SOUTH JORDAN, Utah, Feb. 21, 2013 (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 record revenues of $102.2 million for the quarter ended December 31, 2012, an increase of 12% over revenues of $91.1 million for the quarter ended December 31, 2011. Revenues for the year ended December 31, 2012 were a record $394.3 million, an increase of 10% over revenues of $359.4 million for the year ended December 31, 2011. Revenues from Merit's core business grew 10% and 9% for the quarter and year ended December 31, 2012, respectively, compared to the corresponding periods of 2011. Revenues related to Merit's recent acquisition of Thomas Medical Products Inc. ("Thomas Medical") from a division of GE Healthcare were $1.9 million for the last twelve days of December 2012.

Merit's non-GAAP net income for the quarter ended December 31, 2012 was $6.2 million, or $0.15 per share, compared to $7.4 million, or $0.18 per share, for the quarter ended December 31, 2011. Merit's non-GAAP net income for the year ended December 31, 2012 was $30.8 million, or $0.72 per share, compared to $30.9 million, or $0.78 per share, for the year ended December 31, 2011.

GAAP net income for the quarter ended December 31, 2012 was $641,000, or $0.01 per share, compared to $5.0 million, or $0.12 per share, for the fourth quarter of 2011. GAAP net income for the year ended December 31, 2012 was $19.7 million, or $0.46 per share, compared to $23.0 million, or $0.58 per share, for the year ended December 31, 2011. The decrease in GAAP net income for the quarter and year ended December 31, 2012 was primarily due to $2.2 million, net of tax, for non-recurring costs related to the acquisition of Thomas Medical and $1.5 million for a capital loss related to an investment in a privately-held company.

Gross profits for the fourth quarter of 2012 were 44.5% of sales, compared to 46.3% of sales for the fourth quarter of 2011. Gross profits improved to 46.2% of sales for the year ended December 31, 2012, compared to 46.0% of sales for the year ended December 31, 2011. Merit's gross margins would have been 45.3% and 46.4% of sales for the three- and twelve-month periods ended December 31, 2012, respectively, excluding the non-recurring Thomas Medical acquired inventory mark-up costs of $831,000 for both the quarter and year ended December 31, 2012. The decrease in gross margins for the fourth quarter of 2012, when compared to the corresponding period of 2011, was primarily the result of higher standard costs resulting from lower production volumes for the fourth quarter of 2012.

"The fourth quarter of 2012 was a very busy quarter for Merit as we conducted due diligence, acquired Thomas Medical and initiated the transition process," said Fred P. Lampropoulos, Merit's Chairman and Chief Executive Officer. "Additionally, we prepared for the implementation of the new medical device tax."

"All in all we had a very good sales year while we invested in a number of new products that we plan to introduce throughout the year," Lampropoulos continued. "The basixTOUCH™, the most advanced inflation device Merit has ever produced, is scheduled to be available in the early second quarter of 2013 along with the PHD™ Hemostasis Valve. The TIO™, ONE Snare™ and peritoneal dialysis catheters have all been released in the past few weeks."

"We have also invested in new business segments over the past year," Lampropoulos said. "Recently we initiated sales of procedure packs which are produced in our Galway, Ireland facility. We also plan to complete our hypotube and advanced devices unit in Ireland and begin processing product in early April."

"Despite the challenges of the device industry, Merit has added a stellar line of new products and acquired technology and capacity to take advantage of the opportunities that the disruptions and turmoil of the industry have presented," Lampropoulos added.

For the quarter ended December 31, 2012, compared to the quarter ended December 31, 2011, Endotek sales rose 32%; catheter sales increased 19%; stand-alone device sales were up 11%; custom kit and tray sales increased 9%; embolotherapy device sales grew 6%; and inflation device sales rose 1%. For the year ended December 31, 2012, compared to the year ended December 31, 2011, Endotek sales rose 31%; stand-alone device sales increased 12%; catheter sales grew 10%; embolotherapy device sales rose 9%; custom kit and tray sales were up 3%; and inflation device sales grew 2%. Excluding decreased sales to an OEM customer, inflation device sales were up 6% for the year ended December 31, 2012.

Selling, general and administrative expenses were 32.7% and 31.0% of Merit's sales for the quarter and year ended December 31, 2012, respectively, compared with 30.8% and 29.1% of Merit's sales for the comparable periods of 2011, respectively. 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 increase in SG&A expenses for the year ended December 31, 2012 was primarily related to the hiring of additional sales and marketing representatives, both domestically and internationally, to expand Merit's sales distribution efforts and pursue increased market share for new and existing products.

Research and development costs were 7.5% and 7.0% of sales for the quarter and year ended December 31, 2012, respectively, compared to 6.7% and 6.1% of sales for the corresponding periods of 2011, respectively. The increase was primarily due to headcount additions for Merit's research and development group to support new products and personnel increases in Merit's regulatory department to support product registrations in foreign countries as Merit expands its international sales distribution. In addition, acquired in-process research and development costs were 0.6% and 1.6% of sales for the year ended December 31, 2012 and 2011, respectively. During the year ended December 31, 2012, Merit spent approximately $2.5 million in acquired in-process research and development to purchase five new technologies.

Other expense for the quarter and year ended December 31, 2012 was approximately $2.5 million and $2.0 million, respectively, compared with other income of approximately $150,000 and other expenses of approximately $315,000, for the corresponding periods of 2011, respectively. The increase in other expense for the quarter and year ended December 31, 2012 primarily related to a loss of approximately $2.4 million of an investment in a privately-held company accounted for at cost. A realized gain on marketable securities of approximately $745,000 partially offset the investment loss for the year ended December 31, 2012.

Merit's effective income tax rates for the quarter and year ended December 31, 2012 were 65.3% and 28.6%, respectively, compared to 14.0% and 29.9% for the comparable periods of 2011, 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. 

The increase in the effective income tax rate for the fourth quarter of 2012, when compared to the same period of 2011, was primarily the result of a higher mix of U.S. income compared to Merit's foreign income, which is primarily due to Merit's Irish operations being taxed at a lower income tax rate than its U.S. operations. The decrease in the effective income tax rate for the year ended December 31, 2012, when compared to the corresponding period of 2011, was the result of a higher mix of foreign income, which is primarily due to Merit's Irish operations being taxed at a lower rate than its U.S. operations. 

Merit generated $46.9 million in cash from operations for the year ended December 31, 2012, compared to $34.0 million for the year ended December 31, 2011.

2013 GUIDANCE

Based upon information currently available to Merit's management, Merit estimates that for the year ending December 31, 2013, absent extraordinary transactions, Merit's revenues will be in the range of $455-$465 million, an increase of approximately 15-18%, compared to revenues of $394.3 million for the year ended December 31, 2012.  Also, based on information currently available to Merit's management, Merit estimates that, absent non-recurring transactions, Merit's GAAP earnings per share for 2013 will be in the range of $0.40-$0.46, compared to GAAP earnings per share of $0.46 for the year ended December 31, 2012, and non-GAAP earnings per share of $0.61-$0.67, excluding the acquired in-process research and development and the amortization of intangibles, net of tax.

CONFERENCE CALL

Merit invites all interested parties to participate in its fourth quarter and year-end conference call today, February 21 st, 2013, 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) 941-0843, and the international number is (480) 629-9866. A live webcast as well as a rebroadcast can be accessed through the Investors page at www.merit.com or through the webcasts tab at www.fulldisclosure.com.
     
BALANCE SHEET    
(Unaudited in thousands)    
  December 31, December 31,
  2012 2011
ASSETS    
Current Assets    
Cash and cash equivalents  $ 9,719   $ 10,128 
Trade receivables, net  53,402   40,550 
Employee receivables  169   154 
Other receivables  2,672   1,750 
Inventories  84,599   69,911 
Prepaid expenses  4,133   3,775 
Prepaid income taxes  1,250   883 
Deferred income tax assets  4,976   3,704 
Income tax refunds receivable  1,076   2,797 
Total Current Assets  161,996   133,652 
     
Property and equipment, net  234,803   179,140 
Other intangibles, net  118,131   56,669 
Goodwill  175,108   61,144 
Deferred income tax assets  4,237   5,366 
Marketable Securities    2,798 
Other assets  11,034   8,248 
Total Assets  $ 705,309   $ 447,017 
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current Liabilities    
Trade payables  34,637   22,727 
Accrued expenses  28,349   20,197 
Current portion of long-term debt  10,000   
Advances from employees  551   225 
Income taxes payable  547   646 
Total Current Liabilities  74,084   43,795 
     
     
Deferred income tax liabilities  2,373   2,112 
Liabilities related to unrecognized tax benefits  1,858   3,489 
Deferred compensation payable  5,956   4,585 
Deferred credits  2,980   1,984 
Long-term debt  227,566   30,737 
Other long-term obligation  8,915   3,226 
Total Liabilities  323,732   89,928 
     
Stockholders' Equity    
Common stock  172,341   166,231 
Retained earnings  210,418   190,708 
Accumulated other comprehensive income (loss)  (1,182)  150 
Total stockholders' equity  381,577   357,089 
Total Liabilities and Stockholders' Equity  $ 705,309   $ 447,017 
     
         
INCOME STATEMENT        
(Unaudited, in thousands except per share amounts)        
  Three Months Ended Twelve Months Ended
  December 31, December 31,
  2012 2011 2012 2011
         
SALES  $ 102,231   $ 91,092   $ 394,288   $ 359,449 
         
COST OF SALES  56,768   48,947   212,296   193,981 
         
GROSS PROFIT  45,463   42,145   181,992   165,468 
         
OPERATING EXPENSES        
Selling, general and administrative  33,468   28,028   122,106   104,502 
Research and development  7,665   6,091   27,795   21,938 
Acquired in-process research and development    2,400   2,450   5,838 
Total  41,133   36,519   152,351   132,278 
         
INCOME FROM OPERATIONS  4,330   5,626   29,641   33,190 
         
OTHER INCOME (EXPENSE)        
Interest income  50   77   226   129 
Interest expense  (252)  (34)  (604)  (789)
Other income (expense)  (2,278)  107   (1,645)  345 
Total other income (expense) - net  (2,480)  150   (2,023)  (315)
         
INCOME BEFORE INCOME TAX EXPENSE  1,850   5,776   27,618   32,875 
         
INCOME TAX EXPENSE  1,209   806   7,908   9,831 
         
NET INCOME  $ 641   $ 4,970   $ 19,710   $ 23,044 
         
EARNINGS PER SHARE-        
Basic  $ 0.02   $ 0.12   $ 0.47   $ 0.59 
         
Diluted  $ 0.01   $ 0.12   $ 0.46   $ 0.58 
         
AVERAGE COMMON SHARES-        
Basic 42,442 41,949 42,176 39,086
         
Diluted 42,830 42,410 42,610 39,733
         

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, 2012 and 2011.  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.
         
  Three Months Ended Twelve Months Ended
  December 31, December 31,
  2012 2011 2012 2011
Non-GAAP ADJUSTMENTS        
GAAP net income  $ 641   $ 4,970   $ 19,710   $ 23,044 
         
Acquisition costs  2,492     2,559   86 
Severance  242     494   
Fair value write-up of acquired inventory sold (a)  831   80   831   724 
Long-term asset impairment charges (b)  116   44   143   103 
Acquired in-process research and development    2,400   2,450   5,838 
Amortization of intangible assets        
Cost of sales  876   670   4,072   2,588 
SG&A expenses  943   804   3,441   3,389 
Loss on capital investment  2,368     2,368   
FV adjustment to contingent considerations (c)  110     480   
Income tax effect of reconciling items (d)  (3,032)  (1,519)  (6,398)  (4,837)
Tax effect on capital loss (e)  631     631   
         
Non-GAAP net income  $ 6,218   $ 7,449   $ 30,781   $ 30,935 
         
Non-GAAP net income per share  $ 0.15   $ 0.18   $ 0.72   $ 0.78 
         
Diluted shares used to compute Non-GAAP net income per share  42,830   42,410   42,610   39,733 
         

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 $463,000 and approximately $562,000 for the three months ended December 31, 2012 and 2011, respectively, and stock-based compensation of approximately $1.9 million and approximately $1.6 million for the year ended December 31, 2012 and 2011, 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 the fair value of contingent consideration liabilities for recent acquisitions (d) Reflects an estimated annual income tax rate of 38% on a non-GAAP basis (e) 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 2,750 people worldwide with facilities in Salt Lake City and South Jordan, Utah; Angleton, Texas; Richmond, Virginia; Malvern, Pennsylvania; Maastricht and Venlo, The Netherlands; Paris, France; Galway, Ireland; Beijing, China; Copenhagen, Denmark; and Rockland, Massachusetts.

The Merit Medical Systems, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=3282

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, 2011. 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 recent, 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 price 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, 2011 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         (801) 208-4167         e-mail: awright@merit.com

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