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: December 31, 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 February 19, 2004, Merge Technologies Incorporated dba Merge eFilm
announced the financial results for its fourth quarter and fiscal year ended
December 31, 2003.
A copy of the earnings press release announcing financial results for
the fourth quarter and year end 2003, together with Condensed Consolidated
Statements of Operations for the three and twelve months ended December 31,
2003 and 2002, respectively, as well as Summary Balance Sheet Data for
December 31, 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 fourth quarter
and year end 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: February 20, 2004 By: /s/ Richard A. Linden
-------------------------------------
Richard A. Linden,
President and Chief Executive Officer
MERGE TECHNOLOGIES INCORPORATED
Dated: February 20, 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 RECORD REVENUES AND EARNINGS
FOR FOURTH QUARTER AND YEAR END 2003
Company delivers $28.7 million in revenue for the year;
achieves revenue and earnings guidance; forecasts stronger 2004
Milwaukee, WI, February 19, 2004 - Merge Technologies Incorporated,
d.b.a. Merge eFilm, (NASDAQ: MRGE), today announced the financial results for
the quarter and fiscal year ended December 31, 2003.
Revenues for the quarter ended December 31, 2003, were $8,507,000, an
increase of 26% over revenues of $6,747,000 for the quarter ended December 31,
2002. Revenues were $28,677,000 for the twelve months ended December 31,
2003, an increase of 38% over revenues of $20,786,000 for the twelve months
ended December 31, 2002.
Net income for the quarter ended December 31, 2003, was $1,897,000,
an increase of 48% over net income of $1,279,000 for the quarter ended December
31, 2002. Basic EPS was $0.15 and diluted EPS was $0.14 for the quarter ended
December 31, 2003, compared to basic EPS of $0.12 and diluted EPS of $0.11 for
the quarter ended December 31, 2002.
Net income for the twelve months ended December 31, 2003, was
$6,239,000, an increase of 72% over net income of $3,629,000 for the twelve
months ended December 31, 2002. Basic EPS was $0.53 and diluted EPS was $0.49
for the twelve months ended December 31, 2003, compared to basic EPS of $0.38
and diluted EPS of $0.33 for the twelve months ended December 31, 2002. Gross
margins increased to 68% for the quarter ended December 31, 2003, from 63% for
the quarter ended December 31, 2002. Gross margins for the twelve months
ended December 31, 2003, increased to 69%, compared to 62% for the twelve
months ended December 31, 2002. Cash at December 31, 2003, increased 282%
to $16,871,000 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 Company's operating margin, defined as operating income divided by net
sales, was 22% in the quarter ended December 31, 2003, compared to 19% in the
quarter ended December 31, 2002. Operating margins for the twelve months
ended December 31, 2003, increased to 24% compared to 18% for the twelve
months ended December 31, 2002.
The financial results include approximately 51/2 months of the
operations of RIS Logic(r). 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 169% to $5,098,000 at
December 31, 2003, from $1,892,000 at December 31, 2002, as a result of
the Company's continued growth in new RIS and PACS software solution
customers.
Analysis of Results:
---------------------
"During 2003, Merge eFilm focused on five initiatives: expand our
product line to become a leading provider of RIS/PACS software solutions;
provide our target market customers with a single source for clinical and
business workflow solutions; expand our direct sales and marketing activities
in North America; develop new OEM/VAR partnerships in the U.S., Europe and
Japan; and strengthen our financial position to support continued growth and
strategic initiatives," said Richard A. Linden, President and CEO. "I'm very
pleased to report we have accomplished these initiatives, resulting in
exceptional financial performance and long-term value creation for our key
stakeholders: customers, shareholders and employees."
"The acquisition and rapid integration of RIS Logic, consistent
with our acquisition methodology first used with eFilm Medical(tm), resulted
in another significant expansion of our product portfolio and operational
capabilities. Our unified brand and single company approach to our target
market increased demand for our software solutions during the fourth quarter,
resulting in 24 new RIS, PACS or RIS/PACS contracts. Our customer base grew
to over 130, representing more than 280 healthcare facilities. Of particular
importance were the five integrated RIS/PACS solution sales in the fourth
quarter, bringing the total to seven since the RIS Logic acquisition. We
continue to see accelerating interest from our target market for a
comprehensive workflow solution from a single, trusted solutions provider.
"Our product innovation roadmap focused on the integration of
radiology business and clinical workflow for the purpose of accelerating
productivity in imaging centers, hospitals and clinics. We released new
versions of our FUSION RIS(tm) and FUSION PACS(tm), and completed clinical
trials for embedded dictation, transcription and speech recognition. We
released a new version of eFilm Workstation(tm) to our customers, which
focused on adding clinical tools and productivity enhancing features. As
the most widely used diagnostic desktop software in the world, eFilm
Workstation reached a record 40,000 downloads in 2003, and is a growing
source of sales leads for our FUSION RIS/PACS solutions.
"We continue to benefit from an international approach to new
business development and the distribution of our solutions through multiple
sales channels. We expanded our direct sales team to 24 employees, more
than doubling its size from 2002. Our Professional Services group has
expanded both in size and capabilities in line with our growing volume of
RIS, PACS and RIS/PACS implementations and our increasing number of
extended service contracts. Our strong integration expertise, developed
over 17 years working with OEM's and healthcare IT providers, distinguishes
us from our competitors. Internationally, we have increased the number of
countries in which our products are sold, expanded the number of our value
added resellers globally, and strengthened our VAR relationships in the UK.
These efforts in Europe and Asia further established Merge eFilm as an
international RIS/PACS solution provider," continued Linden.
"Our financial strength continues to support both strategic and
operational business growth initiatives. We established a $15 million
unsecured line of credit, increased from $5 million in 2002, and increased
our cash position to $16.9 million. Our institutional ownership increased
to more than 40%, up from 12% at the beginning of 2003, due in part to the
July private placement and the move to the NASDAQ National Market.
Commenting on healthcare market conditions, Linden added: "The
market is experiencing growth in new imaging centers, spurred by
entrepreneurial radiologists and hospitals looking to improve services to
referring physicians and patients. According to industry studies, total
imaging procedure volume has increased over 17% and imaging study data sets
are growing rapidly with the advent of new digital multi-slice technologies.
Furthermore, these studies suggest continued growth in capital spending as
healthcare moves toward full digitization of patient care records. The
Bank of America Securities 2003 Hospital CIO Survey indicated that 58% of
the hospital CIO's would be purchasing a PACS in the next 3 years. With
the economic advantages of a film-less and paperless workflow environment
yielding a 12 to 18 month payback period, Merge eFilm's strategies in 2003
were well aligned to meet market conditions, and we anticipate that
alignment to strengthen in 2004 and beyond.
"Our strategic and operational initiatives for 2004 will build on
our business and financial accomplishments of 2003. Specifically, we will
further accelerate our growth in full solution RIS/PACS customers through
investments in sales, marketing and professional services. We will expand
our business development efforts to other clinical specialties that now
offer imaging services. We will expand our international sales efforts
to support the growth of our VAR partnerships in Europe and Asia. And
finally, we will continue focusing on imaging centers and small to
medium sized hospitals where our comprehensive integrated workflow
solution from a single source delivers a compelling value proposition,"
said Linden.
Guidance:
----------
The Company believes that accelerating productivity through film-less
and paperless software solutions will remain a key objective for imaging
centers and hospitals. The Company is well positioned to align with this
market trend and anticipates 2004 revenues to grow 30% to 35% year over year
to a range of $37.5 to $39.5 million. The Company expects diluted EPS of
$.47 to $.52, which incorporates an increase in 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 pretax earnings over the comparable 2003
pretax earnings.
##
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. Actual results may vary significantly 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, changing
economic conditions and other risk factors detailed in filings with the
Securities and Exchange Commission.
##
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.
MERGE TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1)
(in thousands, except share data)
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
-------------------------- --------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
Net sales............................. $ 8,507 $ 6,747 $ 28,677 $ 20,786
Cost of sales......................... 2,705 2,485 8,970 7,998
----------- ----------- ----------- -----------
Gross profit.......................... 5,802 4,262 19,707 12,788
Operating costs and expenses:
Sales and marketing.................. 2,073 1,514 6,544 4,305
Product research and development..... 661 455 2,063 1,620
General and administrative........... 1,040 860 3,527 2,553
Depreciation and amortization........ 190 141 573 518
Acquired in-process research and
development........................ ---- ---- ---- 148
----------- ----------- ----------- -----------
Total operating costs and expenses.... 3,964 2,970 12,707 9,144
----------- ----------- ----------- -----------
Operating income...................... 1,838 1,292 7,000 3,644
----------- ----------- ----------- -----------
Total other income (expense).......... 20 20 (102) 64
----------- ----------- ----------- -----------
Net income before income taxes........ 1,858 1,312 6,898 3,708
----------- ----------- ----------- -----------
Income tax expense.................... (39) 33 659 79
----------- ----------- ----------- -----------
Net income............................ $ 1,897 $ 1,279 $ 6,239 $ 3,629
=========== =========== =========== ===========
Net income per share - basic.......... $ 0.15 $ 0.12 $ 0.53 $ 0.38
=========== =========== =========== ===========
Weighted average number of common
Shares Outstanding - basic.......... 12,774,457 10,364,052 11,566,054 8,840,059
=========== =========== =========== ===========
Net income per share - diluted........ $ 0.14 $ 0.11 $ 0.49 $ 0.33
=========== =========== =========== ===========
Weighted average number of common
Shares Outstanding - diluted........ 13,774,247 11,110,646 12,586,900 10,383,651
=========== =========== =========== ===========
(1) These condensed consolidated statements of operations should be read in
conjunction with the Company's Annual Report on Form 10-K for fiscal 2003
proposed to be filed prior to March 15, 2004.
MERGE TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
SUMMARY BALANCE SHEET DATA(1)
(In thousands)
(unaudited)
December 31, December 31,
2003 2002 Change
---------- ----------- -------
Cash.......................... $ 16,871 $ 4,411 282%
Accounts receivable........... 8,359 7,148 17%
Inventory..................... 893 453 97%
Accounts payable.............. 1,294 1,493 -13%
Deferred revenue.............. 3,717 1,892 96%
Billings in excess of revenues
- contracts in progress..... 1,381 ---- ----
Total current assets.......... $ 26,567 $ 12,213 118%
Total current liabilities..... 8,331 4,341 91%
Total assets.................. $ 61,908 $ 27,246 127%
Total liabilities............. 8,385 5,563 51%
(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 Annual
Report on Form 10-K for fiscal 2003 proposed to be filed prior to March
15, 2004.