For the quarterly period ended
|
Commission File Number
|
March 31, 2020
|
001-39218
|
New York
|
16-0977505
|
||
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
||
|
|
|
|
525 French Road
|
Utica,
|
New York
|
13502
|
(Address of principal executive offices)
|
(Zip Code)
|
Title of each class
|
Trading Symbol
|
Name of each exchange on which registered
|
Common Stock, $0.01 par value
|
CNMD
|
NYSE
|
PART I FINANCIAL INFORMATION
|
||
Item Number
|
|
Page
|
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PART II OTHER INFORMATION
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2020
|
|
2019
|
||||
Net sales
|
$
|
214,010
|
|
|
$
|
218,378
|
|
|
|
|
|
||||
Cost of sales
|
94,851
|
|
|
96,940
|
|
||
|
|
|
|
||||
Gross profit
|
119,159
|
|
|
121,438
|
|
||
|
|
|
|
||||
Selling and administrative expense
|
95,867
|
|
|
99,226
|
|
||
|
|
|
|
||||
Research and development expense
|
10,120
|
|
|
10,575
|
|
||
|
|
|
|
||||
Operating expenses
|
105,987
|
|
|
109,801
|
|
||
|
|
|
|
||||
Income from operations
|
13,172
|
|
|
11,637
|
|
||
|
|
|
|
||||
Interest expense
|
9,592
|
|
|
9,369
|
|
||
|
|
|
|
||||
Other expense
|
89
|
|
|
4,225
|
|
||
|
|
|
|
||||
Income (loss) before income taxes
|
3,491
|
|
|
(1,957
|
)
|
||
|
|
|
|
||||
Benefit from income taxes
|
(2,436
|
)
|
|
(2,978
|
)
|
||
|
|
|
|
||||
Net income
|
$
|
5,927
|
|
|
$
|
1,021
|
|
|
|
|
|
||||
Comprehensive income (loss)
|
$
|
(1,121
|
)
|
|
$
|
1,096
|
|
|
|
|
|
||||
|
|
|
|
||||
Per share data:
|
|
|
|
|
|||
|
|
|
|
||||
Net income
|
|
|
|
|
|||
Basic
|
$
|
0.21
|
|
|
$
|
0.04
|
|
Diluted
|
0.20
|
|
|
0.04
|
|
||
|
|
|
|
||||
Weighted average common shares
|
|
|
|
|
|||
Basic
|
28,478
|
|
|
28,173
|
|
||
Diluted
|
29,707
|
|
|
29,034
|
|
|
Common Stock
|
Paid-in
Capital
|
Retained
Earnings
|
Accumulated
Other
Comprehensive
Loss
|
Treasury
Stock
|
Shareholders’
Equity
|
||||||||||||||
|
Shares
|
Amount
|
||||||||||||||||||
Balance at December 31, 2019
|
31,299
|
|
$
|
313
|
|
$
|
379,324
|
|
$
|
470,844
|
|
$
|
(59,277
|
)
|
$
|
(80,737
|
)
|
$
|
710,467
|
|
Common stock issued under employee plans
|
|
|
|
|
(7,736
|
)
|
|
|
|
2,696
|
|
(5,040
|
)
|
|||||||
Stock-based compensation
|
|
|
|
|
3,032
|
|
|
|
|
|
|
|
3,032
|
|
||||||
Dividends on common stock ($0.20 per share)
|
|
|
|
(5,703
|
)
|
|
|
(5,703
|
)
|
|||||||||||
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
||||||||||||
Foreign currency translation adjustments
|
|
|
|
|
(9,988
|
)
|
|
|
||||||||||||
Pension liability, net
|
|
|
|
|
535
|
|
|
|
||||||||||||
Cash flow hedging gain, net
|
|
|
|
|
2,405
|
|
|
|
||||||||||||
Net income
|
|
|
|
5,927
|
|
|
|
|
||||||||||||
Total comprehensive loss
|
|
|
|
|
|
|
(1,121
|
)
|
||||||||||||
Balance at March 31, 2020
|
31,299
|
|
$
|
313
|
|
$
|
374,620
|
|
$
|
471,068
|
|
$
|
(66,325
|
)
|
$
|
(78,041
|
)
|
$
|
701,635
|
|
|
Common Stock
|
Paid-in
Capital
|
Retained
Earnings
|
Accumulated
Other
Comprehensive
Loss
|
Treasury
Stock
|
Shareholders’
Equity
|
||||||||||||||
|
Shares
|
Amount
|
||||||||||||||||||
Balance at December 31, 2018
|
31,299
|
|
$
|
313
|
|
$
|
341,738
|
|
$
|
464,851
|
|
$
|
(55,737
|
)
|
$
|
(88,895
|
)
|
$
|
662,270
|
|
Common stock issued under employee plans
|
|
|
|
|
(769
|
)
|
|
|
|
2,517
|
|
1,748
|
|
|||||||
Stock-based compensation
|
|
|
|
|
2,703
|
|
|
|
|
|
|
|
2,703
|
|
||||||
Dividends on common stock ($0.20 per share)
|
|
|
|
(5,643
|
)
|
|
|
(5,643
|
)
|
|||||||||||
Convertible notes discount, net
|
|
|
39,145
|
|
|
|
|
39,145
|
|
|||||||||||
Convertible notes hedge, net
|
|
|
(38,829
|
)
|
|
|
|
(38,829
|
)
|
|||||||||||
Issuance of warrants
|
|
|
30,567
|
|
|
|
|
30,567
|
|
|||||||||||
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
||||||||||||
Foreign currency translation adjustments
|
|
|
|
|
(578
|
)
|
|
|
||||||||||||
Pension liability, net
|
|
|
|
|
547
|
|
|
|
||||||||||||
Cash flow hedging gain, net
|
|
|
|
|
106
|
|
|
|
||||||||||||
Net income
|
|
|
|
1,021
|
|
|
|
|
||||||||||||
Total comprehensive income
|
|
|
|
|
|
|
1,096
|
|
||||||||||||
Balance at March 31, 2019
|
31,299
|
|
$
|
313
|
|
$
|
374,555
|
|
$
|
460,229
|
|
$
|
(55,662
|
)
|
$
|
(86,378
|
)
|
$
|
693,057
|
|
|
Three Months Ended
|
||||||
|
March 31,
|
||||||
|
2020
|
|
2019
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
5,927
|
|
|
$
|
1,021
|
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
|
|
|
|
|||
Depreciation
|
4,646
|
|
|
4,442
|
|
||
Amortization of debt discount
|
2,264
|
|
|
1,510
|
|
||
Amortization of deferred debt issuance costs
|
819
|
|
|
697
|
|
||
Amortization
|
13,776
|
|
|
12,208
|
|
||
Stock-based compensation
|
3,032
|
|
|
2,703
|
|
||
Deferred income taxes
|
(2,742
|
)
|
|
(4,699
|
)
|
||
Loss on early extinguishment of debt
|
—
|
|
|
300
|
|
||
Increase (decrease) in cash flows from changes in assets and liabilities:
|
|
|
|
|
|
||
Accounts receivable
|
19,057
|
|
|
13,733
|
|
||
Inventories
|
(12,313
|
)
|
|
(11,971
|
)
|
||
Accounts payable
|
1,705
|
|
|
(1,776
|
)
|
||
Accrued compensation and benefits
|
(18,397
|
)
|
|
(13,695
|
)
|
||
Other assets
|
(7,260
|
)
|
|
(10,047
|
)
|
||
Other liabilities
|
(6,793
|
)
|
|
1,654
|
|
||
|
(2,206
|
)
|
|
(4,941
|
)
|
||
Net cash provided by (used in) operating activities
|
3,721
|
|
|
(3,920
|
)
|
||
|
|
|
|
||||
Cash flows from investing activities:
|
|
|
|
|
|||
Purchases of property, plant and equipment
|
(2,825
|
)
|
|
(4,022
|
)
|
||
Payments related to business and asset acquisitions, net of cash acquired
|
(3,852
|
)
|
|
(364,928
|
)
|
||
Net cash used in investing activities
|
(6,677
|
)
|
|
(368,950
|
)
|
||
|
|
|
|
||||
Cash flows from financing activities:
|
|
|
|
|
|||
Payments on term loan
|
(3,313
|
)
|
|
(144,375
|
)
|
||
Proceeds from term loan
|
—
|
|
|
265,000
|
|
||
Payments on revolving line of credit
|
(41,000
|
)
|
|
(342,000
|
)
|
||
Proceeds from revolving line of credit
|
59,000
|
|
|
299,000
|
|
||
Proceeds from convertible notes
|
—
|
|
|
345,000
|
|
||
Payments related to contingent consideration
|
(1,133
|
)
|
|
(2,859
|
)
|
||
Payments related to debt issuance costs
|
—
|
|
|
(16,210
|
)
|
||
Dividends paid on common stock
|
(5,683
|
)
|
|
(5,626
|
)
|
||
Purchases of convertible notes hedges
|
—
|
|
|
(51,198
|
)
|
||
Proceeds from issuance of warrants
|
—
|
|
|
30,567
|
|
||
Other, net
|
(5,132
|
)
|
|
1,655
|
|
||
Net cash provided by financing activities
|
2,739
|
|
|
378,954
|
|
||
|
|
|
|
||||
Effect of exchange rate changes on cash and cash equivalents
|
(1,330
|
)
|
|
(188
|
)
|
||
|
|
|
|
||||
Net increase (decrease) in cash and cash equivalents
|
(1,547
|
)
|
|
5,896
|
|
||
|
|
|
|
||||
Cash and cash equivalents at beginning of period
|
25,856
|
|
|
17,511
|
|
||
|
|
|
|
||||
Cash and cash equivalents at end of period
|
$
|
24,309
|
|
|
$
|
23,407
|
|
|
|
|
|
||||
Non-cash investing and financing activities:
|
|
|
|
||||
Dividends payable
|
$
|
5,703
|
|
|
$
|
5,643
|
|
|
Three Months Ended
|
|
Three Months Ended
|
||||||||||||||||||||
|
March 31, 2020
|
|
March 31, 2019
|
||||||||||||||||||||
|
Orthopedic Surgery
|
|
General Surgery
|
|
Total
|
|
Orthopedic Surgery
|
|
General Surgery
|
|
Total
|
||||||||||||
Primary Geographic Markets
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
United States
|
$
|
37,039
|
|
|
$
|
81,808
|
|
|
$
|
118,847
|
|
|
$
|
45,256
|
|
|
$
|
71,770
|
|
|
$
|
117,026
|
|
Americas (excluding the United States)
|
15,802
|
|
|
7,979
|
|
|
23,781
|
|
|
15,042
|
|
|
7,462
|
|
|
22,504
|
|
||||||
Europe, Middle East & Africa
|
25,907
|
|
|
16,615
|
|
|
42,522
|
|
|
30,402
|
|
|
15,930
|
|
|
46,332
|
|
||||||
Asia Pacific
|
20,535
|
|
|
8,325
|
|
|
28,860
|
|
|
22,737
|
|
|
9,779
|
|
|
32,516
|
|
||||||
Total sales from contracts with customers
|
$
|
99,283
|
|
|
$
|
114,727
|
|
|
$
|
214,010
|
|
|
$
|
113,437
|
|
|
$
|
104,941
|
|
|
$
|
218,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Timing of Revenue Recognition
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Goods transferred at a point in time
|
$
|
90,553
|
|
|
$
|
113,901
|
|
|
$
|
204,454
|
|
|
$
|
104,739
|
|
|
$
|
104,425
|
|
|
$
|
209,164
|
|
Services transferred over time
|
8,730
|
|
|
826
|
|
|
9,556
|
|
|
8,698
|
|
|
516
|
|
|
9,214
|
|
||||||
Total sales from contracts with customers
|
$
|
99,283
|
|
|
$
|
114,727
|
|
|
$
|
214,010
|
|
|
$
|
113,437
|
|
|
$
|
104,941
|
|
|
$
|
218,378
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||
|
|
|
|
||||
Contract liability
|
$
|
14,550
|
|
|
$
|
14,276
|
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Net income
|
$
|
5,927
|
|
|
$
|
1,021
|
|
|
|
|
|
||||
Other comprehensive income (loss):
|
|
|
|
||||
Pension liability, net of income tax (income tax expense of $170 and $173 for the three months ended March 31, 2020 and 2019, respectively)
|
535
|
|
|
547
|
|
||
Cash flow hedging gain, net of income tax (income tax expense of $766 and $34 for the three months ended March 31, 2020 and 2019, respectively)
|
2,405
|
|
|
106
|
|
||
Foreign currency translation adjustment
|
(9,988
|
)
|
|
(578
|
)
|
||
|
|
|
|
||||
Comprehensive income (loss)
|
$
|
(1,121
|
)
|
|
$
|
1,096
|
|
|
Cash Flow
Hedging
Gain (Loss)
|
|
Pension
Liability
|
|
Cumulative
Translation
Adjustments
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
||||||||
Balance, December 31, 2019
|
$
|
493
|
|
|
$
|
(31,691
|
)
|
|
$
|
(28,079
|
)
|
|
$
|
(59,277
|
)
|
|
|
|
|
|
|
|
|
||||||||
Other comprehensive income (loss) before reclassifications, net of tax
|
3,257
|
|
|
—
|
|
|
(9,988
|
)
|
|
(6,731
|
)
|
||||
Amounts reclassified from accumulated other comprehensive income (loss) before taxa
|
(1,124
|
)
|
|
705
|
|
|
—
|
|
|
(419
|
)
|
||||
Income tax
|
272
|
|
|
(170
|
)
|
|
—
|
|
|
102
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net current-period other comprehensive income (loss)
|
2,405
|
|
|
535
|
|
|
(9,988
|
)
|
|
(7,048
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Balance, March 31, 2020
|
$
|
2,898
|
|
|
$
|
(31,156
|
)
|
|
$
|
(38,067
|
)
|
|
$
|
(66,325
|
)
|
|
Cash Flow
Hedging
Gain (Loss)
|
|
Pension
Liability
|
|
Cumulative
Translation
Adjustments
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
||||||||
Balance, December 31, 2018
|
$
|
4,085
|
|
|
$
|
(31,718
|
)
|
|
$
|
(28,104
|
)
|
|
$
|
(55,737
|
)
|
|
|
|
|
|
|
|
|
||||||||
Other comprehensive income (loss) before reclassifications, net of tax
|
1,318
|
|
|
—
|
|
|
(578
|
)
|
|
740
|
|
||||
Amounts reclassified from accumulated other comprehensive income (loss) before taxa
|
(1,598
|
)
|
|
720
|
|
|
—
|
|
|
(878
|
)
|
||||
Income tax
|
386
|
|
|
(173
|
)
|
|
—
|
|
|
213
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net current-period other comprehensive income (loss)
|
106
|
|
|
547
|
|
|
(578
|
)
|
|
75
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Balance, March 31, 2019
|
$
|
4,191
|
|
|
$
|
(31,171
|
)
|
|
$
|
(28,682
|
)
|
|
$
|
(55,662
|
)
|
|
|
|
As of
|
||||||
|
FASB ASC Topic 815 Designation
|
|
March 31, 2020
|
|
December 31, 2019
|
||||
Forward exchange contracts
|
Cash flow hedge
|
|
$
|
156,229
|
|
|
$
|
156,818
|
|
Forward exchange contracts
|
Non-designated
|
|
37,819
|
|
|
33,867
|
|
|
|
Amount of Gain Recognized in AOCI
|
|
Consolidated Condensed Statements of Comprehensive Income
|
|
Amount of Gain (Loss) Reclassified from AOCI
|
|||||||||||||||||||
|
|
Three Months Ended March 31,
|
|
|
|
Three Months Ended March 31,
|
|
Three Months Ended March 31,
|
|||||||||||||||||
|
|
|
|
|
|
|
|
Total Amount of Line Item Presented
|
|
|
|
|
|||||||||||||
Derivative Instrument
|
|
2020
|
|
2019
|
|
Location of amount reclassified
|
|
2020
|
2019
|
|
2020
|
|
2019
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Foreign exchange contracts
|
|
$
|
4,295
|
|
|
$
|
1,738
|
|
|
Net Sales
|
|
$
|
214,010
|
|
$
|
218,378
|
|
|
$
|
1,201
|
|
|
$
|
1,497
|
|
|
|
|
|
|
|
|
Cost of Sales
|
|
94,851
|
|
96,940
|
|
|
(77
|
)
|
|
101
|
|
|||||||
Pre-tax gain
|
|
$
|
4,295
|
|
|
$
|
1,738
|
|
|
|
|
|
|
|
$
|
1,124
|
|
|
$
|
1,598
|
|
||||
Tax expense
|
|
1,038
|
|
|
420
|
|
|
|
|
|
|
|
272
|
|
|
386
|
|
||||||||
Net gain
|
|
$
|
3,257
|
|
|
$
|
1,318
|
|
|
|
|
|
|
|
$
|
852
|
|
|
$
|
1,212
|
|
|
|
|
|
Three Months Ended March 31,
|
||||||
Derivative Instrument
|
|
Location on Consolidated Condensed Statements of Comprehensive Income
|
|
2020
|
|
2019
|
||||
|
|
|
|
|
|
|
||||
Net loss on currency forward contracts
|
|
Selling and administrative expense
|
|
$
|
(245
|
)
|
|
$
|
(181
|
)
|
Net loss on currency transaction exposures
|
|
Selling and administrative expense
|
|
$
|
(191
|
)
|
|
$
|
(229
|
)
|
March 31, 2020
|
Location on Consolidated Condensed Balance Sheet
|
Asset Fair Value
|
|
Liabilities Fair Value
|
|
Net
Fair
Value
|
||||||
Derivatives designated as hedged instruments:
|
|
|
|
|
|
|
||||||
Foreign exchange contracts
|
Prepaids and other current assets
|
$
|
5,329
|
|
|
$
|
(1,790
|
)
|
|
$
|
3,539
|
|
Foreign exchange contracts
|
Other long-term assets
|
1,190
|
|
|
(907
|
)
|
|
283
|
|
|||
|
|
$
|
6,519
|
|
|
$
|
(2,697
|
)
|
|
$
|
3,822
|
|
|
|
|
|
|
|
|
||||||
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|||
Foreign exchange contracts
|
Other current liabilities
|
25
|
|
|
(255
|
)
|
|
(230
|
)
|
|||
|
|
|
|
|
|
|
|
|||||
Total derivatives
|
|
$
|
6,544
|
|
|
$
|
(2,952
|
)
|
|
$
|
3,592
|
|
December 31, 2019
|
Location on Consolidated Condensed Balance Sheet
|
Asset Fair Value
|
|
Liabilities Fair Value
|
|
Net
Fair
Value
|
||||||
Derivatives designated as hedged instruments:
|
|
|
|
|
|
|
||||||
Foreign exchange contracts
|
Prepaids and other current assets
|
$
|
2,307
|
|
|
$
|
(1,341
|
)
|
|
$
|
966
|
|
Foreign exchange contracts
|
Other long-term liabilities
|
38
|
|
|
(353
|
)
|
|
(315
|
)
|
|||
|
|
$
|
2,345
|
|
|
$
|
(1,694
|
)
|
|
$
|
651
|
|
|
|
|
|
|
|
|
||||||
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
||||
Foreign exchange contracts
|
Other current liabilities
|
22
|
|
|
(159
|
)
|
|
(137
|
)
|
|||
|
|
|
|
|
|
|
||||||
Total derivatives
|
|
$
|
2,367
|
|
|
$
|
(1,853
|
)
|
|
$
|
514
|
|
|
March 31,
2020 |
|
December 31,
2019 |
||||
Raw materials
|
$
|
54,003
|
|
|
$
|
51,103
|
|
Work-in-process
|
15,062
|
|
|
15,142
|
|
||
Finished goods
|
105,473
|
|
|
98,371
|
|
||
Total
|
$
|
174,538
|
|
|
$
|
164,616
|
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Net income
|
$
|
5,927
|
|
|
$
|
1,021
|
|
|
|
|
|
|
|||
Basic – weighted average shares outstanding
|
28,478
|
|
|
28,173
|
|
||
|
|
|
|
||||
Effect of dilutive potential securities
|
1,229
|
|
|
861
|
|
||
|
|
|
|
||||
Diluted – weighted average shares outstanding
|
29,707
|
|
|
29,034
|
|
||
|
|
|
|
||||
Net income (per share)
|
|
|
|
|
|
||
Basic
|
$
|
0.21
|
|
|
$
|
0.04
|
|
Diluted
|
0.20
|
|
|
0.04
|
|
Balance as of December 31, 2019
|
$
|
618,042
|
|
|
|
||
Goodwill adjustment resulting from business acquisition
|
(1,009
|
)
|
|
|
|
||
Foreign currency translation
|
(1,351
|
)
|
|
|
|
||
Balance as of March 31, 2020
|
$
|
615,682
|
|
|
March 31, 2020
|
|
December 31, 2019
|
|||||||||||||
|
Weighted Average Amortization Period (Years)
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
||||||||
Intangible assets with definite lives:
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Customer and distributor relationships
|
24
|
$
|
342,359
|
|
|
$
|
(120,072
|
)
|
|
$
|
342,568
|
|
|
$
|
(115,311
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Sales representation, marketing and promotional rights
|
25
|
149,376
|
|
|
(49,500
|
)
|
|
149,376
|
|
|
(48,000
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Patents and other intangible assets
|
15
|
71,582
|
|
|
(47,066
|
)
|
|
70,646
|
|
|
(46,456
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Developed technology
|
16
|
106,604
|
|
|
(14,805
|
)
|
|
106,604
|
|
|
(13,171
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Intangible assets with indefinite lives:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Trademarks and tradenames
|
|
86,544
|
|
|
—
|
|
|
86,544
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
22
|
$
|
756,465
|
|
|
$
|
(231,443
|
)
|
|
$
|
755,738
|
|
|
$
|
(222,938
|
)
|
|
Amortization included in expense
|
|
Amortization recorded as a reduction of revenue
|
|
Total
|
||||||
Remaining, 2020
|
$
|
21,055
|
|
|
$
|
4,500
|
|
|
$
|
25,555
|
|
2021
|
27,453
|
|
|
6,000
|
|
|
33,453
|
|
|||
2022
|
26,299
|
|
|
6,000
|
|
|
32,299
|
|
|||
2023
|
25,443
|
|
|
6,000
|
|
|
31,443
|
|
|||
2024
|
24,705
|
|
|
6,000
|
|
|
30,705
|
|
|||
2025
|
24,957
|
|
|
6,000
|
|
|
30,957
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||
Revolving line of credit
|
$
|
238,000
|
|
|
$
|
220,000
|
|
Term loan, net of deferred debt issuance costs of $1,428 and $1,528 in 2020 and 2019, respectively
|
250,322
|
|
|
253,535
|
|
||
2.625% convertible notes, net of deferred debt issuance costs of $6,807 and $7,252 in 2020 and 2019, respectively, and unamortized discount of $41,048 and $43,312 in 2020 and 2019, respectively
|
297,145
|
|
|
294,436
|
|
||
Financing leases
|
734
|
|
|
836
|
|
||
Total debt
|
786,201
|
|
|
768,807
|
|
||
Less: Current portion
|
13,571
|
|
|
13,596
|
|
||
Total long-term debt
|
$
|
772,630
|
|
|
$
|
755,211
|
|
Remaining 2020
|
$
|
9,937
|
|
2021
|
18,219
|
|
|
2022
|
24,844
|
|
|
2023
|
436,750
|
|
|
2024
|
345,000
|
|
|
2020
|
|
2019
|
||||
Balance as of January 1,
|
$
|
2,186
|
|
|
$
|
1,585
|
|
|
|
|
|
||||
Provision for warranties
|
355
|
|
|
486
|
|
||
Claims made
|
(363
|
)
|
|
(343
|
)
|
||
|
|
|
|
|
|||
Balance as of March 31,
|
$
|
2,178
|
|
|
$
|
1,728
|
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Service cost
|
$
|
179
|
|
|
$
|
253
|
|
|
|
|
|
|
|||
Interest cost on projected benefit obligation
|
639
|
|
|
782
|
|
||
|
|
|
|
|
|||
Expected return on plan assets
|
(1,255
|
)
|
|
(1,181
|
)
|
||
|
|
|
|
|
|||
Net amortization and deferral
|
705
|
|
|
720
|
|
||
|
|
|
|
|
|||
Net periodic pension cost
|
$
|
268
|
|
|
$
|
574
|
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
|
|
|
|
||||
Manufacturing consolidation costs
|
$
|
1,785
|
|
|
$
|
—
|
|
Acquisition and integration costs
|
805
|
|
|
660
|
|
||
Acquisition and other expense included in cost of sales
|
$
|
2,590
|
|
|
$
|
660
|
|
|
|
|
|
||||
Acquisition and integration costs included in selling and administrative expense
|
$
|
754
|
|
|
$
|
7,245
|
|
|
|
|
|
||||
Debt refinancing costs included in other expense
|
$
|
—
|
|
|
$
|
3,904
|
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Orthopedic surgery
|
$
|
99,283
|
|
|
$
|
113,437
|
|
General surgery
|
114,727
|
|
|
104,941
|
|
||
Consolidated net sales
|
$
|
214,010
|
|
|
$
|
218,378
|
|
Item 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
|
|
•
|
general economic and business conditions;
|
•
|
compliance with and changes in regulatory requirements;
|
•
|
COVID-19 global pandemic poses significant risks to our business, financial condition and results of operations, which may be heightened if the pandemic, and various government responses to it, continue for an extended period of time;
|
•
|
environmental compliance risks, including lack of availability of sterilization with Ethylene Oxide (“EtO”);
|
•
|
the possibility that United States or foreign regulatory and/or administrative agencies may initiate enforcement actions against us or our distributors;
|
•
|
competition;
|
•
|
changes in customer preferences;
|
•
|
changes in technology;
|
•
|
the introduction and acceptance of new products;
|
•
|
the availability and cost of materials;
|
•
|
cyclical customer purchasing patterns due to budgetary and other constraints;
|
•
|
quality of our management and business abilities and the judgment of our personnel;
|
•
|
the availability, terms and deployment of capital;
|
•
|
future levels of indebtedness and capital spending;
|
•
|
changes in foreign exchange and interest rates;
|
•
|
the ability to evaluate, finance and integrate acquired businesses, products and companies;
|
•
|
changes in business strategy;
|
•
|
the risk of an information security breach, including a cybersecurity breach;
|
•
|
the risk of a lack of allograft tissues due to reduced donations of such tissues or due to tissues not meeting the appropriate high standards for screening and/or processing of such tissues;
|
•
|
the ability to defend and enforce intellectual property, including the risks related to theft or compromise of intellectual property in connection with our international operations;
|
•
|
the risk of patent, product and other litigation, as well as the cost associated with such litigation; and
|
•
|
trade protection measures, tariffs and other border taxes, and import or export licensing requirements.
|
|
Three Months Ended March 31,
|
||||
|
2020
|
|
2019
|
||
Orthopedic surgery
|
46
|
%
|
|
52
|
%
|
General surgery
|
54
|
%
|
|
48
|
%
|
Consolidated net sales
|
100
|
%
|
|
100
|
%
|
•
|
goodwill and intangible assets.
|
|
Three Months Ended March 31,
|
||||
|
2020
|
|
2019
|
||
Net sales
|
100.0
|
%
|
|
100.0
|
%
|
Cost of sales
|
44.3
|
|
|
44.4
|
|
Gross profit
|
55.7
|
|
|
55.6
|
|
Selling and administrative expense
|
44.8
|
|
|
45.4
|
|
Research and development expense
|
4.7
|
|
|
4.8
|
|
Income from operations
|
6.2
|
|
|
5.3
|
|
Interest expense
|
4.5
|
|
|
4.3
|
|
Other expense
|
—
|
|
|
1.9
|
|
Income (loss) before income taxes
|
1.6
|
|
|
(0.9
|
)
|
Benefit from income taxes
|
(1.1
|
)
|
|
(1.4
|
)
|
Net income
|
2.8
|
%
|
|
0.5
|
%
|
|
Three Months Ended
|
|||||||||||||||
|
|
|
|
|
% Change
|
|||||||||||
|
2020
|
|
2019
|
|
As Reported
|
|
Impact of Foreign Currency
|
|
Constant Currency
|
|||||||
Orthopedic surgery
|
$
|
99.3
|
|
|
$
|
113.4
|
|
|
-12.5
|
%
|
|
1.8
|
%
|
|
-10.7
|
%
|
General surgery
|
114.7
|
|
|
105.0
|
|
|
9.3
|
%
|
|
0.7
|
%
|
|
10.0
|
%
|
||
Net sales
|
$
|
214.0
|
|
|
$
|
218.4
|
|
|
-2.0
|
%
|
|
1.3
|
%
|
|
-0.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|||||||
Single-use products
|
$
|
177.7
|
|
|
$
|
172.4
|
|
|
3.1
|
%
|
|
1.4
|
%
|
|
4.5
|
%
|
Capital products
|
36.3
|
|
|
46.0
|
|
|
-21.1
|
%
|
|
1.0
|
%
|
|
-20.1
|
%
|
||
Net sales
|
$
|
214.0
|
|
|
$
|
218.4
|
|
|
-2.0
|
%
|
|
1.3
|
%
|
|
-0.7
|
%
|
•
|
Orthopedic surgery sales decreased 12.5% in the three months ended March 31, 2020 primarily driven by deferral of non-urgent surgeries as a result of the COVID-19 pandemic. A significant portion of this decline was driven by a reduction in capital equipment purchases as customers deferred these purchases.
|
•
|
General surgery sales increased 9.3% in the three months ended March 31, 2020. Approximately 590 basis points of this growth was from the Buffalo Filter acquisition. In addition to growth in Buffalo Filter products, we also had sales growth in other general surgery product offerings.
|
•
|
We received proceeds of $345.0 million during the three months ended March 31, 2019 related to the issuance of 2.625% convertible notes as further described below.
|
•
|
We entered into a $265.0 million term loan during the three months ended March 31, 2019 in conjunction with the refinancing of our senior credit agreement. This new term loan replaced the previous term loan and resulted in net proceeds of $120.6 million during the three months ended March 31, 2019 compared to $3.3 million in payments in the current year.
|
•
|
We had net proceeds on our revolving line of credit of $18.0 million compared to $43.0 million in payments during the three months ended March 31, 2019.
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•
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During the three months ended March 31, 2019, we paid $51.2 million to purchase hedges related to our convertible notes. Partially offsetting this, were proceeds of $30.6 million from the issuance of warrants as further described below.
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•
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During the three months ended March 31, 2019, we paid $16.2 million in debt issuance costs associated with the 2.625% convertible notes and the sixth amended and restated senior credit agreement.
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•
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We paid $1.1 million in contingent consideration related to prior asset acquisitions during the three months ended March 31, 2020 as compared to $2.9 million during the three months ended March 31, 2019.
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1.
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Our field-based sales representatives are generally restricted from traveling, both in the interests of their health as well as at the request of our customers;
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2.
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Our office-based employees have been working remotely, and
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3.
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Our manufacturing facilities and warehouses are operating with precautions including, increased hygiene and cleaning within facilities, social distancing and monitoring of temperatures.
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•
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the duration and scope of the COVID-19 pandemic;
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•
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governmental, business and individual actions that have been, and continue to be, taken in response to the COVID-19 pandemic, including business and travel restrictions, “stay-at-home” and “shelter-in-place” directives, quarantines, and slowdowns, suspensions or delays of commercial activity;
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•
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the effect of the COVID-19 pandemic on our partners and customers, including their ability to conduct surgeries, to continue to purchase our products, to pay for the products purchased from us and/or to collect reimbursement;
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•
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the effect of the COVID-19 pandemic and the governmental response on the budgets of our partners and customers;
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•
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our ability during the COVID-19 pandemic to continue operations and/or adjust our production schedules, as a result of current and anticipated weakened demand and/or production delays, if any, from our suppliers;
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•
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significant reductions or volatility in demand for surgeries or for our products;
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•
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the effect of the COVID-19 pandemic on our supply chain’s reliability and costs;
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•
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costs incurred as a result of necessary actions and preparedness plans to help ensure the health and safety of our employees and continued operations, including enhanced cleaning processes, protocols designed to implement appropriate social distancing practices, and/or adoption of additional wage and benefit programs to assist employees;
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•
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potential future restructuring, impairment and other charges;
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•
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the impact of the COVID-19 pandemic on the financial and credit markets and economic activity generally;
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•
|
our ability to access lending, capital markets, and other sources of liquidity when needed on reasonable terms or at all;
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•
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our ability to comply with the financial covenants in our debt agreements if a material economic downturn as a result of the COVID-19 pandemic results in substantially increased indebtedness and/or lower earnings; and
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•
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the exacerbation of negative impacts resulting from the occurrence of a global or national recession, depression or other sustained adverse market event as a result of the COVID-19 pandemic.
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Exhibit Index
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Exhibit No.
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Description of Exhibit
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10.1
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31.1
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31.2
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32.1
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101.INS
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XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
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101.SCH
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XBRL Taxonomy Extension Schema Document
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase Document
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase Document
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101.LAB
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XBRL Taxonomy Extension Label Linkbase Document
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase Document
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|
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104
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Cover Page - Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document (included in Exhibit 101)
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CONMED CORPORATION
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By: /s/ Todd W. Garner
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Todd W. Garner
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Executive Vice President and
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Chief Financial Officer
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Date:
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April 30, 2020
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1.
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I have reviewed this quarterly report on Form 10-Q of CONMED Corporation;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a)
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designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b)
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designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
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a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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b)
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any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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/s/ Curt R. Hartman
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Curt R. Hartman
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President & Chief Executive Officer
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1.
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I have reviewed this quarterly report on Form 10-Q of CONMED Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
|
/s/ Todd W. Garner
|
|
Todd W. Garner
|
|
Executive Vice President and
|
|
Chief Financial Officer
|
Date:
|
April 30, 2020
|
/s/ Curt R. Hartman
|
|
|
Curt R. Hartman
|
|
|
President & Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
Date:
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April 30, 2020
|
/s/ Todd W. Garner
|
|
|
Todd W. Garner
|
|
|
Executive Vice President and
|
|
|
Chief Financial Officer
|