CONMED Corporation (Nasdaq:CNMD) today announced
financial results for the third quarter ended September 30,
2017.
Third Quarter 2017 Highlights
- Sales of $190.1 million increased 2.9%
as reported and 2.4% in constant currency as compared to the third
quarter of 2016.
- International revenue increased 7.3% as
reported and 6.2% in constant currency, driven by continued growth
in General Surgery and Orthopedics.
- Diluted net earnings per share (GAAP)
were $0.26 in the third quarter of 2017 and 2016.
- Adjusted diluted net earnings per
share(1) were $0.42 versus $0.41 in the prior-year period.
- The Company increases its constant
currency sales growth guidance and tightens its adjusted diluted
net earnings per share guidance range.
“We are very pleased with our continued top-line progress,
especially when considering the impact of one less selling day and
the issues associated with two hurricanes. International
performance remained strong, posting a sixth consecutive quarter of
growth across both General Surgery and
Orthopedics. Conversely, Domestic Orthopedics reported results
are still lagging, but signs point to an improving trend, and we
are encouraged by the underlying efforts to return this business to
positive growth in 2018,” commented Curt R. Hartman, CONMED’s
President and Chief Executive Officer.
Sales Analysis
For the quarter ended September 30, 2017, domestic sales, which
represented 51.7% of total revenue, decreased 0.9%, as
year-over-year growth of 4.8% in General Surgery was offset by a
decline of 8.8% in Orthopedics. The Company’s third quarter
domestic sales for 2017 were negatively impacted by approximately
$2 million related to the recent hurricanes, largely attributable
to deferred procedures. International sales, which represented
48.3% of total revenue, increased 7.3% compared to the third
quarter of 2016 on a reported basis. Foreign currency exchange
rates, including the effects of the FX hedging program, had a
favorable impact of $0.9 million on third quarter sales. In
constant currency, international sales increased 6.2% versus the
prior-year period.
Earnings Analysis
For the quarter ended September 30, 2017, reported net income
totaled $7.2 million, compared to reported net income of $7.3
million a year ago. Reported diluted net earnings per share were
$0.26 in the quarter and prior-year period. Reported net income for
2017 and 2016 includes business acquisition costs, restructuring
costs, and legal costs. Reported net income for 2016 also includes
the gain on the sale of a facility. The effect of each of these
items on reported net income and reported diluted net earnings per
share appears in the reconciliation of GAAP to non-GAAP measures
below.
The Company excludes the after-tax costs of special items
including acquisitions, restructurings, legal matters, gains on the
sale of assets, debt refinancings, as well as amortization of
intangible assets, net of tax, from its adjusted diluted net
earnings per share. Excluding the impact of these items, adjusted
net earnings(2) of $11.7 million increased 1.7% year over year, and
adjusted diluted net earnings per share(1) of $0.42 increased 2.4%
year over year. The increase in adjusted net earnings resulted
primarily from the favorable impact of foreign exchange rates and
higher sales.
2017 Outlook
Based upon year-to-date sales performance, the Company now
expects 2017 constant currency sales growth in the range of 2.50%
to 3.25%, an increase from the prior guidance of 2.0% to 3.0%.
Based on exchange rates as of October 30, 2017, the impact to 2017
sales from foreign exchange is now anticipated to be minimal, as
compared to the prior estimate of a 0.25% negative impact.
In addition, the Company now expects adjusted diluted net
earnings per share in the range of $1.85 to $1.90, compared to the
prior estimate of $1.85 to $1.95, based on exchange rates as of
October 30, 2017. The adjusted diluted net earnings per share
estimates for 2017 exclude the cost of special items including
acquisition costs, restructuring costs, and legal matters, which
are still estimated in the range of $16.5 million to $18.5 million,
net of tax, and amortization of intangible assets, which are still
estimated in the range of $12 million to $14 million, net of
tax.
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.
(2) A reconciliation of reported net income to adjusted net
earnings, 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 third quarter 2017 results.
To participate in the conference call, dial 844-889-7792
(domestic) or 661-378-9936 (international) and enter the passcode
96832092.
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 7:30 p.m. ET
on Thursday, November 2, 2017, until 6:30 p.m. ET on Thursday,
November 16, 2017. To hear this recording, dial 855-859-2056
(domestic) or 404-537-3406 (international) and enter the passcode
96832092.
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. CONMED has a direct selling
presence in 17 countries, and international sales constitute
approximately 50% of the Company’s total sales. Headquartered in
Utica, New York, the Company employs approximately 3,300 people.
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 risk factors discussed in the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2016. 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 income tax expense; 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 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.
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 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, income tax expense, effective income tax rate,
net income 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 below,
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.
Consolidated Condensed Statements of
Income
(in thousands, except per share amounts,
unaudited)
Three Months Ended Nine Months Ended
September 30, September 30, 2017
2016 2017 2016 Net sales
$ 190,117 $ 184,792 $ 573,837 $ 559,426 Cost of sales 87,570
83,583 266,753
258,055 Gross profit 102,547
101,209 307,084 301,371
% of sales 53.9 % 54.8 % 53.5 % 53.9 % Selling and
administrative expense 80,807 79,009 259,396 251,681 Research &
development expense 8,270 8,353
23,929 24,620 Income from
operations 13,470 13,847
23,759 25,070 % of sales 7.1 % 7.5 %
4.1 % 4.5 % Other expense - - - 2,942 Interest expense 4,806
3,861 13,323
11,448 Income before income taxes 8,664 9,986 10,436
10,680 Provision for income taxes 1,467
2,649 1,645 2,724 Net
income $ 7,197 $ 7,337 $ 8,791 $
7,956 Basic EPS $ 0.26 $ 0.26 $ 0.31 $ 0.29 Diluted
EPS 0.26 0.26 0.31 0.28 Basic shares 27,924 27,818 27,915
27,785 Diluted shares 28,183 27,951 28,124 27,946
Consolidated Condensed Balance Sheets
(in thousands, unaudited)
September December 2017 2016
Assets: Cash and cash equivalents $ 44,034 $ 27,428 Accounts
receivable, net 146,736 148,244 Inventories 149,537 135,869 Other
current assets 16,377 18,971
Total Current
Assets 356,684 330,512 Property, plant and equipment, net
117,041 122,029 Goodwill 401,792 397,664 Other intangible assets,
net 418,957 419,549 Other assets 66,713 59,229
Total Assets $ 1,361,187 $ 1,328,983
Liabilities
and Shareholders' Equity: Current liabilities $ 139,323 $
113,952 Long-term debt, excluding current maturities 494,789
488,288 Other liabilities 137,409 146,167 Shareholders' equity
589,666 580,576
Total Liabilities and
Shareholders' Equity $ 1,361,187 $ 1,328,983
Consolidated Condensed Statements of Cash
Flows
Nine Months Ended September 30, 2017 and
2016
(in thousands, unaudited)
2017 2016 Operating Activities Net
income $ 8,791 $ 7,956 Depreciation and amortization 43,062 41,210
Stock-based compensation 6,340 6,505 Deferred income taxes (5,129 )
(3,977 ) Changes in operating assets and liabilities and other, net
(8,310 ) (25,506 )
Net cash provided by operating
activities 44,754 26,188
Investing Activities Payments related to business and asset
acquisitions, net of cash acquired (15,194 ) (256,450 ) Proceeds
from sale of a facility - 5,178 Purchases of property, plant and
equipment (9,232 ) (10,436 )
Net cash used in
investing activities (24,426 ) (261,708 )
Financing Activities Payments on term loan (6,563 ) (6,564 )
Proceeds from term loan - 175,000 Payments on revolving line of
credit (98,000 ) (130,346 ) Proceeds from revolving line of credit
115,000 192,000 Payments related to debt issuance costs - (5,556 )
Payment related to distribution agreement - (16,667 ) Dividends
paid on common stock (16,722 ) (16,649 ) Other, net (887 )
(1,349 )
Net cash provided by (used in) financing
activities (7,172 ) 189,869 Effect of exchange rate
changes on cash and cash equivalents 3,450 95
Net increase (decrease) in cash and cash equivalents 16,606
(45,556 ) Cash and cash equivalents at beginning of period
27,428 72,504
Cash and cash equivalents at
end of period $ 44,034 $ 26,948
Sales Summary
(in millions, unaudited)
Three Months Ended September 30, %
Change Domestic
International 2017 2016
As Reported
Constant Currency
As Reported
As Reported
Constant Currency
Orthopedic Surgery $ 98.6 $ 99.4 -0.8 % -1.6 % -8.8 % 5.0 %
3.6 % General Surgery 91.5 85.4 7.1 %
7.0 % 4.8 % 11.9 % 11.6 % $ 190.1 $
184.8 2.9 % 2.4 % -0.9 % 7.3 % 6.2 %
Single-use Products $ 153.2 $ 146.7 4.5 % 4.0 % 0.3 % 9.4 % 8.3 %
Capital Products 36.9 38.1 -3.3 % -3.8
% -5.7 % -0.6 % -1.6 % $ 190.1 $ 184.8 2.9 %
2.4 % -0.9 % 7.3 % 6.2 % Domestic $
98.3 $ 99.2 -0.9 % -0.9 % International 91.8
85.6 7.3 % 6.2 % $ 190.1 $ 184.8 2.9 % 2.4 %
Nine Months Ended September 30, %
Change Domestic International 2017
2016
As Reported
Constant Currency
As Reported
As Reported
Constant Currency
Orthopedic Surgery $ 307.9 $ 310.5 -0.8 % -0.4 % -4.6 % 1.8 % 2.5 %
General Surgery 265.9 248.9 6.8 % 7.3 %
5.8 % 9.0 % 10.4 % $ 573.8 $ 559.4 2.6 %
3.0 % 1.3 % 4.0 % 4.9 % Single-use
Products $ 462.4 $ 445.8 3.7 % 4.2 % 2.1 % 5.6 % 6.6 % Capital
Products 111.4 113.6 -2.0 % -1.6 % -2.1
% -1.9 % -1.1 % $ 573.8 $ 559.4 2.6 %
3.0 % 1.3 % 4.0 % 4.9 % Domestic $ 297.7 $
294.0 1.3 % 1.3 % International 276.1 265.4
4.0 % 4.9 % $ 573.8 $ 559.4 2.6 % 3.0 %
Reconciliation of Reported Net Income to
Adjusted Net Earnings
(in thousands, except per share amounts,
unaudited)
Three Months Ended September 30, 2017
Gross Profit
Selling & Administrative
Expense
Operating Income
Tax Expense
Effective Tax Rate
Net Income
Diluted EPS
As reported $ 102,547 $ 80,807 $
13,470 $ 1,467 16.9 % $ 7,197
$ 0.26 % of sales 53.9 % 42.5 %
7.1 % Restructuring costs (1) 1,306 -
1,306 467 839 0.03 Business acquisition costs (2) - (128 ) 128 48
80 0.00 Legal matters (3) - (327 )
327 115
212 0.01 $ 103,853
$ 80,352 $ 15,231 $ 2,097
20.1 % $ 8,328 $ 0.30 % of sales 54.6 % 42.3 % 8.0 %
Amortization of intangible assets $ 1,500 $ (3,761 ) $ 5,261 $
1,854 3,407 0.12
Adjusted net
earnings $ 11,735 $ 0.42
Three Months Ended September 30,
2016
Gross Profit
Selling & Administrative
Expense
Operating Income
Tax Expense
Effective Tax Rate
Net Income
Diluted EPS
As reported $ 101,209 $ 79,009 $
13,847 $ 2,649 26.5 % $ 7,337
$ 0.26 % of sales 54.8 % 42.8 % 7.5 %
Restructuring costs (1) - (361 ) 361 172 189 0.01 Business
acquisition costs (2) - (2,695 ) 2,695 1,207 1,488 0.05 Legal
matters (3) - (619 ) 619 279 340 0.01 Gain on sale of facility (4)
- 1,890 (1,890 )
(853 ) (1,037 )
(0.04 ) $ 101,209 $ 77,224 $
15,632 $ 3,454 29.3 % $ 8,317 $ 0.29 %
of sales 54.8 % 41.8 % 8.5 % Amortization of intangible assets $
1,500 $ (3,498 ) $ 4,998 $ 1,777 3,221
0.12
Adjusted net earnings $ 11,538 $
0.41
Reconciliation of
Reported Net Income to Adjusted Net Earnings
(in thousands, except per share amounts,
unaudited)
Nine Months Ended September 30, 2017
Gross Profit
Selling & Administrative
Expense
Operating Income
Other Expense
Tax Expense
Effective Tax Rate
Net Income
Diluted EPS
As reported $ 307,084 $ 259,396
$ 23,759 $ - $ 1,645 15.8
% $ 8,791 $ 0.31 % of sales 53.5 %
45.2 % 4.1 %
Restructuring costs (1) 2,778 (1,347 ) 4,125 - 1,377 2,748 0.10
Business acquisition costs (2) - (1,020 ) 1,020 - 370 650 0.02
Legal matters (3) - (17,041 )
17,041 - 5,537
11,504 0.41
$ 309,862 $ 239,988 $ 45,945
$ - $ 8,929 27.4 % $
23,693 $ 0.84
% of sales 54.0 % 41.8 % 8.0 % Amortization of
intangible assets $ 4,500 $ (11,096 ) $ 15,596 $ - $ 5,515
10,081 0.36
Adjusted net
earnings $ 33,774 $ 1.20
Nine
Months Ended September 30, 2016
Gross Profit
Selling & Administrative
Expense
Operating Income
Other Expense
Tax Expense
Effective Tax Rate
Net Income
Diluted EPS
As reported $ 301,371 $ 251,681
$ 25,070 $ 2,942 $ 2,724
25.5 % $ 7,956 $ 0.28 % of sales 53.9 %
45.0 % 4.5 % Restructuring costs (1) 5,537 (4,105 ) 9,642 - 3,215
6,427 0.23 Business acquisition costs (2) - (14,547 ) 14,547 -
5,734 8,813 0.32 Legal matters (3) - (2,808 ) 2,808 - 301 2,507
0.09 Gain on sale of facility (4) - 1,890 (1,890 ) - (853 ) (1,037
) (0.04 ) Debt refinancing costs (5) -
- - (2,942 )
930 2,012
0.07 $ 306,908 $ 232,111
$ 50,177 $ - $ 12,051
31.1 % $ 26,678 $ 0.95 % of sales 54.9 % 41.5 % 9.0 % Amortization
of intangible assets $ 4,500 $ (10,489 ) $ 14,989 $ - $ 5,341
9,648 0.35
Adjusted net
earnings $ 36,326 $ 1.30 (1) In
2017 and 2016, the Company restructured certain operating, sales,
marketing and administrative functions and incurred severance,
product discontinuation, and other related costs. (2) In
2017 and 2016, the Company incurred investment banking fees,
consulting fees, legal fees, and integration related costs
associated with the acquisition of SurgiQuest, Inc. (3) In
2017, the Company incurred litigation fees as a result of the
unfavorable verdict in the Lexion vs. SurgiQuest, Inc. case. In
2017 and 2016, the Company incurred legal fees associated with the
Lexion vs. SurgiQuest, Inc. case and other legal matters.
(4) In 2016, the Company recorded a gain on the sale of its
facility in Centennial, Colorado. (5) In 2016, in
conjunction with the acquisition of SurgiQuest, Inc., 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 Nine Months Ended
September 30, September 30, 2017
2016 2017 2016 Net income
$ 7,197 $ 7,337 $ 8,791 $ 7,956
Provision for income taxes 1,467 2,649 1,645 2,724 Interest
expense 4,806 3,861 13,323 11,448 Depreciation 5,234 5,301 14,993
15,242 Amortization 9,367 8,357
27,288 25,187 EBITDA $ 28,071
$ 27,505 $ 66,040 $ 62,557
Stock based compensation 2,119 1,921 6,340 5,784
Restructuring costs 1,306 361 4,125 9,642 Business acquisition
costs 128 2,695 1,020 14,547 Legal matters 327 619 17,041 2,808
Gain on sale of facility - (1,890 ) - (1,890 ) Debt refinancing
costs - - -
2,942 Adjusted EBITDA $ 31,951 $ 31,211
$ 94,566 $ 96,390
EBITDA Margin EBITDA 14.8 % 14.9 % 11.5 % 11.2 % Adjusted
EBITDA 16.8 % 16.9 % 16.5 % 17.2 %
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171102006684/en/
CONMED CorporationLuke A. Pomilio,
315-624-3202Chief Financial
OfficerLukePomilio@conmed.com
CONMED (NASDAQ:CNMD)
Historical Stock Chart
From Apr 2024 to May 2024
CONMED (NASDAQ:CNMD)
Historical Stock Chart
From May 2023 to May 2024