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Merge eFilm Announces Record Revenues and Earnings for Fourth
Quarter and Year End 2004
Company generates $37.0 million in revenue and $0.54 EPS for the year,
exceeding earnings guidance
MILWAUKEE, Feb. 15 /PRNewswire-FirstCall/ -- Merge Technologies Incorporated,
d.b.a. Merge eFilm, (NASDAQ:MRGE), today announced the financial results for
the quarter and fiscal year ended December 31, 2004.
(Logo: http://www.newscom.com/cgi-bin/prnh/20030430/MRGELOGO )
Net sales for the quarter ended December 31, 2004, were $10,154,000, an
increase of 19% over revenues of $8,507,000 for the quarter ended December 31,
2003. Net sales were $37,005,000 for the twelve months ended December 31,
2004, an increase of 29% over revenues of $28,677,000 for the twelve months
ended December 31, 2003. As of December 31, 2004, deferred revenue was
$5,839,000 compared to $3,717,000 as of December 31, 2003, an increase of 57%.
As of December 31, 2004, billings in excess of revenues were $2,839,000
compared to $1,381,000 as of December 31, 2003, an increase of 106%. Deferred
revenues and billings in excess of revenues represent sales not yet recognized
as earned revenue on the Company's income statement to date.
Gross margin for the quarter ended December 31, 2004, was 68%, compared to 68%
for the quarter ended December 31, 2003. Gross margin for the twelve months
ended December 31, 2004, was 65%, compared to 69% for the twelve months ended
December 31, 2003. The Company's operating margin, defined as operating income
divided by net sales, was 24% for the quarter ended December 31, 2004, compared
to 22% for the quarter ended December 31, 2003. Operating margin for the
twelve months ended December 31, 2004, was 25% compared to 24% for the twelve
months ended December 31, 2003.
Income tax expense for the twelve months ended December 31, 2004 was
$2,338,000, a 24% effective rate, compared to $660,000, a 10% effective rate,
for the twelve months ended December 31, 2003. The effective tax rate for 2004
was further positively impacted by a determination this quarter that the
Company was eligible for a larger exclusion, based on the Company's unique
facts and circumstances, under the U.S. tax code requirements which allow an
exclusion of a portion of the profits associated with international sales of
the Company's software products from taxation. The net effects were reduced
tax payments and improved cash flow from operations.
Net income for the quarter ended December 31, 2004, was $2,379,000, an increase
of 25% over net income of $1,897,000 for the quarter ended December 31, 2003.
Basic EPS was $0.18 and diluted EPS was $0.17 for the quarter ended December
31, 2004, compared to basic EPS of $0.15 and diluted EPS of $0.14 for the
quarter ended December 31, 2003. Net income for the twelve months ended
December 31, 2004, was $7,467,000, an increase of 20% over net income of
$6,239,000 for the twelve months ended December 31, 2003. Basic EPS was $0.57
and diluted EPS was $0.54 for the twelve months ended December 31, 2004,
compared to basic EPS of $0.53 and diluted EPS of $0.49 for the twelve months
ended December 31, 2003.
Cash at December 31, 2004, increased 66% to $28,067,000 from $16,871,000 at
December 31, 2003, due to strong cash flow from operations, as a result of
growth in sales contracts, profitability, and a favorable tax rate.
Analysis of Results:
"I'm pleased to report that we successfully delivered strong financial,
operational and strategic performance this year, which furthered our market
leading position as a provider of comprehensive RIS/PACS software solutions and
professional services to our healthcare target markets," said Richard A.
Linden, President and CEO. "During 2004, Merge eFilm focused on five key
initiatives: expanding our business development and sales distribution
capabilities; improving our OEM international and VAR business; expanding our
RIS/PACS product features and market share; implementing strategies to enhance
and strengthen the relationship with our customers and the investment options
for our shareholders; and forming strategic relationships to expand our
products and services in line with emerging medical imaging market trends. Our
strong operational performance combined with our strategic initiatives this
past year positions us to continue our four-year track record of delivering
increasing value to our key stakeholders.
"In 2004, we expanded our business development and sales distribution
capabilities to broaden our coverage of the North American healthcare market
and form long-term partnerships with national imaging center chains. We
developed a distribution partnership with SourceOne Healthcare, which increased
our market coverage and exposed our RIS/PACS solutions to SourceOne's
customers. Our relationship with SourceOne continued to build momentum
throughout the second half of 2004 following the signing of our agreement in
July, resulting in three new FUSION contracts during the 4th quarter. We are
encouraged by the progress of this distribution relationship and the strength
of the SourceOne sales pipeline as we move into 2005. Additionally, our ability
to understand the intricacies of business and clinical workflow within our
healthcare target market, especially imaging centers, resulted in expanding our
relationship with regional and national imaging center chains such as InSight
Health Corp., Center for Diagnostic Imaging and Regional Diagnostic Imaging,
Inc., and winning an important new RIS/PACS software and service contract with
Radiologix, Inc. We are pleased that medical imaging corporations of this size
and stature continue to choose our RIS/PACS solutions to support their business
and clinical operations.
"I'm particularly encouraged by the performance of our OEM and International
VAR business during the 2nd half of 2004. Our European VARs implemented FUSION
PACS in five new countries in 2004, providing reference sites for our
solutions. We also revitalized relationships with our OEM customers, including
the creation of a new software product line customized for a leading OEM in
Europe. In partnership with our OEM's, we entered a new vertical market,
veterinary medicine, where our software components complete our OEM's broader
digital offering to the emerging veterinary medicine market. We expect the
OEM/VAR business development progress we made during the second half of 2004 to
continue in 2005.
"We expanded our market presence in 2004, including 21 new FUSION(TM) contracts
that were added during the 4th quarter, growing our total number of FUSION
solution customers to 195, representing over 400 healthcare facilities. Use of
our eFilm Workstation desktop medical imaging software increased substantially
during the year, delivering strong software licensing revenues and exposing
eFilm Workstation to over 50,000 clinicians and healthcare professionals
worldwide. This unique e-commerce marketing and software distribution strategy
continues to be a strong source of FUSION RIS/PACS sales leads and will serve
as a platform for distribution of our new advanced visualization products
obtained from the acquisition of AccuImage.
"In 2004, we initiated a number of activities to strengthen our relationship
with our customers, built long-term and scalable employee development programs
and enhanced our shareholders investment options. We held our first annual
Users' Group Meeting in October, and formed a Customer Advisory Panel, creating
stronger mutually beneficial relationships with our customers that support the
sharing of best practice information and the contribution of ideas to FUSION
RIS/PACS functional enhancements. We also continued our steady investments in
Human Resources and Organizational Development initiatives to support our
growing organization and the very important human intellectual capital that
drives its success. In 2004, we joined the Russell 2000(R) Small Cap Index,
established a stock repurchase program, and options on Merge eFilm stock
commenced trading, all of which strengthened the financial foundation that
supports our growth initiatives and value to our shareholders.
"Merge eFilm prides itself on forward-thinking strategic initiatives and
product innovation designed to meet the future needs of our healthcare
customers. During 2004 we initiated a strategy to accelerate our entry into
advanced visualization, resulting in the January 2005 acquisition of AccuImage
Diagnostics Corp., a leader in the development, marketing and support of
software for advanced visualization. This acquisition strengthened the
clinical capabilities of our FUSION product suite and expanded opportunities
within our OEM/VAR business. AccuImage advanced clinical applications, when
integrated within our RIS/PACS solutions, will provide our customers with an
expanded set of products designed to enhance their revenue streams and expand
the services they offer to their customers. We are particularly excited about
this strategy because it provides enterprise-wide access to these clinical
applications, rather than industry-standard stand-alone workstations,
increasing product accessibility and further accelerating the productivity and
profitability of our customers.
"On January 18, 2005, we announced the signing of a definitive agreement to
merge with Cedara Software Corp. (Nasdaq: CDSW; TSX: CDE) in an all-stock
transaction, subject to shareholder and regulatory approval. Combining these
companies will bring to the market the most comprehensive image and information
management solution sets to manage clinical and business workflow for the
diagnostic imaging OEM and end user markets, and will expand our growth into
clinical imaging specialties beyond radiology. We anticipate the same
successful integration with Cedara as we have exhibited in our RIS Logic and
eFilm Medical transactions and remain steadfast in our commitment to our
stakeholders during this merger, including the expectation to deliver accretive
earnings as a result of this merger within 12 months post-closing.
"With the economic advantages of a film-less and paperless workflow
environment, expanded market presence, new market opportunities, and strong
projected growth in image and information management systems, we anticipate
that our alignment to meet market conditions will continue and strengthen in
2005 and beyond. In 2005, we will develop products and services that enhance
the value of our RIS/PACS foundation beyond radiology, creating clinical
applications for use by the increasing number of specialists that utilize
diagnostic imaging in their practices. We anticipate accelerating product
innovation in partnership with our OEM customers and leveraging those
partnerships to strategically innovate our RIS/PACS products more rapidly to
meet future customer needs. Pending shareholder approval, we expect to
successfully merge with Cedara, delivering increased value to our shareholders,
customers and employees. And finally, we expect to maintain the operational
discipline, profitable growth and strategic vision to deliver another year of
exceptional performance for our shareholders," said Linden.
Guidance:
Market trends remain very favorable towards the comprehensive clinical and
business workflow solutions offered by the Company. The Company continues to
believe that its target market is moving rapidly towards film-less and
paperless software solutions, and that the growth in imaging services performed
in clinical specialties beyond radiology will expand rapidly. The Company also
believes the definition of RIS/PACS will change substantially over the next
year as advanced visualization and clinical applications become part of
integrated workflow solutions within imaging centers, hospitals and specialty
clinics. The Company's strategy and operational tactics are well aligned with
these market trends. The Company anticipates 2005 revenues to grow 30% to 35%
year over year to a range of $48 million to $50 million. The Company expects
diluted EPS of $.68 to $.75, which incorporates an estimated effective tax rate
of approximately 30% to 35% for the year.
The Company expects to successfully merge its operations with Cedara, pending
shareholder and regulatory approval, and to achieve key integration objectives.
These integration objectives include accelerating product innovation across
our combined OEM and end-user product lines, achieving over $3 million in
non-staff related expense synergies, expanding the distribution of our OEM and
RIS/PACS end-user solutions yielding revenue synergies and delivering accretive
earnings to our shareholders within 12 months following the closing of the
merger.
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 http://www.merge-efilm.com/ .
Notice to Investors, Prospective Investors and the Investment Community
Cautionary Information Regarding Forward-Looking Statements
Statements in this press release regarding the proposed merger of Merge
Technologies, (d.b.a. Merge eFilm) and Cedara Software Corp. which are not
historical facts, including expectations of financial results for the combined
companies (e.g., projections regarding revenue, earnings, cash flow, cost
savings and future growth), are "forward-looking statements." All forward-
looking statements are inherently uncertain as they are based on various
expectations and assumptions concerning future events and they are subject to
numerous known and unknown risks and uncertainties which could cause actual
events or results to differ materially from those projected. Investors are
cautioned not to place undue reliance on these forward-looking statements and
any such forward-looking statements are qualified in their entirety by
reference to the following cautionary statements. Merge eFilm and Cedara
undertake no obligation to publicly release the result of any revisions to
these forward-looking statements that may be made to reflect any future events
or circumstances. Important factors upon which the forward-looking statements
presented in this release are premised include: (a) receipt of regulatory and
shareholder approvals without unexpected delays or conditions; (b) timely
implementation and execution of merger integration plans; (c) the ability to
implement comprehensive plans for asset rationalization; (d) the successful
integration of the IT systems and elimination of duplicative overhead and IT
costs without unexpected costs or delays; (e) retention of customers and
critical employees; (f) successfully leveraging Merge eFilm/Cedara's
comprehensive product offering to the combined customer base; (g) continued
growth at rates approximating recent levels for imaging information systems and
other product markets; (h) no unanticipated changes in laws, regulations,
regulatory requirements or other industry standards affecting Merge
eFilm/Cedara's businesses which require significant product redevelopment
efforts, reduce the market for or value of its products or render products
obsolete; (i) no unanticipated developments relating to previously disclosed
lawsuits or similar matters; (j) successful management of any impact from
slowing economic conditions or consumer spending; (k) no catastrophic events
that could impact Merge eFilm/Cedara's or its major customer's operating
facilities, communication systems and technology or that has a material
negative impact on current economic conditions or levels of consumer spending;
(l) no material breach of security of any Merge eFilm/Cedara's systems; and (m)
successfully managing the potential both for patent protection and patent
liability in the context of rapidly developing legal framework for expansive
software patent protection. In addition, the ability of Merge eFilm/Cedara to
achieve the expected revenues, accretion and synergy savings also will be
affected by the effects of competition (in particular the response to the
proposed transaction in the marketplace), the effects of general economic and
other factors beyond the control of Merge eFilm/Cedara, and other risks and
uncertainties described from time to time in Merge eFilm/Cedara's public
filings with United States Securities and Exchange Commission and Canadian
securities regulatory authorities.
Additional Information
Shareholders are urged to read the joint proxy statement/management information
circular regarding the proposed transaction when it becomes available, because
it will contain important information. Shareholders will be able to obtain a
free copy of the joint proxy statement/management information circular, as well
as other filings containing information about Merge eFilm and Cedara, without
charge, at the Securities and Exchange Commission's internet site
(http://www.sec.gov/). Copies of the joint proxy statement/management
information circular and the filings with the Securities and Exchange
Commission that will be incorporated by reference in the joint proxy
statement/management information circular can also be obtained, without charge,
by directing a request to Merge eFilm's Investor Relations Department at Merge
eFilm's principal executive offices located at 1126 South 70th Street, Suite
S107B, Milwaukee, Wisconsin 53214-3151; telephone number (414) 977-4000. The
respective directors and executive officers of Merge eFilm and Cedara may be
deemed to be participants in the solicitation of proxies in respect of the
proposed transaction. Information regarding Merge eFilm's directors and
executive officers is available in Merge eFilm's proxy statement for its 2004
annual meeting of stockholders, which was filed with the Securities and
Exchange Commission on April 12, 2004, and information regarding Cedara's
directors and executive officers is available in Cedara's notice of annual
meeting and proxy circular for its 2004 annual meeting, which was filed with
the Securities and Exchange Commission on September 24, 2004. Additional
information regarding the interests of potential participants in the proxy
solicitation will be contained in the joint proxy statement/management
information circular to be filed with the Securities and Exchange Commission
when it becomes available.
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,
2004 2003 2004 2003
Net sales $ 10,154 $ 8,507 $ 37,005 $ 28,677
Cost of sales 3,288 2,704 12,887 8,970
Gross profit 6,866 5,803 24,118 19,707
Operating costs
and expenses:
Sales and marketing 2,124 2,073 7,212 6,543
Product research
and development 503 661 1,967 2,063
General and
administrative 1,645 1,040 4,839 3,527
Depreciation and
amortization 177 190 764 573
Total operating costs
and expenses 4,449 3,964 14,782 12,706
Operating income 2,417 1,839 9,336 7,001
Total other income
(expense) 217 20 469 (102)
Net income before
income taxes 2,634 1,859 9,805 6,899
Income tax expense 255 (38) 2,338 660
Net income $ 2,379 $ 1,897 $ 7,467 $ 6,239
Net income per
share - basic $ 0.18 $ 0.15 $ 0.57 $ 0.53
Weighted average
number of common
shares
Outstanding - basic 13,159,781 12,774,457 13,013,927 11,566,054
Net income per
share - diluted $ 0.17 $ 0.14 $ 0.54 $ 0.49
Weighted average
number of common
shares Outstanding
- diluted 14,007,183 13,774,247 13,827,522 12,586,900
(1) These condensed consolidated statements of operations should be read
in conjunction with the Company's Annual Report on Form 10-K for
fiscal 2004, proposed to be filed on or prior to March 16, 2005.
MERGE TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET(1)
(In thousands)
(unaudited)
December 31, December 31,
2004 2003
Cash $ 28,067 $ 16,871
Accounts receivable, net 11,100 8,359
Inventory 1,082 893
Deferred tax asset 3,076 3,541
Other current assets 1,979 444
Current assets 45,304 30,108
Property and equipment, net 1,497 1,674
Intangibles, net, and other assets 32,142 32,113
Total assets $ 78,943 $ 63,895
Accounts payable $ 2,020 $ 1,294
Other current liabilities 2,616 1,993
Deferred revenue 5,839 3,717
Billings in excess of
revenues - contracts in progress 2,839 1,381
Current liabilities 13,314 8,385
Deferred tax liability 2,062 1,987
Total liabilities 15,376 10,372
Shareholders' equity 63,567 53,523
Total liabilities and
shareholders' equity $ 78,943 $ 63,895
(1) These condensed consolidated balance sheets should be read in
conjunction with the Company's Annual Report on Form 10-K for fiscal
2004, proposed to be filed on or prior to March 16, 2005.
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DATASOURCE: Merge Technologies Incorporated
CONTACT: Scott Veech, Chief Financial Officer, or Richard Linden,
President & CEO, +1-414-977-4000, both of Merge Technologies
Web site: http://www.merge-efilm.com/