- --------------------------------------------------------------------------------
Securities and Exchange Commission
Washington, D.C.
20549
Form 10-K/A
Amendment No. 1
to
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the fiscal year ended December 30, 1994 Commission file number 0-16093
CONMED CORPORATION
(Exact name of registrant as specified in its charter)
New York 16-0977505
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
310 Broad Street, Utica, New York 13501
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (315) 797-8375
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ x ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ x ]
The aggregate market value of the shares of the voting stock held by
non-affiliates of the Registrant was approximately $79,738,820 based upon the
average bid and asked prices of stock, which was $13.083 on January 27, 1995.
The number of shares of the Registrant's $0.01 par value common stock
outstanding as of February 14, 1995 was 9,059,721.
DOCUMENTS FROM WHICH INFORMATION IS INCORPORATED BY REFERENCE
Portions of the Definitive Proxy Statement, scheduled to be mailed on
or about April 21, 1995 for the annual meeting of stockholders to be held May
23, 1995, are incorporated by reference into Part III.
INTRODUCTION
CONMED Corporation declared a 3 for 2 stock split in the form of a
common stock dividend which was paid on November 30, 1995 to stockholders of
record at the close of business on November 13, 1995. The following sections of
the Company's Form 10-K for the fiscal year ended December 30, 1994 are amended
to give retroactive effect to this stock dividend.
Form 10-K/A Index
Part II
Item 5. Market for the Registrant's Common Stock
and Related Stockholder Matters
Item 6. Selected Financial Data
Item 8. Financial Statements and Supplementary Data
Part IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K
Signatures
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters
The Company's Common Stock, par value $.01 per share, is traded on the
NASDAQ National Market System (symbol - CNMD). At December 30, 1994, there were
479 owners of record of the Company's Common Stock.
The following tables show the high-low sales prices for the years
ended December 31, 1993 and December 30, 1994 as reported by the NASDAQ Stock
Market. The sales prices have been adjusted to give retroactive effect to the
three-for-two stock splits in the form of stock dividends paid on November 30,
1995 and December 27, 1994.
1993
Period High Low
- ------ ------- ------
First Quarter $10 4/9 $6 5/9
Second Quarter 7 1/9 4 4/9
Third Quarter 6 4/9 3 1/9
Fourth Quarter 5 5/9 4
1994
Period High Low
- ------ ------- ------
First Quarter $ 6 8/9 $4 4/9
Second Quarter 6 4/9 5 1/9
Third Quarter 8 4/9 5 5/9
Fourth Quarter 13 2/3 8
The Company did not pay cash dividends on its Common Stock during 1993
and 1994, and the Board of Directors presently intends to continue to retain
earnings for the development of the Company's business. Accordingly, it is
anticipated that no cash dividends will be paid in the foreseeable future.
Item 6. Selected Financial Data
FIVE - YEAR SUMMARY OF SELECTED FINANCIAL DATA
(In thousands, except per share data)
1990 1991 1992 1993 (2) 1994
-------- -------- -------- -------- --------
Consolidated Statements of
Income (Loss)(1)
- ---------------
Net sales ....................... $ 31,422 $ 38,458 $ 42,602 $ 53,641 $ 71,064
Net income (loss) ............... 2,436 3,945 4,106 (1,396) 5,416
Earnings (loss) per share(3) .... .37 .46 .42 (.15) .56
Weighted average number of shares
and equivalents outstanding(3) 6,656 8,526 9,702 9,426 9,624
Consolidated Balance Sheet
(at end of period)
- ------------------
Working capital ................. $ 7,947 $ 22,094 $ 23,827 $ 15,399 $ 18,159
Total assets .................... 22,207 38,338 41,939 57,338 62,104
Long-term debt
(less current portion) ........ 4,876 107 30 9,375 6,875
Shareholders' equity ............ 12,764 33,951 38,669 37,490 43,061
(1) Includes the results of (i) the Concept disposable electrosurgical business
from February 28, 1991, the date of acquisition; and (ii) Andover Medical
from July 12, 1993, the date of acquisition.
(2) Includes litigation charge of $5,000 relating to a patent infringement case
involving CONMED's line of coated electrosurgical accessory blades and a
product restructure charge of $675 for the write-off of obsolete inventory,
net of related tax benefit of $1,930.
(3) Share and per share information have been adjusted to give retroactive
effect to the three-for-two stock splits in the form of stock dividends paid
to shareholders on November 30, 1995 and December 27, 1994. tock tock
Item 8. Financial Statements and Supplementary Data
The Company's 1994 Financial Statements, together with the report
thereon of Price Waterhouse LLP dated February 3, 1995 and December 18, 1995 are
included elsewhere herein. See Item 14 for a list of Financial Statements and
Financial Statement Schedules.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
Index to Financial Statements:
(a)(1) List of Financial Statements
Report of Independent Accountants
Consolidated Balance Sheets at December 31, 1993
and December 30, 1994
Consolidated Statements of Income for the years
ended December 25, 1992, December 31, 1993, and
December 30, 1994
Consolidated Statements of Shareholders' Equity
for each of the years ended December 25, 1992,
December 31, 1993, and December 30, 1994
Consolidated Statements of Cash Flows for
each of the years ended December 25, 1992,
December 31, 1993, and December 30, 1994 F-5
Notes to Consolidated Financial Statements
(2) List of Financial Statement Schedules*
(3) List of Exhibits*
(b) Reports on Form 8-K*
* Information is not being amended pursuant to this Form 10-K/A.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
December 19, 1995
By: /s/ EUGENE R. CORASANTI
Eugene R. Corasanti
(Chairman of the Board and President)
Pursuant to the requirements of the Securities Act of 1934, this
report has been signed below by the following persons on behalf of the
registrants and in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ EUGENE R. CORASANTI Chairman of the Board December 19, 1995
President (Principal
Executive Officer) and
Director
/s/ ROBERT D. SHALLISH, JR. Vice President - Finance December 19, 1995
(Principal Financial and
Principal Accounting Officer)
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of CONMED Corporation
In our opinion, the consolidated financial statements listed in the
index appearing under Item 14(a)(1) and (2) on page 15 of the Annual Report on
Form 10-K/A present fairly, in all material respects, the financial position of
CONMED Corporation and its subsidiaries at December 30, 1994 and December 31,
1993, and the results of their operations and their cash flows for each of the
three years in the period ended December 30, 1994, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Syracuse, New York
February 3, 1995 (except as to Note 13,
which is as of December 18, 1995)
CONMED CORPORATION CONSOLIDATED BALANCE SHEETS
(In thousands except share amounts)
December 31, December 30,
ASSETS 1993 1994
----- ----
Current assets:
Cash and cash equivalents ..................... $ 1,978 $ 3,615
Accounts receivable less allowance for
doubtful accounts of $347 in 1993
and $343 in 1994 ............................ 11,457 13,141
Inventories (Notes 1 and 2) .................. 9,001 9,620
Deferred income taxes (Notes 1 and 6) ........ 1,363 1,494
Prepaid expenses and other current assets .... 509 451
------- -------
Total current assets ..................... 24,308 28,321
Property, plant and equipment, net
(Notes 1 and 3) ................................ 16,394 16,227
Covenant not to compete, net ...................... 2,098 1,530
Goodwill, net (Notes 1 and 10) .................... 11,745 13,109
Patents, trademarks and other assets (Note 1) ..... 2,793 2,917
------- -------
Total assets ............................. $57,338 $62,104
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt (Note 5) ... $ 2,530 $ 2,500
Accounts payable ............................. 1,265 1,539
Income taxes payable (Notes 1 and 6) ......... 61 455
Accrued payroll and withholdings ............. 1,244 2,571
Accrued pension (Note 9) ..................... 454 307
Accrued patent litigation (Note 11) .......... 2,715 2,360
Other current liabilities .................... 640 430
------- -------
Total current liabilities ................ 8,909 10,162
Long-term debt (Note 5) ........................... 9,375 6,875
Deferred income taxes (Notes 1 and 6) ............. 698 1,011
Accrued pension (Note 9) .......................... 276 276
Deferred compensation ............................. 590 719
------- -------
Total liabilities ........................ 19,848 19,043
------- -------
(Continued)
CONMED CORPORATION CONSOLIDATED BALANCE SHEETS (Continued)
(In thousands except share amounts)
December 31, December 30,
1993 1994
----- ----
Commitments (Notes 3, 5, 7, 9 and 10)
Shareholders' equity (Notes 1 and 7):
Preferred stock, par value $.01 per share;
authorized 500,000 shares; none
outstanding Common stock, par value
$.01 per share; 20,000,000 authorized;
9,026,550 and 9,057,321,
issued and outstanding in
1993 and 1994, respectively ................ 90 90
Paid-in capital ............................... 23,346 23,502
Retained earnings ............................. 14,054 19,469
------- -------
Total shareholders' equity ............... 37,490 43,061
------- -------
Total liabilities and shareholders' equity $57,338 $62,104
======= =======
See notes to consolidated financial statements
CONMED CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In thousands except per share amounts)
For the Years Ended,
Dec. 25, 1992 Dec. 31, 1993 Dec. 30, 1994
---------- ---------- ----------
Net sales (Note 8) ............................. $ 42,602 $ 53,641 $ 71,064
---------- ---------- ----------
Cost of sales .................................. 22,549 30,218 38,799
Selling and administrative expense ............. 12,556 17,402 20,979
Litigation and product restructure (Note 11) .. 5,700
Research and development expense ............... 1,695 2,222 2,352
---------- ---------- ----------
36,800 55,542 62,130
---------- ---------- ----------
Income (loss) from operations .................. 5,802 (1,901) 8,934
Interest income (expense), net (Note 4) ........ 290 (214) (628)
---------- ---------- ----------
Income (loss) before income taxes .............. 6,092 (2,115) 8,306
Provision (benefit) for income taxes
(Notes 1 and 6) ............................. 1,986 (719) 2,890
---------- ---------- ----------
Net income (loss) .............................. $ 4,106 $ (1,396) $ 5,416
========== ========== ==========
Weighted average number of common shares
and equivalents outstanding (Notes 1 and 13) 9,702 9,426 9,624
========== ========== ==========
Earnings (loss) per common and
common equivalent share ..................... $ .42 $ (.15) $ .56
========== ========== ==========
See notes to consolidated financial statements.
CONMED CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years Ended December 25, 1992, December 31, 1993 and December 30, 1994
(In thousands)
Common Shares Paid-in Retained
Number Amount Capital Earnings
------ ------- ------- -------
Balance at December 27, 1991 ....................... 8,826 $ 89 $22,518 $11,344
Exercise of stock options ........................ 121 1 217
Tax benefit arising from exercise of stock options 394
Net income ....................................... 4,106
----- ------- ------- -------
Balance at December 25, 1992 ....................... 8,947 90 23,129 15,450
Exercise of stock options ........................ 80 203
Tax benefit arising from exercise of stock options 14
Net loss ......................................... (1,396)
----- ------- ------- -------
Balance at December 31, 1993 ....................... 9,027 90 23,346 14,054
Exercise of stock options ........................ 30 97
Tax benefit arising from exercise of stock options 59
Cash payment in lieu of fractional shares for
stock split in the form of a stock dividend ... (1)
Net income ....................................... 5,416
----- ------- ------- -------
Balance at December 30, 1994 ....................... 9,057 $ 90 $23,502 $19,469
===== ======= ======= =======
See notes to consolidated financial statements.
CONMED CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the years ended
Dec. 25, 1992 Dec. 31, 1993 Dec. 30, 1994
------------- ------------- -------------
Cash flows from operating activities:
Net income (loss) ..................................................... $ 4,106 $ (1,396) $ 5,416
----------- ----------- -----------
Adjustments to reconcile net income to net cash provided by operations:
Depreciation ................................................... 1,616 2,209 2,457
Amortization ................................................... 630 1,053 1,421
Increase (decrease) in cash flows from changes in assets and
liabilities, net of effects from acquisitions in 1993 and 1994
(See Note 10):
Accounts receivable ........................................ 340 (100) (1,684)
Inventories ................................................ (2,077) 1,634 (619)
Refundable income taxes .................................... 397
Prepaid expenses and other current assets .................. (223) 143 58
Accounts payable ........................................... (438) 397 274
Income tax payable ......................................... 86 (25) 394
Income tax benefit of stock option exercises ............... 394 14 59
Accrued payroll and withholdings ........................... (572) 226 1,327
Accrued pension ............................................ (6) 342 (147)
Accrued patent litigation .................................. 2,715 (355)
Other current liabilities .................................. (207) (345) (210)
Deferred income taxes ...................................... 23 (1,236) 182
Other assets/liabilities (net) ............................. (120) 42 (313)
----------- ----------- -----------
(157) 7,069 2,844
----------- ----------- -----------
Net cash provided by operations ............................ 3,949 5,673 8,260
----------- ----------- -----------
(Continued)
CONMED CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In thousands)
For the years ended
Dec. 25, 1992 Dec. 31, 1993 Dec. 30, 1994
------------- ------------- -------------
Cash flows from investing activities:
Acquisitions (See Note 10) ....................................... (21,800) (2,000)
Redemption of treasury security ................................. 4,121
Acquisition of property, plant and equipment .................... (5,057) (1,506) (2,190)
----------- ----------- -----------
Net cash used in investing activities ....................... (936) (23,306) (4,190)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds of note payable ......................................... 2,327
Payment of notes payable ......................................... (2,327)
Proceeds of long term debt ....................................... 13,500
Proceeds from issuance of common stock ........................... 218 203 97
Payments on long-term debt ....................................... (103) (1,702) (2,530)
----------- ----------- -----------
Net cash provided (used) by financing activities ............ 115 12,001 (2,433)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents ..................... 3,128 (5,632) 1,637
Cash and cash equivalents at beginning of year ........................... 4,482 7,610 1,978
----------- ----------- -----------
Cash and cash equivalents at end of year ................................. $ 7,610 $ 1,978 $ 3,615
=========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest ........................................................ $ 32 $ 294 $ 641
Income taxes .................................................... 1,052 682 2,470
See notes to consolidated financial statements.
CONMED CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Organization and operations
The consolidated financial statements include the accounts of CONMED
Corporation and its subsidiaries (the Company). All intercompany transactions
have been eliminated. The Company is primarily engaged in the development,
manufacturing and marketing of disposable medical products and related devices
for various medical applications.
Statement of cash flows
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
Fiscal year end
The Company's fiscal year ends on the last Friday in December.
Inventories
The inventories are stated at the lower of cost or market, cost being
determined on the first-in, first-out basis.
Property, plant and equipment
Property, plant and equipment are stated at cost and depreciated using
the straight-line method over the estimated useful lives of the related assets,
which range from four to forty years. Expenditures for repairs and maintenance
are charged to expense as incurred. When assets are retired or otherwise
disposed of, the cost and related accumulated depreciation are removed from the
accounts and any resultant gain or loss is recognized.
Patents and Trademarks
Patents and trademarks are amortized over their expected useful lives
of 3 to 17 years. Accumulated amortization of patents and trademarks was
$287,000 and $504,000 at December 31, 1993 and December 30, 1994, respectively.
Goodwill
Goodwill is amortized over periods ranging from 13 to 40 years.
Accumulated amortization of goodwill amounted to $373,000 and $707,000 at
December 31, 1993 and December 30, 1994, respectively.
Income taxes
In January 1993, the Company adopted Statement of Financial Accounting
Standards No. 109 (SFAS 109) "Accounting for Income Taxes", and has applied the
provisions prospectively. The adoption of SFAS 109 changed the Company's method
of accounting for income taxes from the deferred method (APB 11) to an asset and
liability approach. Prior to 1993 the Company deferred the past tax effects of
timing differences between financial reporting and taxable income. The asset and
liability approach requires the recognition of deferred tax liabilities and
assets for the expected future tax consequences of temporary differences between
the carrying amounts and the tax bases of all other assets and liabilities. The
adoption of SFAS 109 did not have a material effect on the Company's financial
statements.
Earnings per common and common equivalent share
Earnings per common and common equivalent share was computed by
dividing net income (loss) by the weighted average number of shares of common
stock and common stock equivalents outstanding during the year.
Reclassifications
Certain amounts previously reported have been reclassified to conform
to current year classifications.
NOTE 2 - INVENTORIES
The components of inventory are as follows (in thousands):
Dec. 31, Dec. 30,
1993 1994
------ ------
Raw materials ............................ $3,813 $4,154
Work in process .......................... 1,376 1,851
Finished goods ........................... 3,812 3,615
------ ------
$9,001 $9,620
====== ======
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
Details of property, plant and equipment are as follows (in thousands):
Dec. 31, Dec. 30,
1993 1994
------- -------
Land and improvements .......................... $ 370 $ 370
Building and improvements ...................... 8,861 9,720
Machinery and equipment ........................ 16,891 18,191
Construction in progress ....................... 476 95
------- -------
26,598 28,376
Less: Accumulated depreciation ................. 10,204 12,149
------- -------
$16,394 $16,227
======= =======
Rental expense on operating leases was approximately $350,000,
$392,000, and $441,000 for the years ending December 1992, 1993, and 1994,
respectively. The aggregate future minimum lease commitments at December 30,
1994 are as follows (in thousands):
1995................................. $ 445
1996................................. 195
195
-----
$ 640
=====
NOTE 4 - INTEREST COSTS
Total interest costs in 1993 and 1994 were $306,000 and $628,000,
respectively, all of which was expensed. Interest cost during 1992 was $78,000
of which $46,000 was capitalized as interest during construction.
NOTE 5 - NOTES AND LOANS PAYABLE
Long-term debt consists of the following (in thousands):
Dec. 31, Dec. 30,
1993 1994
------- -------
Term loan, payable in quarterly amounts of $625,
through June 1998, interest at LIBOR plus 1 1/4% (7.2%
at December 30, 1994) ................................... $11,875 $ 9,375
10% industrial development bond, payable in annual
installments of varying amounts through October
1994, interest payable semiannually ..................... 30 --
------- -------
11,905 9,375
Less current portion .................................... 2,530 2,500
------- -------
$ 9,375 $ 6,875
======= =======
The aggregate amount of required principal payments at December 30,
1994 is as follows (in thousands):
1995........................... $ 2,500
1996........................... 2,500
1997........................... 2,500
1998........................... 1,875
-------
$ 9,375
=======
The Company has a $7,500,000 unsecured bank revolving line of credit
with interest at LIBOR plus 1-1/4%. The line of credit expires in July 1996.
There were no borrowings during 1994 and there were no outstanding amounts on
this revolving line of credit as of December 30, 1994. Both the term loan and
the revolving line of credit contain minimum requirements on working capital,
cash flow and net worth. The Company has met these requirements.
NOTE 6 - FEDERAL AND STATE INCOME TAXES
The provision for income taxes consists of the following (in
thousands):
For the year ended,
Dec. 25, Dec. 31, Dec. 30,
1992 1993 1994
------- ------- -------
Current tax expense:
Federal ................................... $ 1,846 $ 404 $ 2,416
State ..................................... 163 113 292
------- ------- -------
2,009 517 2,708
Deferred income tax expense (benefit) .......... (23) (1,236) 182
------- ------- -------
Provision (benefit) for income taxes ..... $ 1,986 $ (719) $ 2,890
======= ======= =======
A reconciliation between income taxes computed at the statutory federal
rate and the provision for income taxes follows:
For the year ended,
Dec. 25, Dec. 31, Dec. 30,
1992 1993 1994
------- ------- -------
Tax provision (benefit) at statutory rate based
on income before taxes .................. 34.0% (34.0)% 34.0%
Foreign sales corporation ..................... (1.3) (3.0) (1.5)
State taxes ................................... 1.8 3.2 2.3
Other, net .................................... (1.9) (.2)
---- ---- ----
32.6% (34.0)% 34.8%
==== ==== ====
The tax effects of the significant temporary differences which comprise
the deferred tax assets and liabilities are as follows (in thousands):
Dec. 31, Dec. 31,
1993 1994
------- -------
Assets
Accrued litigation costs ..................... $ 887 $ 800
Receivables .................................. 83 138
Inventory .................................... 302 412
Deferred compensation ........................ 201 244
Employee benefits ............................ 121 178
Other ........................................ 139 87
------- -------
1,733 1,859
------- -------
Liabilities
Depreciation ................................ 863 957
Intangible asset amortization ............... -- 283
Interest charge DISC ........................ 162 136
Installment sale ............................ 43
------- -------
1,068 1,376
------- -------
$ 665 $ 483
======= =======
During 1992, deferred income taxes were provided for significant timing
differences in the recognition of revenue and expense for tax and financial
accounting purposes as required by Accounting Principles Board Opinion No. 11
which was followed by the Company prior to the adoption of SFAS 109.
Principally, these timing differences consisted of depreciation and deferred
compensation.
NOTE 7 - SHAREHOLDERS' EQUITY
On November 22, 1994, the Board of Directors of the Company declared a
three-for-two split of the Company's common stock, to be effected in the form of
a stock dividend, payable on December 27, 1994 to shareholders of record on
December 8, 1994. Accordingly, common stock, retained earnings, earnings (loss)
per share, the number of shares outstanding, the weighted average number of
shares and equivalents outstanding and stock option data have been restated to
retroactively reflect the split.
In 1983, the shareholders authorized 500,000 shares of preferred stock,
par value $.01 per share, which may be issued in one or more series by the Board
of Directors without further action by the shareholders. As of December 30,
1994, no preferred stock had been issued.
The Company has reserved shares of common stock for issuance to
employees under two Stock Option Plans (the "Plans"). As of December 30, 1994, a
total of 1,254,000 of these options had been granted at $0.75 to $15.00 per
share. The option price on all outstanding options is equal to the estimated
fair market value of the stock at the date of grant. Stock options are
non-transferable other than on death and are exercisable one year from date of
grant but for not more than ten years from date of grant. As of December 30,
1994, 1,017,000 stock options were exercisable.
The following is a summary of incentive stock option activity (in
thousands except per share amounts):
Number of Price per
Shares Share Total
-------- ----------- --------
Outstanding at December 27, 1991 ..... 782 $0.75-12.22 $ 2,722
Granted during fiscal 1992 ...... 502 6.22-15.00 5,345
Forfeited ....................... (39) 6.45-11.67 (308)
Exercised ....................... (122) 0.75- 8.11 (216)
-------- ----------- --------
Outstanding at December 25,1992 ...... 1,123 0.75-15.00 7,543
Granted during fiscal 1993 ...... 147 5.11- 8.77 832
Forfeited ....................... (35) 5.11-15.00 (259)
Exercised ....................... (80) 0.75- 3.33 (203)
-------- ----------- --------
Outstanding at December 31,1993 ...... 1,155 0.89-15.00 7,913
Granted during fiscal 1994 ...... 137 5.11-10.67 1,275
Forfeited ....................... (8) 5.11-12.22 (108)
Exercised ....................... (30) 0.89- 6.22 (97)
-------- ----------- --------
Outstanding at December 30, 1994 ..... 1,254 $1.33-15.00 $ 8,983
======== =========== ========
In connection with the 1989 acquisition of the Company's Aspen
Laboratories, Inc. subsidiary, Bristol-Myers Squibb Company received a warrant
dated as of August 31, 1989 to purchase at $4.35 per share 689,409 shares of the
Company's common stock subject to adjustment for certain stock transactions. The
warrant is currently exercisable and expires on August 31, 2000.
NOTE 8 - EXPORT SALES AND MAJOR CUSTOMERS
Sales outside of the United States accounted for approximately 17.0% of
the Company's total sales in 1992, 12.8% in 1993 and 13.6% in 1994. The
Company's products are provided to medical professionals and facilities directly
and through medical supply distributors. In 1994, sales to one distributor
totaled 10.7% of the Company's sales and sales to another distributor totaled
10.0% of sales.
NOTE 9 - PENSION PLANS
The Company maintains defined benefit plans covering substantially all
employees. The Company makes annual contributions to the plans equal to the
maximum deduction allowed for federal income tax purposes.
Net pension cost for 1992, 1993, and 1994 included the following
components (in thousands):
1992 1993 1994
---- ---- ----
Service cost - benefits earned during the period .... $ 325 $ 591 $ 583
Interest cost on projected benefit obligation ....... 227 262 286
Actual (gain) loss on plan assets ................... 55 (179) (327)
Net amortization and deferral ....................... (248) 2 86
----- ----- -----
Net pension cost ................................... $ 359 $ 676 $ 628
===== ===== =====
The following tables set forth the plans' funded status and amounts
recognized in the Company's Consolidated Balance Sheet at December 31, 1993, and
December 30, 1994 (in thousands):
1993 1994
-------- --------
Actuarial present value of accumulated benefit obligation
Vested benefits .......................................... $ 3,172 $ 3,404
Non-vested benefits ...................................... 161 129
Accumulated benefits obligations ......................... 3,333 3,533
Additional amounts related to projected pay increases .... 1,226 1,272
-------- --------
Projected benefit obligations for service rendered to date .... 4,559 4,805
Plan assets at fair value, consisting of debt and of equity
securities and cash surrender values on insurance policies 2,871 3,675
Plan benefit obligations in excess of plan assets ............. 1,688 1,130
Unrecognized net obligation of CONMED plan at December 26, 1986
being recognized over 25 years ........................... (88) (84)
Unrecognized prior service cost ............................... (228) (217)
Unrecognized net gain (loss) from past experience different
from that assumed and effects of changes in assumptions .. (642) (246)
-------- --------
Accrued pension costs recognized in the balance sheet ......... $ 730 $ 583
======== ========
For actuarial calculation purposes, the weighted average discount rate
was 8.0% in 1992 and 7.0% in 1993 and 1994. The expected long term rate of
return was 8.0% in 1992, 1993 and 1994. The rate of increase in future
compensation levels was 5.0% in 1992 and 4.0% in 1993 and 1994. Common stock of
the Company included in plan assets, at fair value, was approximately $165,000
at December 31, 1993 and $462,000 at December 30, 1994.
NOTE 10 - BUSINESS ACQUISITIONS
In November 1994, the Company acquired a specialty ECG monitoring
product line from Becton Dickinson Vascular Access Company in a purchase
transaction amounting to $2,000,000 in cash. The product line's operations have
been included with the Company's financial results since the acquisition date.
Goodwill is being amortized on a straight-line basis over a 40 year period and a
covenant not to compete is amortized over a five year period. The pro forma
effects of this acquisition on the Company's results of operations were not
material.
In July 1993 the Company acquired certain assets and the business of
Medtronic Andover Medical, Inc., a manufacturer of cardiac monitoring disposable
products, from Medtronic, Inc. in a purchase transaction for approximately
$21,800,000 in cash. Accordingly, the results of operations of the acquired
business are included in the consolidated results of the Company from the date
of acquisition. The transaction was accounted for using the purchase method of
accounting. Goodwill is being amortized on a straight-line basis over a 40 year
period while a covenant not to compete and other intangible assets related to
the acquisition are being amortized on a straight-line basis over periods
ranging from five to eight years.
On an unaudited pro forma basis, assuming the purchase had occurred as
of the beginning of the period, the consolidated results of the Company would
have been as follows (in thousands, except per share amounts):
For the years ended
December
1992 1993
---------- --------
Pro forma revenues ........................ $ 66,445 $ 66,217
========== ========
Pro forma net income (loss) ............... $ 5,313 $ (515)
========== ========
Pro forma earnings (loss)
per common and
common equivalent share ................. $ .55 $ (.06)
========== ========
On December 5, 1994, the Company agreed to acquire Birtcher Medical
Systems, Inc. ("Birtcher") through an exchange of the Company's common stock for
all of the outstanding common and preferred stock of Birtcher. The agreement is
subject to a majority affirmative vote of the Birtcher common and preferred
shareholders. The shareholders' meeting for the vote is scheduled to occur on
March 14, 1995. Each share of Birtcher's common stock will be converted into
1/12 of a share of CONMED common stock and each share of Birtcher's preferred
stock will be converted into 1/2 of a share of CONMED common stock. As a result
of the exchange of stock, Birtcher will become a wholly owned subsidiary of
CONMED. It is expected that approximately 1,080,000 shares of the Company's
common stock will be issued to effect the acquisition. The Company estimates
that the value of the stock issued for Birtcher together with cash acquisition
costs will approximate $25,000,000. The transaction will be accounted for using
the purchase method of accounting.
The Company has received a commitment from banks to refinance the
Company's and Birtcher's existing bank debt. The commitment includes a
$30,000,000 term facility that is payable over five years at an interest rate of
1.625% over LIBOR. The committed credit facility also includes a $10,000,000
line of credit with interest at LIBOR plus 1.5%.
On an unaudited pro forma basis, assuming the Andover and the Birtcher
purchases had occurred as of the beginning of the periods presented, the
consolidated results of the Company would have been as follows (in thousands,
except per share amounts):
For the years ended
December
1993 1994
-------- --------
Pro forma revenues ........................... $104,689 $ 99,065
======== ========
Pro forma net income ......................... $ 1,448 $ 6,504
======== ========
Pro forma earnings per common
and common equivalent share ............... $ .13 $ .58
======== ========
The unaudited pro forma financial information presented above gives
effect to purchase accounting adjustments which have resulted or are expected to
result from the acquisitions, and in the case of the Birtcher acquisition to the
elimination of certain overhead costs which are not expected to be incurred by
the combined entity. This pro forma information and is not necessarily
indicative of the results that would actually have been obtained had the
companies been combined for the periods presented.
NOTE 11 - LEGAL MATTERS AND PRODUCT RESTRUCTURE
On October 13, 1993, a jury in a U.S. District Court trial in Salt Lake
City, Utah found that the Company's line of coated electrosurgical accessory
blades infringed a patent held by a competitor. Subsequently, the District Court
trial Judge fixed the damage award at $2,100,000 and issued an injunction
prohibiting CONMED from selling the affected products.
Although an appeal of this matter has been filed, the damage award
together with related costs, including legal fees incurred, estimated legal fees
for the appeal, and inventory which can no longer be sold were expensed in 1993.
The total of this charge in 1993 was $5,000,000. Payment of the damage award has
been stayed pending the outcome of the appeal. Oral argument to the appellate
court is scheduled to be conducted on April 3, 1995.
From time to time, the Company has been named as a defendant in certain
lawsuits alleging product liability or other claims incurred in the ordinary
course of business. These claims are generally covered by various insurance
policies, subject to deductible amounts and maximum policy limits. Ultimate
liability with respect to these contingencies, if any, is not considered to be
material to the consolidated financial statements of the Company.
In 1993, management determined that approximately $675,000 of
inventory, primarily in the electrosurgical pencil product line, had become
obsolete due to product modifications. Accordingly, these obsolete items were
charged to litigation and product restructure expense as a restructuring of the
product line.
NOTE 12 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data for the years ended December 31, 1993
and December 30, 1994 are follows (in thousands, except per share amounts):
Three Months Ended
1993 March June September December
- ---- -------- -------- -------- --------
Net sales ..................... $ 10,608 $ 10,264 $ 14,941 $ 17,828
Gross profit .................. 4,847 4,558 6,401 7,617
Net income (loss) ............. 451 170 417 (2,435)
Earnings (loss) per share ..... .05 .02 .05 (.26)
1993 March June September December
- ---- -------- -------- -------- --------
Net sales ..................... $ 17,838 $ 17,547 $ 17,264 $ 18,415
Gross profit .................. 7,834 7,949 7,964 8,518
Net income (loss) ............. 1,147 1,263 1,357 1,649
Earnings per share ............ .12 .13 .14 .17
NOTE 13 - SUBSEQUENT EVENTS
On March 22, 1995, the Company completed its acquisition of Birtcher
for approximately 1,620,000 shares of common stock valued at $17,750,000 and the
assumption of net liabilities totaling approximately $9,300,000.
On May 19, 1995, the Company acquired the business and certain assets
and liabilities of The Master Medical Corporation for a cash purchase price of
approximately $9,500,000. The acquisition was accounted for using the purchase
method of accounting. Preliminary estimates of net assets acquired of $2,500,000
resulted in Goodwill related to the acquisition of approximately $7,000,000.
In October 1995, the Company signed an asset purchase agreement whereby
the Company will acquire the business and certain assets of New Dimensions in
Medicine, Inc. (NDM) for a cash purchase price of approximately $32 million. The
transaction is subject to the approval of the shareholders of NDM.
On November 30, 1995, the Board of Directors of the Company declared a
three-for-two split of the Company's common stock, to be effected in the form of
a stock dividend, payable to shareholders of record on November 13, 1995.
Accordingly, common stock, retained earnings, earnings (loss) per share, the
number of shares outstanding, the weighted average number of shares and
equivalents outstanding and stock option data have been restated to
retroactively reflect the split.
