CONMED Corporation Announces Second Quarter 2014 Financial Results

EPS of $0.37; Adjusted EPS of $0.47, up 9.3% over prior year period

Conference Call to be Held at 8:30 a.m. ET Today (Note time change)

UTICA, N.Y., July 23, 2014 (GLOBE NEWSWIRE) -- CONMED Corporation (Nasdaq:CNMD) today announced financial results for the second quarter ended June 30, 2014.

During the second quarter of 2014, CONMED continued its track record of growing earnings and margins through continued operational performance, with adjusted earnings per share improving 9.3% and adjusted EBITDA margin expanding 50 basis points compared to the second quarter of 2013. Sales declined 2.5% year-over-year caused by lower sales of General Surgery devices due to continued market weakness and the decline in Surgical Visualization capital sales of 24% as customers await the launch of the new IM 8000 surgical video system in the second half of this year. Capital product sales were positively affected by an 11.8% increase of powered instrument handpiece sales driven by the recent launch of the Hall 50 system.

Second Quarter 2014 Financial Highlights:

• Diluted earnings per share (GAAP) grew to $0.37, an increase of 8.8% compared to $0.34 in the second quarter of 2013.
• Adjusted diluted earnings per share increased 9.3% to $0.47 compared to $0.43 in the prior year period.
• Sales were $188.2 million, a decrease of 2.5% over the prior year period caused principally by weaker sales of general surgery devices, surgical visualization capital products and the discontinuance of the Cascade PRP product line.
• Adjusted EBITDA margin grew 50 basis points to 17.4% of sales.
• GAAP EBITDA margin grew 20 basis points to 14.5% of sales.

International sales in the second quarter of 2014 were $100.4 million, representing 53.4% of total sales. Foreign currency exchange rates including the effects of the FX hedging program caused sales to be $0.4 million less in the second quarter of 2014 and $1.7 million less in the first half of 2014 than sales in the respective periods of 2013.

Six Months 2014 Financial Highlights

• Diluted earnings per share (GAAP) was $0.68 compared to $0.71 in the first half of 2013 and was affected by special items as further described below, including a first quarter 2014 non-cash New York State tax matter resulting from recent legislation.
• Adjusted diluted earnings per share grew 8.0% to $0.95 compared to $0.88 in the first six months of 2013.
• Sales were $370.1 million compared to $380.0 million, a decrease of 2.6% caused principally by lower sales of general surgery devices, surgical visualization capital products and the discontinuance of the Cascade PRP product line.
• Adjusted EBITDA margin grew 90 basis points to 17.9% of sales.
• GAAP EBITDA margin grew 40 basis points to 14.9% of sales.

Outlook

Although new products such as the IM 8000 surgical visualization system and the Edge Ablation system expected to be launched in the second half of 2014 should enhance sales performance, it may take more time than the final six months of 2014 for the products to reach their potential. As a result, the Company now forecasts total year sales to be in the range of $735 - $745 million, compared to prior guidance of $770-780 million. Total year adjusted earnings per share guidance is also changed to $1.85 - $1.95 compared to prior guidance of $1.90 - $2.00.

Many companies have adopted the policy of not providing specific financial guidance on a quarterly basis because of the micro forecasting required. CONMED is now adopting this policy to avoid misinterpretation of quarterly fluctuations.

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

Unusual charges

As reconciled on the following schedule, during the second quarter and first half of 2014, the Company continued the on-going consolidation of certain administrative functions and manufacturing activities. Also incurred were litigation and settlement costs associated with patent and legal disputes, the write-off of New York State tax credits eliminated due to a legislative change, and other costs. Expenses associated with these activities, including severance and relocation costs, amounted to $2.7 million, net of tax, in the second quarter of 2014 and $7.6 million, net of tax, for the first six months of 2014. These charges are included in the GAAP earnings per share set forth above and are excluded from the adjusted results. For the remainder of 2014, the Company presently anticipates incurring additional pre-tax restructuring costs of $3.5 - $4.5 million on consolidation projects currently in process and $9.5 - $11.0 million in executive management transition charges.

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 unusual 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 income 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 second quarter 2014 conference call live over the Internet at 8:30 a.m. Eastern Time on Wednesday, July 23, 2014. This webcast can be accessed from CONMED's web site at www.conmed.com. Replays of the call will be made available through August 1, 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 over 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, 2013; (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.

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. 

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. 

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.

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 provide a useful presentation of financial measures as discussed in the section "Use of Non-GAAP Financial Measures" above.