ConMed Announces 2015 Q4 – Sales Down 2% To $191 Million

February 2, 2016
By Team Business For Home International

CONMED Corporation (Nasdaq:CNMD) today announced financial results for the fourth quarter and fiscal year ended December 31, 2015.

Fourth Quarter 2015 Highlights

Sales were $191.0 million, a decrease of 2.0% compared to the fourth quarter of 2014. On a constant currency basis, sales increased 0.5% over the prior-year period.
Gross margin expanded 30 basis points year over year to 53.6%. Adjusted gross margin expanded 80 basis points year over year to 55.1%.
Diluted earnings per share (GAAP) were $0.28, compared to $0.41 in the fourth quarter of 2014. Adjusted diluted earnings per share were $0.52 versus $0.53 in the prior-year period.
Signed definitive agreement to acquire SurgiQuest, Inc., which significantly bolsters CONMED’s Advanced Surgical portfolio. The transaction closed on January 4, 2016.

Fiscal Year 2015 Highlights

Sales were $719.2 million, a decrease of 2.8% compared to the full-year 2014. On a constant currency basis, sales increased 0.3% over the prior-year period.
Diluted earnings per share (GAAP) were $1.09, compared to $1.16 in 2014.
Adjusted diluted earnings per share were $1.68 versus $1.92 in the prior-year period.

“We are pleased with our accomplishments during fiscal 2015, particularly the early signs that our turnaround efforts are starting to gain traction. Despite continued headwinds in our export markets, we reversed the trend of top-line deterioration experienced in 2014 and exited 2015 with two consecutive quarters of constant currency revenue growth. In addition, gross margin improvement in the second half of the year and lower operating expenses as a result of cost saving initiatives are positive trends we intend to build on entering 2016,” commented Curt R. Hartman, CONMED’s President and Chief Executive Officer.

“Based on progress made in 2015, and with new commercial leadership in place, we are confident in our ability to deliver continued improvement in operational performance in 2016. Our team is committed to capitalizing on the SurgiQuest acquisition, to investing in innovation, and to further enhancing CONMED’s growth opportunities domestically and internationally.”

Sales Analysis

For the quarter ended December 31, 2015, domestic sales, which represented 51.1% of total revenue, decreased 0.9%, as growth in Orthopedics was offset by declines in General Surgery and Visualization. International sales, which represented 48.9% of total revenue, declined 3.2% compared to the fourth quarter of 2014 on a reported basis. Foreign currency exchange rates, including the effects of the FX hedging program, had a negative impact of $3.9 million on fourth quarter sales. In constant currency, international sales increased 2.1% versus the prior-year period.

For the fiscal year ended December 31, 2015, domestic sales, which represented 50.3% of total revenue, increased 0.5% and were driven by increases in capital equipment sales across all businesses. International sales, which represented 49.7% of total revenue, declined 6.0% compared to the same period a year ago on a reported basis. Foreign currency exchange rates, including the effects of the FX hedging program, had a negative impact of $22.9 million on fiscal year sales. In constant currency, international sales increased 0.1% versus the prior-year period.

Earnings Analysis

For the quarter ended December 31, 2015, reported net earnings totaled $7.9 million, compared to reported net earnings of $11.3 million a year ago. Reported diluted net earnings per share were $0.28 in the quarter, compared to $0.41 in the prior-year period. Reported net earnings include restructuring and business acquisition costs in 2015 and restructuring costs in 2014. The effect of each of these items on reported net earnings appears in the reconciliation of GAAP to non-GAAP measures below.

Excluding the impact of the items described above, adjusted net earnings of $14.5 million decreased 1.8% year over year and adjusted diluted net earnings per share of $0.52 decreased 1.9% year over year. The decline in adjusted net earnings was largely attributable to the negative impact of foreign currency and a slightly higher tax rate, partially offset by improved gross margin during the quarter.

For the fiscal year ended December 31, 2015, reported net earnings totaled $30.5 million, compared to reported net earnings of $32.2 million in the prior year. Reported diluted net earnings per share were $1.09 compared to $1.16 in the prior-year period. Excluding the impact of the special items provided in the reconciliation of GAAP to non-GAAP measures below, adjusted net earnings of $46.7 million decreased 12.5% year over year, and adjusted diluted net earnings per share of $1.68 decreased 12.5% from the prior year.

2016 Outlook

The Company forecasts 2016 sales to be in the range of $760 to $770 million compared to $719 million in 2015. This revenue forecast includes constant currency organic sales growth of 1% to 3%, sales related to the SurgiQuest acquisition of $55 to $60 million and the negative impact of foreign exchange of $21 to $23 million (based on January 25, 2016 exchange rates and existing hedges).

Beginning in 2016, the Company will exclude amortization of intangible assets from its adjusted earnings per share. Adjusted diluted cash earnings per share for 2015 would have been $1.98 if amortization of intangible assets were excluded.

Based on 2016 revenue of $760 to $770 million, the Company forecasts 2016 adjusted diluted cash earnings per share to be in the range of $1.85 to $1.95.

The adjusted diluted cash earnings per share estimates for 2016 exclude the cost of special items including acquisition costs and restructuring costs which are estimated to be in the range of $18 to $20 million, net of tax, and amortization of intangible assets estimated to be in the range of $14 to $16 million, net of tax.

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 and gastroenterology. The Company distributes its products worldwide from several manufacturing locations. CONMED has a direct selling presence in 17 countries and international sales constitute approximately 50% of the Company’s total sales. Headquartered in Utica, New York, the Company employs approximately 3,500 people.