CONMED Sales Fell 3 Percent in 2015

CONMED Corporation executives may have experienced a bit of déjà vu while discussing the firm’s latest earnings report last week.

For the second consecutive year, CONMED posted losses in both the fourth quarter and previous 12-month period. During the three-month period ending Dec. 31, 2015, sales fell 2 percent to $191 million (but revenue climbed 0.5 percent on a constant currency basis). Gross margin during that time swelled 30 basis points to 53.6 percent and adjusted gross margin increased 80 points to 55.1 percent. Diluted earnings per share (GAAP) plummeted 31.7.7 percent to 28 cents, though adjusted diluted earings per share were flat at 52 cents.

Full-year sales practically mirrored Q4 revenue, falling 2.8 percent to $719.2 million, but rising 0.3 percent on a constant currency basis. Diluted EPS slipped 6 percent to $1.09 while adjusted diluted EPS fell 12.5 percent to $1.68, according to the company.

“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,” said Curt R. Hartman, CONMED’s president/CEO. “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.”

For the quarter ended Dec. 31, 2015, domestic sales, which represented 51.1 percent of total revenue, decreased 0.9 percent, as growth in orthopedics was offset by declines in general surgery and visualization. International sales, which represented 48.9 percent of total revenue, declined 3.2 percent 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 percent versus the prior-year period.

For the 2015 fiscal year, domestic sales, which represented 50.3 percent of total revenue, increased 0.5 percent and were driven by increases in capital equipment sales across all businesses. International sales, which represented 49.7 percent of total revenue, declined 6 percent 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 percent versus the prior-year period.

For the quarter ended Dec. 31, 2015, reported net earnings totaled $7.9 million, compared to reported net earnings of $11.3 million in Q4 2014. Reported diluted net EPS 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 restructuring and business acquisition costs, adjusted net earnings of $14.5 million fell 1.8 percent year over year and adjusted diluted net earnings per share of $0.52 slid 1.9 percent. Executives attributed the decline in adjusted net earnings to the negative impact of foreign currency and a slightly higher tax rate, partially offset by improved gross margin during the quarter.

Based on its 2016 revenue guidance, the company expects 2016 adjusted diluted cash EPS to range between $1.85 and $1.95.

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 various specialties including orthopedics, general surgery, gynecology, neurosurgery and gastroenterology. Headquartered in Utica, N.Y., the firm’s 3,500 employees distribute its products worldwide from several manufacturing locations. CONMED has a direct selling presence in 16 countries outside the United States and international sales constitute more than 50 percent of its total sales.