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Merit Medical Systems, Inc. (MMSI)

Q1 2008 Earnings Call Transcript

April 24, 2008 5:00 pm ET

Executives

Fred Lampropoulos – Chairman, President and CEO

Anne-Marie Wright – VP of Corporate Communications

Kent Stanger – CFO, Secretary and Treasurer

Greg Barnett – CAO

Arlin Nelson – COO

Analysts

Scott Gleason – Stephens, Inc.

Christopher Warren – Friedman, Billings, Ramsey & Co.

Jayson Bedford – Raymond James & Associates

Dave Turkaly – Susquehanna International Group, LLP

Operator

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Merit Medical's first quarter earnings conference call. (Operator instructions) As a reminder, this conference is being recorded today, Thursday, April 24, 2008. I would now like to turn the conference over to Mr. Fred Lampropoulos, Chairman and CEO of Merit Medical. Please go ahead, sir.

Fred Lampropoulos

Good afternoon, ladies and gentleman. This is Fred Lampropoulos broadcasting from a winter wonderland. We're having a whiteout in Salt Lake City this afternoon. Thank you for joining us. We have members of our staff congregated here, and we will start first by having Anne-Marie Wright read to us a Safe Harbor provision. Anne-Marie?

Anne-Marie Wright

In the course of our discussion today, reference may be made to projections, anticipated events or other information which is not purely historical. Please be aware that statements made in this call which are not purely historical may be considered forward-looking statements. We caution you that all forward-looking statements involve risks, unanticipated events, uncertainties and other factors that could cause our actual results to differ materially from those anticipated in such statements. Many of these risks, events, uncertainties and other factors are discussed in our Annual Report on Form 10-K and other reports and filings with the Securities and Exchange Commission, which are also available on our website. To the extent any forward-looking statements are made in this call, such statements are made only as of today's date and we do not assume any obligation to update any such statements.

Fred Lampropoulos

Thank you, Anne-Marie. I appreciate that. Ladies and gentlemen, we’ve announced about an hour ago the results of our first quarter. Let me go over some of the highlights of the quarter. As you can see the company’s revenues were $53.6 million, a 5% increase over the $51 million in the first quarter of 2007. Now, let me give some clarification there. Many of you will recall that the highest sales range for last year’s increase was in the first quarter, which I believe was about 13.4%.

After that time, there was a broad-based decline because of the COURAGE trials and others. So, our comparison, although seeming pale as compared against the highest quarter of the year. Despite that issue, we were able to improve the overall performance of the company by having our earnings increase by 50% going from $0.10 to $0.15 a share. We did that while not incurring any debt whatsoever. Kent in a few moments will go over with you and talk about EBITDA which is at record levels, all-time record levels for the company since its inception.

The rise that I think that you'll find and hopefully have some questions about, and this will be the first time in a broadcast that you've heard me say that our inflation device sales have increased without the benefit of one of our trading partners, Kyphon. So, we saw 5% increase in our angioplasty sales during the quarter, and an overall 7% rise in inflation devices. And we're excited about what that means going forward.

You'll also see that custom trays and kits remain flat. Reminder there that last year we had an OEM order that accounted for more than $1 million in the first quarter, and of course that's not in these numbers. So, it's also not an area of focus while we are focusing on other areas since it is the lowest margin area of the company. Now, our gross margins increased to 40.3% up 330 basis points, and sequentially higher than our fourth quarter, and our overall performance for the last year. I think that is significant and you'll all recall our goal of producing for the overall year of 2008 an increase of 150 basis points over 38.4, so we're even exceeding that level here in the first quarter. So, we're excited about that and the opportunities moving forward.

SG&A costs and R&D costs were about flat overall combined, and we'll give some explanation of that. I'll ask Kent to do that in a moment. And income from operations was at $6.6 million compared to $4.5 million last year. Also we have a higher effective tax rate, and I'm going to have Greg Barnett in a few moments talk about some things that we have to think about regarding FIN48 and some overall planning for the year. Right now Merit is sitting, at least at the end of the fourth – first quarter with about $24 million in cash, that's up from $17.6. And overall as I've said to many of you as we've met out on the road that the company is in its strongest position that I believe we have been ever in our history, with no debt, lots of new products and opportunities, acquisition and product line extension opportunities and really in very good shape in terms of our cost structure despite what I think are very difficult circumstances in terms of oil and those sorts of things, the company is doing well.

Our goals this year are as I had mentioned previously are to do $224 million and earn $0.66 net after tax, up from $0.55, and we would like to reaffirm that that's still our goal and we think capable of doing that. We hope to outdo that, but we feel comfortable moving forward with that. Now, I'm going to ask Kent Stanger to talk a little bit about the SG&A costs and then I'm going to ask Greg Barnett to visit for just a second and talk a little bit about some of the tax effects this year, some things that are being put on by SEC requirements that are important for you to understand as we move through the year.

So Kent, let me just turn a minute over to you, have you discuss the SG&A and maybe some of the other financial aspects of the company that we've discussed previously. Kent?

Kent Stanger

Thank you, Fred. I'd like to start a little bit by adding a little color to the top line. We had some real growth in our top four – three of our top four growth products were inflation devices and a new product and swabable valve, which were higher margin products. And when we consider that mix along with the fact that we now don't have the $ 1 million-plus of sales in a low margin OEM product, it all helps in the mix for part of our margins. So when you look at gross margins, the mix helps some but the biggest effect was efficiencies. I wanted to emphasize in our operations group we were down just here in South Jordan 167 people compared to a year ago, an 18% drop in headcount while we're still producing as much or more than we had in the previous year. And all of that leads to efficiencies.

So we're seeing higher volumes of productions on relatively fixed costs for our facilities and other kinds of fixed assets, while we're being much more efficient with our labor and our overhead in the operations group. I also would like to point out that we were able to manage our cash at record levels because our cash from operations was a record $9.9 million. So we nearly had $10 million in cash from operations for just the quarter compared to, say $5.8 million for last year. And our cash increased significantly in spite of the fact that we had $1.5 million that went out for acquisitions and we had some extra tax costs we had to pay that were $2.2 million. So I was really impressed with the cash flow issues of the company in this quarter, which were the best we've ever seen. And going on in the fundamentals behind that is as Fred already mentioned is the EBITDA.

The EBITDA numbers were $35 million when you look back at a trailing 12 months, which is a record, and it was almost $4 million for just the month which was also very much a record in our history.

In the SG&A costs we did see some increases. They had to do with some changes in our bonus structure. We had a little higher legal costs and we had some increases in sales meetings that we were – and in administrative fees to national accounts. So those were the biggest items. But they were offset in the R&D area by some engineering changes that were made both here and in Angleton and overall we were able to reduce some of our costs in our R&D which offset it in the total operating expenses.

Fred Lampropoulos

Okay. Thanks, Kent. I want to come back just for a minute and talk a little bit about the revenue line as well. As many of you will recall, our revised forecast for last year was $205 million. We had a very, very strong December and fourth quarter, stronger than anticipated, and we ended up at $208 million.

The year started out very candidly somewhat slow as the pipeline was filled and there were some startup issues, and we were actually behind our monthly forecast for the first two months. But we had a very, very, very strong record month in March, and our momentum in terms of our sales continues that moving forward in April. So we feel comfortable with our revenue numbers for the year. We hope to outdo that. But I don't want people to be overly concerned with the comparisons. I think the things that we should look at are the things that are really the important issues, and that is the gross margin improvement, where Merit sits in terms of their cash, and those kinds of issues are important.

The gross margins, the earnings per share, up 50% and the overall fundamentals of the business. Merit's never been healthier. There have never been more opportunities. I spent today again talking on a couple of acquisition issues, and in terms of those particular issues, there are ongoing discussion for many opportunities for Merit, more than we've ever seen. The fallout and softening of some of the major players and their commitments from there and from VC for single-product types of companies has slowed down dramatically, and we hope that as we move forward this year that there will be opportunities for what we think are some significant acquisition situations. And of course we're in great shape in terms of our cash to be able to do that.

Kent Stanger

Our balance sheet.

Fred Lampropoulos

Yes. No debt. The balance sheet speaks for itself. Now, there are some issues regarding taxes that I think are important that we talk about now so that as we go through the year, you'll have a clearer understanding of some requirements that are being put upon us. So, I'm going to just turn the time over to Greg Barnett, our Chief Accounting Officer. Greg?

Greg Barnett

Thank you, Fred. We just wanted people to be aware that from a quarter-to-quarter basis we're going to see some fluctuation in our effective tax rate. One other thing that we'll see in the second and possibly the fourth quarter, we could have an effective rate of about 38%, and in the third quarter 31%. The reason being in the third quarter with the new FIN48 requirements, when there's a lapsing of the statutes on our federal and state and foreign tax returns, it's considered a discrete item and it can't be effected in your rate for the whole year, and it'll be taken in the quarter that it occurs, which will be the third quarter. So we're expecting our effective rate to be 36% for the 2008 year, and so we just wanted people to be aware of that, that there will be some fluctuations in the effective rate from quarter to quarter but we expect it to be about 36% for the year.

Fred Lampropoulos

So, Greg, in the second quarter what type of effective rate would we see, around 39%?

Greg Barnett

39%. Yes.

Fred Lampropoulos

Then in that third quarter we get and take the FIN48 and flush it through and it'll drop down dramatically.

Greg Barnett

Correct.

Fred Lampropoulos

But the real important thing is to take a look at the whole year and understand that the effective tax rate will be 36%.

Greg Barnett

We're going to see a little increase over the prior year. It was at 33%. The reason being is we're projecting a course of more income this year and the permanent tax items we have are lessened with more income, and so you're seeing a higher effective rate on that.

Fred Lampropoulos

So let me just summarize. Thanks, Greg. Let me just summarize. Earnings up 50%. We expect sales to continue to accelerate. Our gross margins are ahead of our targeted levels. Our earnings, I think we're strong. We have a strong balance sheet, no debt in a market environment which I think allows us to maneuver and take advantage of many opportunities as our competitors seem to pay less attention to some of these areas. And we're starting to see positive signs of momentum in some of the other higher margin products like our inflation devices and so on and so forth.

We have corporate goals this year of adding another $5 million worth of implemented cost savings. We believe that we can reduce our inventory while growing by another $2 million. Even though you noticed that this particular quarter inventory was up, I think about $500,000, there were some issues regarding an acquisition from Micrus and a one-time buy of some plastic materials for the entire year which were a substantial amount about $600,000. If you net those out, our inventories would have gone down as well.

So as you look at the overall picture, Merit is in great shape. I think that we had a good quarter. I think we'll have better quarters going forward, and our goal, of course, is to deliver the goods and again to meet or exceed the expectations of Wall Street. We'll be out on the road in the next couple of weeks with a couple of health care conferences. We're starting to get more and more attention from various banks in terms of invitations, and so although we won't announce all of those I will tell you that we'll be in New York at the end of May to do an investment conference there. And we were out on the road just a couple weeks ago, meeting with a lot of funds that I know were initiating positions. So I think I'm finished. Anything, Kent, you want to add, or Greg?

Greg Barnett

No.

Fred Lampropoulos

Okay. Arlin, anything?

Arlin Nelson

No.

Fred Lampropoulos

Okay. Well, then at this time, what we'll do is we'll go ahead and turn the time over for questions.

Question-and-Answer Session

Operator

Thank you, sir. Ladies and gentlemen, we'll now begin the question-and-answer session. (Operator instructions) Our first question comes from the line of Scott Gleason with Stephens. Please go ahead.

Scott Gleason – Stephens, Inc.

Hi, Fred and Kent. How are you guys doing today?

Fred Lampropoulos

Good. Nice to hear from you.

Scott Gleason – Stephens, Inc.

Thanks. Just real quick, you guys had talked on the last call that you were going to maybe provide some details on your secret project on this call that you're working on. Or is it still too early to talk about that?

Fred Lampropoulos

I'll give you a little bit of some information on that. Again it is a product line that we believe has a market opportunity that would approach one of the four categories in terms of opportunity for Merit. As you know for instance with our inflation devices, it's about a $50 million market. I believe that there's about a $30 million Merit opportunity in this product. I visited the site where the product is being manufactured. It has gone through its first run of product. I was satisfied with the processes. There's work to be done in terms of gearing up for production, and we believe that some time probably in the next 30 to 60 days, probably 60 days, we'll be prepared to file a 510K. At that particular point it'll become public knowledge. So we thought there might be a chance that we could talk about it here, but it would not be appropriate to do so. But I think the important thing is the project is on track. It is being given and directed the resources that are necessary to bring it to market. I will tell you this, I’m meeting with physicians as early as this week and working with them on the product, all of them have indicated to me that this product is equal to or better than the market leader. And I think that's a significant point. So that's still a little bit of a teaser. I would love to talk about it. I'm aching to talk about it. But I just need just a little bit more time, and of course we may call a special meeting or discuss this at our shareholders' meeting which comes up at the end of May if by that time we've gone ahead and we've filed a 510K, which time we would do a webcast for the shareholders' meeting or something to that effect. But when it's time to get it out there and when it becomes public knowledge at least in terms of that filing is when we'll go ahead and talk about it.

Scott Gleason – Stephens, Inc.

Okay. And then Fred, as far as the gross margin is concerned you guys saw some pretty nice margin performance in the quarter. Should we still think of 150 basis points for the year, or does that go up now?

Fred Lampropoulos

Yes. It's a good question and I appreciate it. We're going to stick to our story of 150 basis points, so let me tell you why. We're not trying to be coy about it. One other things that we did during the first quarter that takes effect in the second quarter is Utah still has a pretty hot economy, and unemployment rate in Utah is about 3% compared to a national average of about 5%. As you guys know from listening to the jobs report today is that there was actually a better-than-expected jobs report. But the economy is still pretty stable out here, and in order to hire some folks and to be able to maintain them, we did some adjustments in our rates for our employees effective in the second quarter. So we want to stay where we are until we see what we think will be lower training costs and turnover costs and higher productivity. But we are going to have some of those extra costs that will probably still bring us in line. Now, our job of course is to outdo that. But I think it would be inappropriate this early in the year to up that in light of the slight adjustments that we had in the early second quarter. So we're going to stick with the 150 basis points at this point.

Scott Gleason – Stephens, Inc.

Okay. And along those same lines, Fred, can you guys provide us an update with the product move to Mexico and where you guys are in that process?

Fred Lampropoulos

Yes. We have I think five products down there, four or five products down there. We have essentially shut down our second shift and moved. Nel, how many more have we moved down there?

Arlin Nelson

Two product lines in March.

Fred Lampropoulos

Okay. Two product lines in March, so those are just getting started up. Do you have any more planned for this year?

Arlin Nelson

No more this year.

Fred Lampropoulos

Okay. So that will be–

Arlin Nelson

There might be one that comes in at the end of the year but (inaudible).

Fred Lampropoulos

Okay. So we'll have a total of seven products or product lines that are being produced down there, and two of them just started up and we'll get the benefit of that. Of course, I wish they would start to see it in the second quarter as it starts to ramp up. And then there may be one more added down there later in the year.

Scott Gleason – Stephens, Inc.

Okay. And then this last question real quick. As you guys noted R&D expenses were down quite a bit quarter to quarter. Should we think of that as a run rate for the year, or should it get back to more of a normalized trajectory I guess as we look forward?

Fred Lampropoulos

What we did is that we had what we thought were some excesses in some of our centers of excellence, and we leaned it out as part of the overall plan. Another one was a comment I made some time last year about some ideas about our Texas facility, and so we had some folks that actually left, two or three engineers that left. And I can’t really think that was in Merit's best interest as well. So it's going to be in the 3.5% to 4% range. So, a little bit lower than last year. But I can tell you this, the R&D guys are sitting in the room, we were up to our neck in alligators in terms of new projects and things to get out. So we're full up. We have no room whatsoever. Everything is scheduled, the projects in all of our R&D. So we'll be on delivery with all of our new products.

Scott Gleason – Stephens, Inc.

Great. Okay, thanks a lot, Fred.

Fred Lampropoulos

Thank you.

Operator

Thank you, sir. Our next question comes from the line of Christopher Warren with Friedman, Billings, Ramsey. Please go ahead.

Christopher Warren – Friedman, Billings, Ramsey & Co.

Thanks for taking the question. I wanted to ask about I guess the Kyphon partnership, see if there was anything changing there, if you expected those revenues maybe to ramp up through the year. And also to ask about just general market growth trends in the quarter and what you could comment and provide us with there?

Fred Lampropoulos

Let me go on to the first part of the question regarding Kyphon. We had an okay first quarter with them, but where we are starting to see the growth has coming out of Europe. In fact we just shipped our largest order which is new business into the European theater. The real driver will be there is when we get clearance in Japan. I would think that overall in that particular segment we're going to see 13% to 15% growth for the year in that particular segment. So, that's where that whole thing shakes out. Chris, in terms of the overall marketplace, as I mentioned in my earlier comments, we saw a 5% improvement in our inflation devices, and that is the first time that we've seen the indicators, which I've said all along that we have not seen the indicators steering to higher procedural rates. However, in this quarter, we've started to see that for the first time. Now, whether that holds true for the second quarter I don't know. But I think we are becoming more optimistic that maybe this thing has bottomed out is now starting to turn up. So that's we're seeing there. One thing I did not mention in my general comments were that we still believe that there's a lot of opportunity out there in the custom kit area if we want it. And by that I'm saying that as you're all aware one of our competitors spun out a division that we compete with. We're seeing lots of opportunities, but the question is where do we focus our sales force? And we believe in the vascular access side, the catheters and the stand-alone products that there are better opportunities in terms of profit and innovation, new products we have a distinct advantage. And I think that we have nine focused products this year, and those focused products don't fall in that category. So even though that is soft, it's by design. What I will say is there's plenty of opportunity there if we want it. Now, if they start raising prices and we can make more money doing it, then it could alter a little bit how we approach the whole thing.

Christopher Warren – Friedman, Billings, Ramsey & Co.

Got you. If I could just ask one more expense question and then one more revenue question. On SG&A would you expect after the sort of maybe unusual amounts in the first quarter, would you expect that to decrease as a percentage of revenue going forward?

Kent Stanger

Yes. I think it's going to be staying pretty constant, which on growing sales is going to diminish the percentage. There's obviously going to be some variable components like commissions and so forth that will respond to higher sales, but it's more fixed than variable. So I would think that that would start to improve through the year as a percentage of sales.

Fred Lampropoulos

It'll be constant, and you'll see that. Probably that percentage as Kent is saying will probably move down.

Christopher Warren – Friedman, Billings, Ramsey & Co.

Okay. And then just one last question. Any update on premier innovation, GPO contract wins?

Fred Lampropoulos

No. I mean, we are willing to settle on all of them. There's always a few segments. But as I've said many, many times before, Merit has never been penalized to the best of my knowledge in any way in terms of not having access to customers over GPO.

Greg Barnett

We did–as I mentioned we had significant increases as part of our SG&A costs because of fees to those groups. So that's telling me that we're having more product going through those contracts and we're paying the fees on them. So they are influencing our sales in some of – pretty significantly as a percentage growth rate.

Fred Lampropoulos

I'm looking at my national accounts manager, and I think he's signaled to me that you see more opportunity based on some of the negotiations that we have ongoing. So I'm getting a thumbs up from my national accounts guy on the other side of the room.

Christopher Warren – Friedman, Billings, Ramsey & Co

Okay. Thank you so much.

Fred Lampropoulos

Great. We'll look forward to seeing you at the end of May.

Operator

Thank you, sir. Our next question comes from the line of Jayson Bedford with Raymond James. Please go ahead.

Jayson Bedford – Raymond James & Associates

Hi. Good afternoon, guys.

Fred Lampropoulos

Hi, Jayson. How are you?

Jayson Bedford – Raymond James & Associates

Doing well, thanks.

Fred Lampropoulos

Good. Good to hear from you.

Jayson Bedford – Raymond James & Associates

A couple questions for you. Just in terms of the –I don't want to get too granular, but just intra-quarter movement in terms of what explained the softness in January and February versus the strength in March? Was it more company or industry specific? And it sounds to me like April is tracking more closely to March than it is in January, February in terms of strength.

Fred Lampropoulos

That's correct, it is. And we expect from what we're seeing this month it's a very, very strong and we're very excited about that. One other things we saw as I mentioned earlier on is we saw a little bit stronger than we had expected. You remember we came in at 205 and it came in a little stronger than that in the fourth quarter. And then the distributors load up and packers load up to make sure that they don't get stuck in the start-up stuff as we come into the first of the year. So they took a little bit more which meant it was a little slower at the beginning. And in fact I think in January we were about $1 million behind our internal forecast. We were about $0.5 million behind in February. So we were $1.5 million down going into the third month. And then we ended up actually pulling slightly ahead of our internal forecast. We actually finished higher than our internal forecast, and then we're seeing that momentum move forward in April and we expect probably for the full quarter. So it was just one of those things, and we see that from time to time. It's not unusual for us to see a soft first half of January. Kent?

Kent Stanger

OEM was also a little slow. It's the same stuff Fred was already talking about. We saw that be slower from some of our bigger customers there. Their buying patterns are a little harder to predict, and the other thing is that we did have an OEM customer. There was a variance, we already mentioned it about a $1.1 million, which made a harder comparable when you lost that compared to a year ago. That was OEM as well.

Jayson Bedford – Raymond James & Associates

Okay. And maybe this is tough to quantify, but can you just comment on strength in cardiology versus interventional radiology?

Fred Lampropoulos

Interventional radiology continues to be the star. There's a lot of strength there. What we are seeing though, Jayson, is we have seen I think recently particularly in March the failure of some of the bigger companies to deliver products due to back orders. And we have seen, and I think that's part of what we're seeing in April. There's a specific high margin catheter line as an example in which one of the major players was backordered for two or three weeks. And we're opening up six or seven new accounts a day. I saw seven yesterday. I see eight today. And so we're getting, and those are $150, $120 catheters with 50%, 60% gross margins. And so we're starting – so they're stumbling a little bit. We're picking up more business in terms of radial artery that gives us 2X to 3X on our vascular side and taking that away from the big guys. So they're focused on other things, and we think that trend will continue. And they're stumbling on delivering products for existing customers. That's not a good thing for anybody to do. So we expect that not only from some of those stumbles but just what we're starting to see, and it's still early, but for the first time we're starting to see that those angioplasty procedures appear to start to be turning up.

Jayson Bedford – Raymond James & Associates

Okay. Fair enough. And just looking at some of the new products that you talked about, have you launched the larger MAK kit and then the Biliary catheter?

Fred Lampropoulos

Yes. The Biliary catheter's going to roll out on a limited basis. When I say a limited basis, we want it–it's a serious product for seriously ill patients, and we wanted to make sure that we did an appropriate market preference trial. So, it's not a clinical trial but a preference trial just to make sure we had all of our i's dotted and t's crossed. And I think that our plan is to roll that out. I have a meeting I think today or tomorrow to roll that product out starting I think immediately. So that will just start rolling now. But one thing we are seeing because it ties with this, Jayson, is one of the focused products that I talked about earlier, one of the nine–I can't go through the whole list but I will go through this one, and that's our drainage catheters. And with the Biliary catheter, going – it's the natural product that will help us to increase that business. And we're seeing because of the focus on that and the Biliary, we expect that that particular product line which is again a high-margin product line for us is going to have a substantial improvement this year over last, substantial growth in that area. And that's in the interventional radiology, to go back to the first part of your question. That's the area that we see is still strengthening just across the planet.

Jayson Bedford – Raymond James & Associates

Okay. And is this a different drainage catheter versus the Biliary? Or are we talking about the same product?

Fred Lampropoulos

No, we're talking about the same product. This is the RBC, the Resolve Biliary Catheter. That's the one I'm talking about. It goes along with the Resolve Drainage Catheter. They're sister products, and I think we've been at a disadvantage and essentially not having the full line. Now we have the full line. And for instance when we went out and did the Biliary trials, 80% of the people that we talked to said that our product was equal to or better than any of the competitors in the marketplace. 80%, 96% of those recipients had positive comments about the product and said they would consider using it. 80% said it's better, equal to or better. Now that's pretty significant for a new product. We're very, very pleased with that.

Jayson Bedford – Raymond James & Associates

Okay. And any exciting new products that you have in the next quarter too that you could comment on?

Fred Lampropoulos

Yes. They're a couple–one I'm going to talk about, I'm going – again it’ll tease you a little bit. I have a health care conference coming up in New York at the end of May, and in that particular meeting I'm going to introduce and make a press release about our new product called the Blue Diamond. And I'm just going to leave it there. I won't say anything further about it, but it's called the Blue Diamond. It's in the inflation device area. I will tell you that. So it's in that category. We're very excited about it. It's later on in the year, but we will be showing it for the first time at this conference and possibly just doing a general press release about it because it's an extraordinary product and we're excited about that. The Slipknot, which is a suture retention device, is about 60 days away. I worked with the devices today. We're excited about that. The MAK NV is scheduled in the second quarter. So we have plenty of stuff on our plate, new ideas and new products coming out and then plenty of things in the pipeline. So I feel comfortable with our overall R&D effort and the new product releases this year.

Jayson Bedford – Raymond James & Associates

Okay. Fair enough. Just lastly, what were the margins at the Richmond facility?

Fred Lampropoulos

I don't have that right here. But it was 17% or 18%. But I will tell you this, Jayson, I think for the first–and this is I think – I'm glad you asked this question. I might be a little bit off on this but I think we made almost $0.5 million net after taxes in the first quarter out of the Richmond facility. And it is almost double of what was in our forecast. So the Richmond facility is actually exceeding the expectations of our budget even though it was flat for the quarter. So I think that's–the sales of the kits and packs of that segment was flat.

Kent Stanger

Just the trays in Richmond were actually up 33%.

Jayson Bedford – Raymond James & Associates

Yes, but the segment?

Kent Stanger

The combined group was flat.

Fred Lampropoulos

That's how we report it.

Kent Stanger

Another other business we already talked about offset it.

Fred Lampropoulos

But profits in the division were double what we had budgeted for.

Jayson Bedford – Raymond James & Associates

Okay. Fair enough. That's helpful. Great. Thanks.

Operator

Thank you, Sir. Our next question comes from the line of Darnell Azeez with Lord Abbett. Please go ahead. And pardon me, he has just dropped out of the queue. (Operator instructions) Our next question comes from the line of Dave Turkaly with SIG. Please go ahead.

Dave Turkaly – Susquehanna International Group, LLP

Thanks, guys. Two really quick ones. Did you guys have revenues from the Menda products in the quarter? And the second one would be was there any FX impact in the quarter?

Fred Lampropoulos

We did have some. A small amount of revenues from the Micrus products that we released, I think they were actually in March was the first time that we’ve released some of those products. Is that right, Greg?

Greg Barnett

It was probably 50,000 – 60,000.

Fred Lampropoulos

Yes, not very much. It was kind of in the nays.

Greg Barnett

The FX was about 700,000.

Fred Lampropoulos

For the year, or for the quarter?

Dave Turkaly – Susquehanna International Group, LLP

700,000 for the quarter?

Fred Lampropoulos

Yes.

Dave Turkaly – Susquehanna International Group, LLP

Great. Thanks.

Operator

(Operator instructions) And we have no further questions. I would like to turn it back over to management for any closing remarks.

Fred Lampropoulos

Well, ladies and gentlemen, we again thank you for joining us. Again in summary, earnings up 50%, gross margins at 40.3%. Record amounts of EBITDA, plenty of cash. No debt, and a full pipeline. And what we believe will be accelerating performance as we move through the year. So we're excited about the prospects of the company. We appreciate your interest, and we'll look forward to being out at several health care conferences being on the road telling our story. When appropriate we will release information regarding a number of projects that we've alluded to in this meeting. Again we want to thank you for your interest. We will be here if there's any follow up on any detail. We'd be delighted to take your calls. You can call us at 801-208-4309. Again I say 801-208-4309, and Kent and I will discuss whatever you'd like to with whatever's appropriate to discuss. We again thank you for your interest. We look forward to reporting to you in the future. With that said we'll sign off from Salt Lake City, bidding you a good evening. Thank you.

Operator

Ladies and gentlemen, this concludes Merit Medical's first quarter earnings conference call. You may now disconnect.

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Source: Merit Medical Systems, Inc. Q1 2008 Earnings Call Transcript
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