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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 29, 2020

 

 

CONMED CORPORATION

(Exact name of registrant as specified in its charter)

 

Delaware 001-39218 16-0977505
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization)   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))

 

Securities registered pursuant to Rule 12(b) of the Act

 

Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $0.01 par value CNMD NYSE

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

 

 

 

 

Item 2.02Results of Operations and Financial Condition.

 

On July 29, 2020, CONMED Corporation issued a press release announcing financial results for the second quarter ended June 30, 2020. 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.

 

 

 

Item 9.01Financial Statements and Exhibits.

 

(d)Exhibits

 

The following exhibits are included herewith:

 

 

  Exhibit No. Description of Exhibit
     
  99.1 Press Release dated July 29, 2020, issued by CONMED Corporation.
     
  104 Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

 

 

 

 

 

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 hereunto duly authorized.

 

 

 

Date:     July 29, 2020 CONMED CORPORATION
               (Registrant)
     
     
       By: /s/  Todd W. Garner     
  Name: Todd W. Garner
    Title: Executive Vice President-
    Chief Financial Officer

 

 

 

NEWS RELEASE
   
  CONTACT:
  CONMED Corporation
  Todd Garner
  Chief Financial Officer
  315-624-3317
  ToddGarner@conmed.com

 

 

CONMED Corporation Announces Second Quarter 2020 Financial Results

 

Utica, New York, July 29, 2020 --- CONMED Corporation (NYSE: CNMD) today announced financial results for the second quarter ended June 30, 2020.

 

Second Quarter 2020 Highlights

 

·Sales of $157.8 million decreased 33.8% year over year as reported and 32.6% in constant currency.
·Domestic revenue decreased 32.2% year over year.
·International revenue decreased 35.6% as reported and 33.0% in constant currency.
·Diluted net loss per share (GAAP) was $0.96, compared to diluted net earnings per share of $0.19 in the second quarter of 2019.
·Adjusted diluted net loss per share(1) was $0.07 versus adjusted net earnings per share of $0.56 in the second quarter of 2019. 

 

I am extremely proud of our entire organization’s response to the global COVID-19 crisis, the impact of which is reflected in our second quarter results,” commented Curt R. Hartman, CONMED’s President, Chief Executive Officer and Chair of the Board. “The month-over-month improvements in our revenue, profitability, and cash flow over the course of the quarter are encouraging signs. While we expect continued uncertainty as a result of the COVID-19 crisis, we feel well positioned as we enter the second half of 2020 and beyond.”  

 

2020 Outlook

 

Due to the continued uncertainty created by the COVID-19 pandemic, management is unable to provide financial guidance at this time.

 

Supplemental Financial Disclosures

 

(1) A reconciliation of reported diluted net earnings (loss) per share to adjusted diluted net earnings (loss) per share, a non-GAAP financial measure, appears below.

 

 

 

Conference Call

 

The Company’s management will host a conference call today at 4:30 p.m. ET to discuss its second quarter 2020 results.

 

To participate in the conference call, dial 1-844-889-7792 (domestic) or +1-661-378-9936 (international) and refer to the passcode 2083716.

This conference call will also be webcast and can be accessed from the “Investors” section of CONMED's website at www.conmed.com. The webcast replay of the call will be available at the same site approximately one hour after the end of the call.

A recording of the call will also be available from 7:30 p.m. ET on Wednesday, July 29, 2020, until 7:30 p.m. ET on Wednesday, August 5, 2020. To hear this recording, dial 1-855-859-2056 (domestic) or +1-404-537-3406 (international) and enter the passcode 2083716.

 

 

 

Consolidated Condensed Statements of Income (Loss)

(in thousands, except per share amounts, unaudited)

 

   Three Months Ended  Six Months Ended
   June 30,  June 30,
   2020  2019  2020  2019
                     
Net sales  $157,785   $238,263   $371,796   $456,641 
Cost of sales   85,856    107,073    180,707    204,013 
Gross profit   71,929    131,190    191,089    252,628 
% of sales   45.6%    55.1%    51.4%    55.3% 
Selling & administrative expense   84,475    100,726    180,343    199,952 
Research & development expense   8,700    11,806    18,820    22,381 
Income (loss) from operations   (21,246)   18,658    (8,074)   30,295 
% of sales   -13.5%    7.8%    -2.2%    6.6% 
Interest expense   11,401    11,839    20,993    21,208 
Other expense   89    321    178    4,546 
Income (loss) before income taxes   (32,736)   6,498    (29,245)   4,541 
Provision (benefit) for income taxes   (5,336)   803    (7,772)   (2,175)
Net income (loss)  $(27,400)  $5,695   $(21,473)  $6,716 
                     
Basic EPS  $(0.96)  $0.20   $(0.75)  $0.24 
Diluted EPS   (0.96)   0.19    (0.75)   0.23 
                     
Basic shares   28,542    28,276    28,506    28,228 
Diluted shares   28,542    29,337    28,506    29,197 

 

 

 

 

 

 

Sales Summary

(in millions, unaudited)

 

   Three Months Ended June 30,
         % Change
                  Domestic  International
   2020  2019  As
Reported
  Impact
of
Foreign
Currency
  Constant
Currency
  As
Reported
  As
Reported
  Impact
of
Foreign
Currency
  Constant
Currency
Orthopedic Surgery  $60.5   $115.8    -47.7%    1.5%    -46.2%    -50.6%    -46.0%    2.5%    -43.5% 
General Surgery   97.3    122.5    -20.6%    0.8%    -19.8%    -22.9%    -15.3%    2.8%    -12.5% 
   $157.8   $238.3    -33.8%    1.2%    -32.6%    -32.2%    -35.6%    2.6%    -33.0% 
                                              
Single-use Products  $128.5   $190.3    -32.4%    1.1%    -31.3%    -27.5%    -38.7%    2.5%    -36.2% 
Capital Products   29.3    48.0    -39.0%    1.3%    -37.7%    -54.2%    -25.4%    2.9%    -22.5% 
   $157.8   $238.3    -33.8%    1.2%    -32.6%    -32.2%    -35.6%    2.6%    -33.0% 
                                              
Domestic  $87.4   $129.0    -32.2%    0.0%    -32.2%                     
International   70.4    109.3    -35.6%    2.6%    -33.0%                     
   $157.8   $238.3    -33.8%    1.2%    -32.6%                     
                                              

 

   Six Months Ended June 30,
         % Change
                  Domestic  International
   2020  2019  As
Reported
  Impact
of
Foreign
Currency
  Constant
Currency
  As
Reported
  As
Reported
  Impact
of
Foreign
Currency
  Constant
Currency
Orthopedic Surgery  $159.8   $229.2    -30.3%    1.7%    -28.6%    -34.0%    -27.9%    2.8%    -25.1% 
General Surgery   212.0    227.4    -6.8%    0.8%    -6.0%    -6.1%    -8.4%    2.4%    -6.0% 
   $371.8   $456.6    -18.6%    1.3%    -17.3%    -16.1%    -21.4%    2.7%    -18.7% 
                                              
Single-use Products  $306.2   $362.6    -15.6%    1.3%    -14.3%    -11.6%    -20.5%    2.8%    -17.7% 
Capital Products   65.6    94.0    -30.2%    1.1%    -29.1%    -36.8%    -24.4%    2.3%    -22.1% 
   $371.8   $456.6    -18.6%    1.3%    -17.3%    -16.1%    -21.4%    2.7%    -18.7% 
                                              
Domestic  $206.3   $245.9    -16.1%    0.0%    -16.1%                     
International   165.5    210.7    -21.4%    2.7%    -18.7%                     
   $371.8   $456.6    -18.6%    1.3%    -17.3%                     
                                              

 

 

 

Reconciliation of Reported Net Income (Loss) to Adjusted Net Income (Loss)

(in thousands, except per share amounts, unaudited)

 

   Three Months Ended June 30, 2020
   Gross
Profit
  Selling &
Administrative
Expense
  Operating
Income
(Loss)
  Interest
Expense
  Other
Expense
  Tax
Expense/
(Benefit)
  Effective
Tax Rate
  Net
Income
(Loss)
  Diluted
EPS
As reported  $71,929   $84,475   $(21,246)  $11,401   $89   $(5,336)   16.3%   $(27,400)  $(0.96)
% of sales   45.6%    53.5%    -13.5%                               
Plant underutilization costs (1)   6,586        6,586            739         5,847    0.21 
Product rationalization costs (2)   2,169    (2,095)   4,264            460         3,804    0.13 
Restructuring costs (3)   1,087    (2,124)   3,211            346         2,865    0.10 
Manufacturing consolidation costs (4)   1,602        1,602            144         1,458    0.05 
Acquisition and integration costs (5)   652    (439)   1,091            119         972    0.03 
   $84,025   $79,817   $(4,492)  $11,401   $89   $(3,528)       $(12,454)  $(0.44)
Adjusted gross profit %   53.3%                                         
Amortization(6)  $1,500    (6,955)   8,455    (3,413)       1,280         10,588    0.37 
Adjusted net loss       $72,862   $3,963   $7,988   $89   $(2,248)   54.6%   $(1,866)  $(0.07)
% of sales        46.2%    2.5%                               

 

   Three Months Ended June 30, 2019
   Gross
Profit
  Selling &
Administrative
Expense
  Operating
Income
  Interest
Expense
  Other
Expense
  Tax
Expense
  Effective
Tax Rate
  Net
Income
  Diluted
EPS
As reported  $131,190   $100,726   $18,658   $11,839   $321   $803    12.4%   $5,695   $0.19 
% of sales   55.1%    42.3%    7.8%                               
Acquisition and integration costs (5)   503    (2,461)   2,964            855         2,109    0.08 
   $131,693   $98,265   $21,622   $11,839   $321   $1,658        $7,804   $0.27 
Adjusted gross profit %   55.3%                                         
Amortization(6)  $1,500    (6,766)   8,266    (3,183)       2,840         8,609    0.29 
Adjusted net income       $91,499   $29,888   $8,656   $321   $4,498    21.5%   $16,413   $0.56 
% of sales        38.4%    12.5%                               

 

(1) In 2020, the Company incurred a charge related to plant underutilization due to abnormally low production as a result of decreased sales caused by the COVID-19 pandemic.
(2) In 2020, the Company performed an analysis of product lines and determined certain catalog numbers, principally related to capital equipment, would be discontinued and consolidated into existing product offerings resulting in a charge to cost of sales.  We also wrote-off related field inventory used for customer demonstration and evaluation of the discontinued products to selling and administrative expense.
(3) In 2020, the Company incurred restructuring costs related to a voluntary separation arrangement with employees as a result of the COVID-19 pandemic and restructuring of the Orthopedic sales force.
(4) In 2020, the Company incurred costs related to the consolidation of certain manufacturing operations.  These costs related to winding down operations at certain locations and moving production lines to other facilities.
(5) In 2020, the Company incurred inventory adjustments associated with a prior acquisition and integration and severance costs mainly related to the acquisition of Buffalo Filter, LLC.  In 2019, the Company incurred consulting fees, legal fees and integration related costs associated with the acquisition of Buffalo Filter, LLC.
(6) Includes amortization of intangible assets, deferred financing fees and debt discount.

 

 

Reconciliation of Reported Net Income (Loss) to Adjusted Net Income

(in thousands, except per share amounts, unaudited)

 

   Six Months Ended June 30, 2020
   Gross
Profit
  Selling &
Administrative
Expense
  Operating
Income
(Loss)
  Interest
Expense
  Other
Expense
  Tax
Expense/
(Benefit)
  Effective
Tax Rate
  Net Income
(Loss)
  Diluted EPS
As reported  $191,089   $180,343   $(8,074)  $20,993   $178   $(7,772)   26.6%   $(21,473)  $(0.75)
% of sales   51.4%    48.5%    -2.2%                               
Plant underutilization costs (1)   6,586        6,586            739         5,847    0.20 
Product rationalization costs (2)   2,169    (2,095)   4,264            460         3,804    0.13 
Restructuring costs (3)   1,087    (2,124)   3,211            346         2,865    0.10 
Manufacturing consolidation costs (4)   3,387        3,387            837         2,550    0.09 
Acquisition and integration costs (5)   1,457    (1,192)   2,649            722         1,927    0.07 
   $205,775   $174,932   $12,023   $20,993   $178   $(4,668)       $(4,480)  $(0.16)
Adjusted gross profit %   55.3%                                         
Amortization(6)  $3,000    (13,954)   16,954    (6,497)       5,775         17,676    0.62 
Adjusted net income       $160,978   $28,977   $14,496   $178   $1,107    7.7%   $13,196   $0.46 
% of sales        43.3%    7.8%                               

 

   Six Months Ended June 30, 2019
   Gross
Profit
  Selling &
Administrative
Expense
  Operating
Income
  Interest
Expense
  Other
Expense
  Tax
Expense/
(Benefit)
  Effective
Tax Rate
  Net Income  Diluted EPS
As reported  $252,628   $199,952   $30,295   $21,208   $4,546   $(2,175)   -47.9%   $6,716   $0.23 
% of sales   55.3%    43.8%    6.6%                               
Acquisition and integration costs (5)   1,163    (9,706)   10,869            3,182         7,687    0.26 
Debt refinancing costs (7)                   (3,904)   1,149         2,755    0.10 
   $253,791   $190,246   $41,164   $21,208   $642   $2,156        $17,158   $0.59 
Adjusted gross profit %   55.6%                                         
Amortization(6)  $3,000    (12,596)   15,596    (5,390)       5,248         15,738    0.54 
Adjusted net income       $177,650   $56,760   $15,818   $642   $7,404    18.4%   $32,896   $1.13 
% of sales        38.9%    12.4%                               

 

(1) In 2020, the Company incurred a charge related to plant underutilization due to abnormally low production as a result of decreased sales caused by the COVID-19 pandemic.
(2) In 2020, the Company performed an analysis of product lines and determined certain catalog numbers, principally related to capital equipment, would be discontinued and consolidated into existing product offerings resulting in a charge to cost of sales.  We also wrote-off related field inventory used for customer demonstration and evaluation of the discontinued products to selling and administrative expense.
(3) In 2020, the Company incurred restructuring costs related to a voluntary separation arrangement with employees as a result of the COVID-19 pandemic and restructuring of the Orthopedic sales force.
(4) In 2020, the Company incurred costs related to the consolidation of certain manufacturing operations.  These costs related to winding down operations at certain locations and moving production lines to other facilities.
(5) In 2020, the Company incurred inventory adjustments associated with a prior acquisition and integration and severance costs mainly related to the acquisition of Buffalo Filter, LLC.  In 2019, the Company incurred investment banking fees, consulting fees, legal fees and integration related costs associated with the acquisition of Buffalo Filter, LLC.
(6) Includes amortization of intangible assets, deferred financing fees and debt discount.
(7) In 2019, in conjunction with the acquisition of Buffalo Filter, LLC, the Company refinanced its existing credit facility and incurred one-time fees associated with an agreement between the Company and JP Morgan Chase Bank, N.A., as well as costs associated with the early extinguishment of debt.

 

 

 

 

Reconciliation of Reported Net Income (Loss) to EBITDA & Adjusted EBITDA

(in thousands, unaudited)

 

   Three Months Ended  Six Months Ended
   June 30,  June 30,
   2020  2019  2020  2019
             
Net income (loss)  $(27,400)  $5,695   $(21,473)  $6,716 
Provision (benefit) from income taxes   (5,336)   803    (7,772)   (2,175)
Interest expense   11,401    11,839    20,993    21,208 
Depreciation   4,588    4,525    9,234    8,967 
Amortization   13,616    13,252    27,392    25,460 
EBITDA  $(3,131)  $36,114   $28,374   $60,176 
                     
Stock based compensation   3,555    3,108    6,587    5,811 
Plant underutilization costs   6,586        6,586     
Product rationalization costs   4,264        4,264     
Restructuring costs   3,211        3,211     
Manufacturing consolidation costs   1,602        3,387     
Acquisition and integration costs   1,091    2,964    2,649    10,869 
Debt refinancing costs               3,904 
Adjusted EBITDA  $17,178   $42,186   $55,058   $80,760 
                     
                     
EBITDA Margin                    
  EBITDA   -2.0%    15.2%    7.6%    13.2% 
  Adjusted EBITDA   10.9%    17.7%    14.8%    17.7% 

 

 

 

 

 

 

About CONMED Corporation

 

CONMED is a medical technology company that provides surgical devices and equipment for minimally invasive procedures. The Company’s products are used by surgeons and physicians in a variety of specialties, including orthopedics, general surgery, gynecology, neurosurgery, thoracic surgery, and gastroenterology. For more information, visit www.conmed.com.

 

 

Forward-Looking Statements

 

This press release and today’s conference call may contain forward-looking statements based on certain assumptions and contingencies that 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. For example, in addition to general industry and economic conditions, factors that could cause actual results to differ materially from those in the forward-looking statements may include, but are not limited to, the risks posed to the Company’s business, financial condition, and results of operations by the COVID-19 global pandemic and the various government responses to the pandemic, including deferral of surgeries, reductions in hospital and ambulatory surgery center operating volumes, disruption to potential supply chain reliability, as well as the risk factors discussed in the Company's Annual Report on Form 10-K for the full year ended December 31, 2019, and listed under the heading Forward-Looking Statements in the Company’s most recently filed Form 10-Q. Any and all 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 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.

 

 

Supplemental Information - Reconciliation of GAAP to Non-GAAP Financial Measures

 

The Company supplements the reporting of its financial information determined under accounting principles generally accepted in the United States (GAAP) with certain non-GAAP financial measures, including percentage sales growth in constant currency; adjusted gross profit; cost of sales excluding specified items; adjusted selling and administrative expenses; adjusted operating income (loss); adjusted interest expense; adjusted other expense; adjusted income tax expense (benefit); adjusted effective income tax rate; adjusted net income (loss), adjusted diluted shares and adjusted diluted net earnings (loss) per share (EPS). The Company believes that these non-GAAP measures provide meaningful information to assist investors and shareholders in understanding its financial results and assessing its prospects for future performance. Management believes percentage sales growth in constant currency and the other adjusted measures described above are important indicators of its operations because they exclude items that may not be indicative of, or are unrelated to, its core operating results and provide a baseline for analyzing trends in the Company’s underlying business. Further, the presentation of EBITDA is a non-GAAP measurement that management considers useful for measuring aspects of the Company’s cash flow. Management uses these non-GAAP financial measures for reviewing the operating results and analyzing potential future business trends in connection with its budget process and bases certain management incentive compensation on these non-GAAP financial measures.

 

 

 

Net sales on a constant currency basis is a non-GAAP measure. The Company analyzes net sales on a constant currency basis to better measure the comparability of results between periods. To measure percentage sales growth in constant currency, the Company removes the impact of changes in foreign currency exchange rates that affect the comparability and trend of net sales. To measure earnings performance on a consistent and comparable basis, the Company excludes certain items that affect the comparability of operating results and the trend of earnings. These adjustments are irregular in timing, may not be indicative of past and future performance and are therefore excluded to allow investors to better understand underlying operating trends.

 

Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. These adjusted financial measures should not be considered in isolation or as a substitute for reported sales growth, gross profit, cost of sales, selling and administrative expenses, operating income (loss), interest expense, other expense, income tax expense (benefit), effective income tax rate, net income (loss), diluted shares and diluted net earnings (loss) per share, the most directly comparable GAAP financial measures. These non-GAAP financial measures are an additional way of viewing aspects of the Company’s operations that, when viewed with GAAP results and the reconciliations to corresponding GAAP financial measures above, provide a more complete understanding of the business. The Company strongly encourages investors and shareholders to review its financial statements and publicly filed reports in their entirety and not to rely on any single financial measure.