-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TPhDLRRYYLOZvhxjeoA57FuQFlx/YFwMriG38Acvm6NvrqOQTXHJrta6vGO8ZlQZ 5I7dxcHXfmfAIxNy+tyIVQ== 0000914317-97-000232.txt : 19970515 0000914317-97-000232.hdr.sgml : 19970515 ACCESSION NUMBER: 0000914317-97-000232 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONMED CORP CENTRAL INDEX KEY: 0000816956 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 160977505 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16093 FILM NUMBER: 97604349 BUSINESS ADDRESS: STREET 1: 310 BROAD ST CITY: UTICA STATE: NY ZIP: 13501 BUSINESS PHONE: 3157978375 MAIL ADDRESS: STREET 2: 310 BROAD STREET CITY: UTICA STATE: NY ZIP: 13501 10-Q 1 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 March 31, 1997 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 May 9, 1997 is 15,013,574 shares. CONMED CORPORATION TABLE OF CONTENTS FORM 10-Q PART I FINANCIAL INFORMATION Item Number Item 1. Financial Statements - Consolidated Statements of Income - Consolidated Balance Sheets - 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 5. Other Information Item 6. Exhibits and Reports on Form 8-K Signatures Exhibit Index Item 1.
CONMED CORPORATION CONSOLIDATED STATEMENTS OF INCOME Three Months Ended March 1996 and 1997 (thousands except per share amounts) (unaudited) 1996 1997 -------- -------- Net sales .................................... $ 29,200 $ 31,472 -------- -------- Cost and expenses: Cost of sales .............................. 15,167 16,475 Facility consolidation expense (Note 7) .... -- 2,328 Selling and administrative ................. 7,556 8,336 Research and development ................... 683 751 -------- -------- Total operating expenses ............ 23,406 27,890 -------- -------- Income from operations ....................... 5,794 3,582 Interest income (expense), net ............... (682) 262 -------- -------- Income before taxes .......................... 5,112 3,844 Provision for income taxes ................... 1,840 1,384 -------- -------- Net income ................................... $ 3,272 $ 2,460 ======== ======== Weighted average common shares and equivalents 12,570 15,205 ======== ======== Earnings per share ........................... $ .26 $ .16 ======== ======== See notes to consolidated financial statements.
CONMED CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands except share amounts) (unaudited) December March 1996 1997 -------- -------- Current assets: Cash and cash equivalents .............................. $ 20,173 $ 28,175 Accounts receivable, net ............................... 26,336 26,615 Income taxes receivable ................................ 766 -- Inventories (Note 4) ................................... 23,187 21,790 Deferred income taxes .................................. 626 626 Prepaid expenses and other current assets .............. 740 1,094 -------- -------- Total current assets ............................ 71,828 78,300 Property, plant and equipment, net ....................... 26,458 26,462 Deferred income taxes .................................... 1,246 1,246 Covenant not to compete .................................. 713 603 Goodwill ................................................. 64,283 64,449 Patents, trademarks, and other assets .................... 5,555 5,420 -------- -------- Total assets .................................... $170,083 $176,480 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable ....................................... $ 2,433 $ 2,321 Income taxes payable ................................... -- 1,426 Accrued payroll and withholdings ....................... 2,037 1,798 Accrued pension ........................................ 333 627 Accrued facility consolidation (Note 7) ................ -- 2,328 Other current liabilities .............................. 951 1,045 -------- -------- Total current liabilities ....................... 5,754 9,545 Accrued pension .......................................... 276 276 Deferred compensation .................................... 1,033 1,085 Long-term leases ......................................... 2,924 2,937 Other long-term liabilities .............................. 1,461 1,461 -------- -------- 11,448 15,304 -------- -------- CONMED CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands except share amounts) (unaudited) (continued) December March 1996 1997 -------- -------- Shareholders' equity: Preferred stock, par value $.01 per share; authorized 500,000 shares; none outstanding ..... -- -- Common stock, par value $.01 per share; 40,000,000 authorized; 14,988,783 and 14,998,983 issued and outstanding in 1996 and 1997, respectively ........................ 150 150 Paid-in capital ........................................ 111,867 111,948 Retained earnings ...................................... 46,618 49,078 -------- -------- 158,635 161,176 -------- -------- Total liabilities and shareholders' equity ...... $170,083 $176,480 ======== ======== See notes to consolidated financial statements.
CONMED CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended March 1996 and 1997 (in thousands) (unaudited) 1996 1997 -------- -------- Cash flows from operating activities: Net income ....................................... $ 3,272 $ 2,460 -------- -------- Adjustments to reconcile net income to net cash provided by operations: Depreciation .............................. 800 946 Amortization .............................. 631 799 Increase (decrease) in cash flows from changes in assets and liabilities Accounts receivable .............. 1,290 (279) Inventories ...................... (445) 1,213 Prepaid expenses and other current assets ........... 117 (354) Other assets ..................... (1,244) (19) Accounts payable ................. 581 (112) Income taxes payable ............. 2,258 2,192 Income tax benefit of stock option exercises ............... 1,032 -- Accrued payroll and withholdings . 1,362 (239) Accrued pension .................. 193 294 Accrued facility consolidation ... -- 2,328 Other current liabilities ........ (1,337) (410) Deferred compensation and other long-term liabilities .... (273) 52 -------- -------- 4,965 6,411 Net cash provided by operating activities . 8,237 8,871 -------- -------- Cash flows from investing activities: Acquisition of NDM, net of cash acquired ......... (30,721) -- Acquisition of property, plant, and equipment .... (1,015) (950) -------- -------- Net cash used by investing activities ..... (31,736) (950) -------- -------- CONMED CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended March 1996 and 1997 (in thousands) (unaudited) (continued) 1996 1997 -------- -------- Cash flows from financing activities: Proceeds of long term debt ....................... 32,660 -- Proceeds from issuance of common stock ........... 65,990 81 Payments on long-term debt and leases ............ (65,141) -- -------- -------- Net cash provided by financing activities .... 33,509 81 -------- -------- Net increase in cash and cash equivalents ............................. 10,010 8,002 Cash and cash equivalents at beginning of period ... 1,539 20,173 -------- -------- Cash and cash equivalents at end of period ......... $ 11,549 $ 28,175 ======== ======== Supplemental disclosures of cash flow information: Cash paid during the quarter for: Interest ................................ $ 882 $ -- Income taxes ............................ 124 182 See notes to consolidated financial statements.
CONMED CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Consolidation The consolidated financial statements include the accounts of CONMED Corporation (the Company), and its subsidiaries. The Company is primarily engaged in the development, manufacturing and marketing of disposable medical products and related devices. All significant intercompany accounts and transactions have been eliminated in consolidation. Note 2 - Interim financial information The statements for the three months ended March 1996 and 1997 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 1997 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 months ended March 1996 and 1997 are not necessarily indicative of the results of operations to be expected for any other quarter nor for the year ending December 1997. The consolidated financial statements and notes thereto should be read in conjunction with the financial statements and notes for the years ended December 1995 and 1996 included in the Company's Annual Report to the Securities and Exchange Commission on Form 10-K. Note 3 - Earnings per share Earnings per share was computed by dividing net income by the weighted average number of shares of common stock and common stock equivalents outstanding during the quarter. Note 4 - Inventories The components of inventory are as follows (in thousands):
December March 1996 1997 ------- ------- Raw materials .......................... $ 7,079 $ 7,354 Work-in-process ........................ 7,541 6,927 Finished goods ......................... 8,567 7,509 ------- ------- Total ......................... $23,187 $21,790 ======= =======
Note 5 - Business Acquisition On February 23, 1996, the Company acquired the business and certain assets of New Dimensions in Medicine, Inc. ("NDM") for a cash purchase price of approximately $31.6 million and the assumption of $3.3 million of liabilities. The acquisition was accounted for using the purchase method of accounting. Accordingly, the results of operations of the acquired business are included in the consolidated results of the Company from the date of acquisition. Goodwill associated with the acquisition is being amortized on a straight-line basis over a 40 year period. On an unaudited pro forma basis, assuming the NDM acquisition had occurred as of the beginning of 1996, the consolidated results of the Company for the quarter ended March 1996 would have been as follows: (in thousands, except per share amounts):
Pro forma revenues $32,700 ======= Pro forma net income $ 3,576 ======= Pro forma earnings per common and common equivalent shares $ .28 =======
Note 6 - Stock Offering On March 20, 1996, the Company completed a public offering of its common stock whereby 3,000,000 and 850,000 shares of common stock were sold by the Company and certain shareholders, respectively. The common shares sold by the shareholders were received upon the exercise of a warrant and options during the first quarter of 1996. Net proceeds to the Company related to the sale of 3,000,000 shares and exercise of the warrant and options amounted to approximately $62,500,000 and $3,500,000, respectively. Of the aggregate proceeds, $65,000,000 was used to eliminate the Company's indebtedness under its credit agreements. Note 7 - Facility Consolidation During the first quarter of 1997, the Company recorded a pre-tax charge of $2,328,000 related to the closure of the Company's Dayton, Ohio manufacturing facility. Operations of the Dayton facility, which was acquired in connection with the February 1996 acquisition of NDM, will be transferred to the Company's manufacturing location in Rome, New York over the remainder of 1997. The components of the charge consist primarily of estimated costs associated with employee severance and termination, and the impairment of the carrying value of fixed assets. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Three months ended March 1997 compared to three months ended March 1996 Sales for the quarter ended March 1997 were $31,472,000, an increase of 7.8% compared to sales of $29,200,000 in the quarter ended March 1996. The increase was primarily a result of the NDM acquisition that was reflected in 1996 results only from February 23, 1996, the date of acquisition. Offsetting the incremental NDM sales volume was the effects of realignment of the Company's domestic sales force effective January 1, 1997. Prior to 1997, the Company maintained separate salesforces, each of which sold only a portion of the Company's product offerings. With the realignment, each of the Company's territory managers sell the entire produce line of the Company. While management believes that this change will ultimately enhance the Company's sales efforts, first quarter sales were negatively impacted by this change due to training issues. Further, management believes that sales for the second quarter of 1997 may also be affected as the domestic sales force completes their transition to new responsibilities. Additionally, during the second quarter of 1997, the Company announced that it would immediately discontinue certain end of quarter dealer incentives which had previously been offered. Management believes that this may have a negative timing effect on the Company's sales in the second quarter of 1997 by as much as $2.0 million. However, after the second quarter of 1997, sales should return to normal levels as dealers utilize regular ordering patterns rather than relying on end of period purchases to meet hospital needs. Cost of sales increased to $16,475,000 in the current quarter compared to the $15,167,000 in the same quarter a year ago as a result of increased sales volume. The Company's gross margin percentage was 47.7% for the first quarter of 1997 as compared to 48.1% in the first quarter of 1996. The slight deterioration in gross margin percentage reflects the effects of lower pricing primarily on ECG electrodes and the effects of the NDM product line, which generally have lower gross margin percentages than the Company's overall gross margin percentage. During the first quarter of 1997, the Company recorded a charge of $2,328,000 related to the closure of its Dayton, Ohio manufacturing facility. Operations of the Dayton facility, which was acquired in connection with the February 1996 acquisition of NDM, will be transferred to the Company's manufacturing location in Rome, New York. Selling and administrative costs increased to $8,336,000 in the current quarter as compared to $7,556,000 in the first quarter of 1996. As a percentage of sales, selling and administrative expense was 26.5% in the first quarter of 1997 as compared to 25.9% in the comparable 1996 period. This increase reflects the first quarter 1997 sales shortfall discussed above compounded by incremental first quarter 1997 expenses related to domestic sales force realignment and training. Research and development expense was $751,000 in the first quarter of 1997 as compared to $683,000 in the first quarter of 1996. The increase reflects incremental expense related to the NDM acquisition. The first quarter of 1997 had interest income of $262,000 compared to interest expense of $682,000 in the first quarter of 1996. As discussed under Liquidity and Capital Resources, maximum borrowings during the first quarter of 1996 were $65,000,000 of which $32,660,000 related to borrowings associated with the February 23, 1996 acquisition of NDM. All such indebtedness was repaid in late March 1996 with proceeds from the Company's equity offering. The provision for income taxes decreased in 1997 due to the lower income before tax. Liquidity and Capital Resources Cash flows provided or used by operating, investing and financing activities for the first three months of 1996 and 1997 are disclosed in the Consolidated Statements of Cash Flows. Net cash provided by operations was $8,871,000 for the first three months of 1997 as compared to $8,237,000 for the first three months of 1996. Operating cash flows for the first three months of 1997 were negatively impacted by lower net income as compared to the first three months of 1996. Depreciation and amortization in 1997 increased primarily due to the effects of the NDM acquisition. Operating cash flows for the first three months of 1997 were positively impacted by an accrual for facility consolidation, a reduction in inventories and an increase in income taxes payable. Adversely impacting operating cash flows for the first three months of 1997 was an increase in prepaid expenses and other current assets, and a reduction in other current liabilities. Net cash used by investing activities was $950,000 in the first three months of 1997 compared to $31,736,000 in the first three months of 1996. During the first three months of 1997, additions to property, plant and equipment amounted to $950,000. Cash used for the 1996 acquisition of NDM approximated $30.7 million. Additions to property, plant and equipment for the first three months of 1996 amounted to $1,015,000. Cash flows from financing activities were $81,000 for the first three months of 1997 as compared to $33,509,000 for the first three months of 1996. In connection with the NDM acquisition on February 23, 1996, the Company borrowed $32,660,000 bringing aggregate borrowings under its credit facility to $65,000,000. On March 20, 1996, the Company completed an equity offering of common stock and used $65,000,000 of the proceeds to eliminate the indebtedness of the Company. Management believes that cash generated from operations, its current cash resources and funds available under its banking agreement will provide sufficient liquidity to ensure continued working capital for operations and funding of capital expenditures in the foreseeable future. The Company's credit facility consists of a $60,000,000 secured revolving line of credit which expires on March 2001. This facility carries an interest rate of 0.5%-1.25% over LIBOR depending on defined cash flow performance ratios. There were no borrowings outstanding under this facility during the quarter ended March 1997. Item 5. Other Information On May 6, 1997, the Company announced that its Board of Directors authorized the Company to repurchase $30,000,000 of its common stock. The repurchase program calls for shares to be purchased in the open market or in private transactions from time to time. The Company may suspend or discontinue the program at any time. The timing of the purchases will depend upon market conditions, the market price of the common stock and management's assessment of the Company's liquidity and cash flow needs. The Company will finance the repurchases from cash-on-hand and amounts available under the Company's bank credit facility. Item 6. Exhibits and Reports on Form 8-K List of Exhibits Exhibit No. Description of Instrument ----------- ------------------------- 11 Computation of weighted average number of shares of common stock Reports on Form 8-K None 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: May 9, 1997 /s/ Robert D. Shallish, Jr. --------------------------- Robert D. Shallish, Jr. Vice President - Finance (Principal Financial Officer) Exhibit Index Exhibit 11 - Computations of weighted average number of shares of common stock EX-11 2 EXHIBIT 11 Computation of weighted average number of shares of common stock
For the three months ended March -------------------------------- (in thousands) 1996 1997 ------ ------ Shares outstanding at beginning of period............... 11,000 14,989 Weighted average shares issued ......................... 396 8 Incremental shares of common stock outstanding giving effect to stock options and warrant .................................. 1,174 208 ------ ------ 12,570 15,205 ====== ======
EX-27 3
5 3-MOS DEC-31-1997 MAR-31-1997 28,175 0 26,861 (525) 21,790 78,300 44,801 (18,340) 176,480 9,545 0 0 0 150 161,026 176,480 31,472 31,472 16,475 16,475 11,415 0 (262) 3,844 1,384 2,460 0 0 0 2,460 .16 0
-----END PRIVACY-ENHANCED MESSAGE-----