UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
April 22, 2015
CONMED CORPORATION
(Exact name of registrant as specified in its
charter)
New York |
0-16093 |
16-0977505 |
(State or other jurisdiction of |
(Commission |
(I.R.S. Employer |
incorporation or organization) |
File Number) |
Identification No.) |
525 French Road
Utica, New York 13502
(Address of principal executive offices, including
zip code)
(315) 797-8375
(Registrant's telephone number, including area
code)
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligations of the registrant under any of the following provisions (See General Instruction
A.2 below):
o |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Section 2 |
Financial Information |
Item 2.02 |
Results of Operations and Financial Condition. |
On April 22, 2015, CONMED Corporation issued a press release announcing
financial results for the first quarter of 2015. A copy of this press release is attached hereto as Exhibit 99.1.
The information in this Current Report on Form
8-K that is furnished under “Item 2.02. Results of Operations and Financial Condition” and Exhibit 99.1 attached hereto
shall not be deemed “filed” for purposes of Section 18 of the Securities Act of 1934, nor shall they be deemed incorporated
by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such
filing.
Section 9 |
Financial Statements and Exhibits |
Item 9.01 |
Financial Statements and Exhibits. |
The following exhibit is included herewith:
|
Exhibit No. |
Description of Exhibit |
|
|
|
|
99.1 |
Press Release dated April 22, 2015, issued by CONMED Corporation. |
Signature
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
CONMED CORPORATION |
|
(Registrant) |
|
|
|
|
|
|
|
By: |
/s/ Luke A Pomilio |
|
Name: |
Luke A. Pomilio |
|
Title: |
Executive Vice President-Finance and
Chief Financial Officer |
Date: April 22, 2015
EXHIBIT INDEX
Exhibit |
|
Number |
Exhibit Description |
|
|
99.1 |
Press Release, dated April 22, 2015, issued by CONMED Corporation. |
|
NEWS RELEASE |
|
|
|
CONTACT: |
|
CONMED Corporation |
|
Luke Pomilio |
|
Chief Financial Officer |
|
315-624-3202 |
|
LukePomilio@conmed.com |
FOR
RELEASE: 4:05 PM (Eastern) April 22, 2015
CONMED Corporation Announces First
Quarter 2015 Financial Results
Utica, New York, April 22, 2015 -----
CONMED Corporation (Nasdaq: CNMD) today announced financial results for the first quarter ended March 31, 2015.
First Quarter 2015 Financial Highlights
| · | Sales were $177.9 million, a decrease
of 2.2% compared to the first quarter of 2014. On a constant currency basis, sales increased 0.8% over the prior-year period. |
| · | Diluted earnings per share (GAAP) were
$0.23, compared to $0.31 in the first quarter of 2014. |
| · | Adjusted diluted earnings per share were
$0.42 versus $0.49 in the prior-year period. |
"Our focus remains on transforming
our commercial organization to facilitate sales and earnings growth. Beyond the positive constant currency sales growth realized
during the quarter, I am pleased with the operational progress we have made to position our company for future success," commented
Curt R. Hartman, CONMED’s President and Chief Executive Officer.
Sales Analysis
For the quarter ended March 31, 2015,
domestic sales, which represented 48.9% of total sales, increased slightly due to positive growth in capital equipment sales. International
sales, which represented 51.1% of total sales, declined 4.2% compared to the first quarter of 2014 on a reported basis. Foreign
currency exchange rates, including the effects of the FX hedging program, had a negative impact of $5.5 million on first quarter
sales. In constant currency, international sales increased 1.5% versus the prior-year period. Outside the United States, an increase
in capital sales was offset by a slight decline in the sales of single-use products on a constant currency basis.
Earnings Analysis
Reported net earnings of $6.3 million
decreased 26.8% in the quarter, compared to net earnings of $8.6 million in the prior year. Reported diluted net earnings per share
of $0.23 decreased 25.8% in the quarter compared to the prior year. Reported net earnings include restructuring costs in 2015 and
2014, and charges for a patent dispute, shareholder activism, and the New York State corporate tax reform in 2014. The effect of
each of these items on reported net earnings appears in the reconciliation of GAAP to non-GAAP measures provided below.
Excluding the impact of the items described
above, adjusted net earnings of $11.8 million decreased 13.1% and adjusted diluted net earnings per share of $0.42 decreased 14.3%
year over year. The benefits of higher sales volume and lower operating expenses in the current quarter were more than offset by
the negative impact of foreign currency, the expensing of unfavorable production variances incurred in prior periods, and a higher
tax rate.
2015 Outlook
The Company reiterated its previously
disclosed constant currency sales guidance, which calls for organic sales growth in 2015 to be in the range of 1% to 3%. If foreign
currency exchange rates hold near current levels, the Company expects net sales for the last three quarters of 2015 to be negatively
impacted by $3.9 million as compared to prior sales guidance, which was based on January 23, 2015 currency rates. Using current
exchange rates, CONMED now anticipates that reported sales for 2015 will be in the range of $723 million to $738 million, representing
a range of (2%) to 0%, and adjusted diluted net earnings per share will be in the range of $1.82 to $1.92.
Conference Call
The Company’s management
will host a conference call today at 4:30 p.m. ET to discuss its first quarter results.
To participate in the conference call,
dial 877-280-4961 (domestic), or 857-244-7318 (international), and provide the passcode “CONMED.”
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 6:30 p.m. ET on Wednesday, April 22, 2015, until 11:59 p.m. ET on Wednesday, April 29, 2015. To hear this recording,
you may dial 888-286-8010 (domestic) or 617-801-6888 (international) and enter the passcode 72447655.
About CONMED
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 16
countries outside the United States and international sales constitute over 50% of the Company’s total sales. Headquartered
in Utica, New York, the Company employs 3,400 people. For more information, visit www.conmed.com.
Forward-Looking Statements
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, to differ materially from those expressed in the forward-looking statements
herein or in previous disclosures. 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 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, 2014.
Supplemental Information - Reconciliation of GAAP to Non-GAAP
Financial Measures
We supplement the reporting of our 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 effective income tax rate; adjusted net earnings;
and adjusted diluted net earnings per share (EPS). We believe 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 our underlying businesses. 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, we remove 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, we exclude 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, 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. We strongly encourage 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
Three Months Ended March 2015 and 2014
(in thousands except per share amounts, unaudited)
| |
2015 | | |
2014 | |
Net sales | |
$ | 177,940 | | |
$ | 181,941 | |
Cost of sales | |
| 85,658 | | |
| 79,359 | |
Gross profit | |
| 92,282 | | |
| 102,582 | |
% of sales | |
| 51.9% | | |
| 56.4% | |
Selling and administrative expense | |
| 74,786 | | |
| 78,364 | |
Research and development expense | |
| 6,542 | | |
| 6,910 | |
Income from operations | |
| 10,954 | | |
| 17,308 | |
% of sales | |
| 6.2% | | |
| 9.5% | |
Interest expense | |
| 1,460 | | |
| 1,461 | |
Income before income taxes | |
| 9,494 | | |
| 15,847 | |
Provision for income taxes | |
| 3,182 | | |
| 7,221 | |
Net income | |
$ | 6,312 | | |
$ | 8,626 | |
| |
| | | |
| | |
Basic EPS | |
$ | 0.23 | | |
$ | 0.32 | |
Diluted EPS | |
$ | 0.23 | | |
$ | 0.31 | |
| |
| | | |
| | |
Basic shares | |
| 27,573 | | |
| 27,349 | |
Diluted shares | |
| 27,820 | | |
| 27,854 | |
Consolidated Condensed Balance Sheets
(in thousands, unaudited)
| |
March | | |
December | |
| |
2015 | | |
2014 | |
Assets: | |
| | | |
| | |
Cash and cash equivalents | |
$ | 65,729 | | |
$ | 66,332 | |
Accounts receivable, net | |
| 128,950 | | |
| 129,287 | |
Inventories | |
| 144,199 | | |
| 148,149 | |
Other current assets | |
| 35,188 | | |
| 37,382 | |
Total Current Assets | |
| 374,066 | | |
| 381,150 | |
Property, plant and equipment, net | |
| 132,958 | | |
| 133,429 | |
Goodwill | |
| 255,748 | | |
| 256,232 | |
Other intangible assets, net | |
| 313,798 | | |
| 316,440 | |
Other assets | |
| 11,176 | | |
| 10,943 | |
Total Assets | |
$ | 1,087,746 | | |
$ | 1,098,194 | |
| |
| | | |
| | |
Liabilities and Shareholders' Equity | |
| | | |
| | |
Current liabilities | |
$ | 113,485 | | |
$ | 115,956 | |
Long-term debt, excluding current maturities | |
| 257,201 | | |
| 240,201 | |
Other liabilities | |
| 142,970 | | |
| 160,739 | |
Shareholders' equity | |
| 574,090 | | |
| 581,298 | |
Total Liabilities and Shareholders' Equity | |
$ | 1,087,746 | | |
$ | 1,098,194 | |
Consolidated Condensed Statements of Cash
Flows
Three Months Ended March 2015 and 2014
(in thousands, unaudited)
| |
2015 | | |
2014 | |
Operating Activities | |
| | | |
| | |
Net income | |
$ | 6,312 | | |
$ | 8,626 | |
Depreciation and amortization | |
| 10,170 | | |
| 10,868 | |
Changes in operating assets and liabilities and other, net | |
| (1,673 | ) | |
| (2,469 | ) |
Net cash provided by operating activities | |
| 14,809 | | |
| 17,025 | |
| |
| | | |
| | |
Investing Activities | |
| | | |
| | |
Payments related to business acquisitions | |
| (853 | ) | |
| — | |
Purchases of property, plant, and equipment | |
| (4,061 | ) | |
| (4,065 | ) |
Net cash used in investing activities | |
| (4,914 | ) | |
| (4,065 | ) |
| |
| | | |
| | |
Financing Activities | |
| | | |
| | |
Proceeds of debt | |
| 17,000 | | |
| 27,000 | |
Payments related to distribution agreement | |
| (16,667 | ) | |
| (16,667 | ) |
Dividend payments on Common Stock | |
| (5,510 | ) | |
| (5,545 | ) |
Repurchase of Common Stock | |
| — | | |
| (16,862 | ) |
Other, net | |
| 543 | | |
| 867 | |
Net cash used in financing activities | |
| (4,634 | ) | |
| (11,207 | ) |
| |
| | | |
| | |
Effect of exchange rate change on cash and cash equivalents | |
| (5,864 | ) | |
| 122 | |
Net increase (decrease) in cash and cash equivalents | |
| (603 | ) | |
| 1,875 | |
Cash and cash equivalents at beginning of period | |
| 66,332 | | |
| 54,443 | |
Cash and cash equivalents at end of period | |
$ | 65,729 | | |
$ | 56,318 | |
Sales Summary
Three Months Ended March 2015 and 2014
(in millions, unaudited)
| |
| | |
| | |
% Change | |
| |
2015 | | |
2014 | | |
As
Reported | | |
Constant
Currency | |
Orthopedic Surgery | |
$ | 98.6 | | |
$ | 105.9 | | |
| -6.9% | | |
| -3.2% | |
General Surgery | |
| 66.1 | | |
| 63.5 | | |
| 4.1% | | |
| 5.8% | |
Surgical Visualization | |
| 13.2 | | |
| 12.5 | | |
| 5.6% | | |
| 9.6% | |
| |
$ | 177.9 | | |
$ | 181.9 | | |
| -2.2% | | |
| 0.8% | |
| |
| | | |
| | | |
| | | |
| | |
Single-use products | |
$ | 140.1 | | |
$ | 146.4 | | |
| -4.3% | | |
| -1.4% | |
Capital products | |
| 37.8 | | |
| 35.5 | | |
| 6.5% | | |
| 9.9% | |
| |
$ | 177.9 | | |
$ | 181.9 | | |
| -2.2% | | |
| 0.8% | |
Reconciliation of Reported Net Earnings
to Adjusted Earnings
Three Months Ended March 2015 and
2014
(in thousands except per share amounts, unaudited)
| |
2015 |
| |
Gross Profit | |
Selling &
Administrative
Expense | |
Operating
Income | |
Net
Income | |
Effective
Tax Rate | |
Diluted
EPS |
As reported | |
$ | 92,282 | | |
$ | 74,786 | | |
$ | 10,954 | | |
$ | 6,312 | | |
| 33.5% | | |
$ | 0.23 | |
% of sales | |
| 51.9% | | |
| | | |
| 6.2% | | |
| | | |
| | | |
| | |
Restructuring costs1 | |
| 2,329 | | |
| (6,180 | ) | |
| 8,509 | | |
| 5,445 | | |
| 1.2% | | |
| 0.19 | |
Adjusted | |
$ | 94,611 | | |
$ | 68,606 | | |
$ | 19,463 | | |
$ | 11,757 | | |
| 34.7% | | |
$ | 0.42 | |
% of sales | |
| 53.2% | | |
| | | |
| 10.9% | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
2014 |
| |
Gross Profit | |
Selling &
Administrative
Expense | |
Operating
Income | |
Net
Income | |
Effective
Tax Rate | |
Diluted
EPS |
As reported | |
$ | 102,582 | | |
$ | 78,364 | | |
$ | 17,308 | | |
$ | 8,626 | | |
| 45.6% | | |
$ | 0.31 | |
% of sales | |
| 56.4% | | |
| | | |
| 9.5% | | |
| | | |
| | | |
| | |
Restructuring costs1 | |
| 948 | | |
| (713 | ) | |
| 1,661 | | |
| 1,063 | | |
| -0.9% | | |
| 0.04 | |
Patent dispute and shareholder activism2 | |
| — | | |
| (2,484 | ) | |
| 2,484 | | |
| 1,590 | | |
| -1.1% | | |
| 0.06 | |
New York State corporate tax reform3 | |
| — | | |
| — | | |
| — | | |
| 2,258 | | |
| -11.3% | | |
| 0.08 | |
Adjusted | |
$ | 103,530 | | |
$ | 75,167 | | |
$ | 21,453 | | |
$ | 13,537 | | |
| 32.3% | | |
$ | 0.49 | |
% of sales | |
| 56.9% | | |
| | | |
| 11.8% | | |
| | | |
| | | |
| | |
1
In 2014 and 2015, the Company continued its operational restructuring, including
the consolidation of our Centennial, Colorado manufacturing operations into other existing CONMED manufacturing facilities. Additionally,
in 2014 and 2015, the Company restructured certain sales, marketing and administrative functions and incurred severance and other
related costs.
2
In 2014, the Company incurred legal and settlement costs associated with
a patent infringement claim as well as shareholder activism related costs.
3
In 2014, New York State enacted corporate tax reform changing the tax rate of a manufacturing company such as CONMED to
essentially 0%. As a result, our previously recorded New York State net deferred tax assets were written off to income tax expense.
CONMED Corporation
Reconciliation of Reported Net Income to
EBITDA & Adjusted EBITDA
Three Months Ended March 2015 and 2014
(in thousands, unaudited)
| |
2015 | | |
2014 | |
Net income | |
$ | 6,312 | | |
$ | 8,626 | |
Provision for income taxes | |
| 3,182 | | |
| 7,221 | |
Interest expense | |
| 1,460 | | |
| 1,461 | |
Depreciation | |
| 4,633 | | |
| 4,568 | |
Amortization | |
| 5,390 | | |
| 6,154 | |
EBITDA | |
$ | 20,977 | | |
$ | 28,030 | |
| |
| | | |
| | |
Stock based compensation | |
| 1,256 | | |
| 1,185 | |
Restructuring costs | |
| 8,509 | | |
| 1,661 | |
Patent dispute and shareholder activism | |
| — | | |
| 2,484 | |
Adjusted EBITDA | |
$ | 30,742 | | |
$ | 33,360 | |
| |
| | | |
| | |
| |
| | | |
| | |
EBITDA Margin | |
| | | |
| | |
EBITDA | |
| 11.8% | | |
| 15.4% | |
Adjusted EBITDA | |
| 17.3% | | |
| 18.3% | |
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