/ CORRECTION - CONMED Corporation Fourth Quarter 2013 Financial Results Exceed Company Guidance

Marketwired

UTICA, NY--(Marketwired - Feb 13, 2014) - In the news release, "CONMED Corporation Fourth Quarter 2013 Financial Results Exceed Company Guidance," issued earlier today by CONMED Corporation ( NASDAQ : CNMD ), please be advised that the table headings "Twelve months ended December 31" and "Three months ended December 31" should have been switched for tables RECONCILIATION OF INCOME FROM OPERATIONS TO ADJUSTED INCOME FROM OPERATIONS and RECONCILIATION OF REPORTED NET INCOME TO EBITDA & ADJUSTED EBITDA. Complete corrected text follows.

CONMED Corporation Fourth Quarter 2013 Financial Results Exceed Company Guidance

UTICA, NY -- Feb 13, 2014 -- CONMED Corporation ( NASDAQ : CNMD )

  • Record Quarterly Sales of $203.4 million
  • EPS of $0.36
  • Adjusted EPS of $0.53
  • Conference Call to be Held at 10:00 a.m. ET Today

CONMED Corporation ( NASDAQ : CNMD ) today announced financial results for the fourth quarter and year ended December 31, 2013.

"We exited 2013 with strong sales and earnings that exceeded the high end of our guidance for both metrics," said Mr. Joseph J. Corasanti, President and CEO. "Fourth quarter 2013 sales of $203.4 million grew 2.1% on a constant currency basis, compared with a strong performance in the fourth quarter of 2012, and were driven by stronger-than-anticipated sales in Europe and capital equipment products sales. We also achieved sales growth for our single-use and capital products and improved our adjusted gross margins, which led to better-than-expected adjusted earnings per share of $0.53 for the fourth quarter." 

Fourth Quarter 2013 Financial Highlights:

  • Sales were $203.4 million, up 2.1% on a constant currency basis compared with the fourth quarter of 2012; both single-use and capital products grew in excess of 2.0% on an FX neutral basis.

  • International sales in the fourth quarter of 2013 were $102.7 million, representing 50.5% of total sales. Foreign currency exchange rates, including the effects of the FX hedging program, had a negative impact of $2.0 million in the fourth quarter of 2013.

  • Diluted earnings per share (GAAP) (EPS) were $0.36 compared with $0.38 in the fourth quarter of 2012. Excluding the Medical Device Excise Tax, (MDET) EPS was $0.40 in the fourth quarter of 2013.

  • Adjusted diluted earnings per share were $0.53 in the fourth quarter of 2013 compared with $0.52 in the same quarter of 2012. Excluding the MDET, adjusted EPS was $0.57 in the fourth quarter of 2013.

  • Adjusted EBITDA margin was 18.1%, consistent with the prior year period. Excluding the MDET in 2013, adjusted EBITDA margin for the fourth quarter of 2013 was 18.9%.

  • The Board of Directors declared a quarterly cash dividend of $0.20 per share, which was paid on January 6, 2014. This quarterly dividend was 33% higher than the prior quarterly cash dividend of $0.15 per share. Based upon the stock price on February 12, 2014, on an annualized basis, the dividend provides investors with a yield of nearly 2%. 

Year 2013 Financial Highlights

  • Sales for 2013 were $762.7 million, up 0.2% on a constant currency basis compared with 2012, resulting from a 0.4% increase in single-use products and a 0.8% decline in capital equipment on an FX neutral basis.

  • International sales for full year 2013 were $387.2 million, representing 50.8% of total sales. Foreign currency exchange rates, including the effects of the FX hedging program, had a negative impact of $5.7 million on full year 2013.

  • Diluted earnings per share (GAAP) were $1.28 in the 2013 compared with $1.41 in 2012. Excluding the MDET, EPS was $1.41 in 2013.

  • Adjusted diluted earnings per share were $1.81 in 2013 compared with $1.80 in 2012. Excluding the MDET, adjusted EPS was $1.94 in 2013.

  • Adjusted EBITDA margin was 17.2% in 2013 compared with 17.4% in 2012. Excluding the MDET in 2013, adjusted EBITDA margin for the year was 18.0%.

CONMED generated $27.3 million in cash from operating activities in the fourth quarter of 2013. For 2013, the Company generated $80.9 million in cash from operating activities, more than double the net income for the year. The Company repurchased 1,577,800 shares of its common stock for $50.6 million in 2013 at an average price of $32.04 per share.

Outlook

"We are encouraged by the sales growth acceleration we achieved throughout 2013, particularly in our single-use surgical devices, and are optimistic that the positive trends in surgical procedure growth in both the domestic and international markets will support our continued progress," continued Mr. Corasanti. "We have a dynamic financial model and higher-margin single-use products comprise 80% of CONMED's sales with the remaining 20% of sales resulting from surgical devices that fall under the capital expenditure budgets of our hospital customers. Despite the headwinds our capital products faced throughout 2013 due to continued budgetary restraints at hospitals in the United States and public healthcare systems in other countries, we achieved sales growth among these products that exceeded our expectations for the fourth quarter. Looking forward to 2014, we believe that continued modest improvement in the global economy will allow CONMED to achieve annual sales growth and we are reiterating our 2014 sales and adjusted earnings per share guidance. This forecast is based on our expectations for continued sales growth for our single-use products and continued sales improvement for our capital products as the capital equipment replacement cycle normalizes."

For the first quarter of 2014 CONMED expects to achieve:

  • Sales in the range of $191 to $196 million; and
  • Adjusted earnings per share between $0.45 and $0.49.

For the full year 2014 CONMED expects to achieve:

  • Sales in the range of $770 to $780 million;
  • Adjusted earnings per share between $1.90 and $2.00; and
  • Approximately 50 basis point improvement in adjusted operating and EBITDA margins.

The adjusted estimates for the first quarter and full year 2014 exclude special items, such as manufacturing restructuring costs expected to be incurred due to relocation of manufacturing activities and patent litigation expense. 

Special charges

During the fourth quarter of 2013, the Company continued the on-going consolidation of certain administrative functions and manufacturing activities. Also incurred were litigation costs associated with patent litigation. Further, during the fourth quarter of 2013, the Company incurred a non-cash expense from the settlement of certain pension obligations. Expenses associated with these activities, including severance and relocation costs, amounted to $4.7 million, net of tax, in the fourth quarter of 2013. These charges are included in the GAAP earnings per share set forth above and are excluded from the adjusted results. For 2014, the Company presently anticipates incurring additional pre-tax special costs of $4.0 - 5.0 million on projects currently in process.

Use of non-GAAP financial measures

Management has disclosed adjusted financial measurements in this press announcement that present financial information that is not in accordance with generally accepted accounting principles. These measurements are not a substitute for GAAP measurements, although Company management uses these measurements as aids in monitoring the Company's on-going financial performance from quarter-to-quarter and year-to-year on a regular basis, and for benchmarking against other medical technology companies. Adjusted net income, adjusted operating income and adjusted earnings per share measure the income of the Company excluding credits or charges that are considered by management to be outside of the normal on-going operations of the Company. Management uses and presents adjusted net income, adjusted operating margin and adjusted earnings per share because management believes that in order to properly understand the Company's short and long-term financial trends, the impact of special items should be eliminated from on-going operating activities. These adjustments for special items are derived from facts and circumstances that vary in frequency and impact on the Company's results of operations. Management uses adjusted net income, adjusted operating income and adjusted earnings per share to forecast and evaluate the operational performance of the Company as well as to compare results of current periods to prior periods on a consistent basis. Further, the presentation of EBITDA is a non-GAAP measurement that management considers useful for measuring aspects of the Company's cash flow. Adjusted financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. Investors should consider adjusted measures in addition to, and not as a substitute for, or superior to, financial performance measures prepared in accordance with GAAP. 

Conference call

The Company will webcast its fourth quarter 2013 conference call live over the Internet at 10:00 a.m. Eastern Time on Thursday, February 13, 2014. This webcast can be accessed from CONMED's web site at www.conmed.com . Replays of the call will be made available through February 21, 2014.

CONMED profile

CONMED is a medical technology company with an emphasis on 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. Headquartered in Utica, New York, the Company's 3,600 employees distribute its products worldwide from several manufacturing locations. CONMED has a direct selling presence in 16 countries outside the United States and international sales constitute approximately 50% of the Company's total sales.

Forward Looking Information

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. 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. 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: (i) the failure of any one or more of the assumptions stated above, to prove to be correct; (ii) 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, 2012; (iii) cyclical purchasing patterns from customers, end-users and dealers; (iv) timely release of new products, and acceptance of such new products by the market; (v) the introduction of new products by competitors and other competitive responses; (vi) the possibility that any new acquisition or other transaction may require the Company to reconsider its financial assumptions and goals/targets; (vii) increasing costs for raw material, transportation or litigation; (viii) the risk of a lack of allograft tissues due to reduced donations of such tissues or due to tissues not meeting the appropriate high standards for screening and/or processing of such tissues; and/or (ix) the Company's ability to devise and execute strategies to respond to market conditions.

...
 
 
CONMED CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts)
(unaudited)
                 
    Three months ended
December 31,
  Twelve months ended
December 31,
    2012   2013   2012   2013
                         
Net sales   $ 201,244   $ 203,442   $ 767,140   $ 762,704
Cost of sales     91,424     89,910     354,245     341,661
Cost of sales, other - Note A     2,533     2,137     7,052     8,626
                         
Gross profit     107,287     111,395     405,843     412,417
                         
Selling and administrative     79,892     82,355     302,469     310,730
Research and development     6,850     6,438     28,214     25,831
Medical device excise tax     -     1,536     -     5,949
Other expense- Note B     3,529     4,885     9,950     13,399
      90,271     95,214     340,633     355,909
                         
Income from operations     17,016     16,181     65,210     56,508
                         
Loss on early extinguishment of debt     -     -     -     263
                        
Interest expense     1,397     1,482     5,730     5,613
                         
Income before income taxes     15,619     14,699     59,480     50,632
                         
Provision for income taxes     4,722     4,472     18,999     14,693
                         
Net income   $ 10,897   $ 10,227   $ 40,481   $ 35,939
                         
Per share data:                        
  Net income                        
  Basic   $ .38   $ .37   $ 1.43   $ 1.30
  Diluted     .38     .36     1.41     1.28
                           
  Weighted average common shares                        
  Basic     28,408     27,644     28,301     27,722
  Diluted     28,727     28,062     28,653     28,114

Note A - Included in cost of sales, other in the three and twelve months ended December 31, 2012 and 2013 are costs related to the consolidation of our production facilities. Also included in the twelve months ended December 31, 2013 are costs associated with the termination of a product offering. Refer to the Reconciliation of Reported Net Income to Adjusted Net Income for further details.

Note B - Other expense in the three and twelve months ended December 31, 2012 and 2013 includes a number of adjusted charges. Refer to the Reconciliation of Reported Net Income to Adjusted Net Income for further details.

   
   
CONMED CORPORATION  
CONSOLIDATED CONDENSED BALANCE SHEETS  
(in thousands)  
(unaudited)  
ASSETS  
       
    December 31,  
    2012     2013  
Current assets:                
  Cash and cash equivalents   $ 23,720     $ 54,443  
  Accounts receivable, net     139,124       140,426  
  Inventories     156,228       143,211  
  Income taxes receivable     2,897       3,805  
  Deferred income taxes     11,931       13,202  
  Prepaid expenses and other current assets     14,993       17,045  
    Total current assets     348,893       372,132  
                 
Property, plant and equipment, net     139,041       138,985  
Deferred income taxes     1,057       1,183  
Goodwill     248,502       248,428  
Other intangible assets, net     334,185       319,440  
Other assets     7,171       10,340  
    Total assets   $ 1,078,849     $ 1,090,508  
                 
LIABILITIES AND SHAREHOLDERS' EQUITY  
             
Current liabilities:                
  Current portion of long-term debt   $ 1,050     $ 1,140  
  Other current liabilities     124,164       110,125  
    Total current liabilities     125,214       111,265  
                 
Long-term debt     160,802       214,435  
Deferred income taxes     99,199       113,199  
Other long-term liabilities     86,636       45,290  
    Total liabilities     471,851       484,189  
                 
Shareholders' equity:                
  Capital accounts     256,672       228,002  
  Retained earnings     377,907       395,889  
  Accumulated other comprehensive loss     (27,581 )     (17,572 )
    Total equity     606,998       606,319  
                     
    Total liabilities and shareholders' equity   $ 1,078,849     $ 1,090,508  
                 
                 
 
 
CONMED CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
       
    Twelve months ended  
    December 31,  
    2012     2013  
Cash flows from operating activities:                
  Net income   $ 40,481     $ 35,939  
  Adjustments to reconcile net incometo net cash provided by operating activities:                
  Depreciation and amortization     46,616       47,867  
  Stock-based compensation     5,653       5,593  
  Loss on early extinguishment of debt     -       263  
  Deferred income taxes     12,946       7,218  
    Increase (decrease) in cash flows from changes in assets and liabilities:                
      Accounts receivable     1,687       (798 )
      Inventories     3,810       (1,817 )
      Accounts payable     259       4,223  
      Income taxes receivable (payable)     (6,651 )     (1,519 )
      Accrued compensation and benefits     767       (71 )
      Other assets     (1,210 )     (5,222 )
      Other liabilities     (9,159 )     (10,727 )
  Net cash provided by operating activities     95,199       80,949  
                 
Cash flows from investing activities:                
      Payments related to business acquisition and distribution agreement, net of cash acquired     (86,253 )     -  
      Proceeds from sale of property     1,836       -  
      Purchases of property, plant, and equipment     (21,532 )     (18,445 )
  Net cash used in investing activities     (105,949 )     (18,445 )
                 
Cash flows from financing activities:                
      Payments on debt     (54,657 )     (1,277 )
      Proceeds of debt     73,000       55,000  
      Payments related to distribution agreement     -       (34,000 )
      Dividends paid on common stock     (12,862 )     (16,696 )
      Payments related to issuance of debt     -       (1,725 )
      Net proceeds from common stock issued under employee plans     10,165       17,264  
      Repurchase of common stock     (3,923 )     (50,556 )
      Other, net     (370 )     694  
  Net cash provided by (used in) financing activities     11,353       (31,296 )
                 
Effect of exchange rate change on cash and cash equivalents     (2,931 )     (485 )
                 
Net increase (decrease) in cash and cash equivalents     (2,328 )     30,723  
                 
Cash and cash equivalents at beginning of period     26,048       23,720  
                 
Cash and cash equivalents at end of period   $ 23,720     $ 54,443  
                 
                 
   
   
CONMED CORPORATION  
RECONCILIATION OF REPORTED NET INCOME TO ADJUSTED NET INCOME  
Three Months Ended December 31, 2012 and 2013  
(In thousands except per share amounts)  
(unaudited)  
             
    2012     2013  
                 
Reported net income   $ 10,897     $ 10,227  
                 
Facility consolidation costs     2,533       2,137  
                 
  Total cost of sales     2,533       2,137  
                 
Administrative consolidation costs included in other expense     3,053       2,447  
                 
Costs associated with purchase of a business     476       -  
                 
Patent dispute costs included in other expense     -       995  
                 
Pension settlement expense     -       1,443  
                 
  Total other expense     3,529       4,885  
                 
Adjusted expense before income taxes     6,062       7,022  
                 
Provision (benefit) for income taxes on adjusted expenses     (2,074 )     (2,351 )
                 
Adjusted net income   $ 14,885     $ 14,898  
                 
Per share data:                
                 
Reported net income                
  Basic   $ 0.38     $ 0.37  
  Diluted     0.38       0.36  
                 
Adjusted net income                
  Basic   $ 0.52     $ 0.54  
  Diluted     0.52       0.53  
                 
                 

Management has provided the above reconciliation of net income to adjusted net income as an additional measure that investors can use to compare operating performance between reporting periods. Management believes this reconciliation provides a useful presentation of operating performance as discussed in the section "Use of Non-GAAP Financial Measures" above. 

   
 
CONMED CORPORATION 
RECONCILIATION OF REPORTED NET INCOME TO ADJUSTED NET INCOME 
Twelve Months Ended December 31, 2012 and 2013 
(In thousands except per share amounts) 
(unaudited) 
             
    2012     2013  
                 
Reported net income   $ 40,481     $ 35,939  
                 
Costs associated with termination of a product offering     -       2,137  
                 
Facility consolidation costs     7,052       6,489  
                 
  Total cost of sales     7,052       8,626  
                 
Administrative consolidation costs included in other expense     6,497       8,750  
                 
Costs associated with purchase of Nordic region distributor     704       -  
                 
Costs associated with purchase of a business     1,194       -  
                 
Legal arbitration and patent dispute costs included in other expense     1,555       3,206  
                 
Pension settlement expense     -       1,443  
                 
  Total other expense     9,950       13,399  
                 
Loss on early extinguishment of debt     -       263  
                 
Adjusted expense before income taxes     17,002       22,288  
                 
Provision (benefit) for income taxes on adjusted expenses     (5,829 )     (7,473 )
                 
Adjusted net income   $ 51,654     $ 50,754  
                 
Per share data:                
                 
Reported net income                
  Basic   $ 1.43     $ 1.30  
  Diluted     1.41       1.28  
                 
Adjusted net income                
  Basic   $ 1.83     $ 1.83  
  Diluted     1.80       1.81  
                 
                 

Management has provided the above reconciliation of net income to adjusted net income as an additional measure that investors can use to compare operating performance between reporting periods. Management believes this reconciliation provides a useful presentation of operating performance as discussed in the section "Use of Non-GAAP Financial Measures" above. 

 
 
CONMED CORPORATION
RECONCILIATION OF INCOME FROM OPERATIONS TO ADJUSTED INCOME FROM OPERATIONS
(In thousands)
(unaudited)
                 
    Three months ended
December 31,
  Twelve months ended
December 31,
    2012   2013   2012   2013
                         
Reported income from operations   $ 17,016   $ 16,181   $ 65,210   $ 56,508
                         
Costs associated with termination of a product offering included in cost of sales     -     -     -     2,137
                         
Facility consolidation costs included in cost of sales     2,533     2,137     7,052     6,489
                         
Administrative consolidation costs included in other expense     3,053     2,447     6,497     8,750
                         
Medical device excise tax     -     1,536     -     5,949
                         
Costs associated with purchase of a business     476     -     1,194     -
                         
Costs associated with purchaseof Nordic region distributor     -     -     704     -
                         
Legal arbitration and patent dispute costs included in other expense     -     995     1,555     3,206
                         
Pension settlement expense     -     1,443     -     1,443
                         
Adjusted income from operations   $ 23,078   $ 24,739   $ 82,212   $ 84,482
                         
Operating Margin                        
  Reported     8.5%     8.0%     8.5%     7.4%
                           
  Adjusted     11.5%     12.2%     10.7%     11.1%
                           
                           

Management has provided the above reconciliation as an additional measure that investors can use to compare financial results between reporting periods. Management believes this reconciliation provides a useful presentation of financial measures as discussed in the section "Use of Non-GAAP Financial Measures" above.

 
 
CONMED CORPORATION
RECONCILIATION OF REPORTED NET INCOME TO EBITDA & ADJUSTED EBITDA
(in thousands)
(unaudited)
                 
    Three months ended
December 31,
  Twelve months ended
December 31,
    2012   2013   2012   2013
                         
Net income   $ 10,897   $ 10,227   $ 40,481   $ 35,939
                         
Provision for income taxes     4,722     4,472     18,999     14,693
                         
Interest expense     1,397     1,482     5,730     5,613
                         
Loss on early extinguishment of debt     -     -     -     263
                         
Depreciation     4,617     4,952     18,635     18,653
                         
Amortization     7,100     7,228     27,305     28,655
                         
EBITDA   $ 28,733   $ 28,361   $ 111,150   $ 103,816
                         
Stock-based compensation     1,538     1,491     5,653     5,593
                         
Costs associated with termination of a product offering included in cost of sales                        
  -     -     -     2,137
                         
Facility consolidationcosts included in cost of sales     2,533     2,137     7,052     6,489
                         
Administrative consolidationcosts included in other expense     3,053     2,447     6,497     8,750
                         
Costs associated with purchaseof a business     476     -     1,194     -
                         
Costs associated with purchase of Nordic region distributor     -     -     704     -
                         
Legal arbitration and patent dispute costs included in other expense     -     995     1,555     3,206
                         
Pension settlement expense     -     1,443     -     1,443
                         
Adjusted EBITDA   $ 36,333   $ 36,874   $ 133,805   $ 131,434
                         
EBITDA Margin                        
  EBITDA     14.3%     13.9%     14.5%     13.6%
                           
  Adjusted EBITDA     18.1%     18.1%     17.4%     17.2%
                         
                         

Management has provided the above reconciliations as additional measures that investors can use to compare financial results between reporting periods. Management believes these reconciliations provide a useful presentation of financial measures as discussed in the section "Use of Non-GAAP Financial Measures" above.

   
 
CONMED CORPORATION
Fourth Quarter Sales Summary
(in millions)
   
    Three Months Ended December 31,  
   

2012
 

2013
 

Growth
    Constant
Currency
Growth
 
                         
Orthopedic surgery   $ 107.0   $ 107.7   0.7 %   2.2 %
General surgery     76.3     76.8   0.7 %   1.2 %
Surgical visualization     17.9     18.9   5.6 %   5.6 %
                         
    $ 201.2   $ 203.4   1.1 %   2.1 %
                         
Single-use products   $ 160.0   $ 161.5   0.9 %   2.0 %
Capital products     41.2     41.9   1.7 %   2.4 %
                         
    $ 201.2   $ 203.4   1.1 %   2.1 %
                         
                         
   
   
CONMED CORPORATION  
Twelve Months Sales Summary  
(in millions)  
   
    Twelve Months Ended December 31,  
   

2012
 

2013
 

Growth
    Constant
Currency
Growth
 
                         
Orthopedic surgery   $ 413.9   $ 410.2   -0.9 %   0.1 %
General surgery     286.6     286.7   0.0 %   0.5 %
Surgical visualization     66.6     65.8   -1.2 %   -0.9 %
                         
    $ 767.1   $ 762.7   -0.6 %    0.2 %
                         
Single-use products   $ 611.2   $ 609.0   -0.4 %   0.4 %
Capital products     155.9     153.7   -1.4 %   -0.8 %
                         
    $ 767.1   $ 762.7   -0.6 %    0.2 %
                         
                         
Contact:
CONTACT:
CONMED Corporation
Robert Shallish
Chief Financial Officer
315-624-3206

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