News Column

Merit Medical Reports Record Revenues for the Quarter and Year Ended December 31, 2013

February 24, 2014

Revenues Up 17% for the Quarter and 14% for the Year

4Q 2013 Core Growth Up 12%

GAAP and Non-GAAP Income Up Over 4Q 2012

SAFEGUARD® Product Line Integrated

2014 Guidance Scheduled To Be Given on March 3, 2014

SOUTH JORDAN, Utah, Feb. 24, 2014 (GLOBE NEWSWIRE) -- Merit Medical Systems, Inc. (Nasdaq:MMSI), a leading manufacturer and marketer of proprietary disposable devices used primarily in cardiology, radiology and endoscopy, today announced record revenues of $120.0 million for the quarter ended December 31, 2013, an increase of 17% over revenues of $102.2 million for the quarter ended December 31, 2012. Revenues for the year ended December 31, 2013 were a record $449.0 million, an increase of 14% over revenues of $394.3 million for the year ended December 31, 2012. Revenues from Merit's core business grew 12% and 7% for the quarter and year ended December 31, 2013, respectively, compared to the corresponding periods of 2012.

Merit's non-GAAP net income for the quarter ended December 31, 2013 was $9.4 million, up 52%, or $0.22 per share, compared to $6.2 million, or $0.15 per share, for the quarter ended December 31, 2012. Merit's non-GAAP net income for the year ended December 31, 2013 was $30.4 million, or $0.71 per share, compared to $30.8 million, or $0.72 per share, for the year ended December 31, 2012.

GAAP net income for the quarter ended December 31, 2013 was $6.5 million, or $0.15 per share, compared to $641,000, or $0.01 per share, for the fourth quarter of 2012. Absent the non-recurring costs recorded in the fourth quarter of 2012 related to Merit's acquisition of Thomas Medical Products ("Thomas Medical") of $2.2 million, net of tax, and a capital loss related to an investment in a privately-held company of $1.5 million, net of tax, GAAP net income for the fourth quarter of 2012 would have been approximately $4.4 million, or $0.10 per share. The increase in GAAP earnings for the quarter ended December 31, 2013, when compared to the prior period in 2012, was primarily affected by higher sales and lower selling, general and administrative expenses as a percentage of sales.

GAAP net income for the year ended December 31, 2013 was $16.6 million, or $0.39 per share, compared to $19.7 million, or $0.46 per share, for the year ended December 31, 2012. Absent a non-recurring intangible asset impairment charge of $2.7 million, net of tax, GAAP net income would have been approximately $19.3 million, or $0.45 per share, for the year ended December 31, 2013. Excluding the non-recurring items discussed in the preceding paragraph, plus acquired in process research and development expense of $1.5 million, net of tax, GAAP net income would have been $24.9 million, or $0.58 per share, for the year ended December 31, 2012. The decrease in GAAP net income for the year ended December 31, 2013, compared to the corresponding period of 2012, was primarily due to lower gross margins as discussed below.

Merit's non-GAAP gross profit was 46.7% of sales for the quarter ended December 31, 2013, compared to 46.1% of sales for the quarter ended December 31, 2012. Non-GAAP gross profit was 45.6% of sales for the year ended December 31, 2013, compared to 47.4% of sales for the year ended December 31, 2012. Non-GAAP gross profit for the fourth quarter and year ended December 31, 2013 would have been 47.6% and 46.6%, respectively, without the implementation of the medical device excise tax imposed by the Patient Protection and Affordable Care Act (the "Affordable Care Act") in 2013.

GAAP gross profit for the fourth quarter of 2013 was 44.5% of sales, unchanged from 44.5% of sales for the fourth quarter of 2012. GAAP gross profit was 43.3% of sales for the year ended December 31, 2013, compared to 46.2% of sales for the year ended December 31, 2012. GAAP gross profit for the fourth quarter and year ended December 31, 2013 would have been 45.5% and 44.3%, respectively, without the implementation of the medical device excise tax imposed by the Affordable Care Act in 2013. The reduction in GAAP gross profit as a percentage of sales for the year ended December 31, 2013, compared to the year ended December 31, 2012, related primarily to amortization of developed technology costs of 1.3% of sales associated with the acquisitions of Thomas Medical and the assets of Datascope Corp., implementation of the medical device excise tax of 1.0% of sales, imposed by the Affordable Care Act, and higher standard costs of 0.9% of sales resulting from lower production volumes at the beginning of 2013.

"After a difficult beginning to 2013, we made substantial progress throughout the final three quarters," said Fred P. Lampropoulos, Merit's Chairman and Chief Executive Officer. "We were pleased with fourth quarter sales which exceeded robust third quarter sales. During the fourth quarter, we also acquired the SAFEGUARD® Pressure Assisted Device in a relatively seamless process. We expect the SAFEGUARD to be a contributor to our radial program which continues to gain momentum in the United States."

"We recently received our certificate of occupancy for our new facility in Pearland, Texas," Lampropoulos continued. "Over the next six months we plan to transfer production from our facility in Angleton, Texas to Pearland. We believe this new facility will mitigate substantial weather-related risks and help with recruitment from nearby Houston."

"Due to scheduling challenges, we intend to provide sales guidance and an overview of the 2014 business plan on Monday, March 3, 2014," Lampropoulos added.

For the quarter ended December 31, 2013, compared to the quarter ended December 31, 2012, stand-alone device sales increased 19%; catheter sales were up 18%; Endotek sales increased 9%; custom kit and tray sales grew 8%; inflation device sales rose 7%; and BioSphere sales increased 5%. Excluding decreased sales to an OEM customer, inflation device sales were up 14% for the quarter ended December 31, 2013. Sales related to Merit's acquisition of Thomas Medical were $7.3 million for the fourth quarter of 2013, compared to $1.9 million for the last 11 days of the fourth quarter of 2012. Merit's core business sales for the quarter ended December 31, 2013 were up 12% compared to the corresponding period of 2012.

For the year ended December 31, 2013, compared to the year ended December 31, 2012, catheter sales increased 16%; stand-alone device sales grew 10%; custom kit and tray sales rose 10%; Endotek sales were up 7%; BioSphere sales fell 1%; and inflation device sales decreased 4%. Excluding decreased sales to an OEM customer, inflation device sales were up 4% for the year ended December 31, 2013. Sales related to Merit's acquisition of Thomas Medical were $28.3 million for 2013, compared to $1.9 million for the last 11 days of the year ended December 31, 2012. Merit's core business sales for the year ended December 31, 2013 were up 7% compared to the year ended December 31, 2012.

GAAP selling, general and administrative expenses were 28.0% and 28.6% of Merit's sales for the quarter and year ended December 31, 2013, respectively, compared with 32.7% and 31.0% of Merit's sales for the corresponding periods of 2012, respectively. GAAP SG&A expenses would have been 27.6% and 28.1% of sales for the quarter and year ended December 31, 2013, respectively, if not for approximately $489,000 and approximately $2.4 million, respectively, of non-recurring transaction costs attributable to acquisition transactions and related severance payments for the quarter and year ended December 31, 2013, respectively. GAAP SG&A expenses would have been 30.1% and 30.3% of sales for the quarter and year ended December 31, 2012, respectively, if not for $2.7 million of non-recurring transaction costs attributable to the Thomas Medical acquisition for both the quarter and year ended December 31, 2012. Excluding these non-recurring expenses, the decrease in SG&A expenses for the quarter and year ended December 31, 2013 was primarily related to the implementation of cost-cutting initiatives in expenses such as reductions in trade show and convention expenses, 401(k) employer matching payments and employee bonuses. Non-GAAP SG&A expenses for the fourth quarter of 2013 were 26.7% of sales, compared to 28.9% of sales for the fourth quarter of 2012. Non-GAAP SG&A expenses for the year ended December 31, 2013 were 27.1% of sales, compared to 29.2% of sales for the year ended December 31, 2012.

Research and development costs were 7.4% and 7.5% of sales for the quarter and year ended December 31, 2013, respectively, compared to 7.5% and 7.0% of sales for the corresponding periods of 2012, respectively. The increase in research and development expenses for the year ended December 31, 2013 was primarily due to research and development costs associated with the acquisition of Thomas Medical, headcount additions for research and development to support new product development, and personnel increases in Merit's regulatory department to support registrations in foreign countries to expand international product offerings.

Other expense, which consists primarily of interest expense, for the quarter and year ended December 31, 2013 was approximately $2.7 million and $8.0 million, respectively, compared with other expense of approximately $2.5 million and $2.0 million, for the corresponding periods of 2012, respectively. The increase in interest expense for the year ended December 31, 2013 was primarily due to the debt incurred for the Thomas Medical acquisition which closed on December 19, 2012.

Merit's effective income tax rates for the quarter and year ended December 31, 2013 were 20.1% and 16.5%, respectively, compared to 65.3% and 28.6% for the corresponding periods of 2012, respectively. Absent the recognition of a deferred income tax valuation allowance of approximately $631,000 related to certain capital loss carry-forwards, Merit's effective tax rates would have been 31.2% and 26.3% for the quarter and year ended December 31, 2012, respectively. The decrease in the effective tax rate for both periods was primarily the result of a higher mix of earnings from Merit's foreign operations (primarily Ireland), which are taxed at a lower rate than Merit's U.S. operations and the release of unrecognized tax benefits due to statute of limitation expirations. In addition, the effective tax rate for the year ended December 31, 2013 was lower than the corresponding period of 2012, due primarily to the reinstatement in 2013 of the federal research and development credit for the 2012 tax year. The credit was reinstated by the American Taxpayer Relief Act of 2012, which was signed on January 2, 2013 and recognized as a discrete benefit in the first quarter of 2013.

Merit generated $51.0 million in cash from operations for the year ended December 31, 2013, compared to $46.9 million for the year ended December 31, 2012.

CONFERENCE CALL TODAY

Merit invites all interested parties to participate in its fourth quarter and year-end conference call today, February 24th, 2014, at 5:00 p.m. Eastern (4:00 p.m. Central, 3:00 p.m. Mountain, and 2:00 p.m. Pacific). The domestic phone number is (877) 941-9205, and the international number is (480) 629-9818. A live webcast as well as a rebroadcast can be accessed through the Investors page at www.merit.com.

2014 GUIDANCE CONFERENCE CALL SCHEDULED FOR MARCH 3

Due to a variety of factors, Merit's management intends to provide 2014 guidance on a conference call scheduled for Monday, March 3rd, 2014, at 5:00 p.m. Eastern (4:00 p.m. Central, 3:00 p.m. Mountain, and 2:00 p.m. Pacific). The domestic phone number is (480) 629-9835, and the international number is (877) 941-0844. A live webcast as well as a rebroadcast can be accessed through the Investors page at www.merit.com.

     
     
     
BALANCE SHEET    
(Unaudited in thousands)    
 December 31,December 31,
 20132012
ASSETS    
Current Assets    
Cash and cash equivalents  $ 7,459   $ 9,719 
Trade receivables, net  60,186   53,402 
Employee receivables  224   169 
Other receivables  3,279   2,672 
Inventories  82,378   84,599 
Prepaid expenses  5,121   4,133 
Prepaid income taxes  1,232   1,250 
Deferred income tax assets  5,638   4,976 
Income tax refunds receivable  398   1,076 
Total Current Assets  165,915   161,996 
     
Property and equipment, net  243,270   234,803 
Other intangibles, net  119,987   118,131 
Goodwill  184,505   175,108 
Deferred income tax assets  800   4,237 
Other assets  13,806   11,034 
Total Assets  $ 728,283   $ 705,309 
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current Liabilities    
Trade payables  26,511   34,637 
Accrued expenses  26,713   27,269 
Current portion of long-term debt  10,000   10,000 
Advances from employees  292   551 
Income taxes payable  1,089   547 
Total Current Liabilities  64,605   73,004 
     
     
Deferred income tax liabilities  2,548   2,373 
Liabilities related to unrecognized tax benefits  2,031   2,938 
Deferred compensation payable  7,833   5,956 
Deferred credits  3,065   2,980 
Long-term debt  238,854   227,566 
Other long-term obligations  3,641   8,915 
Total Liabilities  322,577   323,732 
     
Stockholders' Equity    
Common stock  177,775   172,341 
Retained earnings  226,988   210,418 
Accumulated other comprehensive income (loss)  943   (1,182)
Total stockholders' equity  405,706   381,577 
Total Liabilities and Stockholders' Equity  $ 728,283   $ 705,309 
 
 
 
INCOME STATEMENT 
(Unaudited, in thousands except per share amounts)
 Three Months EndedTwelve Months Ended
 December 31, December 31, 
 2013201220132012
         
SALES  $ 120,016   $ 102,231   $ 449,049   $ 394,288 
         
COST OF SALES  66,657   56,768   254,682   212,296 
         
GROSS PROFIT  53,359   45,463   194,367   181,992 
         
OPERATING EXPENSES        
Selling, general and administrative  33,640   33,468   128,642   122,106 
Research and development  8,822   7,665   33,886   27,795 
Intangible asset impairment charge      8,089   
Contingent consideration benefit  (19)    (4,094)  
Acquired in-process research and development        2,450 
Total  42,443   41,133   166,523   152,351 
         
INCOME FROM OPERATIONS  10,916   4,330   27,844   29,641 
         
OTHER INCOME (EXPENSE)        
Interest income  55   50   255   226 
Interest (expense)  (2,747)  (252)  (8,044)  (604)
Other income (expense)  (42)  (2,278)  (216)  (1,645)
Total other (expense) - net  (2,734)  (2,480)  (8,005)  (2,023)
         
INCOME BEFORE INCOME TAX EXPENSE  8,182   1,850   19,839   27,618 
         
INCOME TAX EXPENSE  1,642   1,209   3,269   7,908 
         
NET INCOME  $ 6,540   $ 641   $ 16,570   $ 19,710 
         
EARNINGS PER SHARE--        
Basic  $ 0.15   $ 0.02   $ 0.39   $ 0.47 
         
Diluted  $ 0.15   $ 0.01   $ 0.39   $ 0.46 
         
AVERAGE COMMON SHARES--        
Basic  42,749   42,442   42,607   42,176 
         
Diluted  43,157   42,830   42,884   42,610 
         
         
         


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 twelve-month periods ended December 31, 2013 and 2012.  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.

 
 
 
NON-GAAP FINANCIAL STATEMENTS
FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2013 AND 2012 
         
         
 Three Months EndedTwelve Months Ended
 December 31, December 31, 
 2013201220132012
Non-GAAP ADJUSTMENTS        
GAAP net income  $ 6,540   $ 641   $ 16,570   $ 19,710 
         
Acquisition costs  110   2,492   636   2,559 
Mark-up on finished goods (a)    831   744   831 
Severance  379   242   1,790   494 
Long-term asset impairment charges (b)  39   116   119   143 
Intangible asset impairment charge (c)      8,089   
Long-term debt issuance charges  248     845   
Acquired in-process research and development        2,450 
Amortization of intangible assets        
Cost of sales  2,705   876   9,794   4,072 
SG&A expense  1,121   943   4,443   3,441 
Loss on capital investment    2,368     2,368 
Contingent consideration benefit (expense) (d)  (19)  110   (4,094)  480 
Income tax effect of reconciling items (e)  (1,742)  (3,032)  (8,500)  (6,398)
Tax effect on capital loss (f)    631     631 
         
Non-GAAP net income  $ 9,381   $ 6,218   $ 30,436   $ 30,781 
         
Non-GAAP net income per share$0.22$0.15$0.71$0.72
         
Diluted shares used to compute Non-GAAP net income  43,157   42,830   42,884   42,610 
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 $396,000 and approximately $463,000 for the three-month periods ended December 31, 2013 and 2012, respectively, and stock-based compensation of approximately $1.5 million and approximately $1.9 million for the years ended December 31, 2013 and 2012, respectively.

(a) Increase in cost of goods sold related to the mark-up of finished goods associated with Merit's acquisition of Thomas Medical.

(b) Amounts represent abandoned patents.

(c) Represents changes in fair value of certain intangible assets.

(d) Represents changes in the fair value of contingent consideration liabilities for recent acquisitions.

(e) Reflects an estimated annual income tax rate of 38% on a non-GAAP basis.

(f) Reflects the deferred income tax valuation allowance related to certain capital loss carry forwards.

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 200 individuals.  Merit employs approximately 3,000 people worldwide with facilities in South Jordan, Utah; Angleton, Texas; Richmond, Virginia; Malvern, Pennsylvania; Maastricht and Venlo, The Netherlands; Paris, France; Galway, Ireland; Beijing, China; and Rockland, Massachusetts.

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, 2012.  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 completed, 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 prices 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, 2012 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 of Corporate Communications Phone: (801) 208-4167 e-mail: awright@merit.com



company logo

Source: Merit Medical Systems, Inc.


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: GlobeNewswire


Story Tools