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, April 28, 2016 (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 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
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 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.”

“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.”

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.

(In thousands)
March 31, December 31,
2016 2015
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
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

(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
Selling, general and administrative 41,704 36,885
Research and development 10,588 9,672
Contingent consideration 102 122
Total 52,394 46,679
Interest income 9 53
Interest (expense) (1,450) (1,574)
Other income (expense) (359) 280
Total other (expense) - net (1,800) (1,241)
NET INCOME$4,351 $5,174
Basic$0.10 $0.12
Diluted$0.10 $0.12
Basic 44,275 43,703
Diluted 44,579 44,145

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.

FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015 (Unaudited)
In thousands, except per share data
Three Months Ended
March 31, 2016
Pre-TaxTax Impact
After-TaxPer Share
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-TaxTax Impact
After-TaxPer Share
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.

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.

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

Source:Merit Medical Systems, Inc.