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): October 21, 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)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligations of the registrant under any of the
following provisions (See General Instruction A.2 below):
[_] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[_] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[_] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On October 21, 2004, CONMED Corporation issued a press release announcing
financial results for the three and nine month periods ended September 30, 2004.
A copy of this press release is attached hereto as Exhibit 99.1.
The information in this Form 8-K that is furnished under "Item 2.02, Results of
Operations and Financial Condition" and Exhibit 99.1 attached hereto shall not
be deemed "filed" for purposes of Section 18 of the Securities Act of 1934, nor
shall they be deemed incorporated by reference in any filing under the
Securities Act of 1933, except as shall be expressly set forth by specific
reference in such filing.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits
The following exhibit is included herewith:
Exhibit No. Description of Exhibit
99.1 Press Release dated October 21, 2004, issued by
CONMED Corporation.
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: October 22, 2004
EXHIBIT INDEX
Exhibit
Number Exhibit Description
99.1 Press Release, dated October 21, 2004, issued by CONMED Corporation.
ConMed NEWS RELEASE
Corporation
Contact:
CONMED Corporation
Robert Shallish
Chief Financial Officer
315-624-3206
Financial Dynamics
Investors: Julie Huang/Lanie Marcus
Media: Sean Leous
212-850-5600
FOR RELEASE: 7:00 AM (Eastern) October 21, 2004
CONMED REPORTS THIRD QUARTER RESULTS
- 3Q Sales Exceed Guidance -
- Non-GAAP EPS Equals $0.38 -
- Strong Video Systems Sales Drive 19% Arthroscopy Sales Growth -
Utica, New York, October 21, 2004 ----- CONMED Corporation (Nasdaq: CNMD)
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.
CONMED NEWS RELEASE CONTINUED: 2 of 7 October 21, 2004
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.
CONMED NEWS RELEASE CONTINUED: 3 of 7 October 21, 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 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 NEWS RELEASE CONTINUED: 4 of 7 October 21, 2004
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 NEWS RELEASE CONTINUED: 5 of 7 October 21, 2004
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 NEWS RELEASE CONTINUED: 6 of 7 October 21, 2004
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 NEWS RELEASE CONTINUED: 7 of 7 October 21, 2004
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.