Full Press Release Details
| NEWS RELEASE | |
| CONTACT : | |
| CONMED Corporation | |
| Luke A. Pomilio | |
| Chief Financial Officer | |
| 315-624-3202 | |
| LukePomilio@conmed.com |
CONMED Corporation Announces Third Quarter 2015
Utica, New York, October 21,
2015 --- CONMED Corporation (Nasdaq: CNMD) today announced financial results for the third quarter ended September 30, 2015.
Third Quarter 2015 Highlights
"While I am pleased to see
total Company constant currency sales break back into positive growth, the overall results indicate the transformative changes we are pursuing are taking longer to implement than we had
anticipated," commented Curt R. Hartman, CONMED's President and Chief Executive Officer. "Weaker than
expected performance in our export markets and in our domestic General Surgery business slowed our progress this quarter. I remain
confident that CONMED has the right team of leaders and the sense of urgency necessary to advance our turnaround efforts."
For the quarter ended September
30, 2015, domestic sales, which represented 51.9% of total revenue, increased 1.3%, driven by growth in capital equipment sales
within Visualization and Orthopedics. International sales, which represented 48.1% of total revenue, declined 7.8% compared to
the third quarter of 2014 on a reported basis. Foreign currency exchange rates, including the effects of the FX hedging program,
had a negative impact of $6.6 million on third quarter sales. In constant currency, international sales decreased 0.4% versus the
prior-year period as a result of a decline in sales of capital equipment, particularly within General Surgery and Visualization.
Reported net earnings totaled
$8.9 million in the quarter, compared to reported net earnings of $2.0 million in the prior year. Reported diluted net earnings
per share were $0.32 in the quarter, compared to $0.07 in the prior-year period. Reported net earnings for the third quarter of
2014 included substantially higher costs related to restructuring and shareholder activism. The effect of each of these items on
reported net earnings appears in the reconciliation of GAAP to non-GAAP measures provided below.
Excluding the impact of the items
described above, adjusted net earnings of $10.6 million decreased 13.2% year over year and adjusted diluted net earnings per share
of $0.38 decreased 13.6% year over year. The decline in adjusted net earnings was largely attributable to weaker than anticipated
international sales, the negative impact of foreign currency, and a higher tax rate, partially offset by improved gross margin
and lower operating expenses during the quarter.
Based on weaker than expected
third quarter sales, the
Company has reduced its 2015 constant currency organic sales growth estimate to 0% to 1%, compared to the previous estimate of
Using current exchange rates,
the Company now forecasts total reported 2015 sales to be in the range of $715 to $720 million, compared to prior guidance of $723
to $738 million. Adjusted earnings per diluted share are now expected to be in the range of $1.65 to $1.70, compared to prior guidance
The Company's management
will host a conference call today at 4:30 p.m. ET to discuss its third quarter results.
To participate in the conference
call, dial 800-884-5695 (domestic) or 617-786-2960 (international) and enter the passcode 44699196.
This conference call will also
be webcast and can be accessed from the Investors section of CONMED's web site at www.conmed.com. The webcast replay of
the call will be available at the same site approximately one hour after the end of the call.
A recording of the call will also
be available from 8:30 p.m. ET on Wednesday, October 21, 2015, until 11:59 p.m. ET on Wednesday, October 28, 2015. To hear this
recording, dial 888-286-8010 (domestic) or 617-801-6888 (international) and enter the passcode 88091814.
About CONMED Corporation
CONMED is a medical technology
company that provides surgical devices and equipment for minimally invasive procedures. The Company's products are used
by surgeons and physicians in a variety of specialties, including orthopedics, general surgery, gynecology, neurosurgery, and
gastroenterology. The Company distributes its products worldwide from several manufacturing locations. CONMED has a direct selling
presence in 16 countries outside the United States, and international sales constitute over 50% of the Company's total sales.
Headquartered in Utica, New York, the Company employs approximately 3,500 people. For more information, visit www.conmed.com.
Forward-Looking Statements
This press release contains forward-looking
statements based on certain assumptions and contingencies that involve risks and uncertainties. The forward-looking statements
are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and relate to the Company's
performance on a going-forward basis. The forward-looking statements in this press release involve risks and uncertainties which
could cause actual results, performance or trends to differ materially from those expressed in the forward-looking statements herein
or in previous disclosures. In addition to general industry and economic conditions, factors that could cause actual results to
differ materially from those discussed in the forward-looking statements in this press release include, but are not limited to,
the risks relating to forward-looking statements discussed in the Company's Annual Report on Form 10-K for the fiscal year ended
Supplemental Information - Reconciliation of GAAP
to Non-GAAP Financial Measures
The Company supplements the reporting
of its financial information determined under accounting principles generally accepted in the United States (GAAP) with certain
non-GAAP financial measures, including percentage sales growth in constant currency; adjusted gross profit; cost of sales excluding
specified items; adjusted selling and administrative expenses; adjusted operating income; adjusted effective income tax rate; adjusted
net earnings and adjusted diluted net earnings per share (EPS). The Company believes that these non-GAAP measures provide meaningful
information to assist investors and shareholders in understanding our financial results and assessing our prospects for future
performance. Management believes percentage sales growth in constant currency and the other adjusted measures described above are
important indicators of our operations because they exclude items that may not be indicative of, or are unrelated to, our core
operating results and provide a baseline for analyzing trends in the Company's underlying businesses. Further, the presentation
of EBITDA is a non-GAAP measurement that management considers useful for measuring aspects of the Company's cash flow. Management
uses these non-GAAP financial measures for reviewing the operating results and analyzing potential future business trends in connection
with our budget process and bases certain management incentive compensation on these non-GAAP financial measures.
To measure percentage sales growth
in constant currency, the Company removes the impact of changes in foreign currency exchange rates that affect the comparability
and trend of sales. To measure earnings performance on a consistent and comparable basis, the Company excludes certain items that
affect the comparability of operating results and the trend of earnings. These adjustments are irregular in timing, may not
be indicative of our past and future performance and are therefore excluded to allow investors to better understand underlying
Because non-GAAP financial measures
are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures
having the same or similar names. These adjusted financial measures should not be considered in isolation or as a substitute for
reported sales growth, gross profit, cost of sales, selling and administrative expenses, operating income, effective income tax
rate, net earnings and diluted net earnings per share, the most directly comparable GAAP financial measures. These non-GAAP financial
measures are an additional way of viewing aspects of our operations that, when viewed with our GAAP results and the reconciliations
to corresponding GAAP financial measures below, provide a more complete understanding of our business. The Company strongly encourages
investors and shareholders to review our financial statements and publicly-filed reports in their entirety and not to rely on any
single financial measure.
| Consolidated Condensed Statements of Income | ||||||||||||||||
| (in thousands except per share amounts, unaudited) | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Net sales | $ | 169,184 | $ | 174,961 | $ | 528,151 | $ | 545,052 | ||||||||
| Cost of sales | 75,638 | 78,547 | 248,825 | 245,028 | ||||||||||||
| Gross profit | 93,546 | 96,414 | 279,326 | 300,024 | ||||||||||||
| % of sales | 55.3% | 55.1% | 52.9% | 55.0% | ||||||||||||
| Selling and administrative expense | 72,056 | 87,055 | 220,423 | 243,653 | ||||||||||||
| Research and development | 6,652 | 6,910 | 20,695 | 20,674 | ||||||||||||
| Income from operations | 14,838 | 2,449 | 38,208 | 35,697 | ||||||||||||
| % of sales | 8.8% | 1.4% | 7.2% | 6.5% | ||||||||||||
| Interest expense | 1,504 | 1,540 | 4,453 | 4,572 | ||||||||||||
| Income before income taxes | 13,334 | 909 | 33,755 | 31,125 | ||||||||||||
| Provision (benefit) for income taxes | 4,461 | (1,063 | ) | 11,109 | 10,272 | |||||||||||
| Net income | $ | 8,873 | $ | 1,972 | $ | 22,646 | $ | 20,853 | ||||||||
| Basic EPS | $ | 0.32 | $ | 0.07 | $ | 0.82 | $ | 0.76 | ||||||||
| Diluted EPS | $ | 0.32 | $ | 0.07 | $ | 0.81 | $ | 0.75 | ||||||||
| Basic shares | 27,701 | 27,454 | 27,636 | 27,354 | ||||||||||||
| Diluted shares | 27,898 | 27,688 | 27,853 | 27,777 |
| Consolidated Condensed Balance Sheets | ||||||||
| (in thousands, unaudited) | ||||||||
| September | December | |||||||
| 2015 | 2014 | |||||||
| Assets: | ||||||||
| Cash and cash equivalents | $ | 65,326 | $ | 66,332 | ||||
| Accounts receivable, net | 124,697 | 129,287 | ||||||
| Inventories | 161,555 | 148,149 | ||||||
| Other current assets | 32,116 | 37,382 | ||||||
| Total Current Assets | 383,694 | 381,150 | ||||||
| Property, plant and equipment, net | 130,717 | 133,429 | ||||||
| Goodwill | 260,755 | 256,232 | ||||||
| Other intangible assets, net | 308,059 | 316,440 | ||||||
| Other assets | 10,822 | 10,943 | ||||||
| Total Assets | $ | 1,094,047 | $ | 1,098,194 | ||||
| Liabilities and Shareholders' Equity | ||||||||
| Current liabilities | $ | 111,656 | $ | 115,956 | ||||
| Long-term debt, excluding current maturities | 260,545 | 240,201 | ||||||
| Other liabilities | 144,421 | 160,739 | ||||||
| Shareholders' equity | 577,425 | 581,298 | ||||||
| Total liabilities and shareholders' equity | $ | 1,094,047 | $ | 1,098,194 |
| Consolidated Condensed Statements of Cash Flows | ||||||||
| Nine Months Ended September 2015 and 2014 | ||||||||
| (in thousands, unaudited) | ||||||||
| 2015 | 2014 | |||||||
| Operating Activities | ||||||||
| Net income | $ | 22,646 | $ | 20,853 | ||||
| Depreciation and amortization | 32,308 | 34,020 | ||||||
| Changes in operating assets and liabilities and other, net | (16,234 | ) | (15,344 | ) | ||||
| Net cash provided by operating activities | 38,720 | 39,529 | ||||||
| Investing Activities | ||||||||
| Payments related to business acquisitions | (6,104 | ) | (1,245 | ) | ||||
| Purchases of property, plant, and equipment | (11,478 | ) | (12,250 | ) | ||||
| Net cash used in investing activities | (17,582 | ) | (13,495 | ) | ||||
| Financing Activities | ||||||||
| Proceeds of debt | 21,000 | 33,000 | ||||||
| Payment related to distribution agreements | (16,667 | ) | (16,667 | ) | ||||
| Payment related to contingent consideration | (2,423 | ) | - | |||||
| Dividend payments on common stock | (16,565 | ) | (16,455 | ) | ||||
| Repurchase of common stock | - | (16,862 | ) | |||||
| Other, net | (600 | ) | 4,378 | |||||
| Net cash used in financing activities | (15,255 | ) | (12,606 | ) | ||||
| Effect of exchange rate change on cash and cash equivalents | (6,889 | ) | (3,257 | ) | ||||
| Net increase (decrease) in cash and cash equivalents | (1,006 | ) | 10,171 | |||||
| Cash and cash equivalents at beginning of period | 66,332 | 54,443 | ||||||
| Cash and cash equivalents at end of period | $ | 65,326 | $ | 64,614 |
| Sales Summary | ||||||||||||||||||||||||||||||||
| (in millions, unaudited) | ||||||||||||||||||||||||||||||||
| Three Months Ended September | Nine Months Ended September | |||||||||||||||||||||||||||||||
| % Change | % Change | |||||||||||||||||||||||||||||||
| 2015 | 2014 | As Reported | Constant Currency | 2015 | 2014 | As Reported | Constant Currency | |||||||||||||||||||||||||
| Orthopedic Surgery | $ | 89.4 | $ | 92.8 | -3.6% | 1.4% | $ | 284.8 | $ | 301.1 | -5.4% | -1.0% | ||||||||||||||||||||
| General Surgery | 66.1 | 69.7 | -5.2% | -3.2% | 203.3 | 203.9 | -0.3% | 1.5% | ||||||||||||||||||||||||
| Surgical Visualization | 13.7 | 12.5 | 9.6% | 13.8% | 40.1 | 40.1 | 0.1% | 3.6% | ||||||||||||||||||||||||
| $ | 169.2 | $ | 175.0 | -3.3% | 0.5% | $ | 528.2 | $ | 545.1 | -3.1% | 0.3% | |||||||||||||||||||||
| Single-use products | $ | 134.9 | $ | 142.4 | -5.2% | -1.6% | $ | 420.4 | $ | 439.0 | -4.2% | -0.9% | ||||||||||||||||||||
| Capital products | 34.3 | 32.6 | 5.2% | 9.6% | 107.8 | 106.1 | 1.6% | 5.1% | ||||||||||||||||||||||||
| $ | 169.2 | $ | 175.0 | -3.3% | 0.5% | $ | 528.2 | $ | 545.1 | -3.1% | 0.3% |
| Reconciliation of Reported Net Earnings to Adjusted Net Earnings | ||||||||||||||||||||||||
| (in thousands, except per share amounts, unaudited) | ||||||||||||||||||||||||
| Three Months Ended September 2015 | ||||||||||||||||||||||||
| Gross Profit | Selling & Administrative Expense | Operating Income | Net Income | Effective Tax Rate | Diluted EPS | |||||||||||||||||||
| As reported | $ | 93,546 | $ | 72,056 | $ | 14,838 | $ | 8,873 | 33.5% | $ | 0.32 | |||||||||||||
| % of sales | 55.3% | 8.8% | ||||||||||||||||||||||
| Restructuring costs (1) | 1,316 | (1,331 | ) | 2,647 | 1,694 | 0.4% | 0.06 | |||||||||||||||||
| Adjusted | $ | 94,862 | $ | 70,725 | $ | 17,485 | $ | 10,567 | 33.9% | $ | 0.38 | |||||||||||||
| % of sales | 56.1% | 10.3% |
| Three Months Ended September 2014 | ||||||||||||||||||||||||
| Gross Profit | Selling & Administrative Expense | Operating Income | Net Income | Effective Tax Rate | Diluted EPS | |||||||||||||||||||
| As reported | $ | 96,414 | $ | 87,055 | $ | 2,449 | $ | 1,972 | -116.9% | $ | 0.07 | |||||||||||||
| % of sales | 55.1% | 1.4% | ||||||||||||||||||||||
| Restructuring costs (1) | 1,448 | (687 | ) | 2,135 | 1,366 | 1.8% | 0.05 | |||||||||||||||||
| Management restructuring costs (2) | - | (11,022 | ) | 11,022 | 7,054 | 141.2% | 0.25 | |||||||||||||||||
| Patent dispute and other matters (3) | - | (334 | ) | 334 | 214 | 0.2% | 0.01 | |||||||||||||||||
| Shareholder activism (4) | - | (2,441 | ) | 2,441 | 1,562 | 1.4% | 0.06 | |||||||||||||||||
| Adjusted | $ | 97,862 | $ | 72,571 | $ | 18,381 | $ | 12,168 | 27.7% | $ | 0.44 | |||||||||||||
| % of sales | 55.9% | 10.5% |
| Reconciliation of Reported Net Earnings to Adjusted Net Earnings | ||||||||||||||||||||||||
| (in thousands, except per share amounts, unaudited) | ||||||||||||||||||||||||
| Nine Months Ended September 2015 | ||||||||||||||||||||||||
| Gross Profit | Selling & Administrative Expense | Operating Income | Net Income | Effective Tax Rate | Diluted EPS | |||||||||||||||||||
| As reported | $ | 279,326 | $ | 220,423 | $ | 38,208 | $ | 22,646 | 32.9% | $ | 0.81 | |||||||||||||
| % of sales | 52.9% | 7.2% | ||||||||||||||||||||||
| Restructuring costs (1) | 5,179 | (9,795 | ) | 14,974 | 9,583 | 1.0% | 0.35 | |||||||||||||||||
| Adjusted | $ | 284,505 | $ | 210,628 | $ | 53,182 | $ | 32,229 | 33.9% | $ | 1.16 | |||||||||||||
| % of sales | 53.9% | 10.1% |
| Nine Months Ended September 2014 | ||||||||||||||||||||||||
| Gross Profit | Selling & Administrative Expense | Operating Income | Net Income | Effective Tax Rate | Diluted EPS | |||||||||||||||||||
| As reported | $ | 300,024 | $ | 243,653 | $ | 35,697 | $ | 20,853 | 33.0% | $ | 0.75 | |||||||||||||
| % of sales | 55.0% | 6.5% | ||||||||||||||||||||||
| Restructuring costs (1) | 3,754 | (1,855 | ) | 5,609 | 3,590 | 0.3% | 0.13 | |||||||||||||||||
| Management restructuring costs (2) | - | (11,022 | ) | 11,022 | 7,055 | 0.8% | 0.26 | |||||||||||||||||
| Patent dispute and other matters (3) | - | (3,677 | ) | 3,677 | 2,353 | 0.1% | 0.08 | |||||||||||||||||
| Shareholder activism (4) | - | (3,966 | ) | 3,966 | 2,538 | 0.1% | 0.09 | |||||||||||||||||
| New York State corporate tax reform (5) | - | - | - | 2,258 | -4.1% | 0.08 | ||||||||||||||||||
| Adjusted | $ | 303,778 | $ | 223,133 | $ | 59,971 | $ | 38,647 | 30.2% | $ | 1.39 | |||||||||||||
| % of sales | 55.7% | 11.0% |
(1) In 2014 and 2015, the Company continued the operational restructuring,
including the consolidation of our Centennial, Colorado manufacturing operations into other existing CONMED manufacturing facilities.
Additionally, in 2014 and 2015, the Company restructured certain sales, marketing and administrative functions and incurred severance
and other related costs.
(2) In 2014, the Company incurred certain costs associated with
executive management restructuring, including our then Chief Executive Officer.