Full Press Release Details
| NEWS RELEASE | |
| CONTACT : | |
| CONMED Corporation | |
| Todd Garner | |
| Chief Financial Officer | |
| 315-624-3317 | |
| ToddGarner@conmed.com |
CONMED Corporation Announces
First Quarter 2020 Financial Results
Utica, New York, April 29, 2020
--- CONMED Corporation (NYSE: CNMD) today announced financial results for the first quarter ended March 31, 2020.
First Quarter 2020 Highlights
"Our first quarter results
were meaningfully impacted by the global COVID-19 pandemic, particularly during the second half of the quarter," commented
Curt R. Hartman, CONMED's President and Chief Executive Officer. "While the current environment is challenging, we
have taken decisive actions to protect our employees, solidify the financial security of the Company, and fortify the future of
CONMED. Although we anticipate continued pressure in the near term, we believe our actions have positioned us to respond effectively
when demand recovers."
Healthcare providers around the
globe have shifted their attention to caring for victims of the COVID-19 pandemic and preventing the spread of the virus, which
has resulted in a deferral of surgical volumes. Due to the uncertainty created by this evolving dynamic, management has withdrawn
its previously provided 2020 guidance, as announced on March 20, 2020, and is unable to provide reliable guidance at this time.
Credit Agreement Amendment
On April 20, 2020, CONMED announced
an amendment to its existing credit agreement, including adjustments to, and suspension of, certain debt covenant thresholds. The
terms of the amended agreement are temporary in nature and were granted to provide the Company with financial assurance and flexibility
as it navigates the COVID-19 pandemic.
Supplemental Financial Disclosures
(1) A reconciliation
of reported diluted net earnings per share to adjusted diluted net earnings per share, a non-GAAP financial measure, appears below.
The Company's management will
host a conference call today at 4:30 p.m. ET to discuss its first quarter 2020 results.
To participate in the conference
call, dial 1-844-889-7792 (domestic) or +1-661-378-9936 (international) and refer to the passcode 8588056.
This conference call will also
be webcast and can be accessed from the "Investors" section of CONMED's website 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 7:30 p.m. ET on Wednesday, April 29, 2020, until 7:30 p.m. ET on Wednesday, May 6, 2020. To hear this recording,
dial 1-855-859-2056 (domestic) or +1-404-537-3406 (international) and enter the passcode 8588056.
Consolidated Condensed Statements of Income
(in thousands, except per share amounts,
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2020 | 2019 | |||||||
| Net sales | $ | 214,010 | $ | 218,378 | ||||
| Cost of sales | 94,851 | 96,940 | ||||||
| Gross profit | 119,159 | 121,438 | ||||||
| % of sales | 55.7% | 55.6% | ||||||
| Selling & administrative expense | 95,867 | 99,226 | ||||||
| Research & development expense | 10,120 | 10,575 | ||||||
| Income from operations | 13,172 | 11,637 | ||||||
| % of sales | 6.2% | 5.3% | ||||||
| Interest expense | 9,592 | 9,369 | ||||||
| Other expense | 89 | 4,225 | ||||||
| Income (loss) before income taxes | 3,491 | (1,957 | ) | |||||
| Benefit from income taxes | (2,436 | ) | (2,978 | ) | ||||
| Net income | $ | 5,927 | $ | 1,021 | ||||
| Basic EPS | $ | 0.21 | $ | 0.04 | ||||
| Diluted EPS | 0.20 | 0.04 | ||||||
| Basic shares | 28,478 | 28,173 | ||||||
| Diluted shares | 29,707 | 29,034 |
(in millions, unaudited)
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||||
| % Change | ||||||||||||||||||||||||||||||||||||
| Domestic | International | |||||||||||||||||||||||||||||||||||
| 2020 | 2019 | As Reported | Impact of Foreign Currency | Constant Currency | As Reported | As Reported | Impact of Foreign Currency | Constant Currency | ||||||||||||||||||||||||||||
| Orthopedic Surgery | $ | 99.3 | $ | 113.4 | -12.5% | 1.8% | -10.7% | -18.2% | -8.7% | 3.1% | -5.6% | |||||||||||||||||||||||||
| General Surgery | 114.7 | 105.0 | 9.3% | 0.7% | 10.0% | 14.0% | -0.8% | 2.1% | 1.3% | |||||||||||||||||||||||||||
| $ | 214.0 | $ | 218.4 | -2.0% | 1.3% | -0.7% | 1.6% | -6.1% | 2.7% | -3.4% | ||||||||||||||||||||||||||
| Single-use Products | $ | 177.7 | $ | 172.4 | 3.1% | 1.4% | 4.5% | 6.0% | -0.6% | 3.1% | 2.5% | |||||||||||||||||||||||||
| Capital Products | 36.3 | 46.0 | -21.1% | 1.0% | -20.1% | -18.4% | -23.4% | 1.8% | -21.6% | |||||||||||||||||||||||||||
| $ | 214.0 | $ | 218.4 | -2.0% | 1.3% | -0.7% | 1.6% | -6.1% | 2.7% | -3.4% | ||||||||||||||||||||||||||
| Domestic | $ | 118.8 | $ | 117.0 | 1.6% | 0.0% | 1.6% | |||||||||||||||||||||||||||||
| International | 95.2 | 101.4 | -6.1% | 2.7% | -3.4% | |||||||||||||||||||||||||||||||
| $ | 214.0 | $ | 218.4 | -2.0% | 1.3% | -0.7% |
Reconciliation of Reported Net Income to
(in thousands, except per share amounts, unaudited)
| Three Months Ended March 31, 2020 | ||||||||||||||||||||||||||||||||||||
| Gross Profit | Selling & Administrative Expense | Operating Income | Interest Expense | Other Expense | Tax Expense/ (Benefit) | Effective Tax Rate | Net Income | Diluted EPS | ||||||||||||||||||||||||||||
| As reported | $ | 119,159 | $ | 95,867 | $ | 13,172 | $ | 9,592 | $ | 89 | $ | (2,436 | ) | -69.8% | $ | 5,927 | $ | 0.20 | ||||||||||||||||||
| % of sales | 55.7% | 44.8% | 6.2% | |||||||||||||||||||||||||||||||||
| Acquisition and integration costs (1) | 805 | (754 | ) | 1,559 | - | - | 604 | 955 | 0.03 | |||||||||||||||||||||||||||
| Manufacturing consolidation costs (2) | 1,785 | - | 1,785 | - | - | 693 | 1,092 | 0.04 | ||||||||||||||||||||||||||||
| $ | 121,749 | $ | 95,113 | $ | 16,516 | $ | 9,592 | $ | 89 | $ | (1,139 | ) | $ | 7,974 | $ | 0.27 | ||||||||||||||||||||
| Adjusted gross profit % | 56.9% | |||||||||||||||||||||||||||||||||||
| Amortization (3) | $ | 1,500 | (6,999 | ) | 8,499 | (3,084 | ) | - | 4,494 | 7,089 | 0.24 | |||||||||||||||||||||||||
| Adjusted net income | $ | 88,114 | $ | 25,015 | $ | 6,508 | $ | 89 | $ | 3,355 | 18.2% | $ | 15,063 | $ | 0.51 | |||||||||||||||||||||
| % of sales | 41.2% | 11.7% | ||||||||||||||||||||||||||||||||||
| Diluted shares, as reported | 29,707 | |||||||||||||||||||||||||||||||||||
| In-the-money portion of convertible notes (4) | (135 | ) | ||||||||||||||||||||||||||||||||||
| Diluted shares, as adjusted | 29,572 |
| Three Months Ended March 31, 2019 | ||||||||||||||||||||||||||||||||||||
| Gross Profit | Selling & Administrative Expense | Operating Income | Interest Expense | Other Expense | Tax Expense/ (Benefit) | Effective Tax Rate | Net Income | Diluted EPS | ||||||||||||||||||||||||||||
| As reported | $ | 121,438 | $ | 99,226 | $ | 11,637 | $ | 9,369 | $ | 4,225 | $ | (2,978 | ) | 152.2% | $ | 1,021 | $ | 0.04 | ||||||||||||||||||
| % of sales | 55.6% | 45.4% | 5.3% | |||||||||||||||||||||||||||||||||
| Acquisition and integration costs (1) | 660 | (7,245 | ) | 7,905 | - | - | 2,327 | 5,578 | 0.19 | |||||||||||||||||||||||||||
| Debt refinancing costs (5) | - | - | - | - | (3,904 | ) | 1,149 | 2,755 | 0.09 | |||||||||||||||||||||||||||
| $ | 122,098 | $ | 91,981 | $ | 19,542 | $ | 9,369 | $ | 321 | $ | 498 | $ | 9,354 | $ | 0.32 | |||||||||||||||||||||
| Adjusted gross profit % | 55.9% | |||||||||||||||||||||||||||||||||||
| Amortization (3) | $ | 1,500 | (5,829 | ) | 7,329 | (2,207 | ) | - | 2,408 | 7,128 | 0.25 | |||||||||||||||||||||||||
| Adjusted net income | $ | 86,152 | $ | 26,871 | $ | 7,162 | $ | 321 | $ | 2,906 | 15.0% | $ | 16,482 | $ | 0.57 | |||||||||||||||||||||
| % of sales | 39.5% | 12.3% |
(1) In 2020, the Company incurred inventory adjustments associated with a prior acquisition and integration and severance costs mainly related to the acquisition of Buffalo Filter, LLC. In 2019, the Company incurred investment banking fees, consulting fees, legal fees, and integration related costs associated with the acquisition of Buffalo Filter, LLC.
(2) In 2020, the Company incurred costs related to the consolidation of certain manufacturing operations. These costs related to winding down operations at certain locations and moving production lines to other facilities.
(3) Includes amortization of intangible assets, deferred financing fees, and debt discount.
Q1 2020, the Company's average share price exceeded the conversion price of its 2.625% convertible notes due in 2024
(the "Notes"). Non-GAAP adjusted dilutive weighted average shares outstanding exclude dilution that is expected to
be offset by the Company's convertible notes hedge transactions.
(5) In 2019, in conjunction with the acquisition of Buffalo Filter, LLC, the Company refinanced its existing credit facility and incurred one-time fees associated with an agreement between the Company and JP Morgan Chase Bank, N.A., as well as costs associated with the early extinguishment of debt.
Reconciliation of Reported Net Income to
EBITDA & Adjusted EBITDA
(in thousands, unaudited)
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2020 | 2019 | |||||||
| Net income | $ | 5,927 | $ | 1,021 | ||||
| Benefit from income taxes | (2,436 | ) | (2,978 | ) | ||||
| Interest expense | 9,592 | 9,369 | ||||||
| Depreciation | 4,646 | 4,442 | ||||||
| Amortization | 13,776 | 12,208 | ||||||
| EBITDA | $ | 31,505 | $ | 24,062 | ||||
| Stock based compensation | 3,032 | 2,703 | ||||||
| Acquisition and integration costs | 1,559 | 7,905 | ||||||
| Manufacturing consolidation costs | 1,785 | - | ||||||
| Debt refinancing costs | - | 3,904 | ||||||
| Adjusted EBITDA | $ | 37,881 | $ | 38,574 | ||||
| EBITDA Margin | ||||||||
| EBITDA | 14.7% | 11.0% | ||||||
| Adjusted EBITDA | 17.7% | 17.7% |
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, thoracic
surgery, and gastroenterology. For more information, visit www.conmed.com.
Forward-Looking Statements
release and today's conference call may contain forward-looking statements based on certain assumptions and
contingencies that 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. For example, in addition
to general industry and economic conditions, factors that could cause actual results to differ materially from those in the
forward-looking statements may include, but are not limited to, the risks posed to the Company's business, financial
condition, and results of operations by the COVID-19 global pandemic and the various government responses to the pandemic,
including deferral of surgeries, reductions in hospital and ambulatory surgery center operating volumes, disruption to
potential supply chain reliability, as well as the risk factors discussed in the Company's Annual Report on Form 10-K for the
full year ended December 31, 2019, and listed under the heading Forward-Looking Statements in the Company's most
recently filed Form 10-Q. Any and all 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
Company believes that all forward-looking statements made by it have a reasonable basis, but there can be no assurance that
management's expectations, beliefs or projections as expressed in the forward-looking statements will actually occur or
prove to be correct.
Supplemental Information - Reconciliation
of GAAP to Non-GAAP Financial Measures
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
interest expense; adjusted other expense; adjusted income tax expense; adjusted effective income tax rate; adjusted net income,
adjusted diluted shares 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 its financial results and assessing its prospects
for future performance. Management believes percentage sales growth in constant currency and the other adjusted measures described
above are important indicators of its operations because they exclude items that may not be indicative of, or are unrelated to,
its core operating results and provide a baseline for analyzing trends in the Company's underlying business. 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 its budget process and bases certain management incentive compensation on these non-GAAP financial
a constant currency basis is a non-GAAP measure. The Company analyzes net sales on a constant currency basis to better measure
the comparability of results between periods. 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 net 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 past and future performance
and are therefore excluded to allow investors to better understand underlying operating trends.
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,
interest expense, other expense, income tax expense (benefit), effective income tax rate, net income, diluted shares 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 the Company's operations that, when viewed with GAAP results and the reconciliations to corresponding