CONMED Corporation Announces First Quarter 2019 Financial Results

UTICA, N.Y.–(BUSINESS WIRE)–CONMED Corporation (Nasdaq: CNMD) today announced financial
results for the first quarter of 2019.

First Quarter 2019 Highlights

  • Sales of $218.4 million increased 8.1% year over year as reported and
    9.3% in constant currency. Acquisitions contributed approximately 300
    basis points of growth.
  • Domestic revenue increased 10.1% year over year.
  • International revenue increased 5.8% as reported and 8.3% in constant
    currency.
  • Diluted net earnings per share (GAAP) were $0.04, compared to diluted
    net earnings per share of $0.37 in the first quarter of 2018.
  • Adjusted diluted net earnings per share(1) were $0.57
    versus $0.53 in the first quarter of 2018, an increase of 7.5%.
  • Closed Buffalo Filter transaction on February 11, 2019.

“We are pleased to report continued strength and momentum in the
business this quarter,” commented Curt R. Hartman, CONMED’s President
and Chief Executive Officer. “Our expanding new product pipeline,
combined with our solid execution during the first quarter, positions us
well to deliver on our increased expectations for 2019.”

2019 Outlook

The Company is increasing its full-year 2019 financial guidance. The
Company now expects full-year 2019 reported sales growth in the range of
9% to 10%, which includes an increase to its organic constant currency
sales growth to a range of 5.25% to 6.25% from the original range of 5%
to 6%, as well as the addition of the Buffalo Filter acquisition. Based
on recent exchange rates, the negative impact to 2019 sales from foreign
exchange is now expected to be approximately 75 basis points, a
reduction from the original estimate of 100 basis points.

The Company is also increasing its guidance for adjusted diluted net
earnings per share to the range of $2.47 to $2.52 from the original
range of $2.42 to $2.47. This represents growth over 2018 of
approximately 13% to 16%. The adjusted diluted net earnings per share
estimates for 2019 exclude amortization of intangible assets,
amortization of deferred financing fees and debt discount, which are
estimated in the range of $34 to $36 million, net of tax. Also excluded
are the costs of special items, including acquisition costs,
restructuring costs and debt refinancing costs, which are estimated in
the range of $16 to $18 million, net of tax.

Supplemental Financial Disclosures

(1) A reconciliation of reported diluted net earnings per
share to adjusted diluted net earnings 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 first quarter 2019 results.

To participate in the conference call, dial 844-889-7792 (domestic) or
661-378-9936 (international) and refer to the passcode 9275258.

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, April 24, 2019, until 7:30 p.m. ET on Thursday, May 9, 2019.
To hear this recording, dial 855-859-2056 (domestic) or 404-537-3406
(international) and enter the passcode 9275258.

     
Consolidated Condensed Statements of Income

(in thousands, except per share amounts, unaudited)

 
Three Months Ended
March 31,
2019       2018
     
Net sales $ 218,378 $ 202,064
Cost of sales   96,940         92,507
Gross profit   121,438         109,557
% of sales 55.6% 54.2%
Selling and administrative expense 99,226 84,568
Research & development expense   10,575         7,711
Income from operations   11,637         17,278
% of sales 5.3% 8.6%
Interest expense 9,369 4,818
Other expense   4,225        
Income (loss) before income taxes (1,957) 12,460
Provision (benefit) for income taxes   (2,978)         1,803
Net income $ 1,021       $ 10,657
 
Basic EPS $ 0.04 $ 0.38
Diluted EPS 0.04 0.37
 
Basic shares 28,173 28,008
Diluted shares 29,034 28,573
 
 
Sales Summary

(in millions, unaudited)

 
Three Months Ended March 31,
    % Change
      Domestic   International
Impact of   Impact of  
As Foreign Constant

As

Foreign Constant
2019   2018 Reported   Currency   Currency

Reported

As Reported   Currency   Currency
Orthopedic Surgery $ 113.4 $ 108.9 4.2% 1.5% 5.7% 4.9% 3.8% 2.4% 6.2%
General Surgery 105.0   93.2 12.6%   0.8%   13.4% 13.7% 10.2%   2.6%   12.8%
$ 218.4   $ 202.1 8.1%   1.2%   9.3% 10.1% 5.8%   2.5%   8.3%
 
Single-use Products $ 172.4 $ 161.7 6.6% 1.2% 7.8% 11.3% 1.3% 2.5% 3.8%
Capital Products 46.0   40.4 13.9%   1.4%   15.3% 5.3% 22.6%   2.8%   25.4%
$ 218.4   $ 202.1 8.1%   1.2%   9.3% 10.1% 5.8%   2.5%   8.3%
 
Domestic $ 117.0 $ 106.3 10.1% 0.0% 10.1%
International 101.4   95.8 5.8%   2.5%   8.3%
$ 218.4   $ 202.1 8.1%   1.2%   9.3%
 
 
Reconciliation of Reported Net Income to Adjusted Net Income

(in thousands, except per share amounts, unaudited)

 
Three Months Ended March 31, 2019
  Selling &         Tax      
Administrative Operating Interest Other Expense/ Effective

Diluted

Gross Profit   Expense   Income   Expense   Expense   (Benefit)   Tax Rate   Net Income  

EPS

As reported $ 121,438   $ 99,226   $ 11,637   $ 9,369   $ 4,225   $ (2,978)   152.2%   $ 1,021   $ 0.04
% of sales 55.6% 45.4% 5.3%
Business acquisition costs (1) 660 (7,245) 7,905 2,327 5,578 0.19
Debt refinancing costs (2)                   (3,904)     1,149         2,755     0.09
$ 122,098 $ 91,981 $ 19,542 $ 9,369 $ 321 $ 498 $ 9,354 $ 0.32
Gross profit % 55.9%
Amortization(3) $ 1,500   (5,829)     7,329     (2,207)         2,408         7,128     0.25
Adjusted net income $ 86,152   $ 26,871   $ 7,162   $ 321   $ 2,906   15.0%   $ 16,482   $ 0.57
% of sales 39.5% 12.3%
 
Three Months Ended March 31, 2018
Selling & Tax
Administrative Operating Interest Other Expense/ Effective

Diluted

Gross Profit   Expense   Income   Expense   Expense   (Benefit)   Tax Rate   Net Income  

EPS

As reported $ 109,557   $ 84,568   $ 17,278   $ 4,818   $   $ 1,803   14.5%   $ 10,657   $ 0.37
% of sales 54.2% 41.9% 8.6%
Tax reform (4)                       (301)         301     0.01
$ 109,557 $ 84,568 $ 17,278 $ 4,818 $ $ 1,502 $ 10,958 $ 0.38
Adjusted gross profit % 54.2%
Amortization(3) $ 1,500   (4,021)     5,521             1,353         4,168     0.15
Adjusted net income $ 80,547   $ 22,799   $ 4,818   $   $ 2,855   15.9%   $ 15,126   $ 0.53
% of sales 39.9% 11.3%
 
(1) In 2019, the Company incurred investment banking fees,
consulting fees, legal fees and integration related costs associated
with the acquisition of Buffalo Filter, LLC.
(2) 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.
(3) Includes amortization of intangible assets, deferred financing
fees and debt discount.
(4) In 2018, the Company recorded tax expense resulting from the
2017 Tax Cuts and Jobs Act. The 2018 amounts are adjustments to the
initial December 2017 deferred tax balances.
 
 
Reconciliation of Reported Net Income to EBITDA & Adjusted EBITDA

(in thousands, unaudited)

 
Three Months Ended
March 31,
2019   2018
 
Net income $ 1,021   $ 10,657
Provision (benefit) for income taxes (2,978) 1,803
Interest expense 9,369 4,818
Depreciation 4,442 4,502
Amortization   12,208     10,488
EBITDA $ 24,062   $ 32,268
 
Stock based compensation 2,703 2,303
Business acquisition costs 7,905
Debt refinancing costs   3,904    
Adjusted EBITDA $ 38,574   $ 34,571
 
 
EBITDA Margin
EBITDA 11.0% 16.0%
Adjusted EBITDA 17.7% 17.1%
 

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 risk factors discussed in the Company’s Annual Report on
Form 10-K for the fiscal year ended December 31, 2018, 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 research and development expense;
adjusted operating income; adjusted interest expense; adjusted other
expense; adjusted income tax expense; adjusted effective income tax
rate; adjusted net income and adjusted diluted net earnings 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, research and development expense,
operating income, interest expense, other expense, income tax expense
(benefit), effective income tax rate, net income and diluted net
earnings 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.

Contacts

CONMED Corporation
Todd Garner
Chief
Financial Officer

315-624-3317
[email protected]

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