAP 2Q 2021 NI was $3,817 (30.3% of sales),
148.3% higher than non-US GAAP 2Q 2020 NI of $1,537 (17.5% of
sales). Excluding the tax provision increases due to the DTL
adjustment, non-US GAAP 1H 2021 NI was $6,840 (29.0% of sales),
46.3% higher than non-US GAAP 1H 2020 NI of $4,677 (23.8% of
sales).
The average consolidated income tax provisions (as a % of the
same period EBT) per US GAAP in 2Q 2021 and 2Q 2020 were 29.0% and
33.6% respectively, and were 26.1% and 25.4% in 1H 2021 and 1H 2020
respectively. As these tax rates for both 2021 and 2020 periods are
not directly related to EBT generated in the same periods, UTMD
provides the following tax rates excluding the 2Q 2021 $390 tax
provision adjustment and the 2Q 2020 $225 income tax provision
adjustment: The resulting non-GAAP income tax provision rates
were 20.9% and 22.2% for 2Q 2021 and 2Q 2020 respectively, and were
21.6% for both 1H 2021 and 1H 2020.
The consolidated income tax provision rate varies as the mix in
taxable income among U.S. and foreign subsidiaries with differing
income tax rates differs from period to period. The basic corporate
income tax rates in each of the sovereignties were the same as in
the prior year.
Earnings per share (EPS). US GAAP diluted EPS in 2Q 2021
were $0.937 compared to $0.359 in 2Q 2020, a 161.3% increase.
US GAAP diluted EPS in 1H 2021 were $1.765 compared to $1.207 in 1H
2020, a 46.2% increase. Excluding the “one-time” income tax
provision increases due to the DTL adjustments, non-US GAAP diluted
EPS in 2Q 2021 were $1.044 compared to $0.420 in 2Q 2020, a 148.5%
increase, and non-US GAAP diluted EPS in 1H 2021 were $1.871
compared to $1.268 in 1H 2020, a 47.6% increase. In either case,
the increases in EPS were substantial as a result of the
improvement in operating results. Diluted shares were 3,655,319 in
2Q 2021 compared to 3,658,626 in 2Q 2020. The lower diluted
shares in 2Q 2021 were the result of shares repurchased during 2020
offset by employee options exercised, and a lower dilution factor
for unexercised options.
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 2Q 2021 were
3,645,798 compared to 3,643,035 at the end of calendar year 2020.
The difference was due to 2,763 shares in employee option exercises
during 1H 2021. For comparison, outstanding shares were 3,642,946
at the end of 2Q 2020. The total number of outstanding unexercised
employee and outside director options at June 30, 2021 was 63,874
at an average exercise price of $68.38, including shares awarded
but not yet vested. This compares to 76,625 unexercised
option shares at the end of 2Q 2020 at an average exercise price of
$64.72/ share, including shares awarded but not vested.
The number of shares added as a dilution factor in 2Q 2021 was
9,526 compared to 16,040 in 2Q 2020. The number of shares added as
a dilution factor in 1H 2021 was 10,569 compared to 15,342 in 1H
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 $1,039 ($0.285/share)
in dividends to stockholders in 2Q 2021 compared to $1,035 ($0.280/
share) paid in 2Q 2020. Dividends paid to stockholders during 2Q
2021 were 27% of non-US GAAP NI. UTMD paid $2,077 ($0.285/share) in
dividends to stockholders in 1H 2021 compared to $2,077 ($0.280/
share) paid in 1H 2020. The increase in the per share dividend was
offset by share repurchases. Dividends paid to stockholders during
1H 2021 were 30% of non-US GAAP 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 2Q 2021 was $85.04, down from the closing price of
$86.60 at the end of 1Q 2021 despite an increase in cash of $.95/
outstanding share and an increase in stockholders’ equity of $.68/
share during the quarter. The 2Q 2021 ending share price was
up less than 1% from the $84.30 closing price at the end of 2020.
The closing share price at the end of the awful (for UTMD) 2Q 2020
was $88.62.
Balance Sheet.At June 30, 2021 compared to the end of 2020,
UTMD’s cash and investments increased $7.9 million to $59.5 million
primarily as a result of operating EBITDA less a $2.1 million
payment of cash dividends to stockholders, plus some changes in
working capital including increases in both accounts receivable
from the higher sales activity and current liabilities from higher
production activity. At June 30, 2021, net Intangible Assets
decreased to 30.0% of total consolidated assets from 34.1% on
December 31, 2020 despite a weaker USD which raises the USD value
of Femcare’s GBP IIA. UTMD’s 15.9 current ratio at June 30,
2021 was close to the 16.4 current ratio at December 31, 2020
despite 17% higher current liabilities due to higher accrued income
taxes and higher accounts payable. The average age of trade
receivables was 33 days from date of invoice at June 30, 2021
compared to 31 days at December 31, 2020. Average inventory
turns improved to 3.0 in 2Q 2021 compared to 2.5 for the 2020
year.
Financial ratios as of June 30, 2021 which may be of interest to
stockholders follow:1) Current Ratio =
15.92) Days in Trade Receivables (based on 2Q 2021
sales activity) = 333) Average Inventory Turns (based
on 2Q 2021 CGS) = 3.04) 2021 YTD ROE (before dividends)
= 13%
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, Second Quarter (three months ended June 30)(in thousands
except earnings per share):
|
2Q 2021 |
2Q 2020 |
Percent Change |
2Q 2019 |
|
Net Sales |
$ 12,604 |
$ 8,787 |
43.4% |
$ 11,846 |
|
Gross Profit |
7,785 |
4,950 |
57.3% |
7,500 |
|
Operating
Income |
4,765 |
1,977 |
141.0% |
4,481 |
|
Income Before Tax |
4,825 |
1,977 |
144.0% |
4,565 |
|
Net Income before
DTL adjust |
3,817 |
1,537 |
148.3% |
3,525 |
|
Net Income (US GAAP) |
3,426 |
1,313 |
161.0% |
3,525 |
|
EPS before DTL
adjustment |
$1.044 |
$ .420 |
148.5% |
$ .944 |
|
Earnings Per Share (US GAAP) |
$ .937 |
$ .359 |
161.3% |
$ .944 |
|
Shares Outstanding
(diluted) |
3,655 |
3,659 |
|
3,735 |
|
INCOME STATEMENT, First Half (six months ended June 30)(in
thousands except earnings per share):
|
1H 2021 |
1H 2020 |
Percent Change |
1H 2019 |
|
Net Sales |
$ 23,568 |
$ 19,689 |
19.7% |
$ 22,579 |
|
Gross Profit |
14,732 |
11,786 |
25.0% |
14,273 |
|
Operating
Income |
8,652 |
5,840 |
48.2% |
8,582 |
|
Income Before Tax |
8,723 |
5,965 |
46.2% |
8,702 |
|
Net Income before
DTL adjust |
6,840 |
4,677 |
46.3% |
6,664 |
|
Net Income (US GAAP) |
6,450 |
4,452 |
44.9% |
6,664 |
|
EPS before DTL
adjustment |
$ 1.871 |
$ 1.268 |
47.6% |
$ 1.783 |
|
EPS (US GAAP) |
$ 1.765 |
$ 1.207 |
46.2% |
$ 1.783 |
|
Shares Outstanding
(diluted) |
3,656 |
3,690 |
|
3,737 |
|
BALANCE SHEET
(in
thousands) |
(unaudited) JUN 30, 2021 |
(unaudited) MAR 31, 2021 |
(audited)DEC 31, 2020 |
(unaudited)JUN 30, 2020 |
Assets |
|
|
|
|
Cash
& Investments |
$59,506 |
$56,033 |
$51,590 |
$42,352 |
Accounts & Other Receivables, Net |
4,606 |
4,157 |
4,104 |
3,792 |
Inventories |
6,118 |
5,975 |
6,222 |
6,580 |
Other
Current Assets |
357 |
451 |
346 |
393 |
Total Current Assets |
70,587 |
66,616 |
62,262 |
53,117 |
Property &
Equipment, Net |
11,168 |
11,087 |
11,326 |
10,812 |
Intangible Assets,
Net |
35,039 |
36,685 |
38,157 |
39,616 |
Total Assets |
$116,794 |
$114,388 |
$111,745 |
$103,545 |
Liabilities &
Stockholders’ Equity |
|
|
|
|
Accounts
Payable |
1,186 |
840 |
788 |
560 |
REPAT Tax
Payable |
245 |
79 |
79 |
79 |
Other Accrued
Liabilities |
3,000 |
3,648 |
2,924 |
2,604 |
Total
Current Liabilities |
$4,431 |
$4,567 |
$3,791 |
$3,243 |
Deferred Tax
Liability – Intangible Assets |
2,355 |
2,068 |
2,151 |
2,135 |
Long Term Lease
Liability Long Term REPAT Tax Payable |
3221,835 |
3291,995 |
3351,995 |
3561,995 |
Deferred Revenue
and Income Taxes |
486 |
546 |
651 |
528 |
Stockholders’
Equity |
107,365 |
104,883 |
102,822 |
95,288 |
Total Liabilities &
Stockholders’ Equity |
$116,794 |
$114,388 |
$111,745 |
$103,545 |
Contact: Crystal Rios (801) 566-1200
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