CONMED Corporation (Nasdaq:CNMD) today announced
financial results for the fourth quarter and fiscal year ended
December 31, 2016.
Fourth Quarter 2016 Highlights
- Sales of $204.1 million increased 6.8%
as reported compared to the fourth quarter of 2015. On a
constant currency basis, sales increased 9.1% but declined 1.5%
organically.
- International reported revenue grew
6.0% year over year and 0.4% organically. On an organic constant
currency basis, international markets increased 4.8%, delivering a
third consecutive quarter of growth across all three reporting
categories.
- Domestic General Surgery sales grew
33.4% as reported, driven by continued strength in the AirSeal®
platform. On an organic basis, domestic General Surgery sales
increased 1.5%.
- Diluted net earnings per share (GAAP)
were $0.24, compared to diluted net earnings per share (GAAP) of
$0.28 in the fourth quarter of 2015.
- Adjusted diluted net earnings per
share(1) were $0.54 versus $0.60 in the prior-year period.
Fiscal Year 2016 Highlights
- Sales of $763.5 million increased 6.2%
as reported compared to the full year 2015. On a constant currency
basis, sales increased 8.6% but declined 1.1% organically.
- AirSeal® contribution of $68.4 million
to full year 2016 sales exceeded the Company’s forecasted range of
$62 to $67 million.
- Diluted net earnings per share (GAAP)
were $0.52, compared to $1.09 in 2015.
- Adjusted diluted net earnings per
share(1) were $1.84 versus $1.98 in the prior-year period.
“Our International business and the domestic General Surgery
category, which represent 78% of our total revenue, exited the year
with positive momentum. Overall, we are demonstrating consistent
and improving performance across these areas. Clearly, these
successes were offset by ongoing challenges in
domestic Orthopedics, where we believe we are taking the
appropriate steps to drive improvement in this business over
the coming quarters,” commented Curt R. Hartman, CONMED’s
President and Chief Executive Officer.
Sales Analysis
For the quarter ended December 31, 2016, domestic sales, which
represented 51.5% of total revenue, increased 7.6%, despite
declines in Orthopedics and Visualization, due to continued
strength in General Surgery, as the SurgiQuest acquisition and
organic growth contributed to 33.4% year-over-year growth in the
business. International sales, which represented 48.5% of total
revenue, increased 6.0% compared to the fourth quarter of 2015 on a
reported basis. Foreign currency exchange rates, including the
effects of the FX hedging program, had a negative impact of $4.4
million on fourth quarter sales. In constant currency,
international sales increased 10.7% versus the prior-year
period.
For the fiscal year ended December 31, 2016, domestic sales,
which represented 52.3% of total revenue, increased 10.4% as
positive results in General Surgery, driven by AirSeal® sales
growth, were partially offset by weaker than expected sales in
Orthopedics and, to a lesser extent, Visualization. International
sales, which represented 47.7% of total revenue, increased 1.9%
compared to 2015 on a reported basis. Foreign currency exchange
rates, including the effects of the FX hedging program, had a
negative impact of $17.3 million on fiscal year 2016 sales. In
constant currency, international sales increased 6.7% versus the
prior-year period.
Earnings Analysis
For the quarter ended December 31, 2016, reported net earnings
totaled $6.7 million, compared to reported net earnings of $7.9
million a year ago. Reported diluted net earnings per share were
$0.24 in the quarter, compared to reported diluted net earnings per
share of $0.28 in the prior-year period. Reported net earnings for
both 2016 and 2015 include business acquisition and 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 an
asset 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 $15.1 million decreased 8.8% year over year and
adjusted diluted net earnings per share(1) of $0.54 decreased 10.0%
year over year. The decrease in adjusted net earnings resulted
primarily from unfavorable impact of foreign exchange rates,
partially offset by a lower tax rate during the quarter.
For the fiscal year ended December 31, 2016, reported net
earnings totaled $14.7 million, compared to reported net earnings
of $30.5 million in the prior year. Reported diluted net earnings
per share were $0.52, compared to $1.09 in the prior-year period.
Excluding the impact of the special items as described above and as
provided in the reconciliation of GAAP to non-GAAP measures below,
adjusted net earnings(2) of $51.4 million decreased 6.4% year over
year and adjusted diluted net earnings per share(1) of $1.84
decreased 7.1% from the prior year.
2017 Outlook
The Company expects 2017 constant currency sales growth in the
range of 1% to 3%. Based on exchange rates as of January 27, 2017,
the negative impact to 2017 sales from foreign exchange is
anticipated to be approximately 0.5%.
In addition, the Company forecasts adjusted diluted net earnings
per share in the range of $1.85 to $1.95, which includes an
estimated negative impact from foreign exchange based on exchange
rates as of January 27, 2017. The adjusted diluted net earnings per
share estimates for 2017 exclude the cost of special items
including acquisition costs and restructuring costs, which are
estimated in the range of $8.0 to $10.0 million, net of tax, and
amortization of intangible assets, which are 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 a supplemental financial disclosure, which is 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
4:30 p.m. ET to discuss its fourth quarter and fiscal year 2016
results.
To participate in the conference call, dial 844-889-7792
(domestic) or 661-378-9936 (international) and enter the passcode
46955565.
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 7:30 p.m. ET
on Wednesday, February 1, 2017, until 7:30 p.m. ET on Wednesday,
February 15, 2017. To hear this recording, dial 855-859-2056
(domestic) or 404-537-3406 (international) and enter the passcode
46955565.
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
3,300 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 Twelve
Months Ended December 31, December 31,
2016 2015 2016 2015
Net sales $ 204,094 $ 191,017 $ 763,520 $ 719,168
Cost of sales 97,135 88,641 355,190
337,466 Gross profit 106,959
102,376 408,330 381,702 % of sales 52.4% 53.6%
53.5% 53.1% Selling and administrative expense 86,719 82,668
338,400 303,091 Research & development 7,634
6,741 32,254 27,436 Income from
operations 12,606 12,967 37,676
51,175 % of sales 6.2% 6.8% 4.9% 7.1% Other expense - -
2,942 - Interest expense 3,911 1,578
15,359 6,031 Income before income taxes 8,695 11,389
19,375 45,144 Provision for income taxes 1,987
3,537 4,711 14,646 Net income $ 6,708 $
7,852 $ 14,664 $ 30,498 Basic EPS $ 0.24 $ 0.28 $
0.53 $ 1.10 Diluted EPS 0.24 0.28 0.52 1.09 Basic shares
27,832 27,707 27,804 27,653 Diluted shares 27,987 27,875 27,964
27,858
Consolidated Condensed Balance
Sheets(in thousands, unaudited)
December December
2016 2015 Assets: Cash and cash
equivalents $ 27,428 $ 72,504 Accounts receivable, net 148,244
133,863 Inventories 135,869 133,361 Other current assets
18,971 20,076
Total Current Assets 330,512
359,804 Property, plant and equipment, net 122,029 125,452 Goodwill
397,664 260,651 Other intangible assets, net 419,549 308,171 Other
assets 59,229 47,622
Total Assets $
1,328,983 $ 1,101,700
Liabilities and
Shareholders' Equity: Current liabilities $ 113,952 $ 119,718
Long-term debt, excluding current maturities 488,288 269,471 Other
liabilities 146,167 127,438 Shareholders' equity 580,576
585,073
Total Liabilities and Shareholders'
Equity $ 1,328,983 $ 1,101,700
Consolidated Condensed Statements of
Cash FlowsTwelve Months Ended December 31, 2016 and 2015(in
thousands, unaudited)
2016 2015 Operating
Activities Net income $ 14,664 $ 30,498 Depreciation and
amortization 55,309 43,879 Stock-based compensation expense 8,375
7,499 Deferred income taxes (2,871) 2,251 Changes in operating
assets and liabilities and other, net (37,255)
(36,059)
Net cash provided by operating activities
38,222 48,068
Investing Activities Payments
related to business acquisitions (256,450) (9,353) Proceeds from
sale of a facility 5,178 - Purchases of property, plant and
equipment (14,753) (15,009)
Net cash used in
investing activities (266,025) (24,362)
Financing Activities Payments on term loan (8,750) -
Proceeds of term loan 175,000 - Proceeds of revolver 225,000
142,680 Payments on revolver (162,347) (112,000) Payments related
to debt issue costs (5,556) (1,485) Payment related to distribution
agreement (16,667) (16,667) Dividend payments on common stock
(22,213) (22,105) Other, net (265) (196)
Net cash
provided by (used in) financing activities 184,202
(9,773) Effect of exchange rate changes on cash and
cash equivalents (1,475) (7,761) Net increase
(decrease) in cash and cash equivalents (45,076) 6,172 Cash and
cash equivalents at beginning of period 72,504 66,332
Cash and cash equivalents at end of period $ 27,428 $ 72,504
Sales Summary(in millions,
unaudited)
Three Months Ended December 31,
% Change Domestic
International 2016 2015
AsReported
ConstantCurrency
AsReported
AsReported
ConstantCurrency
Orthopedic Surgery $ 98.0 $ 104.2 -5.9% -3.2% -12.6% -1.1%
3.7% General Surgery 92.5 70.9 30.5% 32.0% 33.4% 25.2% 29.5%
Surgical Visualization 13.6 15.9 -15.0% -13.9%
-27.7% 0.2% 3.3% $ 204.1 $ 191.0 6.8% 9.1%
7.6% 6.0% 10.7% Single-use Products $ 160.0 $
146.8 9.0% 11.3% 10.9% 6.8% 11.8% Capital Products 44.1
44.2 -0.2% 1.6% -4.7% 3.7% 7.3% $ 204.1
$ 191.0 6.8% 9.1% 7.6% 6.0% 10.7%
Domestic $ 105.1 $ 97.7 7.6% 7.6% International 99.0
93.3 6.0% 10.7% $ 204.1 $ 191.0 6.8% 9.1%
Twelve Months Ended December 31, % Change
Domestic International 2016
2015
AsReported
ConstantCurrency
AsReported
AsReported
ConstantCurrency
Orthopedic Surgery $ 370.5 $ 389.0 -4.7% -1.7% -5.4% -4.3% 0.7%
General Surgery 341.4 274.2 24.5% 26.0% 27.9% 18.2% 22.5% Surgical
Visualization 51.6 56.0 -7.8% -5.9% -13.0%
-2.2% 2.2% $ 763.5 $ 719.2 6.2% 8.6% 10.4%
1.9% 6.7% Single-use Products $ 605.8 $ 567.3
6.8% 9.3% 10.0% 3.3% 8.5% Capital Products 157.7
151.9 3.8% 6.1% 12.2% -2.8% 1.2% $ 763.5
$ 719.2 6.2% 8.6% 10.4% 1.9% 6.7%
Domestic $ 399.1 $ 361.5 10.4% 10.4% International 364.4
357.7 1.9% 6.7% $ 763.5 $ 719.2 6.2% 8.6%
Reconciliation of Reported Net Earnings
to Adjusted Net Earnings(in thousands, except per share
amounts, unaudited)
Three Months Ended December 31, 2016 Gross
Profit
Selling
&AdministrativeExpense
OperatingIncome
OtherExpense
TaxExpense
EffectiveTax Rate
NetIncome
DilutedEPS
As reported $ 106,959 $ 86,719 $ 12,606
$ - $ 1,987 22.9% $ 6,708 $ 0.24 % of
sales 52.4% 42.5% 6.2%
Restructuring costs (1) 2,075 (2,768) 4,843 - 1,701 3,142
0.11 Business acquisition costs (2) - (3,244)
3,244 - 1,139
2,105 0.08 $ 109,034 $
80,707 $ 20,693 $ - $ 4,827 28.8% $
11,955 $ 0.43 % of sales 53.4% 39.5% 10.1% Amortization of
intangible assets $ 1,500 $ (3,500) $ 5,000 $ - $ 1,857
3,143 0.11
Adjusted earnings $ 15,098 $
0.54
Three Months Ended December 31, 2015 Gross
Profit
Selling
&AdministrativeExpense
OperatingIncome
OtherExpense
TaxExpense
EffectiveTax Rate
NetIncome
DilutedEPS
As reported $ 102,376 $ 82,668 $ 12,967
$ - $ 3,537 31.1% $ 7,852 $ 0.28 % of
sales 53.6% 43.3% 6.8% Restructuring costs (1) 2,837 (4,334) 7,171
- 2,461 4,710 0.17 Business acquisition costs (2) -
(2,069) 2,069 -
172 1,897 0.07 $ 105,213
$ 76,265 $ 22,207 $ - $ 6,170
29.9% $ 14,459 $ 0.52 % of sales 55.1% 39.9% 11.6% Amortization of
intangible assets $ 1,500 $ (1,590) $ 3,090 $ - $ 963 2,127
0.08
Adjusted earnings $ 16,586 $ 0.60
(1)
In 2016 and 2015, the Company restructured
certain operating, sales, marketing and administrative functions
and incurred severance and other related costs.
(2)
In 2016 and 2015, the Company incurred
consulting fees, legal fees, and integration related costs
associated with the acquisition of SurgiQuest, Inc.
Reconciliation of Reported Net Earnings
to Adjusted Net Earnings(in thousands, except per share
amounts, unaudited)
Twelve Months Ended December 31, 2016 Gross
Profit
Selling
&AdministrativeExpense
OperatingIncome
OtherExpense
TaxExpense
EffectiveTax Rate
Net Income
DilutedEPS
As reported $ 408,330 $ 338,400 $ 37,676
$ 2,942 $ 4,711 24.3% $ 14,664 $
0.52 % of sales 53.5% 44.3% 4.9%
Restructuring costs (1) 7,612 (6,873) 14,485 - 4,919
9,566 0.35 Business acquisition costs (2) - (20,599) 20,599 - 7,173
13,426 0.48 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 $ 415,942 $
312,818 $ 70,870 $ - $ 16,880 30.4% $
38,631 $ 1.38 % of sales 54.5% 41.0% 9.3% Amortization of
intangible assets $ 6,000 $ (13,989) $ 19,989 $ - $ 7,197
12,792 0.46
Adjusted earnings $ 51,423
$ 1.84
Twelve Months Ended December 31, 2015 Gross
Profit
Selling
&AdministrativeExpense
OperatingIncome
OtherExpense
TaxExpense
EffectiveTax Rate
Net Income
DilutedEPS
As reported $ 381,702 $ 303,091 $ 51,175
$ - $ 14,646 32.4% $ 30,498 $
1.09 % of sales 53.1% 42.1% 7.1% Restructuring costs (1) 8,016
(13,655) 21,671 - 7,713 13,958 0.51 Business acquisition costs (2)
- (2,543) 2,543 -
311 2,232
0.08 $ 389,718 $ 286,893 $ 75,389 $ - $
22,670 32.7% $ 46,688 $ 1.68 % of sales 54.2% 39.9% 10.5%
Amortization of intangible assets $ 6,000 $ (6,486) $ 12,486 $ - $
4,145 8,341 0.30
Adjusted earnings $
55,029 $ 1.98
(1)
In 2016 and 2015, the Company restructured
certain operating, 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.
(2)
In 2016 and 2015, 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 Twelve
Months Ended December 31, December 31,
2016 2015 2016 2015
Net income $ 6,708 $ 7,852 $ 14,664 $ 30,498
Provision for income taxes 1,987 3,537 4,711 14,646 Interest
expense 3,911 1,578 15,359 6,031 Depreciation 5,237 4,785 20,479
18,704 Amortization 8,601 6,638 33,788
24,581 EBITDA $ 26,444 $ 24,390 $ 89,001
$ 94,460 Stock based compensation 1,869 1,656 7,653
6,478 Restructuring costs 4,843 7,171 14,485 21,671 Business
acquisition costs 3,244 2,069 20,599 2,543 Gain on sale of facility
- - (1,890) - Debt refinancing costs - -
2,942 - Adjusted EBITDA $ 36,400 $
35,286 $ 132,790 $ 125,152
EBITDA
Margin EBITDA 13.0% 12.8% 11.7% 13.1% Adjusted EBITDA 17.8%
18.5% 17.4% 17.4%
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170201006262/en/
CONMED CorporationLuke A. Pomilio,
315-624-3202Chief Financial
OfficerLukePomilio@conmed.com
CONMED (NASDAQ:CNMD)
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