-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Uao4Z9yY2LG31gXotqqiT5nx8zHtp/+XY2Tl82vdSFTRQbYk8imS6nMtkxJAFRWx Z1NnK5DHkap0bFX3RGrgfg== 0000931731-96-000303.txt : 19961113 0000931731-96-000303.hdr.sgml : 19961113 ACCESSION NUMBER: 0000931731-96-000303 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961112 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERIT MEDICAL SYSTEMS INC CENTRAL INDEX KEY: 0000856982 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 870447695 STATE OF INCORPORATION: UT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18592 FILM NUMBER: 96659677 BUSINESS ADDRESS: STREET 1: 1600 WEST MERIT PARK WAY CITY: SOUTH JORDAN STATE: UT ZIP: 84095 BUSINESS PHONE: 8012531600 MAIL ADDRESS: STREET 1: 1600 WEST MERIT PARKWAY CITY: SOUTH JORDAN STATE: UT ZIP: 84095 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996. OR __ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO _____. Commission File Number 0-18592 - -------------------------------------------------------------------------------- MERIT MEDICAL SYSTEMS, INC. (Exact name of Registrant as specified in its charter) - -------------------------------------------------------------------------------- Utah 87-0447695 (State or other jurisdiction of incorporation (I.R.S. Identification No.) or organization) - -------------------------------------------------------------------------------- 1600 West Merit Park Way, South Jordan UT, 84095 (Address of Principal Executive Offices) - -------------------------------------------------------------------------------- (801) 253-1600 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date. Common Stock 6, 925,857 TITLE OR CLASS Number of Shares Outstanding at November 12, 1996 MERIT MEDICAL SYSTEMS, INC. INDEX TO FORM 10-Q PART I. FINANCIAL INFORMATION PAGE Item 1. Financial Statements Consolidated Balance Sheets as of September 30, 1996 and December 31, 1995 ....................1 Consolidated Statements of Operations for the three and nine months ended September 30, 1996 and 1995...................................3 Consolidated Statements of Cash Flows for the nine months ended September 30, 1996 and 1995.............4 Notes to Consolidated Financial Statements......................6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................7 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K...............................9 SIGNATURES..................................................................9 PART I - FINANCIAL INFORMATION ITEM 1: Financial Statements MERIT MEDICAL SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
September 30, 1996 December 31, ASSETS (Unaudited) 1995 - ------ ----------- ---------- CURRENT ASSETS: Cash $ 357,768 $ 270,841 Trade receivables - net 7,064,312 6,727,960 Employee and related party receivables 354,770 363,266 Irish Development Agency grant receivable 391,359 544,725 Inventories 13,418,409 12,156,795 Prepaid expenses and other assets 596,000 403,414 Deferred income tax assets 655,609 655,609 ------------- ------------- Total current assets 22,838,227 21,122,610 ----------- ----------- PROPERTY AND EQUIPMENT: Land 595,991 595,959 Building 1,028,259 782,195 Automobiles 139,844 174,651 Manufacturing equipment 8,956,337 7,959,952 Furniture and fixtures 3,261,270 3,005,093 Leasehold improvements 3,164,160 3,087,602 Construction-in-progress 3,172,076 1,465,945 ------------ ------------ Total 20,317,937 17,071,397 Less accumulated depreciation and amortization (7,138,965) (5,479,589) ---------- ---------- Property and equipment - net 13,178,972 11,591,808 ---------- ----------- OTHER ASSETS: Intangible assets - net 1,667,072 1,463,885 Deposits 126,261 46,984 Prepaid royalty - net 214,286 278,571 ------------- ------------ Total other assets 2,007,619 1,789,440 ------------ ----------- TOTAL $38,024,818 $34,503,858 ----------- -----------
Continued on Page 2 See Notes to Consolidated Financial Statements 1 MERIT MEDICAL SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS (Continued) SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
LIABILITIES AND STOCKHOLDERS' EQUITY September 30, 1996 December 31, (Unaudited) 1995 CURRENT LIABILITIES: Line of credit $ 4,448,400 $ 5,871,539 Current portion of long-term debt 1,216,761 778,088 Trade payables 1,844,127 3,056,289 Accrued expenses 1,812,757 1,715,075 Advances from employees 75,718 52,863 Income taxes payable 499,330 129,785 ----------- ----------- Total current liabilities 9,897,093 11,603,639 DEFERRED INCOME TAX LIABILITIES 543,985 616,652 LONG-TERM DEBT 4,552,889 1,778,953 DEFERRED CREDIT 962,356 1,066,513 ------------ ------------- Total liabilities 15,956,323 15,065,757 ---------- ----------- MINORITY INTEREST IN SUBSIDIARY 311,195 173,576 ------------- -------------- STOCKHOLDERS' EQUITY: Common stock - no par value; 10,000,000 shares authorized; 6,899,880 and 6,786,239 shares issued at September 30, 1996 and December 31, 1995, respectively 13,949,053 13,088,265 Retained earnings 7,848,557 6,153,629 Foreign currency translation adjustment (40,310) 22,631 -------------- -------------- Total stockholders' equity 21,757,300 19,264,525 ---------- ----------- TOTAL $ 38,024,818 $ 34,503,858 ------------ ------------
See Notes to Consolidated Financial Statements 2 MERIT MEDICAL SYSTEMS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 and 1995 (Unaudited) - --------------------------------------------------------------------------------
Three Months Ended Nine Months Ended September 30, September 30, 1996 1995 1996 1995 ------------ ------------ ------------ ------------ SALES $12,702,407 $11,280,734 $37,484,550 $31,685,938 COST OF SALES 7,352,304 6,487,512 21,796,638 18,674,660 ---------- ---------- ----------- ----------- GROSS PROFIT 5,350,103 4,793,222 15,687,912 13,011,278 ----------- ---------- ------------- ------------ OPERATING EXPENSES Selling, general and administrative 3,437,619 3,237,470 10,477,173 9,719,624 Research and development 534,632 618,441 1,725,945 1,681,914 ------------ ----------- ------------ ----------- TOTAL 3,972,251 3,855,911 12,203,118 11,401,538 ----------- ----------- ----------- ----------- INCOME FROM OPERATIONS 1,377,852 937,311 3,484,794 1,609,740 OTHER EXPENSE (142,678) (154,098) (489,424) (303,003) ------------ ------------- -------------- --------------- INCOME BEFORE INCOME TAX EXPENSE AND MINORITY INTEREST 1,235,174 783,213 2,995,370 1,306,737 MINORITY INTEREST IN (INCOME) LOSS OF SUBSIDIARY (34,933) (7,234) (137,619) 548 INCOME TAX EXPENSE (524,218) (322,074) (1,162,823) (540,952) ---------- ------------ ------------ ------------- NET INCOME $ 676,023 $ 453,905 $1,694,928 $ 766,333 ========== ========== ========== ========== NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE $ .10 $ .07 $ .24 $ .11 ============== ============== =============== ============== WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 7,054,457 6,915,267 7,035,095 6,874,096 ========== =========== ========== ===========
See Notes to Consolidated Financial Statements 3 MERIT MEDICAL SYSTEMS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 and 1995 (Unaudited) - --------------------------------------------------------------------------------
September 30, September 30, 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,694,928 $ 766,333 ----------- --------- Adjustments to reconcile net income to net cash provided by (used in) operating activities: Minority interest in income (loss) of subsidiary 137,619 (548) Tax benefit attributable to appreciation of common stock options exercised 9,846 Depreciation and amortization 1,803,489 1,588,042 Deferred income tax benefit (72,667) (321,291) Bad debt expense 14,992 57,871 Loss on sales and abandonment of property and equipment 3,705 35,581 Changes in operating assets and liabilities: Trade receivables (351,344) (1,023,461) Employee and related party receivables 8,496 28,602 Irish Development Agency grant receivable (209,691) (337,424) Inventories (1,261,614) (2,421,197) Prepaid expenses and other assets (192,586) (249,018) Deposits (79,277) 16,804 Trade payables (1,212,162) 586,967 Accrued expenses 97,682 177,424 Advances from employees 22,855 51,677 Income taxes payable 369,545 531,846 Other, net (62,941) 15,905 ----------- ---------- Total adjustments (983,899) (1,252,374) --------- ---------- Net cash provided by (used in) operating activities 711,029 (486,041) ----------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures for: Property and equipment (1,362,413) (3,145,030) Intangible assets (302,437) (58,151) Proceeds from sale of equipment 41,147 Collection of construction advance receivable 2,184,630 ------------- ------------- Net cash used in investing activities (1,623,703) (1,018,551) ------------- -------------
Continued on page 5 See Notes to Consolidated Financial Statements 4 MERIT MEDICAL SYSTEMS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (Unaudited) - --------------------------------------------------------------------------------
September 30, September 30, 1996 1995 ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from: deferred credits 341,289 common stock 860,788 360,998 issuance of long-term debt 2,200,000 1,674,823 Principal payments on: long-term debt (927,236) (452,073) deferred credit (52,101) line of credit (1,423,139) (69,594) ----------- ------------ Net cash provided by financing activities 999,601 1,514,154 ---------- ----------- NET INCREASE IN CASH 86,927 9,562 CASH AT BEGINNING OF PERIOD 270,841 155,836 ---------- ---------- CASH AT END OF PERIOD $ 357,768 $ 165,398 ========= ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period for: Interest (including capitalized interest of $123,569 and $122,582, respectively) $601,890 $ 280,474 ======== ============= Income taxes $865,945 $ 330,397 ======== ============
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES: During the nine month periods ended September 30, 1996 and 1995, the Company issued notes payable totaling $1,960,729 and $ 696,224, respectively, for manufacturing equipment, furniture and fixtures, land and building. See Notes to Consolidated Financial Statements 5 MERIT MEDICAL SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - --------------------------------------------------------------- 1. Basis of Presentation. In the opinion of management, the accompanying consolidated financial statements contain all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of the financial position of the Company as of September 30, 1996 and December 31, 1995 and the results of its operations and cash flows for the three and nine months ended September 30, 1996 and 1995. The results of operations for the three and nine months ended September 30, 1996 and 1995 are not necessarily indicative of the results for a full year period. 2. Inventories. Inventories at September 30, 1996 and December 31, 1995 consisted of the following: September 30, December 31, 1996 1995 Raw materials $ 2,999,881 $ 3,091,679 Work-in-process 4,537,550 3,337,315 Finished goods 5,880,978 5,727,801 ------------ ---------- Total $13,418,409 $12,156,795 ----------- ----------- 3. Income Taxes. The effective tax rate for the three and nine months ended September 30, 1996 and 1995, is higher than the federal statutory tax rate due to losses incurred by the Company's foreign subsidiaries which were recognized as tax benefits but at their applicable foreign tax rates, which in the aggregate were lower than the federal statutory rate. 6 MERIT MEDICAL SYSTEMS, INC. ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - ---------------------------------------------------------------- Operations. The Company has achieved significant increases to record levels in sales and earnings for the three and nine months ended September 30, 1996 compared to the same periods in 1995. The following table sets forth certain operational data as a percentage of sales for the three and nine months ended September 30, 1996 and 1995:
Three Months Ended Nine Months Ended September 30, September 30, 1996 1995 1996 1995 ---- ---- ---- ---- Sales 100.0 % 100.0 % 100.0 % 100.0 % Gross Profit 42.1 42.5 41.9 41.1 Operating Expenses 31.3 34.2 32.5 36.0 Income From Operations 10.8 8.3 9.3 5.1 Other Expense (1.1) (1.4) (1.3) (1.0) Net Income 5.3 4.0 4.5 2.4
Sales. Sales for the third quarter and for the nine months of 1996 increased 13% and 18% respectively, compared to the same periods for 1995. This increase resulted from growth in sales of custom kits and sales of new products sold in custom kits and on a stand alone basis. In the third quarter of 1996, custom kits represented 62% of total sales, up from 55 % of sales for the three months ended September 30, 1995. For the nine months ended September 30, 1996 and 1995, custom kits represented 60 % of sales and 56% of total sales, respectively. International sales for the third quarter of 1996 and year to date for 1996 increased 51% and 56%, respectively, compared to the same periods for 1995. Sales through the Company's direct sales force in Europe was $1,429,641 and $3,870,494 for the three and nine months ended September 30, 1996, an increase of 124% and 287% compared to the same periods in 1995. Gross Profit. Gross profit as a percentage of sales for the third quarter of 1996 was 42.1% down slightly from 42.5% for the third quarter of 1995. For the nine months ended September 30, 1996, gross profit was 41.9% as compared to 41.1% for the same period in 1995. The slight increase is due primarily to improving efficiencies in the Company's operations and increasing volumes of product coming out of the Company's new facility. These improvements continue to be offset by price pressures to varying degrees throughout the Company's product lines and to a continuing change in product mix toward lower margin custom kits. 7 MERIT MEDICAL SYSTEMS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) - ------------------------------------------------------------------------- Operating Expenses. Operating expenses decreased to 31.3% and 32.5% of sales, respectively, for the three and nine months ended September 30, 1996 compared to 34.2% and 36.0% for the same periods in 1995. The Company is beginning to see the absorption of the increased sales expense associated with the expansion of the direct sales force in Europe. Combining this improved selling efficiency with better coverage of administration costs in relation to increased sales volumes has resulted in the nearly 3% improvement in operating expenses for the third quarter of 1996. Product research and development expenses were 4.2% and 4.6% of sales, respectively, for the three and nine months ended September 30, 1996, compared to 5.5% and 5.3% for the same periods in 1995. Such expenses are expected to be approximately four to five percent of sales on an annual basis. Income. During the quarter ended September 30, 1996, the Company reported income from operations of $1,377,852, an increase of 47.0% compared to income from operations of $937,311 for the comparable period in 1995. This increase was primarily the result of increasing revenues, improving selling, general and administrative efficiencies, as previously discussed. Operating income for the nine months of 1996 was $3,484,794, an increase of 116.5% compared to income from operations of $1,609,740 for the same period in 1995. Liquidity and Capital Resources. At September 30, 1996, the Company's working capital was $12,941,134 which represented a current ratio of 2.3 to 1. In October of 1995 the Company increased an available secured bank line of credit from $6,500,000 to $8,500,000. The line of credit bears interest at one quarter percent over the bank's prime rate and contains various conditions and restrictions. At September 30, 1996, the outstanding balance under the line of credit was $4,448,400. Also in October 1995 in conjunction with the new credit line, the Company obtained a commitment for a four year term loan for $2.2 million secured by real and intangible property at a rate of one half percent over prime. This loan was used to finance the leasehold improvements the Company paid for in completing the construction and equipping of it's new facility, thereby decreasing the balance of the line of credit and increasing the Company's available working capital. During 1996, the Company negotiated a lease line for $3,000,000 expiring December 31, 1997. This lease line as of September 30, 1996, has not been utilized. The Company intends to use this lease line to purchase production equipment for new and expanding product lines. 8 MERIT MEDICAL SYSTEMS, INC. PART II - OTHER INFORMATION ITEM 6: Exhibits and Reports on Form 8-K (a) Exhibits - None (b) Reports on Form 8-K - none SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MERIT MEDICAL SYSTEMS, INC. REGISTRANT Date: NOVEMBER 12, 1996 /s/ FRED P. LAMPROPOULOW FRED P. LAMPROPOULOS PRESIDENT AND CHIEF EXECUTIVE OFFICER Date: NOVEMBER 12, 1996 /s/ KENT W. STANGER KENT W. STANGER VICE PRESIDENT AND CHIEF FINANCIAL OFFICER 9 EX-27 2 FDS --
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MERIT MEDICAL SYSTEMS, INC.'S CONSOLIDATED BALANCE SHEET AND INCOME STATEMENT FOR THE NINE-MONTH PERIOD ENDING SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1996 SEP-30-1996 357768 0 7142752 (78440) 13418409 22838227 20317937 (7138965) 38024818 9897093 4552889 0 0 13949053 7848557 38024318 37484550 37484550 21796638 21796638 0 15712 517382 2995370 1162823 3484794 0 0 0 1694928 .24 .24
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