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: June 30, 2004
(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 July 28, 2004, Merge Technologies Incorporated dba Merge eFilm
announced the financial results for its second quarter ended June, 30, 2004.
A copy of the earnings press release announcing financial results for
the second quarter, together with Condensed Consolidated Statements of
Operations for the three and six months ended June 30, 2004 and 2003,
respectively, as well as the Condensed Consolidated Balance Sheet for June 30,
2004 and December 31, 2003, 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 second quarter
of its fiscal year 2004.
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: July 28, 2004 By: /s/ Richard A. Linden
-------------------------------------
Richard A. Linden,
President and Chief Executive Officer
MERGE TECHNOLOGIES INCORPORATED
Dated: July 28, 2004 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 SECOND QUARTER 2004 RESULTS
Revenues grow 38%; New RIS/PACS product releases and national
distribution agreement support reaffirmed 2004 guidance
Milwaukee, WI, July 28, 2004 - Merge Technologies Incorporated,
d.b.a. Merge eFilm, (NASDAQ: MRGE), today announced the financial results
for the quarter ended June 30, 2004. Net sales for the quarter ended June
30, 2004, were $8,907,000, an increase of 38% over net sales of $6,434,000 for
the quarter ended June 30, 2003. Net sales for the six months ended June 30,
2004, were $17,544,000, an increase of 40% over net sales of $12,552,000 for
the six months ended June 30, 2003. Gross margin in the quarter ended June
30, 2004, was 64%, compared to 75% in the quarter ended June 30, 2003. Gross
margin in the six months ended June 30, 2004, was 64%, compared to 71% in the
six months ended June 30, 2003. The Company's operating margin, defined as
operating income divided by net sales, was 27% in the quarter ended June 30,
2004, compared to 30% in the quarter ended June 30, 2003. The Company's
operating margin was 26% in the six months ended June 30, 2004, compared to
27% in the six months ended June 30, 2003.
For the quarter ended June 30, 2004, operating income was $2,381,000,
an increase of 22%, compared to $1,950,000 for the quarter ended June 30, 2003.
For the six months ended June 30, 2004, operating income was $4,522,000, an
increase of 32%, compared to $3,424,000 for the six months ended June 30, 2003.
Income tax expense for the six months ended June 30, 2004 was $1,831,000, a
39% effective rate, compared to $489,000, a 15% effective rate, for the six
months ended June 30, 2003. For the quarter ended June 30, 2004, net income
was $1,497,000, generating $0.11 diluted EPS compared to $1,400,000 net income
and $0.12 diluted EPS for the quarter ended June 30, 2003. For the six months
ended June 30, 2004, net income was $2,851,000, generating $0.21 diluted EPS
compared to $2,716,000 net income and $0.23 diluted EPS for the six months
ended June 30, 2003.
ANALYSIS OF RESULTS:
"Our financial and operational performance this quarter is a direct
result of our strategy to position Merge eFilm as a leader in RIS, PACS and
RIS/PACS software and professional services for our target market - imaging
centers, small to medium sized hospitals and specialty clinics," said Richard
A. Linden, President and CEO. "Second quarter highlights include: exceptional
performance by our North American Direct Sales and Services division which
delivered record year-over-year growth; accelerated product innovation in
collaboration with our customers that resulted in new releases of FUSION
(Trademark) RIS, PACS, RIS/PACS and OEM products; and recognition of our
products' quality by objective third party certification organizations.
These accomplishments, the trends towards paperless and filmless workflow
within our target market, our products' alignment with those trends and
the execution of a national distribution agreement in July 2004 with
SourceOne Healthcare Technologies form the foundation for reaffirming our
2004 guidance.
"The combined reputations of Merge, eFilm and RIS Logic, the value
proposition of our RIS/PACS solutions, our financial strength and our
alignment with our target market have all contributed to an exceptional win
loss ratio this year against our competitors. We successfully closed 20 new
FUSION RIS, PACS and RIS/PACS contracts during the second quarter, growing our
total number of FUSION solution customers to 160, representing over 320
healthcare facilities.
Our partnership with SourceOne Healthcare Technologies represents
advancement in our strategy to rapidly expand our ability to cover the North
American healthcare market. SourceOne brings to the partnership over 120 sales
professionals, increasing our market coverage capabilities tenfold. The new
distribution agreement is in addition to our strong and growing Direct Sales
strategy, which when combined provides Merge eFilm with comprehensive coverage
of our target market. SourceOne understands the customer's analog and digital
workflow, along with the ultimate goal of filmless and paperless operations.
With the combined strengths of both organizations, this partnership provides
our target market and SourceOne's customers with the radiology workflow
expertise to deliver a solution aligned with the customers' current needs,
along with a future growth plan toward seamless digital workflow.
Our OEM and International channel continued to experience challenges
achieving their financial goals, however, we are encouraged by progress with
key OEM customers and our European VARs. A new software product line customized
for a leading OEM in Europe generated improved revenues in the second quarter.
Additionally, several European VARs purchased FUSION PACS components and
software modules for their customers. These signs of improved performance and
new leadership of our OEM and International team give us encouragement that the
OEM channel will produce improved results in the second half of 2004.
"I am particularly proud of our Product Innovation team that delivered
several new FUSION software product releases in the second quarter. Their
quality-driven efforts delivered new versions of our RIS, PACS and RIS/PACS
solutions, adding voice recognition, enhanced web capabilities and document
scanning to our workflow solutions. In addition, they produced updates to our
connectivity solutions and generated new customized PACS component solutions
for our historical OEM customers representing future strength in the OEM/VAR
channel. Finally, we are committed to strengthening our relationship with our
customers, and expect up to 400 individuals to attend our Annual User Group
Meeting to be held in October, which reflects our commitment to customer-driven
RIS/PACS solutions.
"We continue to focus on quality in all areas of our business. In the
second quarter, we were granted two quality system ISO certificates by
Underwriters Laboratories for the design, development and servicing of medical
imaging, storage and distribution devices and diagnostic software. We also
initiated a formal review of our products and services by two outside healthcare
technology evaluation organizations, ECRI and KLAS. Each is an independent
research organization that reviews healthcare products and services from the
customers' perspectives. These initiatives reflect Merge eFilm's commitment
to product quality and the importance of customer satisfaction.
"In summary, I am pleased with the market's positive reception to our
FUSION RIS/PACS solutions, our ability to expand the market coverage of our
direct sales strategies via our SourceOne partnership, and the deepening
relationships we are forming with our customers. We continue to gain market
share at a pace greater than our competition and consistent with our profitable
growth guidance. Our ability to optimize the market's demand for RIS/PACS
solutions, the alignment of our FUSION software products and services with
customer preferences, our continued commitment to strategic initiatives that
accelerate our growth in current or future target markets, and our commitment
to quality products and services, will drive the success of our business
model going forward," said Linden.
GUIDANCE:
The Company anticipates market conditions to remain supportive of its
approach to an integrated RIS/PACS software product and associated professional
services. Our strong financial and operational results to date, combined with
recent product releases and the new national distribution agreement with
SourceOne, positions the Company to reaffirm its full year 2004 guidance with
revenues growing 30% to 35% year over year to a range of $37.5 to $39.5
million. The Company expects pre-tax operating margins of 28% to 31%,
resulting in fully diluted EPS of $0.47 to $0.52, which incorporates an
increase in the effective tax rate from 10% in 2003 to the 38% to 40% range
in 2004. The Company's 2004 guidance represents a 50% increase in pre-tax
earnings over the comparable 2003 pre-tax earnings.
# # #
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 over
seventeen 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 web site 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.
MERGE TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (1)
(in thousands, except for share data)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
Net sales.......................... $ 8,907 $ 6,434 $ 17,544 $ 12,552
Cost of sales...................... 3,172 1,628 6,391 3,680
----------- ----------- ----------- -----------
Gross profit....................... 5,735 4,806 11,153 8,872
----------- ----------- ----------- -----------
Operating costs and expenses:
Sales and marketing............... 1,711 1,477 3,405 2,802
Product research and development.. 423 397 905 836
General and administrative........ 1,024 865 1,936 1,587
Depreciation and amortization..... 196 117 385 223
----------- ----------- ----------- -----------
Total operating costs and expenses. 3,354 2,856 6,631 5,448
----------- ----------- ----------- -----------
Operating income................... 2,381 1,950 4,522 3,424
Total other income (expense)....... 108 (241) 160 (219)
----------- ----------- ----------- -----------
Income before income taxes......... 2,489 1,709 4,682 3,205
Income tax expense................. 992 309 1,831 489
----------- ----------- ----------- -----------
Net income......................... $ 1,497 $ 1,400 $ 2,851 $ 2,716
=========== =========== =========== ===========
Net income per share - basic....... $ 0.12 $ 0.13 $ 0.22 $ 0.25
=========== =========== =========== ===========
Weighted average number of common
shares outstanding - basic....... 12,968,889 10,762,195 12,927,877 10,612,970
=========== =========== =========== ===========
Net income per share - diluted..... $ 0.11 $ 0.12 $ 0.21 $ 0.23
=========== =========== =========== ===========
Weighted average number of common
shares outstanding - diluted..... 13,782,440 11,677,051 13,773,980 11,479,134
=========== =========== =========== ===========
(1) The condensed consolidated statement of operations should be read in
conjunction with the Company's Annual Report on Form 10-K for fiscal
2003 and its Quarterly Report on Form 10-Q for the three months ended
June 30, 2004 proposed to be filed on or prior to August 9, 2004.
MERGE TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (1)
(In thousands)
(unaudited)
June 30, December 31,
2004 2003
---------- ----------
Cash.......................................... $ 20,683 $ 16,871
Accounts receivable, net...................... 8,751 8,359
Inventory..................................... 958 893
Deferred tax asset............................ 2,850 3,541
Other current assets.......................... 960 444
---------- ----------
Current assets.............................. 34,202 30,108
Property and equipment, net................... 1,530 1,674
Intangibles, net, and other assets............ 32,396 32,113
---------- ----------
Total assets................................ $ 68,128 $ 63,895
========== ==========
Accounts payable.............................. $ 1,042 $ 1,294
Other current liabilities..................... 2,046 1,993
Deferred revenue.............................. 4,585 3,717
Billings in excess of revenues - contracts
in progress................................. 1,212 1,381
---------- ----------
Current liabilities......................... 8,885 8,385
Deferred tax liability........................ 2,106 1,987
---------- ----------
Total liabilities........................... 10,991 10,372
Shareholders' equity.......................... 57,137 53,523
---------- ----------
Total liabilities and shareholders' equity.. $ 68,128 $ 63,895
========== ==========
(1) The condensed consolidated balance sheet should be read in conjunction
with the Company's Annual Report on Form 10-K for fiscal 2003 and its
Quarterly Report on Form 10-Q for the three months ended June 30, 2004
proposed to be filed on or prior to August 9, 2004.