MERIT MEDICAL SYSTEMS INC [MMSI] Filings

10-Q 1 mmsi-20220930x10q.htm 10-Q

Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number 0-18592

MERIT MEDICAL SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Utah		87-0447695
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

1600 West Merit Parkway, South Jordan, Utah 84095

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (801) 253-1600

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of exchange on which registered
Common Stock, no par	MMSI	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☒

Accelerated Filer ☐

Non-Accelerated Filer ☐

Smaller Reporting Company ☐

Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date.

Title or class		Shares outstanding as of October 26, 2022
Common Stock, no par		56,919,405

Table of Contents

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION	3

Item 1.	Financial Statements (Unaudited)	3

	Consolidated Balance Sheets	3

	Consolidated Statements of Income	5

	Consolidated Statements of Comprehensive Income	6

	Consolidated Statements of Stockholders’ Equity	7

	Consolidated Statements of Cash Flows	9

	Condensed Notes to Consolidated Financial Statements	11

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38

Item 4.	Controls and Procedures	38

PART II.	OTHER INFORMATION	38

Item 1.	Legal Proceedings	38

Item 1A.	Risk Factors	38

Item 6.	Exhibits	42

SIGNATURES		43

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)


	September 30,		December 31,
ASSETS	2022		2021
		(unaudited)
Current assets:
Cash and cash equivalents	$	51,481	$	67,750
Trade receivables — net of allowance for credit losses — 2022 — $8,018 and 2021 — $6,767		155,828		152,301
Other receivables		10,827		17,763
Inventories		246,660		221,922
Prepaid expenses and other current assets		27,388		16,149
Prepaid income taxes		3,515		3,550
Income tax refund receivables		4,164		2,777
Total current assets		499,863		482,212

Property and equipment:
Land and land improvements		25,699		25,287
Buildings		186,976		190,044
Manufacturing equipment		290,306		277,976
Furniture and fixtures		63,380		61,446
Leasehold improvements		49,962		46,341
Construction-in-progress		59,783		51,182
Total property and equipment		676,106		652,276
Less accumulated depreciation		(299,950)		(280,618)
Property and equipment — net		376,156		371,658

Other assets:
Intangible assets:
Developed technology — net of accumulated amortization — 2022 — $263,990 and 2021 — $234,016		245,282		276,833
Other — net of accumulated amortization — 2022 — $68,308 and 2021 — $65,053		38,825		42,436
Goodwill		358,056		361,741
Deferred income tax assets		5,467		6,080
Right-of-use operating lease assets		64,700		65,913
Other assets		44,388		41,421
Total other assets		756,718		794,424

Total assets	$	1,632,737	$	1,648,294


See condensed notes to consolidated financial statements.	(continued)

Table of Contents

MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)


	September 30,		December 31,
LIABILITIES AND STOCKHOLDERS’ EQUITY	2022		2021
		(unaudited)
Current liabilities:
Trade payables	$	63,206	$	55,624
Accrued expenses		124,504		159,014
Current portion of long-term debt		11,250		8,438
Short-term operating lease liabilities		10,310		10,668
Income taxes payable		3,765		2,536
Total current liabilities		213,035		236,280

Long-term debt		205,412		234,397
Deferred income tax liabilities		31,168		31,503
Long-term income taxes payable		347		347
Liabilities related to unrecognized tax benefits		932		932
Deferred compensation payable		14,786		18,111
Deferred credits		1,735		1,815
Long-term operating lease liabilities		59,989		61,526
Other long-term obligations		16,492		23,584
Total liabilities		543,896		608,495

Commitments and contingencies

Stockholders' equity:
Preferred stock — 5,000 shares authorized as of September 30, 2022 and December 31, 2021; no shares issued		—		—
Common stock, no par value; 100,000 shares authorized; issued and outstanding as of September 30, 2022 - 56,918 and December 31, 2021 - 56,570		658,198		641,533
Retained earnings		447,372		406,257
Accumulated other comprehensive loss		(16,729)		(7,991)
Total stockholders’ equity		1,088,841		1,039,799

Total liabilities and stockholders’ equity	$	1,632,737	$	1,648,294


See condensed notes to consolidated financial statements.	(concluded)

Table of Contents

MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts - unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Net sales	$	287,175	$	267,021	$	857,566	$	796,259
Cost of sales		158,602		146,527		473,019		439,732
Gross profit		128,573		120,494		384,547		356,527

Operating expenses:
Selling, general and administrative		89,780		86,474		259,282		259,061
Research and development		19,221		16,974		55,074		50,841
Impairment charges		—		—		1,672		4,283
Contingent consideration expense		915		1,115		4,702		3,322
Acquired in-process research and development		—		—		6,671		—
Total operating expenses		109,916		104,563		327,401		317,507

Income from operations		18,657		15,931		57,146		39,020

Other income (expense):
Interest income		116		104		316		668
Interest expense		(1,831)		(1,233)		(4,180)		(4,156)
Other income (expense) — net		660		(625)		(808)		(1,796)
Total other expense — net		(1,055)		(1,754)		(4,672)		(5,284)

Income before income taxes		17,602		14,177		52,474		33,736

Income tax expense		2,330		2,210		11,359		5,895

Net income	$	15,272	$	11,967	$	41,115	$	27,841

Earnings per common share
Basic	$	0.27	$	0.21	$	0.73	$	0.50
Diluted	$	0.27	$	0.21	$	0.71	$	0.49

Weighted average shares outstanding
Basic		56,835		56,302		56,707		56,033
Diluted		57,586		57,549		57,573		57,274

See condensed notes to consolidated financial statements.

Table of Contents

MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands - unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Net income	$	15,272	$	11,967	$	41,115	$	27,841
Other comprehensive income (loss):
Cash flow hedges		3,850		1,522		13,182		5,442
Income tax benefit (expense)		(942)		(377)		(3,226)		(1,349)
Foreign currency translation adjustment		(9,003)		(2,873)		(18,775)		(5,535)
Income tax benefit (expense)		85		346		81		678
Total other comprehensive income (loss)		(6,010)		(1,382)		(8,738)		(764)
Total comprehensive income	$	9,262	$	10,585	$	32,377	$	27,077

See condensed notes to consolidated financial statements.

Table of Contents

MERIT MEDICAL SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands - unaudited)


	Common Stock			Retained		Accumulated Other
	Shares	Amount		Earnings		Comprehensive Income (Loss)		Total
Balance — January 1, 2022	56,570	$	641,533	$	406,257	$	(7,991)	$	1,039,799
Net income					10,545				10,545
Other comprehensive income							1,338		1,338
Stock-based compensation expense			4,212						4,212
Options exercised	52		1,320						1,320
Issuance of common stock under Employee Stock Purchase Plan	5		320						320
Shares issued from time-vested restricted stock units	44		—						—
Shares surrendered in exchange for payment of payroll tax liabilities	(16)		(1,015)						(1,015)
Balance — March 31, 2022	56,655		646,370		416,802		(6,653)		1,056,519
Net income					15,298				15,298
Other comprehensive loss							(4,066)		(4,066)
Stock-based compensation expense			3,952						3,952
Options exercised	58		1,303						1,303
Issuance of common stock under Employee Stock Purchase Plan	6		301						301
Shares issued from time-vested restricted stock units	26		—						—
Balance — June 30, 2022	56,745		651,926		432,100		(10,719)		1,073,307
Net income					15,272				15,272
Other comprehensive loss							(6,010)		(6,010)
Stock-based compensation expense			3,893						3,893
Options exercised	201		4,141						4,141
Issuance of common stock under Employee Stock Purchase Plan	5		246						246
Shares surrendered in exchange for payment of payroll tax liabilities	(18)		(1,110)						(1,110)
Shares surrendered in exchange for exercise of stock options	(15)		(898)						(898)
Balance — September 30, 2022	56,918	$	658,198	$	447,372	$	(16,729)	$	1,088,841


See condensed notes to consolidated financial statements.	(continued)

Table of Contents

MERIT MEDICAL SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands - unaudited)


	Common Stock			Retained		Accumulated Other
	Shares	Amount		Earnings		Comprehensive Income (Loss)		Total
Balance — January 1, 2021	55,623	$	606,224	$	357,803	$	(5,452)	$	958,575
Net income					10,958				10,958
Other comprehensive loss							(1,730)		(1,730)
Stock-based compensation expense			3,310						3,310
Options exercised	291		5,897						5,897
Issuance of common stock under Employee Stock Purchase Plan	5		263						263
Shares issued from time-vested restricted stock units	25		—						—
Shares surrendered in exchange for payment of payroll tax liabilities	(9)		(488)						(488)
Shares surrendered in exchange for exercise of stock options	(2)		(93)						(93)
Balance — March 31, 2021	55,933		615,113		368,761		(7,182)		976,692
Net income					4,916				4,916
Other comprehensive income							2,348		2,348
Stock-based compensation expense			2,765						2,765
Options exercised	253		5,455						5,455
Issuance of common stock under Employee Stock Purchase Plan	4		258						258
Shares issued from time-vested restricted stock units	34		—						—
Balance — June 30, 2021	56,224		623,591		373,677		(4,834)		992,434
Net income					11,967				11,967
Other comprehensive loss							(1,382)		(1,382)
Stock-based compensation expense			4,411						4,411
Options exercised	225		5,806						5,806
Issuance of common stock under Employee Stock Purchase Plan	5		314						314
Shares surrendered in exchange for payment of payroll tax liabilities	(1)		(88)						(88)
Shares surrendered in exchange for exercise of stock options	(1)		(86)						(86)
Balance — September 30, 2021	56,452	$	633,948	$	385,644	$	(6,216)	$	1,013,376


See condensed notes to consolidated financial statements.	(concluded)

Table of Contents

MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands - unaudited)


	Nine Months Ended
	September 30,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	41,115	$	27,841
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		61,312		63,173
Loss on disposition of business		1,389		—
Loss on sale or abandonment of property and equipment		196		630
Write-off of certain intangible assets and other long-term assets		1,733		4,412
Acquired in-process research and development		6,671		—
Amortization of right-of-use operating lease assets		7,819		8,941
Adjustments and payments related to contingent consideration liability		2,888		3,322
Amortization of deferred credits		(81)		(81)
Amortization of long-term debt issuance costs		453		453
Stock-based compensation expense		13,691		11,589
Changes in operating assets and liabilities, net of acquisitions and divestitures:
Trade receivables		(9,063)		(6,180)
Other receivables		5,669		(3,173)
Inventories		(30,735)		(11,180)
Prepaid expenses and other current assets		(4,186)		(6,251)
Income tax refund receivables		(1,713)		960
Other assets		1,848		(3,638)
Trade payables		9,752		1,181
Accrued expenses		(8,861)		19,575
Income taxes payable		(1,374)		(1,600)
Deferred compensation payable		(3,325)		606
Operating lease liabilities		(8,406)		(9,365)
Other long-term obligations		(509)		201
Total adjustments		45,168		73,575
Net cash, cash equivalents, and restricted cash provided by operating activities		86,283		101,416

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for:
Property and equipment		(32,539)		(19,612)
Intangible assets		(1,909)		(2,121)
Proceeds from the sale of property and equipment		63		1,037
Payments from disposition of business		(971)		—
Cash paid in acquisitions, net of cash acquired		(4,712)		(1,858)
Net cash, cash equivalents, and restricted cash used in investing activities	$	(40,068)	$	(22,554)


See condensed notes to consolidated financial statements.	(continued)

Table of Contents

MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands - unaudited)


	Nine Months Ended
	September 30,
	2022		2021
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock	$	6,733	$	17,814
Proceeds from issuance of long-term debt		172,336		73,251
Payments on long-term debt		(198,593)		(145,876)
Contingent payments related to acquisitions		(32,862)		(10,579)
Payment of taxes related to an exchange of common stock		(2,125)		(576)
Net cash, cash equivalents, and restricted cash used in financing activities		(54,511)		(65,966)
Effect of exchange rates on cash, cash equivalents, and restricted cash		(5,862)		(908)
Net increase (decrease) in cash, cash equivalents and restricted cash		(14,158)		11,988

CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
Beginning of period		67,750		56,916
End of period	$	53,592	$	68,904

RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO THE CONSOLIDATED BALANCE SHEETS:
Cash and cash equivalents		51,481		68,904
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MERIT MEDICAL SYSTEMS INC [MMSI] Filings
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10-Q	[2022-08-05]
10-Q	[2022-05-06]
10-K	[2022-03-01]
10-Q	[2021-11-05]
10-Q	[2021-08-06]
10-Q	[2021-05-07]
10-K	[2021-03-01]
10-Q	[2020-11-05]
10-Q	[2020-08-06]
10-Q	[2020-05-11]
10-K	[2020-03-02]
10-Q	[2019-11-08]
10-Q	[2019-08-09]
10-Q	[2019-05-03]
10-K	[2019-03-01]
10-Q	[2018-11-09]
10-Q	[2018-08-09]
10-Q	[2018-05-10]
10-K	[2018-03-01]
10-Q	[2017-11-09]
10-Q	[2017-08-07]
10-Q	[2017-05-10]
10-K	[2017-03-01]
10-Q	[2016-11-09]
10-Q	[2016-08-08]
10-Q	[2016-05-09]
10-K	[2016-02-29]
10-Q	[2015-11-09]
10-Q	[2015-08-07]
10-Q	[2015-05-11]
10-K	[2015-03-05]
10-Q	[2014-11-10]
10-Q	[2014-08-11]
10-Q	[2014-05-09]
10-K	[2014-03-12]
10-Q	[2013-11-12]
10-Q	[2013-08-09]
10-Q	[2013-05-10]
10-K	[2013-03-01]
10-Q	[2012-11-09]
10-Q	[2012-08-09]
10-Q	[2012-05-10]
10-K	[2012-02-29]