EX-99.1 2 a04282016-8kpressreleaseex.htm EXHIBIT 99.1 Exhibit


 Exhibit 99.1

FOR IMMEDIATE RELEASE

Date:
April 28, 2016
Contact:
Anne-Marie Wright, Vice President, Corporate Communications
Phone:
(801) 208-4167 e-mail: awright@merit.com Fax: (801) 253-1688


MERIT MEDICAL REPORTS SALES UP 6.6%
FOR THE QUARTER ENDED MARCH 31, 2016

•
Q1 revenue of $138.1 million ($140.0 million in constant currency), up 6.6% as reported, up 8.0% on a comparable, constant currency basis
•
Q1 non-GAAP EPS was $0.19; GAAP EPS was $0.10
•
Q1 2016 non-GAAP gross margin was 45.9%, compared to 44.9% in Q1 2015; Q1 2016 GAAP gross margin was 43.5%, compared to 42.7% for Q1 2015

SOUTH JORDAN, UTAH- Merit Medical Systems, Inc. (NASDAQ: MMSI), a leading manufacturer and marketer of proprietary disposable devices used primarily in cardiology, radiology and endoscopy, today announced sales of $138.1 million for the quarter ended March 31, 2016, an increase of 6.6% over sales of $129.6 million for the quarter ended March 31, 2015. On a constant currency basis, sales for the quarter ended March 31, 2016 would have been up 8% over sales for the comparable quarter of 2015.

Merit’s non-GAAP net income for the quarter ended March 31, 2016 was $8.3 million, or $0.19 per share, up 5.4% compared to $7.9 million, or $0.18 per share, for the quarter ended March 31, 2015. Merit’s GAAP net income for the first quarter of 2016 was $4.4 million, or $0.10 per share, compared to $5.2 million, or $0.12 per share, for the first quarter of 2015.

Revenues from Merit's core and endoscopy business grew 6.2% and 15.0%, respectively, for the quarter ended March 31, 2016, compared to the corresponding period of 2015.





Merit’s sales by category for the quarter ended March 31, 2016, compared to the quarter ended March 31, 2015, were as follows:
 
 
 
Three Months Ended March 31,
 
% Change
 
2016
 
2015
Cardiovascular
 
 
 
 
 
Stand-alone devices
16.5%
 
$43,331

 
$37,179
Custom kits and procedure trays
4.3%
 
28,879

 
27,686
Inflation devices*
-5.2%
 
17,712

 
18,690
Catheters
1.9%
 
23,899

 
23,457
Embolization devices
3.8%
 
10,783

 
10,392
CRM/EP
7.9%
 
7,940

 
7,360
Total
6.2%
 
132,544

 
124,764
 
 
 
 
 
 
Endoscopy
 
 
 
 
 
Endoscopy devices
15.0%
 
5,533

 
4,813
 
 
 
 
 
 
Total
6.6%
 
$138,077

 
$129,577
* The year-over-year sales decrease in inflation devices can be attributed primarily to reduced sales to a large OEM customer and two large distributors.

“The first three months of 2016 were very eventful and we believe will have a positive impact on Merit for many years to come,” said Fred P. Lampropoulos, Merit’s Chairman and Chief Executive Officer. “We closed a transaction in early February with CryoLife, Inc. to acquire the HeRO®Graft product line. We are operating ahead of our plan, with HeRO sales ahead of our 9% forecast and manufacturing commencing two months ahead of schedule at our South Jordan facility. We plan to introduce the Super HeRO™ in the next few months.”

“Our new facility in Mexico reached the point of break-even operations in March,” Lampropoulos said. “A few new product lines were transferred there in early April, which we believe will continue to support our plan of gross margin improvement.”

“Our new direct sales operation in Australia is performing ahead of schedule, and our new direct operation in Canada commenced April 1,” Lampropoulos continued. “With the recent approval of the Corvocet™ Biopsy System, product line extensions in our One-Step™ Centesis line and Elation® Balloon Dilators, and several other planned introductions, we look forward to reporting our progress in the future.”

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“Finally, on a subject difficult to discuss, a major disruption of a competitor has created substantial opportunity for us,” Lampropoulos added. “We do not intend to comment further on this situation until our second quarter report. It is our hope, however, that this worthy competitor is able to regain its footing as soon as possible.”

CONFERENCE CALL
Merit will hold its investor conference call (conference ID 78059341) today, Thursday, April 28, 2016, at 5:00 p.m. Eastern (4:00 p.m. Central, 3:00 p.m. Mountain, and 2:00 p.m. Pacific). The telephone numbers to call are (domestic) 877-313-5341 and (international) 253-336-8671. A live webcast will also be available for the conference call at merit.com.


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BALANCE SHEET
(In thousands)
                  
 
March 31, 2016 (Unaudited)
 
December 31, 2015
 
 
ASSETS
 
 
 
Current Assets
 
 
 
  Cash and cash equivalents
$
5,162

 
$
4,177

  Trade receivables, net
71,574

 
70,292

  Employee receivables
263

 
217

  Other receivables
5,501

 
6,799

  Inventories
110,726

 
105,999

  Prepaid expenses
6,181

 
5,634

  Prepaid income taxes
3,049

 
2,955

  Deferred income tax assets
7,049

 
7,025

  Income tax refunds receivable
504

 
905

    Total Current Assets
210,009

 
204,003

 
 
 
 
 Property and equipment, net
272,891

 
267,778

 Intangibles, net
119,809

 
109,354

 Goodwill
187,047

 
184,472

 Deferred income tax assets
—

 
—

 Other assets
13,664

 
13,121

Total Assets
$
803,420

 
$
778,728

 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Current Liabilities
 
 
 
  Trade payables
39,104

 
37,977

  Accrued expenses
33,866

 
37,846

  Current portion of long-term debt
10,000

 
10,000

  Advances from employees
207

 
589

  Income taxes payable
2,145

 
1,498

   Total Current Liabilities
85,322

 
87,910

 
 
 
 
 
 
 
 
Deferred income tax liabilities
11,099

 
10,985

Liabilities related to unrecognized tax benefits
768

 
768

Deferred compensation payable
8,195

 
8,500

Deferred credits
2,678

 
2,721

Long-term debt
218,402

 
197,593

Other long-term obligation
4,632

 
4,148

   Total Liabilities
331,096

 
312,625

 
 
 
 
Stockholders' Equity
 
 
 
  Common stock
199,003

 
197,826

  Retained earnings
278,115

 
273,764

  Accumulated other comprehensive income
(4,794
)
 
(5,487
)
  Total stockholders' equity
472,324

 
466,103

Total Liabilities and Stockholders' Equity
$
803,420

 
$
778,728


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INCOME STATEMENT
(Unaudited, in thousands except per share amounts)
 
Three Months Ended
 
March 31,
 
2016
 
2015
 
 
 
 
SALES
$
138,077

 
$
129,577

 
 
 
 
COST OF SALES
77,977

 
74,194

 
 
 
 
GROSS PROFIT
60,100

 
55,383

 
 
 
 
OPERATING EXPENSES
 
 
 
  Selling, general and administrative
41,704

 
36,885

  Research and development
10,588

 
9,672

  Contingent consideration
102

 
122

    Total
52,394

 
46,679

 
 
 
 
INCOME FROM OPERATIONS
7,706

 
8,704

 
 
 
 
OTHER INCOME (EXPENSE)
 
 
 
  Interest income
9

 
53

  Interest (expense)
(1,450
)
 
(1,574
)
  Other income (expense)
(359
)
 
280

    Total other (expense) - net
(1,800
)
 
(1,241
)
 
 
 
 
INCOME BEFORE INCOME TAXES
5,906

 
7,463

 
 
 
 
INCOME TAX EXPENSE
1,555

 
2,289

 
 
 
 
NET INCOME
$
4,351

 
$
5,174

 
 
 
 
EARNINGS PER COMMON SHARE-
 
 
 
     Basic
$0.10
 
$0.12
 
 
 
 
     Diluted
$0.10
 
$0.12
 
 
 
 
AVERAGE COMMON SHARES-
 
 
 
     Basic
44,275

 
43,703

 
 
 
 
     Diluted
44,579

 
44,145

 
 
 
 



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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-month periods ended March 31, 2016 and 2015. 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 may affect Merit's net income. Additionally, these calculations may not be comparable with similarly titled measures of other companies. The constant currency revenue adjustment of $1.9 million for the three-month period ended March 31, 2016 was calculated using the average foreign exchange rates for the first quarter of 2015. The non-GAAP income adjustments referenced in the following table do not reflect stock-based compensation expense of approximately $624,000 and approximately $520,000 for the three-month periods ended March 31, 2016 and 2015, respectively.

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MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - NON-GAAP
FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015 (UNAUDITED)

In thousands, except per share data
 
Three Months Ended
 
March 31, 2016
 
Pre-Tax
 
Tax Impact (a)
 
After-Tax
 
Per Share Impact
GAAP net income
$5,906
 
(1,555
)
 
4,351

 
$0.10

 
 
 
 
 
 
 
 
Non-GAAP adjustments:
 
 
 
 
 
 
 
    Cost of Sales
 
 
 
 
 
 
 
        Amortization of intangibles
$3,220
 
(1,181
)
 
2,039

 
$0.05

    Selling, General & Administrative
 
 
 
 
 
 
 
        Severance
$1,219
 
(474
)
 
745

 
$0.02

        Acquisition-related (c)
$736
 
(286
)
 
450

 
$0.01

        Fair value adjustment to contingent consideration (d)
$101
 
(40
)
 
61

 
$0.00

        Amortization of intangibles
$799
 
(304
)
 
495

 
$0.01

    Other Income
 
 
 
 
 
 
 
        Amortization of long-term debt issuance costs
$257
 
(100
)
 
157

 
$0.00

 
 
 
 
 
 
 
 
Adjusted net income
$12,238
 
(3,940
)
 
8,298

 
$0.19

 
 
 
 
 
 
 
 
Diluted shares
 
 
 
 
 
 
44,579

 
 
 
 
 
 
 
 
 
Three Months Ended
 
March 31, 2015
 
Pre-Tax
 
Tax Impact (a)
 
After-Tax
 
Per Share Impact
GAAP net income
$7,463
 
(2,289
)
 
5,174

 
$0.12

 
 
 
 
 
 
 
 
Non-GAAP adjustments:
 
 
 
 
 
 
 
    Cost of Sales
 
 
 
 
 
 
 
        Amortization of intangibles
$2,771
 
(1,053
)
 
1,718

 
$0.04

    Selling, General & Administrative
 
 
 
 
 
 
 
        Severance
$330
 
(125
)
 
205

 
$0.00

        Fair value adjustment to contingent consideration (d)
$122
 
(46
)
 
76

 
$0.00

        Amortization of intangibles
$878
 
(334
)
 
544

 
$0.01

        Long-term asset impairment charge (b)
$14
 
(5
)
 
9

 
$0.00

    Other Income
 
 
 
 
 
 
 
        Amortization of long-term debt issuance costs
$247
 
(94
)
 
153

 
$0.00

 
 
 
 
 
 
 
 
Adjusted net income
$11,825
 
(3,947
)
 
7,878

 
$0.18

 
 
 
 
 
 
 
 
Diluted shares
 
 
 
 
 
 
44,145


(a)
Reflects the tax effect of the non-GAAP adjustments.
(b)
Represents abandoned patents.
(c)
Represents non-recurring costs related to acquisitions.
(d)
Represents changes in the fair value of contingent consideration liabilities and contingent receivables as a result of acquisitions.

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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 hospitals, acute care facilities and clinics worldwide, with a domestic and international sales force totaling approximately 200 individuals. Merit employs approximately 3,900 people worldwide with facilities in South Jordan, Utah; Pearland, Texas; Richmond, Virginia; Malvern, Pennsylvania; Rockland, Massachusetts; Maastricht and Venlo, The Netherlands; Paris, France; Galway, Ireland; Beijing and Hong Kong, China; Tijuana, Mexico; Joinville, Brazil; Markham, Ontario, Canada, and Melbourne, Australia.

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, 2015 and other filings with the U.S. Securities and Exchange Commission. Such risks and uncertainties include risks relating to Merit's potential inability to successfully manage growth through acquisitions, including the inability to commercialize assets 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 in compliance with 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, 2015 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 likely 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.

# # #

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