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: March 31, 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 April 28, 2004, Merge Technologies Incorporated dba Merge eFilm
announced the financial results for its first quarter ended March 31, 2004.
A copy of the earnings press release announcing financial results for
the first quarter, together with Condensed Consolidated Statements of
Operations for the three months ended March 31, 2004 and March 31, 2003,
respectively, as well as Summary Balance Sheet Data for March 31, 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 the first
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: April 29, 2004 By: /s/ Richard A. Linden
-------------------------------------
Richard A. Linden,
President and Chief Executive Officer
MERGE TECHNOLOGIES INCORPORATED
Dated: April 29, 2004 By: /s/ Scott T. Veech
-------------------------------------
Scott T. Veech,
Chief Financial Officer, Treasurer
and Secretary
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EXHIBIT 99.1
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[MERGE EFILM LOGO]
NEWS RELEASE
For Immediate Release
Contact: Scott Veech, Chief Financial Officer
Richard Linden, President & CEO
(414) 977-4000
MERGE EFILM ANNOUNCES FIRST QUARTER 2004 RESULTS
Revenue and operating income grow 41% and 45%, respectively;
RIS/PACS strategy is aligned with market trends; 2004 guidance reaffirmed
Milwaukee, WI, April 28, 2004 - Merge Technologies Incorporated, d.b.a.
Merge eFilm, (Nasdaq: MRGE), today announced the financial results for the
quarter ended March 31, 2004. Net sales for the quarter ended March 31, 2004,
were $8,637,000, an increase of 41% over net sales of $6,117,000 in the quarter
ended March 31, 2003. Gross margin in the quarter ended March 31, 2004, was
63%, compared to 66% in the quarter ended March 31, 2003. The Company's
operating margin, defined as operating income divided by net sales, was 25% in
the quarter ended March 31, 2004, compared to 24% in the quarter ended March
31, 2003.
In the quarter ended March 31, 2004, operating income was $2,141,000,
an increase of 45%, compared to $1,475,000 in the quarter ended March 31, 2003.
Income tax expense in the quarter ended March 31, 2004 was $839,000, a 38%
effective rate, compared to $180,000, a 12% effective rate, in the quarter
ended March 31, 2003. In the quarter ended March 31, 2004, net income was
$1,354,000, generating $0.10 diluted EPS compared to $1,316,000 net income and
$0.11 diluted EPS in the quarter ended March 31, 2003. The decline in diluted
EPS for the quarter ended March 31, 2004 compared to quarter ended March 31,
2003 is attributed to the $659,000 increase in income tax expense due to the
Company's increased tax rate in 2004.
The Company generated approximately $2 million in cash flow from
operations. The Company's cash balance at the end of the quarter was $18.1
million and there were no outstanding draws on its $15 million unsecured bank
line of credit.
Analysis of Results:
---------------------
"Our financial and operational performance this quarter is a reflection
of our strategy to position Merge eFilm as a leader in RIS/PACS software and
professional services for our target market," said Richard A. Linden, President
and CEO. "The rapid and successful integration of RIS Logic (Registered
Trademark), the market adoption of our FUSION RIS/PACS (Trademark) solutions
and corresponding emphasis on North American direct sales, the design and
development of our next generation RIS/PACS in close collaboration with our
customers, and the strengthening of our professional services organization all
contributed to delivering a strong first quarter. These enacted strategies,
along with our operational discipline, form the foundation for reaffirming
our 2004 guidance.
"The successful integration of RIS Logic allowed us to quickly leverage
our expertise in radiology business and clinical workflow solutions. Building
upon the earned trust of both organizations' customers, we became a
single-source provider for radiology business and clinical workflow software,
delivering service and support from a unified professional service team.
During the first quarter, we successfully closed 17 new FUSION RIS, PACS or
RIS/PACS contracts, growing our total number of FUSION solution customers to
143, representing over 290 healthcare facilities.
"We continue to see accelerating interest from our target market for
a comprehensive workflow solution from a single, trusted healthcare software
solutions provider. In response to this trend, we are driving our North
American distribution strategy through a combination of direct sales and new
business development relationships that broaden our market coverage. We have
remained consistent in our focus on imaging centers, small to medium size
hospitals, and specialty clinics, including a growing target market of
orthopedic groups and neurosurgery centers that recognize the value of
integrating PACS solutions into their clinical practice.
"Our product innovation efforts continue to focus on our healthcare
target market's need for a filmless and paperless environment delivered by
an integrated RIS, PACS, billing, dictation, voice recognition and document
management software solution. During the quarter we released a new version
and pricing model of eFilm Workstation(tm), the diagnostic imaging desktop
software market leader, and we continued developing our next generation
RIS/PACS with single desktop integration, enhanced web capabilities and new
modules of functionality such as voice recognition and document management.
We established a Clinical Advisory Panel comprised of radiologists,
representing a wide array of clinical sub-specialties, to provide guidance on
the clinical breadth and depth of these new product capabilities. Additionally,
we developed and implemented a customer outreach plan that optimizes electronic
surveying tools to gather customer preferences and satisfaction information.
These strategies are representative of our commitment to product innovation
that is customer-driven.
"Our Professional Services group has expanded both in size and
capabilities in line with our growing volume of FUSION RIS, PACS and RIS/PACS
implementations and our increasing number of service contracts. Our
Professional Services group optimizes our customers' RIS/PACS investments
through a planning and implementation process based on sharing responsibilities
and establishing long-term partnerships. I'm pleased with the operational
progress the Professional Service group has made this quarter to keep pace
with our FUSION solution backlog.
"In summary, I am pleased with the market's reception to our FUSION
RIS/PACS solutions, our focus on the importance of professional services to
optimize use of our business and clinical workflow software, and the
deepening relationships we are forming with our customers. We continue to
gain market share at a pace consistent with profitable growth. Our ability
to understand and incorporate the interconnections between our software, our
customers' workflow, and the delivery of high quality medical care, will
continue to drive the success of our business model," said Linden.
Guidance:
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The Company anticipates market conditions to remain supportive of its
software-centric approach to an integrated RIS/PACS product and associated
professional services. Our strong financial and operational start in 2004
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 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. 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.
MERGE TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1)
(in thousands, except share data)
(unaudited)
Three Months Ended
March 31,
---------------------------
2004 2003
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Net sales..................................... $ 8,637 $ 6,117
Cost of sales................................. 3,219 2,051
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Gross profit.................................. 5,418 4,066
Operating costs and expenses:
Sales and marketing.......................... 1,694 1,325
Product research and development............. 482 439
General and administrative................... 912 721
Depreciation and amortization................ 189 106
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Total operating costs and expenses............ 3,277 2,591
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Operating income.............................. 2,141 1,475
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Total other income, net....................... 52 21
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Income before taxes........................... 2,193 1,496
Income tax expense............................ 839 180
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Net income.................................... $ 1,354 $ 1,316
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Net income per share - basic.................. $ 0.10 $ 0.12
=========== ===========
Weighted average number of shares of common
stock outstanding - basic................... 12,886,780 10,462,086
=========== ===========
Net income per share - diluted................ $ 0.10 $ 0.11
=========== ===========
Weighted average number of shares of common
stock outstanding - diluted................. 13,752,543 11,238,171
=========== ===========
(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 and its Quarterly Report on Form 10-Q for the three
months ended March 31, 2004 proposed to be filed on or prior to
May 10, 2004.
MERGE TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (1)
(In thousands)
(unaudited)
March 31, December 31,
2004 2003
----------- -----------
Cash.......................................... $ 18,113 $ 16,871
Accounts receivable, net...................... 8,230 8,359
Inventory..................................... 910 893
Deferred tax asset............................ 2,953 3,541
Other current assets.......................... 723 444
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Current assets............................... 30,929 30,108
Property and equipment, net................... 1,671 1,674
Intangibles, net, and other assets............ 32,180 32,113
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Total assets................................. $ 64,780 $ 63,895
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Accounts payable.............................. $ 998 $ 1,294
Other current liabilities..................... 1,684 1,993
Deferred revenue.............................. 3,797 3,717
Billings in excess of revenues - contracts
in progress................................. 904 1,381
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Current liabilities.......................... 7,383 8,385
Deferred tax liability........................ 2,106 1,987
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Total liabilities............................ 9,489 10,372
Shareholders' equity.......................... 55,291 53,523
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Total liabilities and shareholders' equity... $ 64,780 $ 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 March 31,
2004 proposed to be filed on or prior to May 10, 2004.