(2) Recent Accounting Standards. In March 2016, new

The Company has determined that recently issued accounting guidance was issued to simplify several aspects of accounting for employee share-based payment (including stock option) transactions, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. Under the guidance, entities recognize all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement. UTMD adopted this standard on January 1, 2017, which had an insignificantstandards will either have no material impact on its consolidated financial statements. UTMD made a determination to continue to account for forfeitures by estimating the numberposition, results of awards that are expected to vest.  Because UTMD primarily issues incentive stock options, excess tax benefits and tax deficiencies have historically been minimal.

implicit rates, UTMD’s incremental borrowing rate, based on information available at adoption date, was used to determine fairthe present value of its financial assets.  the leases.

(8)  Distribution Agreement Purchase. UTMD completed the purchase of exclusive U.S. distribution rights for the Filshie® Clip System from CooperSurgical, Inc. (CSI) on February 1, 2019. The $21,000 purchase price represents an identifiable intangible asset which is being straight-line amortized and recognized as part of G&A expenses over the now 3.58 year remaining life of the prior CSI agreement with Femcare.

9) Earnings Per Share. Basic earnings per share is calculated by dividing net income attributable to the common stockholders of the company by the weighted average number of common shares outstanding during the period.  Diluted earnings per share is calculated by assuming the exercise of stock options at the closing price of stock at the end of first quarter 2020.

The following table provides financial assets carried at fair value measured as of September 30, 2017:

Utah Medical Products, Inc. (UTMD) manufactures and markets a well-established range of specialty medical devices.  The Company'sCompany’s Form 10-K Annual Report for the year ended December 31, 20162019 provides a detailed description of products, technologies, markets, regulatory issues, business initiatives, resources and business risks, among other details, and should be read in conjunction with this report.  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.  Currency amounts in the report are in thousands, except per share amounts or where otherwise noted.  Currencies in this report are denoted as $ or USD = U.S. Dollars; A$ or AUD = Australia Dollars; £ or GBP = UK Pound Sterling; C$ or CAD = Canadian Dollars; and € or EUR = Euros.

Analysis of Results of Operations

Income statement results in 3Qthe first quarter (1Q) of 2020 compared to 1Q 2019 were as follows:

Profit margins in 1Q 2020 compared to 1Q 2019 follow:

Although sales and 9M 2017gross profits were higher in 1Q 2020 than in 1Q 2019, the corona virus (COVID-19) pandemic substantially hampered financial results beginning in March.  UTMD’s gynecology/ electrosurgery/ urology (GYN) product category is primarily comprised of devices used in procedures which are considered “elective” in the current pandemic. Sales of the Filshie® Clip System (Filshie devices), which are included in the GYN product category, were $764 (+83%) higher in 1Q 2020 than in 1Q 2019 because UTMD first began selling Filshie devices directly to domestic end-users in February 2019 (part way through 1Q 2019), after acquiring the exclusive distribution rights from CooperSurgical Inc.  Although a very short span of time, a better comparison might be that domestic Filshie device sales were 25% lower in March 2020 compared to the same periods of 2016January/February 2020 monthly average.  Outside the U.S. (OUS), Filshie device sales, which were as follows:

The weighted average negative FX impact on GBP, EUR and AUDall foreign currency sales in 9M 2017 compared to 9M 2016 was 2.9%2.6%, reducing reported USD sales by $235. Total$78 relative to the same foreign currency sales in 1Q 2019.  In constant currency terms, total consolidated 3Q 2017 constant currency1Q 2020 sales were up 4.1%, and 9M 2017 constant currency sales were up 3.3%, compared to the same periods in 2016.

UTMD’s 1Q 2020 Gross Profit Margin (GPM)was squeezed by higher direct materials costs. The productivity of UTMD’s direct labor and manufacturing overhead expenses were consistent with the prior year.

UTMD’s Operating Income in 1Q 2020 was $238 lower than in 1Q 2019 because of a $368 higher expense from amortizing the purchase price that UTMD paid CSI to acquire the exclusive U.S. Filshie distribution rights.  The purchase price is an identifiable intangible asset (IIA) that will be amortized at a rate of $1,105 per quarter until October 2023 (14.3 more quarters), Gross Profit (GP) divided by sales, improved to 64.2%as part of General and Administrative (G&A) expenses.  Excluding the CSI IIA amortization expense, UTMD’s Operating Income margin was 45.6% in 3Q 20171Q 2020 compared to 59.8%45.1% in 3Q 2016, and 63.8% in 9M 20171Q 2019.

Income Before Tax (EBT) was down less than Operating Income because 1Q 2020 non-operating income was $89 higher compared to 59.9% in 9M 2016, primarily1Q 2019.  The higher non-operating income was due to a $44 gain in the 2017 conversion from distributor sales to direct end-user salesUSD-remeasured value of the Filshie Clip Systemforeign currency bank balances instead of a $50 loss reported in France1Q 2019.  Net Income and Canada. Consolidated Operating Expenses (OE)Earnings Per Share (EPS) were $19 lower in 3Q 2017 compared to 3Q 2016, and $196 lower in 9M 2017 compared to 9M 2016.  Included in G&A OE, the UK amortization of Identifiable Intangible Assets (IIA) expense was aboutessentially the same in 3Q 2017 but $145both periods as the 21.3% consolidated income tax provision rate in 1Q 2020 was lower than the 24.1% rate in 9M 2017 due to1Q 2019.  The 80,000 UTMD shares repurchased by UTMD in 1Q 2020 had only a small impact on diluted shares for calculating EPS as the weaker GBPshares were purchased in first half 2017 compared to first half 2016, accountingMarch and the formula for most of the 9M lower OE. The combination of lower OE and higher GPM spurred a 15% increase in 9M 2017 Operating Income (OI) with just a 3% increase in revenues. The 17% higher Net Income (NI) in 9M 2017 was a result of the 15% higher OI plus 1) a reductioncalculating diluted shares is time-weighted.

UTMD’s March 31, 2020 Balance Sheet, in the corporate income tax rate in the UK starting in 2Q 2017, and 2) a lower tax provision in the UK and Ireland based on translationabsence of USD cash balances in those sovereignties when converted to their respective native currencies.

to repurchase 80,000 UTMD shares in the open market in March, and Stockholders'paying $1.0 million in cash dividends to stockholders during 1Q 2020. Stockholders’ Equity was up $12.0(SE) declined $6.7 million in the three month period from December 31, 2016.2019 because the $7.4 million in stock repurchases and dividends reduced SE.  The lower converted USD value of fixed assets outside the U.S. (OUS) also helped reduce SE.  FX rates for Balance Sheet purposes are the applicable rates at the end of each reporting period. The FX rates from the applicable foreign currenciescurrency to USD for assets and liabilities at the end of September 20171Q 2020 and the end of September 20162019 follow:

Terms of sale are established in advance of UTMD'sUTMD’s acceptance of customer orders.  In the U.S., Canada, Ireland, UK France and Australia prior to 2017, UTMD generally acceptsaccepted orders directly from and shipsshipped directly to end user clinical facilities, as well as third party med/surgmedical/surgical distributors, under UTMD'sUTMD’s Standard Terms and Conditions (T&C) of Sale. The same was true in 2017 with the addition of direct shipments to end user facilities in Canada and France. About 14% of UTMD's U.S.UTMD’s domestic end user sales, excluding Femcare’s Filshie Clip System sales to its exclusive U.S. distributor, CooperSurgical Inc. (CSI), go through third party med/surg distributors which contract separately with clinical facilities to provide purchasing, storage and scheduled delivery functions for the applicable facility.  UTMD'sUTMD’s T&C ofof Sale to end user facilities are substantially the same in the U.S., Canada, Ireland, UK, France and Australia.  In other geographic regions, UTMD sells its devices to third party distributors which then distribute the devices to medical facilities within their designated territories. UTMD's T&C of Sale for its international distributors are substantially the same.

Total 3Q 2017 consolidated 1Q 2020 UTMD sales were $471 (4.9%$169 (+1.6%) higher than in 3Q 2016, and in 9M 20171Q 2019. Constant currency sales were $768 (2.5%$247 (+2.3%) higher than in 9M 2016.  Comparing 3Q 2017 to 3Q 2016, totalhigher. U.S. domestic sales were about the same and USD sales outside the U.S. (OUS sales) were 10% higher. Comparing 9M 2017 to 9M 2016, total U.S. domestic sales were 3%11% higher and OUS sales were 2% higher.

Domestic sales in 1Q 2020 were $6,443 compared to $5,794 in 1Q 2019.  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”, which beginning in February 2019 were 0% ($8) higher in 3Q 2017 than in 3Q 2016, and 3% ($443) higher in 9M 2017 than in 9M 2016.  Domesticby UTMD direct to U.S. clinical users. Direct other device sales, were 49% of total consolidated sales in 3Q 2017 and 51% in 3Q 2016, and 49% in both 9M 2017 and 9M 2016. Sales of Femcare's Filshie Clip System to CooperSurgical Inc. (CSI) for distribution in the U.S. were $264 higher in 3Q 2017 compared to 3Q 2016, and $594 higher in 9M 2017 compared to 9M 2016.  CSI purchases included, for the first time, $159 in 3Q 2017 and $244 in 9M 2017 of Filshie Sterishot kits which incorporate single use applicators approved by the FDA in December 2016. Femcare's sales to CSI were 13%representing 52% of total domestic sales, were $125 (4%) lower in 3Q 20171Q 2020 than in 1Q 2019. OEM sales, representing 21% of total domestic sales, were just $9 (+1%) higher. Direct Filshie device sales were $764 (+83%) higher in 1Q 2020 compared to 8%1Q 2019.  However, the average daily rate of direct U.S. Filshie device sales was 30% lower in 3Q 2016, and 20%March than in 9M 2017the first two months of 1Q 2020.  

In the short time period during April ensuing the end of 1Q 2020, at possibly the height of concern regarding COVID-19, incoming U.S. orders for  Filshie devices have been 63% lower than in the first two months of the year.  Assuming April sales rate continues through June would yield just $700  in 2Q 2020 direct U.S. Filshie device sales compared to 16%$1,979 in 9M 2016. Domestic OEM2Q 2019.  A number of UTMD’s other gynecology/ electrosurgery/ urology devices are also considered “elective” in the current environment, but unless economic conditions deteriorate to the point where the quality of essential care in general continues to suffer, demand for UTMD’s critical care devices, including devices used in L&D and the NICU, should remain consistent.

OUS sales in 1Q 2020 were $32 higher in 3Q 2017$4,459 compared to 3Q 2016,$4,938 in 1Q 2019. OUS sales invoiced in GBP, EUR, AUD and $95 higherCAD currencies were $78 lower solely as a result of changes in 9M 2017 compared to 9M 2016. Direct sales to U.S. user facilities were $287 lower in 3Q 2017 compared to 3Q 2016, and $246 lower in 9M 2017 compared to 9M 2016. AllFX rates.  In other words, at least 16% of the lower domestic directOUS sales werewas due to a weaker third quarterstronger USD.  Foreign currency OUS sales in 1Q 2020 were $2,866, which was 64% of all OUS sales and 26% of total consolidated sales.  Foreign currency OUS sales in 1Q 2019 were $3,206, which was 65% of all OUS sales and 30% of total consolidated sales.  In USD terms, OUS Filshie device sales were $513 (19%) lower.  OUS direct end-user sales in USD terms were 26% lower in Ireland, 22% lower in Canada, 12% lower in France, 11% lower in the UK and 9% lower in Australia.  Because all of the OUS direct end-user sales were in foreign currencies, a portion of the decline was due to the stronger USD as noted in the FX rate table above. Although Filshie device sales to OUS distributors were 36% lower in 1Q 2020 compared to 1Q 2019, some of the difference was just uneven order pattern from U.S. hospitalsas distributors order larger quantities of devices in all product categories, partly due to one less shipping day, partly from the effects of hurricanes in the U.S., partly resulting from an end of 3Q 2017 delivery glitch by UTMD's sterilizer, and partly related to a larger volume of late orders that didn't ship until the beginning of October (resulting in a larger than normal 4Q 2017 beginning backlog).

Recognizing a high level of uncertainty, a projection of the ensuing 2Q 2020 consolidated revenues at the current April incoming order rate extrapolates to 40% lower 2Q 2020 consolidated revenues compared to 2Q 2019 revenues.  What happens after 2Q 2020 depends in large part not only on when hospitals once again allow so-called elective procedures, but also on when patients again feel confident in going to the hospital without significant risk of contracting an unwanted disease.  

Trade sales are sales to third parties, excluding sales from one UTMD entity to another, (intercompany sales). UK subsidiary USD-denominated OUS tradewhich are called intercompany sales. Intercompany sales including direct sales to France clinical facilities, were 25% of total OUS sales in 3Q 2017 compared to 24% in 3Q 2016, and 24% in both 9M 2017 and 9M 2016. Australia subsidiary USD sales were 11% of total OUS sales in both 3Q 2017 and 9M 2017 compared to 12% in 3Q 2016 and 11% in 9M 2016.profits are eliminated from consolidated financial results. Ireland subsidiary USD1Q 2020 trade sales were 26% of total OUS$185 (14%) lower than in 1Q 2019 helped in part by an average 2.3% weaker EUR.  Ireland EUR sales were €142 (12%) lower. Trade sales in 3Q 2017 compared1Q 2020 by UTMD’s UK subsidiary, Femcare Ltd, were $183 (13%) lower, while in GBP terms, UK trade sales were £126 (12%) lower than in 1Q 2019. Femcare Ltd trade sales include Filshie device sales directly to 37%France medical facilities where the elective procedure restriction effects of COVID-19 may have exhibited earlier than in 3Q 2016, and 25%the UK. Trade sales in 9M 2017 compared1Q 2020 by UTMD’s Australia subsidiary to 36%Australian end user facilities were $37 (9%) lower than in 9M 2016.1Q 2019, but only AUD 4 (less than 1%) lower as the AUD was the weakest foreign currency relative to the USD, down in value more than 8%.  Trade sales by UTMD’s Canada subsidiary USDto Canadian end user facilities in 1Q 2020 were $123 (22%) lower than in 1Q 2019, representing the poorest sales results of UTMD’s foreign direct Filshie device sales, leveraged down only slightly by a weaker CAD. Canada subsidiary sales were 13%CAD 160 (21%) lower. Because of total OUSthe relatively short span of time, sales results for any given three month period in 3Q 2017 and 14% in 9M 2017 compared to 0% in 2016.

The following table provides USD sales amounts divided into general product categories for total sales and the subset of OUS sales:

Global revenues (USD) by product category:

GP results from subtracting the costcosts of manufacturing and shipping products to customers (direct materials,customers. UTMD’s GP was $63 (0.9%) higher in 1Q 2020 than in 1Q 2019 because of higher revenues.  However, UTMD’s GP Margin was slightly lower at 62.7% in 1Q 2020 compared to 63.1% in 1Q 2019 due to higher direct material costs. Otherwise, the Company maintained the productivity of its direct labor manufacturing overhead and shipping costs), or the purchase price of distributed finished products manufactured by other companies, from revenues.  At UTMD, manufacturing overhead costs fully absorb indirect costs including depreciation ofin its manufacturing equipment and facilities, quality assurance, materials requirements planning and purchasing, manufacturing engineering, production supervision, shipping, royalties paid to other entities and health plan benefits for both direct and indirect manufacturing personnel.  UTMD's consolidated GP in 3Q 2017 was $721 higher than in 3Q 2016, while sales were only $471 higher. UTMD's 9M 2017 GP was $1,675 higher than in 9M 2016, while sales were only $768 higher. The higher GPMs in 2017 resulted essentially from direct sales in Canada and France at retail prices which replaced distributor sales at wholesale prices inoperations consistent with the prior year.

Operating Income results from subtracting Operating Expenses from GP. Operating Expenses, comprised of general and administrative (G&A)G&A expenses, sales and marketing (S&M) expenses and product development (R&D) expenses. Consolidated USD-denominated OEexpenses, were $1,817$2,973 in 3Q 2017 (17.9% of consolidated revenues) compared to $1,836 in 3Q 2016 (19.0% of consolidated revenues). Holding OE relatively constant while increasing sales added leverage to the 12.5% increase in GP in achieving UTMD's 18.8% increase in 3Q 2017 OI.  Consolidated OE were $5,487 in 9M 2017 (17.6% of revenues) compared to $5,684 in 9M 2016 (18.7% of revenues), helping to leverage a 9.2% increase in GP into a 14.9% increase in OI for 9M 2017.

Consolidated G&A expenses were $1,350 (13.3%$2,419 (22.2% of sales) in 3Q 20171Q 2020 compared to $1,293 (13.4%$2,140 (19.9% of sales) in 3Q 2016, and were $3,993 (12.8%1Q 2019. The G&A expenses in 1Q 2020 included $512 (4.7% of sales) in 9M 2017 compared to $4,050 (13.3% of sales) in 9M 2016. A weaker GBP in the first half of the year helped lower 9M 2017 amortization of IIA resulting from the Femcare acquisition, which are part of G&A expenses, by $145. To be more clear, consolidated G&A expenses included non-cash expense from the amortization of IIA resulting from the 2011 Femcare acquisition, which were $520 (4.8% of $522 (5.2%sales) in 1Q 2019.  The lower USD amortization expense was the result of consolidated revenues)the stronger USD, as the Femcare amortization expense in 3Q 2017 and $1,526 (4.9%GBP was £399 in both periods. In addition, 1Q 2020 G&A expenses included $1,105 (10.1% of consolidated revenues) in 9M 2017, compared to $524 (5.4% of consolidated revenues) in 3Q 2016 and $1,671 (5.5% of consolidated revenues) in 9M 2016. The period to period differences in USD-denominatedsales) IIA amortization expense resulting from the purchase of the CSI remaining U.S. exclusive Filshie distribution rights, which was $737 (6.9% of sales) in 1Q 2019.  Excluding both Filshie-related non-cash IIA amortization expenses, G&A expenses were almost all FX-related since the$802 (7.4% of sales) in 1Q 2020 compared to $883 (8.2% of sales) in 1Q 2019.  The change in FX rates reduced 1Q 2020 OUS G&A expenses excluding IIA amortization expense was £1,196by $8. The lower 1Q 2020 constant currency G&A expenses were due to lower U.S. G&A salaries including stock option expense, and lower regulatory consulting expenses in 9M 2017Australia.

S&M expenses were $419 (3.8% of sales) in 1Q 2020 compared to £1,201$416 (3.9% of sales) in 9M 2016.  G&A1Q 2019.  The change in FX rates reduced 1Q 2020 OUS S&M expenses excludingby $4.   

R&D expenses in 1Q 2020 were $135 (1.2% of sales) compared to $115 (1.1% of sales) in 1Q 2019. Since almost all R&D is being carried out in the noncashU.S., there was negligible FX rate impact.   

In summary, Operating Income in 1Q 2020 was $3,863 (35.4% of sales) compared to $4,102 (38.2% of sales) in 1Q 2019.  The additional $368 CSI IIA amortization expense were $828 (8.2% of revenues) in 3Q 2017 compared to $770 (8.0% of revenues) in 3Q 2016.  The increase in 3Q 2017 was due to $44 in G&A expenseaccounted for the new Canada subsidiarylower Operating Income and a stronger EUR which increased Ireland G&A expenses in USD terms.  G&A expenses excluding the noncash IIA amortization expense were $2,467 (7.9% of revenues) in 9M 2017 compared to $2,379 (7.8% of revenues) in 9M 2016.  Again, the increase was due to G&A expenses for the new Canada subsidiary, which added $142 to consolidated G&A expenses in 9M 2017.

Non-operating expense/ Non-operating income 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'sCompany’s technology. Negative NOENon-operating expense is NOI.negative Non-operating income.  Net NOINon-operating income in 3Q 20171Q 2020 was $17$125 compared to $41$36 in 3Q 2016. Net NOI in 9M 20171Q 2019.  The difference was $65 compareddue to $206 in 9M 2016.  A gain on remeasured USD value of foreign currency bank balances.  In 1Q 2020, UTMD realized a $44 gain from remeasuring the value of EUR cash bank balances in 3Q 2017 was $4 compared tothe UK, and GBP cash balances in Ireland, in USD terms.  In 1Q 2019, UTMD realized a gain$50 loss from remeasuring the value of $18EUR cash bank balances in 3Q 2016.  In 9M 2017, a gain on remeasured foreign currencythe UK, and GBP cash balances was $5 compared to a gain of $129 in 9M 2016.  Royalties received were $23Ireland, in 3Q 2017 compared to $22 in 3Q 2016, and $65 in 9M 2017 compared to $67 in 9M 2016.

Income before income taxes (EBT) results from subtractingadding net NOE or adding NOI from orNon-operating income to as applicable, consolidated OI.Operating Income.  Consolidated 3Q 20171Q 2020 EBT was $4,696 (46.4%$3,988 (36.6% of sales) compared to $3,980 (41.2%$4,137 (38.5% of sales) in 3Q 2016. Consolidated 9M 20171Q 2019.  The $149 (3.6%) lower 1Q 2020 EBT was $14,503 (46.5% of sales) compared to $12,772 (42.0% of sales)1Q 2019 was due to the $368 higher CSI IIA amortization expense included in 9M 2016.

The EBT of Utah Medical Products, Inc. (U.S. only)in the U.S. was $2,331$2,497 in 3Q 20171Q 2020 compared to $2,347$2,628 in 3Q 2016, and $6,815 in 9M 2017 compared to $6,750 in 9M 2016.1Q 2019. The EBT of Utah Medical Products, Ltd (Ireland) was EUR 7171,116 in 3Q 20171Q 2020 compared to EUR 855814 in 3Q 2016, and EUR 2,229 in 9M 2017 compared to EUR 2,455 in 9M 2016 . The lower 2017 EBT in Ireland was due to Ireland selling its manufactured Filshie Sterishot kits on a discounted intercompany basis to UTMD Canada and UTMD UK for distribution directly into France, instead of selling on a wholesale trade basis to external distributors distributing Filshie devices in Canada and France.  The trade-off to lower Ireland EBT was higher UK subsidiary trade revenues and profits, and new revenues and profits by UTMD Canada.1Q 2019. The EBT of Femcare Group Ltd (Femcare-Nikomed,(Femcare Ltd., UK and Femcare Australia)Australia Pty Ltd) was GBP 835148 in 3Q 20171Q 2020 compared to GBP 566585 in 3Q 2016, and GBP 3,141 in 9M 2017 compared to GBP 2,374 in 9M 2016.1Q 2019. The 3Q 2017 and 9M 20171Q 2020 EBT of Utah Medical Products Canada, Inc. (dba Femcare Canada) was CAD 435 and CAD 1,497, respectively,257 compared to zeroCAD 355 in 2016.

Net Income in 1Q 2020 of $3,140 was essentially the same as Net Income of $3,139 in 1Q 2019. The average consolidated income tax provisions (as a percent of EBT) in 1Q 2020 and 1Q 2019 were 21.3% and 24.1%, respectively. The income tax provision for income taxes.  NI in 3Q 2017 of $3,622 (35.8% of sales)1Q 2020 was $686 (+23.4%) higher$114 lower than it would have been using the NI of $2,935 (30.4% of sales) in 3Q 2016.  In addition to the 18.0% growth in EBT, NI in 3Q 2017 was further leveraged by1Q 2019 rate. The lower combined tax provision rate resulted from a lower accruedU.S. GILTI tax estimate on foreign earnings (included by Congress in the December 2017 TCJA), and a shift in taxable income of foreign subsidiaries with differing income tax provision.rates. The consolidated income tax provision rate in 3Q 2017for the full year of 2019 at 20.9% was 22.9% compared to 26.3% for 3Q 2016.  NI in 9M 2017 of $11,027 (35.3% of sales) was $1,616 (+17.2%) higher than the NI of $9,411 (30.9% of sales) in 9M 2016. The consolidated income tax provision rates were 24.0% in 9M 2017 and 26.3% in 9M 2016.  On April 1, 2017, the corporate income tax rate in the UK was lowered from 20% to 19%. For foreign subsidiaries, the tax provision booked in consolidated results is based on taxable income in the applicable sovereignty, not based on U.S. GAAP EBT.  As UTMD held about $19 million in cash in USD currency in Ireland and UK subsidiary bank accounts as of September 30, 2017, and the USD weakened relativecloser to the applicable native currency, the resulting translation loss for each subsidiary created a tax credit for those subsidiaries. In summary, although there was not a corresponding translation loss for consolidated UTMD EBT results, which are obviously expressed in USD, there was an income tax1Q 2020 provision benefit.

EPS are consolidated NINet Income divided by the weighted average number of shares of stock outstanding (diluted to take into consideration stock option awards which are "in“in the money,"” i.e., have exercise prices below the applicable period'speriod’s weighted average market value). Diluted EPS in 3Q 20171Q 2020 were $0.969practically the same as in 1Q 2019, consistent with NI because diluted shares used to calculate EPS were only slightly lower.  Diluted shares were 3,724,156 in 1Q 2020 compared to $0.7773,738,373 in 3Q 2016.  In 9M 2017, diluted EPS were $2.953 compared to $2.493 in 9M 2016.  With some help from1Q 2019.  The lower diluted shares outstanding, 3Q 2017 EPS increased 24.7% (19.2 cents) compared to 3Q 2016,in 1Q 2020 were the combined result of 5,000 shares repurchased in May 2019 and 9M 2017 EPS increased 18.5% (46.0 cents) compared to 9M 2016.

Outstanding shares at the end of 1Q 2020 were 3,642,431 compared to 3,721,757 at the end of calendar year 2019. The difference was due to the 80,000 share repurchase less 674 shares in employee option exercises during 1Q 2020. For comparison, outstanding shares were 3,722,706 at the end of 1Q 2019. The total number of outstanding unexercised employee and outside director options at September 30, 2017March 31, 2020 was 57,019 shares77,315 at an average exercise price of $45.35/$64.71, including shares awarded but not yet vested.  This compares to 57,350 unexercised option shares at the end of 1Q 2019 at an average exercise price of $57.90/ share, including shares awarded but not vested. This compares

The number of shares added as a dilution factor in 1Q 2020 was 17,313 compared to 49,398 unexercised16,326 in 1Q 2019. In March 2020, 26,300 option shares outstandingwere awarded to 48 employees at September 30, 2016, at an average exercise price of $39.55/$77.05 per share. No option shares have beenoptions were awarded in 2019.  UTMD paid $1,042 ($0.280/share) in dividends to datestockholders in 2017.

In March 2020, UTMD did not repurchaserepurchased 80,000 of its shares in the open market.market at $80.32/ share. In May 2019, UTMD repurchased 5,000 shares at $79.52/ share.  No other shares were repurchased in 2019. The Company retains the strong desire and financial ability for repurchasing its shares when they seem undervalued.

ROE is the portion of NINet Income retained by UTMD to internally finance its growth, divided by the average accumulated stockholders'stockholders’ equity for the applicable time period.  Annualized ROE in 9M 2017 was 14% compared to 12% in 9M 2016.  Annualized ROE (before stockholder dividends) in 9M 20171Q 2020 was 20% compared to 18%13% and in 9M 2016.  The higher1Q 2019 was 17%. Because Net Income was the same in both periods, the lower ROE in 9M 20171Q 2020 was due to the increase in NI.much higher average Stockholders’ Equity. Targeting a high ROE of 20% (before dividends) remains a key financial objective for UTMD management. ROE can be increased by increasing NI,Net Income, or by reducing stockholders'stockholders’ equity by paying cash dividends to stockholders or by repurchasing shares.

Net cash provided by operating activities, including adjustments for depreciation and amortization and other non-cash expenses along with changes in working capital, totaled $12,323$5,674 in 9M 20171Q 2020 compared to $11,143$3,360 in 9M 2016.1Q 2019.  Since Net Income was the same in both periods, the substantial difference was due to greater amortization expense along with changes in working capital. The most significant differences in cash provided during the two periods were the $1,616 increase$158 lower ending inventories in net income,1Q 2020 compared to $2,255 higher inventories in 1Q 2019 due to the purchase of CSI Filshie device inventory in 1Q 2019, a $831 use of cash from a larger increase$231 decrease in 9M 2017 trade accounts receivable (A/R) in 1Q 2020 compared to 9M 2016, and a $575 benefit to cash from an larger$940 increase in 1Q 2019 A/R, a $218 higher increase in accrued expenses and a $359 higher increase in 9M 2017 compared to 9M 2016.

Capital expenditures for property and equipment (PP&E) were $174$454 in 9M 20171Q 2020 compared to $237$12 in 9M 2016. Capital expenditures of approximately $1.5 million1Q 2019 as UTMD invested in a state-of-art testing machine for the fit-out of the UK facility will occur in 4Q 2017.its specialized pressure transducers for its bio-pharmaceutical OEM customer, and a new molding machine for increased capacity. Depreciation of PP&E was $489$175 in 9M 20171Q 2020 compared to $452$179 in 9M 2016.

Cash dividends paid to stockholders in 1Q 2020 were $1,042 compared to $1,954$1,027 in 9M 2016.  The Company did not use cash to repurchase any of its own shares during either 9M 2017 or 9M 2016.

In 9M 2017,1Q 2020, UTMD received $224$47 and issued 6,198674 shares of its stock upon the exercise of employee and director stock options, net of 211 shares retired upon employees trading those shares in payment of the stock option exercise price.options.  Option exercises in 9M 20171Q 2020 were at an average price of $37.39$70.47 per share.  In comparison, in 9M 2016 the Company1Q 2019 UTMD received $306$97 and issued 10,0622,991 shares of its stock onupon the exercise of employee and director stock options, net of 861 shares retired upon optionees trading those shares in payment of the stock option exercise price.options.  Option exercises in 9M 20161Q 2019 were at an average price of $33.12$32.33 per share.

Management believes that current cash balances, income from operations and effective management of working capital will provide the liquidity needed to finance internal growth plans. Thesurvive the COVID-19 pandemic shutdown of the U.S. economy. As it did in 1Q 2019, the Company may utilize cash not needed to support normal operations in one or a combination of the following:  1) in general, to continue to invest at an opportune time in ways that will enhance future profitability, for example, to fit-out a UK facility and property purchased in late 2016 specific to UTMD's needs;profitability; 2) to make additional investments in new technology and/or processes; and/or 3) to acquire a product line or company that will augment revenue and EPS growth and better utilize UTMD'sUTMD’s existing infrastructure.  If there are no better strategic uses for UTMD'sUTMD’s cash, the Company will continue to return cash to stockholders in the form of dividends and share repurchases when the stock appears undervalued.

March 31, 2020 total consolidated assets were $90,675, an increase of $14,091declined $6,593 from December 31, 2016.2019 to $103,193. The increasedecline was due mainly to a $11,156 increase$3,174 decrease in cash and investments. Otherinvestments, a $489 decrease in current assets other than cash, and $2,830 lower net intangible assets. In addition to the decrease in cash which resulted from $7,468 use of cash for share repurchases and payment of stockholder dividends, significant changes in current assets from the end of 2019 included a $1,519 increase$332 decrease in consolidated net trade receivables and a $500 increase$157 decrease in consolidated inventories,inventories.

The 1Q 2020 ending lower net intangible assets resulted from amortization expense of $1,630 and a $496 increase in4.4% lower GBP/USD exchange rate on remaining Femcare IIA.  At March 31, 2020, net intangible assets. UTMD's Irelandassets including goodwill were 40% of total consolidated assets compared to 40% at year-end 2019 (because of the large reduction in cash during 1Q 2020), and 46% at March 31, 2019.

The Net Book Value (NBV) of consolidated property, plant and equipment (PP&E) fixed assets decreased $100 as a combined result of $454 in new purchases, $175 in depreciation and $379 in lower USD NBV due to ending FX rate changes.  PP&E assets in the U.S. increased $162 as investment in new manufacturing equipment exceeded

depreciation. But the NBV of PP&E OUS in USD at March 31, 2020 declined $262 in the aggregate, affected by the change in FX rates which changed significantly near the end of the quarter as a result of the COVID-19 pandemic. FX rates for Balance Sheet purposes are the applicable rates at the end of each reporting period. UTMD’s Femcare subsidiary EUR-denominatedPP&E assets in the UK and liabilitiesAustralia were $320 lower as, in addition to the UK GBP-denominated assets translated into USD at an FX rate 11.9% higher (stronger EUR)6.1% lower than the FX rate at the end of 2016. UTMD's UK2019, Australia AUD-denominated assets translated into USD at an FX rate 12.6% lower than the FX rate at the end of 2019. Because UTMD’s Canada subsidiary GBP-denominatedCAD-denominated assets were translated into USD at an FX rate 8.6% higher (stronger GBP)8.2% lower than the FX rate at the end of 2016.  UTMD's Australia subsidiary AUD-denominated assets were translated into USD at an FX rate 8.4% higher (stronger AUD)2019 in addition to depreciation, PP&E in Canada was $62 lower than the FX rate at the end of 2016.  The net book value2019. Ireland PP&E NBV increased $119 despite a 1.8% lower EUR as a result of consolidated property, plant and equipment increased $441 at September 30, 2017 from the end of 2016 due to period-ending changed FX rates, $174investment in new asset purchases and $489 in depreciation.

Working capital (current assets minus current liabilities) was $42,838$47,422 at September 30, 2017,March 31, 2020 compared to $31,845$51,438 at December 31, 2016.  A2019, and $38,625 at March 31, 2019.  Current assets declined $3,662 and current asset increase of $13,153 was led by the $11,156 increase in cash and investments. Current liabilities increased $2,161, including a $1,941 increase in accrued liabilities. The accrued liabilities increase was mainly due to the $986 3Q 2017 quarterly dividend payment to stockholders accrued but not paid until October 3, whereas the $984 4Q 2016 dividend was paid before$354 from the end of December 2016.2019. UTMD management believes that its working capital remains sufficient to meet normal operating needs, new capital expendituresinvestments and projected cash dividend payments to stockholders.

The deferred tax liability balance for the Femcare Ltd IIA ($9,084 on the date of the 2011 acquisition), was $3,176$2,008 at September 30, 2017,March 31, 2020 compared to $3,209$2,239 at December 31, 2016,2019 and $3,612$2,496 at September 30, 2016.March 31, 2019.  Reduction of the deferred tax liability occurs as the book/tax difference of IIA amortization is eliminated over the remaining useful life of the Femcare Ltd IIA. UTMD'sUTMD’s total debt ratio (total liabilities/total assets) as of September 30, 2017 andMarch 31, 2020 was 9% compared to 8% as of December 31, 2016 was 10%2019 (again, because of the 1Q 2020 reduction in cash).  UTMD'sUTMD’s total debt ratio as of September 30, 2016March 31, 2019 was 12%.

Even though the COVID-19 pandemic has significantly changed UTMD’s financial outlook as outlined in its December 31, 20162019 SEC 10-K report, UTMD'sUTMD’s operating plan for 2017 is2020 remains to

1)  exploit distribution and manufacturing synergies by further integrating capabilities and resources in its multinational operations;  

2)  focus on effectively direct marketing of the Company continues to effectively execute its plan as outlined above. Based on resultsbenefits of 9M 2017, management expects to exceed the financial objectives for the full year of 2017 as statedFilshie Clip System in the Form SEC 10-K atU.S.; 

3)  introduce additional products helpful to clinicians through internal new product development; 

4)  continue to achieve profitable overall financial operating performance and a stable working environment for employees;

5)  utilize positive cash generation to continue providing cash dividends to stockholders and make open market share repurchases if/when the beginning ofUTMD share price seems undervalued; and

6)  be vigilant for accretive acquisition opportunities which may be brought about by the year.

None.

Forward-Looking Information.   This report contains certain forward-looking statements and information relating to the Company that are based on the beliefs of management as well as assumptions made by management based on information currently available.  When used in this document, the words "anticipate," "believe," "project," "estimate," "expect," "intend"“anticipate,” “believe,” “project,” “estimate,” “expect,” “intend” and similar expressions, as they relate to the Company or its management, are intended to identify forward-looking statements.  Such statements reflect the current view of the Company respecting future events and are subject to certain risks, uncertainties and assumptions, including the risks and uncertainties stated throughout the document.  Although the Company has attempted to identify important factors that could cause the actual results to differ materially, there may be other factors that cause the forward statement not to come true as anticipated, believed, projected, expected, or intended.  Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may differ materially from those described herein as anticipated, believed, projected, estimated, expected or intended.  Financial estimates are subject to change and are not intended to be relied upon as predictions of future operating results, and the Company assumes no obligation to update or disclose revisions to those estimates.

UTMD has manufacturing and trading operations, including related assets, in the U.S. denominated in the U.S. Dollar (USD), in Ireland denominated in the Euro (EUR), in England denominated in the British Pound (GBP), in Australia denominated in the Australia Dollar (AUD), and, starting in 2017, in Canada denominated in the Canadian Dollar (CAD).  The currencies are subject to exchange rate fluctuations that are beyond the control of UTMD.  The exchange rates were .8465, .9474.9071, .8907 and .8897.8906 EUR per USD as of September 30, 2017,March 31, 2020, December 31, 20162019 and September 30, 2016,March 31, 2019, respectively.  Exchange rates were .7463, .8105.8029, .7537, and .7685.7672 GBP per USD as of September 30, 2017,March 31, 2020, December 31, 20162019 and September 30, 2016,March 31, 2019, respectively.  Exchange rates were 1.2756, 1.38291.6285, 1.4226 and 1.30441.4083 AUD per USD on September 30, 2017,March 31, 2020, December 31, 2016,2019 and September 30, 2016,March 31, 2019, respectively.  Exchange rates were 1.25131.4118, 1.2962, and 1.3644 CAD per USD on September 30, 2017.March 31, 2020, December 31, 2019, and March 31, 2019 respectively. UTMD manages its foreign currency risk without separate hedging transactions by either invoicing customers in the local currency where costs of production were incurred, by converting currencies as transactions occur, and by optimizing global account structures through liquidity management accounts.

The Company'sCompany’s management, under the supervision and with the participation of the Chief Executive Officer and the Principal Financial Officer, evaluated the effectiveness of the Company'sCompany’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of September 30, 2017.March 31, 2020. Based on this evaluation, the Chief Executive Officer and Principal Financial Officer concluded that, as of September 30, 2017,March 31, 2020, the Company'sCompany’s disclosure controls and procedures were effective.

There were no changes in the Company'sCompany’s internal controls over financial reporting that occurred during the nine monthsquarter ended September 30, 2017,March 31, 2020, that have materially affected, or are reasonably likely to materially affect, the Company'sCompany’s internal controls over financial reporting.