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 27, 2006
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):
o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Section
2 Financial
Information
Item
2.02 Results
of Operations and Financial Condition.
On
April
27, 2006, CONMED Corporation issued a press release announcing financial results
for the first quarter of 2006. A copy of this press release is attached hereto
as Exhibit 99.1.
The
information in this Current Report on 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.
Section
9
Financial
Statements and Exhibits
Item
9.01 Financial
Statements and Exhibits.
|
(c)
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Exhibits
|
The following exhibit is included herewith:
|
Exhibit
No.
|
Description
of Exhibit
|
|
99.1
|
Press
Release dated April 27, 2006, 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: April
27,
2006
EXHIBIT
INDEX
|
Exhibit
|
|
|
Number
|
Exhibit
Description
|
|
Press
Release, dated April 27, 2006, issued by CONMED
Corporation.
|
 |
NEWS
RELEASE
|
|
CONTACT:
|
|
|
CONMED
Corporation
|
|
|
Robert
Shallish
|
|
|
Chief
Financial Officer
|
|
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315-624-3206
|
|
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Financial
Dynamics
|
|
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Investors:
Julie Huang/Theresa Kelleher
|
|
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212-850-5600
|
FOR
RELEASE: 7:00 AM (Eastern) April 27, 2006
CONMED
Corporation Announces First Quarter 2006 Results
-
Sales Grow to $158.5 million -
-
Non-GAAP Diluted Earnings Per Share Equals $0.21 -
Utica,
New York, April 27, 2006 ----- CONMED Corporation (Nasdaq:
CNMD) today
announced financial results for the first quarter ended March 31, 2006. Sales
for the 2006 first quarter were $158.5 million compared to $155.9 million in
the
first quarter of 2005. Net income equaled $4.3 million, or $0.15 per diluted
share for the quarter, compared to $10.8 million, or $0.36 per diluted share
in
the first quarter of 2005, based on a diluted weighted average share count
of
28.4 million for the quarter ended March 31, 2006.
Excluding
transition charges related to an acquisition and other unusual charges (see
attached reconciliation for additional information), non-GAAP net income for
the
first quarter was $5.9 million, or $0.21 per non-GAAP diluted share, compared
to
first quarter 2005 non-GAAP net income of $13.5 million, or $0.46 per non-GAAP
diluted share. In the first quarter of 2006, the Company adopted Financial
Accounting Standards Board (FASB) Statement No. 123R, Share-Based Payment,
which
requires companies to recognize the cost of stock options as compensation
expense. As a result of adopting Statement FAS 123R, the diluted
earnings per share and non-GAAP diluted earnings per share were reduced by
$0.03
per share in the March 2006 quarter.
Mr.
Joseph J. Corasanti, President and Chief Operating Officer, noted, “Our first
quarter 2006 financial results came in at the high end of our expectations.
We
are beginning to see a turn-around in the sales softness we encountered in
the
last half of 2005. Across all our product lines, our single-use products grew
2.5% (3.4% in constant currency) over the first quarter of 2005, and the
sequential growth over the fourth quarter of 2005 was even higher at 4.2%.
Capital equipment sales experienced a slight decline of 1.2% compared to the
first quarter of 2005. We believe, however, our new powered instrument
handpieces that were introduced at the American Academy of Orthopaedic Surgeons
conference last month will drive the capital products portion of our business
back to positive growth.”
Sales
outside the United States were $61.1 million in the first quarter of 2006
growing 4.2% overall and 6.4% on a constant currency basis compared to the
first
quarter of 2005. International sales grew to 38.5% of the Company’s total sales
in the March 2006 quarter continuing the trend for higher growth in
international markets.
The
Company’s cash flow continued to be strong with cash from operations totaling
$14.0 million for the three months ended March 31, 2006. This enabled the
Company to reduce its senior credit lines and receivable securitization
facilities by $9.5 million. Additionally, the Company repurchased $3.4 million
of its common stock.
| CONMED News Release Continued |
Page
2 of 7
|
April
27, 2006
|
During
the second half of 2005, the Company experienced soft sales in a number of
product lines and has since seen improvements in certain areas. In the first
quarter of 2006, the Arthroscopy product line experienced growth of 1.3%
compared to the 4.4% sales decline recorded in the fourth quarter of 2005.
Powered Surgical Instruments declined 3.7% quarter over quarter due to lower
capital equipment handpiece sales, offset by a 7.0% increase in single-use
blade
and burr sales. Electrosurgery continues to increase its market share and
improve sales of the System 5000®
generators
and
single-use disposables resulting in growth of 12.0%, compared to the same period
2005. Endoscopic Technologies’ sales growth in the first quarter of 2006 was
2.8% over the first quarter of 2005, due to increased sales of biliary and
stricture management devices. Endosurgery’s decline of 3.3% was due to reduced
orders from distributors outside the United States following a strong order
flow
in the fourth quarter of 2005, offset by a 3.7% increase in U.S. sales. Patient
Care grew 3.7% primarily due to improved sales of ECG electrodes.
Following
is a summary of the Company’s sales by product line for the three months ended
March 31, 2006 (in millions):
|
Three
Months Ended March 31,
|
|||||||||||||
|
Constant
|
|||||||||||||
|
Currency
|
|||||||||||||
|
2005
|
2006
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Growth
|
Growth
|
||||||||||
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(in
millions)
|
|||||||||||||
|
Arthroscopy
|
$
|
54.0
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$
|
54.7
|
1.3
|
%
|
2.8
|
%
|
|||||
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Powered
Surgical Instruments
|
35.5
|
34.2
|
-3.7
|
%
|
-2.3
|
%
|
|||||||
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Electrosurgery
|
20.9
|
23.4
|
12.0
|
%
|
12.0
|
%
|
|||||||
|
Endoscopic
Technologies
|
14.3
|
14.7
|
2.8
|
%
|
2.8
|
%
|
|||||||
|
Endosurgery
|
12.3
|
11.9
|
-3.3
|
%
|
-3.3
|
%
|
|||||||
|
Patient
Care
|
18.9
|
19.6
|
3.7
|
%
|
3.7
|
%
|
|||||||
|
$
|
155.9
|
$
|
158.5
|
1.7
|
%
|
2.5
|
%
|
||||||
Compared
to the first quarter of 2005, the Company’s profitability has been impacted by
several previously discussed factors including the adverse effects of foreign
currency translation, higher costs of production caused by higher petroleum
based plastic raw materials and transportation, quality initiatives, litigation
expense, greater research and development expenditures, and higher interest
costs. Management expects these higher costs to be mitigated as progress is
made
throughout 2006 on various profit improvement initiatives.
Outlook
Mr.
Corasanti concluded, “Based on our sales results for the first quarter of 2006,
we are starting to see an improvement in our revenue growth rate compared to
the
last six months of 2005. We believe that the steps we have taken over the last
three months to improve our margins will have a positive impact on our
profitability. Our long-term goal is to achieve steady growth in our top and
bottom lines. We continue to believe that our operating margin in 2007 will
improve to approximately 14% of sales as growing revenues leverage the Company’s
fixed-cost structure and as we realize measures to improve margins and reduce
costs.”
| CONMED News Release Continued |
Page 3 of
7
|
April
27, 2006
|
CONMED
is
reiterating previously disclosed guidance. The Company continues to expect
top-line organic growth of approximately 5% in 2006, an improvement from the
2%
organic growth in 2005. The Company also continues to expect higher levels
of
costs in 2006 compared to 2005 such that non-GAAP diluted earnings per share
in
2006 will approximate $0.85 - $0.90, including the effects of FAS 123R, as
previously disclosed. This estimate does not reflect charges for previously
disclosed higher costs of products for the Endoscopic Technology line while
the
Company completes the transition to self-manufacturing of this line, and the
previously disclosed surgical light replacement costs. For the second quarter
2006, CONMED anticipates revenues in the range of $153 - $158 million and
diluted earnings per share on a non-GAAP basis (including FAS 123R expense)
of
$0.18 - $0.22 per share.
Conference
Call
The
Company will webcast its first quarter 2006 conference call live over the
Internet on Thursday, April 27, 2006 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 May 4, 2006.
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 3,100 employees distribute its
products worldwide from several 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, 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,
2005; (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 4 of
7
|
April
27, 2006
|
CONMED
CORPORATION
CONSOLIDATED
STATEMENTS OF INCOME
Three
Months Ended March 31, 2005 and 2006
(In
thousands except per share amounts)
(unaudited)
|
2005
|
2006
|
||||||
|
Net
sales
|
$
|
155,859
|
$
|
158,466
|
|||
|
Cost
of sales
|
73,046
|
78,737
|
|||||
|
Cost
of sales, nonrecurring - Note A
|
2,338
|
1,829
|
|||||
|
Gross
profit
|
80,475
|
77,900
|
|||||
|
Selling
and administrative- Note B
|
52,532
|
58,374
|
|||||
|
Research
and development
|
5,849
|
7,825
|
|||||
|
Other
expense - Note C
|
1,900
|
570
|
|||||
|
60,281
|
66,769
|
||||||
|
Income
from operations
|
20,194
|
11,131
|
|||||
|
Interest
expense
|
3,759
|
4,866
|
|||||
|
Income
before income taxes
|
16,435
|
6,265
|
|||||
|
|
|||||||
|
Provision
for income taxes
|
5,670
|
1,925
|
|||||
|
|
|||||||
|
Net
income
|
$
|
10,765
|
$
|
4,340
|
|||
|
Per
share data:
|
|||||||
|
Net
income
|
|||||||
|
Basic
|
$
|
.37
|
$
|
.15
|
|||
|
Diluted
|
.36
|
.15
|
|||||
|
Weighted
average common shares
|
|||||||
|
Basic
|
29,127
|
28,082
|
|||||
|
Diluted
|
29,721
|
28,358
|
|||||
Note
A
-
Included in cost of sales in the three months ended March 31, 2005 and 2006
are
approximately $2.3 million and $1.8 million, respectively, in
acquisition-related costs.
Note
B
-
Included in selling and administrative expense in the three months ended March
31, 2006 is $0.8 million for stock option expense pursuant to
FAS123R.
Note
C
-
Included in other expense in the three months ended March 31, 2005 are $1.4
million in acquisition-related costs and $0.5 million of expense related to
the
termination of a product offering. Included in other expense in the three months
ended March 31, 2006 are $0.5 million in acquisition-related costs and $0.1
million of expense related to the termination of a product
offering.
| CONMED News Release Continued |
Page 5 of
7
|
April
27, 2006
|
CONMED
CORPORATION
CONSOLIDATED
CONDENSED BALANCE SHEETS
(in
thousands)
(unaudited)
ASSETS
|
December
31,
|
March
31,
|
||||||
|
2005
|
2006
|
||||||
|
Current
assets:
|
|||||||
|
Cash
and cash equivalents
|
$
|
3,454
|
$
|
4,653
|
|||
|
Accounts
receivable, net
|
83,327
|
81,160
|
|||||
|
Inventories
|
152,428
|
157,735
|
|||||
|
Deferred
income taxes
|
12,887
|
12,342
|
|||||
|
Other
current assets
|
3,419
|
3,784
|
|||||
|
Total
current assets
|
255,515
|
259,674
|
|||||
|
Property,
plant and equipment, net.
|
104,224
|
106,364
|
|||||
|
Goodwill
and other intangible assets, net
|
527,053
|
525,882
|
|||||
|
Other
assets
|
16,991
|
15,145
|
|||||
|
Total
assets
|
$
|
903,783
|
$
|
907,065
|
|||
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|||||||
|
Current
liabilities:
|
|||||||
|
Current
portion of long-term debt
|
$
|
4,208
|
$
|
2,963
|
|||
|
Other
current liabilities
|
57,924
|
61,531
|
|||||
|
Total
current liabilities
|
62,132
|
64,494
|
|||||
|
Long-term
debt
|
302,643
|
297,423
|
|||||
|
Deferred
income taxes
|
62,554
|
64,068
|
|||||
|
Other
long-term liabilities
|
23,448
|
25,381
|
|||||
|
Total
liabilities
|
450,777
|
451,366
|
|||||
|
Shareholders'
equity:
|
|||||||
|
Capital
accounts
|
202,810
|
200,990
|
|||||
|
Retained
earnings
|
259,932
|
264,272
|
|||||
|
Accumulated
other comprehensive loss
|
(9,736
|
)
|
(9,563
|
)
|
|||
|
Total
equity
|
453,006
|
455,699
|
|||||
|
Total
liabilities and shareholders' equity
|
$
|
903,783
|
$
|
907,065
|
|||
| CONMED News Release Continued |
Page 6 of
7
|
April
27, 2006
|
CONMED
CORPORATION
CONSOLIDATED
CONDENSED STATEMENT OF CASH FLOWS
(in
thousands)
(unaudited)
|
Three
months ended
|
|||||||
|
March
31,
|
|||||||
|
2005
|
2006
|
||||||
|
Cash
flows from operating activities:
|
|||||||
|
Net
income
|
$
|
10,765
|
$
|
4,340
|
|||
|
Adjustments
to reconcile net income
|
|||||||
|
to
net cash provided by operating activities:
|
|||||||
|
Depreciation
and amortization
|
7,461
|
7,328
|
|||||
|
Stock
option expense
|
-
|
814
|
|||||
|
Deferred
income taxes
|
3,683
|
2,121
|
|||||
|
Sale
of accounts receivable
|
(5,000
|
)
|
(3,000
|
)
|
|||
|
Other,
net
|
(2,678
|
)
|
2,408
|
||||
|
Net
cash provided by operating activities
|
14,231
|
14,011
|
|||||
|
Cash
flow from investing activities:
|
|||||||
|
Purchases
of property, plant, and equipment, net
|
(3,985
|
)
|
(4,908
|
)
|
|||
|
Proceeds
from sale of equity investment
|
-
|
1,205
|
|||||
|
Net
cash used in investing activities
|
(3,985
|
)
|
(3,703
|
)
|
|||
|
|
|||||||
|
Cash
flow from financing activities:
|
|||||||
|
Payments
on debt
|
(13,152
|
)
|
(6,465
|
)
|
|||
|
Net
proceeds from common stock issued under employee plans
|
6,053
|
772
|
|||||
|
Repurchase
of common stock
|
-
|
(3,406
|
)
|
||||
|
Other,
net
|
(847
|
)
|
(170
|
)
|
|||
|
Net
cash used in financing activities
|
(7,946
|
)
|
(9,269
|
)
|
|||
|
Effect
of exchange rate change
|
|||||||
|
on
cash and cash equivalents
|
(648
|
)
|
160
|
||||
|
Net
increase in cash and cash equivalents
|
1,652
|
1,199
|
|||||
|
Cash
and cash equivalents at beginning of period
|
4,189
|
3,454
|
|||||
|
Cash
and cash equivalents at end of period
|
$
|
5,841
|
$
|
4,653
|
|||
| CONMED News Release Continued |
Page 7 of
7
|
April
27, 2006
|
CONMED
CORPORATION
RECONCILIATION
OF REPORTED NET INCOME TO NET INCOME
BEFORE
UNUSUAL ITEMS
Three
Months Ended March 31, 2005 and 2006
(In
thousands except per share amounts)
(unaudited)
|
2005
|
2006
|
||||||
|
Reported
net income
|
$
|
10,765
|
$
|
4,340
|
|||
|
Acquisition-transition
related costs included
|
|||||||
|
in
cost of sales
|
2,338
|
1,829
|
|||||
|
Termination
of product offering
|
520
|
56
|
|||||
|
|
|||||||
|
Other
acquisition related costs
|
1,380
|
514
|
|||||
|
Total
other expense
|
1,900
|
570
|
|||||
|
Unusual
expense before income taxes
|
4,238
|
2,399
|
|||||
|
Provision
(benefit) for income taxes on unusual expenses
|
(1,462
|
)
|
(864
|
)
|
|||
|
Net
income before unusual items
|
$
|
13,541
|
$
|
5,875
|
|||
|
Per
share data:
|
|||||||
|
Reported
net income
|
|||||||
|
Basic
|
$
|
0.37
|
$
|
0.15
|
|||
|
Diluted
|
0.36
|
0.15
|
|||||
|
Net
income before unusual items
|
|||||||
|
Basic
|
$
|
0.46
|
$
|
0.21
|
|||
|
Diluted
|
0.46
|
0.21
|
|||||
Management
has provided the above reconciliation of net income before unusual 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.