CONMED Corporation (NYSE: CNMD) today announced financial
results for the fourth quarter ended December 31, 2020.
Fourth Quarter 2020 Highlights
- Sales of $252.8 million decreased 4.5% year over year as
reported and 5.2% in constant currency.
- Domestic revenue decreased 0.7% year over year.
- International revenue decreased 9.1% as reported year over year
and 10.5% in constant currency.
- Diluted net earnings per share (GAAP) were $0.81, compared to
diluted net earnings per share of $0.49 in the fourth quarter of
2019.
- Adjusted diluted net earnings per share(1) were $0.84 versus
adjusted diluted net earnings per share of $0.90 in the fourth
quarter of 2019.
Full-Year 2020 Highlights
- Sales of $862.5 million decreased 9.7% year over year as
reported and 9.3% in constant currency.
- Domestic revenue decreased 6.7% year over year.
- International revenue decreased 13.2% year over year as
reported and 12.4% in constant currency.
- Diluted net earnings per share (GAAP) were $0.32, compared to
diluted net earnings per share of $0.97 in 2019.
- Adjusted diluted net earnings per share(1) were $2.18 versus
adjusted diluted net earnings per share of $2.64 in 2019.
“I am very pleased with the agility and resilience that our team
showed as it responded to a challenging fourth quarter operating
environment, which reflected the ongoing impacts from COVID-19 on
our customers’ surgical procedure volumes.” commented Curt R.
Hartman, CONMED’s Chair of the Board, President, and Chief
Executive Officer. “While challenges remain as we enter 2021, we
expect to see improvement in procedure volumes as vaccines become
more readily available. I remain confident that CONMED enters 2021
better positioned than ever to achieve long-term success as we
continue to deliver innovative products to our customers.”
2021 Outlook
The Company expects full-year 2021 revenue between $975 million
and $1.02 billion. Based on recent exchange rates, foreign exchange
is expected to be immaterial to 2021 financial results.
The Company also forecasts full-year 2021 adjusted diluted net
earnings per share in the range of $2.85 to $3.05.
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 fourth 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 4987274.
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, January 27, 2021, until 7:30 p.m. ET on Wednesday,
February 3, 2021. To hear this recording, dial 1-855-859-2056
(domestic) or +1-404-537-3406 (international) and enter the
passcode 4987274.
Consolidated Condensed
Statements of Income
(in thousands, except per share
amounts, unaudited)
Three Months Ended
Year Ended
December 31,
December 31,
2020
2019
2020
2019
Net sales
$
252,828
$
264,865
$
862,459
$
955,097
Cost of sales
117,314
122,890
402,159
430,382
Gross profit
135,514
141,975
460,300
524,715
% of sales
53.6%
53.6%
53.4%
54.9%
Selling & administrative expense
99,097
102,002
373,817
400,141
Research & development expense
11,716
12,094
40,473
45,460
Income from operations
24,701
27,879
46,010
79,114
% of sales
9.8%
10.5%
5.3%
8.3%
Interest expense
11,114
10,319
44,052
42,701
Other expense
89
321
355
5,188
Income before income taxes
13,498
17,239
1,603
31,225
Provision (benefit) for income taxes
(10,642)
2,306
(7,914)
2,605
Net income
$
24,140
$
14,933
$
9,517
$
28,620
Basic EPS
$
0.84
$
0.53
$
0.33
$
1.01
Diluted EPS
0.81
0.49
0.32
0.97
Basic shares
28,745
28,403
28,581
28,325
Diluted shares
29,941
30,504
29,464
29,495
Sales Summary
(in millions, unaudited)
Three Months Ended December
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
$
112.7
$
123.8
-8.9%
-0.7%
-9.6%
-12.3%
-6.8%
-1.1%
-7.9%
General Surgery
140.1
141.1
-0.7%
-0.6%
-1.3%
5.3%
-12.8%
-1.9%
-14.7%
$
252.8
$
264.9
-4.5%
-0.7%
-5.2%
-0.7%
-9.1%
-1.4%
-10.5%
Single-use Products
$
205.9
$
209.3
-1.6%
-0.6%
-2.2%
4.0%
-8.8%
-1.3%
-10.1%
Capital Products
46.9
55.6
-15.5%
-0.9%
-16.4%
-21.6%
-10.0%
-1.7%
-11.7%
$
252.8
$
264.9
-4.5%
-0.7%
-5.2%
-0.7%
-9.1%
-1.4%
-10.5%
Domestic
$
141.6
$
142.5
-0.7%
0.0%
-0.7%
International
111.2
122.4
-9.1%
-1.4%
-10.5%
$
252.8
$
264.9
-4.5%
-0.7%
-5.2%
Year Ended December
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
$
374.7
$
463.3
-19.1%
0.7%
-18.4%
-22.1%
-17.2%
1.2%
-16.0%
General Surgery
487.8
491.8
-0.8%
0.1%
-0.7%
1.5%
-5.9%
0.3%
-5.6%
$
862.5
$
955.1
-9.7%
0.4%
-9.3%
-6.7%
-13.2%
0.8%
-12.4%
Single-use Products
$
703.0
$
756.3
-7.0%
0.4%
-6.6%
-2.9%
-12.3%
1.0%
-11.3%
Capital Products
159.5
198.8
-19.8%
0.2%
-19.6%
-23.6%
-16.3%
0.5%
-15.8%
$
862.5
$
955.1
-9.7%
0.4%
-9.3%
-6.7%
-13.2%
0.8%
-12.4%
Domestic
$
482.1
$
516.7
-6.7%
0.0%
-6.7%
International
380.4
438.4
-13.2%
0.8%
-12.4%
$
862.5
$
955.1
-9.7%
0.4%
-9.3%
Reconciliation of Reported Net
Income to Adjusted Net Income
(in thousands, except per share
amounts, unaudited)
Three Months Ended December
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
$
135,514
$
99,097
$
24,701
$
11,114
$
89
$
(10,642)
-78.8%
$
24,140
$
0.81
% of sales
53.6%
39.2%
9.8%
Restructuring and related costs (1)
-
(1,649)
1,649
-
-
1,548
101
0.00
Acquisition and integration costs (2)
567
-
567
-
-
532
35
0.00
$
136,081
$
97,448
$
26,917
$
11,114
$
89
$
(8,562)
$
24,276
$
0.81
Adjusted gross profit %
53.8%
Amortization(4)
$
1,500
(6,998)
8,498
(3,479)
-
11,242
735
0.03
Adjusted net income
$
90,450
$
35,415
$
7,635
$
89
$
2,680
9.7%
$
25,011
$
0.84
% of sales
35.8%
14.0%
Diluted shares, as reported
29,941
In-the-money portion of convertible
notes(5)
(236)
Diluted shares, as adjusted
29,705
Three Months Ended December
31, 2019
Gross Profit
Selling & Administrative
Expense
Operating Income
Interest Expense
Other Expense
Tax Expense
Effective Tax Rate
Net Income
Diluted EPS
As reported
$
141,975
$
102,002
$
27,879
$
10,319
$
321
$
2,306
13.4%
$
14,933
$
0.49
% of sales
53.6%
38.5%
10.5%
Acquisition and integration costs (2)
-
(1,870)
1,870
-
-
137
1,733
0.06
Manufacturing consolidation costs (3)
1,430
-
1,430
-
-
105
1,325
0.05
$
143,405
$
100,132
$
31,179
$
10,319
$
321
$
2,548
$
17,991
$
0.60
Adjusted gross profit %
54.1%
Amortization(4)
$
1,500
(6,639)
8,139
(3,183)
-
2,535
8,787
0.30
Adjusted net income
$
93,493
$
39,318
$
7,136
$
321
$
5,083
15.9%
$
26,778
$
0.90
% of sales
35.3%
14.8%
Diluted shares, as reported
30,504
In-the-money portion of convertible
notes(5)
(643)
Diluted shares, as adjusted
29,861
(1) In 2020, the Company incurred
restructuring costs related to restructuring of our sales
force.
(2) In 2020, the Company incurred
inventory adjustments associated with a prior acquisition. In 2019,
the Company incurred inventory adjustments, consulting fees, legal
fees, severance and integration related costs associated with the
acquisition of Buffalo Filter, LLC.
(3) In 2019, 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.
(4) Includes amortization of intangible
assets, deferred financing fees and debt discount.
(5) In Q4 2020 and 2019, the Company’s
average share price exceeded the conversion price of our 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 note hedge
transactions.
Reconciliation of Reported Net
Income to Adjusted Net Income
(in thousands, except per share
amounts, unaudited)
Year Ended December 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
$
460,300
$
373,817
$
46,010
$
44,052
$
355
$
(7,914)
-493.9%
$
9,517
$
0.32
% of sales
53.4%
43.3%
5.3%
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 and related costs (3)
1,087
(4,782)
5,869
-
-
1,807
4,062
0.14
Acquisition and integration costs (4)
2,820
(1,192)
4,012
-
-
888
3,124
0.11
Manufacturing consolidation costs (5)
3,993
-
3,993
-
-
485
3,508
0.12
$
476,955
$
365,748
$
70,734
$
44,052
$
355
$
(3,535)
$
29,862
$
1.02
Adjusted gross profit %
55.3%
Amortization(6)
$
6,000
(27,945)
33,945
(13,414)
-
13,037
34,322
1.16
Adjusted net income
$
337,803
$
104,679
$
30,638
$
355
$
9,502
12.9%
$
64,184
$
2.18
% of sales
39.2%
12.1%
Year Ended December 31,
2019
Gross Profit
Selling & Administrative
Expense
Operating Income
Interest Expense
Other Expense
Tax Expense
Effective Tax Rate
Net Income
Diluted EPS
As reported
$
524,715
$
400,141
$
79,114
$
42,701
$
5,188
$
2,605
8.3%
$
28,620
$
0.97
% of sales
54.9%
41.9%
8.3%
Acquisition and integration costs (4)
1,335
(13,066)
14,401
-
-
3,609
10,792
0.37
Manufacturing consolidation costs (5)
2,858
-
2,858
-
-
354
2,504
0.08
Debt refinancing costs (7)
-
-
-
-
(3,904)
1,149
2,755
0.09
$
528,908
$
387,075
$
96,373
$
42,701
$
1,284
$
7,717
$
44,671
$
1.51
Adjusted gross profit %
55.4%
Amortization(6)
$
6,000
(26,075)
32,075
(11,756)
-
10,590
33,241
1.13
Adjusted net income
$
361,000
$
128,448
$
30,945
$
1,284
$
18,307
19.0%
$
77,912
$
2.64
% of sales
37.8%
13.4%
(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. The Company 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 our sales force.
(4) In 2020, the Company incurred
inventory adjustments associated with a prior acquisition and
severance and integration costs mainly related to the Buffalo
Filter, LLC acquisition. In 2019, the Company incurred inventory
adjustments, investment banking fees, consulting fees, legal fees,
severance and integration related costs associated with the
acquisition of Buffalo Filter, LLC.
(5) In 2020 and 2019, 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.
(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 to EBITDA & Adjusted EBITDA
(in thousands, unaudited)
Three Months Ended
Year Ended
December 31,
December 31,
2020
2019
2020
2019
Net income
$
24,140
$
14,933
$
9,517
$
28,620
Provision (benefit) for income taxes
(10,642)
2,306
(7,914)
2,605
Interest expense
11,114
10,319
44,052
42,701
Depreciation
4,427
4,463
18,044
18,688
Amortization
13,608
14,798
54,581
53,635
EBITDA
$
42,647
$
46,819
$
118,280
$
146,249
Stock based compensation
2,992
2,960
13,111
11,779
Plant underutilization costs
-
-
6,586
-
Product rationalization costs
-
-
4,264
-
Restructuring and related costs
1,649
-
5,869
-
Acquisition and integration costs
567
1,870
4,012
14,401
Manufacturing consolidation costs
-
1,430
3,993
2,858
Debt refinancing costs
-
-
-
3,904
Adjusted EBITDA
$
47,855
$
53,079
$
156,115
$
179,191
EBITDA Margin
EBITDA
16.9%
17.7%
13.7%
15.3%
Adjusted EBITDA
18.9%
20.0%
18.1%
18.8%
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 (benefit); 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/20210127005855/en/
CONMED Corporation Todd Garner Chief Financial
Officer 315-624-3317 ToddGarner@conmed.com
CONMED (NYSE:CNMD)
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