Conference Call to Be Held at 10:00 a.m. ET Today
UTICA, NY, Apr 26, 2012 (MARKETWIRE via COMTEX) --CONMED Corporation (NASDAQ: CNMD)
-- Sales Increase Approximately 6%
-- GAAP EPS Increases Approximately 13%
-- Adjusted EPS Increases Over 16%
CONMED Corporation (NASDAQ: CNMD) today announced financial results for
the first quarter ended March 31, 2012.
"CONMED is off to a solid start in 2012 with double digit earnings
growth and a sales increase of approximately six percent. Both sales
and adjusted earnings were within the ranges of our expectations for
the quarter," commented Mr. Joseph J. Corasanti, President and CEO.
"The Company's single-use product revenues continue to perform well,
with overall growth of nine percent in the first quarter. Moreover,
our new relationship with the Musculoskeletal Transplant Foundation
has already proven to be a highly-beneficial addition to our Sports
Medicine/Arthroscopy offering."
As discussed below under "Use of Non-GAAP Financial Measures," the
Company presents various non-GAAP adjusted financial measures in this
release. Investors should consider adjusted measures in addition to,
and not as a substitute for, or superior to, financial performance
measures prepared in accordance with generally accepted accounting
principles ("GAAP"). Please refer to the attached reconciliation
between GAAP and adjusted financial measures.
First Quarter 2012 Financial Highlights:
-- Sales grew to $194.3 million, an increase of 5.9% (organic growth of
1.8%).
-- Single-use products comprised 79.4% of total revenues and grew 9.0%,
while sales of capital products declined 4.5%.
-- Diluted earnings per share (GAAP) grew 12.9% to $0.35
-- Adjusted diluted earnings per share grew 16.2% to $0.43.
-- Adjusted operating margin expanded 30 basis points to 10.5%.
-- GAAP operating margin was 8.8%.
-- The Board of Directors initiated a cash dividend policy and declared
the first quarterly dividend of $0.15 per share which was paid on
April 5, 2012.
International sales in the first quarter of 2012 were $98.2 million,
representing 50.5% of total sales. Foreign currency exchange rates
were approximately the same in the first quarter of 2012 compared to
rates in the first quarter of 2011.
Cash provided by operating activities declined from the first quarter
of 2011 due to an increase in accounts receivable from higher sales,
a contribution of $6.5 million to the Company's frozen pension plan
and payment of incentive compensation. Management expects quarterly
cash flow to improve in the remaining quarters of 2012 since the
pension and incentive compensation payments only affect the first
quarter of 2012.
Outlook
"We expect to sustain the momentum from the first quarter and
continue to deliver double digit earnings growth for the remainder of
2012," continued Mr. Corasanti. "However, while we do think the
capital equipment business is beginning to stabilize, in light of the
relatively soft sales from this product category in the first
quarter, we are tightening our adjusted earnings per share guidance
for the full year of 2012 by reducing the top end of our previous
estimate. We now expect that adjusted earnings per share for 2012
will approximate $1.75 - $1.85, as opposed to our previously issued
guidance of $1.75 - $1.88. This range would result in an increase in
adjusted EPS of between 17 and 23 percent over 2011. The sales
forecast for 2012 has been revised accordingly to $775 - $785 million
from $780 - $790 million."
"For the second quarter of 2012, we anticipate sales will approximate
$190 - $195 million and adjusted earnings per share are forecasted to
be $0.42 - $0.47," noted Mr. Corasanti.
The sales and earnings forecasts have been developed using April 2012
currency exchange rates and take into account the currency hedges
entered into by the Company. CONMED estimates that 80% of the
currency exposure is hedged for 2012 at the following average annual
exchange rates: Euro - $1.41, CAD - $1.00, GPB - $1.60 and AUD -
$1.00.
The adjusted estimates for the second quarter and full year 2012
exclude unusual matters, such as the manufacturing restructuring
costs expected to be incurred in 2012 due to the relocation of
manufacturing activities from the Santa Barbara, California site to
the Company's facilities in Chihuahua, Mexico and Largo, Florida.
Marketing and R&D activities will remain in Santa Barbara, as
previously disclosed.
Association with The Musculoskeletal Transplant Foundation
On January 3, 2012, CONMED became the exclusive world-wide marketing
representative of MTF's sports medicine allograft tissues. In
accordance with MTF's commitment to the stewardship of the donated
gift, the organization maintains full responsibility for all
activities related to donor suitability, quality acceptance,
processing, storage, and distribution of the tissue, as well as
reimbursement of service fees related to the sports medicine
allografts. CONMED's team of surgical representatives serves as the
educational resource to surgeons and facilities concerning the
suitability of MTF allografts for ligament reconstruction, cartilage
repair and meniscal transplantation, as well as for biologic
solutions, including scaffolds and fixation devices. MTF will share
50% of the service revenue with CONMED for these educational
activities.
Upon signing of the agreement, CONMED paid $63 million to MTF. The
agreement calls for additional consideration to be paid to MTF of $84
million over the next four years contingent upon MTF providing an
adequate supply of tissue. We have recorded the full amount of the
consideration as a long term asset and amortize this amount ratably
over the 25 year life of the agreement. Remaining contingent payments
to MTF have been recorded as other liabilities. In the three months
ended March, 2012, we recorded gross revenues from MTF of $9.0
million which were reduced by amortization of $1.5 million resulting
in net revenues of $7.5 million.
Unusual charges
During the first quarter of 2012, the Company continued the on-going
consolidation of certain administrative functions and the transfer of
additional product lines to its Mexican manufacturing facility. Also
incurred were integration costs relative to the purchase of a
distributor in northern Europe and litigation costs associated with
an arbitration matter. Expenses associated with these activities,
including severance and relocation costs, amounted to $2.2 million,
net of tax, in the first quarter of 2012. These charges are included
in the GAAP earnings per share set forth above and are excluded from
the adjusted results. For the remainder of 2012, the Company
presently anticipates incurring additional pre-tax restructuring
costs of $2.5 - $3.5 million on projects currently in process.
Convertible note amortization of debt discount
Through November 2011, the Company recorded non-cash interest expense
related to its convertible notes to bring the effective interest rate
to a level approximating that of a non-convertible note of similar
size and tenor. Substantially all of the notes were redeemed in
November 2011. Accordingly, the fourth quarter of 2011 was the last
quarter of such additional interest expense. In the first quarter of
2011, CONMED recorded additional non-cash pre-tax interest charges of
$1.1 million. These charges were included in the GAAP earnings per
share for 2011 and excluded from the 2011 non-GAAP amounts.
Use of non-GAAP financial measures
Management has disclosed adjusted financial measurements in this
press announcement that present financial information that is not in
accordance with generally accepted accounting principles. These
measurements are not a substitute for GAAP measurements, although
Company management uses these measurements as aids in monitoring the
Company's on-going financial performance from quarter-to-quarter and
year-to-year on a regular basis, and for benchmarking against other
medical technology companies. Adjusted net income and adjusted
earnings per share measure the income of the Company excluding
unusual credits or charges that are considered by management to be
outside of the normal on-going operations of the Company. Management
uses and presents adjusted net income and adjusted earnings per share
because management believes that in order to properly understand the
Company's short and long-term financial trends, the impact of unusual
items should be eliminated from on-going operating activities. These
adjustments for unusual items are derived from facts and
circumstances that vary in frequency and impact on the Company's
results of operations. Management uses adjusted net income and
adjusted earnings per share to forecast and evaluate the operational
performance of the Company as well as to compare results of current
periods to prior periods on a consistent basis. Adjusted financial
measures used by the Company may be calculated differently from, and
therefore may not be comparable to, similarly titled measures used by
other companies. Investors should consider adjusted measures in
addition to, and not as a substitute for, or superior to, financial
performance measures prepared in accordance with GAAP.
Conference call
The Company will webcast its first quarter 2012 conference call live
over the Internet at 10:00 a.m. Eastern Time on Thursday, April 26,
2012. This webcast can be accessed from CONMED's web site at
www.conmed.com. Replays of the call will be made available through
May 4, 2012.
CONMED profile
CONMED is a medical technology company with an emphasis on surgical
devices and equipment for minimally invasive procedures and patient
monitoring. The Company's products serve the clinical areas of
arthroscopy, powered surgical instruments, electrosurgery, cardiac
monitoring disposables, endosurgery and endoscopic technologies. They
are used by surgeons and physicians in a variety of specialties
including orthopedics, general surgery, gynecology, neurosurgery and
gastroenterology. Headquartered in Utica, New York, the Company's
3,400 employees distribute its products worldwide from several
manufacturing locations.
Forward Looking Information
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. 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. 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: (i) the failure of any one
or more of the assumptions stated above, to prove to be correct; (ii)
the risks relating to forward-looking statements discussed in the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2011; (iii) cyclical purchasing patterns from customers,
end-users and dealers; (iv) timely release of new products, and
acceptance of such new products by the market; (v) the introduction
of new products by competitors and other competitive responses; (vi)
the possibility that any new acquisition or other transaction may
require the Company to reconsider its financial assumptions and
goals/targets; (vii) increasing costs for raw material,
transportation of litigation; (viii) the risk of a lack of allograft
tissues due to reduced donations of such tissues or due to tissues
not meeting the appropriate high standards for screening and/or
processing of such tissues; and/or (ix) the Company's ability to
devise and execute strategies to respond to market conditions.
CONMED CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31, 2011 and 2012
(In thousands except per share amounts)
(unaudited)
2011 2012
------------- -------------
Net sales $ 183,450 $ 194,316
------------- -------------
Cost of sales 86,980 91,931
Cost of sales, other - Note A 754 1,474
------------- -------------
Gross profit 95,716 100,911
------------- -------------
Selling and administrative 70,078 74,806
Research and development 7,681 7,095
Other expense - Note B 694 1,988
------------- -------------
78,453 83,889
------------- -------------
Income from operations 17,263 17,022
Amortization of debt discount 1,094 -
Interest expense 1,805 1,437
------------- -------------
Income before income taxes 14,364 15,585
Provision for income taxes 5,369 5,617
------------- -------------
Net income $ 8,995 $ 9,968
============= =============
Per share data:
Net income
Basic $ .32 $ .36
Diluted .31 .35
Weighted average common shares
Basic 28,261 28,029
Diluted 28,701 28,484
Note A -Included in cost of sales, other in the three months ended
March 31, 2011 and 2012, are $0.8 million and $1.5 million,
respectively, related to the moving of additional product lines to
the manufacturing facility in Chihuahua, Mexico.
Note B - Included in other expense in the three months ended March
31, 2011 and 2012, are $0.7 million and $0.3 million, respectively,
related to administrative consolidation expense. Also included in
other expense in the three months ended March 31, 2012 is $0.7
million in cost associated with the acquisition of our former
distributor in the Nordic region of Europe and $1.0 million in costs
associated with legal arbitration.
CONMED CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
(unaudited)
ASSETS
December 31, March 31,
2011 2012
------------ ------------
Current assets:
Cash and cash equivalents $ 26,048 $ 19,454
Accounts receivable, net 135,641 142,351
Inventories 168,438 163,390
Deferred income taxes 10,283 10,951
Other current assets 16,314 15,132
------------ ------------
Total current assets 356,724 351,278
Property, plant and equipment, net 139,187 141,032
Deferred income taxes 2,389 2,422
Goodwill 234,815 234,794
Other intangible assets, net 195,531 193,643
Other assets 6,948 153,391
------------ ------------
Total assets $ 935,594 $ 1,076,560
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 54,557 $ 54,219
Other current liabilities 76,627 111,626
------------ ------------
Total current liabilities 131,184 165,845
Long-term debt 88,952 138,952
Deferred income taxes 92,785 95,791
Other long-term liabilities 49,602 89,247
------------ ------------
Total liabilities 362,523 489,835
------------ ------------
Shareholders' equity:
Capital accounts 244,980 251,811
Retained earnings 354,439 360,185
Accumulated other comprehensive loss (26,348) (25,271)
------------ ------------
Total equity 573,071 586,725
------------ ------------
Total liabilities and shareholders' equity $ 935,594 $ 1,076,560
============ ============
CONMED CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
Three months ended
March 31,
--------------------------
2011 2012
------------ ------------
Cash flows from operating activities:
Net income $ 8,995 $ 9,968
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 10,340 11,812
Stock-based compensation 1,026 1,183
Deferred income taxes 4,625 2,735
Increase (decrease) in cash flows from
changes in assets and liabilities:
Accounts receivable 90 (5,618)
Inventories 420 2,764
Accounts payable 1,782 2,601
Income taxes payable 333 (1,232)
Accrued compensation and benefits (7,442) (10,446)
Other assets (1,917) (1,106)
Other liabilities 2,448 (5,032)
------------ ------------
Net cash provided by operating activities 20,700 7,629
------------ ------------
Cash flow from investing activities:
Purchases of property, plant and equipment (4,143) (6,424)
Payments related to business acquisitions
and distribution agreement (72) (64,116)
------------ ------------
Net cash used in investing activities (4,215) (70,540)
------------ ------------
Cash flow from financing activities:
Payments on debt (13,337) (338)
Proceeds from debt borrowings - 50,000
Net proceeds from common stock issued under
employee plans 1,287 5,345
Other, net 337 809
------------ ------------
Net cash provided by (used in) financing
activities (11,713) 55,816
------------ ------------
Effect of exchange rate change on cash and cash
equivalents 750 501
------------ ------------
Net increase (decrease) in cash and cash
equivalents 5,522 (6,594)
Cash and cash equivalents at beginning of period 12,417 26,048
------------ ------------
Cash and cash equivalents at end of period $ 17,939 $ 19,454
============ ============
CONMED CORPORATION
RECONCILIATION OF REPORTED NET INCOME TO NON-GAAP NET INCOME
BEFORE UNUSUAL ITEMS AND AMORTIZATION OF DEBT DISCOUNT
Three Months Ended March 31, 2011 and 2012
(In thousands except per share amounts)
(unaudited)
2011 2012
------------ ------------
Reported net income $ 8,995 $ 9,968
------------ ------------
Facility consolidation costs included in cost of
sales 754 1,474
------------ ------------
Administrative consolidation costs included in
other expense 694 273
Costs associated with purchase of Nordic region
distributor - 704
Legal arbitration costs included in other
expense - 1,011
------------ ------------
Total other expense 694 1,988
------------ ------------
Amortization of debt discount 1,094 -
------------ ------------
Unusual expense before income taxes 2,542 3,462
Provision (benefit) for income taxes on unusual
expenses (926) (1,246)
------------ ------------
Net income before unusual items $ 10,611 $ 12,184
============ ============
Per share data:
Reported net income
Basic $ 0.32 $ 0.36
Diluted 0.31 0.35
Net income before unusual items
Basic $ 0.38 $ 0.43
Diluted 0.37 0.43
Management has provided the above reconciliation of net income before
unusual items and amortization of debt discount as an additional
measure that investors can use to compare operating performance
between reporting periods. Management believes this reconciliation
provides a useful presentation of operating performance as discussed
in the section "Use of Non-GAAP Financial Measures" above. We have
included the amortization of debt discount in our analysis in order
to facilitate comparison with the non-GAAP earnings guidance provided
in the "Outlook" section of this and previous releases which exclude
such expense.
CONMED CORPORATION
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
Three Months Ended March 31, 2011 and 2012
(In thousands)
(unaudited)
2011 2012
------------ ------------
Reported income from operations $ 17,263 $ 17,022
============ ============
Facility consolidation costs included in cost of
sales 754 1,474
Administrative consolidation costs included in
other expense 694 273
Costs associated with purchase of Nordic region
distributor - 704
Legal arbitration costs included in other
expense - 1,011
------------ ------------
Adjusted income from operations $ 18,711 $ 20,484
============ ============
Operating Margin
Reported (GAAP) 9.4% 8.8%
Adjusted (Non-GAAP) 10.2% 10.5%
Management has provided the above reconciliation as an additional
measure that investors can use to compare financial results between
reporting periods. Management believes this reconciliation provides a
useful presentation of financial measures as discussed in the section
"Use of Non-GAAP Financial Measures" above.
CONMED CORPORATION
First Quarter Sales Summary
Three Months Ended March 31,
--------------------------------------
Constant
Currency
2011 2012 Growth Growth
--------- --------- -------- --------
(in millions)
Arthroscopy
Single-use $ 58.1 $ 69.2 19.1% 18.3%
Capital 17.3 17.0 -1.7% -1.7%
--------- --------- -------- --------
75.4 86.2 14.3% 13.7%
--------- --------- -------- --------
Powered Surgical Instruments
Single-use 20.4 21.5 5.4% 4.9%
Capital 17.7 17.1 -3.4% -3.9%
--------- --------- -------- --------
38.1 38.6 1.3% 0.8%
--------- --------- -------- --------
Electrosurgery
Single-use 16.7 16.6 -0.6% -1.2%
Capital 6.9 5.9 -14.5% -14.5%
--------- --------- -------- --------
23.6 22.5 -4.7% -5.1%
--------- --------- -------- --------
Endoscopic Technologies
Single-use 11.9 12.8 7.6% 7.6%
--------- --------- -------- --------
Endosurgery
Single-use and reposable 17.9 18.2 1.7% 1.1%
--------- --------- -------- --------
Patient Care
Single-use 16.6 16.0 -3.6% -3.6%
--------- --------- -------- --------
Total
Single-use and reposable 141.6 154.3 9.0% 8.4%
Capital 41.9 40.0 -4.5% -4.8%
--------- --------- -------- --------
$ 183.5 $ 194.3 5.9% 5.4%
========= ========= ======== ========
CONTACT:
CONMED Corporation
Robert Shallish
Chief Financial Officer
315-624-3206
FTI Consulting
Investors:
Brian Ritchie
212-850-5600
SOURCE: CONMED Corporation