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.
http://www.newscom.com/cgi-bin/prnh/20030430/MRGELOGO
http://photoarchive.ap.org/ 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/
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