MERIT MEDICAL SYSTEMS INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - July 27, 2016

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 Exhibit 99.1

FOR IMMEDIATE RELEASE

Date:
July 27, 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 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- 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

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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.

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BALANCE SHEET
(In thousands)
                  
 
June 30, 2016 (Unaudited)
 
December 31, 2015
 
 
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
 
 
 
 

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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
 
 
 
 
 
 
 
 


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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 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.



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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-Tax
 
Tax Impact (a)
 
After-Tax
 
Per 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-Tax
 
Tax Impact (a)
 
After-Tax
 
Per 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


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In thousands, except per share data
 
 
 
 
 
 
 
 
Six Months Ended
 
June 30, 2016
 
Pre-Tax
 
Tax Impact (a)
 
After-Tax
 
Per 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-Tax
 
Tax Impact (a)
 
After-Tax
 
Per 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.

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(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

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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, 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

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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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MERIT MEDICAL SYSTEMS INC Reports