UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549





FORM
10-Q





Quarterly
Report Under Section 13 or 15(d) of


The
Securities Exchange Act of 1934











For
      quarter ended: September 30, 2009
            Commission
      File No. 0-11178








UTAH
MEDICAL PRODUCTS, INC.


(Exact
name of Registrant as specified in its charter)








UTAH
            87-0342734(State
      or other jurisdiction of
            (I.R.S.
      Employerincorporation
      or organization)
            Identification
      No.)








7043
South 300 West


Midvale,
Utah  84047


Address
of principal executive offices








Registrant's
telephone number:    (801)
566-1200








Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports) and; (2) has been subject to such filing requirements for
the past 90 days.   Yes x   No o





Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company.  See the definitions of “large
accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule
12b-2 of the Exchange Act.


Large
accelerated filer o                                           Accelerated
filer x                                Non-accelerated
filer o                                           Smaller
reporting company o





Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the
Act).  Yes o   No x





Indicate the number of shares
outstanding of each of the issuer’s classes of common stock as of November 4,
2009: 3,610,000.











UTAH MEDICAL PRODUCTS,
INC.


INDEX TO FORM
10-Q














PART
      I - FINANCIAL INFORMATION
            PAGEItem
      1.
            Financial
      StatementsConsolidated
      Condensed Balance Sheets as of September
      30, 2009 and December 31, 2008
            1Consolidated
      Condensed Statements of Income for the threeand nine months ended
      September 30, 2009 and September 30, 2008
            2Consolidated
      Condensed Statements of Cash Flows for thenine months ended
      September 30, 2009 and September 30, 2008
            3Notes
      to Consolidated Condensed Financial Statements
            4Item
      2.
            Management’s
      Discussion and Analysis of Financial
      Condition and Results of Operations
            6Item
      3.
            Quantitative
      and Qualitative Disclosures about Market Risk
            10Item
      4.
            Controls
      and Procedures
            10PART
      II – OTHER INFORMATIONItem
      1A.
            Risk
      Factors
            11Item
      2.
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            11Item
      6.
            Exhibits
            11SIGNATURES
            11










PART
      I  -  FINANCIAL INFORMATIONItem
      1.  Financial StatementsUTAH MEDICAL PRODUCTS,
      INC. AND SUBSIDIARIESCONSOLIDATED CONDENSED
      BALANCE SHEETS AS OFSEPTEMBER 30, 2009 AND
      DECEMBER 31, 2008(in
      thousands)  (unaudited)
              
              
              (audited)ASSETS
              
              SEPTEMBER 30, 2009
              
              
              DECEMBER 31, 2008Current
      assets:Cash
              
              $
              1,214
              
              
              $
              97Investments,
      available-for-sale
              
              
              17,755
              
              
              
              15,927Accounts
      & other receivables - net
              
              
              3,183
              
              
              
              3,517Inventories
              
              
              3,862
              
              
              
              3,275Other
      current assets
              
              
              450
              
              
              
              463Total
      current assets
              
              
              26,464
              
              
              
              23,280Property
      and equipment - net
              
              
              8,317
              
              
              
              8,127Goodwill
              
              
              7,191
              
              
              
              7,191Other
      intangible assets
              
              
              2,659
              
              
              
              2,653Other
      intangible assets - accumulated amortization
              
              
              (2,453
              )
              
              
              (2,430
              )Other
      intangible assets - net
              
              
              205
              
              
              
              223TOTAL
              
              $
              42,178
              
              
              $
              38,821LIABILITIES AND
      STOCKHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable
              
              $
              382
              
              
              $
              418Accrued
      expenses
              
              
              2,351
              
              
              
              1,086Current
      portion of note payable
              
              
              262
              
              
              
              265Total
      current liabilities
              
              
              2,995
              
              
              
              1,768Note
      payable
              
              
              1,465
              
              
              
              1,828Deferred
      income taxes
              
              
              429
              
              
              
              420Total
      liabilities
              
              
              4,889
              
              
              
              4,016Stockholders'
      equity:Preferred
      stock - $.01 par value; authorized - 5,000shares; no shares issued
      or outstanding
              
              
              -
              
              
              
              -Common
      stock - $.01 par value; authorized - 50,000shares; issued -
      September 30, 2009, 3,610 shares and December 31, 2008, 3,603
      shares
              
              
              36
              
              
              
              36Accumulated
      other comprehensive income
              
              
              (941
              )
              
              
              (1,122
              )Retained
      earnings
              
              
              38,194
              
              
              
              35,892Total
      stockholders' equity
              
              
              37,289
              
              
              
              34,805TOTAL
              
              $
              42,178
              
              
              $
              38,821





see
notes to consolidated condensed financial statements


-1-
  UTAH MEDICAL PRODUCTS,
      INC. AND SUBSIDIARIESCONSOLIDATED CONDENSED
      STATEMENTS OF INCOME FOR THETHREE AND NINE MONTHS
      ENDED SEPTEMBER 30, 2009 AND SEPTEMBER 30, 2008(in
      thousands, except per share amounts - unaudited)THREE
      MONTHS ENDED
              
              
              NINE MONTHS
      ENDEDSEPTEMBER
      30,
              
              
              SEPTEMBER
      30,2009
              
              
              2008
              
              
              2009
              
              
              2008Sales,
      net
              
              $
              6,673
              
              
              $
              7,181
              
              
              $
              19,424
              
              
              $
              21,185Cost
      of goods sold
              
              
              3,174
              
              
              
              3,244
              
              
              
              9,089
              
              
              
              9,578Gross
      profit
              
              
              3,500
              
              
              
              3,937
              
              
              
              10,335
              
              
              
              11,608Operating
      expenseSelling,
      general and administrative
              
              
              1,018
              
              
              
              897
              
              
              
              3,006
              
              
              
              3,147Research
      & development
              
              
              97
              
              
              
              100
              
              
              
              273
              
              
              
              282Total
              
              
              1,116
              
              
              
              997
              
              
              
              3,279
              
              
              
              3,429Operating
      income
              
              
              2,384
              
              
              
              2,940
              
              
              
              7,056
              
              
              
              8,178Other
      income (expense)
              
              
              61
              
              
              
              (213
              )
              
              
              148
              
              
              
              179Income
      before provision for income taxes
              
              
              2,445
              
              
              
              2,727
              
              
              
              7,204
              
              
              
              8,357Provision
      for income taxes
              
              
              830
              
              
              
              908
              
              
              
              2,493
              
              
              
              2,729Net
      income
              
              $
              1,615
              
              
              $
              1,820
              
              
              $
              4,711
              
              
              $
              5,628Earnings
      per common share (basic)
              
              $
              0.45
              
              
              $
              0.47
              
              
              $
              1.31
              
              
              $
              1.45Earnings
      per common share (diluted)
              
              $
              0.44
              
              
              $
              0.47
              
              
              $
              1.30
              
              
              $
              1.44Shares
      outstanding - basic
              
              
              3,609
              
              
              
              3,864
              
              
              
              3,606
              
              
              
              3,875Shares
      outstanding - diluted
              
              
              3,642
              
              
              
              3,900
              
              
              
              3,624
              
              
              
              3,915





see
notes to consolidated condensed financial statements


-2-
  UTAH MEDICAL PRODUCTS,
      INC. AND SUBSIDIARIESCONSOLIDATED CONDENSED
      STATEMENTS OF CASH FLOWSFOR THE NINE MONTHS
      ENDED SEPTEMBER 30, 2009 AND SEPTEMBER 30, 2008(in
      thousands - unaudited)SEPTEMBER
      30,2009
              
              
              2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income
              
              $
              4,711
              
              
              $
              5,628Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
      and amortization
              
              
              433
              
              
              
              447(Gain)
      loss on investments
              
              
              (199
              )
              
              
              29Provision
      for (recovery of) losses on accounts receivable
              
              
              6
              
              
              
              (43
              )Deferred
      income taxes
              
              
              -
              
              
              
              (165
              )(Gain)
      loss on disposal of assets
              
              
              -
              
              
              
              0Stock-based
      compensation expense
              
              
              75
              
              
              
              97Changes
      in operating assets and liabilities:Accounts
      receivable - trade
              
              
              385
              
              
              
              147Accrued
      interest and other receivables
              
              
              (45
              )
              
              
              86Inventories
              
              
              (546
              )
              
              
              (429
              )Prepaid
      expenses and other current assets
              
              
              (7
              )
              
              
              9Accounts
      payable
              
              
              (37
              )
              
              
              151Accrued
      expenses
              
              
              431
              
              
              
              (35
              )Total
      adjustments
              
              
              497
              
              
              
              292Net
      cash provided by operating activities
              
              
              5,207
              
              
              
              5,920CASH
      FLOWS FROM INVESTING ACTIVITIES:Capital
      expenditures for:Property
      and equipment
              
              
              (437
              )
              
              
              (189
              )Intangible
      assets
              
              
              (6
              )
              
              
              (6
              )Purchases
      of investments
              
              
              (2,600
              )
              
              
              (2,250
              )Proceeds
      from the sale of investments
              
              
              1,016
              
              
              
              1,908Net
      cash provided by (used in) investing activities
              
              
              (2,028
              )
              
              
              (536
              )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from issuance of common stock - options
              
              
              104
              
              
              
              224Common
      stock purchased and retired
              
              
              (116
              )
              
              
              (1,908
              )Tax
      benefit attributable to exercise of stock options
              
              
              16
              
              
              
              51Repayments
      of note payable
              
              
              (428
              )
              
              
              (1,502
              )Payment
      of dividends
              
              
              (1,658
              )
              
              
              (2,625
              )Net
      cash used in financing activities
              
              
              (2,081
              )
              
              
              (5,760
              )Effect
      of exchange rate changes on cash
              
              
              19
              
              
              
              9NET
      INCREASE (DECREASE) IN CASH
              
              
              1,117
              
              
              
              (367
              )CASH
      AT BEGINNING OF PERIOD
              
              
              97
              
              
              
              1,251CASH
      AT END OF PERIOD
              
              $
              1,214
              
              
              $
              883SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Cash
      paid during the period for income taxes
              
              $
              2,305
              
              
              $
              2,525Cash
      paid during the period for interest
              
              
              40
              
              
              
              167





see
notes to consolidated condensed financial statements


-3-





UTAH MEDICAL PRODUCTS,
INC.


NOTES TO CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS


(unaudited)





(1)       The
unaudited financial statements have been prepared in accordance with the
instructions to form 10-Q and do not include all of the information and note
disclosures required by accounting principles generally accepted in the United
States.  These statements should be read in conjunction with the
financial statements and notes included in the Utah Medical Products, Inc.
("UTMD" or "the Company") annual report on form 10-K for the year ended December
31, 2008.  In the opinion of management, the accompanying financial
statements include all adjustments (consisting only of normal recurring
adjustments) necessary to summarize fairly the Company's financial position and
results of operations.  Dollar amounts are in thousands except
per-share amounts, and where noted.





(2)      Inventories
at September 30, 2009 and December 31, 2008 consisted of the
following:





September
      30,
            
            
            December
      31,2009
            
            
            2008Finished
      goods
            
            $
            1,347
            
            
            $
            1,353Work-in-process
            
            
            1,066
            
            
            
            817Raw
      materials
            
            
            1,449
            
            
            
            1,105Total
            
            $
            3,862
            
            
            $
            3,275





(3)      Stock-Based
Compensation.  At September 30, 2009 the Company had stock-based
employee compensation plans, which authorized the grant of stock options to
eligible employees and directors.  The Company accounts for stock
compensation under Statement of Financial Accounting Standards 123R, Share-Based
Payment.  This statement requires the Company to recognize
compensation cost based on the grant date fair value of options granted to
employees and directors.  In the quarters ended September 30, 2009 and
2008, the Company recognized $22 and $33, respectively, in stock-based
compensation cost.   In the nine months ended September 30, 2009
and 2008, the Company recognized $75 and $97, respectively, in stock-based
compensation cost.





(4)       Comprehensive
Income.  Comprehensive income for the third quarter (3Q) and first
nine months (9M) of 2009 was $1,771 and $4,832, net of taxes,
respectively.  The components used to calculate comprehensive income
were foreign currency translation adjustments of $70 and $93 in 3Q and 9M 2009,
respectively, and unrealized holding gains of $86 and $29 in 3Q and 9M
2009, respectively.





(5)      Warranty
Reserve.   The Company accrues provisions for estimated costs
that may be incurred for product warranties and uncollectible
accounts.  The amount of the provision is adjusted, as required, to
reflect historical experience.  The following table summarizes changes
to UTMD’s warranty reserve during 3Q 2009:





Beginning
      Balance, July 1, 2009
            
            $
            0Changes in Warranty Reserve during 3Q
      2009:Aggregate
      reductions for warranty repairs
            
            
            -Aggregate
      changes for warranties issued during reporting period
            
            
            -Aggregate
      changes in reserve related to preexisting warranties
            
            
            -Ending
      Balance, September 30, 2009
            
            $
            0







(6)      Investments.  As
of September 30, 2009, the Company’s investments were held in Fidelity Cash
Reserves (FDRXX), Fidelity Inst MMKT Port CL 1 (FMPXX), Citigroup (C) and
General Electric (GE).  Changes in the unrealized holding gain/loss on
investment securities available-for-sale and reported as a separate component of
accumulated other comprehensive income are as follows:


3Q 2009
            
            
            
            3Q 2008Balance,
      beginning of period
            
            $
            (307
            )
            
            $
            (415
            )Realized
      loss from securities included in beginning balance
            
            
            96
            
            
            
            266Gross
      unrealized holding gains (losses), in equity securities
            
            
            45
            
            
            
            56Deferred
      income taxes on unrealized holding loss
            
            
            (55
            )
            
            
            (21
            )Balance,
      end of period
            
            $
            (221
            )
            
            $
            (114
            )




-4-





(7)    
 Fair Value Measurements.  In September 2006, the Financial
Accounting Standards Board (“FASB”) issued Statement of Financial Accounting
Standards (“SFAS”) No. 157 “Fair
Value Measurements.”   This statement defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles and expands disclosures about fair value
measurements.  SFAS 157 is effective for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal
years.  UTMD adopted the requirements of SFAS 157 on January 1,
2008.







The
following table provides financial assets carried at fair value measured as of
September 30, 2009:




Fair
      Value Measurements UsingDescription
            Total Fair Value at
              9/30/2009
            Quoted
      Prices in Active
              Markets
      for Identical Assets
              (Level 1)
            Significant
      Other
              Observable
      Inputs
              (Level 2)
            Significant
              Unobservable
      Inputs
              (Level 3)Available-for-sale
      securities
            $
      17,755
            $
      17,755
            $  0
            $  0







(8)     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” 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
noted throughout this 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.


General risk factors that may impact
the Company’s revenues include the market acceptance of competitive products;
administrative practices of group purchasing organizations; obsolescence caused
by new technologies; the possible introduction by competitors of new products
that claim to have many of the advantages of UTMD’s products at lower prices;
the timing and market acceptance of UTMD’s own new product introductions;
changes in clinical practices; UTMD’s ability to efficiently and responsively
manufacture its products; including the possible effects of lack of performance
of suppliers; opportunities in gaining access to important global distribution
channels; budgetary constraints; the timing of regulatory approvals for newly
introduced products; regulatory intervention in current operations; and third
party reimbursement of health care costs of patients.


Negative factors that may adversely
impact future performance include managed care reforms or hospital group buying
agreements that may limit physicians’ ability to choose certain products or
procedures, new products introduced by other companies that displace UTMD’s
products, new product regulatory approval delays, changes in the Company’s
relationships with, or lack of performance of, its distribution partners, and
loss of key personnel.


The length of time and number of
administrative steps required in adopting new products for use in hospitals has
grown substantially in recent years.  As a potential negative factor
to future performance, as UTMD introduces new products it believes are safer and
more effective, it may find itself excluded from certain customers because of
the existence of long term supply agreements for preexisting
products.  UTMD may also be unable to establish viable relationships
with other medical device companies that do have access to users but lack an
interest in the Company’s approach or present unreasonable burdens.


Risk factors, in addition to the risks
outlined in the previous paragraphs and elsewhere in this report that may impact
the Company’s assets and liabilities, as well as cash flows, include: risks
inherent to companies manufacturing products used in healthcare, including
claims resulting from the improper use of devices and other product liability
claims; defense of the Company’s intellectual property and infringement claims
of others; productive use of assets in generating revenues; management of
working capital, including inventory levels required to meet delivery
commitments at a minimum cost; and timely collection of accounts
receivable.


Additional risk factors that may affect
non-operating income include: the continuing viability of the Company’s
technology license agreements; actual cash and investment balances; asset
dispositions; and acquisition activities that may or may not require external
funding.





-5-





Item 2.  Management's Discussion and Analysis
of Financial Condition and Results of Operations





General


UTMD manufactures and markets a
well-established range of primarily single-use specialty medical
devices.  The Company’s Form 10-K Annual Report for the year ended
December 31, 2008 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.  A pictorial display as well as description of UTMD’s devices
is available on the Company’s website www.utahmed.com.


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.  Dollar amounts in the report are in thousands, except
per-share amounts or where otherwise noted.





Analysis
of Results of Operations


a)   Overview


In third quarter (3Q) 2009, UTMD’s
consolidated global sales were 7% lower than in 3Q 2008.  3Q 2009
earnings per share (EPS) were $.443 compared to $.467 EPS in 3Q
2008.  UTMD achieved the following profitability as a ratio of sales
in 3Q 2009 and 3Q 2008:


3Q 09
            
            
            
            3Q 08Gross
      Profit Margin:
            
            
            52.4
            %
            
            
            54.8
            %Operating
      Profit Margin:
            
            
            35.7
            %
            
            
            40.9
            %Net
      Income Margin:
            
            
            24.2
            %
            
            
            25.3
            %





For the first nine months (9M) of
2009, UTMD’s total sales were down 8% compared to 9M 2008. 9M 2009 EPS were
$1.300 compared to $1.438 EPS in 9M 2008.  UTMD achieved the following
profitability as a ratio of sales in 9M 2009 and 9M 2008:


9M 09
            
            
            
            9M 08Gross
      Profit Margin:
            
            
            53.2
            %
            
            
            54.8
            %Operating
      Profit Margin:
            
            
            36.3
            %
            
            
            38.6
            %Net
      Income Margin:
            
            
            24.3
            %
            
            
            26.6
            %


b)     Revenues


The Company recognizes revenue at the
time of shipment as title generally passes to the customer at that
time.  Revenue recognized by UTMD is based upon documented
arrangements and fixed contracts in which the selling price is fixed prior to
completion of an order.  Revenue from product and service sales is
generally recognized at the time the product is shipped or service completed and
invoiced, and collectibility is reasonably assured.  There are
circumstances under which revenue may be recognized when product is not shipped,
which meet the criteria of SAB 104:  the Company provides engineering
services, for example, design and production of manufacturing tooling that may
be used in subsequent UTMD manufacturing of custom components for other
companies.  This revenue is recognized when UTMD’s service has been
completed according to a fixed contractual agreement.


Total sales were 7% lower in 3Q 2009
compared to 3Q 2008. Domestic sales were 5% lower while international sales were
12% lower.  Domestic sales were comprised of domestic OEM sales (sales
of components to other companies for use in their products) down 4% and domestic
direct sales (sales of finished devices to users or distributors) down
5%.  The primary reason for the lower international sales was the
cessation of purchases of custom blood pressure monitoring kits by UTMD’s
largest international customer. Domestic OEM sales and international sales have
an uneven quarter-to-quarter sales pattern because customers tend to purchase
several months’ supply of products at a time to minimize costs.


Total 9M 2009 global sales were
$1,762 (8%) lower than in 9M 2008.  9M 2009 international sales were
$1,253 (19%) lower.  UTMD’s largest international customer in 9M 2008
purchased $1,302 of custom BPM kits compared to zero in 9M
2009.  Because these kits were assembled by UTMD Ltd., trade shipments
from UTMD’s Ireland facility to international customers were down 24% in US
Dollar terms and 16% in EURO terms compared to 9M 2008.


For 9M 2009, domestic sales,
comprised of direct sales to finished device end-users and sales of OEM
components to other companies, were down 4% and 3%, respectively, compared to 9M
2008.  Domestic direct sales of obstetric devices, the product
category most affected by restrictive GPO agreements, declined
$498.  Domestic direct sales of neonatal devices decreased $62, and
domestic direct gyn/electrosurgery sales increased $66.  Domestic
direct sales of hospital products were down as a result of increased
competition, lower prices and Group Purchasing Organizations (GPOs) which
restrict hospital member purchase options. UTMD’s objective is to replace sales
lost due to increased competition by continued development of unique products
that provide significant improvements in patient safety and effectiveness of
care.  U.S. OEM sales by UTMD’s Oregon molding facility declined $61
(18%), while OEM sales from UTMD’s Utah facility increased $28
(+4%).





-6-





The
following table provides the actual sales dollar amounts by general product
category for total sales and the subset of international sales:





Global
revenues by product category:


3Q 2009
            
            
            
            3Q 2008
            
            
            
            9M 2009
            
            
            
            9M 2008Obstetrics
            
            $
            1,624
            
            
            $
            1,771
            
            
            $
            4,836
            
            
            $
            5,393Gynecology/
      Electrosurgery/ Urology
            
            
            1,573
            
            
            
            1,573
            
            
            
            4,806
            
            
            
            4,730Neonatal
            
            
            1,902
            
            
            
            1,942
            
            
            
            5,483
            
            
            
            5,457Blood
      Pressure Monitoring and Accessories*
            
            
            1,574
            
            
            
            1,895
            
            
            
            4,298
            
            
            
            5,605Total:
            
            $
            6,673
            
            
            $
            7,181
            
            
            $
            19,424
            
            
            $
            21,185


*includes molded components sold to
OEM customers.





International
revenues by product category:


3Q 2009
            
            
            
            3Q 2008
            
            
            
            9M 2009
            
            
            
            9M 2008Obstetrics
            
            $
            122
            
            
            $
            116
            
            
            $
            344
            
            
            $
            402Gynecology/
      Electrosurgery/ Urology
            
            
            535
            
            
            
            524
            
            
            
            1,698
            
            
            
            1,693Neonatal
            
            
            255
            
            
            
            211
            
            
            
            714
            
            
            
            625Blood
      Pressure Monitoring and Accessories*
            
            
            1,005
            
            
            
            1,320
            
            
            
            2,676
            
            
            
            3,966Total:
            
            $
            1,916
            
            
            $
            2,171
            
            
            $
            5,432
            
            
            $
            6,686


*includes molded components sold to
Int’l OEM customers.





UTMD’s sales depend on its continued
ability to retain medical staff involvement in purchasing decisions for UTMD’s
“physician-preference” products used in U.S. hospitals where administrators are
increasingly making the product decisions, expanded clinical acceptance of its
newer specialty products, release of new products after FDA concurrence with
premarketing submissions and continued development of UTMD’s international
distribution channels.





c)   Gross
Profit


UTMD’s average gross profit margin
(GPM), gross profits as a percentage of sales, was 52.4% and 53.2% in 3Q and 9M
2009, respectively, compared to 54.8% in both 3Q and 9M 2008.  As a
result of the combination of lower sales and lower GPM, gross profits declined
$437 (11%) in 3Q 2009 and $1,273 (11%) in 9M 2009 compared to the same periods
in 2008. The lower GPM were substantially due to lower absorption of fixed costs
on lower sales volume.  After adjustments which were made in 3Q, the
Company is currently targeting gross profits for the year of 2009 as a whole to
be down 8-9% from 2008.


OEM sales are sales of UTMD
components and subassemblies that are marketed by other companies as part of
their product offerings.  UTMD utilizes OEM sales as a means to help
optimize utilization of its capabilities established to satisfy its direct sales
business.  As a general rule, prices for OEM sales expressed as a
multiple of direct variable manufacturing expenses are lower than for direct
sales because, in the OEM and international channels, UTMD’s business partners
incur significant expenses of sales and marketing.  Because of UTMD’s
small size and period-to-period fluctuations in OEM business, fixed
manufacturing overhead expenses cannot be meaningfully allocated between direct
and OEM sales. Therefore, UTMD does not report GPM by sales
channels.





d)    Operating
Profit


Operating
Profit, or income from operations, is the profit remaining after subtracting
operating expenses from gross profits.  Operating expenses include
sales and marketing (S&M), research and development (R&D) and general
and administrative (G&A) expenses.  Operating expenses in 3Q 2009
were $119 higher than in 3Q 2008, because of the $250 reduction in 2008
management bonus accrual representing the elimination of the CEO’s 2008 annual
bonus which occurred in 3Q 2008.  Operating expenses in 9M 2009 were
$151 lower than in 9M 2008.  The lower 9M operating expenses resulted
from lower domestic sales expenses, which were lower in approximately the same
proportion as lower sales.  9M G&A and R&D expenses were about
the same as in 9M 2008.  Please see the table below.





-7-








UTMD’s operating profit margin in 3Q
2009 was 35.7% compared to 40.9% in 3Q 2008, and 36.3% in 9M 2009 compared to
38.6% in 9M 2008.  UTMD is currently targeting an operating profit
margin for the whole year of 2009 at 36%.





3Q 2009
            
            
            
            3Q 2008
            
            
            
            9M 2009
            
            
            
            9M 2008S&M
      Expense
            
            $
            389
            
            
            $
            457
            
            
            $
            1,218
            
            
            $
            1,365R&D
      Expense
            
            
            97
            
            
            
            100
            
            
            
            273
            
            
            
            282G&A
      Expense
            
            
            630
            
            
            
            439
            
            
            
            1,788
            
            
            
            1,782Total
      Operating Expenses:
            
            $
            1,116
            
            
            $
            996
            
            
            $
            3,279
            
            
            $
            3,429


Note:
Option compensation expense included in G&A expenses in 3Q 2009 was $22
compared to $33 in 3Q 2008, and $75 in 9M 2009 compared to $97 in 9M
2008.





e)  Non-operating income
(expense)


Non-operating income in 3Q 2009 was
$61 compared to non-operating expense of $213 in 3Q 2008, and $148 in 9M 2009
compared to $179 in 9M 2008.  The $274 difference in 3Q was due
primarily to realizing a net capital loss of $428 on investments in 3Q
2008.  UTMD did not receive royalty income in 3Q or 9M 2009 compared
to $113 in 3Q and $337 in 9M 2008.  UTMD received $71 in 3Q 2009
compared to $154 in 3Q 2008, and $194 in 9M 2009 compared to $419 in 9M 2008 in
interest, dividends and capital gains/losses income from investing cash
balances.  The declines were primarily due to the fact that interest
rates in the U.S. have declined substantially compared to one year
ago.


In 3Q and 9M 2009, UTMD had interest
expenses of $11 and $40, respectively, compared to $41 and $168 in 3Q and 9M
2008, due to lower interest rates on its loan in Ireland, lower average Ireland
loan balances and favorable foreign exchange conversion as a result of a
stronger US Dollar. The interest expense resulted from UTMD’s Ireland facility
borrowing 4,500 EURO (€) in December 2005 to allow the repatriation of profits
generated by its Ireland operations between 1996 and 2005.  The loan
is being paid by the Ireland subsidiary from profits generated
there.  The loan balance as of September 30, 2009 was €1,182 EURO, so
about 74% of the loan has been repaid.  Management currently estimates
that total 2009 non-operating income will be about $200 lower than in
2008.  The actual amount of 2009 non-operating income may be lower if
UTMD utilizes current cash and investment balances for an acquisition,
unexpected litigation costs or substantial share
repurchases.





f)    Earnings
Before Income Taxes


Earnings before income taxes (EBT) in
3Q 2009 were $2,445 compared to $2,727 in 3Q 2008.  EBT in 9M 2009
were $7,204 compared to $8,357 in 9M 2008.  EBT margins (EBT divided
by sales) were 36.6% and 37.1% in 3Q and 9M 2009, respectively, compared to
38.0% and 39.5% in 3Q and 9M 2008, respectively.





g)  Net Income and Earnings
per Share


UTMD’s net income was $1,615 in 3Q
2009 compared to $1,820 in 3Q 2008, and $4,711 in 9M 2009 compared to $5,628 in
9M 2008.  Net profit margins (NPM), which are net income (after tax)
expressed as a percentage of sales, were 24.2% in 3Q 2009 compared to 25.3% in
3Q 2008, and 24.3% in 9M 2009 compared to 26.6% in 9M 2008.  The
income tax provision rates in 3Q and 9M 2009 were 34.0% and 34.6% of EBT,
respectively, compared to 33.3% and 32.7% in 3Q and 9M 2008.  The
lower tax provision rate in 2008 resulted primarily from refunds on amended
2004-2006 income tax returns in Ireland.  UTMD expects its
consolidated income tax provision rate for the year of 2009 will be between one
and two percentage points higher than for 2008, which was 33.1% for the
year.


UTMD’s net income divided by weighted
average outstanding shares for the applicable reporting period, diluted for
unexercised employee and director options, provides earnings per share (EPS) as
follows:




3Q 2009
            
            
            
            3Q 2008
            
            
            
            9M 2009
            
            
            
            9M 2008Earnings
      Per Share (EPS)
            
            $
            .443
            
            
            $
            .467
            
            
            $
            1.300
            
            
            $
            1.438Shares
      (000), Diluted
            
            
            3,642
            
            
            
            3,900
            
            
            
            3,624
            
            
            
            3,915




The Company did not repurchase any of
its shares in the open market in 3Q 2009, and has repurchased 5,367 shares in 9M
2009.  Exercises of employee options added 4,000 and 13,000 shares in
3Q and 9M 2009 respectively (net of 2,100 shares swapped in 9M by individuals in
payment of the exercise price of the options).  Options outstanding at
September 30, 2009 were 243,800 shares at an average exercise price of $23.94
per share, including shares awarded but not vested.





-8-




Increases and decreases in UTMD’s
stock price impact EPS as a result of the dilution calculation for unexercised
options with exercise prices below the average stock market value during each
period.  The dilution calculation added 33,000 and 17,600 shares to
actual weighted average shares outstanding in 3Q and 9M 2009 respectively,
compared to 36,100 and 39,200 in 3Q and 9M 2008.  Actual outstanding
common shares as of the end of 3Q 2009 were 3,610,400 compared to 3,856,900 at
the end of 3Q 2008.





h)  Return on
Equity


Return on equity (ROE) is the portion
of net income retained by UTMD (after payment of dividends) to internally
finance its growth, divided by the average accumulated shareholder equity for
the applicable time period.  Annualized ROE (after payment of
dividends) for 9M 2009 was 8% compared to 10% for 9M 2008.  The lower
ROE in 9M 2009 was due primarily to lower net profits.  UTMD expects
ROE for the remainder of 2009 comparable to the 8% achieved for 9M 2009 as a
result of lower net profits, higher dividends and higher average shareholder
equity.





Liquidity
and Capital Resources


i)    Cash
flows


Net cash provided by operating
activities, including adjustments for depreciation and other non-cash operating
expenses along with changes in working capital totaled $5,207 in 9M 2009
compared to $5,920 in 9M 2008.  The lower amount is due to lower net
income thus far in 2009.  Other significant differences were a $466
benefit to cash from higher accrued expenses and a $238 benefit from lower
accounts receivable in 9M 2009, partially offset by a $228 higher use of cash
from gains on investments.


The Company’s use of cash for
investing activities was primarily as a result of purchases of short-term
investments, in an effort to maximize returns on excess cash balances while
maintaining safety and liquidity.  Capital expenditures for property
and equipment were $437 in 9M 2009 compared to $189 in 9M 2008.  In
addition to investing in new property and equipment required to keep facilities,
equipment and tooling in good working condition, UTMD has embarked on some
longer term new facilities, equipment and technology investments which will more
than double capital spending in 2009 compared to recent years.


In 9M 2009, UTMD received $104 and
issued 13,027 shares of stock upon the exercise of employee stock
options.  Option exercises in 9M 2009 were at an average price of
$10.42 per share.  Employees exercised a total of 15,172 option shares
in 9M 2009, with 2,145 shares immediately being retired as a result of the
individuals trading the shares in payment of the exercise price of the
options.  For comparison, the Company received $224 from issuing
18,369 shares of stock on the exercise of employee stock options in 9M 2008, net
of 1,800 shares retired upon employees trading those shares in payment of the
stock option exercise price.  The Company repurchased 5,367 shares of
its stock in the open market at a cost of $116 during 9M 2009, an average cost
of $21.58 per share including commissions and fees.  For comparison,
UTMD repurchased 66,806 shares of stock in the open market at a cost of $1,908
during 9M 2008.


UTMD Ltd. (Ireland subsidiary) made
payments of $428 on its note payable during 9M 2009, compared to $1,502 in 9M
2008.  UTMD paid $1,658 in cash dividends in 9M 2009 compared to
$2,625 in 9M 2008.


Management believes that future
income from operations and effective management of working capital will provide
the liquidity needed to finance internal growth plans.  The Company
may continue to use cash for marketing or product manufacturing rights to
broaden the Company's product offerings; for continued share repurchases when
the price of the stock is undervalued; and if available for a reasonable price,
acquisitions that may strategically fit UTMD’s business and be accretive to
performance.





j)    Assets and
Liabilities


September 30, 2009 total assets were
$3,357 higher than at December 31, 2008.  Changes include a $2,945
increase in cash and investments, a $587 increase in inventories, a $334
decrease in accounts and other receivables and a $13 decrease in other current
assets.  Inventories increased substantially compared to the end of
2008 as a result of the first quarter 2009 one-time annual purchases of certain
raw materials to take advantage of discounts offered by vendors for purchasing
in bulk, and an increase in WIP/FG inventory resulting from keeping excess labor
capacity productive during the soft demand first half.  Inventory
balances during the remainder of 2009 should decline.  UTMD management
retains a target of 4.0 inventory turns.


Working capital was $23,469 at
September 30, 2009, $1,957 higher than at 2008 year-end.  Working
capital continues substantially in excess of UTMD’s normal operating
needs.  UTMD’s current ratio was 8.8 on September 30, 2009, compared
to 13.2 at year-end 2008 and 9.6 on September 30, 2008.





-9-




Net property and equipment increased
$190 in 9M 2009 after purchases of $437, offset by depreciation of
$409.  Goodwill resulting from prior acquisitions remained the same.
Net intangible assets excluding goodwill decreased $18 as a result of
amortization of intellectual property of $24 offset by additions of intangibles
of $6.  At September 30, 2009, net intangible assets including
goodwill were 18% of total assets, compared to 19% at year-end
2008.


UTMD’s long term liabilities are
comprised of the Ireland note payable ($1,465 on September 30, 2009) and
deferred income taxes ($429 on September 30, 2009).  As of December
31, 2008, the respective long term liabilities were $1,828 and
$420.  The note payable, denominated in Euros, declined $363 in USD
book value despite actual principal payments of $428 because the USD decreased
in value against the Euro.  In Euros, the note declined 16% from
€1,485 to €1,182 (both in thousands) during the nine month period.  As
of September 30, 2009, UTMD’s total debt ratio (total liabilities/ total assets)
was 10% compared to 12% on December 31, 2008.


UTMD does not have any off-balance
sheet arrangements that have or are reasonably likely to have a current or
future effect on its financial condition, changes in financial condition,
revenues or expenses.





k)     Management's
Outlook.


Although UTMD’s management objectives
for 2009 remain the same as listed in its December 31, 2008 10-K and ensuing
10-Q Reports, the Company currently projects a decline in sales of 6-7%, in
gross profit of 8-9%, in operating profit of 10-11%, in net profit of 13-14% and
in eps of 7-8% for the 2009 year as a whole compared to the full year of
2008.





l)     Accounting
Policy Changes.


None.








Item 3. Quantitative and Qualitative
Disclosures about Market Risk





UTMD has manufacturing
operations, including related assets, in Ireland denominated in the EURO, and
sells products under agreements denominated in various Western European
currencies.  The EURO and other currencies are subject to exchange
rate fluctuations that are beyond the control of UTMD.  The exchange
rate was 0.6840 EURO per USD as of September 30, 2009, and 0.6940 EURO per USD
as of September 30, 2008.  UTMD manages its foreign currency risk
without separate hedging transactions by converting currencies to USD as
transactions occur.








Item
4. Controls and Procedures





The
company’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’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, 2009. Based on this evaluation, the Chief Executive Officer and
Principal Financial Officer concluded that, as of September 30, 2009, the
company’s disclosure controls and procedures were effective.


There were no changes in
the company’s internal controls over financial reporting that occurred during
the quarter ended September 30, 2009, that have materially affected, or are
reasonably likely to materially affect, the company’s internal controls over
financial reporting.




-10-





PART II -
OTHER INFORMATION





Item
1A. Risk Factors





In addition to the other information
set forth in this report, investors should carefully consider the factors
discussed in Part I, “Item 1A. Risk Factors” in UTMD’s Annual Report on Form
10-K for the year ended December 31, 2008, which could materially affect its
business, financial condition or future results.  The risks described
in the Annual Report on Form 10-K are not the only risks facing the
Company.  Additional risks and uncertainties not currently known to
UTMD or currently deemed to be immaterial also may materially adversely affect
the Company’s business, financial condition and/or operating
results.








Item
2.  Unregistered Sales of Equity Securities and Use of
Proceeds





UTMD did not purchase any of its own
securities during 3Q 2009.








Item
6.  Exhibits





Exhibit
      #
            SEC
              Reference
      #
            Title of
      Document1
            31
            Certification
      of CEO pursuant to Rule 13a-14(a) as adopted pursuant to Section 302 of
      the Sarbanes-Oxley Act of 20022
            31
            Certification
      of Principal Financial Officer pursuant to Rule 13a-14(a) as adopted
      pursuant to Section 302 of the Sarbanes-Oxley Act of
  20023
            32
            Certification
      of CEO pursuant to 18 U.S.C. §1350, as Adopted Pursuant to Section 906 of
      the Sarbanes-Oxley Act of 20024
            32
            Certification
      of Principal Financial Officer pursuant to 18 U.S.C. §1350, as Adopted
      Pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002








SIGNATURES





Pursuant
to the requirements of the Securities Exchanges Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.








UTAH MEDICAL PRODUCTS,
      INC.REGISTRANTDate:
      11/5/09
            By:
            /s/
      Kevin L. CornwellKevin
      L. CornwellCEODate:
      11/5/09
            By:
            /s/
      Paul O.
      RichinsPaul
      O. RichinsPrincipal
      Financial Officer






-11-