Merit Medical Systems, Inc. (MMSI)

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Merit Medical Systems, Inc. (MMSI)

Q4 2008 Earnings Call

February 5, 2009 5:00 pm ET


Fred P. Lampropoulos - Chairman, President, and Chief Executive Officer

Kent W. Stanger - Chief Financial Officer

Gregory L. Barnett - Chief Accounting Officer

Rashelle Perry - Chief Legal Officer


Kevin Casey - Casey Capital

Christopher Warren - Caris & Company

James Sidoti - Sidoti & Company

Edward Han-Burgess - Raymond James & Associates

David Turkaly - Susquehanna Financial Group

Andrew O. Rem - FAF Advisors



Welcome to the Merit Medical fourth quarter and year-end 2008 earnings conference call. (Operator Instructions). I would now like to turn the conference over to our host, Fred Lampropoulos.

Fred P. Lampropoulos

Good afternoon, ladies and gentlemen. This is Fred Lampropoulos. We’re assembled in Salt Lake City and other locations and are pleased to be reporting our year-end and fourth quarter results. We appreciate you being with us and look forward to your questions following our formal presentation. I’ve asked Rashelle Perry, our legal counsel, to read our Safe Harbor provision.

Rashelle Perry

Thank you, Fred. In the course of our discussion today, reference may be made to projections, anticipated events, or other information, which is not purely historical. Please be aware that statements made in this call, which are not purely historical, may be considered forward-looking statements. We caution you that all forward-looking statements involve risks, unanticipated events, uncertainties and other factors that could cause our actual results to differ materially from those anticipated in such statements. Many of these risks and uncertainties are discussed in our Annual Report on Form 10-K and other reports and filings with the Securities and Exchange Commission which are also available on our website. To the extent all forward-looking statements are made in this call, such statements are made only as of today’s date, and we do not assume any obligation to update any such statements.

Fred P. Lampropoulos

Ladies and gentlemen, just about an hour ago Merit reported our year-end results and fourth quarter. The headline read that we had reported record sales earnings for the year ended December 31. As you’re all aware, Merit’s revenues for the year were $227 million compared to $208 million last year, our earnings were a record $20.1 million, up 33% from the year-before period, and gross margins improved to 41% from 38.4%.

I would like to bring to your attention that each of these benchmarks; revenues, earnings, gross margins were all ahead of schedule, all above what we had originally anticipated, and all in all we had a wonderful year. We did this despite tremendous increases in input costs, and everybody of course is well aware of the problems that all companies felt in the second, third, and fourth quarter as we had these huge input costs. We’re aware of an increasing of the dollar which had an effect in the fourth quarter, and I’ll talk to you about that. You’re all aware that we had to deal with Hurricane Ike, which cost about $1 million in charge, plus of course, the slowdown in response time; our facility was down almost 30 days in the fastest growing area of our sales, and then of course, one other issue that we’ll discuss in a few moments and that was the tax effect that hurt us in the fourth quarter regarding a securities issue in our top hat program, which required an expense against tax, which amounted to about $356,000. In just a few minutes I’ll have Greg Barnett just walk you through that. So, despite some of those issues, Merit had what I would consider to be a great year and I think has poised the company from a new product’s point of view, from a cash point of view, performance, facilities, and everything else to look forward to 2009.

Kent, I’m going to go ahead and ask you just for a minute to kind of step in here for a minute and just discuss a few of the points regarding some of the issues that I just discussed.

Kent W. Stanger

Well, for example, our sales, if you want to talk about that, in the fourth quarter our sales were up about 7%, but they were a little bit weaker because we had an OEM customer who for inventory management purposes deferred some of their shipments and it was a material amount. The euro in the fourth quarter declined in value as a relation to the dollar, which is the majority, the pound sterling as well, and so it had an effect of about $736,000 compared to the fourth quarter of a year ago of a reduction in our revenues. So those were top line influences that I think were significant that down turned a little bit the 7% number we had.

Fred P. Lampropoulos

And Greg, would you just briefly discuss the issue regarding the income tax expense that we discussed in the report that affected the fourth quarter?

Gregory L. Barnett

We have a deferred comp plan that’s an insurance plan that we had losses that the whole market saw and the deferred comp had as well, but those losses that are recognized in the deferred comp for tax purposes become a permanent item and affect our tax rate. And so in the quarter we had about a 2.4% effect to our taxes for that or about $356,000 that hit our bottom line because of the losses that were sustained in that deferred comp plan most of which occurred during the fourth quarter.

Fred P. Lampropoulos

So, we’ve talked about input costs, we’ve talked about the euro and pound sterling, we’ve talked about some of the market adjustments that we had to take and some of the other issues that affected the bottom line net. Despite all that, Merit, I think, performed admirably. We have a huge pipeline of new products. We received 510(K) approval for our new microcatheter. In fact, I was just on the phone a few minutes ago, as we’re doing some market preference trials out in the Midwest, and the trials are going great, and we expect to launch this microcatheter some time in full market launch in just the next couple of weeks.

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