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NEWS RELEASE:
FOR IMMEDIATE RELEASE:
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MERGE HEALTHCARE ANNOUNCES FINANCIAL RESULTS FOR
THE SECOND QUARTER OF 2007 AND FILING OF ITS RESTATED
2006 FORM 10-K AND FIRST QUARTER 2007 10-Q
Milwaukee, WI, December 28, 2007 - Merge Technologies Incorporated, d.b.a. Merge Healthcare (NASDAQ: MRGE; TSX: MRG), today announced financial results for the second quarter and six month periods ended June 30, 2007. In addition, the Company announced that it has filed with the Securities and Exchange Commission the Company’s restated financial statements for the years ended December 31, 2006, 2005 and 2004 included in the 2006 Form 10-K and the restated financial statements for the three months ended March 31, 2007 and 2006 included in the first quarter 2007 10-Q.
Second Quarter Results:
For the second quarter ended June 30, 2007, revenue totaled $14.0 million compared to $31.4 million in the second quarter ended June 30, 2006 and $15.9 million in the first quarter ended March 31, 2007, representing a 55% and a 12% decrease, respectively. Revenue for the second quarter of 2006 included $11.6 million of revenue from contracts signed in previous quarters for which the revenue had been deferred due to delays in delivery of the required product functionality until the second quarter of 2006.
Operating loss for the second quarter ended June 30, 2007 was $10.7 million compared to an operating loss of $209.9 million in the second quarter ended June 30, 2006 and $10.2 million in the first quarter ended March 31, 2007. The operating loss for the second quarter of 2006 includes a charge of $214.1 million for goodwill impairment. Adjusted operating loss for the second quarter ended June 30, 2007 was $5.4 million compared to income of $9.4 million in the second quarter ended June 30, 2006 and a loss of $4.2 million in the first quarter ended March 31, 2007.
The net loss for the second quarter of 2007 totaled $10.7 million, or $0.32 per share, compared to a net loss of $211.0 million, or $6.27 per share, in the second quarter of 2006 and a net loss of $9.7 million, or $0.29 per share, in the first quarter of 2007. During the second quarter of 2006, the Company recognized a goodwill impairment charge of $214.1 million, or $6.36 per share.
Six Month Results:
For the six months ended June 30, 2007, revenue totaled $29.9 million compared to $47.6 million in the six months ended June 30, 2006, a decrease of 37%. Revenue for the first six months of 2006 included $11.5 million of revenue from contracts signed in previous quarters for which the revenue had been deferred due to delays in delivery of the required product functionality until the second quarter of 2006.
Operating loss for the six months ended June 30, 2007 was $20.9 million compared to an operating loss of $217.4 million for the six months ended June 30, 2006 which includes a goodwill impairment charge of $214.1 million. Adjusted operating loss for the six months ended June 30, 2007 was $9.7 million compared to income of $7.2 million for the six months ended June 30, 2006.
The net loss for the first six months of 2007 totaled $20.5 million, or $0.60 per share, compared to a net loss of $216.3 million, or $6.43 per share, for the first six months of 2006. During the first six months of 2006, the Company recognized a goodwill impairment charge of $214.1 million, or $6.37 per share.
Bookings:
Bookings for the three month and six month periods ended June 30, 2007 totaled approximately $10 million and $30 million, respectively. Bookings is defined by the Company as the total value of all contracts signed during a quarter and excludes any value attributed to related maintenance other than the first year of post-contract customer support (PCS). Bookings for the six months ended June 30, 2007 included 4 contracts in excess of $1 million and 21 contracts with new customers. Comparative figures for the prior periods are not available as the Company did not begin disclosing bookings until the quarter ended December 31, 2006.
Third Quarter Financial Results:
The Company currently anticipates filing its quarterly report on Form 10-Q for the three month period ended September 30, 2007 in January of 2008 and will conduct a conference call to review the third quarter results and provide an update on the Company's business operations and strategy following the release of its financial statements. On December 20, 2007, the Company’s management and audit committee concluded that all, or substantially all, of our goodwill has been impaired, thus leading to a non-cash goodwill impairment charge during the three months ended September 30, 2007. The Company is currently working with an independent valuation consultant to finalize our assessment of the fair value of our goodwill and our other indefinite lived assets. As soon as possible following completion of this assessment, the Company will file its third quarter Form 10-Q and an announcement will be made as to the date of this call as soon as the details are known. As previously disclosed in the Company’s press release on October 29, 2007, bookings for the quarter ended September 30, 2007 are expected to be approximately $9 million and the cash balance on September 30, 2007 was approximately $22 million.
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GAAP versus Non- GAAP Presentation
Merge Healthcare provides adjusted operating income, adjusted net income and adjusted earnings per share in this press release as additional information regarding the Company’s operating results. The measures are not in accordance with, or an alternative for, GAAP and may be different from non-GAAP operating income, non-GAAP net income and non-GAAP earnings per share measures used by other companies. The Company believes that this presentation of adjusted operating income, adjusted net income and adjusted earnings per share provides useful information to investors regarding additional financial and business trends relating to the Company’s financial condition and results of operations. This release should be read in conjunction with our Form 8-K earnings release and our quarterly report on Form 10-Q filings for the quarter ended June 30, 2007.
The non-GAAP adjusted operating income, adjusted net income and adjusted earnings per share exclude the impact of stock option expense under SFAS 123(R), depreciation and amortization, non-recurring legal and accounting costs associated with our restatement and various lawsuits, goodwill impairment, reduction in force and duplication of effort costs. Results prepared in accordance with U.S. GAAP are reconciled with non-GAAP results excluding the impact of these adjustments. A full reconciliation of our GAAP financial measures to non-GAAP adjustments is included in the supplemental attachment to this release.
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About Merge Healthcare
Merge Healthcare is a developer of medical imaging and clinical software applications and developmental tools that are on the forefront of medicine. We develop medical imaging software solutions that support end-to-end business and clinical workflow for radiology department and specialty practices, imaging centers and hospitals. Our software technologies accelerate market delivery for our OEM customers, while our end-user solutions improve our customers’ productivity and enhance the quality of the patient experience. For additional information, visit our website at www.mergehealthcare.com.
Cautionary Notice Regarding Forward-Looking Statements
This announcement may include forward-looking statements within the meaning and subject to the protections of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. When used in this announcement, the words “will,” “believes,” “intends,” “anticipates,” “expects” and similar expressions of the future are intended to assist you in identifying such forward-looking statements. Such forward-looking statements include, among others, statements regarding: the timing of our filing of our SEC reports and our potential goodwill impairment. Any number of factors could cause the actual results to differ from the results contemplated by such forward-looking statements, including, but not limited to: market acceptance and performance of the Company’s new products and services, including the Company’s teleradiology product and services; delay in the offering of the Company’s teleradiology product and services; the Company’s ability to attract and retain qualified radiologist consultants; risks and effects of the past and current restatement of financial statements of the Company and other actions that may be taken or required as a result of such restatements; the Company’s ability to generate sufficient cash from operations to meet future operating, financing and capital requirements; the Company’s inability to timely file reports with the Securities and Exchange Commission; risks associated with the Company’s inability to meet the requirements of The NASDAQ Stock Market for continued listing, including possible delisting; costs, risks and effects of legal proceedings and investigations, including the formal investigation being conducted by the Securities and Exchange Commission and class action, derivative, and other lawsuits; the uncertainty created by and the adverse impact on relationships with customers, potential customers, suppliers and investors potentially resulting from, and other risks associated with, the changes in the Company’s senior management; the impact of competitive products and pricing; continued negative effects of the DRA (Deficit Reduction Act of 2005); risks related to regulatory and other legal compliance with applicable health care laws, regulations, government agency pronouncements and judicial and quasi-judicial rulings; limited acceptance of digital modalities and RIS-PACS and workflow technologies; the Company’s ability to integrate acquisitions; changing economic conditions; credit and payment risks associated with end-user sales; the Company’s dependence on major customers; the Company’s dependence on key personnel; and other risk factors detailed in the Company’s filings with the Securities and Exchange Commission. You should not place undue reliance on forward-looking statements, since the statements speak only as of the date that they are made. We do not have, or undertake any obligation to, publicly update, revise or correct any of the forward-looking statements after the date of this announcement, or after the respective dates on which such statements otherwise are made, whether as a result of new information, future events or otherwise. This announcement should be read in conjunction with the risk factors, financial information and other information contained in the filings that the Company makes and previously has made with the Securities and Exchange Commission.
Merge Technologies Incorporated And Subsidiaries Condensed Consolidated Balance Sheets
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Attn: Beth Frost-Johnson
Merge Healthcare
6737 West Washington St.
Suite 2250
Milwaukee, WI 53214
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