January 30, 2018, 09:00 ET | Source: Utah Medical Products Corporation. Utah Medical Products Corporation.
Salt Lake City, January 30, 2018 (Global News Agency)-Utah Medical Products Corporation (NASDAQ: UTMD) ended an outstanding year in 2017, harvesting the distribution that has been brewing for years Variety. Although UTMD greatly exceeded management’s expectations for 2017 financial performance, due to the one-time U.S. repatriation tax (REPAT) imposed on foreign subsidiaries’ cash and cumulative earnings (E&P) in the fourth quarter (fourth quarter) of this year, Cover up this result. According to US Generally Accepted Accounting Principles (GAAP), the REPAT impact of the “Tax Cuts and Employment Act” enacted in December 2017 is included in the results for the fourth quarter of 2017. Except for net income (NI), profit after tax and earnings per share (EPS), all income statement categories of UTMD's operating performance are not affected by the REPAT tax.
The outstanding 2017 financial performance was mainly due to UTMD's transformation from distributing the Filshie Clip System through third-party distributors to direct sales to medical institutions in Canada and France. In the fourth quarter of 2017 and 2017, the changes in the results of UTMD's income statement compared with the same period of the previous calendar year are as follows:
UTMD pointed out that the weak performance in the fourth quarter of 2016 does not represent the overall situation in 2016. The monetary amount in this report is in thousands, except for the amount per share and those indicated.
According to GAAP, the estimated REPAT tax registered in the income statement tax reserve for the fourth quarter of 2017 is $6,288, but it will actually be paid in the next eight years. The federal spending requirement is 8% of total REPAT tax liabilities for the first five years, 15% for the sixth year, 20% for the seventh year, and 25% for the eighth year. Due to REPAT tax regulations, both GAAP NI and EPS in the fourth quarter of 2017 were negative, while GAAP NI and EPS in 2017 decreased by 30% and 29%, respectively, compared with 2016. In the view of UTMD management, comparing GAAP NI and earnings per share in 2017 and 2016 does not provide shareholders with any meaningful insights into UTMD's financial performance.
Compared with the same period of the previous calendar year, the related main profit margins (profit as a percentage of sales) have improved as follows:
Gross profit margin expanded by 3.4 percentage points in 2017, mainly from direct shipments to end users in Canada and France, which in itself increased the contribution of gross profit margin to OI by US$1.4 million. In addition, despite UTMD’s direct sales and marketing (S&M) role and opening of additional facilities in Canada, the company was able to reduce consolidated operating expenses, which further increased GP’s total OI by US$2.8 million, only a 5% increase in consolidated sales .
The US GAAP NI for the 2017 calendar year is US$8,505, including a one-time REPAT tax of US$6,288 and a reduction in income tax provisions of US$230 due to the net reduction in deferred tax liabilities (DTL) and deferred tax assets (DTA) issued by the United States gold. Reduce future income tax rates. The 2017 US GAAP NI of US$8,505 compared with the 2016 US$12,128. Shareholders may remember that the 2016 NI included a reduction of US$123 in income tax reserves in the fourth quarter of 2016 due to the reduction in DTL (leading to an increase of US$123 in NI in 2016) from the UK setting a lower future income tax rate. As the REPAT tax and net DTL adjustments are one-time tax events that are not related to normal operations, UTMD management believes that the performance presentation that does not include the 2016 DTL favorable adjustments and the 2017 unfavorable REPAT tax provisions is slightly offset by the favorable DTL adjustments. The management and investors provided meaningful supplementary information. Compared with 2016, this information more clearly shows the operating performance of UTMD in 2017.
Excluding the 2017 REPAT clause and the 2016 DTL adjustment, the resulting non-GAAP NI and EPS are as follows:
In short, UTMD achieved a “normal” earnings per share of US$3.90 in 2017 compared to US$3.19 in 2016. In 2017, sales increased by 5%, (non-GAAP) NI increased by 21%, and (non-US GAAP) NI increased by 22%. Generally Accepted Accounting Principles) Earnings per share. Excluding the non-cash effects of depreciation, amortization of intangible assets, the remeasurement value of foreign currency bank balances and non-cash stock option expenses, the comprehensive income before tax plus interest expense (EBITDA) in 2017 was US$21,979, compared to US$19,218 in 2016. The 2017 REPAT tax and DTL adjustment and the 2016 DTL adjustment have any impact on this EBITDA indicator. The main item that contributed to the higher EBITDA was the increase in OI excluding depreciation and amortization expenses by US$2.9 million.
Summary of income statement. The consolidated total revenue in 2017 was US$2,117 (+5%) higher than in 2016. The main factors contributing to the USD 2.1 million change were 1) direct sales to end-user facilities in Canada and France, which was USD 1,850 higher than sales to UTMD distributors in 2016 in Canada and France, and 2) Filshie Clip System to UTMD’s United States Distributor CooperSurgical Inc. (CSI) increased sales by US$832 (+28%), and 3) lost US$516 in sales of BPM kits to OEM distributors in Germany. Compared with previous years, the net impact of foreign currency exchange rates (FX) on foreign currency sales is small.
Reseller sales in Canada and France in 2016 also included a $500 payment for distributor marketing rights, which was not available in 2017. In addition, direct sales in Canada and France in 2017 reduced dealer inventory repurchase by $25. For the first time, higher CSI sales include the $476 Sterishot disposable applicator kit. When considering sales by geographic region, readers should remember that direct sales in Canada and France are included in UTMD’s Outside the United States (OUS) category, while CSI sales are included in the “domestic sales” category.
In 2017, total domestic sales in the United States increased by US$798 (+4%), from US$19,488 in 2016 to US$20,286. Excluding sales to CSI, domestic sales in 2017 and 2016 were roughly the same. More specifically, UTMD's direct sales of its equipment to domestic end users decreased by 2%, and sales of parts and finished products to domestic OEM customers increased by 6%.
The total sales of OUS in 2017 increased by 1,319 US dollars (+7%) compared with 2016, from 19,809 US dollars to 21,129 US dollars, which included only the negative foreign exchange impact of 68 US dollars; that is, the fixed currency (foreign exchange in 2017 and 2016) Same exchange rate) foreign currency sales will be US$68 higher.
In addition to the benefits of distributor profit margins in Canada and France, the higher gross profit margin in 2017 than in 2016 was due to the increased productivity of UTMD's experienced Utah workforce, despite a 4% increase in the cost of living wages in the middle of the year. The total overall operating expenses (OE) actually fell by US$118, resulting in an OE ratio of only 17.8% of sales, compared to 19.1% in 2016. Femcare in the United Kingdom was able to manage the direct sales of the French Filshie Clip System without adding S&M staff, and UTMD did not increase the US sales staff it expected in early 2017. The net result of a 5% increase in sales, an increase in gross profit margin, and a decrease in OE was an increase in OI of USD 2.8 million (+17%) in 2017 compared to 2016.
The U.S. Tax Cuts and Employment Act (the Act) enacted in December 2017 imposed a REPAT tax of approximately US$6.3 million on UTMD, which is due to the cumulative income (E&P) of UTMD’s foreign subsidiaries. The US$29 million foreign cash balance is taxed at a 15.5% tax rate, and the remaining E&P is taxed at an 8% tax rate for accrued federal income tax. Although Utah did not provide any information, because based on past experience, Utah seems more likely to follow the IRS and levy a REPAT tax, and the income tax accruals include the state's REPAT tax estimate. It's also in Utah. The resulting total REPAT tax of $6,288 was included in UTMD's tax provision for the fourth quarter of 2017, which correspondingly reduced NI and earnings per share in the fourth quarter of 2017. 8% of REPAT's tax liability ($503) is included in current liabilities because it will be paid within one year. The remaining long-term liabilities (US$5,785) are listed as a separate item in the attached balance sheet to facilitate comparison with previous periods.
Below are additional details to expand the above summary.
Consolidated revenue (sales). Total sales in 2017 were US$41,414 (+5.4%), compared to US$39,298 in 2016.
Domestic sales. In 2017, domestic sales in the United States were US$20,286 (49% of total sales), and in 2016 it was US$19,488 (50% of total sales). In the fourth quarter of 2017, domestic sales in the United States were US$4,857 (48% of total sales), while US$4,503 (51% of total sales) total sales) in the fourth quarter of 2016. The main contributor to the increase in domestic sales of US$798 (+4%) in 2017 was the increase in sales to Femcare’s Filshie Clip System US distributor CSI by US$832 (+28%) and US$188 (+6%). Sales of components and finished products of other companies' products (OEM customers) are higher. Direct sales of UTMD finished equipment to domestic end users decreased by US$223 (2%).
In 2017, CSI purchased the Sterishot Disposable Filshie Clip applicator kit for $476 for the first time, which was approved by the U.S. FDA in December 2016. Due to the significantly lower risk, the Sterishot applicator has been widely accepted outside the United States since 2009. Infections inherent in surgical instruments that are reused in laparoscopic surgery eliminate the need for recalibration and repair of precision instruments. Switching to single-use applicators will have an expanded impact on sales.
Domestic OEM sales accounted for 8% of total sales in 2017, compared with 7% in 2016. In 2017, UTMD sold components and finished products to 148 different US companies, compared with 139 companies in 2016 for their product supply. From a financial point of view, OEM sales can help dilute manufacturing costs and increase UTMD's GPM by making better use of existing capabilities.
By product category, domestic direct sales of neonatal products are US$4,049 (high 0%), labor and delivery (L&D) products are US$3,761 (low 3%), BPM products are US$934 (high 7%), and Filshie Clip System is not included Of gynecological/urological products at US$4,657 (low 4%).
Outside the United States (OUS) sales. In 2017, OUS sales were US$21,129 (+7%), compared to US$19,809 in 2016. In 2017 (in U.S. dollars), 64% of OUS sales were invoiced in foreign currencies, compared to 58% in 2016.
As part of total sales, 33% of UTMD's 2017 USD equivalent sales were invoiced in foreign currencies, compared with 29% in 2016. This increase is due to increased sales in Canadian dollars (CAD) used to sell Canada directly to end-user facilities from UTMD's newly formed distribution subsidiary, Utah Medical Products Canada (dba Femcare Canada). In 2016, Filshie Clip System was sold to a third-party Canadian distributor of Femcare. If it is manufactured and shipped by UTMD's Irish subsidiary, it will be invoiced in Euros (EUR). If it is shipped from UTMD's UK subsidiary, it will be invoiced in British pounds ( GBP) to issue an invoice. In 2017, the British pound, euro, Australian dollar (AUD) and Canadian dollar converted sales accounted for 10%, 10%, 6%, and 7% of 2017 U.S. dollar sales, respectively. In contrast, US dollar sales in 2016 accounted for 12%, 11%, and 6%, respectively. There were no Canadian dollar sales in 2016. In addition to the redistribution of foreign currency sales, the foreign currency exchange rate (FX) also has an impact.
The foreign exchange rate used by UTMD in the income statement is the transaction weighted average. Compared with the same period in 2016, the average exchange rates of applicable foreign currencies to the U.S. dollar in the fourth quarter of 2017 and 2017 are as follows:
The above table shows that the U.S. dollar weakened significantly in the fourth quarter of 2017 compared to the fourth quarter of 2016 compared to the whole year. Since a large part of UTMD's sales are invoiced in foreign currencies, changes in foreign exchange rates may have a significant impact on sales denominated in U.S. dollars during the period. Compared with the previous three years when the U.S. dollar continued to strengthen significantly relative to other currencies, the net impact of changes in foreign exchange for the whole of 2017 was minimal. However, in the fourth quarter of 2017, the weaker US dollar relative to the fourth quarter of 2016 increased foreign currency sales by US$184. Due to the BREXIT referendum in mid-2016, UTMD's sales in the first half of 2017 (1H) were US$282 lower than the British pound exchange rate in the first half of 2016. After the fourth quarter of 2016, the pound exchange rate stabilized and gradually strengthened relative to the U.S. dollar. Therefore, the negative impact of the pound exchange rate on overall sales in 2017 was only (US$232). In contrast, the euro and the Australian dollar strengthened in 2017 compared to 2016, almost offsetting the negative impact of the pound exchange rate on sales. Therefore, calculated at a fixed exchange rate, UTMD's total consolidated revenue for the year will only increase by another $68. Since there were no Canadian dollar sales in 2016, changes in the Canadian dollar exchange rate had no effect on the comparison of sales in 2017 and 2016.
Compared with 2016, UTMD's Irish factory (UTMD Ltd)’s US dollar-denominated trade sales to OUS customers (excluding inter-company) sales fell by 1,712 US dollars (25%) in 2017, because 1) 2016 sales to Canada Trade sales with UTMD distributors in France were US$1,390. In 2017, it was converted to inter-company sales (zero trade sales), and 2) The sales of BPM kits to UTMD German OEM distributors in 2016 were US$516, and production was discontinued in 2017 ( Zero trade sales). Calculated in euros, UTMD Ltd's 2017 sales (including inter-company shipments) fell 15% year-on-year.
Femcare-Nikomed, Ltd's (UK subsidiary) domestic, French, and international distributor customers' US dollar-denominated equipment trade sales in 2017 (excluding inter-company sales) were higher than 2016 by US$1,249 (+16%) The reason is 1) In fact, direct trade sales in France in 2017 were 828 US dollars higher than sales to French and Canadian distributors in 2016, and 2) sales to Femcare Filshie Clip System exclusive distributors in the United States were higher than 2016 It is 832 dollars higher in the year. Sales to CSI are in the U.S. dollar currency, but due to the negative exchange rate, the foreign currency sales of the British subsidiary are $157 lower than in 2016. In pounds sterling, the sales of the British subsidiary in 2017 (including intercompany shipments) increased by 24% year-on-year.
Compared with 2016, Femcare's Australian distribution subsidiary (Femcare Australia) saw a 4% drop in USD-denominated equipment sales to Australian end users in 2017. In 2017, Australian dollar sales fell by approximately 7% compared to 2016.
Looking ahead, based on the exchange rate at the end of 2017, the overall foreign currency sales in 2018 will be calculated in U.S. dollars, benefiting for the first time in many years because the U.S. dollar is relatively weak compared to at least the first three quarters of 2017.
Gross profit (GP). As mentioned above, the significant increase in UTMD's 2017 average gross profit margin was mainly due to the conversion of wholesale distributor sales into direct end-user sales in Canada and France. There is also a favorable combination change, that is, low-margin BPM products sold to international OEMs (accounting for 3% of total international OEM sales in 2016) are replaced by sales of other products with higher profit margins. In Utah, due to the good experience gained from Utah's self-insurance health benefit plan, the manufacturing industry can do more work with fewer people. In 2017, with the help of investing in increasing RM inventory, the company achieved relatively little increase in raw material (RM) costs. Operating income (OI). OI is the result of subtracting OE from GP. In 2017, the OI was US$19,011 (45.9% of sales), while in 2016 it was US$16,187 (41.2% of sales). In the fourth quarter of 2017, UTMD's OI was US$4,573 (44.8% of sales), while the OI of the fourth quarter of 2016 was US$3,621 (40.9% of sales).
The OE in 2017 was US$7,385 (17.8% of sales), which was US$118 lower than the 2016 OE of US$7,503 (19.1% of sales). The substantial improvement in the OE ratio was due to a 5% increase in sales and a 2% decrease in OE. The OE in the fourth quarter of 2017 was US$1,897 (18.6% of sales), while it was US$1,819 (20.5% of sales) in the fourth quarter of 2016. The lower OE ratio in the fourth quarter of 2017 was simply because sales were 15% higher than in the fourth quarter of 2016, not because of lower expenses. Operating expenses include general and administrative (G&A) expenses, sales and marketing (S&M) expenses, and product development (R&D) expenses.
G&A expenses in 2017 were US$5,393 (13.0% of 2017 sales), and in 2016 it was US$5,355 (13.6% of 2016 sales). Compared with 2016, the G&A expenses of the new Canadian subsidiary increased by US$160. Although the Canadian subsidiary until 2017, employees were hired and trained at the end of 2016. The amortization of the Femcare identifiable intangible assets (IIA) acquired in 2011 is part of the G&A expenses. Although the IIA amortization expense in 2017 was only 4 pounds lower than that in 2016, due to the weakening of the pound after the BREXIT referendum, the IIA amortization expense in 2017 was reduced by 112 US dollars. Femcare IIA's non-cash amortization expenses in G&A (sales increase by 5%, while USD amortization expenses decrease by 5%) accounted for 5.0% of total sales in 2017 and 5.5% of sales in 2016. The IIA amortization expense (US$2,055 in 2017), US$2,167 in 2016) will continue until March 2026 (or until the value of the remaining IIA is impaired). A more detailed breakdown of UTMD's OE including G&A fees will be provided in the UTMD SEC 10-K annual report to be released on or before March 16.
S&M expenses in 2017 were $1,544 (accounting for 3.7% of sales in 2017), while in 2016 it was $1,673 (accounting for 4.3% of sales in 2016). The lower US dollar S&M fee is partly due to the weakening of the British pound, and partly because UTMD has not hired some substitutes to sell its previously planned representatives in the United States. Compared with 2016, the new Canadian subsidiary increased S&M expenses by US$59.
Research and development expenses are US$448 (1.1% of 2017 sales) and US$475 (1.2% of 2016 sales). Although no additional UTMD equipment was launched in 2017, R&D played an important and continuous role in the improvement of manufacturing processes, which became apparent in the improvement of GPM in 2017, and work on new product projects continued. UTMD will not announce in advance new devices that are under development.
Income before taxes (EBT). EBT is the result of subtracting net non-operating expenses (NOE) from OI or adding net non-operating income (NOI) to OI. The EBT in 2017 was US$2,660 (+16.2%) higher than in 2016. The EBT in the fourth quarter of 2017 was US$928 (+25.4%) higher than that in the fourth quarter of 2016. The total EBT in 2017 was US$19,082 (46.1% of sales, 46.12% of sales)% in 2016). Looking to the future, UTMD's consistently high level of EBT will maximize the interests of shareholders with the recently announced lower US corporate income tax rate.
The NOI in 2017 was US$71, while the NOI in 2016 was US$235. The re-measurement of the value of the euro cash balance held in the United Kingdom and the British pound balance held in Ireland generates a profit and loss, which is recorded as a NOI or NOE at the end of the reporting period. Mainly due to the relative value of the euro held in the United Kingdom, UTMD 2016 The currency return (NOI) remeasured at the end of the year was US$129, compared to only US$4 in 2017. In addition, NOI includes royalties for licensing UTMD technology, rents from renting out underutilized properties to others, income from investing in the company’s excess cash, and gains or losses from the sale of assets, which are offset by NOE, including bank loan interest, bank Service charge and consumption tax. UTMD did not have any interest expenses in 2017 or 2016.
As a clear note to the results, UTMD’s 2017 and 2016 EBT and all other income statement indicators above the EBT line in the income statement are not affected by the accrual of the US REPAT tax and the reduction of DTL in the fourth quarter of 2017. Compared with the bill, and due to the changes in the UK corporate income tax rate promulgated in 2016, the DTL and income tax reserves have been reduced. Therefore, the comparison of GP, OI and EBT between 2017 and 2016 is a good indicator of UTMD's operating performance.
Net income (NI) and return on equity (ROE). NI is the result of subtracting the estimated income tax reserve from EBT. In 2017, UTMD’s US GAAP NI was US$8,505, while in 2016 it was US$12,128. The 2017 non-US GAAP NI (before the application of the REPAT tax and related net DTL adjustments to the provision) was US$14,562 (35.2% of sales), compared to US$131.2225 million in 2016. %) in 2016. UTMD’s US GAAP NI in the fourth quarter of 2017 was (US$2,522)-a net loss-compared to US$2,717 in the fourth quarter of 2016. Non-U.S. GAAP NI (before applying REPAT tax and related DTL adjustments to provisions)) In the fourth quarter of 2017, it was US$3,535 (34.7% of sales), compared with US$2,717 (representing sales in the fourth quarter of 2016). 30.7% of the amount).
As mentioned earlier, in the fourth quarter of 2017, the US GAAP tax reserve included a one-time US repatriation tax of US$6,288 on cumulative earnings (E&P) of US subsidiaries due to the bill enacted in December 2017. Lowering the future federal income tax rate, a net decrease of $230 in DTL reduced the tax provision for the fourth quarter of 2017, slightly offsetting the increase in REPAT tax. According to GAAP, the impact of the DTL adjustment is reflected in the income statement at the time the tax law change is promulgated.
UTMD believes that due to the REPAT tax, calculating and comparing the percentage of income tax reserves to EBT during the calculation and comparison period does not provide meaningful information to shareholders. Therefore, both NI and EPS are presented in the closing financial statements in accordance with US GAAP and prior to the confirmation of REPAT tax and related DTL adjustments in the fourth quarter of 2017. The 2016 results include a DTL adjustment of $123, which reduces tax provisions (increases NI) and is listed in the table according to GAAP.
Ignoring the 2017 REPAT accrued tax reserve of US$6,288 and the 2017 and 2016 DTL adjustments, the 2017 (non-US GAAP) consolidated income tax reserve tax rate was 23.7% of the EBT, compared to 26.9% in 2016. The non-US GAAP tax rate difference is mainly due to the combination of the United Kingdom and Ireland allowing tax deductions on the remeasured value of their dollar cash balances, and the combination of income and actual tax reserves generated in sovereign countries with different tax rates. Subsidiaries in the United Kingdom and Ireland experienced substantial losses in domestic currencies in the value of USD cash balances in 2017. These currency conversion losses are tax deductions applicable to foreign jurisdictions, but do not affect UTMD's EBT (U.S. dollars is U.S. dollars). However, the actual (lower) taxation requirements of OUS subsidiaries do become part of UTMD's consolidated income tax reserve. In 2017, due to direct sales to medical institutions in France, the EBT of UTMD's UK subsidiary increased by 47%. In 2017, the tax rate for profits of UK patented products before special deductions was 19%, compared with 20% in the first quarter of 2016 and 19% in the last three quarters of 2016. Australia’s corporate income tax rate is 30%. Compared with the previous year, EBT has been reduced by 12%. The Canadian tax rate is 25%. The Irish tax rate is 12.5%.
Maintaining a high ROE is a key management objective of UTMD in order to achieve growth without diluting the interests of its shareholders. ROE is the quotient of NI divided by average shareholder equity (ASE), but it is a function of NIM, asset productivity, and financial leverage. Although UTMD’s high net interest margin is the main factor that continues to drive its ROE, it repurchased 50,000 shares at a price of US$2,850 in the fourth quarter of 2016, and distributed a cash dividend of US$3,960 to shareholders in 2017. Reduction, all of which help to reduce ASE and reduce the denominator of ROE. Although the REPAT tax helped the denominator by lowering ASE by US$3.1 million, it also reduced the net interest margin from 35.2% to 20.5% in 2017, causing even greater damage to ROE. UTMD's ROE in 2017 was 6.2%, including dividends and recorded REPAT tax reduced NI, compared to 11.8% in 2016. Before dividends, UTMD's ROE in 2017 was 11.5%, compared to 17.5% in 2016. Excluding the impact of the REPA tax on NI and ASE and before dividends, UTMD's ROE in 2017 was 19.0%, compared to 17.5% in 2016.
Further comments on the REPAT tax For the benefit of shareholders, UTMD believes that it may be helpful to further discuss its current (early) understanding of the impact of the tax law changes caused by the bill.
Before the new tax law, the effective federal tax rate of UTMD in the United States was usually about 29.4% after allowing deductions. Utah is based on federal taxable income, plus a 5% income tax. The main reason why the effective federal interest rate before UTMD is not 34% is "manufacturing profit deduction" (MPD), which is equivalent to 8.1% of UTMD's US EBT. There are other factors, such as research and development tax credits and accelerated depreciation for tax purposes, which help reduce the effective income tax rate of UTMD, and these other benefits will continue to exist under the Act. However, MPD has been terminated under the Act, and the US corporate tax rate has been reduced from 34% to 21%.
Because Utah uses federal taxable income as the taxable basis, the state will receive considerable "windfall" tax increases in the future, because UTMD's 5% EBT will lose members of Congress. There is currently no sign that Utah will reduce its corporate income tax rate, but in UTMD's view, if they also tax the E&P of UTMD's accumulated foreign subsidiaries, they should comply with the Act in this regard.
As a rough guide to help shareholders estimate the expected effects of the new tax law, UTMD's effective income tax rate for U.S. EBT should be about 7.9 percentage points lower than in the past. UTMD's 2017 US EBT accounted for approximately 48% of the total EBT (including the EBT of all OUS subsidiaries). Based on the 2017 EBT, UTMD's comprehensive tax reserve will be reduced by approximately 3.8 percentage points, which is equivalent to approximately US$720 higher than NI and US$0.20 higher earnings per share.
In other words, in exchange for a higher net income of US$720 per year, if you spread the REPAT tax over eight years, UTMD shareholders would suffer a loss of US$786 per year instead of (at least for the next eight years) a “significant reduction” Taxes", such as President Trump. From the point of view of the income statement, the impact of the REPAT tax has already been produced in the 2017 GAAP performance. The impact of the lower tax rate will increase the future performance of NI and EPS. Of course, UTMD intends to continue its usual EBT growth.
Earnings per share (EPS). At the end of 2017, there were 3,721,400 shares outstanding, compared with 3,713,100 shares at the end of 2016. The number of shares used to calculate earnings per share is higher than the closing shares because of the time-weighted average outstanding shares plus the dilution of outstanding employee and director options. As of December 31, 2017, outstanding outstanding employees and outside directors The total number of options is 54,340 shares, and the average exercise price is US$45.50 per share, including shares that have been granted but not granted. In contrast, as of the end of 2016, there were 74,672 outstanding options outstanding, with an average strike price of US$46.62 per share. In the fourth quarter of 2017, the dilution of outstanding option shares of UTMD in the fourth quarter of 2017 was 21,300 shares, compared with 15,100 shares in the fourth quarter of 2016, 19,400 shares in 2017, and 14,600 shares in 2016. This was due to increased dilution. Option awards in November 2016, the impact of higher stock prices on outstanding options that were not exercised at the end of 2017, and future option compensation expenses. In November 2016, 28,000 options were granted to 41 employees at an exercise price of US$58.50 per share. No options were granted in 2017.
UTMD paid or accumulated (end of 2017) USD 3,960 (USD 1.065/share) dividends to shareholders in 2017, compared with USD 3,916 (USD 1.045/share) in 2016. Dividends paid to shareholders in 2017 are non-GAAP (non-GAAP 27% REPAT tax). The dividend to shareholders in 2017 was 47% of NI.
UTMD repurchased 50,000 shares from institutional investors in November 2016 at a price of US$57.00 per share. In 2017, UTMD did not repurchase shares. The company retains its strong desire and financial ability to repurchase its shares at a price attractive to the remaining shareholders. The closing price of UTMD at the end of 2017 was US$81.40, a 12% increase from the closing price of US$72.75 at the end of 2016.
Summary of the balance sheet. As of the end of 2017, UTMD had total assets of US$93 million, including US$40 million in cash and investments, and had no bank debt. In contrast, at the end of 2016, UTMD had US$26.4 million in cash and investments as part of its total assets of US$76.6 million. At the end of 2017, the proportion of intangible assets to total assets dropped from 41% at the end of 2016 to 34%. Shareholders’ equity at the end of 2017 was US$78.1 million, an increase of US$8.9 million from the end of 2016, despite a reduction of US$4 million in payments and year-end shareholder cash dividend accruals.
Emphasize. 1) Cash and investment balance increased by US$13.6 million, although the company allocated US$3 million in cash to shareholders and used US$1.6 million in cash for PP&E improvements, mainly for the renovation of a 36,000 square foot facility in the UK to replace its lease facility. 2) The U.S. government imposed a special REPAT tax on OUS accumulated E&P, which reached UTMD's income statement for the fourth quarter of 2017, but will actually be paid within eight years. The impact on the balance sheet as of December 31, 2017 was that current liabilities increased by US$503, long-term liabilities increased by US$5,785, and shareholders’ equity decreased by US$6,288. 3) Although the amortization was US$2,113, the net book value of intangible assets did not decline due to the weakening of the US dollar at the end of 2017. 4) UTMD completed the move of Femcare's UK business into the new 36,000 SF Romsey facility at the end of November. 2017 did not have any significant negative impact on 2017 performance and now owns all of its facilities. The previous lease and all related potential liabilities have been terminated.
Financial ratios as of December 31, 2017. 1) Current ratio = 9.4 (including REPAT current liabilities) 2) Accounts receivable days (based on 4Q sales activities) = 32 3) Average inventory turnover rate (based on 2017 CGS) = 3.1 4) 2017 ROE = 19% ( Before paying dividends and REPAT tax provision)
Investors should note that this press release contains forward-looking statements and actual events may differ from expectations. Risk factors that may cause the results to differ materially from expectations include product market acceptance, regulatory approval time for new products, regulatory interventions in current operations, government medical "reforms", foreign exchange rate fluctuations, and the company's ability to effectively manufacture and market And sales of its products, as well as other factors that have been and will be outlined in the public disclosure documents submitted by UTMD to the U.S. Securities and Exchange Commission. The 2017 SEC Form 10-K will be filed on or before March 16, 2018.
Utah Medical Products, Inc. is particularly interested in the medical care of women and their babies. It develops, manufactures and sells a wide range of disposable and reusable professional medical devices, which are recognized by clinicians in more than 100 countries around the world. To obtain the best long-term results for their patients. For more information about Utah Medical Products, Inc., please visit UTMD's website at www.utahmed.com.
Income statement, fourth quarter (three months ended December 31) (in thousands, except earnings per share)
Income statement, annual (12 months ended December 31)