Merit Medical Systems Inc. Reports Operating Results (10-Q)
Merit Medical Systems, Inc. has a market cap of $578.6 million; its shares were traded at around $13.96 with a P/E ratio of 18.6 and P/S ratio of 1.6. Merit Medical Systems, Inc. had an annual average earning growth of 5.8% over the past 10 years. GuruFocus rated Merit Medical Systems, Inc. the business predictability rank of 3.5-star.
Highlight of Business Operations:For the quarter ended June 30, 2012, we reported record revenues of $100.5 million, up 10% from the three months ended June 30, 2011 of $91.2 million. Revenues for the six months ended June 30, 2012 were a record $196.1 million, compared to $177.9 million for the first six months of 2011, a gain of 10%.
Net income for the quarter ended June 30, 2012 was $6.1 million, or $.14 per share, compared to $6.9 million, or $0.18 per share, for the corresponding period of 2011. Net income for the six-month period ended June 30, 2012 was $11.8 million, or $0.28 per share, compared to $13.5 million, or $0.37 per share, for the corresponding period of 2011. The decrease in net income for the three and six-month periods ended June 30, 2012 was primarily attributable to an increase in selling costs (related primarily to our engagement of additional sales representatives in U.S. and international markets), as well as increases in marketing and research and development expenses. There was also significant non-recurring expenses for acquired in-process research and development of $2.0 million and $2.2 million for the three and six months ended June 30, 2012, respectively.
Sales. Sales for the three months ended June 30, 2012 increased by 10%, or approximately $9.3 million, compared to the corresponding period of 2011. Sales for the six months ended June 30, 2012 increased by 10%, or approximately $18.3 million, compared to the corresponding period of 2011. Listed below are our sales by business segment for the three and six-month periods ended June 30, 2012 and 2011 (in thousands):
Historically, we have incurred significant expenses in connection with new facilities, production automation, product development and the introduction of new products. Over the last three years, we spent a substantial amount of cash in connection with our acquisition of certain assets and product lines (including $12.5 million to acquire the assets of Ostial and to enter into a marketing and distribution agreement with Scion Cardio-Vascular, Inc. during the six months ended June 30, 2012; $10.3 million to acquire the assets of Ash Access Technology, Inc., and AAT Catheter Technologies, LLC, among other transactions, during 2011; approximately $86.0 million (net of acquired cash) to acquire BioSphere Medical, Inc. in September 2010; and $46.2 million to acquire the assets of Alveolus and Hatch, among other transactions, during 2009). We are in the process of constructing three new production facilities in South Jordan, Utah and Pearland, Texas. During 2011, we also finished construction of a parking terrace in South Jordan, Utah. In May of 2012, we completed our 80,000 square-foot manufacturing facility in Galway, Ireland. The total anticipated cost of these construction projects is approximately $88 million. As of June 30, 2012, we had incurred total costs of approximately $63.5 million with respect to those construction projects. In the event we pursue and complete significant transactions or acquisitions in the future, additional funds will likely be required to meet our strategic needs, which may require us to raise additional funds in the debt or equity markets. We currently believe that our existing cash balances, anticipated future cash flows from operations, sales of equity, and existing lines of credit and committed debt financing will be adequate to fund our current and currently planned future operations for the next twelve months and the foreseeable future.
Forecasted unit demand is derived from our historical experience of product sales and production raw material usage. If market conditions become less favorable than those projected by our management, additional inventory write-downs may be required. During the years ended December 31, 2011, 2010 and 2009, we recorded obsolescence expense of approximately $1.5 million, $1.9 million and $1.5 million, respectively, and wrote off approximately $1.1 million, $1.1 million and $1.3 million, respectively. Based on this historical trend, we believe that our inventory balances as of June 30, 2012 have been accurately adjusted for any unmarketable and/or slow moving products that may expire prior to being sold.
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