CONMED Corporation (Nasdaq:CNMD) today announced
financial results for the second quarter ended June 30, 2015.
Second Quarter 2015 Highlights
- Sales were $181.0 million, a decrease
of 3.8%, compared to the second quarter of 2014. On a constant
currency basis, sales decreased 0.4% over the prior-year
period.
- Diluted earnings per share (GAAP) were
$0.27, compared to $0.37 in the second quarter of 2014.
- Adjusted diluted earnings per share
were $0.36 versus $0.47 in the prior-year period.
- Appointed Peter Shagory as Executive
Vice President, Strategy and Corporate Development.
- On July 1, added David Bronson and John
Workman to its Board of Directors.
"I am encouraged by the progress we have made throughout our
commercial organization, and we exited the second quarter with
positive momentum across our business. We are well positioned for
accelerating growth in the second half and, importantly, remain on
track to achieve our full year financial guidance," commented Curt
R. Hartman, CONMED’s President and Chief Executive Officer.
Sales Analysis
For the quarter ended June 30, 2015, domestic sales, which
represented 49.2% of total revenue, increased 1.9%, driven by
growth in capital equipment sales. International sales, which
represented 50.8% of total revenue, declined 8.7% compared to the
second quarter of 2014 on a reported basis. Foreign currency
exchange rates, including the effects of the FX hedging program,
had a negative impact of $6.4 million on second quarter sales. In
constant currency, international sales decreased 2.5% versus the
prior-year period. Outside the United States, a slight increase in
the sales of single-use products was more than offset by a decline
in capital equipment sales.
Earnings Analysis
Reported net earnings of $7.5 million decreased 27.2% in the
quarter, compared to reported net earnings of $10.3 million in the
prior year. Reported diluted net earnings per share of $0.27
decreased 27.0% in the quarter, compared to the prior year period.
Reported net earnings include restructuring costs in 2015 and 2014,
as well as charges for a patent dispute and shareholder activism 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 $9.9 million decreased 23.5% year over year, and
adjusted diluted net earnings per share of $0.36 decreased 23.4%
year over year. 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%. Using current exchange rates,
CONMED continues to anticipate that reported sales for 2015 will be
in the range of $723 million to $738 million, representing a growth
range of (2%) to 0%, and that 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 second quarter results.
To participate in the conference call, dial 877-280-4957
(domestic) or 857-244-7314 (international) and enter the passcode
95923964.
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 8:30 p.m. ET
on Tuesday, July 21, 2015, until 11:59 p.m. ET on Tuesday, July 28,
2015. To hear this recording, dial 888-286-8010 (domestic) or
617-801-6888 (international) and enter the passcode 99098236.
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 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
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 effective income tax rate; adjusted net
earnings 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
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
the Company’s 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, the
Company removes 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, 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 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. The Company strongly
encourages 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
(in thousands except per share amounts,
unaudited)
Three Months Ended Six Months Ended
June 30, June 30, 2015
2014 2015 2014
Net sales $ 181,027 $ 188,150 $ 358,967 $ 370,091
Cost of sales 87,529 87,122
173,187 166,481 Gross profit 93,498
101,028 185,780 203,610
% of sales 51.6 % 53.7 % 51.8 % 55.0 % Selling and
administrative expense 73,581 78,234 148,367 156,598 R & D
7,501 6,854 14,043
13,764 Income from operations 12,416
15,940 23,370 33,248 % of sales
6.9 % 8.5 % 6.5 % 9.0 % Interest expense 1,489
1,571 2,949 3,032 Income before
income taxes 10,927 14,369 20,421 30,216 Provision for income taxes
3,466 4,114 6,648
11,335 Net income $ 7,461 $ 10,255 $ 13,773
$ 18,881 Basic EPS $ 0.27 $ 0.38 $ 0.50 $ 0.69
Diluted EPS $ 0.27 $ 0.37 $ 0.49 $ 0.68 Basic shares 27,620
27,257 27,603 27,303 Diluted shares 27,857 27,753 27,839 27,803
Consolidated Condensed Balance
Sheets
(in thousands, unaudited)
June December 2015
2014 Assets: Cash and cash equivalents $ 62,216 $
66,332 Accounts receivable, net 129,660 129,287 Inventories 149,180
148,149 Other current assets 33,210 37,382
Total
Current Assets 374,266 381,150 Property, plant and equipment,
net 131,625 133,429 Goodwill 261,004 256,232 Other intangible
assets, net 311,128 316,440 Other assets 11,363
10,943
Total Assets $ 1,089,386 $ 1,098,194
Liabilities and Shareholders' Equity Current liabilities $
109,882 $ 115,956 Long-term debt, excluding current maturities
258,545 240,201 Other liabilities 142,865 160,739 Shareholders'
equity 578,094 581,298
Total liabilities and
shareholders' equity $ 1,089,386 $ 1,098,194
Consolidated Condensed Statements of
Cash Flows
Six Months Ended June 2015 and
2014
(in thousands, unaudited)
2015 2014
Operating Activities Net income $ 13,773 $ 18,881
Depreciation and amortization 21,081 22,304 Changes in operating
assets and liabilities and other, net (9,799 )
(16,272 )
Net cash provided by operating activities
25,055 24,913
Investing
Activities Payments related to business acquisitions (6,104 ) -
Purchases of property, plant, and equipment (7,783 )
(8,641 )
Net cash used in investing activities
(13,887 ) (8,641 )
Financing Activities
Proceeds of debt 19,000 31,000 Payment related to distribution
agreements (16,667 ) (16,667 ) Payment related to contingent
consideration (2,423 ) - Dividend payments on Common Stock (11,026
) (10,987 ) Repurchase of Common Stock - (16,862 ) Other, net
51 2,252
Net cash used in financing
activities (11,065 ) (11,264 ) Effect of exchange rate
change on cash and cash equivalents (4,219 ) 963
Net increase (decrease) in cash and cash equivalents (4,116
) 5,971 Cash and cash equivalents at beginning of period
66,332 54,443
Cash and cash equivalents at
end of period $ 62,216 $ 60,414
Sales Summary
(in millions, unaudited)
Three Months Ended June
Six Months Ended June
% Change
% Change
2015 2014
AsReported
ConstantCurrency
2015 2014
AsReported
ConstantCurrency
Orthopedic Surgery $ 96.8 $ 102.4 -5.4 % -1.0 %
$
195.4
$
208.3
-6.2
%
-2.1
%
General Surgery 71.1 70.7 0.5 % 2.3 %
137.2
134.2
2.2
%
3.9
%
Surgical Visualization 13.1 15.1 -12.8 % -9.4 %
26.4
27.6
-4.3
%
-1.0
%
$ 181.0 $ 188.2 -3.8 % -0.4 %
$
359.0
$
370.1
-3.0
%
0.2
%
Single-use products $ 145.3 $ 150.2 -3.2 % 0.2 %
$
285.5
$
296.6
-3.7
%
-0.6
%
Capital products 35.7 38.0 -6.1 % -2.8 %
73.5
73.5
0.0
%
3.2
%
$ 181.0 $ 188.2 -3.8 % -0.4 %
$
359.0
$
370.1
-3.0
%
0.2
%
Reconciliation of Reported Net Earnings
to Adjusted Net Earnings
(in thousands, except per share amounts,
unaudited)
Three Months Ended June 2015
Gross Profit
Selling
&AdministrativeExpense
OperatingIncome
Net Income
EffectiveTax Rate
DilutedEPS
As reported
$ 93,498 $ 73,581 $ 12,416
$ 7,461 31.7 % $ 0.27 % of sales 51.6 %
6.9 % Restructuring costs (1)
1,534 (2,284 ) 3,818
2,444 1.1 % 0.09
Adjusted
$ 95,032 $ 71,297 $ 16,234
$ 9,905 32.8 % $ 0.36 % of sales 52.5 % 9.0 %
Three Months Ended June 2014
Gross Profit
Selling
&AdministrativeExpense
OperatingIncome
Net Income
EffectiveTax Rate
DilutedEPS
As reported
$ 101,028 $ 78,234 $ 15,940
$ 10,255 28.6 % $ 0.37 % of sales 53.7 % 8.5 %
Restructuring costs (1) 1,358 (494 ) 1,852 1,185 0.8 % 0.05 Patent
dispute and other matters (2) - (1,410 ) 1,410 902 0.5 % 0.03
Shareholder activism (3) - (935 )
935 598 0.3 %
0.02
Adjusted
$ 102,386 $ 75,395 $ 20,137
$ 12,940 30.3 % $ 0.47 % of sales 54.4 % 10.7
%
Six Months Ended June 2015
Gross Profit
Selling
&AdministrativeExpense
OperatingIncome
Net Income
EffectiveTax Rate
DilutedEPS
As reported
$ 185,780 $ 148,367 $ 23,370
$ 13,773 32.6 % $ 0.49 % of sales 51.8 % 6.5 %
Restructuring costs (1) 3,863 (8,464 )
12,327 7,889 1.3 %
0.29
Adjusted
$ 189,643 $ 139,903 $ 35,697
$ 21,662 33.9 % $ 0.78 % of sales 52.8 % 9.9 %
Six Months Ended June 2014
Gross Profit
Selling
&AdministrativeExpense
OperatingIncome
Net Income
EffectiveTax Rate
DilutedEPS
As reported
$ 203,610 $ 156,598 $ 33,248
$ 18,881 37.5 % $ 0.68 % of sales 55.0 % 9.0 %
Restructuring costs(1) 2,306 (1,207 ) 3,513 2,248 -0.2 % 0.08
Patent dispute and other matters (2) - (3,304 ) 3,304 2,115 -0.1 %
0.08 Shareholder activism (3) - (1,525 ) 1,525 976 0.0 % 0.03 New
York State corporate tax reform (4) -
- 2,258 -5.9 %
0.08
Adjusted
$ 205,916 $ 150,562 $ 41,590
$ 26,478 31.3 % $ 0.95 % of sales 55.6 % 11.2
% 1 In 2015 and 2014, the Company continued the operational
restructuring, including the consolidation of our Centennial,
Colorado manufacturing operations into other existing CONMED
manufacturing facilities. Additionally, in 2015 and 2014, 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 and costs associated with a legal
matter in which we prevailed at trial. 3 In 2014, the Company
incurred certain costs associated with shareholder activism. 4 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.
Reconciliation of Reported Net Income
to EBITDA & Adjusted EBITDA
(in thousands, unaudited)
Three Months Ended Six Months Ended
June 30, June 30, 2015
2014 2015 2014
Net income $ 7,461 $ 10,255 $ 13,773
$ 18,881 Provision for income taxes 3,466 4,114 6,648
11,335 Interest expense 1,489 1,571 2,949 3,032 Depreciation 4,563
4,906 9,196 9,473 Amortization 6,199 6,385
11,589 12,539
EBITDA $
23,178 $ 27,231 $ 44,155 $ 55,260
Stock based compensation 1,782 1,333 3,038 2,518
Restructuring costs 3,818 1,852 12,327 3,513 Patent dispute and
other matters - 1,410 - 3,304 Shareholder activism -
935 - 1,525
Adjusted
EBITDA $ 28,778 $ 32,761 $ 59,520 $ 66,120
EBITDA Margin EBITDA 12.8 % 14.5 % 12.3
% 14.9 % Adjusted EBITDA 15.9 % 17.4 % 16.6 % 17.9 %
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150721006247/en/
CONMED CorporationLuke Pomilio,
315-624-3202Chief Financial
OfficerLukePomilio@conmed.com
CONMED (NASDAQ:CNMD)
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