SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1999 Commission File Number 0-16093
CONMED CORPORATION
(Exact name of the 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)
(315) 797-8375
(Registrant's telephone number, including area code)
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 [ ]
The number of shares outstanding of registrant's common stock, as of
August 4, 1999 is 15,294,798 shares.
CONMED CORPORATION
TABLE OF CONTENTS
FORM 10-Q
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
- Consolidated Statements of Income
- Consolidated Balance Sheets
- Consolidated Statements of Shareholders'
Equity
- Consolidated Statements of Cash Flows
- Notes to Consolidated Financial
Statements
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Signatures
Exhibit Index
CONMED CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share amounts)
(unaudited)
For three months ended For six months ended
------------------------ ------------------------
June June June June
1998 1999 1998 1999
--------- --------- --------- ---------
Net sales ...................... $ 80,513 $ 90,483 $ 160,755 $ 181,352
--------- --------- --------- ---------
Cost and expenses:
Cost of sales ................ 40,874 42,825 85,264 86,367
Selling and administrative ... 21,995 26,550 43,774 53,116
Research and development ..... 2,874 2,842 5,601 5,798
--------- --------- --------- ---------
Total operating expenses ... 65,743 72,217 134,639 145,281
--------- --------- --------- ---------
Income from operations ......... 14,770 18,266 26,116 36,071
Interest expense, net .......... (7,666) (7,814) (15,181) (15,740)
--------- --------- --------- ---------
Income before income taxes
and extraordinary item ....... 7,104 10,452 10,935 20,331
Provision for income taxes ..... (2,557) (3,762) (3,936) (7,318)
--------- --------- --------- ---------
Income before extraordinary
item ......................... 4,547 6,690 6,999 13,013
Extraordinary item, net of
income taxes (Note 4) ........ -- -- (1,569) --
--------- --------- --------- ---------
Net income ..................... $ 4,547 $ 6,690 $ 5,430 $ 13,013
========= ========= ========= =========
CONMED CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share amounts)
(unaudited)
For three months ended For six months ended
------------------------ ------------------------
June June June June
1998 1999 1998 1999
--------- --------- --------- ---------
Per share data:
Income before extraordinary item
Basic ................. $ .30 $ .44 $ .46 $ .86
Diluted ............... .30 .43 .46 .84
Extraordinary item - (Note 4)
Basic ................. $ -- $ -- $ (.10) $ --
Diluted ............... -- -- (.10) --
Net Income
Basic ................. $ .30 $ .44 $ .36 $ .86
Diluted ............... .30 .43 .36 .84
Weighted average common shares
Basic ................. 15,057 15,235 15,047 15,204
Diluted ............... 15,326 15,612 15,286 15,575
See notes to consolidated financial statements.
CONMED CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands except share amounts)
(unaudited)
December June
1998 1999
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents ...................... $ 5,906 $ 2,519
Accounts receivable, net ....................... 66,819 70,515
Income taxes receivable ........................ 1,441 --
Inventories (Note 3) ........................... 78,058 87,920
Deferred income taxes .......................... 2,776 2,776
Prepaid expenses and other current assets ...... 4,620 4,178
--------- ---------
Total current assets .................... 159,620 167,908
Property, plant and equipment, net ............... 59,044 56,479
Deferred income taxes ............................ 3,900 3,900
Goodwill, net .................................... 194,690 192,443
Patents, trademarks, and other assets, net ....... 211,530 207,700
--------- ---------
Total assets ............................... $ 628,784 $ 628,430
========= =========
CONMED CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands except share amounts)
(unaudited)
December June
1998 1999
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt .............. $ 22,995 $ 27,785
Accrued interest ............................... 6,069 4,458
Accounts payable ............................... 19,594 18,125
Income taxes payable ........................... -- 7,526
Accrued payroll and withholdings ............... 9,665 6,519
Other current liabilities ...................... 7,873 5,517
--------- ---------
Total current liabilities .................. 66,196 69,930
Long-term debt ................................... 361,877 341,478
Other long-term liabilities ...................... 18,543 20,294
--------- ---------
Total liabilities ....................... 446,616 431,702
--------- ---------
Shareholders' equity:
Preferred stock, par value $.01 per share;
authorized 500,000 shares; none outstanding -- --
Common stock, par value $.01 per share;
100,000,000 authorized; 15,182,811 and
15,300,091 issued and outstanding,in
1998 and 1999, respectively ................ 152 153
Paid-in capital ................................ 125,039 126,605
Retained earnings .............................. 57,361 70,374
Cumulative translation adjustments ............. 35 15
Less 25,000 shares of common stock in treasury,
at cost ...................................... (419) (419)
--------- ---------
Total equity ............................ 182,168 196,728
--------- ---------
Total liabilities and shareholders' equity . $ 628,784 $ 628,430
========= =========
See notes to consolidated financial statements.
CONMED CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Six Months Ended June 1998 and 1999
(in thousands)
(unaudited)
1998 1999
--------- ---------
Common stock
Balance at beginning of period ................. $ 151 $ 152
Exercise of stock options ...................... -- 1
--------- ---------
Balance at end of period ....................... 151 153
--------- ---------
Paid-in capital
Balance at beginning of period ................. 123,451 125,039
Exercise of stock options ...................... 416 1,566
--------- ---------
Balance at end of period ....................... 123,867 126,605
--------- ---------
Retained earnings
Balance at beginning of period ................. 39,553 57,361
Net income (A) ................................. 5,430 13,013
--------- ---------
Balance at end of period ....................... 44,983 70,374
--------- ---------
Accumulated other comprehensive income
Balance at beginning of period
Cumulative foreign currency translation
adjustments ............................... -- 35
Other comprehensive income
Foreign currency translation adjustments(B) .. -- (20)
--------- ---------
Balance at end of period
Cumulative foreign currency translation
adjustments ............................... -- 15
--------- ---------
Treasury stock at beginning
and end of period ............................ (419) (419)
--------- ---------
Total shareholders' equity ....................... $ 168,582 $ 196,728
========= =========
Total comprehensive income (A + B) ............... $ 5,430 $ 12,993
========= =========
See notes to consolidated financial statements.
CONMED CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30 1998 and 1999
(in thousands)
(unaudited)
1998 1999
---- ----
Cash flows from operating activities:
Net income ..................................... $ 5,430 $ 13,013
--------- ---------
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation ............................ 3,944 4,330
Amortization ............................ 7,849 8,095
Extraordinary item, net of
income taxes (Note 4) ................. 1,569 --
Increase (decrease) in cash flows
from changes in assets and liabilities:
Accounts receivable ............ (1,867) (3,716)
Inventories .................... (8,192) (11,039)
Prepaid expenses and
other current assets ......... (1,387) 442
Accounts payable ............... 8,703 (1,469)
Income taxes receivable/payable (1,081) 8,967
Accrued interest ............... 4,832 (1,611)
Accrued payroll and withholdings 1,438 (3,146)
Other current liabilities ...... (2,305) (668)
Other assets/liabilities, net .. (439) 1,249
--------- ---------
13,064 1,434
Net cash provided by operations .............. 18,494 14,447
--------- ---------
Cash flows from investing activities:
Payments related to acquisition of Linvatec .... (6,996) --
Acquisition of property, plant,
and equipment ............................. (6,663) (3,792)
--------- ---------
Net cash used by investing activities ........ (13,659) (3,792)
--------- ---------
Cash flows from financing activities:
Proceeds of long term debt ..................... 130,000 900
Repayments under revolving
credit facility .............................. (10,000) (5,000)
Proceeds from issuance of common stock ......... 416 1,567
Payments related to issuance of long-term debt . (4,635) --
Payments on long-term debt ..................... (129,614) (11,509)
--------- ---------
Net cash used by financing
activities ............................. (13,833) (14,042)
--------- ---------
Net decrease in cash
and cash equivalents .......................... (8,998) (3,387)
Cash and cash equivalents at beginning of period . 13,452 5,906
--------- ---------
Cash and cash equivalents at end of period ....... $ 4,454 $ 2,519
========= =========
See notes to consolidated financial statements.
CONMED CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Organization and Operations
The consolidated financial statements include the accounts of CONMED
Corporation (the "Company"), and its subsidiaries. All intercompany accounts and
transactions have been eliminated in consolidation. The Company is a leading
developer, manufacturer and supplier of a range of medical instruments and
systems used in surgical and other medical procedures. The Company's business is
organized, managed and internally reported as a single segment. The Company
believes its product offerings, which include arthroscopic surgery devices,
powered surgical instruments, electrosurgical systems, electrocardiogram
electrodes and accessories, surgical suction instruments, intravenous therapy
accessories and wound care products, have similar economic, operating and other
related characteristics. The Company's products are used in a variety of
clinical settings, such as operating rooms, surgery centers, physicians' offices
and critical care areas of hospitals.
Note 2 - Interim financial information
The financial statements for the three and six months ended June 1998
and 1999 are unaudited; in the opinion of the Company such unaudited statements
include all adjustments (which comprise only normal recurring accruals)
necessary for a fair presentation of the results for such periods. The
consolidated financial statements for the year ending December 1999 are subject
to adjustment at the end of the year when they will be audited by independent
accountants. The results of operations for the three and six months ended June
1999 are not necessarily indicative of the results of operations to be expected
for any other quarter nor for the year ending December 1999. The consolidated
financial statements and notes thereto should be read in conjunction with the
financial statements and notes for the year ended December 1998 included in the
Company's Annual Report to the Securities and Exchange Commission on Form 10-K.
Certain 1998 amounts previously reported have been reclassified to conform with
the current year presentation.
Note 3 - Inventories
The components of inventory are as follows (in thousands):
December June
1998 1999
------- -------
Raw materials......... $35,204 $35,963
Work-in-process....... 7,429 11,472
Finished goods........ 35,425 40,485
------- -------
Total........ $78,058 $87,920
======= =======
Note 4 - Subordinated Note Offering
The Company completed a subordinated note offering (the "Notes") in the
aggregate principal amount of $130,000,000 in March 1998. Proceeds from the
offering amounting to $126,100,000 were used to reduce the Company's term loans
under its credit facility. Deferred financing fees related to the portion of the
credit facility repaid amounting to $2,451,000 ($1,569,000 net of income taxes)
were written-off as an extraordinary charge.
Note 5 - Subsidiary Guarantees
The Company's credit facility and Notes are guaranteed (the "Subsidiary
Guarantees") by each of the Company's subsidiaries (the "Subsidiary
Guarantors"). The Subsidiary Guarantees provide that each Subsidiary Guarantor
will fully and unconditionally guarantee the Company's obligations on a joint
and several basis. Each Subsidiary Guarantor is wholly-owned by the Company.
Separate financial statements and other disclosures concerning the
Subsidiary Guarantors are not presented because management has determined such
financial statements and other disclosures are not material to investors. The
combined condensed financial information of the Company's Subsidiary Guarantors
is as follows (in thousands):
December June
-------- ----
1998 1999
---- ----
Current assets................................... $ 96,434 $106,411
Non-current assets............................... 366,299 356,652
Current liabilities.............................. 30,367 23,852
Non-current liabilities.......................... 363,160 347,347
For the Six
Months Ended June
-----------------
1998 1999
---- ----
Revenues......................................... $113,579 $139,222
Operating income................................. 18,266 30,205
Net income....................................... 1,849 9,229
Note 6 - Subsequent Events
On June 29, 1999, the Company entered into an agreement to purchase
certain assets of the Powered Surgical Instrument business of Minnesota Mining
and Manufacturing Company ("3M")). The Company and 3M have also agreed to a
series of transition-related matters that will facilitate the transfer of the
business. The acquisition was completed on August 11, 1999 for a purchase price
of $39,000,000, before certain adjustments, which was funded through borrowings
under the Company's amended credit facility (see discussion under Liquidity and
Capital Resources section of Management's Discussion and Analysis of Financial
Condition and Results of Operations).
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion includes certain forward-looking statements. Such
forward-looking statements are subject to a number of factors, including
material risks, uncertainties and contingencies, which could cause actual
results to differ materially from the forward-looking statements. Such factors
include, among others, the following: general economic and business conditions;
changes in customer preferences; competition; changes in technology; the
integration of any acquisitions, changes in business strategy; the indebtedness
of the Company; the identification and remediation of Year 2000 issues; quality
of management, business abilities and judgment of the Company's personnel; and
the availability, terms and deployment of capital. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date hereof. The Company does not undertake any obligation to publicly
release any revisions to these forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Three months ended June 1999 compared to three months ended June 1998
Sales for the quarter ended June 1999 were $90,483,000, an increase of
12.4% compared to sales of $80,513,000 in the quarter ended June 1998.
Approximately 5% of the sales increase reflects the pricing impact of changes in
distribution from the second quarter of 1999 as compared to 1998. In connection
with the December 31, 1997 acquisition of Linvatec Corporation from
Bristol-Myers Squibb ("BMS"), the Company entered into fixed price distribution
agreements with Zimmer, Inc., a wholly-owned subsidiary of BMS, to distribute
certain of the Company's orthopaedic products in selected geographic markets. In
1999, most of the products formerly distributed by Zimmer were sold and
distributed directly by the Company, resulting in improved pricing for the
affected products. The remainder of the increase is a result of increased sales
volumes, primarily of orthopaedic products, due to the acquisition of the fluid
management business from 3M in November 1998 as well as increased demand for
existing product lines.
Cost of sales increased to $42,825,000 in the current quarter compared
to the $40,874,000 in the same quarter a year ago. The Company's gross margin
percentage for the second quarter of 1998 was 49.2% compared to 52.7% for the
second quarter of 1999. The increase in gross margin percentage is primarily
attributable to higher sales volumes of orthopaedic products as well as improved
pricing resulting from the elimination of most of the fixed price distribution
agreements with Zimmer discussed previously.
Selling and administrative costs increased to $26,550,000 in the
current quarter as compared to $21,995,000 in the second quarter of 1998. As a
percentage of sales, selling and administrative expense was 29.3% in the second
quarter of 1999 as compared to 27.3% in the comparable 1998 period. The increase
was primarily a result of costs associated with the direct selling and
distribution of products formerly distributed through Zimmer.
Research and development expense was $2,842,000 in the second quarter
of 1999 as compared to $2,874,000 in the second quarter of 1998. As a percentage
of sales, research and development expense was 3.1% in the second quarter of
1999 as compared to 3.6% in the comparable 1998 period. The amount of research
and development expense incurred in the second quarter of 1999 is consistent
with the comparable 1998 quarter representing the Company's ongoing efforts in
this area; the decrease in second quarter 1999 expense as a percentage of sales
is primarily a result of higher sales in the second quarter of 1999 as compared
to the second quarter 1998.
Interest expense for the second quarter of 1999 was $7,814,000 compared
to $7,666,000 in the second quarter of 1998. The increase in interest expense is
a result of higher borrowings under the Company's revolving credit facility
during the second quarter of 1999 as compared to the second quarter of 1998,
partially offset by lower principal balances on the Company's term debt. The
higher borrowings were primarily a result of the Company's $17,500,000
acquisition of a fluid management product line from 3M during the fourth quarter
of 1998.
Six months ended June 1999 compared to six months ended June 1998
Sales for the six months ended June 1999 were $181,352,000, an increase
of 12.8% compared to sales of $160,755,000 in the six months ended June 1998.
Approximately 5% of the increase reflects the pricing impact of changes in
distribution from the first six months of 1999 as compared to 1998. In
connection with the December 31, 1997 acquisition of Linvatec Corporation from
Bristol-Meyers Squibb ("BMS"), the Company entered into fixed price distribution
agreements with Zimmer, Inc., a wholly-owned subsidiary of BMS, to distribute
certain of the Company's orthopaedic products in selected geographic markets. In
1999, most of the products formerly distributed by Zimmer were sold and
distributed directly by the Company, resulting in improved pricing for the
affected products. The remainder of the increase is a result of increased sales
volumes, primarily of orthopaedic products, due to the acquisition of the fluid
management product line from 3M in November 1998 as well as increased demand for
existing product lines.
Cost of sales increased to $86,367,000 in the six months ended June
1999 compared to $85,264,000 in the six months ended June 1998. In connection
with purchase accounting for the December 31, 1997 acquisition of Linvatec
Corporation, the Company increased the acquired value of inventory by $3,000,000
over its production cost. This inventory was sold during the quarter ended March
1998 and, accordingly, this non-recurring adjustment served to increase cost of
sales during the first quarter of 1998 by $3,000,000. Excluding the impact of
this adjustment, cost of sales increased from $82,271,000 in the first six
months of 1998 to $86,367,000 in the first six months of 1999, as a result of
increased sales volumes. Excluding the nonrecurring adjustment, the Company's
gross margin percentage for the first six months of 1998 was 48.8% compared to
52.4% for the first six months of 1999. The increase in gross margin percentage
is primarily attributable to higher sales volumes as well as improved pricing
resulting from the elimination of most of the fixed price product distribution
agreements with Zimmer discussed previously.
Selling and administrative costs increased to $53,116,000 in the six
months ended June 1999 as compared to $43,774,000 in the six months ended June
1998. As a percentage of sales, selling and administrative expense was 29.2% in
the first half of 1999 as compared to 27.2% in the comparable 1998 period. The
increase was primarily a result of costs associated with the direct selling and
distribution of products formerly distributed through Zimmer and the launch of
several new products.
Research and development expense was $5,798,000 in the first half of
1999 as compared to $5,601,000 in the first half of 1998. As a percentage of
sales, research and development expense was 3.2% in the first half of 1999 as
compared to 3.5% in the comparable 1998 period. The amount of research and
development expense incurred in the six months ended June 1999 is consistent
with the comparable 1998 period representing the Company's ongoing efforts in
this area; the decrease in six months ended June 1999 expense as a percentage of
sales is primarily a result of higher sales in the six months ended June 1999 as
compared to the six months ended June 1998.
Interest expense for the six months ended June 1999 was $15,740,000
compared to $15,181,000 in the first six months of 1998. The increase in
interest expense is a result of higher borrowings under the Company's revolving
credit facility during the first half of 1999 as compared to the first half of
1998, partially offset by lower principal balances on the Company's term debt.
The higher borrowings were primarily a result of the Company's $17,500,000
acquisition of an arthroscopy product line from 3M during the fourth quarter of
1998.
As discussed under Liquidity and Capital Resources, during the first
quarter of 1998, the Company completed an offering of subordinated notes (the
"Notes") and used the net proceeds to repay a portion of the Company's term
loans under its credit facility. Deferred financing fees relating to the portion
of the credit facility repaid amounting to $2,451,000 ($1,569,000 net of income
taxes) were written-off as an extraordinary charge. There was no such write-off
during the first six months of 1999.
Liquidity and Capital Resources
The Company's net working capital position increased $4,554,000 or 5%
to $97,978,000 at June 1999 compared to $93,424,000 at December 1998. Net cash
provided by operations was $14,447,000 for the first six months of 1999 compared
to $18,494,000 for the first six months of 1998. Operating cash flow in the
first half of 1999 was positively impacted by higher net income and increases in
depreciation, amortization and accrued income taxes payable compared to the
first half of 1998. Negatively impacting operating cash flow in the first half
of 1999 were increases in accounts receivable and inventory and decreases in
accrued interest and accrued payroll compared to the first half of 1998.
Net cash used by investing activities for the first six months of 1998
included $6,996,000 of transaction costs related to the Linvatec acquisition.
There were no such costs incurred during the first six months of 1999. Capital
expenditures for the first six months of 1999 and 1998 amounted to $3,792,000
and $6,663,000, respectively.
Financing activities during the first six months of 1999 consisted
primarily of scheduled payments of $11,509,000 on the Company's term loans;
additionally, $5,000,000 was repaid on the Company's revolving credit facility.
Financing activities during the first six months of 1998 involved the completion
of the Notes offering in the aggregate principal amount of $130,000,000. Net
proceeds from the offering amounting to $126,100,000 were used to repay a
portion of the Company's term loans under its credit facility. Additionally,
scheduled payments of $1,757,000 on the Company's term loans and $10,000,000 on
the Company's revolving credit facility were repaid during the first six months
of 1998.
The Company's term loans under its credit facility at June 30, 1999
aggregate $205,375,000 and are repayable quarterly over remaining terms
approximating four and six years. The Company's credit facility also includes a
$100,000,000 revolving credit facility which expires December 2002, of which
$67,000,000 was available on June 30, 1999. The borrowings under the credit
facility carry interest rates based on a spread over LIBOR or an alternative
base interest rate. The covenants of the credit facility provide for increase
and decrease to this interest rate spread based on the operating results of the
Company. The weighted average interest rates at June 30, 1999 under the term
loans and the revolving credit facility were 7.04% and 6.81%, respectively.
Additionally, the Company is obligated to pay a fee of .375% per annum on the
unused portion of the revolving credit facility.
The Company does not use derivative financial instruments for trading
or other speculative purposes. Interest rate swaps, a form of derivative, are
used to manage interest rate risk. Currently, the Company has entered into two
interest rate swaps expiring in June 2001 which convert $100,000,000 of floating
rate debt under the Company's credit facility into fixed rate debt at rates
ranging from 7.18% to 8.25%. Provisions in one of the interest rate swaps
cancels such agreement when LIBOR exceeds 7.35%.
The credit facility is collateralized by all the Company's personal
property. The credit facility contains covenants and restrictions which, among
other things, require maintenance of certain working capital levels and
financial ratios, prohibit dividend payments and restrict the incurrence of
certain indebtedness and other activities, including acquisitions and
dispositions. The Company is also required to make mandatory prepayments from
net cash proceeds from any issue of equity and asset sales and also from any
excess cash flow, as defined in the credit agreement.
The Notes are in aggregate principal amount of $130,000,000 and have a
maturity date of March 15, 2008. The Notes bear interest at 9.0% per annum which
is payable semi-annually. The indenture governing the Notes has certain
restrictive covenants and provides for, among other things, mandatory and
optional redemptions by the Company.
The credit facility and Notes are guaranteed by each of the Company's
subsidiaries. The Subsidiary Guarantees provide that each Subsidiary Guarantor
will fully and unconditionally guarantee the Company's obligations on a joint
and several basis. Each Subsidiary Guarantor is wholly-owned by the Company.
Under the credit facility and Note indenture, the Company's subsidiaries are
subject to the same covenants and restrictions that apply to the Company (except
that the Subsidiary Guarantors are permitted to make dividend payments and
distributions, including cash dividend payments, to the Company or another
Subsidiary Guarantor).
On June 29, 1999, the Company entered into an agreement to purchase
certain assets of the Powered Surgical Instrument business of 3M. The Company
and 3M have also agreed to a series of transition-related matters that will
facilitate the transfer of the business. The acquisition was completed on August
11, 1999 for a purchase price of $39,000,000, before certain adjustments. The
Company's existing credit facility was amended to provide for an additional
$40,000,000 loan commitment, due June 30, 2005, which was used to fund the
purchase price and related fees and expenses. The $40,000,000 loan commitment
carries an interest rate based on a 2.5% spread over LIBOR.
Management believes that cash generated from operations, its current
cash resources and funds available under its credit facility will provide
sufficient liquidity to ensure continued working capital for operations, debt
service and funding of capital expenditures in the foreseeable future.
Year 2000
The Company and its subsidiaries use information technology ("IT") and
non-IT systems that contain embedded technology throughout their businesses.
Third parties with which the Company has material relationships also use such
systems. After December 31, 1999, these systems will face a potentially serious
problem if they are not able to recognize and correctly process dates beyond
December 31, 1999. All of the Company's products, operations and information
technology systems have been inventoried and those that were not Year 2000 ready
have been identified, upgraded and tested to ensure they function properly after
December 31, 1999. The Company is also in the process of contacting its vendors
and customers to ascertain their preparation for the Year 2000 issue and is in
the process of identifying critical business partners for which the need for
additional due diligence will be assessed. The costs of the Company's Year 2000
assessment and remediation program have not been and are not expected to be
material. Although the Company does not expect the Year 2000 issue to have a
material effect on its results of operations, liquidity or financial condition,
failure of critical IT and non-IT systems could have a material adverse effect
on the Company's results of operations, liquidity or financial condition.
Further, the Company cannot eliminate the risk that revenue will be lost or
costs will be incurred as a result of the failure by third parties to properly
remediate their Year 2000 issues.
Foreign Operations
The Company's foreign operations are subject to special risks inherent
in doing business outside the United States, including governmental instability,
war and other international conflicts, civil and labor disturbances,
requirements of local ownership, partial or total expropriation,
nationalization, currency devaluation, foreign exchange controls and foreign
laws and policies, each of which may limit the movement of assets or funds or
result in the deprivation of contract rights or the taking of property without
fair compensation.
An additional risk with respect to the Company's European operations
relates to the conversion of certain European countries to a common currency
which began January 1, 1999 (the "Euro Conversion"). The Company has formed an
internal task force to evaluate the risks and implement any required actions
with respect to the Euro Conversion. Based on the analysis of this task force,
the Company does not believe that the costs to the Company to convert to a
common currency will be material. Additionally the Company does not believe that
there will be any material impact from a competitive point of view with respect
to the impact of the Euro Conversion on the sales of products.
Item 6. Exhibits and Reports on Form 8-K
List of Exhibits
Exhibit No. Description of Instrument
----------- -------------------------
10.1 The Asset Purchase Agreement, dated as of June 29, 1999
by and between Linvatec Corporation and Minnesota Mining
and Manufacturing Company, as amended by an amendment
dated as of August 11, 1999.
10.2 Amended and Restated Credit Agreement, dated as of
August 11, 1999, among CONMED Corporation and the
several banks and other financial institutions or
entities from time to time parties thereto.
10.3 Acknowledgement and Consent, dated as of August 11,
1999, among CONMED Corporation and each of its
subsidiaries.
11 Computation of weighted average number of shares of
common stock
27 Financial Data Schedule
Reports on Form 8-K
(1) On July 1, 1999, the Company filed a report on Form 8-K
which reported a press release that on June 29, 1999,
Linvatec Corporation, ("Linvatec") a wholly-owned
subsidiary of the Registrant, and Minnesota Mining and
Manufacturing Company ("3M") entered into an Asset
Purchase Agreement dated as of June 29, 1999, pursuant
to which Linvatec agreed to purchase for cash certain
assets relating to 3M's business of manufacturing and
selling certain surgical powered instrument products.
SIGNATURES
Pursuant to the requirements 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
(Registrant)
Date: August 13, 1999
/s/ Robert D. Shallish, Jr.
-----------------------------
Robert D. Shallish, Jr.
Vice President - Finance
(Principal Financial Officer)
Exhibit Index
Exhibit
10.1 The Asset Purchase Agreement, dated as of June 29, 1999
by and between Linvatec Corporation and Minnesota Mining
and Manufacturing Company, as amended by an amendment
dated as of August 11, 1999.
10.2 Amended and Restated Credit Agreement, dated as of
August 11, 1999, among CONMED Corporation and the
several banks and other financial institutions or
entities from time to time parties thereto.
10.3 Acknowledgement and Consent, dated as of August 11,
1999, among CONMED Corporation and each of its
subsidiaries.
11 Computations of weighted average number of shares of
common stock
27 Financial Data Schedule