UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report: October 30, 2003
(Date of earliest event reported)
MERGE TECHNOLOGIES INCORPORATED
(Exact name of registrant as specified in the charter)
Wisconsin 0-29486 39-1600938
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
1126 South 70th Street, Milwaukee, Wisconsin 53214-3151
(Address of Principal Executive Offices)
(414) 977-4000
(Registrant's telephone number including area code)
N/A
(Former name or former address, if changed since last report)
ITEM 12. RESULT OF OPERATIONS & FINANCIAL CONDITION
On October 30, 2003, Merge Technologies Incorporated dba Merge eFilm
announced the financial results for its third quarter of its fiscal year 2003.
A copy of the earnings press release announcing financial results for
the third quarter, together with Condensed Consolidated Statements of
Operations for the three and nine months ended September 30, 2003 and 2002,
respectively, as well as Summary Balance Sheet Data for September 30, 2003 and
December 31, 2002, included therein, is filed as an exhibit to this Form 8-K
and is incorporated by reference herein.
(a) Exhibit
99.1 Press Release announcing financial results for third quarter
of its fiscal year 2003.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MERGE TECHNOLOGIES INCORPORATED
Dated: October 30, 2003 By: /s/ Richard A. Linden
-------------------------------------
Richard A. Linden,
President and Chief Executive Officer
MERGE TECHNOLOGIES INCORPORATED
Dated: October 30, 2003 By: /s/ Scott T. Veech
-------------------------------------
Scott T. Veech,
Chief Financial Officer, Treasurer
and Secretary
EXHIBIT 99.1
[MERGE EFILM LOGO]
NEWS RELEASE
For Immediate Release
Contact: Scott Veech, Chief Financial Officer
Richard Linden, President & CEO
(414) 977-4000
MERGE EFILM ANNOUNCES RECORD REVENUES AND EARNINGS FOR THIRD QUARTER 2003
Revenues grow 43%; Strategic acquisition of RIS Logic delivers sales synergies
Milwaukee, WI, October 30, 2003 - Merge Technologies Incorporated
(NASDAQ: MRGE), d.b.a. Merge eFilm, today announced financial results for the
quarter and nine months ended September 30, 2003.
Revenues for the quarter ended September 30, 2003 were $7,619,000, an
increase of 43% over revenues of $5,322,000 for the quarter ended September
30, 2002. Revenues were $20,170,000 for the nine months ended September 30,
2003, an increase of 44% over revenues of $14,040,000 for the nine months
ended September 30, 2002.
Net income for the quarter ended September 30, 2003, was $1,625,000,
an increase of 55% over net income of $1,046,000 for the quarter ended
September 30, 2002. Fully diluted EPS was $0.12 for the quarter ended
September 30, 2003 compared to fully diluted EPS of $0.09 for the quarter
ended September 30, 2002.
Net income for the nine months ended September 30, 2003 was 4,342,000,
an increase of 85% over net income of $2,350,000 for the nine months ended
September 30, 2002. Fully diluted EPS was $0.35 for the nine months ended
September 30, 2003 compared to fully diluted EPS of $0.22 for the nine months
ended September 30, 2002. Gross margins increased to 66% for the quarter
ended September 30, 2003, compared to 61% for the quarter ended September 30,
2002. Gross margins for the nine months ended September 30, 2003 increased
to 69% compared to 61% for the nine months ended September 30, 2002. The
Company's operating margin, defined as operating income divided by net
sales, increased to 23% in the quarter ended September 30, 2003, compared
to 20% in the quarter ended September 30, 2002. Operating margin for the
nine months ended September 30, 2003 increased to 26%, compared to 17% for
the nine months ended September 30, 2002. Cash at September 30, 2003
increased 245% to $15,238,000 from $4,411,000 at December 31, 2002, due to
strong cash flow from operations and monies raised in a private placement
in the third quarter.
The financial results include approximately 2 1/2 months of the
operations of RIS Logic. Included in the balance sheet is a new line
item, "billings in excess of revenues - contracts in progress", which
represents future revenue to the Company. This line item is the result
of the Company's determination that the services associated with certain
Radiology Information System ("RIS") sales are essential to our customer,
resulting in the Company recognizing both the service fees and software
license fees for these sales on a percentage-complete basis. As a
result, the Company's aggregate deferred revenue increased 143% to
$4,592,000 from $1,892,000 as the result of the Company's continued
growth in new RIS and PACS software solution customers.
ANALYSIS OF RESULTS:
"I am pleased to report that the strategic initiatives we launched in
the third quarter have delivered on expectations," said Richard A. Linden,
President and CEO. "Specifically, the RIS Logic acquisition has strengthened
our product portfolio to include a full RIS/PACS solution, enhanced our target
market positioning and accelerated the effectiveness of our operations. The
results are positive financial performance, confirmed alignment with market
trends, growing market share, expanding sales pipeline and demonstrable
RIS/PACS product innovation, all of which further reinforced our belief that
we are well positioned for continued growth and financial success.
"I am proud of our organization's ability to stay focused on
operational excellence, bringing the best of Merge eFilm and RIS Logic
together with a focus on delivering enhanced value to both our target market
customers and our shareholders. Our financial performance this quarter
benefited from a combined sales force that increased our U.S. territory
coverage and the RIS Logic brand awareness that helped accelerate RIS/PACS
lead generation. These results confirm the strategic importance of adding
the RIS component to our product portfolio through the acquisition of an
established RIS market leader.
"We have refined our product development, sales and marketing
strategies based upon the convergence of several important market trends.
The shortage of radiologists and radiology technologists is approaching 20%
in 2003, and at the same time there has been a 15% growth in the number of
imaging centers, and a 16% increase in average imaging center volume.
Hospitals are experiencing similar challenges in radiology growth statistics
and workforce shortages. Our product innovation roadmap, marketing and sales
strategies are focused on the integration of business and clinical workflow
for the purpose of accelerating productivity for a specific target market -
imaging centers and small to medium sized hospitals. Our strategy and
RIS/PACS product and professional service offerings are aligned to address
these market trends.
"Our combined company is now positioned as one of the leading
single-vendor RIS/PACS providers focused primarily on the image and
information management needs of imaging centers and small to medium-sized
hospitals. The marketplace reaction to the RIS Logic acquisition was
immediate and positive, as evidenced by our ability to convert RIS/PACS leads
to new contracts in the third quarter. We added eighteen new PACS or RIS
customers in this quarter. In addition, we added two new RIS/PACS accounts,
both of which recognized the unique value proposition in having a single
vendor for integrated, end-to-end automation of their clinical and business
workflow. We now have over 100 customers utilizing a combination of RIS or
PACS software modules. Additionally, marketplace interest in our eFilm
Workstation continues to be strong as we are approaching 40,000 downloads
of this most widely used desktop diagnostic imaging software in the world.
These milestones in our sales efforts, along with the accelerating
strength of our pipeline through add-on sales to existing customers and
new RIS/PACS opportunities, reinforces our contention that our target
market needs a reliable, experienced single-solution provider for RIS/PACS
software and professional services.
"We made steady progress on the integration of our product innovation
effort. We anticipate our first integrated product, FUSION RIS/PACS, to debut
at the RSNA (Radiological Society of North America) tradeshow in December.
FUSION RIS/PACS is an integrated workflow management system that provides our
customers with a single-vendor solution for their end-to-end business needs,
a distinctive advantage in their optimization of revenues and cash flow. We
also recently released new versions of our eFilm Workstation and FUSION PACS
solutions to current customers. These products, which offer enhanced clinical
and technical performance, will also make their public debut at RSNA in
December. Finally, we continue to make progress enhancing the productivity
of our RIS and PACS solutions with the integration of embedded dictation and
speech recognition. This functionality has been released for use with the
RIS solution, and is in clinical trials with the PACS solution, with an
expected release in early 2004.
"Finally, the continued strengthening of our balance sheet supports
both our operating plans and strategic growth initiatives. Specifically,
we successfully raised $8 million in cash through a private placement,
generated record positive operating cash flow for the quarter, significantly
increased our aggregate deferred revenue balances representing future
revenues to the Company and remain debt-free.
GUIDANCE:
The Company anticipates market conditions will support the continued
growth of its RIS/PACS software product and professional service offerings.
The Company's strong year-to-date performance, accelerating pipeline of
RIS/PACS opportunities and recognition of certain RIS software sales revenues
on a percentage-complete basis, positions the Company to refine its guidance
within the previously stated range. Revenues in 2003 are expected to be $29
million, with year-over-year growth over 40%. The Company expects fully
diluted EPS on an after-tax basis to be $0.49. Further, the Company
anticipates aggregate deferred revenues will continue to grow, representing
future software licensing and service revenues. The Company also reaffirms
its guidance that the RIS Logic acquisition will be accretive in 2004 and
beyond.
# # #
ABOUT MERGE EFILM
Merge eFilm is a global healthcare software and services company focused on
accelerating the productivity of imaging centers, hospitals and clinics with
a suite of RIS/PACS software solutions and professional services. For
sixteen years, Merge eFilm has been a leader in integration of radiology
workflow to improve productivity, profitability and patient care by fusing
business and clinical workflow, and intelligently managing and distributing
diagnostic images and information throughout the healthcare enterprise. For
additional information, visit our website at www.merge-efilm.com.
Except for the historical information herein, the matters discussed in this
news release include forward-looking statements that may involve a number of
risks and uncertainties. When used in this press release, the words: believes,
intends, anticipates, expects, and similar expressions are intended to
identify forward-looking statements. Actual results could differ materially
from those projected in the forward-looking statements based on a number of
factors, including, but not limited to, risks in product and technology
development, market acceptance of new products and continuing product demand,
the impact of competitive products and pricing, ability to integrate
acquisitions, unexpected outcomes to any pending or future litigation,
changing economic conditions, credit and payment risks associated with
end-user sales, dependence on major customers, dependence on key personnel,
and other risk factors detailed in filings with the Securities and Exchange
Commission. The Company undertakes no obligation to publicly release the
result of any revisions to these forward-looking statements that may be made
to reflect any future events or circumstances.
(FINANCIAL STATEMENTS ATTACHED)
MERGE TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1) (2)
(Dollars in thousands, except share data)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------------------------------
2003 2002 2003 2002
----------- ------------ ------------ ------------
Net sales............................. $ 7,619 $ 5,322 $ 20,170 $ 14,040
Cost of sales......................... 2,586 2,079 6,266 5,513
----------- ------------ ------------ ------------
Gross profit.......................... 5,033 3,243 13,904 8,527
----------- ------------ ------------ ------------
Operating costs and expenses:
Sales and marketing.................. 1,669 1,043 4,470 2,792
Product research and development..... 566 451 1,402 1,164
General and administrative........... 901 543 2,487 1,693
Depreciation and amortization........ 159 145 383 377
Acquired in-process research and
development........................ ---- ---- ---- 148
----------- ------------ ------------ ------------
Total operating costs and expenses.... 3,295 2,182 8,742 6,174
----------- ------------ ------------ ------------
Operating income...................... 1,738 1,061 5,162 2,353
----------- ------------ ------------ ------------
Total other income (expense).......... 97 (2) (122) 43
----------- ------------ ------------ ------------
Net income before income taxes........ 1,835 1,059 5,040 2,396
----------- ------------ ------------ ------------
Income tax expense.................... 210 12 698 46
----------- ------------ ------------ ------------
Net income............................ $ 1,625 $ 1,047 $ 4,342 $ 2,350
=========== ============ ============ ============
Net income per share - basic.......... $ 0.13 $ 0.10 $ 0.38 $ 0.26
=========== ============ ============ ============
Weighted average number of common
shares outstanding - basic.......... 12,233,517 10,131,406 11,158,830 8,330,855
=========== ============ ============ ============
Net income per share - diluted........ $ 0.12 $ 0.09 $ 0.35 $ 0.22
=========== ============ ============ ============
Weighted average number of common
shares outstanding - diluted........ 13,333,497 10,977,879 12,155,375 10,146,516
=========== ============ ============ ============
(1) These condensed consolidated statements of operations should be read in conjunction with the
Company's Annual Report on Form 10-KSB for fiscal 2002 and its Quarterly Report on Form 10-Q
for the three and nine months ended September 30, 2003 proposed to be filed on or prior to
November 14, 2003.
(2) Income statement is subject to change pending final valuation of the purchase accounting for
the acquisition of RIS Logic.
MERGE TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
SUMMARY BALANCE SHEET DATA(1) (2)
(In thousands, except for current ratio)
(unaudited)
September 30, December 31,
2003 2002 Change
-------- -------- --------
Cash.................................. $ 15,238 $ 4,411 245%
Accounts receivable................... 8,107 7,148 13%
Inventory............................. 693 453 53%
Accounts payable...................... 979 1,493 -34%
Deferred revenue...................... 3,778 1,892 100%
Billings in excess of revenue -
Contracts in progress............... 814 ---- ----
Total current assets.................. $ 24,473 $ 12,213 100%
Total current liabilities............. 7,975 4,341 84%
Total assets.......................... $ 57,843 $ 27,246 112%
Total liabilities..................... 8,328 5,563 50%
(1) This summary balance sheet data should be read in conjunction with
the Company's Annual Report on Form 10-KSB for fiscal 2002 and its
Quarterly Report on Form 10-Q for the three and nine months ended
September 30, 2003 proposed to be filed on or prior to November 14,
2003.
(2) Balance sheet data subject to change pending final valuation of the
purchase accounting for the acquisition of RIS Logic.