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: February 27, 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 27, 2003, Merge Technologies Incorporated dba Merge eFilm
announced the financial results for its fiscal year 2002.
A copy of the earnings press release announcing financial results for
the fourth quarter and year ended 2002, together with Condensed Consolidated
Statements of Operations for three months and twelve months ended December 31,
2002 and 2001, respectively, as well as Summary Balance Sheet Data for fiscal
years ended 2002 and 2001, respectfully, 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 ended 2002.
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: March 6, 2003 By: /s/ Richard A. Linden
-------------------------------------
Richard A. Linden,
President and Chief Executive Officer
MERGE TECHNOLOGIES INCORPORATED
Dated: March 6, 2003 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 2002
Revenues of $6.75 million for the fourth quarter highlight the most successful
year in company's history; FUSION Server(tm) gains market
strength in direct and VAR partner channels
Milwaukee, WI, February 27, 2003 - Merge Technologies Incorporated, d.b.a.
Merge eFilm, (Nasdaq: MRGE), today announced the financial results for the
quarter and fiscal year ended December 31, 2002.
Financial Results:
Revenues in the quarter ended December 31, 2002 were $6,746,000, a 47% increase
over revenues of $4,597,000 in the quarter ended December 31, 2001 and a
sequential increase of 27% over revenues of $5,322,000 in the quarter ended
September 30, 2002. In the quarter ended December 31, 2002, net income was
$1,279,000, generating $0.11 diluted EPS compared to net income of $682,000
and $0.07 diluted EPS in the quarter ended December 31, 2001. Net income was
$3,629,000 and diluted EPS was $0.33 in the year ended December 31, 2002,
compared to net income of $1,271,000 and diluted EPS of $0.15 in the year ended
December 31, 2001.
As a result of the eFilm Medical acquisition on June 28, 2002, the Company has
presented costs associated with service revenues as a component of cost of
sales. All periods presented have been conformed to the current presentation,
and net income does not change in any period. Gross margin in the quarter ended
December 31, 2002, was 63%. The Company's operating margin, defined as
operating income divided by net sales, was 19% in the quarter ended December 31,
2002, compared to 15% in the quarter ended December 31, 2001. Operating margins
increased for the year ended December 31, 2002, to 18%, compared to 8% in the
year ended December 31, 2001.
At December 31, 2002, the Company had a cash balance of $4,411,000 and no
outstanding draws on its $5 million bank line of credit, which was increased
from $3 million in December 2002.
Analysis of Results:
"We continue to transition the focus of our business on developing healthcare
software solutions and providing professional services that support them, with
the end result of streamlining radiology workflow for our customers. The
multiple distribution channel approach we have adopted is developing according
to our plan, and the results are evident in the financial performance of the
Company in 2002," stated Richard A. Linden, President and CEO of Merge eFilm.
"We successfully aligned our product innovation, distribution channel expansion,
and professional services with the diagnostic image and information management
needs of our target market, which further solidified our position as a provider
of PACS solutions to healthcare facilities and imaging centers.
"Augmenting our product innovation efforts this year was the successful
acquisition and integration of eFilm Medical and our corporate renaming to Merge
eFilm. These actions signaled the acceleration of our strategy to launch our
combined Fusion product line and to leverage the brand loyalty of the Merge and
eFilm customer bases. This strategy resulted in over 35 hospitals and imaging
centers purchasing our Fusion solution since its launch in the second half of
2002, the development of several new OEM/VAR partnerships in the U.S., Europe
and Japan, and the continued growth of worldwide sales of eFilm Workstation(tm).
With over 25,000 users of eFilm Workstation, we lead the market in diagnostic
imaging desktop software and are very pleased with how this market presence is
being leveraged into additional Fusion solution sales.
"Expanding our distribution channels continues to be a key initiative to drive
financial growth and market presence. We successfully doubled the size of our
direct sales staff, providing broader coverage in the United States. We also
expanded our resources focused on professional services, which supports the
pre-sales process as well as the post-sale project management activities. We
have initiated an e-commerce strategy to complement our sales and service
capabilities.
"During the year, we continued to demonstrate our unwavering commitment to
customer service, deploying our solutions by leveraging our strong integration
proficiencies and our depth of understanding of radiology workflow and clinical
practice. As a result, our reputation as a comprehensive solution partner with
our customers continues to grow," continued Linden.
"The market conditions and independent healthcare IT studies suggest continued
growth in capital spending in healthcare as the industry moves toward full
digitization of patient care records. Now that electronic patient
confidentiality standards have been established by the Health Insurance
Portability and Accountability Act (HIPAA) regulations, healthcare organizations
are ready to confidently invest in their digital future, particularly in
clinical specialties such as radiology information systems and PACS.
"Consolidation in the marketplace continues to provide us with opportunities
for strategic partnerships. In anticipation of those opportunities, we have
established a strong financial position for strategic growth in 2003 with our
enhanced $5 million line of credit and our growing positive cash flow. We will
maintain the operational and financial discipline that has contributed to our
positive financial performance in 2002, and will remain steadfast in our
customer-focused model of integrating clinical and operational insights in the
development of our solutions," said Linden.
Guidance:
In 2003 the Company will solidify its position as a global provider of
integrated healthcare image and information management software solutions. The
mix of the Company's business will continue to shift towards software and
services, and the company will steadily expand sales resources both in support
of the direct sales channel and the growing OEM/VAR partnership program. During
2003, an increasing investment is anticipated in both people and capital
resources to take advantage of the Company's momentum and market conditions.
The Company will also continue to evaluate strategic partnerships designed to
further accelerate revenue and profit growth. Based on these objectives,
revenues for 2003 are anticipated to be in the range of $27 million to $28
million, with year-over-year growth of approximately 30% to 35%, yielding a
diluted EPS on a pre-tax basis in a range of $0.47 to $0.52.
# # #
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 eFilm provides integrated healthcare image and information workflow
solutions that create a filmless workflow environment, address the clinical
imaging needs across the healthcare enterprise, and enable cost-effective,
patient-centric care. For more than fifteen years, Merge eFilm has leveraged
its healthcare IT, clinical and engineering experience to create elegant and
affordable solutions that improve the clinicians' productivity and enhance
the quality of the care they provide. For additional information, go to
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,
--------------------- -------------------------
2002 2001 2002 2001
--------------------- -------------------------
Net sales........................... $ 6,746 $ 4,597 $ 20,786 $ 15,741
Cost of sales....................... 2,485 1,674 7,998 6,261
-------- -------- --------- ---------
Gross profit........................ 4,261 2,923 12,788 9,480
-------- -------- --------- ---------
Operating costs and expenses:
Sales and marketing............... 1,513 1,090 4,305 3,227
Product research and development.. 456 401 1,620 1,870
General and administrative........ 860 537 2,553 2,286
Depreciation and amortization..... 141 189 518 765
Acquired in-process research
and development................. ---- ---- 148 ----
Restructuring and related expenses ---- ---- ---- 36
-------- -------- --------- --------
Total operating costs and expenses.. 2,970 2,217 9,144 8,184
-------- -------- --------- --------
Operating income.................... 1,291 706 3,644 1,296
-------- -------- --------- --------
Total other income.................. 21 22 64 62
-------- -------- --------- ---------
Net income before income taxes...... 1,312 728 3,708 1,358
-------- -------- --------- ---------
Income tax expense.................. 33 46 79 87
-------- -------- --------- ---------
Net income.......................... $ 1,279 $ 682(2) $ 3,629 $ 1,271(2)
======== ======== ========= =========
Net income per share - basic........ $ 0.12 $ 0.09 $ 0.38 $ 0.16
======== ======== ========= =========
Weighted average number of common
shares
Outstanding - basic................. 10,366,912 6,663,129 8,840,059 6,178,821
========== ========= ========= =========
Net income per share - diluted...... $ 0.11 $ 0.07 $ 0.33 $ 0.15
========== ========= ========= =========
Weighted average number of common
shares
Outstanding - diluted.............. 11,113,326 8,618,284 10,383,651 7,310,731
========== ========= ========== =========
(1) These condensed consolidated statements of operations should be read in conjunction
with the Company's Annual Report on Form 10-KSB for fiscal 2002 proposed to be filed prior
to March 31, 2003.
(2) The Company adopted SFAS 142, Goodwill and Other Intangible Assets, on January 1, 2002.
As a result, goodwill is no longer amortized and is instead subject to an annual impairment
test. Had the Company adopted SFAS 142 on January 1, 2001, net income for the three months
ended December 31, 2001 and fiscal 2001 would have been $701,000 and $1,345,000,
respectively, and basic and diluted EPS would have been $0.09 and $0.07, and $0.18 and $0.16,
respectively.
MERGE TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
SUMMARY BALANCE SHEET DATA(1)
(in thousands except for current ratio)
(unaudited)
December 31, December 31,
2002 2001 Change
----------- ------------ --------
Cash................................ $ 4,411 $ 1,043 323%
Accounts receivable................. 7,148 3,142 127%
Inventory........................... 453 542 -16%
Accounts payable.................... 1,493 815 83%
Deferred revenue.................... 1,892 480 294%
Total current assets................ $ 12,213 $ 4,852 152%
Total current liabilities........... 4,341 2,224 95%
Total assets........................ $ 27,246 $ 10,056 171%
Total liabilities................... 5,563 3,887 43%
Current ratio....................... 2.81 2.18 29%
(1) This summary balance sheet data should be read in conjunction with the
Company's Annual Report on Form 10-KSB for fiscal 2002 proposed to be filed
prior to March 31, 2003.