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CONMED Reports Third Quarter Results
UTICA, N.Y., Oct 21, 2004 (PRNewswire-FirstCall via COMTEX) -- CONMED Corporation announced today its financial results for the third quarter ended September 30, 2004.
Mr. Joseph J. Corasanti, President and Chief Operating Officer, said, "CONMED's third quarter sales growth of close to 10% was excellent. Our strong quarterly performance was primarily driven by a 100% increase in video systems sales, which fueled our 19% Arthroscopy sales growth, and a 9% increase in Patient Care sales which resulted from the introduction of several new products over the past twelve months."
Total sales for the third quarter increased 9.6% to $132.3 million ($130.4 million at constant exchange rates) compared to $120.7 million in the third quarter of 2003. Excluding acquisition and transition charges (please see attached reconciliation for full explanation), non-GAAP net income for the third quarter grew to $11.5 million, or $0.38 per diluted share, on a 3% increase in diluted shares outstanding, compared to $10.4 million, or $0.36 per diluted share, in last year's third quarter. GAAP net income, including acquisition and transition charges, for the three months ended September 2004 was $1.7 million, or $0.06 per diluted share, compared to $9.7 million or $0.33 per diluted share in the third quarter of 2003.
Strong sales growth in the 2004 third quarter was fueled by revenues of the Company's video imaging products for arthroscopy and general surgery, which grew 100% in the third quarter compared to the last year's third quarter. This growth resulted from the introduction of CONMED's newest enhanced definition camera early in 2004. Further, revenues for the Company's Patient Care product group grew 9.4% in the third quarter of 2004 on the strength of a variety of its clinical care offerings, including its pulse oximetry monitoring devices.
Sales in the Company's orthopedic business, which is comprised of its Arthroscopy and Powered Instruments product groups, grew 12.5% to $81.0 million from $72.0 million in last year's third quarter. Arthroscopy sales, including integrated systems, increased 19.0% to $50.8 million compared to $42.7 million in the same period a year ago. Powered Instrument sales grew 3.1% to $30.2 million compared to $29.3 million in the third quarter of 2003.
Electrosurgery revenues increased 2.9% to $21.2 million on a difficult comparison to robust sales in the third quarter of 2003 of $20.6 million. Sales of Patient Care Products grew 9.4% to $18.7 million compared to $17.1 million. Endosurgery (formerly named Endoscopy) revenues increased 3.6% to $11.4 million compared to third quarter 2003 sales of $11.0 million.
Over the previous six quarters, the Company's gross margin percentage has remained relatively consistent at approximately 52.5%. In the third quarter of 2004, however, the gross margin percentage was equal to 51.0% as a result of a change in the mix of our product sales - specifically, the growth in video imaging systems sales (in the Arthroscopy product group) and Patient Care product sales, both of which have lower gross margins than the other product groups. It has been the Company's experience that sales of video products often lead to future sales of the Company's Arthroscopy single-use products, with gross margins generally higher than the Company average.
For the nine months ended September 30, 2004, CONMED reported a 9.3% increase in revenues, rising to $397.2 million, ($389.7 million in constant currency) from the $363.3 million in the first nine months of last year. Non-GAAP net income for year-to-date September 2004 excluding acquisition and transition charges (please see attached reconciliation for full explanation) grew to $35.8 million, or $1.18 per diluted share, compared to non-GAAP net income of $30.6 million, or $1.05 per diluted share, for the nine months ended September 30, 2003. GAAP net income and diluted EPS for the first nine months of 2004 were $26.0 million and $0.86, respectively compared to GAAP net income and diluted EPS of $19.1 million and $0.66 in the nine months ended September 30, 2003.
Sales growth by product line for the nine months ended September, 2004 is as follows: Arthroscopy (including integrated systems) + 14.4%; Powered Instruments + 5.7%; Electrosurgery + 10.1%; Patient Care + 5.8%; and Endosurgery + 3.9%.
Cash flow of the Company continues to be strong. For the nine months ended September 30, 2004, cash inflows approximate $62 million from operations.
As previously announced, the Company completed the acquisition of the Endoscopic Technologies product line from C.R. Bard on September 30, 2004 for a purchase price of $80 million (subject to adjustment). Accordingly, the estimated fair value of the assets and liabilities acquired have been recorded as of September 30, 2004. One of the intangible assets acquired, in-process research and development, has an estimated value of $13.7 million based on a preliminary independent, third-party valuation. In accordance with the applicable accounting standards, this acquired asset was charged to expense in the quarter ended September 2004. Additional pre-tax costs of acquisition and transition amounting to $1.2 million were recorded in the period ending September 30, 2004.
Mr. Corasanti concluded, "On October 1, 2004 we began shipping the products of our newly acquired product line, Endoscopic Technologies. For the fourth quarter of 2004, as a result of this increased sales activity, we expect total sales of CONMED medical devices to be in the range of $154 - $158 million with diluted earnings per share estimated to be $0.45 - $0.49, excluding acquisition and transition related charges. Looking ahead to 2005, we estimate sales to increase approximately 15% over 2004 amounts on forecasted 7% increase from our continued organic sales growth and the remainder from our new Endoscopic Technologies business. At these sales levels, we estimate that diluted earnings per share for 2005 will approximate $1.94 - $1.98 excluding acquisition and transition related charges. We also expect that free cash flow for 2005 will approximate $75 - $80 million."
Today's Conference Call
CONMED will broadcast its third quarter 2004 conference call live over the Internet today at 10:00 a.m. Eastern Time. This broadcast can be accessed from CONMED's web site at http://www.conmed.com/ . Replays of the call will be made available through October 27, 2004.
CONMED Profile
CONMED is a medical technology company with an emphasis on surgical devices and equipment for minimally invasive procedures and monitoring. The Company's products serve the clinical areas of arthroscopy, powered surgical instruments, electrosurgery, cardiac monitoring disposables, endosurgery and endoscopic technologies. They 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 2,800 employees distribute its products worldwide from eleven manufacturing locations.
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, including the above mentioned anticipated revenues and earnings, 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, 2003; (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 acquisition (and its integration) or other transaction may require the Company to reconsider its financial assumptions and goals/targets; and/or (vii) the Company's ability to devise and execute strategies to respond to market conditions.
CONMED CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands except per share amounts)
Three months ended Nine months ended
September 30, September 30,
2003 2004 2003 2004
Net sales $120,747 $132,289 $363,321 $397,165
Cost of sales 57,516 64,802 172,564 190,605
Cost of sales,
nonrecurring - Note A - - 739 -
Gross profit 63,231 67,487 190,018 206,560
Selling and
administrative 38,596 42,719 115,094 128,921
Research and
development 4,487 4,706 12,568 14,281
Write-off of purchased
in-process research
and development assets
- Note B - 13,700 7,900 13,700
Other expense (income),
net - Note C 1,153 867 (3,195) 867
44,236 61,992 132,367 157,769
Income from operations 18,995 5,495 57,651 48,791
Loss on early
extinguishment of debt - - 8,078 -
Interest expense
- Note D 3,829 3,189 15,228 9,053
Income before income
taxes 15,166 2,306 34,345 39,738
Provision for income
taxes 5,460 607 15,208 13,708
Net income $9,706 $1,699 $ 19,137 $ 26,030
Per share data:
Net Income
Basic $ .34 $ .06 $ .66 $ .88
Diluted .33 .06 .66 .86
Weighted average
common shares
Basic 28,941 29,816 28,909 29,618
Diluted 29,391 30,347 29,190 30,241
Note A - Included in cost of sales in the nine months ended September 30,
2003 are $.7 million in acquisition-related costs.
Note B - In the nine months ended September 30, 2003, we wrote off $7.9
million of purchased in-process research and development assets in
connection with the Bionx acquisition. No benefit for income taxes was
recorded on the write-off as these costs are not deductible for income
tax purposes. On September 30, 2004, we wrote off the tax-deductible
purchased in-process research and development assets related to the Bard
Endoscopic Technologies acquisition estimated at $13.7 million.
Note C - Included in other expense (income) in the three months ended
September 30, 2003 are $.8 million of pension settlement costs related to
the restructuring of our orthopedic sales force and $.4 million in
acquisition-related costs. Included in other expense (income) in the
nine months ended September 30, 2003 are a $9.0 million gain on the
settlement of a contractual dispute, $2.8 million of pension settlement
costs related to the restructuring of our orthopedic sales force and $3.0
million in acquisition-related costs. Included in other expense (income)
for the three and nine months ended September 30, 2004 are $.9 million of
acquisition-related costs.
Note D - Interest expense for the three and nine months ended September
30, 2004 includes $.3 million of financing costs related to the Bard
Endoscopic Technologies acquisition.
CONMED CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
ASSETS
(unaudited)
December Sept. 30,
2003 2004
Note A
Current assets:
Cash and cash equivalents $5,986 $10,223
Accounts receivable, net 60,449 63,627
Inventories 120,945 125,369
Deferred income taxes 10,188 10,705
Other current assets........ 3,538 3,467
Total current assets 201,106 213,391
Property, plant and equipment, net. 97,383 100,557
Goodwill and other assets, net 506,569 553,891
Total assets $805,058 $867,839
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $4,143 $3,988
Other current liabilities 50,712 43,916
Total current liabilities 54,855 47,904
Long-term debt 260,448 285,995
Other long-term liabilities 56,265 64,111
Total liabilities 371,568 398,010
Shareholders' equity:
Capital accounts 236,948 248,035
Retained earnings 194,473 220,503
Accumulated other comprehensive income 2,069 1,291
Total equity 433,490 469,829
Total liabilities and shareholders' equity $805,058 $867,839
OTHER FINANCIAL INFORMATION
(unaudited, in thousands)
Three months ended Nine months ended
September 30, September 30,
2003 2004 2003 2004
Depreciation $2,809 $2,744 $7,717 $ 8,003
Amortization 3,655 3,865 10,166 11,295
Capital expenditures 2,340 3,191 6,291 7,529
Note A - The Consolidated Condensed Balance Sheet as of September 30,
2004 includes the estimated assets and liabilities related to the Bard
Endoscopic Technologies acquisition.
CONMED CORPORATION
RECONCILIATION OF REPORTED NET INCOME TO NET INCOME
BEFORE NONRECURRING ITEMS
(In thousands except per share amounts)
(unaudited)
Three months ended
September 30,
2003 2004
Reported net income $9,706 $ 1,699
Write-off of purchased in-process research
And development assets - 13,700
Pension settlement costs 758 -
Other acquisition-related costs 395 867
Total other expense (income), net 1,153 867
Acquisition-related interest expense - 360
Nonrecurring expense before income taxes 1,153 14,927
Provision (benefit) for income taxes on
nonrecurring expense (415) (5,150)
Net income before nonrecurring items. $ 10,444 $11,476
Per share data:
Reported net income (loss)
Basic $ 0.34 $ 0.06
Diluted 0.33 0.06
Net income before nonrecurring items
Basic $ 0.36 $ 0.38
Diluted 0.36 0.38
Management has provided the above reconciliation of net income before nonrecurring items 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.
CONMED CORPORATION
RECONCILIATION OF REPORTED NET INCOME TO NET INCOME
BEFORE NONRECURRING ITEMS
(In thousands except per share amounts)
(unaudited)
Nine months ended
September 30,
2003 2004
Reported net income $19,137 $26,030
Acquisition-related costs included
in cost of sales 739 -
Write-off of purchased in-process research
and development assets 7,900 13,700
Gain on settlement of a contractual
dispute, net of legal costs (9,000) -
Pension settlement costs 2,839 -
Other acquisition-related costs 2,966 867
Total other expense (income), net (3,195) 867
Acquisition-related interest expense - 360
Loss on early extinguishment of debt 8,078 -
Nonrecurring expense before income taxes 13,522 14,927
Provision (benefit) for income taxes on
nonrecurring expense (2,024) (5,150)
Net income before nonrecurring items. $30,635 $35,807
Per share data:
Reported net income
Basic $ 0.66 $ 0.88
Diluted 0.66 0.86
Net income before nonrecurring items
Basic $ 1.06 $ 1.21
Diluted 1.05 1.18
Management has provided the above reconciliation of net income before nonrecurring items 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.
SOURCE CONMED Corporation
Robert Shallish, Chief Financial Officer of CONMED Corporation, +1-315-624-3206; or Investors: Julie Huang or Lanie Marcus, or Media: Sean Leous, +1-212-850-5600, all of Financial Dynamics for CONMED Corporation
http://www.conmed.com/