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, 2007 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. Dollar amounts in the report are in thousands, except per-share amounts or where otherwise noted.

Given the recent crisis in credit markets, the dramatic change in the value of the EURO vis-à-vis the U.S. Dollar and the apparent serious concern regarding a significant recession that may affect the order patterns of customers, UTMD is not able to provide a projection for the remainder of 2008 in this report.

Analysis of Results of Operations

a) Overview

In third quarter (3Q) 2008, UTMD's consolidated global sales were 1% higher than in 3Q 2007, and represented the highest sales for a calendar quarter to date in 2008. 3Q 2008 earnings per share (EPS) were $.467 compared to $.508 EPS in 3Q 2007. UTMD achieved the following profitability measures for 3Q 2008 and 3Q 2007:

                                                3Q 08 3Q 07
                       Gross Profit Margin:     54.8% 56.0%
                       Operating Profit Margin: 40.9% 38.3%
                       Net Income Margin:       25.3% 28.5%

The most significant difference in performance comparing 3Q 2008 with 3Q 2007 was due to a change in non-operating income. In 3Q 2008, UTMD recorded non-operating expense of $213, compared to non-operating income of $365 in 3Q 2007. The $578 difference was due to realizing a net capital loss of $428 on investments and lower interest rates on cash balances. As an offset to the capital loss, UTMD reduced the management bonus reserve for 2008 by $250, representing an estimate of the CEO's annual bonus. The income statement effect reduced G&A expenses as part of operating expenses, thus increasing operating income by $250. From an income tax perspective, the capital loss will be offset by capital gains achieved in the prior three years.

The following table compares certain 3Q 2008 and 3Q 2007 income statement categories according to GAAP, with adjusted 3Q 2008 income statement categories omitting the 3Q 2008 net capital loss and the 3Q 2008 management bonus adjustment: