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Merge Healthcare suffers $258M loss in `06

West Allis, Wis. - Acknowledging that a return to profitability won't happen until later this year, Merge Healthcare reported an annual net loss of $258.5 million, or $7.67 per diluted share, in a difficult 2006 that saw several executives resigned in the wake of financial reporting errors.

The loss, which included a goodwill impairment, trade name impairment, and restructuring charge of $230.8 million, or $6.85 per share, compares to a net loss of $2.7 million, or $0.11 per diluted share, in fiscal 2005.

Annual revenues declined from $82.6 million in 2005 to $75.0 million in 2006, and the company's cash balance also declined from $64.3 million at the end of 2005 to $45.9 million at the end of last year.

The company, which develops medical imaging and clinical software applications, has revamped its senior management team and has introduced several product upgrades in recent months. CEO Ken Rardin said financial results will continue to lag recent strategic decisions, but he believes the company has made strides in repositioning itself in the global medical imaging market.

He also repeated previous statements that Merge would be profitable again by the fourth quarter of 2007. "We believe the worst is behind us, and we are confident that the changes that we have made over the past several months will begin to pay off over the next several quarters,” Rardin said in a release.
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Fourth quarter results

During the fourth quarter of 2006, the company reported a goodwill impairment, trade name impairment, and restructuring charge of $11.3 million, or $0.33 per share, primarily related to a "right-sizing" initiative announced in November 2006.

Also in the quarter, Merge's GAAP loss was $27.0 million or $0.80 per diluted share, versus earnings of $2.8 million or $0.08 per diluted share during the same period of 2005.

Fourth quarter revenue totaled $13.2 million, compared to $25.5 million in the fourth quarter of 2005.

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