Merit Medical Systems Inc (MMSI) 2015 Q1 法說會逐字稿

Good day ladies and gentlemen. Welcome to MMSI's first-quarter 2015 conference call. At this time, I would like to hand things over to Mr. Fred Lampropoulos, Chairman and Chief Executive Officer. Please go ahead, sir.

Thank you very much. Good afternoon, ladies and gentlemen. This is Fred Lampropoulos and we are broadcasting from our corporate headquarters in South Jordan, Utah, and we thank you and appreciate your attendance. I will ask Anne-Marie Wright if she will please read our disclaimer. Anne-Marie?

Thank you Fred. During 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 and uncertainties that could cause our actual results to differ materially from those anticipated in such statements. Many of these risks are discussed in our annual report on Form 10-K and other reports and filings with the Securities and Exchange Commission available on our website. Any forward-looking statements made in this call are made only as of today's date and we do not assume any obligation to update any such statements.

Although Merit's financial statements are prepared in accordance with accounting principles which are generally accepted in the United States, or GAAP, Merit's management believes that certain non-GAAP financial measures provide investors with useful information regarding the underlying business trends and performance of Merit's ongoing operations and can be useful for period-over-period comparisons of such operations. The table included in our release and discussed on this call sets forth supplemental financial data and corresponding reconciliations to GAAP financial statements. Investors should consider these non-GAAP measures in addition to, not as a substitute for, financial reporting measures prepared in accordance with GAAP. These non-GAAP financial measures exclude some items that affect net income. Finally, these calculations may not be comparable with similarly titled measures of other companies.

Thank you very much, Anne Marie. And once again, good afternoon ladies and gentlemen. We are again grateful for your attendance. And let's kind of start going through our report and talk about our business.

As you can see from the report, our sales were up 9% for the quarter. If we were to adjust that for the FX affect, we would be talking about 11 over last year's numbers. You'll recall that we had talked about revenues being in the 6% to 8% range in terms of growth. So we are very pleased, especially when we look at the first quarter and we have things like sales meetings, we have President's Club. You'll always get kind of a slow ramp up because of the just the first of the year, a number of issues that come into place. And so, we saw specifically that business start out a little slow but as we started moving through the quarter, it ramped up very, very nicely. And so we are excited and we are pleased and we hope you are with those numbers.

As we move through the year, we have a number of new products. And one I'd like to talk about that kind of goes on the revenue side here from moment is to talk about the Prelude Snap. This is a very big deal for Merit. We, as you know, purchased Thomas Medical now almost three years ago. And although we were very excited about the product in terms of the classic Sheath, this is Merit's Meritization product called the Prelude Snap. We've done a number of trials. When I say, trials this was the product being used by physicians in Europe. And without I think exception, everybody that used this in over 40 or so trials, the physician stated that this was a better product than anything they had ever used. So this product now is CE Mark. It is now FDA approved. We will be rolling it out over the next 30 days or so. And we think that this is going to help us to recapture business we may have lost. Just as a reminder, the classic Sheath was 20-year-old technology.

But the other thing that I'm even more excited about is the fact that we are able to take an acquisition, be able to take and put the folks that come into the Merit family, get them involved in an R&D project and have this success. And you are going to see some very, very exciting numbers from this product as we move forward. And they are also now starting on a couple of other products to go along with our Worley line.

So what I'm trying to say is that we have a number of new products and our revenue line I think is fine and we expect that the business as we move through the year will accelerate. So we are very excited about that.

Kent, I know -- Kent can hardly contain himself here, and that's because everything that a CFO wants to see he is seeing. And Kent, I'm just going to let you out of the gate here and let you talk about all of the things that I know you are very excited about sharing today.

Thank you Fred. Yes, one of the things that you see here, our income is up considerably. GAAP-wise, it's up 82% over a year ago and then non-GAAP, which is where most of our analysts look at it, it's up 47%. So we've exceeded I think expectations both internally and from the Street.

What that helps produce is, first, an EBITDA increase of up to $81.4 million now in the trailing 12 months. And it's been very gratifying to watch our leverage ratio decline dramatically. A year ago, it was 3.46. Just two quarters ago, it was 3.24. So we've dropped it now down to 2.62.

We've also been able to reduce inventory about $3.5 million in the quarter and when you combine that in the total, cash flow from operations was a record $19.3 million and gave us free cash flow of nearly $10 million.

We were able to pay the debt down by almost $12 million, $11.6 million, and help reduce that balance now down. At quarter end, it was a little under $213 million. So, we've reduced it about $26 million in the last two quarters and changed our ratio, as I said. So, the cash flow is very -- the EBITDA ratios are great.

The earnings are really improved. One of the real areas we've been getting leverage in this statement as you noticed is 240 bps out of our SG&A expenses. They've stayed flat, really pretty close to flat over the last year and from the last quarter even went up a little bit even with loading up front-end expenses at the first of the year for healthcare and other things. So, we are excited about the leverage we are seeing in that by the discipline we've put into our expenditures and the ability we have.

We've also reduced our interest expense significantly. So when you reduce the balance and you reduce our interest rates -- and our interest rates will go down again, about May 25 will go down another 25 bps. So we are -- we dropped our interest costs from $2.6 million a year ago quarter to $1.2 million this year. Again, that's really helped in both cash flow and earnings.

Thank you Kent. You know, a couple of other things that I don't know how important this is, but as you know and as many of our analysts have said, that the real key in watching the Company is to take a look at the discipline.

So we were just going through number of metrics last evening and an interesting one popped up that I think will be of some interest to you. And that is, a year ago in this quarter, in the SG&A area worldwide, we had 628 employees. Just as a point of interest, a year later, and substantial growth, we have 629. Again, just one data point, but I think it speaks to the issues of the things that we are doing to hold things in line and to operate our business. And consequently, we are going to get some leverage there.

Let me move on to an issue that you may raise in your questions and let me talk about that, and that is the gross margin side. So, you will see that our gross margins are lower than of course they were for the fourth quarter, and you will also recall that we discussed this. We discussed that we have higher operating expenses coming into the first quarter. We have (technical difficulty) issues. When I say that, I'm talking about insurance and all of those things that start up at higher rates. And then we have the lag of production.

Kent, why don't you just kind of go through the variance model? Because I think that's something that's also of interest and I think will help support what we should see as we go forward on gross margin and our expectations there from this point.

We had an unusual startup for us because of the way the calendar hit, we didn't begin production until January 5, which is a late start. It was part of the reason we also produced less inventory, reducing our inventory, which helped make it less inventory-applications or overhead applications to inventory.

But, what was also interesting was the timing of it. So most of it -- our biggest variance was $1.6 million in January. And it takes about four months with our inventory turns to roll those costs out into cost of sales or in other words, the departure of the inventory to the shipping of the product.

So what's happened is we had a lot of loaded up variances early in the quarter that are mostly flushed through now, at least January, so the big one is all set, three-fourths of the way done and half of February. So as I look forward, I'm encouraged that our variance models will improve and our gross margins will improve. But for this quarter we are explaining now, it was weighted heavily. So we were under applied in our overheads. It's a short-term thing. It's happened every year but it was heavier this year than we've seen in the past.

Yes. And again, I think you'll recall that we had this conversation when we went through our year-end and our three-year plan. So, I think Kent did allude to it and that is the results that we're talking to you today are in fact ahead of our own internal expectations and yet we are not prepared of course after one quarter to change anything and to move anything in any direction at this point. But again, I think we are very encouraged by the performance and how the business is doing.

In terms of the areas, US sales force I thought is of interest and particularly when we start talking about and consider the international markets, the US sales force for the first quarter was up 9.2%. And I'm very pleased with the efforts there.

You will also notice that in our report that we've had of course a change in management. When I say a change, a retirement. Marty Stephens has retired. And Monroe May, who has been with the Company for 14 years, has assumed those responsibilities as well as Kevin Sterba. So these are seasoned veterans. They were responsible for this growth. They've been responsible for the growth in the past.

And of course our international markets and particularly in China, we really have had and continue to see substantial growth in China. We are operating now somewhere around about 27% or so overall growth in China, so that continues to be a strong point, particularly in our embolics. We are really starting to see our QuadraSphere loadable spheres really start to move along there. In fact, we were just talking the other day. It seems like each month, we are hitting new records of sales in those areas. So, Joe Wright and his international team I think are doing fine.

Our European team is doing fine although affected by of course the FX issues. It is interesting to note, and so I hope you find it of interest, that our EU direct was only up about 3%. But adjusted for FX, it would be over 20%, or about 20%, and yet our EU dealers, which are paid in US dollars, are around 22%. And again, for the first quarter and taking into consideration these adjustments that we just discussed, we are very, very pleased with that. So I'm satisfied with what we have.

In terms of our product pipeline, as I mentioned, we have the Snap. We have a new line of products in our drainage catheters that will be coming out midyear.

And I think we have another very exciting product, and that's our Corvocet Biopsy system. Now some, of you got to see this biopsy system when you were here and when we had our investor day. We continue to get rave reviews on the product. Physicians are waiting for that product to come to the marketplace.

So our product pipeline is full and a lot of other types of opportunities are presenting themselves. We are having no less than four different discussions with international companies that want their products distributed worldwide, and these things appear that they are going to fit very nicely. So whether it be from those or our internal developments, I think there is no doubt that we have plenty of fuel to keep everything going.

As we look at Mexico, I'd like to bring you up-to-date on Mexico. In fact, early next week, we will be meeting in Tijuana with our production staff. And some of you might recall that we were able to strike a deal where essentially people that have worked for the contract manufacturer are essentially all going to come over to Merit. And we are going to be meeting with them, taking them to the new facility, and we are excited about that opportunity to meet our new associates. We still are looking for a time frame of about July (technical difficulty) to have the facility up and running. In the first quarter, there was a charge of about [$340],000 in the first quarter. And that all hit the SG&A line. We'll have some additional expense in the second quarter of about $400,000 that will hit the SG&A expense line. And then as we roll into production -- and it should transfer over, by the way, very quickly. The reason for that is we have the same engineering staff. We are just a mile or two away from the old facility and we have those same employees. So, we think, as that all plays out, you'll start to see the advantages that we see of having that particular facility.

We've also now almost consolidated all of our West Jordan facility into Salt Lake City and into Pearland, Texas. So these plans that we talked about at our investor meeting and during our overview for this year and the next three years are all playing out as planned. So, everything is in line and everything is moving forward. And these things are going to have a dramatic effect on the Company in a very, very short period of time. And despite the expenses associated with that, we still were able to I think beat expectations by about $0.03 on the earnings line on a non-GAAP basis and I think revenues by about $4 million, give or take. So I think these are important issues for the Company and getting that part done, a lot of work being done transferring but essentially without any hiccups at all at this point. And I very candidly, I probably shouldn't say this, but I don't expect any. These guys are seasoned at doing this. We've got a great staff head up by Neil Peterson and Dave (technical difficulty) here and they are just experts at doing this stuff. So we expect this to be predictable and our expectation is it will be on time and on budget. So all in all, we are very excited about that.

So, in summary, I think a great quarter. And when I say that, again, remember that we had tried to line this up to have you understand what we see in the business in terms of the FX, the startup time, some of these additional expenses. And I think you can see that our discipline is certainly presenting itself and the results are there.

Let's see, Kent, do you have anything else you'd like to add financially or otherwise?

Again, I just really feel that we've got a great momentum. We need it because our earnings expectations are increasing as we go through the year, but I think we are ahead of schedule and that we have the basis or the infrastructure (technical difficulty) invested in for many years that I think we can continue to leverage for some time.

Okay. All right. Well, guys and gals, there it is. It's pretty straight up. And again, we hope that you are pleased, or at least we've tried to explain how the business is doing. And I think you can see from our feelings here that we are doing what we said we would do and a bit more. So, I think what we'll do is let's go ahead and turn the time over to you. So operator, let the games begin. Let's open up.

(Operator Instructions). Thom Gunderson, Piper Jaffray.

Good afternoon Fred, Kent, and everyone. I guess I'd like to pick up where you left off on the prepared remarks, and that is gross margin and Mexico, the move to Mexico. Kent, or maybe Fred, can you give us a sense of timing of impact to the income statement? What I'm looking for is there is always these transition periods and you've got this well planned out, should go through without a hiccup. But I'm just wondering when we flip that and do you take a step back on gross margin or does it just through the quarter transition seamlessly?

Thom, it's a good question. The business won't be at 100% capacity and absorbing all of the expense initially. So, what we are doing is we're transferring the existing business there at about 150 employees and a number of products and the engineering staff that we have that are Merit staff that are already on the ground and have been for a number of years operating out of San Diego. So that part will come online, but we've had to hire a staff, so there's going to be a period of which it will affect the gross margins until the absorption is in place. And that will take place over about an 18-month period so by the time we fill that up and we expect that over that 18 months, which we put in our three-year plan, we will have by that time about 450 or so employees. So, we can probably get a little bit more granular but I think in our three-year plan that we gave that those expenses, although they are on an annual basis are in there. So it won't immediately flip the switch, but I do believe that because the people have been building the product, because the equipment there is our equipment, because it's our engineering staff and because of our transfer and set up team out of Salt Lake will be on there, that part should go very, very, very smoothly. And then what we are doing is we have a number of products that we'll be moving from -- to a number of facilities. So part of this plan, so that it can be understood, is not just Mexico. But part of it is shutting down the West Jordan plant to bring some stuff here, bringing some products to Pearland and bringing some products to Mexico. So it's a consolidation that involves a lot of these plants and, again, at the end of the day, it will lower our costs. But there is, on the Mexico part, it's not going to be capacity immediately. We're not just going to fill it up.

Kent do you want to add to that any color?

Just that you've got the right idea. There is a transition in part of the building which continued to be an SG&A expense and then it will evolve. As we move more products down there, it will convert over into cost of sales. And as you move it, you won't immediately see the difference but then once it settles in and you can reduce the overheads where it last turned and move them or transfer those to Mexico, you start to have reduced costs, particularly in labor. But that's not the whole story. The overhead actually costs less because it's mostly people too -- so as you can build that infrastructure. So it's kind of a gradual phased-in thing over the next at least a year if not 18 months. Well, I think we are three months into our 18-month plan already, but it's going to come along. And so, in 2015, we tried to be conservative on our gross margins and it was a good thing because we are even a little below that. But it's a thing where the momentum is going to pick up internally without Mexico.

Now, with Mexico coming on, it's more a next year thing as far as the benefits of it, and it will be transitioning from the SG&A costs into production costs. But once those production costs are being realized, the benefits also begin, the lower cost per unit. And we've seen when we moved it even to a contract manufacturer, to give you color to that, it's been from 25% to 40% drop in costs even with the layer of profit for the contract manufacturer. And we've got to pick up our own overhead to somewhat offset that. But you are going to see that that gets leveraged particularly in the oncoming years.

And Thom, I'm sorry to belabor the point but to this point where I talked about it involves a number of facilities, you recall that we had talked about when we brought online the Pearland, Texas facility, it was about $300,000 a month of additional expense. You had a new building, new equipment, an amortization and so on and so forth. That particular facility is probably also on schedule with that $300,000 a month hopefully will start to be absorbed by the end of the year. So we hope to buy -- and think about that. That's $3.6 million of expense negative variance that would come out of that. And that facility and the work they are doing down there, we've transferred our stent business there. We're transferring products from Melbourne there. We're transferring products from West Jordan and from Salt Lake City. That plant is filling up and absorbing. It may be slightly ahead of schedule. So there's a whole bunch of pieces to this plan and they are all on schedule and performing as expected or better. Long commentary but --.

No. That's what I wanted was a long commentary, so I appreciate that. The next question is purely financial. You did a good job in Q1 with your record cash flow and then paying down debt of almost $12 million. How would you look at debt reduction through the rest of the year?

We had planned for $20 million $25 million. We are probably ahead of that game a little bit. And we've got to watch our inventory levels for customer service and so forth because -- maybe we can do a little better. I don't want to promise that is at this point though.

Yes, well, I'm going to have to jump in there. If we pay down $12 million and we're talking about $25 million for the year, I think that's probably a little conservative. I think we'll pay it down substantially more than that hopefully. And I think we'll also beat our -- I think we had talked about $20 million to $30 million worth of free cash flow. Well, in the first quarter, I think the number is really about $10 million or $12 million. So now we are talking about instead of $25 million to $30 million, closer to $40 million. So now, again, that's projecting out for the year, but I think we are probably going to do better in all of those categories.

And of course, as Kent pointed out, in terms of interest expense and some of these other things and covenants, I remember last year at this time, everybody was talking about covenants and how we stood. And clearly those are not issues at this point and I think we are doing on the financial side kind of -- we are ahead of where we thought we would be and I think we will be at the end of the year as well.

Got it. Thanks guys. That's it for me.

Jayson Bedford, Raymond James.

Thanks for taking the questions and nice job on the quarter. First question -- I guess just on the gross margin, you cited overhead and I think you explained that pretty well, but you also mentioned in the release discounts internationally. So I guess the question is which of those two factors had the bigger impact in the quarter?

So, let me address the issue of discounts and explain that to you. As you know, there are many locations that are affected by currency that Merit participates in, and that's places like Brazil but particularly Russia and other places. And we just simply, rather than reduce prices, what we did is we kept our pricing at the same level and then we made concessions. I think it amounted to about 30 to 40 basis points of gross margin in the first quarter.

Now, interestingly enough, that kind of crosses over at somewhere around RUB50 to the dollar and it's sitting here at RUB50.85 today. So, I can't predict where the ruble is going to go but once it gets to RUB50, the discounts are off. So that's part of it.

The other part I think goes to the issue that we talked about which is the slow start up. We had an extra day in the quarter in January as an example, and I think Kent explained the variances that we saw in January and February, how most of that has gone down and how we had positive variances in March and we continue to expect that we'll see those positive variances moving forward through the balance of the year. So, that is kind of that phenomenon, and most of it comes from really that startup more so than it does the discounts, Jayson. It's substantially more.

Kent, do you want to talk --

34 bps was the cost of the discount for Russia that we had. So, it's -- we had a much bigger effect, almost 2%, out of the variance issues. And then we had some help from the euro expenses being lower, as we talked about, helping us in that natural hedge thing we've got going. So sales were down but so were costs, as we predicted. So we had that helping us and even beside that, we couldn't overcome the overhead variances that I already explained.

Does that answer your question, Jayson?

It does. It does. It sounds like the price (technical difficulty) the concessions were quite low.

Yes, I mean they were not a big deal. And again, remember, this is something we expected, so this is what we were trying to explain as we were setting up the quarter and making sure that people understood that in our January-February call.

All right. You gave some guidance around gross margin back at the analyst day. Is that still -- are you still comfortable with that range?

Yes. Everything that we had on our range is still intact. That's still what we expect the business to do. And so yes, everything -- nothing is changed in terms of those projections, although, as you can see, we are slightly ahead of it in the first quarter. And usually, as you know from our history, our business accelerates. So we have this great product pipeline.

And so I'm trying to temper my enthusiasm a bit. I've always found that it's kind of better off to do that. But we've got some great stuff coming. We've got this great biopsy, the Corvocet, the Snap, the one step. We have so many nice things with such great margins and then we have this consolidation going on that I think we are managing very nicely. And I would be less than -- I'm optimistic. I'm pleased. I expressed to my staff before we came online they are doing a good job. But, we've got to kind of hold to the wheel here and just keep going.

I'm going to share a couple more things too. You know, in the quarter, there were some expenses for some severance. In the quarter, we accrued for staff bonuses and that's in anticipation that we are going to meet or exceed our numbers. So that was like $450,000 to $500,000. You know, we haven't had the luxury of doing that in the past. We usually, at the end of the year, we catch it up. But these expenses are already in these first numbers and we still exceeded the numbers. So I'm -- Kent?

Well, I just wanted to acknowledge that we have some work to do on the gross margins, and the hardest one to project and predict. But I do think that the worst is behind us as far as the way that started and how heavy January was. So I believe we can catch up I guess is the bottom line to give you your answer, Jayson.

Okay. Couple other questions. Just on FX, as I recall, your earnings actually benefit from a stronger US dollar. Does that get reflected more in the cost of goods or the OpEx line?

It's both. I don't remember if I have them this split up. Because I remember that for -- it's almost $2.2 million in the ops line and $1.7 million is operating and that includes R&D. So it's both.

And then Malvern sales were kind of the only real weak spot it looked like in the revenue line. It sounds like Snap will help that out. But is there any other explanation for what would look to be a little softness in the quarter?

Yes, yes there is. So, you will recall that that business is basically an OEM business, and so it can be affected by an order that is either received or couldn't be delivered or so on and so forth. So again, from our point of view, not a big deal.

Incidentally, I should point out that I think the ramp rate on our direct sales of classic Sheath was about $10 million. And this is not for the quarter but our ramp rate overall for the year on a direct basis.

Snap, as you recall seeing here, Jayson, when you were here for investor day, is a very, very big deal. And it has the capability of almost doubling that business, which is $25 million. It has that potential and we expect to get out and get after it. And we're going to get after it straightaway. It's a big deal and we are very excited about it. I can't tell you -- we did a lot of our trials in Germany and in the Netherlands and Scandinavia and, boy, if you can please those guys, they are tough, and every comment and every place we went that it meets or exceeds all of our -- almost 90% of them exceeds the competition and they couldn't wait to get their hands on it. So, our guys, we have products sterile on the shelf. The product is regulatory-approved. It is signed off. I believe the numbers are in the system. But we want to -- we'll do some training and it's an extraordinary product.

And then I'll tease you a little bit by saying we've got a little something up our sleeve for later on this year in the same product line, so we've got a little something else to go with it. And then we have two more projects that have been started up back in Malvern. So Malvern is becoming Meritized. And I just can't tell you how pleased I am with the work they've done back there.

And then one other little thing, and this is just a little tidbit. Labor is an issue. The labor markets are tight. Our turnover rate in Malvern is 2%. Our people -- I was just there last week and did a plant tour and we have extraordinary people there doing extraordinary things and you'll see the results of that going forward. It's a very, very big deal and then to be followed with the Corvocet, which is a big deal. So from those points of view, and the strength I'm seeing in the US sales force, which it's really nice to see that because we don't have those FX effects there, those are all pure to us. So very excited about the products and the direction of the business.

All right. Thanks guys. I'll jump back in queue and let someone else ask.

(Operator Instructions). Jim Sidoti, Sidoti & Company.

So, the sales number, $129 million, a few million dollars above my number and the Street. Were there any one-times in that or was that -- is that generally recurring business?

No, that's all recurring business, no one-times.

Okay. And on the catheter line, the strongest line, what was the main driver there?

On the what line?

I don't know, the catheter line?

Catheter?

The catheter line, correct.

Catheter line!

That was interesting, because I looked through that. It was really dispersed in a lot of things. Probably the largest thing was the ProGuide was heavy. We had some new catheters likely the hydrophilic catheter for Prelude for introducer sheaths was a big grower. But then it was interesting because micro catheters did well. The macro accesses added a few hundred thousand. The Prelude case was $300,000. I'm picking numbers of growth, the locking ReSolve -- locking drainage catheter. So it was really about six or seven that were all showing $300,000 and $400,000 of growth in. It's kind of spread across the lot of them.

Yes, our Fountain catheter, our Infusion catheter, was up 37%. Our Guide catheters were up 82% over a year ago. These are Guide catheters. That's a pretty big move. Our micro catheters that are used to deliver embolic materials were up 31%, so these are kind of big numbers. You know, I mean it was a great part of the business for the quarter clearly with several products, not just one. So --.

Yes.

And do you think this is because of procedure growth or is it because of the change you made to the selling strategy last year, or what do you attribute the growth here to?

I've just got to say we're just taking market share, yes. You know another product that I want to talk about, another part of the business that for the quarter --

While you are looking at that, it's international market share growing at even a greater rate than in the domestic, but they are all growing.

Yes. Our Endotek business for the quarter was up 11.2%. And we've introduce this new AEROmini stent and we can't make them fast enough. I mean we just literally cannot make them fast enough. So this is a very small pulmonary tracheal bronchial stent and kind of I don't want to say caught us by surprise but clearly we are -- we didn't have enough inventory. We essentially have sold everything we have and we are backordered on it. And it's great when you have a product that has the demand and which you don't have competition. And so, we have -- as you know, we are a big player in that tracheobronchial market and this AEROmini has just taken off, and it's really nice to have it. You get products that take time or they sputter or they do this or -- this thing just came out and it was off to the races from day one. Great product and great margins, great margins.

Last question for Kent is on the tax rate. It's the first time in a while I've seen you guys report a tax rate over 30%. Was there something that's specific to this quarter or was that what we should expect going forward?

Well, it's what we projected for you for the year when we gave guidance.

And we didn't have any one time help. We seem to have picked up things, whether it was R&D credits in Ireland or here, or we got able to reverse some costs we had there. It's kind of at normal right now. And frankly, it's gone up a little bit because we're making more money in the US and the US has a high tax rate. So, we've got some plans to try and shift some of that and Mexico as part of that so that we can gradually move more of the earnings just a little bit from when we manufacture. But the point is is that that's a normalized rate and one you should plan on.

Okay, thank you.

(Operator Instructions). At this time, there are no further questions.

Well, let me go ahead and summarize. I think that we did a good job. I want to thank my staff. We'll do better. We are on our plan. We are, I think, demonstrating that we can be disciplined and we should be disciplined and that we'll get higher returns for our shareholders.

Our goal is to simply make more money and still balance the business. We have employees and stakeholders and all that sort of thing, but I think we are doing those things.

And on the R&D side, the pipeline side, international side, things are getting better and stronger and Merit's presence is being felt more and more. And I think you can see that kind of across the board in both our dealers internationally, China, and worldwide dealers was even up. And this is when we are talking about Central and South America and so on and so forth.

So our business is strong and again, it's just pleasing to see what the US is doing. We haven't seen those large numbers up there and very candidly, I wouldn't be surprised if that didn't go into double digits this year. So there's a little pressure from our US guys to kind of feel -- but I believe that may very well be in the cards. And if you look at other companies, there are some great companies out there but I think this is good performance.

So guys, we are on plan. We have a one-year plan, a two-year and a three-year plan and we have a monthly plan and that is to look at it and make sure that we are on course. And that's what our promise is to deliver and to enhance the value to our owners and we intend to do that.

So we will thank you for your interest. We will be out on the road traveling around and talking to folks in the future. We have a number of conferences that come up later on. But we look forward to reporting the progress in the second quarter and the consolidations and the product introductions and I think you can look forward to interesting and positive reports as we go forward. So, we'll thank you very much for your interest and we'll go ahead now and sign off from Salt Lake City wishing you a good evening and all good things. Good night.

Ladies and gentlemen, that does conclude today's program. We would like to thank you all for your participation.