UTICA, NY -- (Marketwired) -- 04/24/14 -- CONMED Corporation (NASDAQ: CNMD)

• EPS of $0.31; Adjusted EPS of $0.49, up 8.9% over prior year period
  
  
• Company Reiterates 2014 Guidance
  
  
• Conference Call to be Held at 10:00 a.m. ET Today
  

CONMED Corporation (NASDAQ: CNMD) today announced financial results for the first quarter ended March 31, 2014.

"Our continued operational focus during the first quarter allowed us to grow our adjusted earnings per share to $0.49, which was at the top end of our guidance and represented an 8.9% increase over the prior year period," commented Mr. Joseph J. Corasanti, President and CEO. "We achieved this growth despite weaker capital product revenue, which represents 20% of our business and, as we have seen in the past, can be volatile on a quarter to quarter basis. On a positive note, sales of single-use devices increased in international markets with Europe continuing with year-over-year growth and emerging markets delivering an 11% gain. With the recent introduction of the IM8000 surgical visualization system and the Hall 50 powered surgical handpieces, we believe that we can drive growth in the capital product portion of our business throughout the remaining quarters of 2014. We remain focused on creating value for our shareholders and will continue to take actions that we believe enable us to achieve this core objective."

First Quarter 2014 Financial Highlights:

• Diluted earnings per share (GAAP) was $0.31 and was affected by special items as further described, including a non-cash New York State tax matter resulting from recent legislation.
  
  
• Adjusted diluted earnings per share grew to $0.49, up 8.9% over the prior-year period.
  
  
• Sales were $181.9 million, a decrease of 2.7% over the prior-year period caused principally by weaker sales of capital products.
  
  
• Adjusted EBITDA margin grew 120 basis points to 18.3% of sales.
  
  
• GAAP EBITDA margin grew 70 basis points to 15.4% of sales.
  

International sales in the first quarter of 2014 were $94.6 million, representing 52.0% of total sales. Foreign currency exchange rates including the effects of the FX hedging program caused sales to be $1.4 million less in the first quarter of 2014 compared with sales in the first quarter of 2013.

Cash provided by operating activities in the first quarter of 2014 was $17.0 million, an increase of $11.6 million compared with the first quarter of 2013. Similar to the quarterly cash flow of 2013, management expects 2014 cash flow from operations to improve in the remaining quarters of 2014 since incentive compensation payments only affect the first quarter of 2014. During the first quarter of 2014 the Company repurchased 402,000 shares of its common stock amounting to $16.9 million.

Outlook

"We reiterate our full year 2014 sales guidance of $770 - $780 million and our full year adjusted diluted earnings per share guidance of $1.90 - $2.00. We continue to expect that new product introductions and improving economic conditions will have a positive impact on sales throughout the remainder of 2014," said Mr. Corasanti.

"For the second quarter of 2014, we anticipate sales will be in the range of $190 - $195 million and adjusted earnings per share are forecasted to be in the range of $0.44 - $0.48," said Mr. Corasanti.

The adjusted estimates for the second quarter and 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 and other costs.

Unusual charges

During the first quarter 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 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 $4.9 million, net of tax, in the first quarter 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 $7.5 - $8.5 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 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 first quarter 2014 conference call live over the Internet at 10:00 a.m. Eastern Time on Thursday, April 24, 2014. This webcast can be accessed from CONMED's web site at www.conmed.com. Replays of the call will be made available through May 2, 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, 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.

CONMED CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
Three Months Ended March 31, 2013 and 2014
(In thousands except per share amounts)
(unaudited)
				2013			2014
Net sales				$	187,014		$	181,941
Cost of sales					82,710			78,411
Cost of sales, other - Note A					1,622			948
Gross profit					102,682			102,582
Selling and administrative expense					77,725			73,818
Research and development					5,694			6,910
Medical device excise tax					1,580			1,349
Other expense - Note B					1,813			3,197
					86,812			85,274
Income from operations					15,870			17,308
Loss on early extinguishment of debt					263			-
Interest expense					1,366			1,461
Income before income taxes					14,241			15,847
Provision for income taxes					3,749			7,221
Net income				$	10,492		$	8,626
Per share data:
	Net income
		Basic		$	.37		$	.32
		Diluted			.37			.31
	Weighted average common shares
		Basic			28,127			27,349
		Diluted			28,500			27,854

Note A - Included in cost of sales, other in the three months ended March 31, 2013 and 2014 are costs related to the consolidation of our production facilities. Refer to the Reconciliation of Reported Net Income to Adjusted Net Income for further details.

Note B - Other expense in the three months ended March 31, 2013 and 2014 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,				March 31,
				2013				2014
Current assets:
	Cash and cash equivalents			$	54,443			$	56,318
	Accounts receivable, net				140,426				129,831
	Inventories				143,211				152,173
	Income taxes receivable				3,805				2,522
	Deferred income taxes				13,202				12,661
	Prepaid expenses and other current assets				17,045				14,296
		Total current assets			372,132				367,801
Property, plant and equipment, net					138,985				138,632
Deferred income taxes					1,183				1,146
Goodwill					248,428				248,423
Other intangible assets, net					319,440				316,122
Other assets					10,340				11,074
		Total assets		$	1,090,508			$	1,083,198
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Current portion of long-term debt			$	1,140			$	1,140
	Other current liabilities				110,125				99,972
		Total current liabilities			111,265				101,112
Long-term debt					214,435				241,435
Deferred income taxes					113,199				116,529
Other long-term liabilities					45,290				28,650
		Total liabilities			484,189				487,726
Shareholders' equity:
	Capital accounts				228,002				213,031
	Retained earnings				395,889				399,062
	Accumulated other comprehensive loss				(17,572	)			(16,621	)
		Total equity			606,319				595,472
		Total liabilities and shareholders' equity		$	1,090,508			$	1,083,198

CONMED CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(In thousands)
(unaudited)
				Three months ended
				March 31,
				2013				2014
Cash flows from operating activities:
Net income				$	10,492			$	8,626
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization					11,729				10,868
Stock-based compensation					1,152				1,185
Loss on early extinguishment of debt					263				-
Deferred income taxes					1,914				3,325
	Increase (decrease) in cash flows from changes in assets and liabilities:
		Accounts receivable			3,042				10,636
		Inventories			(4,858	)			(11,936	)
		Accounts payable			313				(1,151	)
		Income taxes receivable (payable)			244				1,826
		Accrued compensation and benefits			(8,830	)			(9,164	)
		Other assets			(2,423	)			2,088
		Other liabilities			(7,566	)			722
	Net cash provided by operating activities				5,472				17,025
Cash flow from investing activities:
		Purchases of property, plant, and equipment			(4,130	)			(4,065	)
	Net cash used in investing activities				(4,130	)			(4,065	)
Cash flow from financing activities:
		Proceeds of debt			64,000				27,000
		Payments related to distribution agreement			(34,000	)			(16,667	)
		Dividend paid on common stock			(4,256	)			(5,545	)
		Payments related to issuance of debt			(1,636	)			-
		Net proceeds from common stock issued under employee plans			7,633				729
		Repurchase of common stock			(25,732	)			(16,862	)
		Other, net			1,625				138
	Net cash provided by (used in) financing activities				7,634				(11,207	)
Effect of exchange rate change on cash and cash equivalents					(337	)			122
Net increase in cash and cash equivalents					8,639				1,875
Cash and cash equivalents at beginning of period					23,720				54,443
Cash and cash equivalents at end of period				$	32,359			$	56,318

CONMED CORPORATION
RECONCILIATION OF REPORTED NET INCOME TO ADJUSTED NET INCOME
Three Months Ended March 31, 2013 and 2014
(In thousands except per share amounts)
(unaudited)
			2013				2014
Reported net income			$	10,492			$	8,626
Facility consolidation costs included in cost of sales				1,622				948
Administrative consolidation costs included in other expense				1,604				713
Patent dispute & settlement costs, and other included in other expense				209				2,484
	Total other expense			1,813				3,197
Loss on early extinguishment of debt				263				-
Adjusted expense before income taxes				3,698				4,145
Provision (benefit) for income taxes on adjusted expenses				(1,331	)			(1,492	)
New York State corporate tax reform				-				2,258
Adjusted net income			$	12,859			$	13,537
Per share data:
Reported net income
	Basic		$	.37			$	.32
	Diluted			.37				.31
Net income before adjusted items
	Basic		$	.46			$	.49
	Diluted			.45				.49

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
Three Months Ended March 31, 2013 and 2014
(In thousands)
(unaudited)
			2013				2014
Reported income from operations			$	15,870			$	17,308
Facility consolidation costs included in cost of sales				1,622				948
Administrative consolidation costs included in other expense				1,604				713
Patent dispute & settlement costs, and other included in other expense				209				2,484
Adjusted income from operations			$	19,305			$	21,453
Operating Margin
	Reported			8.5	%			9.5	%
	Adjusted			10.3	%			11.8	%

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
			March 31,
			2013				2014
Net income			$	10,492			$	8,626
Provision for income taxes				3,749				7,221
Interest expense				1,366				1,461
Loss on early extinguishment of debt				263				-
Depreciation				4,619				4,568
Amortization				6,992				6,154
EBITDA (using GAAP measures)			$	27,481			$	28,030
Stock-based compensation				1,152				1,185
Facility consolidation costs included in cost of sales				1,622				948
Administrative consolidation costs included in other expense				1,604				713
Patent dispute & settlement costs, and other included in other expense				209				2,484
Adjusted EBITDA			$	32,068			$	33,360
EBITDA Margin
	EBITDA			14.7	%			15.4	%
	Adjusted EBITDA			17.1	%			18.3	%

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
First Quarter Sales Summary
(In millions)
		Three Months Ended March 31,
		2013			2014			Growth			Constant Currency Growth
Orthopedic surgery		$	105.0		$	105.9		0.9	%		1.9	%
General surgery			66.8			63.5		-4.9	%		-4.6	%
Surgical visualization			15.2			12.5		-17.8	%		-17.1	%
		$	187.0		$	181.9		-2.7	%		-2.0	%
Single-use products		$	147.8		$	146.4		-0.9	%		-0.1	%
Capital products			39.2			35.5		-9.4	%		-8.9	%
		$	187.0		$	181.9		-2.7	%		-2.0	%

CONTACT:
CONMED Corporation
Robert Shallish
Chief Financial Officer
315-624-3206

Source: CONMED Corporation