UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) July 17, 2003
CONMED CORPORATION
(Exact name of registrant as specified in its charter)
New York 0-16093 16-0977505
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
525 French Road, Utica, New York 13502
(Address of principal executive offices) (Zip Code)
(315) 797-8375
(Registrant's telephone number, including area code)
Item 7. Financial Statements and Exhibits
(c) Exhibits
The following is furnished as an Exhibit to this report:
Exhibit No. Description of Exhibit
99.1 Press Release dated July 17, 2003, issued by
CONMED Corporation
Item 9. Regulation FD Disclosure
This information is being furnished pursuant to "Item 12. Results of Operations
and Financial Condition" of Form 8K.
On July 17, 2003, CONMED Corporation issued a press release announcing second
quarter and first half 2003 results. The press release is attached hereto as
Exhibit 99.1
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONMED CORPORATION
By:/s/ Robert D. Shallish, Jr.
---------------------------
Vice President-Finance and
Chief Financial Officer
Date: July 18, 2003
EXHIBIT INDEX
Exhibit No. Exhibit Description
99.1 Press Release, dated July 17, 2003, issued by CONMED Corporation
[GRAPHIC OMITTED]
NEWS RELEASE
Contact:
CONMED Corporation
Robert Shallish
Chief Financial Officer
315-624-3206
Morgen-Walke Associates
Investors: Lauren Levine, Lanie Fladell
Media: Sean Leous
212-850-5600
FOR RELEASE: 7:00 AM (Eastern) July 17, 2003
CONMED Reports Record Quarterly Sales
- Sales Increase 11.9% (9.4% at Constant Currency) to $124.5 Million -
- Excluding Charges, Net Income Increases 13.3% To $10.2 Million -
- Reported Net Income, Including Financing and Other Charges, Is $2.8 Million-
Utica, New York, July 17, 2003 ----- CONMED Corporation (Nasdaq: CNMD) today
announced financial results for the second quarter and six months ended June 30,
2003.
Total sales for the quarter increased 11.9% (9.4% at constant currency) to
$124.5 million compared to $111.3 million in last year's second quarter. For the
2003 second quarter, CONMED posted net income, excluding financing, acquisition,
and other charges, of $10.2 million, up 13.3% from net income of $9.0 million
for last year's second quarter. Diluted earnings per share excluding the charges
grew to $0.35, on a 7% increase in diluted shares outstanding, compared to
diluted earnings per share of $0.33 for the 2002 second quarter. In the 2003
second quarter, the Company recorded after-tax charges totaling $7.4 million
related to the refinancing of the Company's senior subordinated 9% bonds, the
acquisitions of Bionx and Core Dynamics, and settlement of certain pension
obligations (please see below for full explanation). On a generally accepted
accounting principles (GAAP) basis, including these charges, CONMED reported net
income of $2.8 million, or $0.09 per diluted share for the second quarter of
2003.
Commenting on the quarter, Mr. Joseph J. Corasanti, President and Chief
Operating Officer, said, "CONMED had a very strong second quarter, with revenue
growth exceeding our projections across almost all product lines. Most notable
was the performance of our powered instruments, electrosurgery and endoscopy
business segments--all of which either met or exceeded our expectations thanks
to the success of new products and the efforts of our devoted sales teams.
Additionally, from an expense control standpoint, we were able to refinance all
of our 9% senior subordinated bonds and as such will have substantially lower
interest costs going forward."
CONMED NEWS RELEASE CONTINUED: Page 2 of 8 July 17, 2003
The Company's Arthroscopy sales were $44.4 million, including $4.1 million in
sales from Bionx Implants, Inc., which was acquired by CONMED on March 10, 2003,
compared to $41.2 million in the second quarter of last year. Organic sales for
arthroscopy were slightly softer than the prior year's second quarter, as a 5%
increase in sales of resection shaver blades was offset by modest declines in
sales of video systems and fluid management products. Second quarter Powered
Surgical Instrument sales grew 10% to $29.7 million compared to $27.0 million
last year, reflecting continued growth in demand for the PowerPro(R) group of
products. Electrosurgery revenues increased 11% to $18.9 million compared to
$17.0 million in the prior year's second quarter, due to strong sales of the
Company's new generator. Patient Care sales grew 4% to $17.7 million over the
$17.1 million recorded in the second quarter of 2002. Endoscopy sales increased
32% to $11.9 million compared to $9.0 million in the same quarter a year ago.
Organic sales growth in Endoscopy was 12%, rebounding from flat sales in the
first quarter of 2003. The remainder of sales growth in Endoscopy came from Core
Dynamics, acquired by CONMED on December 31, 2002, which contributed $1.8
million for the second quarter. The Integrated Systems product line, which
CONMED obtained through its acquisitions of ValMed and Nortrex in the fourth
quarter of 2002, contributed $1.9 million to total revenue for the 2003 second
quarter.
Mr. Corasanti continued, "As demonstrated by our strong powered instruments
sales, our PowerPro(R) line of battery powered surgical instruments continues to
build momentum within the medical community, fueled by a 21% increase in large
bone product sales. Additionally, our distribution agreement with DePuy is
moving forward, as PowerPro(R) sales to DePuy grew sequentially from the first
quarter. In Electrosurgery, our 11% growth was led by our newly released Series
5000 electrosugical generators. We continue to be very excited by the many
opportunities in Endoscopy and Integrated Systems and believe that these
businesses will fuel much growth for CONMED over the coming years."
Mr. Corasanti added, "We are making solid progress in expanding our orthopedic
sales force to maximize coverage in key markets for arthroscopy and powered
instruments. Since announcing our sales strategy this past April, we have added
30 sales professionals and remain committed to our stated goal of adding a total
of 50 professionals to our orthopedic sales team over the next twelve months."
For the six months ended June 30, 2003, CONMED reported revenues of $242.6
million, up 8% from the $224.5 million in the first half of last year. Net
income, excluding special charges and credits, for the first half of this year
grew to $20.2 million, or $0.69 per diluted share, on a 10.5% increase in
diluted shares outstanding, compared to net income of $18.0 million, or $0.68
per diluted share, for the six months ended June 30, 2002 (please see below for
full explanation of the special charges and credits). On a GAAP basis, including
these charges and credits, CONMED reported net income of $17.3 million, or $0.59
per diluted share for the six months ended June 30, 2003.
Mr. Corasanti concluded, "Seasonally, the upcoming third quarter tends to be our
softest in terms of sales, due to the combination of fewer elective surgeries
performed and overall slowness in European business during the summer months.
Accordingly, for the 2003 third quarter, we expect to generate revenues of
approximately $117 million to $122 million, and diluted earnings per share,
reflecting the reduced interest rates, in the range of $0.35 to $0.38, excluding
special charges, if any. For the full year of 2003, we remain comfortable with
our forecast for top-line growth of 10% over 2002 levels and diluted earnings
per share, reflecting the reduced interest costs, in the range of $1.47 to $1.51
excluding the special charges and credits. (Please see paragraph below on
reconciliation of forecasted earnings per share)."
CONMED NEWS RELEASE CONTINUED: Page 3 of 8 July 17, 2003
Explanation of Unusual Charges and Credits
As previously disclosed, on June 30, 2003, the Company refinanced all of its
outstanding 9% senior subordinated notes with the proceeds of a $160 million
expansion of the term loan component of its senior credit facility. The Company
expensed a total of $7.9 million of pre-tax costs in the second quarter of 2003
associated with the refinancing consisting of the call premium on the notes of
$5.7 million and $2.2 million (non-cash) for the unamortized deferred financing
fees associated with original issue of the notes. The current interest rate on
the term loan expansion is equivalent to LIBOR plus 2.75%, for an approximate
total of 4.0%.
During the second quarter of 2003, CONMED recorded pre-tax acquisition related
charges associated with the acquisitions of Bionx and Core Dynamics amounting to
$1.5 million for various transitional activities.
In the second quarter of 2003, the Company's pension plan settled pension
obligations with certain terminated employees, primarily with regard to the
sales-force reorganization on April 1, 2003, by lump-sum payment of accrued
benefits. Because Department of Labor rules with respect to lump-sum payment
calculations are different than the pension plan's assumptions regarding
discount rates, a non-cash, pre-tax loss was incurred amounting to $2.1 million.
The Company recorded this expense in the second quarter of 2003.
In the first quarter of 2003, the Company recorded a special credit to income
that, together with first quarter acquisition charges, affected the Company's
results for the six months ended June 30, 2003. As previously announced, in
March 2003, the Company received $9.5 million as a settlement of a dispute
related to the 1997 acquisition of its orthopedic subsidiary, Linvatec
Corporation. Accordingly, the Company recorded the settlement, less estimated
legal expenses of $0.5 million, as a pre-tax gain of $9.0 million in the first
quarter of 2003. Offsetting this gain in the first quarter of 2003, were pre-tax
charges totaling $1.7 million associated with the integration of the Company's
previously announced Bionx, Core and ValMed acquisitions. In addition, the
Company incurred a $0.2 million pre-tax expense related to the purchase on the
open market of $2.6 million of the Company's 9% subordinated bonds.
Reconciliation of Forecasted Earnings Per Share
The diluted earnings per share forecasted range of $0.35 to $0.38 for the third
quarter 2003 excludes any potential additional pension settlement charges and
acquisition related charges for the Bionx acquisition which, if they occur, are
not presently quantifiable. The Company expects to record in an in-process
research and development write-off associated with the Bionx acquisition once an
independent valuation has been completed, most likely in the third quarter of
2003.
The diluted earnings per share forecasted range of $1.47 to $1.51 for the year
2003 excludes the earnings per share net benefit of the lawsuit settlement gain,
acquisition, financing and pension settlement related charges recorded in the
first and second quarters of 2003 (explained above), and any potential pension
settlement and acquisition related charges which may occur in the third and
fourth quarters of 2003 which, if they occur, are not presently quantifiable.
CONMED NEWS RELEASE CONTINUED: Page 4 of 8 July 17, 2003
CONMED Profile
CONMED is a medical technology company specializing in instruments, implants,
and video equipment for arthroscopic sports medicine, and powered surgical
instruments, such as drills and saws, for orthopedic, ENT, neuro-surgery, and
other surgical specialties. The Company is also a leading developer,
manufacturer and supplier of RF electrosurgery systems used routinely to cut and
cauterize tissue in nearly all types of surgical procedures worldwide, endoscopy
products such as trocars, clip appliers, scissors, and surgical staplers. The
Company offers integrated operating room design and intensive care unit service
managers. The Company also manufactures and sells a full line of ECG electrodes
for heart monitoring and other patient care products. Headquartered in Utica,
New York, the Company's 2,600 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,
2002; (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; and/or (vii) the Company's ability to devise and execute
strategies to respond to market conditions.
CONMED NEWS RELEASE CONTINUED: Page 5 of 8 July 17, 2003
CONMED CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share amounts)
(unaudited)
Three months ended Six months ended
June 30, June 30,
-------- --------
2002 2003 2002 2003
---- ---- ---- ----
Net sales .......................... $111,269 $124,540 $224,474 $242,574
Cost of sales ...................... 51,711 59,082 105,815 115,048
Cost of sales, nonrecurring - Note A -- 327 -- 739
-------- -------- -------- --------
Gross profit ....................... 59,558 65,131 118,659 126,787
Selling and administrative ......... 35,141 39,353 69,609 76,498
Research and development ........... 4,078 4,378 7,902 8,081
Other expense - Note B, C .......... -- 11,222 -- 3,730
-------- -------- -------- --------
39,219 54,953 77,511 88,309
-------- -------- -------- --------
Income from operations ............. 20,339 10,178 41,148 38,478
Interest expense ................... 6,355 5,861 12,983 11,399
-------- -------- -------- --------
Income before income taxes ......... 13,984 4,317 28,165 27,079
Provision for income taxes ......... 5,034 1,554 10,139 9,748
-------- -------- -------- --------
Net income ......................... $ 8,950 $ 2,763 $ 18,026 $ 17,331
======== ======== ======== ========
Per share data:
Net Income
Basic .......................... $ .34 $ .10 $ .70 $ .60
Diluted ........................ .33 .09 .68 .59
Weighted average common shares
Basic .......................... 26,584 28,910 25,735 28,892
Diluted ........................ 27,359 29,212 26,422 29,195
Note A - Included in cost of sales in the three and six months ended June 30,
- ------
2003 are $.3 million and $.7 million, respectively, in acquisition-related costs
Note B - Included in other expense in the three months ended June 30, 2003 are
- ------
the following: $7.9 million in losses on the early extinguishment of debt; $2.1
million in pension settlement costs; and $1.2 million in other
acquisition-related costs.
Note C - Included in other expense in the six months ended June 30, 2003 are the
- ------
following: a $9.0 million gain on the settlement of a contractual dispute; $8.1
million in losses on the early extinguishment of debt; $2.1 million in pension
settlement costs; and $2.5 million in other acquisition-related costs.
CONMED NEWS RELEASE CONTINUED: Page 6 of 8 July 17, 2003
CONMED CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
ASSETS
(unaudited)
December 31, June 30,
2002 2003
---- ----
Current assets:
Cash and cash equivalents ............................................. $ 5,626 $ 2,360
Accounts receivable, net .............................................. 58,093 63,242
Inventories ........................................................... 120,443 128,099
Other current assets .................................................. 9,504 9,851
--------- ---------
Total current assets .............................................. 193,666 203,552
Property, plant and equipment, net ........................................ 95,608 96,109
Goodwill and other assets, net ............................................ 452,866 497,299
--------- ---------
Total assets ...................................................... $ 742,140 $ 796,960
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt ..................................... $ 2,631 $ 4,061
Accrued interest ...................................................... 3,794 510
Other current liabilities ............................................. 51,549 50,699
--------- ---------
Total current liabilities ......................................... 57,974 55,270
Long-term debt ............................................................ 254,756 285,451
Other long-term liabilities ............................................... 42,471 46,466
--------- ---------
Total liabilities ................................................. 355,201 387,187
--------- ---------
Shareholders' equity:
Capital accounts ...................................................... 231,701 234,361
Retained earnings ..................................................... 162,391 179,722
Accumulated other comprehensive loss .................................. (7,153) (4,310)
--------- ---------
Total equity ...................................................... 386,939 409,773
--------- ---------
Total liabilities and shareholders' equity ....................... $ 742,140 $ 796,960
========= =========
OTHER FINANCIAL INFORMATION
(unaudited, in thousands)
Three months ended Six months ended
------------------ ----------------
June 30, June 30,
-------- --------
2002 2003 2002 2003
---- ---- ---- ----
Depreciation ....... $2,198 $2,534 $4,404 $4,908
Amortization ....... 3,029 3,375 5,809 6,321
Capital expenditures 5,220 2,241 8,428 3,951
CONMED NEWS RELEASE CONTINUED: Page 7 of 8 July 17, 2003
CONMED CORPORATION
RECONCILIATION OF REPORTED NET INCOME TO NET INCOME
BEFORE NONRECURRING ITEMS
(In thousands except per share amounts)
(unaudited)
Three months ended
June 30,
--------
2002 2003
---- ----
Reported net income (loss) ................................. $ 8,950 $ 2,763
-------- --------
Acquisition-related costs included
in cost of sales ................................... -- 327
-------- --------
Pension settlement costs ................................... -- 2,081
Other acquisition-related costs ............................ -- 1,229
Loss on early extinguishment of debt ....................... -- 7,912
-------- --------
Other expense .............................................. -- 11,222
-------- --------
Nonrecurring expense before income taxes ................... -- 11,549
Provision (benefit) for income taxes on nonrecurring expense -- (4,157)
-------- --------
Net income before nonrecurring items ....................... $ 8,950 $ 10,155
======== ========
Per share data:
Reported net income
Basic ................................................ $ 0.34 $ 0.10
Diluted .............................................. 0.33 0.09
Net income before nonrecurring items
Basic ............................................... $ 0.34 $ 0.35
Diluted ............................................ 0.33 0.35
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 NEWS RELEASE CONTINUED: Page 8 of 8 July 17, 2003
CONMED CORPORATION
RECONCILIATION OF REPORTED NET INCOME TO NET INCOME
BEFORE NONRECURRING ITEMS
(In thousands except per share amounts)
(unaudited)
Six months ended
June 30,
2002 2003
Reported net income ........................................ $ 18,026 $ 17,331
-------- --------
Acquisition-related costs included
in cost of sales ................................... -- 739
-------- --------
Gain on settlement of a contractual dispute,
net of legal costs ................................. -- (9,000)
Pension settlement costs ................................... -- 2,081
Other acquisition-related costs ............................ -- 2,571
Loss on early extinguishment of debt ....................... -- 8,078
-------- --------
Other expense .............................................. -- 3,730
-------- --------
Nonrecurring expense before income taxes ................... -- 4,469
Provision (benefit) for income taxes on nonrecurring expense -- (1,608)
-------- --------
Net income before nonrecurring items ....................... $ 18,026 $ 20,192
======== ========
Per share data:
Reported net income
Basic ................................................ $ 0.70 $ 0.60
Diluted .............................................. 0.68 0.59
Net income before nonrecurring items
Basic ................................................ $ 0.70 $ 0.70
Diluted .............................................. 0.68 0.69
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.