Exhibit 99.1
Contact:
CONMED Corporation
Robert Shallish
Chief Financial Officer
315-624-3206
Financial Dynamics
Investors: Julie Huang / Lanie Marcus
Media: Sean Leous
212-850-5600
FOR RELEASE: 7:00 AM (Eastern) July 22, 2004
CONMED REPORTS SECOND QUARTER FINANCIAL RESULTS
17.1% Increase in EPS (excluding unusual charges from 2003)
Utica, New York, July 22, 2004 ----- CONMED Corporation (Nasdaq: CNMD) announced
today its financial results for the second quarter ended June 30, 2004.
Total sales for the second quarter increased 5.1% to $130.9 million ($129.4
million at constant exchange rates) compared to $124.5 million in the second
quarter of 2003. Excluding the Company's capital-intensive Integrated Systems
product line, second quarter product sales grew 6.5% (5.3% at constant currency)
from the year-ago quarter. GAAP net income for the second quarter grew to $12.3
million, or $0.41 per diluted share, on a 4% increase in diluted shares
outstanding, compared to $2.8 million, or $0.09 per diluted share, in last
year's second quarter. Excluding acquisition, financing and pension charges in
last year's second quarter (please see attached reconciliation for full
explanation), non-GAAP net income for the three months ended June 2003 was $10.2
million, or $0.35 per diluted share.
Sales of the Company's orthopedic products grew 6.8% to $79.1 million from $74.1
million in last year's second quarter. Arthroscopy sales increased 7.4% to $47.7
million (5.6% internal growth, and 1.8% foreign currency) compared to $44.4
million in the same period a year ago. Powered instrument sales grew 5.7% to
$31.4 million (3.4% internal growth and 2.3% from foreign currency) compared to
$29.7 million in the second quarter of 2003 on the continued strength of the
PowerPro(R) line of products.
Electrosurgery revenues increased 9.0% to $20.6 million compared to sales of
$18.9 million in the 2003 second quarter. Sales of Patient Care Products grew
4.0% to $18.4 million compared to $17.7 million. Endosurgery (renamed from
Endoscopy consistent with the market's description of these endo-mechanical
surgery products) revenues increased 5.0% to $12.5 million compared to second
quarter 2003 sales of $11.9 million. The Integrated Systems product line had
sales of $0.3 million in the second quarter of 2004 compared to $1.9 million in
the comparable period of 2003.
CONMED NEWS RELEASE CONTINUED: 2 of 8 July 22, 2004
Mr. Joseph J. Corasanti, President and Chief Operating Officer, said, "Our solid
second quarter performance was in line with our expectations and primarily
driven by the strength of our orthopedic and electrosurgery divisions. Our
quarterly performance was driven by:
o Orthopedic sales, which were led by our
o New enhanced definition 3-chip Autoclavable camera;
o PowerPro(TM) line of powered surgical instruments; and
o Bioabsorable line of shoulder repair implants; and
o Electrosurgery sales, which were driven by our System 5000
electrosurgical generator, which continues to take market share
thanks to its enhanced features and product line specific
salesforce."
"In addition, our Patient Care sales continue to show positive growth, keeping
with our strategy of growing the base business together with the addition of new
products such as our pulse oximetry offering and our Endosurgery sales (as
mentioned above, this was renamed from Endoscopy) improved sequentially, due to
higher international sales."
The Company experienced strong cash flow in the quarter, growing its cash
balance $21 million. CONMED is in discussions regarding an acquisition, and if
completed, will utilize its cash balances and a portion of its available line of
credit to finance the purchase.
For the six months ended June 30, 2004, CONMED reported revenues of $264.9
million, up 9.2% (6.9% excluding foreign currency) from the $242.6 million in
the first half of last year. Net income for the first half of 2004 grew to $24.3
million, or $0.81 per diluted share, compared to net income of $9.4 million, or
$0.32 per diluted share, for the six months ended June 30, 2003. Excluding
special charges and credits in the first six months of 2003, non-GAAP net income
and EPS for the first half of 2003 were $20.2 million and $0.69, respectively
(please see attached schedule for full explanation of the special charges and
credits in 2003).
Mr. Corasanti commented, "Our SG&A and R&D expense levels during the second
quarter of 2004 were approximately $1.0 million higher than we had contemplated
during this year's budget process primarily due to increased research and
development activities and legal expenses associated with the Johnson & Johnson
anti trust lawsuit we announced earlier this year. However, absent these costs,
our earnings for the quarter would have been even better. We began the anti
trust lawsuit because we believe Johnson & Johnson's marketing practices for
endosurgery products utilize monopoly bundling techniques in violation of
several federal and state statutes. In seeking to complete the process in the
most expeditious manner, we have incurred certain legal expenses in this period
which were greater than originally contemplated."
CONMED NEWS RELEASE CONTINUED: 3 of 8 July 22, 2004
"As for increased R&D activities, during the first half of 2004, in addition to
many other projects, we have been progressing with the product launch
development of two Patient Care products acquired last year. Pro2(R) is our
patented pulse oximetry device utilizing unique reflectance technology to
measure blood oxygenation. ECOM(R), is a new way to measure the cardiac output
of critically ill patients. We expect Pro2(R) to be available for sale this
fall, while ECOM(R) should be ready for market in the first half of next year."
As required of all public companies, ConMed has been involved with
Sarbanes-Oxley section 404 compliance activities for several months. During the
last half of 2004 the Company will be performing tests of its internal
accounting controls in accordance with the Act and has engaged consulting
assistance in this regard. Further, the Company's independent auditors will also
perform tests of internal accounting controls in accordance with the Act. The
Company estimates that it will incur additional costs of approximately $800,000
in the next six months for these mandated audit activities.
Mr. Corasanti concluded, "As we look ahead to the second half of 2004, we are
confident that our sales and earnings will continue to grow. Seasonally, the
upcoming third quarter tends to be our softest in terms of sales, due to the
combination of fewer elective surgeries performed and overall slowness in
European business during the summer months. Accordingly, for the 2004 third
quarter, we expect to generate revenues of approximately $125 million to $130
million, and diluted earnings per share in the range of $0.34 to $0.38,
considering slightly higher legal, Sarbanes-Oxley, and development expenses. For
the full year of 2004, we remain comfortable with our forecast for top-line
growth of 6% over 2003 levels. At this level of sales, we expect diluted
earnings per share for 2004 in the range of $1.68 to $1.72."
CONMED Profile
CONMED is a medical technology company specializing in instruments, implants,
and video equipment for arthroscopic sports medicine, and powered surgical
instruments, such as drills and saws, for orthopedic, ENT, neuro-surgery, and
other surgical specialties. The Company is also a leading developer,
manufacturer and supplier of RF electrosurgery systems used routinely to cut and
cauterize tissue in nearly all types of surgical procedures worldwide, endoscopy
products such as trocars, clip appliers, scissors, and surgical staplers. The
Company offers integrated operating room design and intensive care unit service
managers. The Company also manufactures and sells a full line of ECG electrodes
for heart monitoring and other patient care products. Headquartered in Utica,
New York, the Company's 2,600 employees distribute its products worldwide from
eleven manufacturing locations.
CONMED NEWS RELEASE CONTINUED: 4 of 8 July 22, 2004
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, including the above mentioned anticipated revenues and
earnings, to differ materially from those expressed in the forward-looking
statements herein or in previous disclosures. 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. 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: (i) the
failure of any one or more of the assumptions stated above, to prove to be
correct; (ii) the risks relating to forward-looking statements discussed in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2003; (iii) cyclical purchasing patterns from customers, end-users and dealers;
(iv) timely release of new products, and acceptance of such new products by the
market; (v) the introduction of new products by competitors and other
competitive responses; (vi) the possibility that any new acquisition or other
transaction may require the Company to reconsider its financial assumptions and
goals/targets; and/or (vii) the Company's ability to devise and execute
strategies to respond to market conditions.
CONMED NEWS RELEASE CONTINUED: 5 of 8 July 22, 2004
CONMED CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share amounts)
(unaudited)
Three months ended Six months ended
June 30, June 30,
-------- --------
2003 2004 2003 2004
---- ---- ---- ----
Net sales ............................................ $ 124,540 $ 130,912 $ 242,574 $ 264,876
Cost of sales ........................................ 59,082 62,198 115,048 125,803
Cost of sales, nonrecurring - Note A ................. 327 -- 739 --
--------- --------- --------- ---------
Gross profit ......................................... 65,131 68,714 126,787 139,073
--------- --------- --------- ---------
Selling and administrative ........................... 39,353 42,409 76,498 86,202
Research and development ............................. 4,378 4,836 8,081 9,575
Write-off of purchased in-process research
and development assets - Note B .................... -- -- 7,900 --
Other expense (income), net - Note C ................. 3,310 -- (4,348) --
--------- --------- --------- ---------
47,041 47,245 88,131 95,777
--------- --------- --------- ---------
Income from operations ............................... 18,090 21,469 38,656 43,296
Loss on early extinguishment of debt............. 7,912 -- 8,078 --
Interest expense ..................................... 5,861 2,558 11,399 5,864
--------- --------- --------- ---------
Income before income taxes ........................... 4,317 18,911 19,179 37,432
Provision for income taxes ........................... 1,554 6,619 9,748 13,101
--------- --------- --------- ---------
Net income ........................................... $ 2,763 $ 12,292 $ 9,431 $ 24,331
========= ========= ========= =========
Per share data:
Net Income
Basic ............................................ $ .10 $ .41 $ .33 $ .83
Diluted .......................................... .09 .41 .32 .81
Weighted average common shares
Basic ............................................ 28,910 29,649 28,892 29,476
Diluted .......................................... 29,212 30,313 29,195 30,151
Note A - Included in cost of sales in the three and six months ended June 30,
- ------
2003 are $.3 million and $.7 million, respectively, in acquisition-related costs
Note B - In the six months ended June 30, 2003, we wrote off $7.9 million of
- ------
purchased in-process research and development assets in connection with the
Bionx acquisition. No benefit for income taxes was recorded on the write-off as
these costs are not deductible for income tax purposes.
Note C - Included in other expense (income) in the three months ended June 30,
- ------
2003 are $2.1 million of pension settlement costs related to the restructuring
of our orthopedic sales force and $1.2 million in acquisition-related costs.
Included in other expense (income) in the six months ended June 30, 2003 are a
$9.0 million gain on the settlement of a contractual dispute, $2.1 million of
pension settlement costs related to the restructuring of our orthopedic sales
force and $2.6 million in acquisition-related costs.
CONMED NEWS RELEASE CONTINUED: 6 of 8 July 22, 2004
CONMED CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
ASSETS
(unaudited)
December June 30,
2003 2004
---- ----
Current assets:
Cash and cash equivalents......................................................... $ 5,986 $ 30,203
Accounts receivable, net.......................................................... 60,449 54,675
Inventories .................................................................... 120,945 116,094
Deferred income taxes............................................................. 10,188 9,481
Other current assets.............................................................. 3,538 3,548
---------- -----------
Total current assets.......................................................... 201,106 214,001
Property, plant and equipment, net.................................................... 97,383 96,253
Goodwill and other assets, net........................................................ 506,569 502,114
---------- -----------
Total assets.................................................................. $ 805,058 $ 812,368
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt................................................. $ 4,143 $ 3,988
Other current liabilities......................................................... 50,712 43,545
---------- -----------
Total current liabilities..................................................... 54,855 47,533
Long-term debt .................................................................... 260,448 236,399
Other long-term liabilities........................................................... 56,265 62,636
---------- -----------
Total liabilities............................................................. 371,568 346,568
---------- -----------
Shareholders' equity:
Capital accounts.................................................................. 236,948 246,786
Retained earnings................................................................. 194,473 218,804
Accumulated other comprehensive income............................................ 2,069 210
---------- -----------
Total equity.................................................................. 433,490 465,800
---------- -----------
Total liabilities and shareholders' equity................................... $ 805,058 $ 812,368
========== ===========
OTHER FINANCIAL INFORMATION
(unaudited, in thousands)
Three months ended Six months ended
------------------ ----------------
June 30, June 30,
-------- --------
2003 2004 2003 2004
---- ---- ---- ----
Depreciation....................... $ 2,534 $ 2,614 $ 4,908 $ 5,259
Amortization....................... 3,375 3,496 6,321 7,430
Capital expenditures............... 2,241 2,718 3,951 4,338
CONMED NEWS RELEASE CONTINUED: 7 of 8 July 22, 2004
CONMED CORPORATION
RECONCILIATION OF REPORTED NET INCOME TO NET INCOME
BEFORE NONRECURRING ITEMS
(In thousands except per share amounts)
(unaudited)
Three months ended
June 30,
--------
2003 2004
---- ----
Reported net income ........................................ $ 2,763 $ 12,292
-------- ---------
Acquisition-related costs included
in cost of sales ................................... 327 --
-------- ---------
Pension settlement costs ................................... 2,081 --
Other acquisition-related costs ............................ 1,229 --
-------- ---------
Total other expense (income), net ...................... 3,310 --
-------- ---------
Loss on early extinguishment of debt ....................... 7,912 --
-------- ---------
Nonrecurring expense before income taxes ................... 11,549 --
Provision (benefit) for income taxes on nonrecurring expense (4,157) --
-------- ---------
Net income before nonrecurring items ....................... $ 10,155 $ 12,292
======== =========
Per share data:
Reported net income (loss)
Basic ................................................ $ 0.10 $ 0.41
Diluted .............................................. 0.09 0.41
Net income before nonrecurring items
Basic ................................................ $ 0.35 $ 0.41
Diluted .............................................. 0.35 0.41
Management has provided the above reconciliation of net income before
nonrecurring items as an additional measure that investors can use to compare
operating performance between reporting periods. Management believes this
reconciliation provides a useful presentation of operating performance.
CONMED NEWS RELEASE CONTINUED: 8 of 8 July 22, 2004
CONMED CORPORATION
RECONCILIATION OF REPORTED NET INCOME TO NET INCOME
BEFORE NONRECURRING ITEMS
(In thousands except per share amounts)
(unaudited)
Six months ended
June 30,
--------
2003 2004
---- ----
Reported net income ........................................ $ 9,431 $ 24,331
-------- ---------
Acquisition-related costs included
in cost of sales ................................... 739 --
-------- ---------
Write-off of purchased in-process research
and development assets ................................ 7,900 --
-------- ---------
Gain on settlement of a contractual dispute,
net of legal costs ................................. (9,000) --
Pension settlement costs ................................... 2,081 --
Other acquisition-related costs ............................ 2,571 --
-------- ---------
Total other expense (income), net ...................... (4,348) --
-------- ---------
Loss on early extinguishment of debt ....................... 8,078 --
-------- ---------
Nonrecurring expense before income taxes ................... 12,369 --
Provision (benefit) for income taxes on nonrecurring expense (1,608) --
-------- ---------
Net income before nonrecurring items ....................... $ 20,192 $ 24,331
======== =========
Per share data:
Reported net income
Basic ................................................ $ 0.33 $ 0.83
Diluted .............................................. 0.32 0.81
Net income before nonrecurring items
Basic ................................................ $ 0.70 $ 0.83
Diluted .............................................. 0.69 0.81
Management has provided the above reconciliation of net income before
nonrecurring items as an additional measure that investors can use to compare
operating performance between reporting periods. Management believes this
reconciliation provides a useful presentation of operating performance.