CONMED Reports Third Quarter Results - 3Q Sales Exceed Guidance -
UTICA, N.Y., Oct. 21 /PRNewswire-FirstCall/ -- CONMED Corporation
(NASDAQ: CNMD) announced today its financial results for the third
quarter ended September 30, 2004. Mr. Joseph J. Corasanti,
President and Chief Operating Officer, said, "CONMED's third
quarter sales growth of close to 10% was excellent. Our strong
quarterly performance was primarily driven by a 100% increase in
video systems sales, which fueled our 19% Arthroscopy sales growth,
and a 9% increase in Patient Care sales which resulted from the
introduction of several new products over the past twelve months."
Total sales for the third quarter increased 9.6% to $132.3 million
($130.4 million at constant exchange rates) compared to $120.7
million in the third quarter of 2003. Excluding acquisition and
transition charges (please see attached reconciliation for full
explanation), non-GAAP net income for the third quarter grew to
$11.5 million, or $0.38 per diluted share, on a 3% increase in
diluted shares outstanding, compared to $10.4 million, or $0.36 per
diluted share, in last year's third quarter. GAAP net income,
including acquisition and transition charges, for the three months
ended September 2004 was $1.7 million, or $0.06 per diluted share,
compared to $9.7 million or $0.33 per diluted share in the third
quarter of 2003. Strong sales growth in the 2004 third quarter was
fueled by revenues of the Company's video imaging products for
arthroscopy and general surgery, which grew 100% in the third
quarter compared to the last year's third quarter. This growth
resulted from the introduction of CONMED's newest enhanced
definition camera early in 2004. Further, revenues for the
Company's Patient Care product group grew 9.4% in the third quarter
of 2004 on the strength of a variety of its clinical care
offerings, including its pulse oximetry monitoring devices. Sales
in the Company's orthopedic business, which is comprised of its
Arthroscopy and Powered Instruments product groups, grew 12.5% to
$81.0 million from $72.0 million in last year's third quarter.
Arthroscopy sales, including integrated systems, increased 19.0% to
$50.8 million compared to $42.7 million in the same period a year
ago. Powered Instrument sales grew 3.1% to $30.2 million compared
to $29.3 million in the third quarter of 2003. Electrosurgery
revenues increased 2.9% to $21.2 million on a difficult comparison
to robust sales in the third quarter of 2003 of $20.6 million.
Sales of Patient Care Products grew 9.4% to $18.7 million compared
to $17.1 million. Endosurgery (formerly named Endoscopy) revenues
increased 3.6% to $11.4 million compared to third quarter 2003
sales of $11.0 million. Over the previous six quarters, the
Company's gross margin percentage has remained relatively
consistent at approximately 52.5%. In the third quarter of 2004,
however, the gross margin percentage was equal to 51.0% as a result
of a change in the mix of our product sales - specifically, the
growth in video imaging systems sales (in the Arthroscopy product
group) and Patient Care product sales, both of which have lower
gross margins than the other product groups. It has been the
Company's experience that sales of video products often lead to
future sales of the Company's Arthroscopy single-use products, with
gross margins generally higher than the Company average. For the
nine months ended September 30, 2004, CONMED reported a 9.3%
increase in revenues, rising to $397.2 million, ($389.7 million in
constant currency) from the $363.3 million in the first nine months
of last year. Non-GAAP net income for year-to-date September 2004
excluding acquisition and transition charges (please see attached
reconciliation for full explanation) grew to $35.8 million, or
$1.18 per diluted share, compared to non-GAAP net income of $30.6
million, or $1.05 per diluted share, for the nine months ended
September 30, 2003. GAAP net income and diluted EPS for the first
nine months of 2004 were $26.0 million and $0.86, respectively
compared to GAAP net income and diluted EPS of $19.1 million and
$0.66 in the nine months ended September 30, 2003. Sales growth by
product line for the nine months ended September, 2004 is as
follows: Arthroscopy (including integrated systems) + 14.4%;
Powered Instruments + 5.7%; Electrosurgery + 10.1%; Patient Care +
5.8%; and Endosurgery + 3.9%. Cash flow of the Company continues to
be strong. For the nine months ended September 30, 2004, cash
inflows approximate $62 million from operations. As previously
announced, the Company completed the acquisition of the Endoscopic
Technologies product line from C.R. Bard on September 30, 2004 for
a purchase price of $80 million (subject to adjustment).
Accordingly, the estimated fair value of the assets and liabilities
acquired have been recorded as of September 30, 2004. One of the
intangible assets acquired, in-process research and development,
has an estimated value of $13.7 million based on a preliminary
independent, third-party valuation. In accordance with the
applicable accounting standards, this acquired asset was charged to
expense in the quarter ended September 2004. Additional pre-tax
costs of acquisition and transition amounting to $1.2 million were
recorded in the period ending September 30, 2004. Mr. Corasanti
concluded, "On October 1, 2004 we began shipping the products of
our newly acquired product line, Endoscopic Technologies. For the
fourth quarter of 2004, as a result of this increased sales
activity, we expect total sales of CONMED medical devices to be in
the range of $154 - $158 million with diluted earnings per share
estimated to be $0.45 - $0.49, excluding acquisition and transition
related charges. Looking ahead to 2005, we estimate sales to
increase approximately 15% over 2004 amounts on forecasted 7%
increase from our continued organic sales growth and the remainder
from our new Endoscopic Technologies business. At these sales
levels, we estimate that diluted earnings per share for 2005 will
approximate $1.94 - $1.98 excluding acquisition and transition
related charges. We also expect that free cash flow for 2005 will
approximate $75 - $80 million." Today's Conference Call CONMED will
broadcast its third quarter 2004 conference call live over the
Internet today at 10:00 a.m. Eastern Time. This broadcast can be
accessed from CONMED's web site at http://www.conmed.com/ . Replays
of the call will be made available through October 27, 2004. CONMED
Profile CONMED is a medical technology company with an emphasis on
surgical devices and equipment for minimally invasive procedures
and 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 2,800 employees distribute its products
worldwide from eleven 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, including the above mentioned
anticipated revenues and earnings, 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, 2003; (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
acquisition (and its integration) or other transaction may require
the Company to reconsider its financial assumptions and
goals/targets; and/or (vii) the Company's ability to devise and
execute strategies to respond to market conditions. CONMED
CORPORATION CONSOLIDATED STATEMENTS OF INCOME (unaudited, in
thousands except per share amounts) Three months ended Nine months
ended September 30, September 30, 2003 2004 2003 2004 Net sales
$120,747 $132,289 $363,321 $397,165 Cost of sales 57,516 64,802
172,564 190,605 Cost of sales, nonrecurring - Note A - - 739 -
Gross profit 63,231 67,487 190,018 206,560 Selling and
administrative 38,596 42,719 115,094 128,921 Research and
development 4,487 4,706 12,568 14,281 Write-off of purchased
in-process research and development assets - Note B - 13,700 7,900
13,700 Other expense (income), net - Note C 1,153 867 (3,195) 867
44,236 61,992 132,367 157,769 Income from operations 18,995 5,495
57,651 48,791 Loss on early extinguishment of debt - - 8,078 -
Interest expense - Note D 3,829 3,189 15,228 9,053 Income before
income taxes 15,166 2,306 34,345 39,738 Provision for income taxes
5,460 607 15,208 13,708 Net income $9,706 $1,699 $ 19,137 $ 26,030
Per share data: Net Income Basic $ .34 $ .06 $ .66 $ .88 Diluted
.33 .06 .66 .86 Weighted average common shares Basic 28,941 29,816
28,909 29,618 Diluted 29,391 30,347 29,190 30,241 Note A - Included
in cost of sales in the nine months ended September 30, 2003 are
$.7 million in acquisition-related costs. Note B - In the nine
months ended September 30, 2003, we wrote off $7.9 million of
purchased in-process research and development assets in connection
with the Bionx acquisition. No benefit for income taxes was
recorded on the write-off as these costs are not deductible for
income tax purposes. On September 30, 2004, we wrote off the
tax-deductible purchased in-process research and development assets
related to the Bard Endoscopic Technologies acquisition estimated
at $13.7 million. Note C - Included in other expense (income) in
the three months ended September 30, 2003 are $.8 million of
pension settlement costs related to the restructuring of our
orthopedic sales force and $.4 million in acquisition-related
costs. Included in other expense (income) in the nine months ended
September 30, 2003 are a $9.0 million gain on the settlement of a
contractual dispute, $2.8 million of pension settlement costs
related to the restructuring of our orthopedic sales force and $3.0
million in acquisition-related costs. Included in other expense
(income) for the three and nine months ended September 30, 2004 are
$.9 million of acquisition-related costs. Note D - Interest expense
for the three and nine months ended September 30, 2004 includes $.3
million of financing costs related to the Bard Endoscopic
Technologies acquisition. CONMED CORPORATION CONSOLIDATED CONDENSED
BALANCE SHEETS (in thousands) ASSETS (unaudited) December Sept. 30,
2003 2004 Note A Current assets: Cash and cash equivalents $5,986
$10,223 Accounts receivable, net 60,449 63,627 Inventories 120,945
125,369 Deferred income taxes 10,188 10,705 Other current
assets........ 3,538 3,467 Total current assets 201,106 213,391
Property, plant and equipment, net. 97,383 100,557 Goodwill and
other assets, net 506,569 553,891 Total assets $805,058 $867,839
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current
portion of long-term debt $4,143 $3,988 Other current liabilities
50,712 43,916 Total current liabilities 54,855 47,904 Long-term
debt 260,448 285,995 Other long-term liabilities 56,265 64,111
Total liabilities 371,568 398,010 Shareholders' equity: Capital
accounts 236,948 248,035 Retained earnings 194,473 220,503
Accumulated other comprehensive income 2,069 1,291 Total equity
433,490 469,829 Total liabilities and shareholders' equity $805,058
$867,839 OTHER FINANCIAL INFORMATION (unaudited, in thousands)
Three months ended Nine months ended September 30, September 30,
2003 2004 2003 2004 Depreciation $2,809 $2,744 $7,717 $ 8,003
Amortization 3,655 3,865 10,166 11,295 Capital expenditures 2,340
3,191 6,291 7,529 Note A - The Consolidated Condensed Balance Sheet
as of September 30, 2004 includes the estimated assets and
liabilities related to the Bard Endoscopic Technologies
acquisition. CONMED CORPORATION RECONCILIATION OF REPORTED NET
INCOME TO NET INCOME BEFORE NONRECURRING ITEMS (In thousands except
per share amounts) (unaudited) Three months ended September 30,
2003 2004 Reported net income $9,706 $ 1,699 Write-off of purchased
in-process research And development assets - 13,700 Pension
settlement costs 758 - Other acquisition-related costs 395 867
Total other expense (income), net 1,153 867 Acquisition-related
interest expense - 360 Nonrecurring expense before income taxes
1,153 14,927 Provision (benefit) for income taxes on nonrecurring
expense (415) (5,150) Net income before nonrecurring items. $
10,444 $11,476 Per share data: Reported net income (loss) Basic $
0.34 $ 0.06 Diluted 0.33 0.06 Net income before nonrecurring items
Basic $ 0.36 $ 0.38 Diluted 0.36 0.38 Management has provided the
above reconciliation of net income before nonrecurring items 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. CONMED CORPORATION RECONCILIATION OF REPORTED NET
INCOME TO NET INCOME BEFORE NONRECURRING ITEMS (In thousands except
per share amounts) (unaudited) Nine months ended September 30, 2003
2004 Reported net income $19,137 $26,030 Acquisition-related costs
included in cost of sales 739 - Write-off of purchased in-process
research and development assets 7,900 13,700 Gain on settlement of
a contractual dispute, net of legal costs (9,000) - Pension
settlement costs 2,839 - Other acquisition-related costs 2,966 867
Total other expense (income), net (3,195) 867 Acquisition-related
interest expense - 360 Loss on early extinguishment of debt 8,078 -
Nonrecurring expense before income taxes 13,522 14,927 Provision
(benefit) for income taxes on nonrecurring expense (2,024) (5,150)
Net income before nonrecurring items. $30,635 $35,807 Per share
data: Reported net income Basic $ 0.66 $ 0.88 Diluted 0.66 0.86 Net
income before nonrecurring items Basic $ 1.06 $ 1.21 Diluted 1.05
1.18 Management has provided the above reconciliation of net income
before nonrecurring items 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. DATASOURCE: CONMED
Corporation CONTACT: Robert Shallish, Chief Financial Officer of
CONMED Corporation, +1-315-624-3206; or Investors: Julie Huang or
Lanie Marcus, or Media: Sean Leous, +1-212-850-5600, all of
Financial Dynamics for CONMED Corporation Web site:
http://www.conmed.com/
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