Merit Medical Systems, Inc. (MMSI)

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Merit Medical Systems, Inc. (MMSI)

Q1 2014 Earnings Conference Call

April 24, 2014 05:00 pm ET


Fred Lampropoulos - Chairman of the Board, President, Chief Executive Officer

Rashelle Perry - Chief Legal Officer

Kent Stanger - Chief Financial Officer, Secretary, Treasurer, Director


Tom Gunderson - Piper Jaffray

Jayson Bedford - Raymond James

Jim Sidoti - Sidoti & Company

Greg Macosko - Montrose



Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Merit Medical Systems Incorporated First Quarter 2014 Earnings Conference Call. During today's presentation, all participants will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions)

I would now like to turn the call over to Fred Lampropoulos, Chairman and CEO. Please go ahead, sir.

Fred Lampropoulos

Good afternoon, ladies and gentlemen. This is Fred Lampropoulos broadcasting from Salt Lake City, with our staff assembled in our conference room. We would like to start the meeting today by having Rashelle Perry, our General Counsel, discuss our Safe Harbor policy.

Rashelle Perry

Thank you, Fred. During our discussion today, reference maybe 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 historical maybe considered forward-looking statements. We caution you that all forward-looking statements involve risks, unanticipated events and uncertainties that could cause our actual results to differ materially from those anticipated in such statements.

Many of these risks are discussed in our annual report on Form 10-K and other reports and filings with the SEC available on our website. Any forward-looking statements made in this call, are made only as of today's date and we do not assume obligation to update such statements.

Although, Merit's financial statements are prepared in accordance with accounting principles generally accepted in United States, GAAP, Merit's management believes that certain non-GAAP financial measures provide investors with useful information regarding the underlying business trends and performance of Merit's ongoing operations and can be useful for period-over-period comparisons of such operations. The table included in our release and discussed on this call, sets forth supplemental financial data and corresponding reconciliations to GAAP financial statements.

Investors should consider these non-GAAP measures in addition to and not as a substitute for, financial reporting measures prepared in accordance with GAAP. These non-GAAP financial measures exclude some items that affect net income. Finally, these calculations may not be comparable with similarly titled measures of other companies.

Fred Lampropoulos

Rashelle, thank you very much and good afternoon, ladies and gentlemen thank you for joining us. We are delighted to discuss with you today the results of our first quarter.

Before I get started, I would like to just go over a couple of issues that we hope that you will keep in mind. As you look at our sales effort, I think would all agree that this is a great performance. We are very, very excited about the sales results. It's approximately $5 million ahead of our internal forecast.

If we take a look at our earnings, those earnings are ahead of our internal forecast and we reaffirm the numbers that we put forth in our guidance, in our call, in February, so we are actually ahead of where we thought we would be now I recognized that it was a little difficult as we were discussing some of these expenses that would come into play in the first quarter. Things like the 401(k), which we have got back into place and I think we shared those numbers or the issues of why we thought that it was necessary after a year or three quarters of being taken away.

Pretty substantially increasing healthcare cost, approximately $1.8 million of healthcare costs, some ongoing litigation that we discussed with and I will get into more detailed with that and then some building allocation costs and we really essentially have two facilities in Texas right now, one in Angleton, Texas, and the new facility in Pearland, Texas. For those of who you may not recall several years ago we were hit by Hurricane Ike. We have been in a facility that's more than 60 years old and we felt that we needed to make some changes. We moved a portion of that business to Salt Lake City, and we then built this new facility which will withstand winds up to the 150-mile an hour range in a new facility, closer to Houston and the medical center in which we conduct substantial business, so those are a number of the issues that go onto play.

I think I continue, I think, to be optimistic about our sales, the efforts. I would like to discuss for a moment before I get into few other numbers. One of the developments that we have kept [somewhat] under-wraps and that is that effective the 1st of January, we have divided our sales force. A little detail on that, we first of all spent almost a year in planning and evaluating how we would do that, legibly do that. We did that, because we had such a large bag that it was very difficult for our sales force to be able to be proficient in selling products that are very, very complex that range all away from embolic, therapy to the placement of pacemakers and coronary sinus guides and a various types of things associated and EP and CRM business, and so what the emphasis coming in late yields, emphasis coming in other very complex areas, we just simply could not and did not feel that our sales people that handle all those products and so we redirected now a sales force that has about 35 direct salespeople in our interventional business and the balance of about now 90 salespeople that are in on our cardiovascular division.

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