CONMED Corporation (NYSE: CNMD) today announced financial
results for the second quarter ended June 30, 2020.
Second Quarter 2020 Highlights
- Sales of $157.8 million decreased 33.8% year over year as
reported and 32.6% in constant currency.
- Domestic revenue decreased 32.2% year over year.
- International revenue decreased 35.6% as reported and 33.0% in
constant currency.
- Diluted net loss per share (GAAP) was $0.96, compared to
diluted net earnings per share of $0.19 in the second quarter of
2019.
- Adjusted diluted net loss per share(1) was $0.07 versus
adjusted net earnings per share of $0.56 in the second quarter of
2019.
“I am extremely proud of our entire organization’s response to
the global COVID-19 crisis, the impact of which is reflected in our
second quarter results,” commented Curt R. Hartman, CONMED’s
President, Chief Executive Officer and Chair of the Board. “The
month-over-month improvements in our revenue, profitability, and
cash flow over the course of the quarter are encouraging signs.
While we expect continued uncertainty as a result of the COVID-19
crisis, we feel well positioned as we enter the second half of 2020
and beyond.”
2020 Outlook
Due to the continued uncertainty created by the COVID-19
pandemic, management is unable to provide financial guidance at
this time.
Supplemental Financial Disclosures
(1) A reconciliation of reported diluted net earnings (loss) per
share to adjusted diluted net earnings (loss) 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 second 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 2083716.
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, July 29, 2020, until 7:30 p.m. ET on Wednesday,
August 5, 2020. To hear this recording, dial 1-855-859-2056
(domestic) or +1-404-537-3406 (international) and enter the
passcode 2083716.
Consolidated Condensed
Statements of Income (Loss)
(in thousands, except per share
amounts, unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2020
2019
2020
2019
Net sales
$
157,785
$
238,263
$
371,796
$
456,641
Cost of sales
85,856
107,073
180,707
204,013
Gross profit
71,929
131,190
191,089
252,628
% of sales
45.6%
55.1%
51.4%
55.3%
Selling & administrative expense
84,475
100,726
180,343
199,952
Research & development expense
8,700
11,806
18,820
22,381
Income (loss) from operations
(21,246)
18,658
(8,074)
30,295
% of sales
-13.5%
7.8%
-2.2%
6.6%
Interest expense
11,401
11,839
20,993
21,208
Other expense
89
321
178
4,546
Income (loss) before income taxes
(32,736)
6,498
(29,245)
4,541
Provision (benefit) for income taxes
(5,336)
803
(7,772)
(2,175)
Net income (loss)
$
(27,400)
$
5,695
$
(21,473)
$
6,716
Basic EPS
$
(0.96)
$
0.20
$
(0.75)
$
0.24
Diluted EPS
(0.96)
0.19
(0.75)
0.23
Basic shares
28,542
28,276
28,506
28,228
Diluted shares
28,542
29,337
28,506
29,197
Sales Summary
(in millions, unaudited)
Three Months Ended June
30,
% 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
$
60.5
$
115.8
-47.7%
1.5%
-46.2%
-50.6%
-46.0%
2.5%
-43.5%
General Surgery
97.3
122.5
-20.6%
0.8%
-19.8%
-22.9%
-15.3%
2.8%
-12.5%
$
157.8
$
238.3
-33.8%
1.2%
-32.6%
-32.2%
-35.6%
2.6%
-33.0%
Single-use Products
$
128.5
$
190.3
-32.4%
1.1%
-31.3%
-27.5%
-38.7%
2.5%
-36.2%
Capital Products
29.3
48.0
-39.0%
1.3%
-37.7%
-54.2%
-25.4%
2.9%
-22.5%
$
157.8
$
238.3
-33.8%
1.2%
-32.6%
-32.2%
-35.6%
2.6%
-33.0%
Domestic
$
87.4
$
129.0
-32.2%
0.0%
-32.2%
International
70.4
109.3
-35.6%
2.6%
-33.0%
$
157.8
$
238.3
-33.8%
1.2%
-32.6%
Six Months Ended June
30,
% 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
$
159.8
$
229.2
-30.3%
1.7%
-28.6%
-34.0%
-27.9%
2.8%
-25.1%
General Surgery
212.0
227.4
-6.8%
0.8%
-6.0%
-6.1%
-8.4%
2.4%
-6.0%
$
371.8
$
456.6
-18.6%
1.3%
-17.3%
-16.1%
-21.4%
2.7%
-18.7%
Single-use Products
$
306.2
$
362.6
-15.6%
1.3%
-14.3%
-11.6%
-20.5%
2.8%
-17.7%
Capital Products
65.6
94.0
-30.2%
1.1%
-29.1%
-36.8%
-24.4%
2.3%
-22.1%
$
371.8
$
456.6
-18.6%
1.3%
-17.3%
-16.1%
-21.4%
2.7%
-18.7%
Domestic
$
206.3
$
245.9
-16.1%
0.0%
-16.1%
International
165.5
210.7
-21.4%
2.7%
-18.7%
$
371.8
$
456.6
-18.6%
1.3%
-17.3%
Reconciliation of Reported Net
Income (Loss) to Adjusted Net Income (Loss)
(in thousands, except per share
amounts, unaudited)
Three Months Ended June 30,
2020
Gross Profit
Selling & Administrative
Expense
Operating Income
(Loss)
Interest Expense
Other Expense
Tax Expense/ (Benefit)
Effective Tax Rate
Net Income (Loss)
Diluted EPS
As reported
$
71,929
$
84,475
$
(21,246)
$
11,401
$
89
$
(5,336)
16.3%
$
(27,400)
$
(0.96)
% of sales
45.6%
53.5%
-13.5%
Plant underutilization costs (1)
6,586
-
6,586
-
-
739
5,847
0.21
Product rationalization costs (2)
2,169
(2,095)
4,264
-
-
460
3,804
0.13
Restructuring costs (3)
1,087
(2,124)
3,211
-
-
346
2,865
0.10
Manufacturing consolidation costs (4)
1,602
-
1,602
-
-
144
1,458
0.05
Acquisition and integration costs (5)
652
(439)
1,091
-
-
119
972
0.03
$
84,025
$
79,817
$
(4,492)
$
11,401
$
89
$
(3,528)
$
(12,454)
$
(0.44)
Adjusted gross profit %
53.3%
Amortization(6)
$
1,500
(6,955)
8,455
(3,413)
-
1,280
10,588
0.37
Adjusted net loss
$
72,862
$
3,963
$
7,988
$
89
$
(2,248)
54.6%
$
(1,866)
$
(0.07)
% of sales
46.2%
2.5%
Three Months Ended June 30,
2019
Gross Profit
Selling & Administrative
Expense
Operating Income
Interest Expense
Other Expense
Tax Expense
Effective Tax Rate
Net Income
Diluted EPS
As reported
$
131,190
$
100,726
$
18,658
$
11,839
$
321
$
803
12.4%
$
5,695
$
0.19
% of sales
55.1%
42.3%
7.8%
Acquisition and integration costs (5)
503
(2,461)
2,964
-
-
855
2,109
0.08
$
131,693
$
98,265
$
21,622
$
11,839
$
321
$
1,658
$
7,804
$
0.27
Adjusted gross profit %
55.3%
Amortization(6)
$
1,500
(6,766)
8,266
(3,183)
-
2,840
8,609
0.29
Adjusted net income
$
91,499
$
29,888
$
8,656
$
321
$
4,498
21.5%
$
16,413
$
0.56
% of sales
38.4%
12.5%
(1) In 2020, the Company incurred a charge
related to plant underutilization due to abnormally low production
as a result of decreased sales caused by the COVID-19 pandemic.
(2) In 2020, the Company performed an
analysis of product lines and determined certain catalog numbers,
principally related to capital equipment, would be discontinued and
consolidated into existing product offerings resulting in a charge
to cost of sales. We also wrote-off related field inventory used
for customer demonstration and evaluation of the discontinued
products to selling and administrative expense.
(3) In 2020, the Company incurred
restructuring costs related to a voluntary separation arrangement
with employees as a result of the COVID-19 pandemic and
restructuring of the Orthopedic sales force.
(4) 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.
(5) 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 consulting
fees, legal fees and integration related costs associated with the
acquisition of Buffalo Filter, LLC.
(6) Includes amortization of intangible
assets, deferred financing fees and debt discount.
Reconciliation of Reported Net
Income (Loss) to Adjusted Net Income
(in thousands, except per share
amounts, unaudited)
Six Months Ended June 30,
2020
Gross Profit
Selling & Administrative
Expense
Operating Income
(Loss)
Interest Expense
Other Expense
Tax Expense/ (Benefit)
Effective Tax Rate
Net Income (Loss)
Diluted EPS
As reported
$
191,089
$
180,343
$
(8,074)
$
20,993
$
178
$
(7,772)
26.6%
$
(21,473)
$
(0.75)
% of sales
51.4%
48.5%
-2.2%
Plant underutilization costs (1)
6,586
-
6,586
-
-
739
5,847
0.20
Product rationalization costs (2)
2,169
(2,095)
4,264
-
-
460
3,804
0.13
Restructuring costs (3)
1,087
(2,124)
3,211
-
-
346
2,865
0.10
Manufacturing consolidation costs (4)
3,387
-
3,387
-
-
837
2,550
0.09
Acquisition and integration costs (5)
1,457
(1,192)
2,649
-
-
722
1,927
0.07
$
205,775
$
174,932
$
12,023
$
20,993
$
178
$
(4,668)
$
(4,480)
$
(0.16)
Adjusted gross profit %
55.3%
Amortization(6)
$
3,000
(13,954)
16,954
(6,497)
-
5,775
17,676
0.62
Adjusted net income
$
160,978
$
28,977
$
14,496
$
178
$
1,107
7.7%
$
13,196
$
0.46
% of sales
43.3%
7.8%
Six Months Ended June 30,
2019
Gross Profit
Selling & Administrative
Expense
Operating Income
Interest Expense
Other Expense
Tax Expense/ (Benefit)
Effective Tax Rate
Net Income
Diluted EPS
As reported
$
252,628
$
199,952
$
30,295
$
21,208
$
4,546
$
(2,175)
-47.9%
$
6,716
$
0.23
% of sales
55.3%
43.8%
6.6%
Acquisition and integration costs (5)
1,163
(9,706)
10,869
-
-
3,182
7,687
0.26
Debt refinancing costs (7)
-
-
-
-
(3,904)
1,149
2,755
0.10
$
253,791
$
190,246
$
41,164
$
21,208
$
642
$
2,156
$
17,158
$
0.59
Adjusted gross profit %
55.6%
Amortization(6)
$
3,000
(12,596)
15,596
(5,390)
-
5,248
15,738
0.54
Adjusted net income
$
177,650
$
56,760
$
15,818
$
642
$
7,404
18.4%
$
32,896
$
1.13
% of sales
38.9%
12.4%
(1) In 2020, the Company incurred a charge
related to plant underutilization due to abnormally low production
as a result of decreased sales caused by the COVID-19 pandemic.
(2) In 2020, the Company performed an
analysis of product lines and determined certain catalog numbers,
principally related to capital equipment, would be discontinued and
consolidated into existing product offerings resulting in a charge
to cost of sales. We also wrote-off related field inventory used
for customer demonstration and evaluation of the discontinued
products to selling and administrative expense.
(3) In 2020, the Company incurred
restructuring costs related to a voluntary separation arrangement
with employees as a result of the COVID-19 pandemic and
restructuring of the Orthopedic sales force.
(4) 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.
(5) 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.
(6) Includes amortization of intangible
assets, deferred financing fees and debt discount.
(7) 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 (Loss) to EBITDA & Adjusted EBITDA
(in thousands, unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2020
2019
2020
2019
Net income (loss)
$
(27,400)
$
5,695
$
(21,473)
$
6,716
Provision (benefit) from income taxes
(5,336)
803
(7,772)
(2,175)
Interest expense
11,401
11,839
20,993
21,208
Depreciation
4,588
4,525
9,234
8,967
Amortization
13,616
13,252
27,392
25,460
EBITDA
$
(3,131)
$
36,114
$
28,374
$
60,176
Stock based compensation
3,555
3,108
6,587
5,811
Plant underutilization costs
6,586
-
6,586
-
Product rationalization costs
4,264
-
4,264
-
Restructuring costs
3,211
-
3,211
-
Manufacturing consolidation costs
1,602
-
3,387
-
Acquisition and integration costs
1,091
2,964
2,649
10,869
Debt refinancing costs
-
-
-
3,904
Adjusted EBITDA
$
17,178
$
42,186
$
55,058
$
80,760
EBITDA Margin
EBITDA
-2.0%
15.2%
7.6%
13.2%
Adjusted EBITDA
10.9%
17.7%
14.8%
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 (loss); adjusted interest expense; adjusted other
expense; adjusted income tax expense (benefit); adjusted effective
income tax rate; adjusted net income (loss), adjusted diluted
shares and adjusted diluted net earnings (loss) 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 (loss), interest expense, other expense, income
tax expense (benefit), effective income tax rate, net income
(loss), diluted shares and diluted net earnings (loss) 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/20200729005941/en/
CONMED Corporation Todd Garner Chief Financial
Officer 315-624-3317 ToddGarner@conmed.com
CONMED (NYSE:CNMD)
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