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
SAFEGUARDĀ® Product Line Integrated 2014
Guidance Scheduled To Be Given on March 3, 2014
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
SAFEGUARDĀ® 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, |
|
2013 |
2012 |
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
Ended |
Twelve Months
Ended |
|
December
31, |
December
31, |
|
2013 |
2012 |
2013 |
2012 |
|
|
|
|
|
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
Ended |
Twelve Months
Ended |
|
December
31, |
December
31, |
|
2013 |
2012 |
2013 |
2012 |
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
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