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) January 29, 2004
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 January 29, 2004, issued by CONMED
Corporation
Item 12. Results of Operations and Financial Condition
On January 29, 2004, CONMED Corporation issued a press release announcing fourth
quarter and year ended December 31, 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
(Registrant)
By: /s/ Robert D. Shallish, Jr.
---------------------------
Vice President-Finance and
Chief Financial Officer
Date: February 2, 2004
EXHIBIT INDEX
Exhibit No. Exhibit Description
99.1 Press Release, dated January 29, 2004, issued by CONMED
Corporation
[CONMED LETTERHEAD OBJECT OMITTED]
NEWS RELEASE
CONTACT:
CONMED Corporation
Robert Shallish
Chief Financial Officer
315-624-3206
Financial Dynamics
Investors: Lanie Fladell/
Tiernan Cavanna
Media: Sean Leous
212-850-5600
FOR RELEASE: 7:05 AM (Eastern) January 29, 2004
CONMED CORPORATION REPORTS RECORD 2003 FOURTH QUARTER RESULTS
-Fourth Quarter Non-GAAP Net Income Up 47% on a 16%
(13% Constant Currency) Sales Increase-
-GAAP Net Income Increases 63% In The Fourth
Quarter- - Fourth Quarter Orthopedic Sales Increase
17.2% to $81.1 Million - - Fourth Quarter Arthroscopy
Sales Increase 20.3% to $49.1 million-
Utica, New York, January 29, 2004 - CONMED Corporation (Nasdaq: CNMD) today
announced record financial results for the fourth quarter and year ended
December 31, 2003.
Fourth quarter sales increased 16.0% (13.1% at constant currency) to a record
$133.8 million from $115.3 million in the comparable period of 2002. Non-GAAP
net income, which excludes acquisition-related charges (see below explanation of
charges), grew 47% to a record $13.5 million compared to $9.2 million in the
fourth quarter of 2002. Non-GAAP diluted earnings per share, which excludes the
aforementioned charges (see below explanation), increased 44% to $0.46 compared
to $0.32 in the 2002 quarter. On a GAAP basis, net income and diluted earnings
per share were $12.9 million and $0.44, respectively, for the fourth quarter of
2003 compared to $7.9 million and $0.27, respectively, in the fourth quarter of
2002.
Non-GAAP net income and diluted earnings per share for the 2003 fourth quarter
exclude after-tax charges of $507,000 related to the Bionx and ValMed
acquisitions. Non-GAAP net income and diluted earnings per share for the 2002
fourth quarter exclude after-tax charges of $1.3 million related to a legal
settlement.
The Company's fourth quarter tax rate was reduced to 30.6% in order to reflect
the appropriate provision for income taxes for the year ended December 31, 2003.
Joseph J. Corasanti, CONMED's President and COO commented, "The 2003 fourth
quarter was the best in CONMED's history. Our record-setting sales growth was
driven by the excellent efforts of international and domestic sales teams,
including our newly expanded orthopedics sales force, the success of newer
products such as PowerPro(R) and the System 5000, and the continued favorable
foreign currency exchange."
CONMED NEWS RELEASE CONTINUED: 2 of 8 January 29, 2004
Sales of the Company's orthopedic products grew 17.2% to $81.1 million from
$69.2 million in last year's fourth quarter. Arthroscopy sales increased 20.3%
to $49.1 million (6.1% internal growth, 4.9% foreign currency, and 9.3% from the
Bionx acquisition) compared to $40.8 million in the same period a year ago. The
Company believes that the increases in the orthopedic sales team, initiated
during the second quarter of 2003, have contributed to the fourth quarter 2003
improvement in the arthroscopy internal growth rate when compared to the first
nine months of the year. Powered instrument sales grew 12.7% to $32.0 million
(7.8% internal growth and 4.9% from foreign currency) compared to $28.4 million
in the fourth quarter of 2002 on the continued strength of the PowerPro(R)
battery line of products.
Electrosurgery revenues were $21.0 million, an increase of 11.1%, compared to
sales of $18.9 million in the 2002 fourth quarter. Strong electrosurgery growth
has continued due to sales of the System 5000(TM) generator, introduced in the
first quarter of 2003. Sales of Patient Care Products increased 4.1% to $17.9
million compared to $17.2 million. Endoscopy revenues grew 30.1% to $12.1
million (10.8% internal growth and 19.3% from the Core acquisition) compared to
fourth quarter 2002 sales of $9.3 million. The Integrated Systems product line
had sales of $1.7 million in the fourth quarter of 2003 compared to $0.7 million
in the comparable period of 2002.
Mr. Corasanti continued, "The performance of each of our product lines confirms
the strength of our business strategy--to grow the Company through the
introduction of new, innovative products marketed by well-trained sales teams in
each of our business divisions. During the quarter, we saw continued strength in
sales of our Powered Instruments, Electrosurgery and Endoscopy product lines,
and an impressive turnaround in sales of our Arthroscopy product line. In
Arthroscopy, we believe our domestic orthopedic sales force is gaining traction
producing positive sales growth in the quarter while the international sales
team continued its strong performance for the year. Further, we had a very good
quarter of video product sales growing 23% in the period. We are pleased to end
2003 with a record quarter and believe that the opportunities in 2004 and beyond
have never been greater."
"In another matter, CONMED amended its existing senior credit term loans in
December 2003, to provide for a lower interest cost. The refinancing reduced the
term loan interest rate by 50 basis points resulting in a new rate equal to
LIBOR plus 2.25%. This rate reduction is expected to save $1.1 million annually
in interest expense," added Mr. Corasanti.
Full-Year Results
For the year ended December 31, 2003, CONMED reported record revenues of $497.1
million, an increase of 9.7% (7.3% at constant currency) over 2002 sales of
$453.1 million. Non-GAAP net income grew 21% to $44.1 million compared to $36.4
million in 2002, excluding unusual credits and charges in both years for
acquisitions, refinancing activities, and legal matters. Non-GAAP diluted
earnings per share grew 15% on a 5.1% higher average share count to $1.51
compared to $1.31, excluding the unusual credits and charges.
Net income on a reported GAAP basis was $32.1 million in 2003 compared to $34.2
million in 2002. Unusual items in 2003 include after tax charges of $10.8
million related to acquisition activities (including a non-cash charge of $7.9
million for in-process research and development), $5.2 million related to
refinancing activity, $1.8 million for pension settlement costs, and a gain of
$5.8 million regarding a legal matter. In 2002, the Company recorded after-tax
charges of $0.9 million related to refinancing activity and $1.3 million related
to settlement of a legal matter. Diluted earnings per share on a reported GAAP
basis was $1.10 in 2003 and $1.23 in 2002.
CONMED NEWS RELEASE CONTINUED: 3 of 8 January 29, 2004
For the full year 2003, the Company's orthopedic products grew 8.4% to $299.4
million from $276.2 million in 2002. Arthroscopy sales increased 9.6% (-0.6%
internal, 2.3% currency, 7.9% from the Bionx acquisition) to $177.4 million
compared to $161.9 million in 2002. Powered instrument sales grew 6.7% (9.6%
excluding a $3 million non-recurring sale of samples to a distributor in 2002,
of which 5.6% was internal and 4% currency) to $122.0 million compared to $114.3
million in the prior year.
Electrosurgery revenues were $77.3 million, an increase of 10.9%, compared to
sales of $69.7 million in 2002. Sales of Patient Care Products increased 0.6% to
$70.1 million compared to $69.7 million. Endoscopy revenues grew 24.2% to $45.7
million (4.6% internal growth and 19.6% from the Core acquisition) compared 2002
sales of $36.8 million. The Integrated Systems product line had sales of $4.6
million in 2003 compared to $0.7 million in 2002.
Outlook
Mr. Corasanti added, "As mentioned in our third quarter earnings press release,
we expect total sales increases for the 2004 year to approximate 6%. By product
line, we expect growth across the board, with Powered Surgical Instruments
likely to grow in the range of 7-8%, Endoscopy by 6-8%, Arthroscopy by 5-7%,
Electrosurgery by 5-6%, and Patient Care by 3-5%. At these levels of organic
sales growth, we believe we will generate diluted earnings per share growth of
approximately 15% over 2003 through revenue growth, expansion of margins and
reduced interest costs. For the first quarter of 2004, we expect revenues to be
in the range of $126 million to $130 million and diluted earnings per share to
be in the range of $0.39 to $0.43."
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: 4 of 8 January 29, 2004
CONMED CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share amounts)
(unaudited)
Three months ended Twelve months ended
December 31, December 31,
2002 2003 2002 2003
--------- ----------- ----------- -----------
Net sales....................................... $ 115,256 $ 133,809 $ 453,062 $ 497,130
--------- ----------- ----------- -----------
Cost of sales................................... 55,647 63,616 215,891 236,180
Cost of sales, nonrecurring-Note A.............. - - - 739
--------- ----------- ----------- -----------
Gross Profit.................................... 59,609 70,193 237,171 260,211
--------- ----------- ----------- -----------
Selling and administrative...................... 35,564 42,359 139,735 157,453
Research and development ....................... 3,932 4,738 16,087 17,306
Write-off of purchased in-process
research and development assets - Note B.... - - - 7,900
Other expense - Note C, D....................... 2,000 792 3,475 5,675
--------- ----------- ----------- -----------
41,496 47,889 159,297 188,334
--------- ----------- ----------- -----------
Income from operations.......................... 18,113 22,304 77,874 71,877
Interest expense................................ 5,765 3,640 24,513 18,868
--------- ----------- ----------- -----------
Income before income taxes...................... 12,348 18,664 53,361 53,009
Provision for income taxes - Note E............. 4,446 5,719 19,210 20,927
--------- ----------- ----------- -----------
Net income...................................... $ 7,902 $ 12,945 $ 34,151 $ 32,082
========= =========== =========== ===========
Per share data:
Net Income
Basic ..................................... $ .28 $ .45 $ 1.25 $ 1.11
Diluted..................................... .27 .44 1.23 1.10
Weighted average common shares
Basic....................................... 28,724 28,991 27,337 28,930
Diluted..................................... 29,106 29,500 27,827 29,256
Note A - Included in cost of sales in the twelve months ended December 31, 2003
- ------
are $.7 million in acquisition-related costs.
Note B - During the twelve months ended December 31, 2003, the Company recorded
- ------
a charge of $7.9 million to write-off purchased in-process research and
development assets acquired as a result of an acquisition. No benefit for income
taxes was recorded on the write-off as these costs are not deductible for income
tax purposes.
CONMED NEWS RELEASE CONTINUED: 5 of 8 January 29, 2004
Note C - Included in other expense in the three months ended December 31, 2002
- ------
are a $2.0 million loss on the settlement of a patent dispute. Included in other
expense in the three months ended December 31, 2003 are $.8 million in
acquisition-related costs.
Note D - Included in other expense in the twelve months ended December 31, 2003
- ------
are a $2.0 million loss on the settlement of a patent dispute and $1.5 million
in losses on the early extinguishment of debt. The $1.5 million in losses on the
early extinguishment of debt were classified as an extraordinary charge in 2002
but have been reclassified to operating income as a result of the adoption of
FASB Statement No. 145. Included in other expense in the twelve months ended
December 31, 2003 are a $9.0 million gain on the settlement of a contractual
dispute; $8.1 million in losses on the early extinguishment of debt; $2.8
million in pension settlement costs; and $3.8 million in acquisition-related
costs.
Note E - The Company's fourth quarter tax rate was reduced to 30.6% in order to
- ------
reflect the appropriate provision for income taxes for the year ended December
31, 2003.
CONMED NEWS RELEASE CONTINUED: 6 of 8 January 29, 2004
CONMED CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
(unaudited)
ASSETS
December 31,
2002 2003
Current assets: ---------- -----------
Cash and cash equivalents...................................$ 5,626 $ 5,986
Accounts receivable, net.................................... 58,093 60,849
Inventories .............................................. 120,443 120,945
Other current assets........................................ 9,504 11,700
---------- -----------
Total current assets.................................... 193,666 199,480
Property, plant and equipment, net.............................. 95,608 97,382
Goodwill and other assets, net.................................. 452,866 500,756
---------- -----------
Total assets............................................$ 742,140 $797,618
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt...........................$ 2,631 $ 4,143
Accrued interest............................................ 3,794 279
Other current liabilities................................... 51,549 48,124
---------- -----------
Total current liabilities............................... 57,974 52,546
Long-term debt .............................................. 254,756 260,448
Other long-term liabilities..................................... 42,471 56,293
---------- -----------
Total liabilities....................................... 355,201 369,287
Shareholders' equity:
Capital accounts............................................ 231,701 236,558
Retained earnings........................................... 162,391 194,473
Accumulated other comprehensive loss........................ (7,153) (2,700)
---------- -----------
Total shareholders' equity.............................. 386,939 428,331
---------- -----------
Total liabilities and shareholders' equity.............$ 742,140 $ 797,618
========== ===========
OTHER FINANCIAL INFORMATION
(unaudited, in thousands)
Three months ended Twelve months ended
-----------------------------------------------
December 31, December 31,
------------ ------------
2002 2003 2002 2003
-------- -------- -------- -------
Depreciation..............................$ 2,472 $ 2,822 $ 9,203 $10,539
Amortization.............................. 3,104 3,464 11,946 13,630
Capital expenditures...................... 2,823 3,018 13,384 9,309
CONMED NEWS RELEASE CONTINUED: 7 of 8 January 29, 2004
CONMED CORPORATION
RECONCILIATION OF REPORTED NET INCOME TO NET INCOME
BEFORE NONRECURRING ITEMS
(In thousands except per share amounts)
(unaudited)
Three months ended
December 31,
------------
2002 2003
-------- --------
Reported net income ...........................................$ 7,902 $ 12,945
Other acquisition-related costs................................ - 792
Loss on settlement of a patent dispute,
net of legal costs......................................... 2,000 -
-------- --------
Total other expense.................................... 2,000 792
Provision (benefit) for income taxes on nonrecurring expense... (720) (285)
-------- --------
Net income before nonrecurring items...........................$ 9,182 $ 13,452
======== ========
Per share data:
Reported net income
Basic....................................................$ 0.28 $ 0.45
Diluted.................................................. 0.27 0.44
Net income before nonrecurring items
Basic....................................................$ 0.32 $ 0.46
Diluted.................................................. 0.32 0.46
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: 8 of 8 January 29, 2004
CONMED CORPORATION
RECONCILIATION OF REPORTED NET INCOME TO NET INCOME
BEFORE NONRECURRING ITEMS
(In thousands except per share amounts)
(unaudited)
Twelve months ended
December, 31,
-------------
2002 2003
-------- --------
Reported net income............................................$ 34,151 $ 32,082
Acquisition-related costs included
in cost of sales....................................... - 739
-------- --------
Write-off of purchased in-process research and
development assets..................................... - 7,900
-------- --------
Gain on settlement of a contractual dispute,
net of legal costs..................................... - (9,000)
Pension settlement costs....................................... - 2,839
Other acquisition-related costs................................ - 3,758
Loss on settlement of a patent dispute,
net of legal costs......................................... 2,000 -
Loss on early extinguishment of debt........................... 1,475 8,078
-------- --------
Total other expense.................................... 3,475 5,675
-------- --------
Provision (benefit) for income taxes on nonrecurring expense... (1,251) (2,309)
-------- --------
Net income before nonrecurring items...........................$ 36,375 $ 44,087
======== ========
Per share data:
Reported net income
Basic....................................................$ 1.25 $ 1.11
Diluted........................................................ 1.23 1.10
Net income before nonrecurring items
Basic....................................................$ 1.33 $ 1.52
Diluted........................................................ 1.31 1.51
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.
