Merit Medical Reports Record Sales and Net Income for the Year Ended December 31, 2011 and Gives Sales and Earnings Guidance for 2012

Revenues Up 21% for the Year and 12% for the Quarter

Gross Margins Up 270 Basis Points for the Year and 150 Basis Points for the Quarter

SOUTH JORDAN, Utah, Feb. 23, 2012 (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 revenues of $91.1 million for the quarter ended December 31, 2011, an increase of 12% over revenues of $81.2 million for the quarter ended December 31, 2010. Revenues for the year ended December 31, 2011 were a record $359.4 million, an increase of 21% over revenues of $296.8 million for the year ended December 31, 2010. Merit's core business grew 12% and 14% for the quarter and year ended December 31, 2011, respectively, compared to the corresponding periods of 2010.

Merit's non-GAAP net income for the quarter ended December 31, 2011, was $7.4 million, up 10%, or $0.18 per share, compared to $6.7 million, or $0.19 per share, for the quarter ended December 31, 2010. Merit's non-GAAP net income for the year ended December 31, 2011 was $30.9 million, up 23%, or $0.78 per share, compared to $25.2 million, or $0.70 per share, for the year ended December 31, 2010. 

GAAP net income for the quarter ended December 31, 2011 was $5.0 million, up 18%, or $0.12 per share, compared to $4.2 million, or $0.12 per share, for the fourth quarter of 2010. GAAP net income for the year ended December 31, 2011 was $23.0 million, up 85%, or $0.58 per share, compared to $12.5 million, or $0.35 per share, for the year ended December 31, 2010. 

Gross margins for the fourth quarter of 2011 were 46.3% of sales, up 150 basis points, compared to 44.8% of sales for the fourth quarter of 2010, and also up sequentially from 45.4% of sales for the third quarter of 2011. 

Gross margins improved to 46.0% of sales for the year ended December 31, 2011, compared to 43.3% of sales for the year ended December 31, 2010, an improvement of 270 basis points. The improvement in gross margins for the quarter and year ended December 31, 2011 can be attributed primarily to increased sales of BioSphere products, which generally provide a higher gross margin than many of Merit's legacy products, and increased direct sales in China.

"2011 was an important year for Merit's future," said Fred P. Lampropoulos, Merit's Chairman and Chief Executive Officer. "We successfully integrated the BioSphere Medical business during the year and commenced the HiQuality clinical trial, which we believe, when completed, will support substantial future growth. We also acquired the technology relating to the Ostial Pro® Stent Positioning System, which we acquired during January 2012 and is scheduled to be launched over the next several weeks, as well as the technology relating to a crossing support catheter from QX Medical, LLC, which will be introduced later this year."

"Construction of facilities for anticipated future growth is well underway, with three new buildings coming on line late this year. We believe these new facilities will help us consolidate older facilities and substantially improve productivity," Lampropoulos continued. "We believe an advanced new product pipeline will enhance growth moving forward with new technologies in non-vascular stents and balloon catheters this year."

"Merit will continue to expand its opportunities in Brazil, India, Russia and Eastern Europe by adopting modified versions of the system we implemented in China," Lampropoulos said. "We believe new products, facilities, geographic expansion and tuck-in acquisitions will move us forward in the future."

For the fourth quarter of 2011, compared to the fourth quarter of 2010, Endotek sales rose 51%; catheter sales increased 25%; embolotherapy device sales grew 15%; stand-alone device sales rose 9%; custom kit and tray sales increased 9%; and inflation device sales grew 5%. Excluding lower sales to an OEM customer, inflation device sales rose 12%. Sales of catheters and non-vascular stent products increased due primarily to competitive withdrawals, and we believe this new business is sustainable in the future.

For the year ended December 31, 2011, compared to the year ended December 31, 2010, Endotek sales rose 33%; catheter sales grew 23%; stand-alone device sales increased 15%; custom kit and tray sales rose 11%; and inflation device sales grew 8%. Excluding decreased sales to the OEM customer referenced above, inflation device sales were up 11%.  

Selling, general and administrative expenses were 30.8% and 29.1% of Merit's sales for the quarter and year ended December 31, 2011, respectively, compared with 32.2% and 29.5% of Merit's sales for the comparable periods of 2010, respectively. SG&A expenses would have been 30.6% and 27.8% of sales for the quarter and year ended December 31, 2010, respectively, if not for non-recurring transaction and integration expenses attributable to the BioSphere acquisition of $1.3 million for the quarter and $5.2 million for the year ended December 31, 2010, respectively. The increase in SG&A expenses for the year ended December 31, 2011 was primarily related to the addition of sales and marketing employees, trade shows, commissions, amortization of intangibles relating to the BioSphere acquisition and starting up Merit's Chinese distribution system.

Research and development costs were 6.7% and 6.1% of sales for the quarter and year ended December 31, 2011, respectively, compared to 5.8% and 5.2% of sales for the comparable periods of 2010, respectively. The increase in R&D expense for the quarter and year ended December 31, 2011 was attributable primarily to headcount additions to support various new product launches, regulatory costs for seeking product approvals from the U.S. Food and Drug Administration and international regulatory agencies, additional regulatory costs incurred for the start-up of Merit's HiQuality clinical trial and the development of several new products for Merit's endoscopy product line.

Acquired in-process research and development costs were 2.6% and 1.6% of sales for the quarter and year ended December 31, 2011. During the quarter ended December 31, 2011, Merit incurred a $2.0 million charge related to the purchase of support guide catheter technology from QX Medical, and $400,000 related to the write-off of acquired in-process research and development related to Merit's acquisition of Alveolus, Inc. During the year ended December 31, 2011, Merit also incurred a $1.0 million charge related to the acquisition of a vena cava filter, a $1.9 million charge related to the acquisition of flexible sheath technology and $500,000 related to the write-off of coating technology acquired from Vysera Biomedical Ltd.

Interest expense was $34,000 for the quarter ended December 31, 2011, compared to $451,000 for the quarter ended December 31, 2010. This decrease was primarily related to lower debt balances as the result of Merit's use of stock offering proceeds to pay down balances under its credit facility. Interest expense was $789,000 for the year ended December 31, 2011, compared to $596,000 for the year ended December 31, 2010. This increase was primarily the result of the finance costs associated with the BioSphere acquisition, which were higher due to more days outstanding in 2011 than in 2010.

Merit's effective tax rates for the quarter and year ended December 31, 2011 were 14.0% and 29.9%, respectively, compared to 17.9% and 25.8% for the comparable periods of 2010, respectively. The decreased tax rate for the quarter ended December 31, 2011 was primarily attributable to an increase in Merit's production tax credits. The increased tax rate for the year ended December 31, 2011 was largely the result of Merit's increased U.S. operations which are taxed at a higher rate than foreign operations income, primarily Merit's Irish operations.

Merit generated $34.0 million in cash from operations for the year ended December 31, 2011, compared to $34.8 million for the year ended December 31, 2010. 

2012 GUIDANCE

Based upon information currently available to Merit's management, Merit currently estimates that for the year ending December 31, 2012, absent extraordinary transactions, Merit's revenues will be in the range of $392-$402 million, an increase of approximately 9-12%, compared to revenues of $359.4 million for the year ended December 31, 2011. Also based on information currently available to Merit's management, Merit currently estimates that, absent non-recurring transactions, Merit's GAAP earnings per share for 2012 will be in the range of $0.55-$0.60, compared to GAAP earnings per share of $0.58 for calendar year 2011, and non-GAAP earnings per share of $0.67-$0.72, 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 23^rd, 2012, 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) 941-2332, and the international number is (480) 629-9723. 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.

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 Merit's GAAP financial statements for the three and twelve-month periods ended December 31, 2011 and 2010. 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.

The non-GAAP income for adjustments referenced in the preceding table do not reflect stock-based compensation expense of $562,000 and $343,000, for three months ended December 31, 2011 and 2010, respectively, and $1.6 million and $1.3 million for the year ended December 31, 2011 and 2010, respectively.

(a)  Increase in cost of goods sold related to the mark-up of finished goods associated with Merit's acquisition of BioSphere.
(b)  Amounts represent patents and trademarks and construction work-in-progress equipment abandoned.
(c)  Reflects an estimated annual effective tax rate of 38% on a non-GAAP basis.

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 130 individuals. Merit employs approximately 2,400 people worldwide with facilities in Salt Lake City and South Jordan, Utah; Angleton, Texas; Richmond, Virginia; 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 or other financial results, 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, 2010. Such risks and uncertainties include risks relating to Merit's product recalls and product liability claims; compliance with governmental regulations and administrative procedures; possible infringement of Merit's technology or the assertion that Merit's technology infringes the rights of other parties; potential inability to successfully manage growth through acquisitions, including the inability to commercialize technology acquired through recent, proposed or future acquisitions; potential restrictions on Merit's liquidity or its ability to operate its business by its current debt agreements; 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; 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; laws targeting fraud and abuse in the healthcare industry; potential for significant adverse changes in, or failure to comply with, governing regulations; 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, 2010 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.