UTICA, N.Y.--(BUSINESS WIRE)--Nov. 2, 2017-- 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/

Source: CONMED Corporation

CONMED Corporation
Luke A. Pomilio, 315-624-3202
Chief Financial Officer
LukePomilio@conmed.com