CONMED Corporation
(
CNMD
), a medical technologies and surgical devices company, reported
second quarter 2012 adjusted earnings (excluding one-time expenses)
of 43 cents per share missing the Zacks Consensus Estimate by a
penny. The company, however, surpassed the year-ago earnings of 35
cents a share, up 23%.
Profit in the reported quarter was $10.3 million (or 36 cents
per share) compared with a profit of $8.9 million (or 30 cents per
share) in the year-ago quarter, up 15.7%. Profit was driven by
higher sales and margin expansion.
Revenue
Revenues rose 3.5% (down 0.4% organic) year over year to $189.7
million trailing the Zacks Consensus Estimate of $193 million.
Growth was backed by solid sales across Arthroscopy business alone,
while all other businesses partially dampened revenue growth. In
addition, single-use products sales (81.1% of total sales) grew
7.5% but capital offerings (18.9% of total sales) dropped 10.7% in
the quarter.
On a geographic basis, revenues in the international markets
were $96.4 million. Foreign exchange rates had no impact on
revenues due to the company's hedging policy, despite considerable
volatility in exchange rates recently.
Revenues from the Musculoskeletal Transplant Foundation's
("MTF") association were $7.2 million in the second quarter of
2012
Segment Analysis
Revenues from the core Arthroscopy segment jumped 14.7% year
over year (up 15% in constant currency) to $81 million. Revenues
from Endoscopic Technologies division grew 6.4% to $13.3
million.
However, revenues from Electrosurgery and Patient Care dropped
6.5% and 6%, to $24.4 million and $15.6 million, respectively.
Moreover, sales from Powered Surgical Instruments and Endosurgery
dipped 2.9% and 4.7% year over year to $37.2 million and 18.2
million, respectively.
Margins
Gross margin increased to 52.6% in second quarter 2012 from
49.9% in the year-ago quarter. Adjusted operating margin increased
90 basis points to 10.6%.
Selling and administrative charges were higher at 38.9% of sales
compared with 37% in the year-ago quarter. Research and Development
expenses, as a percentage of sales, were 3.8%, roughly flat year
over year.
Balance Sheet
CONMED exited second quarter 2012 with cash and cash equivalents
of $16.2 million, down 33.2% year over year. Long-term debt
(inclusive of current portion) decreased 3.8% year over year to
$168 million. Cash provided by operating activities increased year
over year and stood at $25.6 million in the quarter.
Guidance
The company expects adjusted earnings to be in a range of 38
cents to 42 cents for the third quarter of 2012. Revenues are
forecast to remain in a band of $180 million and $185 million for
the third quarter.
Conmed revised its sales guidance for 2012 based on the
company's soft capital equipment sales due to prevailing global
economic headwinds. Revenues are forecast to remain between $765
million and $775 million (earlier $775 million to $785 million) for
2012. The company, however, reiterated its adjusted earnings
forecast to be in the range of $1.75 to $1.85 per share for
2012.
Adjusted earnings forecast for the third quarter and full year
2012 exclude restructuring costs associated with the transfer of
manufacturing activities to the company's manufacturing plants in
Chihuahua, Mexico and Largo, Florida, from Santa Barbara,
California. The company also announced the merging of the Tampere,
Finland facility into the U.S. facilities.
Conmed is a medical products maker, specializing in surgical
instruments and devices. A large percentage of the company's
products are designed for minimally invasive surgery, a trend that
is extremely popular these days. We maintain our 'Neutral'
recommendation on Conmed. The company retains a short-term Zacks #2
Rank (Buy).
However, we remain concerned about poor capital product sales
due to the ongoing dismal macroeconomic conditions. Moreover,
Conmed operates in a highly-competitive orthopedic surgery market
against much larger, more technically-competent companies, such as
Covidien plc
(
COV
),
Smith & Nephew
(
SNN
) and
Stryker Corporation
(
SYK
).
CONMED CORP (CNMD): Free Stock Analysis Report
COVIDIEN PLC (COV): Free Stock Analysis Report
SMITH & NEPHEW (SNN): Free Stock Analysis
Report
STRYKER CORP (SYK): Free Stock Analysis Report
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