CONMED Corporation Announces Fourth Quarter and Full Year 2014 Financial Results

UTICA, NY -- (Marketwired) -- 01/27/15 -- CONMED Corporation (NASDAQ: CNMD) today announced financial results for the fourth quarter and full year ended December 31, 2014.Fourth Quarter 2014 Financial Highlights:Sales of $195.0 million decreased 4.1% on a reported basis and 2.7% in constant currency compared to the fourth quarter of 2013. ...

UTICA, NY -- (Marketwired) -- 01/27/15 -- CONMED Corporation (NASDAQ: CNMD) today announced financial results for the fourth quarter and full year ended December 31, 2014.

Fourth Quarter 2014 Financial Highlights:

  • Sales of $195.0 million decreased 4.1% on a reported basis and 2.7% in constant currency compared to the fourth quarter of 2013. 
     
  • Diluted earnings per share (GAAP) were $0.41 compared to $0.36 in the fourth quarter of 2013 and were affected by special items as described below. 
     
  • Adjusted diluted earnings per share were $0.53 and equal to $0.53 in the prior year period. 
     

Full Year 2014 Financial Highlights:

  • Sales of $740.1 million decreased 3.0% on a reported basis and 2.4% in constant currency compared to 2013. 
     
  • Diluted earnings per share (GAAP) were $1.16 compared to $1.28 in 2013 and were affected by special items as described below. 
     
  • Adjusted diluted earnings per share were $1.92 compared to $1.81 in the prior year. 
     
  • Adjusted EBITDA margin improved 80 basis points to 18.0% compared to 17.2% in 2013. 
     

"Our fourth quarter results allowed us to complete the year in-line with the guidance we provided last July and reconfirmed in October. Our focus is on transforming our commercial organization to facilitate future sales and earnings growth. Our management team is fully engaged in this process, and I look forward to sharing our progress with you," commented Curt R. Hartman, President and Chief Executive Officer.

Sales Analysis

For the quarter ended December 31, 2014, domestic sales, which represented 50.7% of total sales, declined 1.8% while international sales, 49.3% of total sales, declined 6.5% compared to the fourth quarter of 2013 on a reported basis. In constant currency, international sales declined 3.8%. The sales decline in the United States was caused by reduced single-use product revenue, offset by increased capital equipment sales. Outsidethe United States, the decline was caused primarily by FX headwinds and reduced capital equipment sales. The currency impact on fourth quarter 2014 sales as compared to the fourth quarter of 2013 was $2.8 million.

For the 2014 full year, domestic sales, 48.8% of total sales, decreased 3.9% due to declines in single-use and capital products, while international sales, 51.2% of total sales, decreased 2.1% on a reported basis and 1.0% in constant currency. The international sales declines were caused by FX headwinds and reduced sales of capital products. The currency impact on 2014 sales as compared to 2013 was $4.3 million.

Earnings Analysis

Diluted earnings per share on a GAAP basis for the December 2014 quarter improved over the fourth quarter of 2013 due to lower operating expenses, including lower special items. Adjusting for the special items in both quarterly periods, adjusted diluted EPS was the same in both periods, as lower sales and gross margin in the fourth quarter of 2014 were offset by lower operating costs, a lower tax rate and reduced shares outstanding as compared to the fourth quarter of 2013.

For the 2014 full year, GAAP diluted earnings per share declined 9.4% caused by lower sales and higher costs for special items, particularly for those associated with management restructuring, Denver plant consolidation, and shareholder activism. Adjusting for the special items in both years as indicated on the following reconciliation, adjusted earnings per share grew 6.1% due to lower operating costs.

2015 Outlook

CONMED has outlined certain changes in the structure of its commercial organization that management believes will return the Company to sales growth in 2015. The Company anticipates constant currency sales growth of 1% to 3% for the full year, which will be driven by new product launches and a reorganization of certain aspects of the commercial sales organization in early 2015. As a result, management expects revenue growth to accelerate in the second half of 2015 compared to the first half of 2015.

CONMED's prior 2015 guidance contemplated foreign exchange rates as of December 2014. The January 2015 volatility in the currency markets has been significant, and the Company has chosen to update 2015 guidance based on currency spot rates as of the close on January 23, 2015. Based on these rates, the updated negative impact of foreign exchange rates versus 2014 is $19 million to revenues and $0.14 to EPS, versus the prior estimates of $6 million and $0.04, respectively.

Using January 23, 2015 exchange rates and existing hedges, CONMED now anticipates that reported sales for 2015 will be in the range of $727 million to $742 million, representing a range of (2%) to 0% versus the prior year. The Company continues to expect 2015 constant currency revenue growth of 1% to 3%. In addition, adjusted diluted earnings per share will be in the range of $1.82 to $1.92.

The adjusted estimates for the full year 2015 exclude the cost of special items, including the manufacturing consolidation, commercial restructuring and senior management changes which are estimated to be $9.0 million to $11.0 million, net of tax, for 2015.

Special Charges

As reconciled on the following schedules, during the fourth quarter and full year 2014, the Company continued the ongoing consolidation of certain administrative functions and manufacturing activities. Also incurred were costs due to shareholder activism, changes in senior management, litigation and settlement costs associated with patent and legal disputes, the write-off of New York State tax credits eliminated due to a legislative change, and other costs. Expenses associated with these activities, including severance and relocation costs, amounted to $3.4 million, net of tax, in the fourth quarter of 2014 and$21.2 million, net of tax, for 2014. These charges are included in the GAAP earnings per share set forth above and are excluded from the adjusted results.

Use of Non-GAAP Financial Measures

Management has disclosed adjusted financial measurements in this press announcement that present financial information that is not in accordance with generally accepted accounting principles. These measurements are not a substitute for GAAP measurements, although Company management uses these measurements as aids in monitoring the Company's on-going financial performance from quarter-to-quarter and year-to-year on a regular basis, and for benchmarking against other medical technology companies. Adjusted net income, adjusted operating income, adjusted gross margin and adjusted earnings per share measure the income of the Company excluding credits or charges that are considered by management to be outside of the normal on-going operations of the Company. Management uses and presents adjusted net income, adjusted operating income, adjusted gross margin and adjusted earnings per share because management believes that in order to properly understand the Company's short and long-term financial trends, the impact of special charges should be eliminated from on-going operating activities. These adjustments for special charges are derived from facts and circumstances that vary in frequency and impact on the Company's results of operations. Management uses adjusted net income, adjusted operating income, adjusted gross margin and adjusted earnings per share to forecast and evaluate the operational performance of the Company as well as to compare results of current periods to prior periods on a consistent basis. Further, the presentation of EBITDA and adjusted EBITDA are non-GAAP measurements that management considers useful for measuring aspects of the Company's cash flow. Adjusted financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. Investors should consider adjusted measures in addition to, and not as a substitute for, or superior to, financial performance measures prepared in accordance with GAAP.

Conference Call

The Company will conduct a conference call and webcast regarding its fourth quarter 2014 financial results at 4:30 p.m. Eastern Time on Tuesday, January 27, 2015. To participate in the conference call, dial 866-515-2907 in the United States, or 617-399-5121 from other locations, and provide passcode 96396892. The webcast can be accessed from CONMED's web site at WWW.CONMED.COM. Replays of the call will be made available through February 15, 2015.

CONMED Profile

CONMED is a medical technology company with an emphasis on 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 and gastroenterology. Headquartered in Utica, New York, the Company's 3,500 employees distribute its products worldwide from several manufacturing locations. CONMED has a direct selling presence in 16 countries outsidethe United States and international sales constitute over 50% of the Company's total sales.

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. 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 the risks relating to forward-looking statements discussed in the Company's Annual Report on Form 10-K for the fiscal year endedDecember 31, 2013.

Source: phx.corporate-ir.net