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Merit Medical Reports Sales Up 9.4% for the Quarter Ended June 30, 2016

  • Q2 revenue of $151.1 million ($151.7 million in constant currency), up 9.4% as reported, up 9.9% on a comparable, constant currency basis, over Q2 2015
  • YTD revenue of $289.1 million ($291.7 million in constant currency), up 8.0% as reported, up 9.0% on a comparable, constant currency basis, over YTD 2015
  • Q2 non-GAAP EPS was $0.26; Q2 GAAP EPS was $0.16
  • YTD non-GAAP EPS was $0.44, compared to $0.42 for same period in 2015
  • Q2 2016 non-GAAP gross margin was 46.4%, compared to 46.1% in Q2 2015; Q2 2016 GAAP gross margin was 44.3%, compared to 44.1% for Q2 2015
  • YTD 2016 non-GAAP gross margin was 46.1%, compared to 45.5% for same period in 2015; YTD 2016 GAAP gross margin was 43.9%, compared to 43.4% for same period in 2015

SOUTH JORDAN, Utah, July 27, 2016 (GLOBE NEWSWIRE) -- Merit Medical Systems, Inc. (NASDAQ:MMSI), a leading manufacturer and marketer of proprietary disposable devices used in interventional, diagnostic and therapeutic procedures, particularly in cardiology, radiology and endoscopy, today announced sales of $151.1 million for the quarter ended June 30, 2016, an increase of 9.4% over sales of $138.1 million for the quarter ended June 30, 2015. On a constant currency basis, sales for the quarter ended June 30, 2016 would have been up 9.9% over sales for the comparable quarter of 2015.

For the six months ended June 30, 2016, Merit’s sales were $289.1 million, an increase of 8.0% over sales of $267.7 million, for the six months ended June 30, 2015. On a constant currency basis, sales for the six months ended June 30, 2016 would have been up 9.0% over sales for the comparable period of 2015.

Merit’s non-GAAP net income for the quarter ended June 30, 2016 was $11.5 million, or $0.26 per share, up 5.5% compared to $10.9 million, or $0.25 per share, for the quarter ended June 30, 2015. Merit’s GAAP net income for the second quarter of 2016 was $7.3 million, or $0.16 per share, compared to $7.4 million, or $0.17 per share, for the second quarter of 2015.

Merit’s non-GAAP net income for the six months ended June 30, 2016 was $19.8 million, or $0.44 per share, up 5.4% compared to $18.8 million, or $0.42 per share, for the six months ended June 30, 2015. Merit’s GAAP net income for the six months ended June 30, 2016 was $11.6 million, or $0.26 per share, compared to $12.6 million, or $0.28 per share, for the comparable period of 2015.

Merit’s sales by category for the three and six-month periods ended June 30, 2016, compared to the corresponding periods in 2015, were as follows:

Three Months Ended Six Months Ended
June 30, June 30,
% Change 2016 2015 % Change 2016 2015
Cardiovascular
Stand-alone devices 17.5% $46,394 $39,496 17.0% $89,726 $76,674
Custom kits and procedure trays—% 30,065 30,067 2.1% 58,944 57,753
Inflation devices * -0.1% 18,691 18,701 -2.6% 36,403 37,391
Catheters 19.5% 28,846 24,139 10.8% 52,745 47,596
Embolization devices 3.0% 11,948 11,603 3.3% 22,731 21,995
CRM/EP 9.1% 9,581 8,783 8.5% 17,520 16,143
Total 9.6% 145,525 132,789 8.0% 278,069 257,552
Endoscopy
Endoscopy devices 4.8% 5,546 5,293 9.6% 11,079 10,107
Total 9.4% $151,071 $138,082 8.0% $289,148 $267,659
* 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 second quarter was packed with opportunity and activity,” said Fred P. Lampropoulos, Merit’s Chairman and Chief Executive Officer. “We hired more than 50 production and support personnel to ramp up production of various catheters and access products. This effort involved training, sourcing and manufacturing, and we estimate that approximately $3.6 million of new revenue was derived from the sale of those products. We have also acquired additional production equipment that is now coming on line for what we anticipate to be a larger than expected opportunity for the sale of such products.”

“Our new direct operations in Canada and Australia have exceeded our initial expectations, and we believe they will continue to provide exceptional growth,” Lampropoulos said. “We have also completed the transition of production for our HeRO® product line to our South Jordan, Utah facility and have reduced our initial cost estimates. Additionally, we anticipate that we will introduce two new HeRO® products during the third quarter.”

“Finally, substantial due diligence and planning relating to DFINE, Inc. resulted in the previously announced acquisition,” Lampropoulos continued. “During the upcoming quarters, we expect to complete the restructuring and integration of the DFINE operations, which we believe will enhance our business prospects going forward. I appreciate my staff and all those who accomplished so much in just 90 days.”

CONFERENCE CALL
Merit will hold its investor conference call (conference ID 49502894) today, Wednesday, July 27, 2016, at 5:00 p.m. Eastern (4:00 p.m. Central, 3:00 p.m. Mountain, and 2:00 p.m. Pacific). The domestic telephone number is (844) 578-9672, and the international number is (508) 637-5656. A live webcast will also be available for the conference call at merit.com.

BALANCE SHEET
(In thousands)
June 30, December 31,
2016 2015
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents$10,487 $4,177
Trade receivables, net 76,792 70,292
Employee receivables 165 217
Other receivables 4,742 6,799
Inventories 109,858 105,999
Prepaid expenses 7,829 5,634
Prepaid income taxes 3,044 2,955
Deferred income tax assets 7,017 7,025
Income tax refunds receivable 43 905
Total Current Assets 219,977 204,003
Property and equipment, net 276,486 267,778
Intangibles, net 116,698 109,354
Goodwill 187,034 184,472
Other assets 14,770 13,121
Total Assets$814,965 $778,728
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Trade payables 31,286 37,977
Accrued expenses 40,196 37,846
Current portion of long-term debt 10,000 10,000
Advances from employees 473 589
Income taxes payable 3,138 1,498
Total Current Liabilities 85,093 87,910
Deferred income tax liabilities 11,024 10,985
Liabilities related to unrecognized tax benefits 768 768
Deferred compensation payable 9,103 8,500
Deferred credits 2,635 2,721
Long-term debt 221,719 197,593
Other long-term obligations 4,633 4,148
Total Liabilities 334,975 312,625
Stockholders' Equity
Common stock 200,015 197,826
Retained earnings 285,405 273,764
Accumulated other comprehensive loss (5,430) (5,487)
Total stockholders' equity 479,990 466,103
Total Liabilities and Stockholders' Equity$814,965 $778,728


INCOME STATEMENT
(Unaudited, in thousands except per share amounts)
Three Months Ended Six Months Ended
June 30,
June 30,
2016 2015 2016 2015
SALES$151,071 $138,082 $289,148 $267,659
COST OF SALES 84,217 77,196 162,193 151,390
GROSS PROFIT 66,854 60,886 126,955 116,269
OPERATING EXPENSES
Selling, general and administrative 43,653 39,321 85,358 76,206
Research and development 11,529 9,202 22,116 18,874
Contingent consideration expense 91 121 193 243
Total 55,273 48,644 107,667 95,323
INCOME FROM OPERATIONS 11,581 12,242 19,288 20,946
OTHER INCOME (EXPENSE)
Interest income 16 79 25 132
Interest (expense) (1,768) (1,713) (3,097) (3,287)
Other income (expense) 33 (85) (447) 195
Total other (expense) - net (1,719) (1,719) (3,519) (2,960)
INCOME BEFORE INCOME TAXES 9,862 10,523 15,769 17,986
INCOME TAX EXPENSE 2,572 3,122 4,128 5,411
NET INCOME$7,290 $7,401 $11,641 $12,575
EARNINGS PER COMMON SHARE-
Basic$0.16 $0.17 $0.26 $0.29
Diluted$0.16 $0.17 $0.26 $0.28
AVERAGE COMMON SHARES-
Basic 44,308 44,055 44,297 43,880
Diluted 44,703 44,517 44,647 44,332

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 six-month periods ended June 30, 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 $0.6 million and $2.5 million for the three and six-month periods ended June 30, 2016, respectively, was calculated using the average foreign exchange rates for the three and six-month periods ended June 30, 2015. The non-GAAP income adjustments referenced in the following table do not reflect stock-based compensation expense of approximately $786,000 and approximately $565,000 for the three-month periods ended June 30, 2016 and 2015, respectively, and approximately $1.4 million and approximately $1.1 million for the six-month periods ended June 30, 2016 and 2015, respectively.

MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - NON-GAAP
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015 (Unaudited)
In thousands, except per share data
Three Months Ended
June 30, 2016
Pre-TaxTax Impact (a)After-TaxPer Share Impact
GAAP net income$9,862 (2,572)7,290$0.16
Non-GAAP adjustments:
Cost of Sales
Amortization of intangibles$3,169 (1,162)2,007$0.04
Inventory mark-up related to acquisition$61 (24)37$0.00
Selling, General & Administrative
Severance$560 (218)342$0.01
Acquisition-related (c)$1,637 (637)1,000$0.02
Fair value adjustment to contingent consideration (d)$91 (35)56$0.00
Long-term asset impairment charge (b)$88 (34)54$0.00
Acquired in-process research & development$100 (39)61$0.00
Amortization of intangibles$847 (323)524$0.01
Other Income
Amortization of long-term debt issuance costs$264 (103)161$0.00
Adjusted net income$16,679 (5,147)11,532$0.26
Diluted shares 44,703
Three Months Ended
June 30, 2015
Pre-TaxTax Impact (a)After-TaxPer Share Impact
GAAP net income$10,523 (3,122)7,401$0.17
Non-GAAP adjustments:
Cost of Sales
Amortization of intangibles$2,797 (1,063)1,734$0.04
Selling, General & Administrative
Severance$785 (298)487$0.01
Acquisition-related (c)$64 (24)40$0.00
Fair value adjustment to contingent consideration (d)$121 (46)75$0.00
Amortization of intangibles$878 (334)544$0.01
Termination fee (e)$800 (304)496$0.01
Other Income
Amortization of long-term debt issuance costs$247 (94)153$0.00
Adjusted net income$16,215 (5,285)10,930$0.25
Diluted shares 44,517

In thousands, except per share data
Six Months Ended
June 30, 2016
Pre-TaxTax Impact (a)After-TaxPer Share Impact
GAAP net income$15,769 (4,128)11,641$0.26
Non-GAAP adjustments:
Cost of Sales
Amortization of intangibles$6,242 (2,285)3,957$0.09
Inventory mark-up related to acquisition$207 (80)127$0.00
Selling, General & Administrative
Severance$1,778 (692)1,086$0.02
Acquisition-related (c)$2,403 (935)1,468$0.03
Fair value adjustment to contingent consideration (d)$162 (63)99$0.00
Long-term asset impairment charge (b)$88 (34)54$0.00
Acquired in-process research & development$100 (39)61$0.00
Amortization of intangibles$1,646 (627)1,019$0.02
Other Income
Amortization of long-term debt issuance costs$521 (203)318$0.01
Adjusted net income$28,916 (9,086)19,830$0.44
Diluted shares 44,647
Six Months Ended
June 30, 2015
Pre-TaxTax Impact (a)After-TaxPer Share Impact
GAAP net income$17,986 (5,411)12,575$0.28
Non-GAAP adjustments:
Cost of Sales
Amortization of intangibles$5,568 (2,117)3,451$0.08
Selling, General & Administrative
Severance$1,115 (424)691$0.02
Acquisition-related (c)$64 (24)40$0.00
Fair value adjustment to contingent consideration (d)$243 (92)151$0.00
Long-term asset impairment charge (b)$14 (5)9$0.00
Amortization of intangibles$1,756 (667)1,089$0.02
Termination fee (e)$800 (304)496$0.01
Other Income
Amortization of long-term debt issuance costs$494 (188)306$0.01
Adjusted net income$28,040 (9,232)18,808$0.42
Diluted shares 44,332
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.
e. Costs associated with the termination of our agreement with a third-party contract manufacturer in Tijuana, Mexico

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, diagnostic and therapeutic 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 4,000 people worldwide with facilities in South Jordan, Utah; Pearland, Texas; Richmond, Virginia; Malvern, Pennsylvania; Rockland, Massachusetts; San Jose, California; Maastricht and Venlo, The Netherlands; Paris, France; Galway, Ireland; Beijing, China; Tijuana, Mexico; Joinville, Brazil; Markham, Ontario, Canada; Melbourne, Australia and Mannheim, Germany.

Statements contained in this release which are not purely historical, including, without limitation, statements regarding Merit's forecasted plans, 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. Such risks and uncertainties include risks relating to Merit's potential inability to successfully manage growth through acquisitions, including the inability to commercialize assets or technology acquired through completed, proposed or future transactions (including the recently completed acquisition of DFINE, Inc.); 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 materially 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.