ConMed Corp. (NSDQ:CNMD) posted fourth-quarter sales of $179.2 million for the three months ended Dec. 31, 2009, down 6 percent compared with $190.6 million during the same period in 2008. Net income rose 67.9 percent to $8.3 million, compared with $5 million during Q4 2008:
Press Release
CONMED Corporation Announces Fourth Quarter and Full Year 2009 Results
Fourth Quarter Sales Increase 6.4%
UTICA, NY–(Marketwire – February 4, 2010) – CONMED Corporation (
financial results for the fourth quarter and year-ended December 31, 2009.
Sales for the fourth quarter ended December 31, 2009 were $190.6 million
compared to $179.2 million in the same quarter of 2008, an increase of 6.4%
(2.6% in constant currency). GAAP diluted earnings per share were $0.17
for the fourth quarter 2009 compared to $0.28 in the fourth quarter of
2008. Non-GAAP diluted earnings per share equaled $0.37 for the fourth
quarter 2009 compared to non-GAAP diluted earnings per share of $0.34 in
the 2008 fourth quarter. As discussed below under “Use of Non-GAAP
Financial Measures,” the Company presents various non-GAAP financial
measures in this release. Investors should consider non-GAAP measures in
addition to, and not as a substitute for, or superior to, financial
performance measures prepared in accordance with GAAP. Please refer to the
attached reconciliation between GAAP and non-GAAP financial measures.
For the year ended December 31, 2009, sales were $694.7 million compared to
$742.2 million in 2008. GAAP diluted earnings per share were $0.42 for
2009 compared to $1.37 in 2008. Non-GAAP diluted earnings per share were
$1.00 for 2009 compared to $1.54 in 2008.
“We are very pleased with the improved sequential financial performance of
CONMED over the last two quarters. The fourth quarter of 2009 was
highlighted by increased total sales in both single-use surgical devices
and capital equipment products. Most importantly, the strong results
support our conviction that the Company is once again on a positive growth
trajectory,” commented Mr. Joseph J. Corasanti, President and Chief
Executive Officer.
As previously announced, the Company implemented a series of cost-cutting
actions during 2009 including consolidating a division’s administrative
functions within the Corporate headquarters, delaying hiring for certain
open positions, freezing the defined benefit pension plan for U.S.
employees, and continuing with the previously announced manufacturing
restructuring. Costs associated with these activities are further
described in the following sections. The Company continues to review its
total cost structure for reductions in areas that are not critical to
CONMED’s long-term growth strategy.
International sales in the fourth quarter of 2009 were $85.2 million,
representing 44.7% of total sales, and $309.0 million for the year ended
December 31, 2009. Currency exchange rates became favorable in the fourth
quarter of 2009, reversing to a limited extent the unfavorable currency
environment of the first nine months of the year. Compared to the rates in
2008, sales were increased by $6.8 million in the fourth quarter of 2009,
and were reduced by $20.4 million for the full year 2009 due to currency
fluctuations.
Cash flow in the fourth quarter was strong, enabling an $11.7 million
reduction in the Company’s total financings compared to balances at
September 30, 2009. This reduction includes the lower usage of the
accounts receivable securitization at December 31, 2009. As previously
discussed, a recent accounting pronouncement will require that this
facility be included on the Company’s balance sheet in the first quarter of
2010. It will have the effect of increasing accounts receivable and short
term debt by the same amount.
Outlook
Mr. Corasanti added, “Although last year’s economy presented unique
challenges for the entire healthcare industry, we are confident that the
proactive cost-cutting actions we initiated in 2009 will lead to increased
profitability in 2010 and beyond. Further, we expect that the improving
business trends we have seen in the second half of 2009 should continue
into 2010, and we therefore reiterate the full year guidance that we
communicated in our October 2009 third quarter earnings press release.
Sales in 2010 are anticipated to be $715 – $725 million, with non-GAAP
diluted earnings per share estimated to be $1.20 – $1.30. For the first
quarter of 2010, we anticipate that sales should approximate $175 – $180
million and
non-GAAP earnings per share should approximate $0.24 – $0.29.”
The non-GAAP estimates for the full year and first quarter of 2010 exclude
the additional amortization of bond discount required by recently issued
Financial Accounting Standards Board (“FASB”) guidance, and unusual costs,
if any.
Endoscopic Technologies division consolidation
In July 2009, the Company began the process of consolidating the
administrative functions of the Endoscopic Technologies division from its
offices in Massachusetts to the Corporate Headquarters in Utica, New York.
The sales force and product portfolio remain unchanged and CONMED
Endoscopic Technologies will continue to operate as a separate division of
the Company. In connection with this consolidation, we incurred costs of
$4.6 million in the fourth quarter of 2009, including severance, lease
termination costs, and write-downs of certain inventory and fixed assets.
The fourth quarter 2009 costs are included in the GAAP earnings per share
set forth above, and are excluded from the non-GAAP amount.
Product recall
During the third quarter of 2009, the Company announced a voluntary recall
of certain model numbers of the PRO5 & PRO6 series battery handpieces and
certain lots of the MC5057 Universal Cable used with certain of CONMED
Linvatec’s electric powered handpieces. Current models of these products
are not affected. We estimated that the recall costs would total
approximately $6.0 million and previously recorded this charge in the third
quarter. This cost is also included in the total year 2009 GAAP earnings
per share set forth above, and is excluded from the non-GAAP amount.
Convertible bond repurchase
During the first quarter of 2009, the Company repurchased and retired $9.9
million face value of its 2.5% Convertible Notes at a discount of
approximately 21%. The repurchase was substantially funded by CONMED’s own
cash resources. The transaction resulted in a pre-tax gain to the 2009
year’s financial statements of approximately $1.1 million, which is
included in the GAAP earnings per share set forth above, and excluded from
the non-GAAP amount.
U.S. pension plan
In March 2009, the Company gave notice that it would freeze the benefits of
its defined benefit pension plan for U.S. employees. As has been widely
reported, such plans have become increasingly difficult for companies to
maintain because of the volatility in asset performance and required
changes in the actuarial determination of plan liabilities. The Company’s
first quarter 2009 financial statements included a non-cash net pre-tax
gain of $1.9 million, comprised of a $4.4 million pension curtailment
benefit offset by a $2.5 million first quarter pension charge. This net
non-cash pre-tax gain is also included in the year’s GAAP earnings per
share set forth above, and is excluded from the non-GAAP amount.
Manufacturing restructuring
As previously disclosed, the Company largely completed its previously
announced plan for restructuring certain of its manufacturing operations by
consolidating locations in New York and moving certain production lines to
its new manufacturing site in Mexico. Such expenses amounted to $3.4
million in the fourth quarter of 2009 and $14.6 million for the full year.
These amounts are included in the GAAP earnings per share set forth above,
and excluded from the
non-GAAP amounts. The Company recently announced that additional lines of
manufactured product will be moved to the Mexican site over the next eight
months. We expect such restructuring costs for 2010 to approximate $2.5
million in total; these costs are excluded from our full year 2010 non-GAAP
EPS estimate.
Convertible note interest expense
As disclosed in the past, and in accordance with recently issued FASB
guidance, beginning in 2009, the Company is required to record the
amortization of the bond discount related to its convertible notes to bring
the effective interest rate to a level approximating that of a
non-convertible note of similar size and tenor. For the fourth quarter of
2009 and the full year of 2009, the Company recorded additional non-cash
pre-tax interest charges of $1.0 million and $4.1 million, respectively.
The pronouncement also requires that a similar adjustment be made in
previously issued financial statements to facilitate comparative analysis.
Accordingly, the 2008 financial statements have been adjusted and now
include additional interest expense of $1.2 million in the fourth quarter
and $4.8 million for the full year. These charges are also included in the
GAAP earnings per share set forth above, and excluded from the non-GAAP
amounts.
