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): April 22, 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, including 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 April 22, 2004, issued by CONMED
Corporation
Item 12. Results of Operations and Financial Condition
On April 22, 2004, CONMED Corporation issued a press release announcing
financial results for the first quarter ended March 31, 2004. 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: April 23, 2004
EXHIBIT INDEX
Exhibit
Number Exhibit Description
99.1 Press Release, dated April 22, 2004, issued by CONMED Corporation
Exhibit 99.1
Contact:
CONMED Corporation
Robert Shallish
Chief Financial Officer
315-624-3206
Morgen-Walke Associates
Investors: Lanie Marcus
Media: Sean Leous
212-850-5600
FOR RELEASE: 7:00 AM (Eastern) April 22, 2004
CONMED Reports First Quarter Financial Results
- Total Sales Increase 13.6% (11% at Constant Currency)
- 14.3% Increase in EPS (excluding unusual charges from 2003)
- Arthroscopy sales increase 20.6% to $50.3 million -
Utica, New York, April 22, 2004 ----- CONMED Corporation (Nasdaq: CNMD)
announced today its financial results for the first quarter ended March 31,
2004.
Sales increased 13.6% in the first quarter of 2004 to $134.0 million ($131.0
million at constant exchange rates) compared to $118.0 million in the first
quarter of 2003. GAAP net income for the first quarter grew to $12.0 million, or
$0.40 per diluted share, on a 3% increase in diluted shares outstanding,
compared to $6.7 million, or $0.23 per diluted share, in last year's first
quarter. Excluding acquisition and financing charges and a gain on a settlement
of a legal dispute (please see attached reconciliation for full explanation),
non-GAAP net income for the first quarter of 2003 was $10.0 million, or $0.35
per diluted share.
Key highlights for the first quarter included:
o Linvatec, CONMED's sports medicine technology subsidiary, unveiled
fourteen new products at the American Academy of Orthopedic Surgeons
Annual Meeting;
o CONMED announced a strategic partnership with eTrauma; and
o CONMED teamed up with Dolphin, a subsidiary of OSI Systems (Nasdaq:
OSIS) to become its exclusive North American distributor for a full
line of pulse oximetry products manufactured by Dolphin.
Sales of the Company's orthopedic products grew 15.3% to $83.8 million from
$72.7 million in last year's first quarter. Arthroscopy sales increased 20.6% to
$50.3 million (9.0% internal growth, 3.7% foreign currency, and 7.9% from the
Bionx acquisition) compared to $41.7 million in the same period a year ago.
Powered instrument sales grew 8.1% to $33.5 million (3.3% internal growth and
4.8% from foreign currency) compared to $31.0 million in the first quarter of
2003 on the continued strength of the PowerPro(R) line of products.
CONMED NEWS RELEASE CONTINUED: -2- April 22, 2004
Electrosurgery revenues were $20.2 million, an increase of 20.2%, compared to
sales of $16.8 million in the 2003 first quarter. Sales of Patient Care Products
increased 4.0% to $18.0 million compared to $17.3 million. Endoscopy revenues
grew 2.8% to $11.0 million compared to first quarter 2003 sales of $10.7
million. The Integrated Systems product line had sales of $1.0 million in the
first quarter of 2004 compared to $0.5 million in the comparable period of 2003.
Mr. Joseph J. Corasanti, President and Chief Operating Officer, said, "CONMED's
sales growth in the first quarter of 2004 is a repeat of the robust performance
we experienced in the fourth quarter of 2003. More than ever we believe that our
dynamic strategy of adding depth to our product lines through organic
development and acquisitions of companies like Bionx Implants and CORE Dynamics
helped CONMED reach record sales levels. We are very pleased to see domestic
Arthroscopy sales increase 7.5% organically, excluding the effects of the Bionix
acquisition. Our growth was also aided by the additions of new complementary and
supplementary products to an excellent sales force that continues to grow in
size. We believe this strategy will result in sales growth levels consistent
with or better than market growth rates."
"We also made significant progress in improving our balance sheet during the
first quarter. Our strong cash flow enabled us to pay down $23 million in debt
during the quarter, and we continued to make progress in managing our working
capital by again reducing the days outstanding in inventory."
The Company's diluted earnings per share for the 2004 first quarter, was
consistent with previously provided guidance of $0.39 to $0.43. Diluted earnings
per share would have been even stronger absent two matters that occurred during
the quarter. First, the Company incurred foreign currency transaction losses on
certain balance sheet items due to the strengthening of the U.S. dollar during
March 2004. Second, while the Company's gross margin was within the historical
range, it was somewhat lower than had been anticipated as the mix of products
sold favored lower margin products.
Mr. Corasanti concluded, "We remain confident that we are on the right track
with our growth strategy as evidenced by our better than expected top-line
growth for the quarter and our strong cash flow. The investments we have made in
sales, marketing and research are beginning to bear fruit. Consequently, we
reaffirm our forecast for 2004 diluted earnings per share estimate of
approximately $1.70 to $1.74. As for the upcoming second quarter, our experience
tells us that the Company's second quarter sales are typically slightly lower
than those for the first quarter, as hospitals tend to use their newly
authorized annual capital budgets to a greater extent in the first quarter.
Consequently, for the three months ended June 30, 2004, we expect to generate
sales of approximately $127 million to $131 million and diluted earnings per
share in the range of $0.38 to $0.42.
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.
CONMED NEWS RELEASE CONTINUED: -3- April 22, 2004
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 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- April 22, 2004
CONMED CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31, 2003 and 2004
(In thousands except per share amounts)
(unaudited)
2003 2004
--------- ---------
Net sales ................................ $ 118,034 $ 133,964
--------- ---------
Cost of sales ............................ 55,966 63,605
Cost of sales, nonrecurring - Note A ..... 412 --
--------- ---------
Gross profit ............................. 61,656 70,359
--------- ---------
Selling and administrative expense ....... 37,145 43,793
Research and development expense ......... 3,703 4,739
Write-off of purchased in-process research
and development assets - Note B ........ 7,900 --
Other expense (income), net - Note C ..... (7,658) --
--------- ---------
41,090 48,532
--------- ---------
Income from operations ................... 20,566 21,827
Loss on early extinguishment of debt ..... 166 --
Interest expense ......................... 5,538 3,306
--------- ---------
Income before income taxes ............... 14,862 18,521
Provision for income taxes ............... 8,194 6,482
--------- ---------
Net income ............................... $ 6,668 $ 12,039
========= =========
Per share data:
Net income
Basic .............................. $ .23 $ .41
Diluted ............................ .23 .40
Weighted average common shares
Basic .............................. 28,876 29,303
Diluted ............................ 29,037 29,992
Note A - Included in cost of sales in the three months ended March 31, 2003 are
- ------
approximately $.4 million in acquisition-related costs.
Note B - In the three months ended March 31, 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.
Note C - Included in other expense (income) in the three months ended March 31,
- ------
2003 are a $9.0 million gain on the settlement of a contractual dispute and $1.3
million in acquisition-related costs.
CONMED NEWS RELEASE CONTINUED: -5- April 22, 2004
CONMED CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
ASSETS
(unaudited)
December March
31, 31,
2003 2004
-------- --------
Current assets:
Cash and cash equivalents ............................ $ 5,986 $ 9,467
Accounts receivable, net ............................. 60,449 61,884
Inventories .......................................... 120,945 115,214
Deferred income taxes ................................ 10,188 10,084
Other current assets ................................. 3,538 3,424
-------- --------
Total current assets ............................. 201,106 200,073
Property, plant and equipment, net ....................... 97,383 96,302
Goodwill and other assets, net ........................... 506,569 504,257
-------- --------
Total assets ..................................... $805,058 $800,632
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt .................... $ 4,143 $ 3,906
Other current liabilities ............................ 50,712 44,829
-------- --------
Total current liabilities ........................ 54,855 48,735
Long-term debt ........................................... 260,448 237,507
Other long-term liabilities .............................. 56,265 60,375
-------- --------
Total liabilities ................................ 371,568 346,617
-------- --------
Shareholders' equity:
Capital accounts ...................................... 236,948 245,520
Retained earnings ..................................... 194,473 206,512
Accumulated other comprehensive income ................ 2,069 1,983
-------- --------
Total equity ..................................... 433,490 454,015
-------- --------
Total liabilities and shareholders' equity ...... $805,058 $800,632
======== ========
OTHER FINANCIAL INFORMATION
(unaudited, in thousands)
Three months ended
March 31,
2003 2004
---- ----
Depreciation.............................................. $ 2,374 $ 2,645
Amortization.............................................. 2,946 3,934
Capital expenditures...................................... 1,710 1,620
CONMED NEWS RELEASE CONTINUED: -6- April 22, 2004
CONMED CORPORATION
RECONCILIATION OF REPORTED NET INCOME TO NET INCOME
BEFORE NONRECURRING ITEMS
Three Months Ended March 31, 2003 and 2004
(In thousands except per share amounts)
(unaudited)
2003 2004
---- ----
Reported net income ............................. $ 6,668 $ 12,039
-------- --------
Acquisition-related costs included
in cost of sales ........................ 412 --
-------- --------
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) --
Other acquisition related costs ................. 1,342 --
-------- --------
Total other expense (income), net ....... (7,658) --
-------- --------
Loss on early extinguishment of debt ............ 166 --
-------- --------
Nonrecurring income before income taxes ......... 820 --
Provision for income taxes on nonrecurring income 2,549 --
-------- --------
Net income before nonrecurring items ............ $ 10,037 $ 12,039
======== ========
Per share data:
Reported net income
Basic ........................ $ 0.23 $ 0.41
Diluted ...................... 0.23 0.40
Net income before nonrecurring items
Basic ........................ $ 0.35 $ 0.41
Diluted ...................... 0.35 0.40
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.