Merit Medical Announces Results for the Quarter Ended September 30, 2012 Revenues Up 6% for the Quarter and 9% Year to Date SOUTH JORDAN, Utah, Oct. 25, 2012 (GLOBE NEWSWIRE) -- Merit Medical Systems, Inc. (Nasdaq:MMSI), a leading manufacturer and marketer of proprietary disposable medical devices used in interventional and diagnostic procedures, particularly in cardiology, radiology and endoscopy, today announced revenues of $95.9 million for the quarter ended September 30, 2012, an increase of 6% over revenues of $90.5 million for the third quarter of 2011. Revenues for the nine-month period ended September 30, 2012 were a record $292.1 million, compared with $268.4 million for the comparable nine-month period in 2011, an increase of 9%. Merit's non-GAAP net income for the quarter ended September 30, 2012, adjusted to eliminate non-recurring costs and amortization of intangibles, was $8.5 million, up 11%, or $0.20 per share, compared to $7.7 million, or $0.18 per share, for the quarter ended September 30, 2011. Merit's non-GAAP net income for the nine months ended September 30, 2012, adjusted to eliminate non-recurring costs and amortization of intangibles, was up 5% to a record $24.6 million, or $0.58 per share, compared to $23.5 million, or $0.60 per share, for the corresponding period of 2011. GAAP net income for the quarter ended September 30, 2012 was a record $7.2 million, or $0.17 per share, compared to $4.6 million, or $0.11 per share, for the comparable quarter of 2011. GAAP net income for the nine-month period ended September 30, 2012 was a record $19.1 million, or $0.45 per share, compared to $18.1 million, or $0.47 per share, for the corresponding period of 2011. "We experienced our typical summer slowdown in the third quarter, due to a lower number of procedures and the annual European summer holiday season," said Fred P. Lampropoulos, Merit's Chairman and Chief Executive Officer."We continue to expect growth for the year to be within our previously forecasted range of 9-12%.Recent 510(k) clearance of our Merit Laureate® hydrophilic guide wire has reinvigorated our U.S. sales force.With the Merit Laureate cleared in China and now again in the United States, we expect substantial growth for the next several years.We have also completed the transfer of our stent manufacturing to a new vendor, which we expect will save us almost $2 million in 2013.We believe this move will improve both our gross margin and our competitive position.We also expect to launch a number of new products in the next few quarters, including the TIO™ three-in-one oral airway bite block, the One Snare™ single-loop device, the BowTie™ guide wire insertion device, the PHD™ hemostasis valve, the Concierge® guiding catheter and the Elation™ esophageal dilatation balloon." "Additionally, we are pleased to announce that we have reached an agreement in principle to acquire Medigroup, Inc., a manufacturer of peritoneal dialysis catheters," Lampropoulos continued."The Company, based in Illinois, has a broad product line of catheters and implantation devices.Medigroup's current annual sales are approximately $2 million, mostly in the United States, and we plan to offer the product line immediately on a worldwide basis.While growing in the United States, peritoneal dialysis is the procedure of choice over chronic catheters in many international markets. Medigroup is profitable, with 75% gross margins, and we believe the transaction will be immediately accretive for us.We believe this opportunity will enhance our overall dialysis business, and we expect to close in the next few weeks." In the third quarter of 2012, compared to the third quarter of 2011, Merit Endotek sales were up 29%; catheter sales grew 8%; stand-alone device sales rose 8%; BioSphere sales increased 7%; inflation device sales were up 6%; and custom kit and tray sales were essentially flat.Excluding lower sales to an OEM customer, inflation device sales rose 6%. For the nine-month period ended September 30, 2012, compared to the nine-month period ended September 30, 2011, Merit Endotek sales were up 31%; catheter sales rose 17%; stand-alone device sales grew 13%; BioSphere sales rose 9%; inflation device sales increased 3%; and custom kit and tray sales were up 2%.Excluding decreased sales to the OEM customer referenced above, inflation device sales were up 7%. Gross margin for the third quarter of 2012 was 47.3% of sales, up 190 basis points, compared to 45.4% of sales for the third quarter of 2011.Gross margin for the nine-month period ended September 30, 2012 was 46.7% of sales, up 70 basis points, compared to 46.0% of sales for the comparable period of 2011.The improvement in gross margin for both periods can be attributed primarily to increased overhead and manufacturing efficiencies resulting from higher production volumes, increased sales of higher-margin products, including the QuadraSphere® and Merit Endotek products, and increased direct sales in China. Selling, general and administrative expenses for the third quarter of 2012 were 30.1% of sales, compared to 28.4% of sales for the third quarter of 2011.For the nine-month period ended September 30, 2012, SG&A expenses were 30.3% of sales, compared to 28.5% of sales for the first nine months of 2011.The SG&A increase for both periods can be attributed primarily to addition of sales and marketing personnel, both domestically and internationally, and the development of programs to improve distribution and increase market share for new and existing products.SG&A expenses for the third quarter of 2012 decreased sequentially $1.3 million, or 4.4%, when compared to SG&A expenses for the second quarter of 2012. Research and development costs during the third quarter of 2012 were 7.4% of sales, compared to 6.0% of sales for the third quarter of 2011.Research and development costs were 6.9% of sales for the first nine months of 2012, compared to 5.9% of sales for the comparable period of 2011.The increase in R&D costs for both periods can be attributed primarily to the addition of personnel to perform the HiQuality study and to support new development projects. Merit's income from operations was $9.1 million for the third quarter of 2012, compared to $6.5 million for the third quarter of 2011.For the nine-month period ended September 30, 2012, income from operations was $25.3 million, compared to $27.6 million for the comparable period of 2011. Merit's income tax expense for the third quarter of 2012 reflects an effective tax rate of 20.0%, compared to an effective tax benefit of 31.7% for the third quarter of 2011.For the nine-month period ended September 30, 2012, Merit's effective tax rate was 26.0%, compared to 33.3% for the comparable period of 2011.The decrease in the effective income tax rate for the three- andnine-month periods ended September 30, 2012, compared to the corresponding periods of 2011, was primarily attributable to the release of FIN 48 reserves due to statute of limitation expirations, an increase to the Domestic Production Activity deduction, and increased research and development credits in the United States and foreign jurisdictions. Merit's effective income tax rate was also reduced by a higher mix of earnings in foreign jurisdictions (primarily Ireland), which are generally taxed at lower rates than Merit's U.S. operations. CONFERENCE CALL Merit Medical invites all interested parties to participate in its conference call today, (Thursday, October 25^th, 2012) at 5:00 p.m. Eastern (4:00 p.m. Central, 3:00 p.m. Mountain, and 2:00 p.m. Pacific).The domestic telephone number is (877) 941-1466, and the international number is (480) 629-9773.A live webcast will also be available for the conference call at www.merit.com and www.fulldisclosure.com. BALANCE SHEET (Unaudited in thousands) September 30, December 31, 2012 2011 ASSETS Current Assets Cash and cash equivalents $9,465 $10,128 Trade receivables, net 47,720 40,550 Employee receivables 235 154 Other receivables 3,034 1,750 Inventories 78,795 69,911 Prepaid expenses 4,371 3,775 Prepaid income taxes 881 883 Deferred income tax assets 3,705 3,704 Income tax refunds receivable 672 2,797 Total Current Assets 148,878 133,652 Property and equipment, net 215,946 179,140 Intangible assets: Developed technology, net 48,723 35,415 Other, net 24,293 21,254 Goodwill 65,854 61,144 Deferred income tax assets 5,365 5,366 Marketable Securities 2,798 Other assets 10,127 8,248 Total Assets $519,186 $447,017 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Trade payables 27,050 22,727 Accrued expenses 24,007 20,197 Advances from employees 630 225 Income taxes payable 842 646 Total Current Liabilities 52,529 43,795 Deferred income tax liabilities 2,135 2,112 Liabilities related to unrecognized tax benefits 2,495 3,489 Deferred compensation payable 5,422 4,585 Deferred credits 2,971 1,984 Long-term debt 64,500 30,737 Other long-term obligations 8,101 3,226 Total Liabilities 138,153 89,928 Stockholders' Equity Common stock 171,440 166,231 Retained earnings 209,777 190,708 Accumulated other comprehensive income (loss) (184) 150 Total stockholders' equity 381,033 357,089 Total Liabilities and Stockholders' Equity $519,186 $447,017 INCOME STATEMENT (Unaudited, in thousands except per share amounts) Three Months Ended Nine Months Ended September 30, September 30, 2012 2011 2012 2011 SALES $95,907 $90,477 $292,057 $268,357 COST OF SALES 50,572 49,423 155,528 145,034 GROSS PROFIT 45,335 41,054 136,529 123,323 OPERATING EXPENSES Selling, general and 28,880 25,708 88,638 76,474 administrative Research and development 7,098 5,401 20,130 15,847 Acquired in-process research and 275 3,438 2,450 3,438 development Total 36,253 34,547 111,218 95,759 INCOME FROM OPERATIONS 9,082 6,507 25,311 27,564 OTHER INCOME (EXPENSE) Interest income 57 36 176 52 Interest (expense) (128) (19) (352) (755) Other income 26 159 633 238 Total other income (expense) - (45) 176 457 (465) net INCOME BEFORE INCOME TAX EXPENSE 9,037 6,683 25,768 27,099 INCOME TAX EXPENSE 1,811 2,120 6,699 9,025 NET INCOME $7,226 $4,563 $19,069 $18,074 EARNINGS PER SHARE-- Basic $0.17 $0.11 $0.45 $0.47 Diluted $0.17 $0.11 $0.45 $0.47 AVERAGE COMMON SHARES-- Basic 42,202 41,909 42,087 38,123 Diluted 42,692 42,502 42,536 38,832 Although Merit's financial statements are prepared in accordance with accounting principles which are generally accepted in the United States of America ("GAAP"), Merit's management believes that certain non-GAAP financial measures provide investors with useful information regarding the underlying business trends and performance of Merit's ongoing operations and can be useful for period-over-period comparisons of such operations. The following table sets forth supplemental financial data and corresponding reconciliations to GAAP financial statements for the three- and nine-month periods ended September 30, 2012 and 2011.Readers should consider these non-GAAP measures in addition to, not as a substitute for, financial reporting measures prepared in accordance with GAAP.These non-GAAP financial measures exclude some, but not all, items that affect Merit's net income.Additionally, these calculations may not be comparable with similarly titled measures of other companies. Three Months Ended Nine Months Ended September 30, September 30, 2012 2011 2012 2011 Non-GAAP ADJUSTMENTS GAAP net income $7,226 $4,563 $19,069 $18,074 Acquisition costs 67 86 Severance 252 Fair value write-up of acquired 117 644 inventory sold (a) Long-term asset impairment charges 17 42 27 59 (b) Acquired in-process research and 275 3,438 2,450 3,438 development Amortization of intangible assets Cost of sales 1,200 659 3,196 1,900 SG&A expenses 646 784 2,498 2,603 FV adjustment to contingent (90) 370 considerations (c) Income tax effect of reconciling (778) (1,915) (3,367) (3,317) items (d) Non-GAAP net income $8,496 $7,688 $24,562 $23,487 Non-GAAP net income per share $0.20 $0.18 $0.58 $0.60 Diluted shares used to compute 42,692 42,502 42,536 38,832 Non-GAAP net income per share Merit's non-GAAP income, after giving effect to the adjustments referenced in the preceding table, does not reflect stock-based compensation expense of approximately $429,000 and approximately $436,000 for the three months ended September 30, 2012 and 2011, respectively, and stock-based compensation of approximately $1.5 million and approximately $1.1 million for the nine months ended September 30, 2012 and 2011, respectively. (a) Increase in cost of goods sold related to the mark-up of finished goods associated with Merit's acquisition of BioSphere Medical, Inc. (b) Amounts represent abandoned patents. (c) Represents changes in the fair value of contingent consideration liabilities for recent acquisitions. (d) Reflects an estimated annual income tax rate of 38% on a non-GAAP basis. ABOUT MERIT Founded in 1987, Merit Medical Systems, Inc. is engaged in the development, manufacture and distribution of proprietary disposable medical devices used in interventional and diagnostic procedures, particularly in cardiology, radiology and endoscopy.Merit serves client hospitals worldwide with a domestic and international sales force totaling approximately 170 individuals. Merit employs approximately 2,600 people worldwide with facilities in Salt Lake City and South Jordan, Utah; Angleton, Texas; Richmond, Virginia; Maastricht and Venlo, The Netherlands; Paris, France; Galway, Ireland; Beijing, China; Copenhagen, Denmark; and Rockland, Massachusetts. The Merit Medical Systems, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=3282 Statements contained in this release which are not purely historical, including, without limitation, statements regarding Merit's forecasted revenues, net income, financial results or anticipated acquisitions, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties such as those described in Merit's Annual Report on Form 10-K for the year ended December 31, 2011. Such risks and uncertainties include risks relating to Merit's potential inability to successfully manage growth through acquisitions, including the inability to commercialize technology acquired through recent, proposed or future transactions;product recalls and product liability claims; expenditures relating to research, development, testing and regulatory approval or clearance of Merit's products and risks that such products may not be developed successfully or approved for commercial use; greater governmental scrutiny and regulation of the medical device industry; reforms to the 510(k) process administered by the U.S. Food and Drug Administration; compliance with governmental regulations and administrative procedures; potential restrictions on Merit's liquidity or its ability to operate its business by its current debt agreements; possible infringement of Merit's technology or the assertion that Merit's technology infringes the rights of other parties; the potential of fines, penalties, or other adverse consequences if Merit's employees or agents violate the U.S. Foreign Corrupt Practices Act or other laws and regulations; laws targeting fraud and abuse in the healthcare industry; potential for significant adverse changes in, or failure to comply with, governing regulations; the effect of changes in tax laws and regulations in the United States or other countries; increases in the price of commodity components; negative changes in economic and industry conditions in the United States and other countries; termination or interruption of relationships with Merit's suppliers, or failure of such suppliers to perform; fluctuations in Euro and GBP exchange rates; Merit's need to generate sufficient cash flow to fund its debt obligations, capital expenditures, and ongoing operations; concentration of Merit's revenues among a few products and procedures; development of new products and technology that could render Merit's existing products obsolete; market acceptance of new products; volatility in the market price of Merit's common stock; modification or limitation of governmental or private insurance reimbursement policies; changes in health care markets related to health care reform initiatives; failure to comply with applicable environmental laws; changes in key personnel; work stoppage or transportation risks; uncertainties associated with potential healthcare policy changes which may have a material adverse effect on Merit; introduction of products in a timely fashion; price and product competition; availability of labor and materials; cost increases; fluctuations in and obsolescence of inventory; and other factors referred to in Merit's Annual Report on Form 10-K for the year ended December 31, 2011 and other materials filed with the Securities and Exchange Commission. All subsequent forward-looking statements attributable to Merit or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Actual results will differ, and may differ materially, from anticipated results. Financial estimates are subject to change and are not intended to be relied upon as predictions of future operating results, and Merit assumes no obligation to update or disclose revisions to those estimates. CONTACT: Anne-Marie Wright, Vice President Corporate Communications (801) 208-4167 e-mail: firstname.lastname@example.org Fax: (801) 253-1688 company logo
Merit Medical Announces Results for the Quarter Ended September 30, 2012
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