Merit Medical Systems Inc (MMSI) 2009 Q4 法說會逐字稿

Good day, ladies and gentlemen. Thank you for standing for standing by. Welcome to the Merit Medical's fourth quarter and year end 2009 earnings conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation the conference will be open for questions. (Operator Instructions) I would now like to turn the conference over to Fred Lampropoulos, Chairman and CEO. Please go ahead sir.

Good afternoon, ladies and gentlemen. This is Fred Lampropoulos, broadcasting from South Jordan, Utah where we have assembled with us, essentially all the members of our general staff. We are also pleased to have our Executive Vice President from Europe and our Country Manager from Germany as well as our Plant Manager from Angleton, Texas with us today and we are delighted to have them.

About an hour ago we reported our fourth quarter and full year results. You can see that our revenues were $257 million for the year an increase of 13% from $227 million. A $30 million increase in revenues. You can also see that our earnings for the year were up 9% and were $0.79 up from $0.73. You'll recall that early in the year we restated our objectives for the year due to the Alveolus acquisition arranged at that time was $0.77, I believe to $0.79. You'll see that the gross margins were 42.3% up 120 basis points. I will be the first to say that we came short particularly in the fourth quarter by about 30 basis points over what we had promised.

I'll discuss that in detail in a few minutes but I would like to remind everybody that if we take a look at our three year plan, that we had discussed, last year we promised 150 and we delivered 270 and I believe that we were up 190 basis points or so the year before. So we did come up a little bit short in that particular aspect. Revenues for the fourth quarter were $67 million, up from $58 million an increase of 16%. Now, earnings were affected in the fourth quarter primary from the integration and start up of Merit's nonvascular stent division, Endotek, and investments in expanding our sales force in the United States and Europe as well as some new research and development projects that we are starting up in the Endotek division as well as some offshore research and development activities.

Gross margins in the fourth quarter were 40.5%. That's where that drag came in if you take a look at the full year. One of the other I think positive sides of the fourth quarter is that we slowed down production. We thought we had a little bit more inventory, and when you slow that down, our sequential inventory from quarter to quarter went down by $880,000. That's $880,000 we have in the bank instead of sitting on the self someplace. But I think it's important to note lest, and if you feel dismayed, is that in January, which is generally a relatively slow month because of the startup after the holidays and kind of that lag, that our gross margin snapped back to 42.6% which we are very, very pleased about that we have seen it come back.

If we were to look forward to next year and we are going to talk in this call about about a range of earnings and sales, but we're going to look at about 100 basis points in next year's performance in terms of gross margins to give ourselves a little bit of room. We'll talk about next year in a few minutes. Again on another positive side, the EN Snare has turned out to just be a magnificent product. Going in to the year, we thought that we would see some significant headwinds as in regards to the pipeline filling by the former distributor and getting rid of their inventory. The fact of the matter is one of the positives from Merit is that fabulous direct sales force that we have in Europe and in the United States as well as our distribution network, and because we were able to gardener new accounts as well as being able to transfer the business from the previous distributor, we were able to generate sales of about $623,000 in our very first month.

If we were of course to take that out for the year, it's going to be somewhere around $8 million if you annualize that. Because of the success we saw and because we normally model an acquisition by forecasting it 25% below the known income values because of transfer loss business, we've now in our internal forecast moved that up by $2 million and as you all know this is an 80% gross margin product. So we think we'll actually gain more -- our hope is that we will gain more momentum through the year which will add more sales, more gross margins and profits. But again I'll come back to those numbers in a few minutes.

But I think an extraordinary effort by the people at Merit in which we essentially bought the business on June the 2nd and by December 2nd, we had the production up and running, clearly qualified FDA approval, European CE Mark approval, inventory on the shelf, all the sales and marketing, all the training done. So when we hit the 4th of January, we were at full stride. I think it's an extraordinary accomplishment and the technology that is proprietary best of class. It is best execution, of a transaction that I've ever seen. I don't know how candidly we could have done it any better. It was an extraordinary effort by the people in this room and the people in our Irish facility. It's also another important factor is that particular product is going to be taxed even after we take a look at transfer pricing. It's taxed essentially in our Irish office and out of Ireland so consequently it's going to be more profitable than our normal product taxation issues.

We are going to launch a number of new products in the first half of this year. One product that we'll be launching next week is our One Step VOS. It's a valved product that competes with those that don't have a valve and you get leakage and a lot of nasty things that are going on in the floor in a mess, whenever you are doing a centesis process or a procedure and we are excited about that. That is a patented product. The Merit Laureate Hydrophilic Guide Wire we'll launch in the very near future. Yesterday we received approval for our IMPRESS Hydrophilic selective and nonselective catheters that was just received yesterday.

We are very excited about that because it takes the price of the project, of a standard catheter that is about $13 to $15 and it's 2x to 3x because of the Hydrophilic coating that we have on it. So we are excited to launch that product in the very near future. Also, although in various financial meetings we have talked about the ASAP, we've never talked about what that product is. The ASAP is an aspiration catheter -- thrombus extraction catheter. The market in the United States alone is in excess of $30 million. We believe that the worldwide market is approximately $50 million to $60 million. We believe that Merit has the best in class product. Product sells -- I think I mentioned -- $550. We believe that it will have a 65% gross margin, and we hope to launch that late in the second quarter. We'll be filing our 510-K on that product by the end of this month, and we'll wait to go through that process.

If I could just briefly weigh in that there was an article in the Wall Street Journal today that discussed some of the difficulties with 510-Ks. I'll simply say this, that regulatory clearances have never been an issue for us. We play by the rules. We provide the information. We do it straight up. And in one case recently on one product that we filed and we are expecting a 90 day clearance on the ALIMAXX Biliary catheter, we received that 510-K on that product in three weeks. So I don't think that that's going to be an issue on the regulatory despite what you are hearing in the press. It's really for the outliers and the guys aren't playing by the rules. Merit plays by the rules and we have always done very, very well. In fact in our clearance for our EN Snare, we got that clearance from the FDA in four days. So I don't foresee that despite all the rhetoric that is out there, I think that rhetoric is for those who aren't playing by the rules.

We play by the rules. We have a good relationship with the Agency. We also as I just mentioned with that approval, our finalizing some trials that are really preference trials and we'll be launching both the endoscopic version and also the transhepatic version of our ALIMAXX-B Biliary catheter. Just to give you a little bit of the feel for that, if you take a look at the biliary market, it's almost double the size of the esophageal and the bronchial, tracheal marketplace, and one of the reasons we had a little bit less revenue this year than we had anticipated is because we did not introduce that product when we bought it.

We essentially retool it, made improvements on it and now it's ready to go. And those improvements facilitated a 510-K and it goes back to what I was just saying that we played by the rules. We didn't try to say, well this was a letter to file. There were some changes. We analyzed it, we played by the rules and now we are ready to go to the market. We have a number of other new products that are coming to the marketplace. All of these products have significant opportunities but they are coming late in the -- some of them in the late second quarter. They have to ramp -- you get into the summer and they'll ramp up over the year to the end of the year. They just get started. They have to be introduced. They have to be tried. So there will be some impact from these product this is year but it will be minimal. The real impact of course will come in 2011. But they are all significant products and some of which include new technologies that Merit has never had before. So we are excited about that.

If you take a look at the categories, you can see that our catheter sales continue to be strong for the year. Custom kits continue to be strong, even inflation devices did reasonably well and although for the year up to the third quarter, we had kind of flat sales. We actually had very strong sales from an OEM customer, a significant OEM customer in the fourth quarter. So even the inflation device sales did very, very well. I think they were up 2% for the year. Kent, is that correct?

2% for the year and in fact they were up 4% even without the OEM, but it was in the fourth quarter. So there has been some concerns. I've had a few calls from some analysts worrying about whether the procedures were doping off. And if they are, we are getting more market share or something because our numbers are still rising at a 4% rate in the most recent quarter without the OEM business which made it go to 9%.

So I think one of the things that we are trying to do in this call today is to make sure that we get our expectations aligned really to the lower end. We'll talk about that in just a minute, and then do all that we can do over promise, not over promise -- goodness gracious -- to over deliver. We are trying to under promise and then over deliver. Again our guidance for 2010 are going to be sales in the $283 million to $291 million range. Our earnings per share in the $0.85 to $0.89 range. 100 basis points on our gross margin improvement. Again we think that that's a conservative estimate but that's what we are going to use for our official numbers throughout the year. Kent I'm going to let you go ahead and discuss any issues you think that should be mentioned this time.

I'd like to mention that we've gone through an interesting cycle this year of production of inventory management and we have seen an emphasis recently in trying to reduce our inventories a little bit and it's affected our production. So we've had a swing in our gross margins. We've also made some major investments in our distribution system through the year in adding countries, we just added Finland this month. We did Sweden. We recently did Ireland. And we expanded our German sales presence.

We are also expanding in our OEM sales force and offerings there. And so we are making investments for the future growth in our distribution system as well as of course the new division for selling stents in our Endotek division. So you will notice the increases we are having in our SG&A costs, and those are affecting our earnings in the near term. They did in this quarter and they will some in the coming year but we believe it's important for developing overall long term of our business.

To that point another expense that is substantial but we think will reap huge dividends in revenues in the future is China. We are setting up our own distribution office in Beijing. We've hired two people. They are currently and let me explain to you why. We currently have a distributor there and China has been our fastest growing international market. Unfortunately, however, our distributor there only sells 25% of our product line, and we believe that in order to control the outcome and have the growth that we think is available in China, that we have to control the distribution and the regulatory status of our licenses.

So we are talking about several hundred thousand dollars that have been spent or being spent to set up our office, to hire these people and to get those registrations put to bed where Merit owns those, where the inventory is then shipped to Beijing and we control who the distributors are. We are not putting a direct sales force there. We will still use distributors for the near term but we are going to control the fact that Merit's products will go there. We'll make the deals with our distributors and this way we can ensure that all of our products get sold rather than just 25% of our product offerings. Kent?

In addition to that we are going to get a higher ASP for our products because it's going to be one step closer to the customer. So we are cutting out one level of middle man, so we'll get a higher ASP.

We are also that very same process in Brazil and we're looking at other areas, so that we can control the outcome and the long term prospects of the Company. Unfortunately these things are very expensive to do. You are required to have people and facilities in place. We are doing all that we can to keep that at the minimum at this particular point but we are talking about hundreds of thousands of dollars. Much of which has been expended this year as we set these new opportunities and these new windows of opportunities take place in these international markets.

One thing I failed to do so I'm going to go ahead and back up for a minute and again I beg for your forgiveness, but I forgot to read our Safe Harbor Provisions so I'm going to read it. And that is 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 on 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 material 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. Again my apologies for not reading that at the opening of the call but I think we have now dispensed with that. Kent, do you have any other things that you'd like to talk about in terms of the financial statements, maybe any debt DSOs and that sort of thing before we move on?

Sure. Our DSOs continue to be strong. They're only at 42 days. I think we are managing well on our receivables and our bad debts are low. We have an improving situation in our sales. The 16% has really been aggressive growth in the catheter division or part of our business and it's strong in stand alone products. A lot of that has to do with new products that come in as well as the acquisitions we've had. But the acquisitions represent about 3% of our growth. So the base business is still growing at about 10% for the year.

We expect that the base business next year will grow at 9% or 10%, our core business as well. The way we try to structure our guidance to say that we will take from 10% to 13% growth and then take and match that growth to the bottom line growth. So again there's not a lot of leverage that is in this particular forecast. We hope that we will do better but we think that we'll guide to that lower end and then hopefully what we'll be able to do is to do better than that, but that's how we're going to see it. I'm going to come back to Kent's comments on acquisitions. Whenever you do this acquisitions, you have a lot of strain on the organization. You have the challenges and of course all the unknowns. I can say that almost on every single opportunity that we worked on this year, and I'm going to go over each one of those, there were challenges and things that popped up.

Let's go to the Alveolus. There were some issues there that involved what Merit thought was the potential discussion of off brand use. We put an end to it very quickly, and it affected I'm sure our outcome in revenues. We did what, I think the law requires and certainly what our policies require. When we took at the EN Snare, I think it speaks for itself. I've already addressed that. It's, I think an extraordinary opportunity, and I think it will be for many, many years to come. We did another deal with Vysera. We are very excited about that opportunity to have an anti-reflux valve inside of a biliary stent. To that end, -- esophageal, excuse me -- esophageal stent. To that extent, we've received or Vysera's received the CE Mark on that particular product and we are starting in the very near future to do some trials to prove the concept. In order to sell that in the United States we will have to file other regulatory documents to do so but we are also very excited about the way that we structured the deal in terms of the opportunities for the thermal plastics and other uses for the materials. So that project is moving along very, very nicely.

Now, the other one that turned out to be an absolute winner for us is a small little transaction that we did out of New Jersey, the Hydromer deal. In the first year, we more than, we sold more than what the price was at about 65% gross margin. We think that small business unit of which is now part of our Endotek will double this year and we have great hopes for some of the products that came out of there for the future. In terms of other opportunities. All of these transactions last year which I think have filled Merit's portfolio with new and exciting technology, were because of the difficult times in the lending markets and both the venture capital and private equity marketplaces. We continue to see opportunities galore and we continue to look at the questions of should we and are we taking on more than we can chew with some more of these things.

Let me say that all of the transactions that we did last year have been fully integrated into our businesses. So the overall business has integrated the Hydromer and transferred the technology., the EN Snare product, the Vysera project is ongoing and moving forward, and even the Alveolus transaction has been I think structured. Even though it lost money and will lose money this year, we think that with the new products that we have, the new stents that we are developing, and the knowledge that we gained from that will allow us to move into some other stent areas that may be vascular in the future that we think will pay greatly for the Company going forward. Each of those have been done and have been integrated.

Now our staff is busy. We still have another $30 million plus of revenue to put into place which means over $60 million if we were to finish the year where we think we'll end in 2010 and that is a lot of work and stress on the staff. That being said, we have competent people. We have people that I'm looking around the room don't look well rested but nevertheless I think they are up to the task and we are engaged in several conversations, in several opportunities that range from full outside acquisitions to technology transfers, to tuck ins. There are a number of things that we think fit very nicely in the business and we'll continue to look at that.

There is nothing imminent and should it come, of course we will come back and discuss those things but we are actively engaged with this window that we think is open, clearly because we are engaged in these opportunities. We think that window will come to a close at sometime in the future but we think there is some great opportunities out there in which for a relatively small amount of money there is some technology that can be transferred that we think would be essential to product growth and market growth in the future. So I think that pretty well wraps it up for what we want to say and now we'll go ahead and turn the time to our operator and let you give instructions to our listeners.

(Operator Instructions) The first question comes from the line of Shawn Bevec with SIG. Please go ahead.

Thanks, a couple of questions. The maintenance shutdown that you guys did over the holiday, are there more of those planned to cut more inventory and if so, was that included in your guidance of 100 basis points improvement in 2010?

What we've done -- Shawn, we do that each year for two reasons that we have, the Christmas shutdown is simply because of the focus of our employees and the fact that we need to do work on the facilities as they expand, so it's kind of an annual thing. What we found out in the last year is in order to manage our workforce we also take essentially the July 4th holiday and use three or four days in that week. There are some things we can't get done in the winter because of the weather out here, that are necessary for us in terms of maintenance and installations.

So we'll shut down for three or four days during July and then we'll also shut down basically a couple days before Christmas and then come back to work on the first business day following the New Years. One of the things that we believe that is necessary is to always control your inventories to make sure that you have the appropriate amount of accruals for products that get old that doesn't move and that sort of thing. So our goal will be to, I can't say that our inventories will go down for the year but I can say that we hope to make sure that we can turn our inventories faster than we did this year.

As I mentioned in that fourth quarter, the inventory levels actually went down and what is starting to happen now is we've come through January. We are starting to see more demand for our product and we actually as of today, we are starting to see a little bit more of a backlog. We are starting to see some of the sales as we come through January now start to kind of pile up and create more demand for the business. At least that's what we're starting to see and we hope that we see more of it in the future.

If that shutdown was expected, would it last a little bit longer than you expected? I'm just trying to figure out why --

No. One of the other things that happened although we didn't discuss this in detail, one of the things that we've been doing over the year is that we moved a lot of our freight that is going overseas and coming back from Ireland but particularly this year, about 65% of our exports are being put on the water. And so in January, the January our first quarter and second quarter we built inventory to get and fill that pipeline as that started filling up, you don't know how fast and how well that's going to work but then it started to drop off at least the demand because we had the pipeline full and candidly even though we had a great quarter, in the sales side as we were looking out into the future, let's say into this quarter, we saw a little bit lighter demand.

That now has filled in for the quarter. So part of it was the inventories that we built to put our product on the water. By the way, we would expect and hope that this year that we'll be able to take the on the water cost and numbers from about 60%, 65% closer to 85% to 90% and put them on the water. But takes 30 days to get them there so you have to fill up that pipeline. So we saw maybe a little bit more build than we would have seen traditionally and then it started to pull back as that pipeline became a little fuller. Kent any further comment on that?

No, it's just the cycle where we built capacities that are less efficient in the fourth quarter because of lower numbers of production or units. We had headcounts and overheads that were less, I guess negative variances were created versus positive ones earlier on that cycle of inventory builds and then slowing down.

Okay. On the inflation devices, should we continue to see the OEM customer decline in, for 2010, would we see that line item sort of trend down versus this year or is it going to be flattish?

It's the most difficult thing for a comment. As you are making that comment, I'm looking at our Vice President in charge of OEM and he's shaking his head and saying no, that the OEM customer has indicated that they are going to have higher demand this year. But the point is, they can say that and we can, we just simply don't know. We planned to the best of our abilities. We have seen it come down. We've got a pop in the fourth quarter. It's so difficult to do and candid, they hold their cards pretty close to their chest.

In fact a year ago they thought it was going to rise in 2009 and it didn't. Now they're saying that again, hopefully it will. I don't know.

It's really a tough one. Now, I think the important thing, though, going to that issue that in our OEM business, we grew our business ex that one OEM customer, close to 25% this year. So that's another thing is our OEM business continues to be very, very strong. We just returned from the MDMA meeting where we took 170 leads, just last week. It continues to be a focus where we think our business can go. Every once in a while you get a customer like that one, that we just discussed and which it ended up being a $10 million, $15 million business. Most of those customers are $300,000, $500,000 or $1 million bucks. It's just so difficult to predict.

I will say this, that we have two inflation devices that are commissioned. One is our new 60 mL inflation device that will be used for esophageal balloons. We've been out in the field with our design. It has been well received. Essentially, after talking to about 20 to 30 physicians, we are tooling and going forward on that project. We think that will be exciting for that Endotek division as well as the long awaited and testing my patience, Blue Diamond should be rolling out at the -- in this quarter. So we hope that with these new products that we'll also get some attention really with what we think are the best inflation products and clearly the market leader in inflation worldwide.

Okay. I believe you said maybe earlier this year that OEM customer was going to eventually go away completely. But is that not now the case?

We think they could in some ways and I have to be careful here because of commitments we have. It may go away down the road, but for instance, there are some discussions that it may not go away, for instance in Europe and we are also in discussions that we'll continue to sell them other parts that we sell as part of that on the other OEM side, so stand alone VacLoks and this and that. So there's always going to be, we hope, going to be a certain percentage of that business. But as we all know and Merit can tell you this better than anybody. Integrating and bringing to market new products is not as easy as it seems and it takes you longer than you think it does. This is clearly the case in this situation.

One of our customers.

Thanks guys.

You bet. Thank you.

The next question is from the line of Jayson Bedford with Raymond James. Please go ahead.

Good evening. Thanks for taking the question guys. Just to follow on the gross margin dynamics in the fourth quarter. Is it solely related to the plant shutdown and the inventory levels? I'm looking at your guidance for next year as well on the gross margin line. Is there a pricing or mix dynamic that occurred in the quarter that could persist in 2010?

If we look at the mix in the quarter and compare that for the year, they are pretty close. If you look at all the sales in the catheters and all that kind of stuff in the general broad catheters. There is nothing that sticks out for me in the mix. Although, what we did start to see is some price increases in resins, as oil prices came off that $60 mark and started moving back up. So we started seeing some of those price pressures. We haven't seen them with labor. We are still in a recessionary environment. Labor prices are staying stable. But you're seeing some of those petroleum base products that were part of that. So I think there is some of that and I'm sure there might be a little bit of mix here and there. Kent do you want to comment?

No, I think it's mostly, we don't want to over emphasize the shutdown. It more has to do with changing inventory levels and production levels. So we were reducing inventory rather than expanding inventory as in the earlier quarters and in the year. We felt some capacity here as far as headcounts of people for both in overheads and direct labor and they were less efficient in the fourth quarter.

That's most of it Jayson, it's really in the production more so than the shutdown. But when you add that together, then it starts to amplify that a bit.

I guess, though, just looking at the contribution from some of your higher margin new products, meaning EN Snare, even, the Alveolus, I would have thought that would have given you 100 basis points of margin improvement in 2010 alone.

Let's talk about. Of course the EN Snare, none in 2009. And again remember many of these products as we started the manufacturing around relatively low volumes and relatively inefficient to start out with. I think the point is when we went out and promised 150 basis points we're able to hit those. We fell short. We're not likely to go out and promise it higher and fall short again.

The EN Snare is going to help next year but it didn't in 2009 in the fourth quarter and in relation to the Alveolus, the sales were pretty weak in the fourth quarter. I'm glad to see them rebounding now in the fourth quarter. Their mix was actually compared to the third quarter, was less advantageous, slightly. But it was so small it doesn't make a lot of difference yet in the big picture, Jayson on those stents.

So in our initial forecast of the EN Snare for the first quarter we thought it would add about 60 basis points for the year. Based on the additional $2 million, we think it could add as much as $80 million. And if we hit that number based on the ramp, that alone will add 80 basis points. So we just want to make sure that we don't promise something and then miss it so we thought we'd take based on the advice of counsel of many people that and our advisors we thought it would be best to make sure that we gave a little broader range, and guided to that down side and gave ourselves a little bit of room. We are setting expectations a little bit lower so that we have a little bit of room to operate here while we are running the business the way we think it needs to be run.

Do you expect the Alveolus business to be dilutive next year?

I have a couple of guys nodding their heads. You are talking about in 2011 or 2010, this year? We will lose money this year in that division, and that's because of the lower sales and anticipated, because of the research and development that we are doing and candidly kind of a restructuring in Europe. We just hired a person in Europe. We haven't had anybody in Europe, so we're going to have some of that additional expense. Let me talk on the positive side. And that is we have the new biliary catheter, both, transhepatic and we have the endoscopic version. We have a couple of other stents and then we have a number of accessories that are in development.

By the way that division in our salespeople are selling inflation devices. We also have some higher margin products that we are developing. So, yes, the answer is, we will see it be dilutive this year, but hopefully in 2011 that would turn with these new product introductions and a better sales presence and again, we also mentioned that we pulled back in some of the areas where there was some activities going on and some sales that we didn't think were appropriate. So we turned away from those.

Okay. And then can you just, I am trying to reconcile the meat of the P&L. Your R&D assumption in terms of percentage of sales for 2010?

In 2010 we believe that it's going to be about 4.5%.

And then just in terms of new products, when are you going to launch the Laureate and then will you be able to launch the new biliary stent right away and then I'll jump in queue and let other --

On the biliary stent we are actually out in the field right now just doing some final checks with customers. Remember, we felt that it required 510-K so we are doing our final gut checks with customers. So that should launch in the next couple of weeks. The Laureate will launch in the next month. We made one final tweak. That product is being built and we'll go out and just do one last gut check and we are building [first lots] to stock. We'll be starting in production in the next couple of weeks there. We are also going to introduce as I think I mentioned the One Step VOS. That is an exciting product.

Another product that we are going to introduce in the second quarter that we didn't discuss in this call but we are excited about is a new combination product that we call the TRAM. It's the first time you're hearing that word. Because we just came up with it today and it's a transducer manifold combination where we integrated and built into the manifold a transducer. One of the other things -- while I'm on this subject, again, it's a little bit of a diversion, but there's another great event that's taking place here this year Jayson, and for everybody that is listening. We recently delivered our first pressure sensors from our wafer fab from our sensor division to our facility and over this next year we're going to be integrating all of our own sensors into our blood pressure sensors.

That's a significant event. It's taken us a very long time to get there and so that also opens up great opportunities in our sensor division. We are excited about what is going on in our MC Tech division, these are our technology companies. There's a lot of optimism and a lot of excitement about all the things that we are doing this year. We want to make sure that we stay conservative enough and don't stretch out. I think we'd rather do that on the performance side than on the promise side.

Thank you.

Thanks Jayson. Jayson, we'll look forward to seeing you down at your healthcare conference here in a couple of weeks.

The next question is from the line of James Sidoti with Sidoti & Company. Please go ahead.

Good afternoon Fred. Can you hear me?

I can Jim. How are you?

Good, good, I just want to back up --

Jim, we are looking forward to coming to your healthcare conference.

We are looking forward to having you, Fred.

Thank you, sir.

The Endotek division, now is that primarily Alveolus products?

Yes, it is. It includes our esophageal stent. It includes our tracheal, branchial stent and our biliary stent, which we're just launching.

Where are you going to report those sales? Are you going to continue to report them?

It's a new reporting segment it's in that area. There's an Endotek reporting segment.

As of the first quarter of 2010 you'll have a fifth segment?

That's correct. Now remember we didn't have, so you'll be aware, we didn't have that segment last year. It's reported in the sales.

They were $2.1 million in this quarter.

In the fourth quarter. Which was a little slow.

What division were they put in in this quarter?

In the MSEC. They should be right here. I'm looking for it. It's in here, isn't it guys?

No.

It's not in here. Why wouldn't they report it? Did we miss it? We may have missed it, Jim our apologies. It was $2.1 million for the fourth quarter. $7.7 million for the year.

Okay. Then the EN Snare device that will be reported in the catheters?

No. It will be reported as the Endotek stand-alone.

Okay.

No. It stands by itself. You will have catheters. You will have stand alone, custom, inflation device and Endotek.

No. EN Snare.

Oh EN Snare. That is, where did you report that Kent? Stand-alone.

Stand-alone. The other one we included, it's under catheters.

Yes, it's stand alone.

Okay.

So you will see a big jump there.

Okay.

13%. You will see a jump quite substantially.

If I look at your guidance with the top and bottom line, about 100 basis points of gross margin expansion, you probably won't get all of that through to the bottom line -- to the operating margin. I would imagine operating margin expansion, it would be less than that. Is that correct?

Which part is it affecting the operating margin?

If you say you are guiding to around $287 million in sales with 100 basis points of finish in the gross margin. You're probably going to have less than that 100 basis points by the time you get to the operating margin.

Yes, in other words we're going to spend some of it increased in R&D compared to this year and some in SG&A as well. Yes, that's true.

Okay, that was my question. The SG&A spend is that to build up the Endotek sales force?

There will be some there. We talk about the person in Europe and then there's going to be some, we made some investments already by the way. So they'll have a full year impact coming into next year. We added seven or eight salespeople in Europe but it wasn't all year. When I looked at the fourth quarter there was quite a difference because of that. So, yes. The answer to your question the SG&A percentage is going to be a little higher than last year.

That's primarily Endotek?

Not primarily. It's all three of our sales forces.

Okay. The last question on CapEx. Where do you expect CapEx to come in in 2010?

We'd normally in maintenance do somewhere between $8 million to $12 million in maintenance. We are looking at some new facility operations. I guess it's a good point to say this, Jim, that we are going to open a new business in Europe. We are going to start a pack business. It won't be until 2011 but we will be spending money to build a new facility in Europe. We have all the approvals. We hope to make, this is the first announcement of that, but we believe that there's a great opportunity much like we did here in the United States to be able to have, it's been a hindrance to us not to have that capability in Europe. So we are going to spend some money during the year probably EUR 4 million to EUR 5 million which would be somewhere around $6 million, $6.5 million of CapEx for new facility in Galway, Ireland.

One of the advantages if I could say is that we get a grant of about $1 million of capital there and another really I think exciting thing about that is that since we don't have to add additional overhead by that I mean we don't have to hire HR, finance, MIS, management, it's all right there in place. And so we shouldn't see the kind of effect that we saw when we started up our business in Richmond where it was all from scratch and we had to hire all those new people. We will have the advantages of having all of those places.

Now you'll have labor and you'll have a production supervisor but that's a relatively small expense and we think there's an opportunity to build a business over in Europe that helps to pull along all of our other products but that won't be until 2011. But we will spend some CapEx on that. We're also looking at an expansion as we have talked in the past, we are in the process of moving at least a new facility that is fitted out in Salt Lake City. We are removing some of our catheter production or what we call our vascular access products from Angleton, Texas to a facility that we are leasing here about two miles from this particular facility. We believe that all of that will be completed by the end of the second quarter.

You'll recall and may have read that we received a $4.5 million incentive from the state of Utah to do that. Although that will be paid out over time. So we are looking at the possibility of building a new facility here on our Salt Lake City campus to move other products and to have room for other future acquisitions and growth here as well. So all in all to answer your question I think that we will probably this year spend somewhere between $20 million and $25 million in CapEx.

Okay. So you should still generate somewhere $8 million to $10 million in free cash?

That's correct.

It should be north of $30 million in our operating cash flow.

So what's the, is the cash going to go to the bank for acquisition or any thought on buying back stock?

We'll see what you guys decide tomorrow. I don't think, we still have our stock repurchase plan in place and so we would do that. I think the wiser way to spend money as we look at this year is to take a look at some of these other tuck ins and look for some other opportunities like Endotek, excuse me - like Endotek, but maybe like the EN Snare. The EN Snare is a great product and a great technology that's going to generate this year somewhere around $6.5 million worth of gross profit and then taxed, there's some very good opportunities out there. We want to be wise. We don't want to over do it but at the same time, we are here to build the business and take it to the future and this is one of those years where we made, in 2009 where we made some investments in the future. As Kent pointed out, but I don't regret as I look at it.

I always wish things would do better than they do but how can you do any better than the EN Snare? How can you do any better than the Hydromer? How could you do any better than some of the things we are working on? These things are going to pay us huge dividends. The Company is in a transition, Jim. It's really going, even though we have some of these situations like kits and trays and those things. If you take a look at our larger strategy, it's really to provide a lot of services and a lot of opportunities for our customers as our competitors continue to get weaker. You can read the newspapers too. Our competitors are cutting sales staff, they are pulling back on their business. Merit grew at 13.3% last year. We'll grow again in double digits this year. I think our strategy is effective. Now what we have to do, and our challenge is to make sure we can leverage that top line to the bottom line, and I think that as we digest some of this stuff going forward, that we will do a better job of that and that's hopefully that's where we will get the upside opportunity for our shareholders.

Okay, thank you Fred.

You bet Jim. Thank you.

The next question is from the line of Ross Taylor with CL King & Associates. Please go ahead.

Hi. I think most of my questions have been answered but just a few left. With regards to the EN Snare acquisition, are there going to be any expenses related to intangible amortization in 2010 that are going to be holding back the results?

All of that was built, is built into for instance the margins that I mentioned in January. Yes, there are, now, I can't discuss it further, but yes, that amortization of intangibles, yes.

There's considerable intangibles that start when we're getting into the production and we're bringing those online, and most of those that are involved with the production are included in the margin. There are SG&A amortizations too that are included in that. But it's still a highly profitable operating margin for the product.

Okay. The other questions I have. Just in terms of pricing of your products with end markets or with your customers, is price competition or competitive behavior in your market changed at -- changed at all over the last couple months, or over the last quarter?

I don't think so. We always have the issue of national accounts but we've been dealing with those for a long time but I haven't seen anything over the last quarter. One of the things I've been very pleased about is that as we brought this EN Snare product line on board we didn't have to discount. We didn't have to do anything. We were able to maintain and in some areas in Europe we are getting as much as $1,000 for some of our mini Snares. We are getting regularly $400, $500, $600 for some of those products over there. We are not seeing that price pressure. Again when you are best in class and that product clearly is, it's a desirable product and we are able to maintain our prices and it's of course patented. It's a great product.

Okay. With regards to Alveolus, I think you addressed this already but can you just sum up again? It seems growth has not been what you expected or maybe what some of us expected. What's been holding that back since you acquired it?

I appreciate the question. Let's go back and talk a little bit about it. I addressed some of these things on the call, but, I'll go over them. We bought the product and then of course in all situations you are going to have the integration, the transfer of accounts. We found that there was product out there that had been out in the field and we had to take a lot of returns back in because there was stuff out there and then commitments made and some of the things you miss and you do diligence, but there was some product that we had to take back, some product that was old and we wanted to maintain these relationships. So we have taken a lot of returns of old product that was out there and we had to do that.

Secondly we had a situation where there were products and the product was being sold for off brand uses and we put an end to that because it's against the law and Merit's not going to be a part of it. So we pulled back on that. And last the biliary which we'd expected to be able to launch and some physicians told us that it would be acceptable. As we looked at it and talked to more people there were things clearly that did not make it equal to or better than our competitors and Merit doesn't want to be in a position where we are selling. So we essentially retooled it and just now in the last week or two weeks got the FDA approval on it. And so that's a factor in terms of getting that to the market. So we didn't get any inventory -- or any sales met. There was also some high inventories in accounts and they had to work. Some of that inventory was unloaded so that they can have the the benefit of the cash. Remember we just bought the assets. We didn't get the receivables in some of those things. So that was another factor.

I think we've just worked through this. But if I could just talk about, Ross some of the things that other people have told us and that is when we take a look at these products and I talked to GI Docs, they say to me, Fred, we're glad you are in this market because no one pays any attention to us and a Company like Merit that can bring some of these new ideas and new products and full service in terms of both the disposable and stents. We've been looking for a Company like Merit for a long time that's why we are developing a number of disposable products with high margins that go to this market. So if you were to look at this division three years down the road, we are going to have esophageal balloons. We are going to have inflation devices. We are going to have probes, we're going to have other stent products.

We are going to have a division that's going to be profitable and then we are going to take that technology that can be used and legally develop other products where we take the core technologies and develop it into vascular type of opportunities down the road. So I haven't lost my enthusiasm nor have I lost the vision of what this business can be but like if you recall a couple of years ago. Do you remember when we were sitting and having a discussion like this and we were talking about Richmond and we were talking about why in the world will you do this and this and that, and so on so forth. We stuck with it. We built it.

What is interesting about it? It's $25 million, it's producing a quarter of a million dollars a month in profits or more and it's getting margins equal to our custom kit business. It's strategically important. You are going to go through these things. But the other thing that I think it's important and I want everyone to hear. We haven't gone out and bet the Company. We haven't gone out and made silly mistakes by over reaching and putting ourselves into debt. We have done and made acquisitions that are strategic that can be tucked in and that are manageable. If you take at look at everything we've done, we've made everything work. This will work for us too. Not because I say it will work, because the market and our customers want our products. I talk to them all the time. We have competent leadership. We have research and development. So, I'm excited about the future of it. Yes, we had a few bumps and there were a few things that we didn't see. I wish they were all EN Snares. I wish they were all Hydromers. I wish they were all this and that. But it had a few warts on it. So we are going to scrape those puppies off and we are going to put our heads down and we are going to drive on like a young airborne trooper would do. That's the plan.

Okay. That's helpful commentary. Thank you.

The next question is from the line of Eric Criscuolo with Thomas Weisel Partners. Please go ahead.

Hi guys, thanks for taking my questions. Just filling in for Peter tonight. So I apologize if I missed this but I was jumping back and forth between conference calls. I guess on the catheter side, what was the main driver for sales growth there?

Good question. On catheters we put a lot of our vascular access products, I think that goes in there, our sheets and all of that stuff. Prelude, so our prelude, our resolved catheters those are growing in excess of 50%, our vascular access, Vak and Smak. All of those vascular access products and all of our catheters are growing at extraordinary rates. Let me give you an example of a couple of them. If we take a look for instance at even something like our centesis catheter grew at 17%. The IMPRESS catheter which we launched, grew last year at 60% last year and with now the new Hydrophilic catheter we're going to see great growth again this year. We take a look at the prelude. This is our sheath line that we introduced over five years ago. Grew at 43% last year.

It was even higher when you consider the short sheath that goes separately.

Our resolved locking catheters, our drainage catheters grew at 51%. So clearly you can see that although we are still selling $8, $9 angiography catheters. The catheters in the things we have built through our Angleton -- Mak, Smack, pericardiocentesis, drainage and prelude, all of these things have grown dramatically against entrenched competition. We simply have better products. They haven't improved them. They are the names you all know, they are the household names and we are candidly kicking little butt and taking names.

That growth in the fourth quarter was about $2.1 million or a 25% rate. So it's actually accelerating in both real terms and percentage.

Thanks a lot for that color. And then getting back to the gross margin I wonder if you exclude the inventory reduction and the shutdowns would margin have been roughly equal sequentially or up or down?

We were talking about the other day, I'm going to throw out here that we'd discussed. But had we produced at the same level we would have produced another $.05 in profit. It would have been the wrong thing to do though. We could have produced at the same level and kept that pipeline and we would have been blotted and we would have looked just wonderful and you guys would all love me, and I would have been doing exactly the wrong thing. $.05 a share. It could have come in at $0.23, I'd have been a hero, you guys would be loving me right now, my stock is going to go up tomorrow. But instead we managed our inventory. We pulled back and didn't build things that we shouldn't, and have to cause things down the road, and try to ease through this thing and it cost us a nickel a share but it was the right thing to do. So from our point of view, I hope -- you may disagree but I would love to have that debate privately with you.

That's very helpful, thank you for that. Just one last question. As far as broad general kind of trends in the industry are there new procedures, new medical procedures or new imaging technology or procedures that are coming out which will consistently increase demand for your products? Are there these kind of shifts occuring for minimally evasive and non evasive procedures expanding from where they are now?

I think there are some areas where we're seeing that. But I think overall some of the trends are topping out and flattening out if we take a look at the inflation devices and stents you can read there J&J stuff, the metrons they are all having some difficult times. I think what Merit has been doing is going to market's that are pretty substantially and going out and making improvements whether it would be Aramaic, NV. Whether it would be our Mak NV, whether it be our prelude, our drainage., These are going against entrenched companies that have been around with a household names. Yet those businesses for us are growing in 50%, 60% and they are not small numbers. It's not like going from $50,000 to $80,000. It's going from $3.5 million to $5 million. It's going from $5 million to $7.5 million.

So I mean there's significant gains and I think a product like the EN Snare enhances that, it enhances Merit reputation at the same point of sale with the best of class. One of the things I saw recently on our sales log, is I saw a couple of these new EN Snare products and right next to them I saw three or four of our other products that we had never sold that accounts before. I think there is a lot of carry out, a lot of momentum that we can have going forward with these products. We simply build the best products in our marketplace.

We come behind these now EUR 15 products or more that are market leaders and we are improving on them. We are using the superior materials, value added functions many of them patented but some not, that we just improve on them, visibility, ease of entry and we focus on them from a sales effort and we are able to take market share from them and as we do, there will be two benefits, obvious sales growth, but also improved efficiencies as the product line volumes improve and that'll help move that up the margins scale as the volumes grow in those. Those are exciting opportunities particularly in the catheter area that we have invested in the last few years. Stand alone to, we have several and EN Snare is one of those.

That's straight guys, thanks for the insight.

You bet. Thank you.

Next question is from the line of Shawn Fitz with Stephens. Please go ahead.

Hey Shawn.

Hey guys, this is Drew for Shawn. How are you?

Good Drew on for Shawn.

Just trying to get our arms around a composition of the inventory. I guess given your commentary on Alveolus inventories, disposable that prior to the deal, the structure of the EN Snare deal, is it safe to assume that the increase in inventory over the past 24 months is that solely base business, core business?

No. It's acquisition and new stuff too.

All the Alveolus -- the Alveolus stuff was the inventory. With the EN Snare we built inventory. We didn't acquire any. We built it all

That was in the fourth quarter. It would have been over a million dollars.

But that was -- I don't think it's all core. There's been some of it that has been this inventory that has come from these acquisitions.

Thanks.

You bet. Thank you sir.

The next question is from the line of James Terwilliger with Duncan Williams. Please go ahead.

Hello James how are you?

Good, how are you doing, Fred.

Just fine, thank you sir.

Fred, I've got a question for you and then a question for Kent. I'm going to start with you first. Fred, could you just take a step back and give me a tone as it relates to your customers. What did you see in the fourth quarter as it relates to a procedure volume. I know there are a number of medical device companies that have a bump here in the fourth quarter, and I know there was four less days in the fourth quarter. If you take a step back what type of visibility did you see in terms of -- with your customers here in the fourth quarter?

It's interesting that you ask. If we take a look at the numbers, we had the fastest growth. We grew 16% in the fourth quarter. So this is what we've been asking. If you saw that 16% growth, why didn't that translate into higher earnings then instead of a decline in earnings in the quarter and the answer is we had some unaccrued expenses. We had a number of issues that took place including the things that we talked about with lower production. Primarily it was lower production but from a customer point of view, I don't think we saw at least in our business in taking a look at across all the categories we didn't see a whole lot of decline or slow down in any of them. In fact quite to the contrary.

Okay, that's great. That 16% growth is a nice growth number.

I think it's again a terrific growth number.

The fastest in your last eight quarters. So I think that's great. Kent I have a quick question for you along the lines of the revenue growth number. Again, excuse me, I was jumping from another call that I had to be on. For 2010 should we be looking at an 8% to 14% top-line growth for 2010?

No, I can narrow that range a little bit, it's more like from 11% to 13%.

Okay.

And 12.5% to 13%. That's what that broader range shows.

And then any acquisitions in 2010 due to the nature of what is happening out there in the field would be on top of that?

That is not anticipating any additional acquisition.

That is just core and existing business and we are in discussions with several opportunities as we speak. There are a lot of opportunities out there we have not seen the markets turn around yet on some of these opportunities.

So the three nice deals that you did in 2009, that 11% to 13% represents the full inclusion of them? You're managing them --

There was about 10% was our core business, 3% and going forward as we look at revenues next year about the same percentages, roughly the same, about 3% coming from online acquisitions coming next year and then 10% from our core if we hit the topside of our range.

EN Snare is most of that.

EN Snare is most of that growth.

Thanks. Last question. I know you guys talked at length on gross margins and again I compliment you for pushing down inventory levels which we talked about last quarter and I think Fred you came out and said you were too high so you pushed them down, so I compliment you for that. But Kent, previously we had talked about, I want to attack gross margin from a different angle. Are you seeing any changes in the prices of the core materials that you acquired to do the manufacturing? I know before we talked about a downward movement in resin pricing and how that was beneficial to you.

Now that's reversed a little bit.

We have seen as oil prices have moved -- pushed up to the $75 range we are starting to see a small amount. We are not seeing like we saw a couple of years ago, but we are seeing a little bit of price pressure coming on the resin side.

Other than that, the core materials are stable as it relates to price?

We are not seeing a whole lot of stuff. I mean, in core, you are seeing a little bit but we're also getting, one of the things I should mention that one of the goals that we had as a Company last year was to implement over $5 million of implemented cost savings. When we talk about implemented means the project started. We may not have realized the full value but what the annual level would be, and we were able to come in at somewhere around at $6.5 million to $7 million worth of implemented -- one of them being, by the way another -- we are going to fully automated needle assembly machine here in the first quarter. We spent over $1 million in CapEx last year getting the equipment purchased and getting qualified and Neil Peterson's sitting with me here, our Vice President of Engineering and that will be up and running and it's going to knock off I don't know some $0.15 or $0.20 per needle or some number like that.

But those kinds of opportunities are coming on board this year and we would expect as a goal this year, that the Company would establish another requirement to have at least another $5 million of savings. So there's still lots of various out there, in opportunities but you do get some price pressures and our goal of course is to offset any increases that we have with cost savings. Another one that comes to mind on cost savings is in our health insurance this year. We essentially had no increase in the cost of healthcare. You don't hear that or read that in the newspaper anywhere, do you? We were able to do that this year by implementing an HSA combined with an HRA and putting the responsibility and high deductible plan. It was a hybrid of what we have done over the last year but rather than seeing 10, 13, 15 38, we were able to keep that at essentially zero. So that's something that we expect that we'll get some leverage on as we go through the year. Those are things again we don't talk about but the cost increase had we not done that, were somewhere $1 million and $2 million of cost increases that Merit's not going to see this year in healthcare costs. I bet you don't get too many calls where people talk about no increase in healthcare cost. There's not very many of them around, I'll bet.

I congratulate you on that. I don't want to get into Obama care, hopefully not. But thanks -- I think the revenue number is very good. The inventory is moving in the right direction and thank you for taking my call.

Appreciate your interest. Thank you, sir.

(Operator Instructions) Our next question is from the line of Craig Yeshion with Accipiter. Please go ahead.

How are you?

Good. How are you? A quick question for you. With respect to the inventory write-down that you saw in the quarter, have you been able to estimate how much inventory you want today bring down in total and how much may or may not remain coming into this quarter? I apologize if someone asked that already.

These things are kind of the things that you look at. We didn't have a goal of saying we are going to drop off $2 million. What we looked at is that you want your production to respond to demand. You have a certain amount of inventory. You have the pipeline filled that we talked about at least to the extent of sending our products on the water. In addition to that, while we are doing all that we are building inventories, the EN Snare product which was a big launch for us of not just the raw materials that went into those units which we built, the 6,000 or so units that we built, but also the raw materials that go behind it.

So we were able to take this major product line that's going to account for somewhere around 25% of our growth this year and we were able to reduce inventories while we launch that product successfully with no backorders. So I don't know that we said there was a target number but I think our accounting staff and to their credit, to Craig -- Greg and Kent, who are saying, guys, these inventories look a little heavy for us. We need to start to look at it. Then our Chief Operating Officer and with his guys Ron Frost and the guys were able to take these numbers and as we came into the New Year, we are sitting there with our demand pretty well balanced.

So we haven't seen a whole lot of shift. Now recently I would just say in the last week I am starting to see a little bit build in the backorder number which means that demand and at least this week, is start to push up a little against inventories. The key for us will be to try to narrow those down. We did see just on production as Kent pointed out we have a little bit more capacity than we needed and we just tried to lean this out like you would to make sure you get the best fuel burn. That's what we were kind of doing.

I think our inventory turns will improve this year over last year, I hope and by not necessarily shrinking but at least not growing at the rates we have been seeing.

So is it safe to assume that based on those comments that if demand was roughly in line with what you were expecting at the beginning of the quarter and then if you started to see some demand picking up in the last week or so, is it safe to assume then that we probably will not see further employer reductions this quarter.

We are going to see that we got rid, we sold all of these EN Snares that we sold well over 2,000 of them and we are starting to see an increase in the demand, in the backorder. I'm just seeing a little bit of that. Just a tick up this week of the last ten days. That would tell me if I were to look at inventories that we would actually see it flat to down because we have the demand that's at least pushing a little bit on the supply at this point. We'll have to see, for instance in January, let's talk about January. We talked about the fact that our gross margins in January were 42.6%. Craig, I don't have this inventory. What happened to inventories in January? How much? Was it significant?

A lot of it has to do with the work in process that we need to get out and we have to refill again.

So in January we did not have a significant increase at all in inventories.

We would expect to see inventory grow some, because your sales growth is going to be there. We are trying to improve our turns.

I think we'll stick by the statement that we're going to improve our turns this year and we're going to do a better jog of controlling that, for a couple of reasons. We have opportunities we want to have the cash in the bank. We don't want to have the obsolescence and we don't want to have numbers that are bloated. We're going to watch this closer because we have a lot of demand for capital going down the road and a lot of opportunities and we want to make sure we have it.

Thanks guys.

I'm showing that there are no further questions at this time.

Okay. We'll wrap it up. These were good questions. They were tough questions. I think we had a good year. I think we made some strategic decisions that will have positive results on us. We had a few bumps but if we really look at it, we were able to do four acquisitions, four technology opportunities. We were able to take all of those and to digest those and implement those and execute those into the business. We've launched products essential on all of them. We started new research and development projects. We are enhancing our capabilities for the growth of the Company going forward and we did that with little if any debt. We had a little debt in the fourth quarter as we paid that final payment to complete the EN Snare transaction. All of that being said, we had a good January. Our gross margins were improving. We spent a lot of money in various areas of the world as I mentioned in China to get ready for future growth there. We are spending money in Europe with more marketing personnel and more salespeople. We expect great things out of Germany. I have my German manager sitting here and I'm giving him the eyeball as we speak. We expect our OEM division to continue to grow.

We expect that we will have better performance as we move forward in our Endotek division and we expect to see continued growth in the Company in the double digit area. I'm not satisfied with the operating leverage that we are getting and we'll work on that and we'll work on improving all aspects of the business. That's what we are here to do. I think all of you know us and know us well. I think what we've been trying to do today is to reset the expectations to make sure that we don't get ahead of ourselves and that you don't get ahead of us. We think these are fair. The Company is profitable. The Company essentially only has $5 million of debt and we will extinguish that debt and continue to build this Company forward with great opportunities in technology.

Please do not underestimate the product introductions and the impact they will have. In 2011, we'll start to roll out. The ASAP, the IMPRESS Hydrophilic catheter, the One Step VOS, the Laureate Guide Wire and other products that we'll be bringing, the TRAM, the Finale, these are names that you're going to be hearing more of as we move through the year. These are great products and great opportunities. That being said, ladies and gentlemen, thank you for your interest. We appreciate it. We look forward to reporting any developing news to you as well as our quarterly results and we'll go ahead and sign off wishing you a good evening from Salt Lake City. Good night.

Ladies and gentlemen, this concludes the Merit Medical's fourth quarter and year end 2009 earnings conference call. Thank you for using ACT conferencing. You may now disconnect.