CONMED Corporation (Nasdaq: CNMD) today announced
financial results for the third quarter ended September 30,
2016.
Third Quarter 2016 Highlights
- Sales were $184.8 million, an increase
of 9.2% compared to the third quarter of 2015. On a constant
currency basis, sales increased 11.2% and grew 0.8%
organically.
- AirSeal® sales continued to
show strength at $17.3 million in the quarter, with total
year-to-date sales of $48.5 million.
- Global General Surgery sales grew 29.2%
as reported, 30.6% in constant currency, and 4.2% organically in
constant currency.
- Diluted net earnings per share (GAAP)
were $0.26, compared to diluted net earnings per share (GAAP) of
$0.32 in the third quarter of 2015.
- Adjusted diluted net earnings per
share(1) were $0.41 versus $0.45 in the prior-year period.
“We are encouraged by the continued progress in our
international markets, strong contribution from AirSeal®, and solid
organic growth within General Surgery. While the rebuilding of
our domestic Orthopedics franchise is taking longer than expected,
we feel confident that we are making the appropriate changes to
return this business to growth. Overall, we are pleased with a
return to positive organic growth on a constant currency basis,”
commented Curt R. Hartman, CONMED’s President and Chief Executive
Officer. “As we close out the year, we look to build upon the
recent momentum across several of our businesses while continuing
to focus on improving operating efficiencies and reaccelerating
organic growth across all of our product categories.”
Sales Analysis
For the quarter ended September 30, 2016, domestic sales, which
represented 53.7% of total revenue, increased 13.0% as strong
growth in General Surgery was partially offset by declines in
Orthopedics and Visualization. The SurgiQuest acquisition
contributed to 32.1% year-over-year growth in the U.S. General
Surgery business. International sales, which represented 46.3% of
total revenue, increased 5.1% compared to the third quarter of 2015
on a reported basis. Foreign currency exchange rates, including the
effects of the FX hedging program, had a negative impact of $3.4
million on third quarter sales. In constant currency, international
sales increased 9.2% versus the prior-year period.
Earnings Analysis
For the quarter ended September 30, 2016, reported net earnings
totaled $7.3 million, compared to reported net earnings of $8.9
million a year ago. Reported diluted net earnings per share were
$0.26 in the quarter, compared to reported diluted net earnings per
share of $0.32 in the prior-year period. Reported net earnings for
2016 include business acquisition and restructuring costs, as well
as a gain on the sale of the Company’s facility in Centennial,
Colorado, while reported net earnings for 2015 include
restructuring costs. The effect of each of these items on reported
net earnings and reported diluted net earnings per share appears in
the reconciliation of GAAP to non-GAAP measures below.
The Company excludes the after-tax costs of special items
including acquisitions, restructuring, the gain on the sale of the
Company’s facility in Centennial, Colorado, and debt refinancing,
as well as amortization of intangible assets, net of tax, from its
adjusted diluted net earnings per share. Excluding the impact of
these items, adjusted net earnings(2) of $11.5 million decreased
8.0% year over year and adjusted diluted net earnings per share(1)
of $0.41 decreased 8.9% year over year. The decrease in adjusted
net earnings was largely attributable to lower gross margin, higher
R&D as a percentage of sales, and the unfavorable impact of
foreign exchange rates, partially offset by a lower tax rate during
the quarter.
2016 Outlook
There is no change to CONMED’s previously issued financial
guidance. The Company continues to expect 2016 constant currency
organic sales growth in the range of -1% to 1% and sales related to
the SurgiQuest acquisition in the range of $62 to $67 million.
Based on foreign currency exchange rates as of October 21, 2016,
the Company continues to anticipate the negative impact of foreign
exchange for the year in the range of $17 to $19 million.
The Company continues to expect 2016 reported sales in the range
of $757 to $767 million, which represents growth of 5.3% to 6.7%
over reported 2015 revenue of $719 million. Adjusted diluted net
earnings per share are still expected in the range of $1.83 to
$1.93. The adjusted diluted net earnings per share estimates for
2016 exclude the cost of special items including acquisition costs,
restructuring costs, the gain on the sale of the Company’s facility
in Centennial, Colorado, and debt refinancing, which are now
estimated in the range of $19 to $21 million, net of tax, compared
to the previous range of $21 to $23 million, and amortization of
intangible assets, which continue to be estimated in the range of
$12 to $14 million, net of tax.
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.
(2) A reconciliation of reported net earnings to adjusted net
earnings, a non-GAAP financial measure, appears below.
In conjunction with this earnings press release, CONMED has
prepared supplemental financial disclosures which are available on
the home page of the “Investors – Financial Reports” section of the
Company’s website at www.conmed.com.
Conference Call
The Company’s management will host a conference call today at
5:30 p.m. ET to discuss its third quarter 2016 results.
To participate in the conference call, dial 844-889-7792
(domestic) or 661-378-9936 (international) and enter the passcode
95238932.
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 8:30 p.m. ET
on Thursday, October 27, 2016, until 7:30 p.m. ET on Thursday,
November 10, 2016. To hear this recording, dial 855-859-2056
(domestic) or 404-537-3406 (international) and enter the passcode
95238932.
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 17 countries, and international sales
constitute approximately 50% of the Company’s total sales.
Headquartered in Utica, New York, the Company employs approximately
3,400 people. For more information, visit www.conmed.com.
Forward-Looking Statements
This press 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 risk factors discussed in the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2015. 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
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 income tax expense; 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 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 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 operating trends.
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, income tax expense, 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,
2016 2015 2016
2015 Net sales $ 184,792
$
169,184
$ 559,426 $ 528,151 Cost of sales 83,583
75,638 258,055 248,825 Gross
profit 101,209 93,546 301,371
279,326 % of sales 54.8 % 55.3 % 53.9 % 52.9 %
Selling and administrative expense 79,009 72,056 251,681 220,423
Research & development 8,353 6,652
24,620 20,695 Income from operations
13,847 14,838 25,070
38,208 % of sales 7.5 % 8.8 % 4.5 % 7.2 % Other
expense - - 2,942 - Interest expense 3,861
1,504 11,448 4,453 Income before
income taxes 9,986 13,334 10,680 33,755 Provision for income taxes
2,649 4,461 2,724
11,109 Net income $ 7,337 $ 8,873 $ 7,956
$ 22,646 Basic EPS $ 0.26 $ 0.32 $ 0.29 $ 0.82
Diluted EPS 0.26 0.32 0.28 0.81 Basic shares 27,818 27,701
27,785 27,636 Diluted shares 27,951 27,898 27,946 27,853
Consolidated Condensed Balance
Sheets
(in thousands, unaudited)
September
December 2016 2015
Assets: Cash and cash equivalents $ 26,948 $ 72,504 Accounts
receivable, net 133,190 133,863 Inventories 188,528 166,894 Other
current assets 20,710 20,076
Total
Current Assets 369,376 393,337 Property, plant and equipment,
net 123,446 125,452 Goodwill 398,376 260,651 Other intangible
assets, net 424,216 308,171 Other assets 15,310
14,089
Total Assets $ 1,330,724
$ 1,101,700
Liabilities and Shareholders' Equity:
Current liabilities $ 112,860 $ 119,718 Long-term debt, excluding
current maturities 490,176 269,471 Other liabilities 143,513
127,438 Shareholders' equity 584,175
585,073
Total Liabilities and Shareholders' Equity $
1,330,724 $ 1,101,700
Consolidated Condensed Statements of
Cash Flows
Nine Months Ended September 2016 and
2015
(in thousands, unaudited)
2016
2015 Operating Activities Net income $ 7,956 $
22,646 Depreciation and amortization 41,210 32,308 Changes in
operating assets and liabilities and other, net (24,527 )
(16,234 )
Net cash provided by operating activities
24,639 38,720
Investing
Activities Payments related to business acquisitions (256,450 )
(6,104 ) Proceeds from sale of a facility 5,178 - Purchases of
property, plant and equipment (10,436 ) (11,478 )
Net cash used in investing activities (261,708 )
(17,582 )
Financing Activities Payments on
term loan (6,564 ) - Proceeds of term loan 175,000 - Proceeds of
revolver, net 61,654 21,000 Payments related to debt issue costs
(5,556 ) (1,410 ) Payments related to distribution agreement
(16,667 ) (16,667 ) Dividend payments on common stock (16,649 )
(16,565 ) Other, net 200 (1,613 )
Net cash
provided by (used in) financing activities 191,418 (15,255 )
Effect of exchange rate changes on cash and cash equivalents
95 (6,889 ) Net decrease in cash and cash
equivalents (45,556 ) (1,006 ) Cash and cash equivalents at
beginning of period 72,504 66,332
Cash and cash equivalents at end of period $ 26,948 $
65,326
Sales Summary
(in millions, unaudited)
Three Months Ended September 30,
% Change Domestic
International 2016 2015 As
Reported Constant Currency As Reported
As Reported Constant Currency
Orthopedic Surgery $ 86.3 $ 89.4 -3.5 % -1.1 % -3.5 % -3.5 %
0.6 % General Surgery 85.4 66.1 29.2 % 30.6 % 32.1 % 23.7 %
27.7 % Surgical Visualization 13.1 13.7 -4.3 %
-3.0 % -16.1 % 11.3 % 14.8 % $ 184.8 $ 169.2
9.2 % 11.2 % 13.0 % 5.1 % 9.2 % Single-use
Products $ 146.7 $ 134.9 8.7 % 10.7 % 10.9 % 6.2 % 10.5 % Capital
Products 38.1 34.3 11.2 % 13.2 % 22.1 %
1.2 % 4.8 % $ 184.8 $ 169.2 9.2 % 11.2 % 13.0 %
5.1 % 9.2 % Domestic $ 99.2 $ 87.8 13.0 % 13.0
% International 85.6 81.4 5.1 % 9.2 % $ 184.8
$ 169.2 9.2 % 11.2 %
Nine Months Ended
September 30, % Change Domestic
International 2016 2015 As
Reported Constant Currency As Reported
As Reported Constant Currency
Orthopedic Surgery $ 272.5 $ 284.8 -4.3 % -1.2 % -2.5 % -5.5 % -0.3
% General Surgery 248.9 203.3 22.4 % 23.9 % 26.0 % 15.8 % 20.0 %
Surgical Visualization 38.0 40.1 -5.0 % -2.7 %
-6.8 % -3.1 % 1.8 % $ 559.4 $ 528.2 5.9 % 8.4
% 11.4 % 0.4 % 5.3 % Single-use Products $
445.8 $ 420.4 6.0 % 8.6 % 9.7 % 2.1 % 7.3 % Capital Products
113.6 107.8 5.5 % 8.0 % 19.7 % -5.3 %
-1.2 % $ 559.4 $ 528.2 5.9 % 8.4 % 11.4 % 0.4 %
5.3 % Domestic $ 294.0 $ 263.8 11.4 % 11.4 %
International 265.4 264.4 0.4 % 5.3 % $ 559.4
$ 528.2 5.9 % 8.4 %
Reconciliation of Reported Net Earnings
to Adjusted Net Earnings
(in thousands, except per share amounts,
unaudited)
Three Months Ended September 30,
2016 Gross Profit Selling & Administrative
Expense Operating Income Other
Expense Tax Expense Effective Tax
Rate Net Income Diluted EPS As
reported $ 101,209 $ 79,009 $
13,847 $ - $ 2,649 26.5 %
$ 7,337 $ 0.26 % of sales 54.8 % 42.8 %
7.5 % Restructuring costs
(1) - (361 ) 361 - 172 189 0.01 Business acquisition costs (2) -
(3,314 ) 3,314 - 1,486 1,828 0.06 Gain on sale of facility (3)
- 1,890 (1,890 )
- (853 )
(1,037 ) (0.04 ) $ 101,209 $ 77,224
$ 15,632 $ - $ 3,454
29.3 % $ 8,317 $ 0.29 % of sales 54.8 % 41.8 % 8.5 %
Amortization of intangible assets $ 1,500 $ (3,498 ) $ 4,998 $ - $
1,777 3,221 0.12
Adjusted
earnings $ 11,538 $ 0.41
Three
Months Ended September 30, 2015 Gross Profit
Selling & Administrative Expense Operating
Income Other Expense Tax Expense
Effective Tax Rate Net Income
Diluted EPS As reported $ 93,546 $
72,056 $ 14,838 $ - $ 4,461
33.5 % $ 8,873 $ 0.32 %
of sales 55.3 % 42.6 % 8.8 % Restructuring costs (1) 1,316
(1,331 ) 2,647
- 953 1,694
0.06 $ 94,862 $ 70,725
$ 17,485 $ - $ 5,414
33.9 % $ 10,567 $ 0.38 % of sales 56.1 % 41.8 % 10.3 %
Amortization of intangible assets $ 1,500 $ (1,578 ) $ 3,078 $ - $
1,108 1,970 0.07
Adjusted
earnings $ 12,537 $ 0.45 (1) In
2016 and 2015, the Company restructured certain sales, marketing
and administrative functions and incurred severance and other
related costs. In 2015, the Company continued the operational
restructuring, including the consolidation of its Centennial,
Colorado manufacturing operations into other existing CONMED
manufacturing facilities. (2) In 2016, the Company incurred
consulting fees, legal fees, and integration related costs
associated with the acquisition of SurgiQuest, Inc. (3) In 2016,
the Company recorded a gain on the sale of its facility in
Centennial, Colorado.
Reconciliation of Reported Net Earnings
to Adjusted Net Earnings
(in thousands, except per share amounts,
unaudited)
Nine Months Ended September 30,
2016 Gross Profit Selling & Administrative
Expense Operating Income Other
Expense Tax Expense Effective Tax
Rate Net Income Diluted EPS As
reported $ 301,371 $ 251,681 $
25,070 $ 2,942 $ 2,724
25.5 % $ 7,956 $ 0.28 % of sales 53.9 %
45.0 % 4.5 %
Restructuring costs (1) 5,537 (4,105 ) 9,642 - 3,215 6,427 0.23
Business acquisition costs (2) - (17,355 ) 17,355 - 6,035 11,320
0.41 Gain on sale of facility (3) - 1,890 (1,890 ) - (853 ) (1,037
) (0.04 ) Debt refinancing costs (4) -
- - (2,942 )
930 2,012
0.07 $ 306,908 $ 232,111
$ 50,177 $ - $ 12,051
31.1 % $ 26,678 $ 0.95 % of sales 54.9 % 41.5 % 9.0 % Amortization
of intangible assets $ 4,500 $ (10,489 ) $ 14,989 $ - $ 5,341
9,648 0.35
Adjusted
earnings $ 36,326 $ 1.30
Nine
Months Ended September 30, 2015 Gross Profit
Selling & Administrative Expense Operating
Income Other Expense Tax Expense
Effective Tax Rate Net Income
Diluted EPS As reported $ 279,326 $
220,423 $ 38,208 $ - $
11,109 32.9 % $ 22,646 $ 0.81
% of sales 52.9 % 41.7 % 7.2 % Restructuring costs (1)
5,179 (9,795 ) 14,974
- 5,391
9,583 0.35 $
284,505 $ 210,628 $ 53,182
$ - $ 16,500 33.9 % $ 32,229 $
1.16 % of sales 53.9 % 39.9 % 10.1 % Amortization of intangible
assets $ 4,500 $ (4,896 ) $ 9,396 $ - $ 3,383 6,013
0.21
Adjusted earnings $ 38,242
$ 1.37 (1) In 2016 and 2015, the Company
restructured certain sales, marketing and administrative functions
and incurred severance and other related costs. Additionally, in
the second quarter of 2016, the Company terminated a product
offering and incurred charges mainly related to inventory and fixed
assets. Finally, in 2016 and 2015, the Company continued and
completed the operational restructuring, including the
consolidation of its Centennial, Colorado manufacturing operations
into other existing CONMED manufacturing facilities. (2) In 2016,
the Company incurred investment banking fees, consulting fees,
legal fees, and integration related costs associated with the
acquisition of SurgiQuest, Inc. (3) In 2016, the Company recorded a
gain on the sale of its facility in Centennial, Colorado. (4) In
2016, in conjunction with the acquisition of SurgiQuest, Inc., 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 Nine
Months Ended September 30, September 30,
2016 2015 2016
2015 Net income $ 7,337 $ 8,873
$ 7,956 $ 22,646 Provision for income taxes 2,649
4,461 2,724 11,109 Interest expense 3,861 1,504 11,448 4,453
Depreciation 5,301 4,723 15,242 13,919 Amortization 8,357
6,354 25,187 17,943
EBITDA $ 27,505 $ 25,915 $ 62,557 $
70,070 Stock based compensation 1,921 1,784 5,784
4,822 Restructuring costs 361 2,647 9,642 14,974 Business
acquisition costs 3,314 - 17,355 - Gain on sale of facility (1,890
) - (1,890 ) - Debt refinancing costs - -
2,942 - Adjusted EBITDA $ 31,211
$ 30,346 $ 96,390 $ 89,866
EBITDA Margin EBITDA 14.9 % 15.3 % 11.2 % 13.3 %
Adjusted EBITDA 16.9 % 17.9 % 17.2 % 17.0 %
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161027006615/en/
CONMED CorporationLuke A. Pomilio,
315-624-3202Chief Financial
OfficerLukePomilio@conmed.com
CONMED (NASDAQ:CNMD)
Historical Stock Chart
From Aug 2024 to Sep 2024
CONMED (NASDAQ:CNMD)
Historical Stock Chart
From Sep 2023 to Sep 2024