Merge Healthcare Announces Fourth Quarter and 2006 Year End Financial Results



    MILWAUKEE, March 8 /CNW/ -- Merge Technologies Incorporated, d.b.a. Merge
Healthcare (Nasdaq:   MRGE; TSX: MRG), today announced financial results for the
quarter and year ended December 31, 2006.
    (Logo:  http://www.newscom.com/cgi-bin/prnh/20030430/MRGELOGO )

    
    Fourth Quarter Results:
    
    For the fourth quarter ended December 31, 2006, revenue totaled $13.2
million compared to $25.5 million in the fourth quarter ended December 31,
2005. During the fourth quarter of 2006, the Company recognized a goodwill
impairment, trade name impairment and restructuring charge of $11.3 million,
or $0.33 per share, primarily related to the right-sizing initiative announced
in November 2006. Including this charge, Merge's GAAP loss was $27.0 million
or $0.80 per diluted share versus earnings of $2.8 million or $0.08 per
diluted share during the same period last year.
    Additionally, Merge Healthcare recorded a full income tax valuation
allowance during the fourth quarter, relating primarily to the uncertainty of
our ability to utilize our tax net operating loss carry forwards in future
years.

    
    Fiscal 2006 Year-end Results:
    
    For the year ended December 31, 2006, revenue totaled $75.0 million
compared to $82.6 million in the prior year. The Company's GAAP loss totaled
$258.5 million or $7.67 per diluted share, which included a goodwill
impairment, trade name impairment and restructuring charge of $230.8 million,
or $6.85 per share, versus a net loss of $2.7 million or $0.11 per diluted
share in fiscal 2005.
    The Company's cash balance as of December 31, 2006 was $45.9 million, a
decrease from $52.2 million at September 30, 2006 and a decrease from $64.3
million at December 31, 2005. Deferred revenue totaled $21.4 million at
December 31, 2006, an increase from $20.4 million at September 30, 2006 and a
decrease from $34.7 million at December 31, 2005.

    
    Analysis of Results:
    
    "These last few months have witnessed tremendous change at Merge. While
our financial results will continue to lag some of our strategic decisions, we
have made great strides in repositioning the company to become a leading
global supplier of medical imaging and clinical applications solutions in the
future," stated Ken Rardin, Chief Executive Officer of Merge Healthcare.
"While our return to profitability will not happen overnight, we are working
diligently on the integration of our Cedara and Merge Healthcare businesses,
and are seeing the fruits of our labor as the new senior management team is
beginning to work very effectively together." Mr. Rardin concluded, "We
believe the worst is behind us and we are confident that the changes that we
have made over the past several months will begin to pay off over the next
several quarters. As I have stated previously, I still believe we are on track
to return to a profitable growth company by the fourth quarter of this year."

    
    Conference Call Details:
    
    The management of Merge Technologies Incorporated will conduct a
conference call on Friday, March 9, 2007 at 10:00 AM (Eastern) to review
fourth quarter results and provide an update of the company's business
operations and strategy. Following the review, a question and answer session
will be conducted.
    Investors will have the opportunity to listen to the conference call via
phone or over the Internet at http://www.videonewswire.com/event.asp?id=38336
. To listen to the live call, investors should go to the web site at least
fifteen minutes early to register, download, and install any necessary audio
software. For those who cannot listen to the live broadcast, a replay via the
Internet will also be available shortly after the call. Detailed call and web
cast information is also listed at:
http://www.merge.com/CORP/investorrelations/confcalllist.asp .

    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 http://www.merge.com .

    Except for the historical information herein, the matters discussed in
this news release include forward-looking statements that may involve a number
of risks and uncertainties. When used in this press release, the words "will,"
"believes," "intends," "anticipates," "expects" and similar expressions are
intended to identify forward-looking statements. Actual results could differ
materially from those expressed in, or implied by, the forward-looking
statements based on a number of factors, including, but not limited to, the
risk factors detailed in the Company's filings with the Securities and
Exchange Commission. Except as expressly required by the federal securities
laws, the Company undertakes no obligation to update such factors or to
publicly announce the results of any of the forward-looking statements
contained herein to reflect future events, developments, or changed
circumstances, or for any other reason.



    
                MERGE TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)

                                                  December 31,    December 31,
                                                     2006             2005

    Current assets:
      Cash                                         $45,945           $64,278
      Accounts receivable, net                      17,210            23,624
      Inventory                                      2,164             2,440
      Prepaid expenses                               1,660             2,646
      Deferred income taxes                            196            11,213
      Other current assets                             812             3,208
    Total current assets                            67,987           107,409

    Property and equipment, net                      3,940             4,440
    Purchased and developed software, net           16,628            19,539
    Other intangibles, net                           9,511            11,789
    Goodwill                                       124,407           350,634
    Other                                           12,190             7,862
    Total assets                                  $234,663          $501,673

    Current liabilities:
      Accounts payable                              $8,284            $5,938
      Accrued wages                                  6,244             5,870
      Income taxes payable                           4,033             3,894
      Other accrued liabilities                      2,381             3,453
      Deferred revenue                              18,175            30,918
    Total current liabilities                       39,117            50,073

    Deferred income taxes                              -               3,491
    Deferred revenue                                 3,218             3,784
    Other                                              633               484
    Total liabilities                               42,968            57,832

    Total shareholders' equity                     191,695           443,841
    Total liabilities and shareholders'
     equity                                       $234,663          $501,673


    The condensed consolidated balance sheets should be read in conjunction
    with the Company's Annual Report on Form 10-K for 2006 which was filed
    with the Securities and Exchange Commission on March 8, 2007.



                 MERGE TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                        (in thousands, except share data)

                                   Three Months Ended     Twelve Months Ended
                                       December 31,           December 31,
                                     2006       2005        2006        2005
                                 (unaudited) (unaudited)
    Net sales
      Software and other           $5,688     $17,702     $40,635     $60,120
      Services and maintenance      7,486       7,758      34,407      22,481
    Total net sales                13,174      25,460      75,042      82,601
    Cost of sales:
      Software and other            1,969       1,959       9,611       6,921
      Services and maintenance      3,479       3,543      14,464      11,106
      Amortization                  1,944       3,989       5,532       7,740
    Total cost of sales             7,392       9,491      29,607      25,767
    Gross margin                    5,782      15,969      45,435      56,834
    Operating costs and
     expenses:
      Sales and marketing           5,326       5,001      20,132      13,647
      Product research and
       development                  5,381       4,000      20,440       9,914
      General and administrative    8,295       2,433      28,629      11,622
      Acquired in-process
       research and development       -           -           -        13,046
      Goodwill impairment,
       restructuring and other
       expenses                    11,329        (219)    230,813         530
      Depreciation and
       amortization                   995       1,120       4,033       3,549
    Total operating costs and
     expenses                      31,326      12,335     304,047      52,308
    Operating income (loss)       (25,544)      3,634    (258,612)      4,526
    Other income                      636         382       2,614         706
    Income (loss) before
     income taxes                 (24,908)      4,016    (255,998)      5,232
    Income tax expense              2,130       1,237       2,460       7,889
    Net income (loss)            $(27,038)     $2,779   $(258,458)    $(2,657)

    Net income (loss) per
     share - basic                 $(0.80)      $0.08      $(7.67)     $(0.11)
    Weighted average number of
     common shares outstanding
      - basic                  33,848,978  33,523,440  33,701,735  24,696,762

    Net income (loss) per
     share - diluted               $(0.80)      $0.08      $(7.67)     $(0.11)
    Weighted average number of
     common shares
     outstanding - diluted     33,848,978  34,930,278  33,701,735  24,696,762


    The condensed consolidated statements of operations should be read in
    conjunction with the Company's Annual Report on Form 10-K for 2006 which
    was filed with the Securities and Exchange Commission on March 8, 2007.



                MERGE TECHNOLOGIES INCORPORATED AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                        (in thousands, except share data)

                                                      Twelve Months Ended
                                                          December 31,
                                                     2006              2005

    Cash flows from operating activities:
    Net loss                                      $(258,458)         $(2,657)
    Adjustments to reconcile net loss to
     net cash provided by (used in)
     operating activities:
      Depreciation and amortization                   9,565           11,288
      Provision for doubtful accounts receivable        289              723
      Deferred income taxes                           4,223            7,374
      In-process research and development               -             13,046
      Stock-based compensation                        5,961              979
      Goodwill and trade name impairment charge     226,118              -
    Change in assets and liabilities,
     excluding effects from acquisitions:
      Accounts receivable                             6,125           (5,421)
      Inventory                                         276             (439)
      Prepaid expenses                                  986              (76)
      Accounts payable                                2,370           (3,474)
      Accrued wages                                     350              765
      Other accrued liabilities                        (923)             (69)
      Deferred revenue                              (13,309)           6,973
      Other assets                                    1,328           (5,117)
      Other                                             139             (293)
    Net cash provided by (used in)
     operating activities                           (14,960)          23,602
    Cash flows from investing activities:
    Cash acquired in acquisitions, net of
     cash paid                                          -              9,644
    Purchases of property, equipment and
     leasehold improvements                          (1,252)          (2,996)
    Purchased technology                               (367)             -
    Capitalized software development                 (2,257)          (3,621)
    Net cash provided by (used in)
     investing activities                            (3,876)           3,027
    Cash flows from financing activities:
    Proceeds from exercise of stock options             471            9,508
    Proceeds from employee stock purchase plan           33               65
    Net cash provided by financing activities           504            9,573
    Effect of exchange rate changes on cash              (1)               9
    Net increase (decrease) in cash                 (18,333)          36,211
    Cash and cash equivalents, beginning
     of period                                       64,278           28,067
    Cash and cash equivalents, end of period         45,945           64,278


    The condensed consolidated statements of cash flows should be read in
    conjunction with the Company's Annual Report on Form 10-K for 2006 which
    was filed with the Securities and Exchange Commission on March 8, 2007.

    




For further information:

For further information: Melanie Gretzon, Director, Corporate Services,
of  Merge Healthcare, +1-414-977-4000, ir@mergehealthcare.com Web Site:
http://www.merge.com

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MERGE HEALTHCARE

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