CONMED Corporation (NYSE: CNMD) today announced financial
results for the first quarter ended March 31, 2020.
First Quarter 2020 Highlights
- Sales of $214.0 million decreased 2.0% year over year as
reported and 0.7% in constant currency. Acquisitions contributed
approximately 290 basis points of growth.
- Domestic revenue increased 1.6% year over year.
- International revenue decreased 6.1% as reported and 3.4% in
constant currency.
- Diluted net earnings per share (GAAP) were $0.20, compared to
diluted net earnings per share of $0.04 in the first quarter of
2019.
- Adjusted diluted net earnings per share(1) were $0.51 versus
$0.57 in the first quarter of 2019, a decrease of 10.5%.
“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.”
2020 Outlook
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this evolving dynamic, management has withdrawn its previously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.
Conference Call
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, unaudited)
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
Sales
Summary
(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
Adjusted Net Income (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.
(4) In 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
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 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
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 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 measures.
Net sales on 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.
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, 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 GAAP financial measures above,
provide a more complete understanding of the business. The Company
strongly encourages investors and shareholders to review its
financial statements and publicly filed reports in their entirety
and not to rely on any single financial measure.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200429005759/en/
CONMED Corporation Todd Garner Chief Financial Officer
315-624-3317 ToddGarner@conmed.com
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