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CONMED Corporation Announces Fourth Quarter and Full-Year 2023 Financial Results

CONMED Corporation (NYSE: CNMD) today announced financial results for the fourth quarter and full-year ended December 31, 2023.

Fourth Quarter 2023 Highlights

  • Sales of $327.0 million increased 30.4% year over year as reported and 31.5% in constant currency
  • Domestic revenue increased 33.3% year over year.
  • International revenue increased 26.5% year over year as reported and 29.0% in constant currency.
  • Diluted net earnings per share (GAAP) were $1.05 compared to diluted net earnings per share (GAAP) of $0.86 in the fourth quarter of 2022.
  • Adjusted diluted net earnings per share(1) were $1.06, an increase of 152.4% compared to the fourth quarter of 2022.

Full-Year 2023 Highlights

  • Sales of $1,244.7 million increased 19.1% year over year as reported and 20.9% in constant currency. Acquisitions contributed approximately 250 basis points of growth.
  • Domestic revenue increased 20.9% year over year.
  • International revenue increased 16.7% year over year as reported and 20.9% in constant currency.
  • Diluted net earnings per share (GAAP) were $2.04 compared to diluted net loss per share (GAAP) of $2.68 in 2022.
  • Adjusted diluted net earnings per share(1) were $3.45, an increase of 30.2% compared to 2022.

“2023 was a great year for CONMED, and I am proud that our global business delivered record revenue in both the fourth quarter and for the full year,” commented Curt R. Hartman, CONMED’s Chair of the Board, President, and Chief Executive Officer. “The balanced growth we saw across our various businesses and geographies is a testament to the strength of the portfolio that we have built. As we shift our focus to 2024, we are very excited to continue delivering innovative technology solutions to our customers and patients across both the General Surgery and Orthopedics categories.”

2024 Outlook

The Company expects full-year 2024 reported revenue between $1.340 billion and $1.365 billion. This represents year-over-year growth of approximately 8% to 10%.

The Company expects full-year 2024 adjusted diluted net earnings per share(2) in the range of $4.30 to $4.40. This represents year-over-year growth of approximately 25% to 28%.

The impact of foreign currency exchange rates in 2024 is expected to be immaterial.

Supplemental Financial Disclosures

(1) A reconciliation of reported diluted net earnings (loss) per share to adjusted diluted net earnings per share, a non-GAAP financial measure, appears below.

(2) Information reconciling forward-looking adjusted diluted net earnings per share to the comparable GAAP financial measures is unavailable to the company without unreasonable effort, as discussed below.

Conference Call

The Company’s management will host a conference call today at 4:30 p.m. ET to discuss its fourth quarter and full-year 2023 results.

To participate in the conference call via telephone, please click here to pre-register and obtain the dial-in number and passcode.

This conference call will also be webcast and can be accessed from the “Investors” section of CONMED's website at www.conmed.com. The webcast replay of the call will be available at the same site approximately one hour after the end of the call.

Consolidated Condensed Statements of Income (Loss)

(in thousands except per share amounts, unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Year Ended

 

 

December 31,

 

December 31,

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

327,045

 

 

$

250,867

 

 

$

1,244,744

 

 

$

1,045,472

 

Cost of sales

 

 

144,870

 

 

 

119,005

 

 

 

568,499

 

 

 

474,227

 

Gross profit

 

 

182,175

 

 

 

131,862

 

 

 

676,245

 

 

 

571,245

 

% of sales

 

 

55.7

%

 

 

52.6

%

 

 

54.3

%

 

 

54.6

%

Selling & administrative expense

 

 

117,960

 

 

 

120,737

 

 

 

503,040

 

 

454,039

 

Research & development expense

 

 

14,028

 

 

 

12,220

 

 

 

52,602

 

 

 

47,152

 

Income (loss) from operations

 

 

50,187

 

 

 

(1,095

)

 

 

120,603

 

 

 

70,054

 

% of sales

 

 

15.3

%

 

 

-0.4

%

 

 

9.7

%

 

 

6.7

%

Interest expense

 

 

9,505

 

 

 

9,443

 

 

 

39,775

 

 

 

28,905

 

Other expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

112,011

 

Income (loss) before income taxes

 

 

40,682

 

 

 

(10,538

)

 

 

80,828

 

 

 

(70,862

)

Provision (benefit) for income taxes

 

 

7,611

 

 

 

(37,122

)

 

 

16,369

 

 

 

9,720

 

Net income (loss)

 

$

33,071

 

 

$

26,584

 

 

$

64,459

 

 

$

(80,582

)

 

 

 

 

 

 

 

 

 

Basic EPS

 

$

1.08

 

 

$

0.87

 

 

$

2.10

 

 

$

(2.68

)

Diluted EPS

 

 

1.05

 

 

 

0.86

 

 

 

2.04

 

 

 

(2.68

)

 

 

 

 

 

 

 

 

 

Basic shares

 

 

30,759

 

 

 

30,484

 

 

 

30,668

 

 

 

30,040

 

Diluted shares

 

 

31,502

 

 

 

30,931

 

 

 

31,548

 

 

 

30,040

 

Sales Summary

(in millions, unaudited)

 

Three Months Ended December 31,

% Change

Domestic

International

 

2023

 

2022

As

Reported

Impact

of

Foreign

Currency

Constant

Currency

 

As

Reported

As

Reported

Impact

of

Foreign

Currency

Constant

Currency

Orthopedic Surgery

$

136.5

$

115.2

18.5

%

0.9

%

19.4

%

6.0

%

27.8

%

2.0

%

29.8

%

General Surgery

 

190.5

 

135.7

40.4

%

1.3

%

41.7

%

47.6

%

24.4

%

3.4

%

27.8

%

$

327.0

$

250.9

30.4

%

1.1

%

31.5

%

33.3

%

26.5

%

2.5

%

29.0

%

 

Single-use Products

$

271.3

$

211.9

28.1

%

1.1

%

29.2

%

33.1

%

20.6

%

2.6

%

23.2

%

Capital Products

 

55.7

 

39.0

42.9

%

0.9

%

43.8

%

34.5

%

49.3

%

1.9

%

51.2

%

$

327.0

$

250.9

30.4

%

1.1

%

31.5

%

33.3

%

26.5

%

2.5

%

29.0

%

 

Domestic

$

190.3

$

142.8

33.3

%

0.0

%

33.3

%

International

 

136.7

 

108.1

26.5

%

2.5

%

29.0

%

$

327.0

$

250.9

30.4

%

1.1

%

31.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31,

% Change

Domestic

International

 

2023

 

2022

As

Reported

Impact

of

Foreign

Currency

Constant

Currency

 

As

Reported

As

Reported

Impact

of

Foreign

Currency

Constant

Currency

Orthopedic Surgery

$

533.1

$

461.5

15.5

%

2.2

%

17.7

%

15.2

%

15.7

%

3.5

%

19.2

%

General Surgery

 

711.6

 

584.0

21.9

%

1.5

%

23.4

%

23.4

%

18.4

%

5.1

%

23.5

%

$

1,244.7

$

1,045.5

19.1

%

1.8

%

20.9

%

20.9

%

16.7

%

4.2

%

20.9

%

 

Single-use Products

$

1,038.5

$

874.9

18.7

%

1.8

%

20.5

%

21.3

%

15.2

%

4.3

%

19.5

%

Capital Products

 

206.2

 

170.6

20.9

%

1.9

%

22.8

%

18.5

%

22.8

%

3.6

%

26.4

%

$

1,244.7

$

1,045.5

19.1

%

1.8

%

20.9

%

20.9

%

16.7

%

4.2

%

20.9

%

 

Domestic

$

700.1

$

579.0

20.9

%

0.0

%

20.9

%

International

 

544.6

 

466.5

16.7

%

4.2

%

20.9

%

$

1,244.7

$

1,045.5

19.1

%

1.8

%

20.9

%

 

Reconciliation of Reported Net Income to Adjusted Net Income

(in thousands, except per share amounts, unaudited)

 

 

Three Months Ended December 31, 2023

 

Gross Profit

Selling &

Administrative

Expense

Operating

Income

Interest

Expense

Tax

Expense

Effective

Tax Rate

Net Income

Basic EPS

Adjustments

 

Diluted EPS

 

As reported

$

182,175

 

$

117,960

 

$

50,187

 

$

9,505

 

$

7,611

 

18.7

%

$

33,071

 

$

-

 

$

33,071

 

 

% of sales

 

55.7

%

 

36.1

%

 

15.3

%

 

 

EPS

$

1.08

 

$

1.05

 

 

Shares

 

30,759

 

743

 

 

31,502

 

 

Acquisition and integration costs(1)

 

2,154

 

 

-

 

 

2,154

 

 

-

 

 

(162

)

 

2,316

 

 

 

Contingent consideration fair value adjustment(2)

 

-

 

 

9,370

 

 

(9,370

)

 

-

 

 

703

 

 

 

(10,073

)

 

 

$

184,329

 

$

127,330

 

$

42,971

 

$

9,505

 

$

8,152

 

 

$

25,314

 

 

 

Adjusted gross profit %

 

56.4

%

 

 

Amortization(3)

$

1,500

 

 

(7,295

)

 

8,795

 

 

(1,500

)

 

2,458

 

 

7,837

 

 

 

As adjusted

$

120,035

 

$

51,766

 

$

8,005

 

$

10,610

 

24.2

%

$

33,151

 

$

-

 

$

33,151

 

 

% of sales

 

 

36.7

%

 

15.8

%

 

 

Adjusted diluted EPS

 

$

1.06

 

 

 

 

Shares

 

30,759

 

743

 

 

31,502

 

 

Convertible note hedges(4)

 

 

(110

)

 

Adjusted diluted shares

 

 

31,392

 

 

 

 

 

Three Months Ended December 31, 2022

 

 

 

 

 

Gross Profit

Selling &

Administrative

Expense

Operating

Income

(Loss)

Interest

Expense

Tax

Expense

(Benefit)

Effective

Tax Rate

Net Income

Basic EPS

Adjustments(7)

 

Diluted EPS

 

As reported

$

131,862

 

$

120,737

 

$

(1,095

)

$

9,443

 

$

(37,122

)

352.3

%

$

26,584

 

$

-

 

$

26,584

 

 

% of sales

 

52.6

%

 

48.1

%

 

-0.4

%

 

 

EPS

$

0.87

 

 

$

0.86

 

 

Shares

 

30,484

 

447

 

 

30,931

 

 

Acquisition and integration costs(1)

 

2,096

 

 

(3,757

)

 

5,853

 

 

-

 

 

12,873

 

 

 

(7,020

)

 

 

 

 

 

Restructuring and related costs(5)

 

1,955

 

 

(786

)

 

2,741

 

 

-

 

 

6,029

 

 

 

(3,288

)

 

 

 

 

 

Software implementation costs(6)

 

-

 

 

(6,769

)

 

6,769

 

 

-

 

 

14,889

 

 

 

(8,120

)

 

 

 

 

 

Contingent consideration fair value adjustment(2)

 

-

 

 

(2,518

)

 

2,518

 

 

-

 

 

5,538

 

 

 

(3,020

)

 

 

$

135,913

 

$

106,907

 

$

16,786

 

$

9,443

 

$

2,207

 

 

$

5,136

 

 

 

Adjusted gross profit %

 

54.2

%

 

 

Amortization(3)

$

1,500

 

 

(7,228

)

 

8,728

 

 

(1,506

)

 

2,446

 

 

7,788

 

 

 

As adjusted

$

99,679

 

$

25,514

 

$

7,937

 

$

4,653

 

26.5

%

$

12,924

 

$

-

 

$

12,924

 

 

% of sales

 

39.7

%

 

10.2

%

 

 

Adjusted diluted EPS

 

$

0.42

 

 

 

 

Shares

 

30,484

 

447

 

 

30,931

 

 

Convertible note hedges(4)

 

 

-

 

 

Adjusted diluted shares

 

 

30,931

 

 

   

(1) In 2023, the Company incurred charges related to the amortization of inventory step-up to fair value associated with the acquisition of In2Bones Global, Inc. In 2022, the Company incurred charges related to the amortization of inventory step-up to fair value and consulting fees, legal fees, and other integration costs associated with the acquisitions of In2Bones Global, Inc. and Biorez, Inc.

(2) In 2023 and 2022, the Company incurred income/(expense) related to the fair value adjustments of contingent consideration.

(3) Includes amortization of intangible assets and deferred financing fees.

(4) Non-GAAP adjusted dilutive weighted average shares outstanding exclude dilution that is expected to be offset by the Company’s convertible notes hedge transactions.

(5) In 2022, the Company incurred consulting fees related to an operational cost improvement initiative and severance related to the elimination of certain positions.

(6) In 2022, the Company incurred incremental freight, professional fees and other costs related to the implementation of a warehouse management software.

(7) The Company adopted ASU 2020-06, effective January 1, 2022. As a result of the adoption, the Company is required to compute diluted EPS using the if-converted method. Under the if-converted method, the numerator is adjusted for interest expense applicable to its convertible notes (net of tax) and the denominator includes additional common shares assuming conversion premium and principal portion of the notes (when permitted or required) are settled in shares. Subsequent to June 6, 2022, the Company is required to settle the principal value of its convertible notes in cash.

 

Reconciliation of Reported Net Income (Loss) to Adjusted Net Income

(in thousands, except per share amounts, unaudited)

 

Year Ended December 31, 2023

 

 

Gross

Profit

Selling &

Administrative

Expense

Operating

Income

Interest

Expense

Other

Expense

Tax

Expense

Effective

Tax Rate

Net

Income

Basic

EPS

Adjustments

 

Diluted EPS

 

As reported

$

676,245

 

$

503,040

 

$

120,603

 

$

39,775

 

$

-

 

$

16,369

 

20.3

%

$

64,459

 

$

-

 

$

64,459

 

 

% of sales

 

54.3

%

 

40.4

%

 

9.7

%

 

 

EPS

$

2.10

 

 

$

2.04

 

 

Shares

 

30,668

 

 

880

 

 

31,548

 

 

Acquisition and integration costs(1)

 

8,617

 

 

(752

)

 

9,369

 

 

-

 

 

-

 

 

1,207

 

 

8,162

 

 

 

Termination of distributor agreements(2)

 

-

 

 

(2,098

)

 

2,098

 

 

-

 

 

-

 

 

417

 

 

1,681

 

 

 

Restructuring and related costs(3)

 

2,035

 

 

(1,578

)

 

3,613

 

 

-

 

 

-

 

 

930

 

 

 

2,683

 

 

 

 

 

 

Software implementation costs(4)

 

-

 

 

(6,056

)

 

6,056

 

 

-

 

 

-

 

 

1,453

 

 

4,603

 

 

 

Contingent consideration fair value adjustment(5)

 

-

 

 

2,421

 

 

(2,421

)

 

-

 

 

-

 

 

2,037

 

 

(4,458

)

 

 

$

686,897

 

$

494,977

 

$

139,318

 

$

39,775

 

$

-

 

$

22,413

 

 

$

77,130

 

 

 

Adjusted gross profit %

 

55.2

%

 

 

Amortization(6)

$

6,000

 

 

(29,068

)

 

35,068

 

 

(6,058

)

 

-

 

 

9,969

 

 

 

31,157

 

 

 

 

 

As adjusted

$

465,909

 

$

174,386

 

$

33,717

 

$

-

 

$

32,382

 

23.0

%

$

108,287

 

$

-

 

$

108,287

 

 

% of sales

 

37.4

%

 

14.0

%

 

 

Adjusted diluted EPS

 

$

3.45

 

 

 

 

Shares

 

30,668

 

 

880

 

 

31,548

 

 

Convertible note hedges(7)

 

 

(142

)

 

Adjusted diluted shares

 

 

31,406

 

 



 

 

 

Year Ended December 31, 2022

 

 

Gross

Profit

Selling &

Administrative

Expense

Operating

Income

Interest

Expense

Other

Expense

Tax

Expense

Effective

Tax Rate

Net

Income

(Loss)

Basic

EPS

Adjustments(12)

 

Diluted EPS

 

As reported

$

571,245

 

$

454,039

 

$

70,054

 

$

28,905

 

$

112,011

 

$

9,720

 

-13.7

%

$

(80,582

)

$

-

 

$

(80,582

)

 

% of sales

 

54.6

%

 

43.4

%

 

6.7

%

 

 

EPS

$

(2.68

)

 

 

$

(2.68

)

 

Shares

 

30,040

 

 

-

 

 

30,040

 

 

Acquisition and integration costs(1)

 

4,540

 

 

(10,063

)

 

14,603

 

 

-

 

 

-

 

 

46,965

 

 

(32,362

)

 

 

Legal matters(8)

 

-

 

 

(775

)

 

775

 

 

-

 

 

-

 

 

(462

)

 

1,237

 

 

 

Restructuring and related costs(3)

 

1,955

 

 

(786

)

 

2,741

 

 

-

 

 

-

 

 

6,029

 

 

 

(3,288

)

 

 

 

 

 

Software implementation costs(4)

 

-

 

 

(6,769

)

 

6,769

 

 

-

 

 

-

 

 

14,889

 

 

 

(8,120

)

 

 

 

 

 

Contingent consideration fair value adjustment(5)

 

-

 

 

(2,518

)

 

2,518

 

 

-

 

 

-

 

 

5,538

 

 

 

(3,020

)

 

 

 

 

 

Convertible notes premium on extinguishment(9)

 

-

 

 

-

 

 

-

 

 

-

 

 

(103,125

)

 

(61,521

)

 

164,646

 

 

 

Change in fair value of convertible notes hedges upon settlement(10)

 

-

 

 

-

 

 

-

 

 

-

 

 

(5,460

)

 

(3,257

)

 

8,717

 

 

 

Loss on early extinguishment of debt(11)

 

-

 

 

-

 

 

-

 

 

-

 

 

(3,426

)

 

(2,044

)

 

5,470

 

 

 

$

577,740

 

$

433,128

 

$

97,460

 

$

28,905

 

$

-

 

$

15,857

 

 

$

52,698

 

 

 

Adjusted gross profit %

 

55.3

%

 

 

 

 

Amortization(6)

$

6,000

 

 

(27,791

)

 

33,791

 

 

(4,910

)

 

-

 

 

9,381

 

 

 

29,320

 

 

 

 

 

As adjusted

$

405,337

 

$

131,251

 

$

23,995

 

$

-

 

$

25,238

 

23.5

%

$

82,018

 

$

2,978

 

$

84,996

 

 

% of sales

 

38.8

%

 

12.6

%

 

 

Adjusted diluted EPS

 

$

2.65

 

 

 

 

Shares

 

30,040

 

 

2,656

 

 

32,696

 

 

Convertible note hedges(7)

 

 

(578

)

 

Adjusted diluted shares

 

 

32,118

 

 

(1) In 2023, the Company incurred charges related to the amortization of inventory step-up to fair value associated with the acquisition of In2Bones Global, Inc., and integration costs and professional fees associated with the acquisitions of In2Bones Global, Inc. and Biorez, Inc. In 2022, the Company incurred charges related to the amortization of inventory step-up to fair value and consulting fees, legal fees, and other integration costs associated with the acquisition of In2Bones Global, Inc. and Biorez, Inc.

(2) In 2023, the Company incurred costs related to the termination of distributor agreements.

(3) In 2023 and 2022, the Company incurred consulting fees related to an operational cost improvement initiative and severance related to the elimination of certain positions.

(4) In 2023 and 2022, the Company incurred additional freight, labor and travel costs as well as professional fees related to the implementation of a warehouse management software.

(5) In 2023 and 2022, the Company incurred income/(expense) related to the fair value adjustments of contingent consideration.

(6) Includes amortization of intangible assets and deferred financing fees.

(7) Non-GAAP adjusted dilutive weighted average shares outstanding exclude dilution that is expected to be offset by the Company’s convertible notes hedge transactions.

(8) In 2022, the Company incurred costs related to a legal settlement.

(9) In 2022, the Company incurred costs related to the conversion premium on the repurchase and extinguishment of $275.0 million of its 2.625% Convertible Notes.

(10) In 2022, the Company incurred costs related to the settlement of convertible notes hedge transactions associated with the repurchase and extinguishment of $275.0 million of its 2.625% Convertible Notes.

(11) In 2022, the Company incurred costs related to the write-off of deferred financing fees associated with the repurchase and extinguishment of $275.0 million of its 2.625% Convertible Notes and term loan paydown.

(12) The Company adopted ASU 2020-06, effective January 1, 2022. As a result of the adoption, the Company is required to compute diluted EPS using the if-converted method. Under the if-converted method, the numerator is adjusted for interest expense applicable to its convertible notes (net of tax) and the denominator includes additional common shares assuming conversion premium and principal portion of the notes (when permitted or required) are settled in shares. Subsequent to June 6, 2022, the Company is required to settle the principal value of its convertible notes in cash. Adjustments in 2022 are applicable on a non-GAAP basis only since GAAP results are in a loss position and therefore exclude dilutive potential shares.

Reconciliation of Reported Net Income (Loss) to EBITDA & Adjusted EBITDA

(in thousands, unaudited)

 

 

 

 

 

 

Three Months Ended

 

Year Ended

 

December 31,

 

December 31,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

 

 

 

 

 

 

 

Net income (loss)

$

33,071

 

 

$

26,584

 

 

$

64,459

 

 

$

(80,582

)

Provision (benefit) for income taxes

 

7,611

 

 

 

(37,122

)

 

 

16,369

 

 

 

9,720

 

Interest expense

 

9,505

 

 

 

9,443

 

 

 

39,775

 

 

 

28,905

 

Depreciation

 

4,052

 

 

 

4,026

 

 

 

16,200

 

 

 

16,055

 

Amortization

 

13,950

 

 

 

13,709

 

 

 

55,674

 

 

 

53,464

 

EBITDA

$

68,189

 

 

$

16,640

 

 

$

192,477

 

 

$

27,562

 

 

 

 

 

 

 

 

 

Stock based compensation

 

5,923

 

 

 

5,758

 

 

 

24,257

 

 

 

21,729

 

Acquisition and integration costs

 

2,154

 

 

 

5,853

 

 

 

9,369

 

 

 

14,603

 

Contingent consideration fair value adjustment

 

(9,370

)

 

 

2,518

 

 

 

(2,421

)

 

 

2,518

 

Termination of distributor agreements

 

-

 

 

 

-

 

 

 

2,098

 

 

 

-

 

Restructuring and related costs

 

-

 

 

 

2,741

 

 

 

3,613

 

 

 

2,741

 

Software implementation costs

 

-

 

 

 

6,769

 

 

 

6,056

 

 

 

6,769

 

Legal matters

 

-

 

 

 

-

 

 

 

-

 

 

 

775

 

Convertible notes premium on extinguishment

 

-

 

 

 

-

 

 

 

-

 

 

 

103,125

 

Change in fair value of convertible notes hedges upon settlement

 

-

 

 

 

-

 

 

 

-

 

 

 

5,460

 

Loss on early extinguishment of debt

 

-

 

 

 

-

 

 

 

-

 

 

 

3,426

 

Adjusted EBITDA

$

66,896

 

 

$

40,279

 

 

$

235,449

 

 

$

188,708

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA Margin

 

 

 

 

 

 

 

EBITDA

 

20.9

%

 

 

6.6

%

 

 

15.5

%

 

 

2.6

%

Adjusted EBITDA

 

20.5

%

 

16.1

%

 

 

18.9

%

 

18.1

%

About CONMED Corporation

CONMED is a medical technology company that provides devices and equipment for surgical procedures. The Company’s products are used by surgeons and other healthcare professionals in a variety of specialties including orthopedics, general surgery, gynecology, thoracic surgery, and gastroenterology. For more information, visit www.conmed.com.

Forward-Looking Statements

This press release and associated conference call may contain forward-looking statements based on certain assumptions and contingencies that involve risks and uncertainties, which could cause actual results, performance, or trends to differ materially from those expressed in the forward-looking statements herein or in previous disclosures. For example, in addition to general industry and economic conditions, factors that could cause actual results to differ materially from those in the forward-looking statements may include, but are not limited to the risk factors discussed in the Company's Annual Report on Form 10-K for the full year ended December 31, 2022, listed under the heading Forward-Looking Statements in the Company’s most recently filed Form 10-Q and other risks and uncertainties, which may be detailed from time to time in reports filed by CONMED with the SEC. Any and all forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and relate to the Company’s performance on a going-forward basis. The Company believes that all forward-looking statements made by it have a reasonable basis, but there can be no assurance that management’s expectations, beliefs or projections as expressed in the forward-looking statements will actually occur or prove to be correct.

Supplemental Information - Reconciliation of GAAP to Non-GAAP Financial Measures

The Company supplements the reporting of its financial information determined under generally accepted accounting principles in the United States (GAAP) with certain non-GAAP financial measures, including percentage sales growth in constant currency; adjusted gross profit; cost of sales excluding specified items; adjusted selling and administrative expenses; adjusted operating income; adjusted interest expense; adjusted other expense; adjusted income tax expense; adjusted effective income tax rate; adjusted net income, adjusted diluted shares and adjusted diluted net earnings per share (EPS). The Company believes that these non-GAAP measures provide meaningful information to assist investors and shareholders in understanding its financial results and assessing its prospects for future performance. Management believes percentage sales growth in constant currency and the other adjusted measures described above are important indicators of its operations because they exclude items that may not be indicative of, or are unrelated to, its core operating results and provide a baseline for analyzing trends in the Company’s underlying business. Further, the presentation of EBITDA is a non-GAAP measurement that management considers useful for measuring aspects of the Company’s cash flow. Management uses these non-GAAP financial measures for reviewing the operating results and analyzing potential future business trends in connection with its budget process and bases certain management incentive compensation on these non-GAAP financial measures.

Net sales on a constant currency basis is a non-GAAP measure. The Company analyzes net sales on a constant currency basis to better measure the comparability of results between periods. To measure percentage sales growth in constant currency, the Company removes the impact of changes in foreign currency exchange rates that affect the comparability and trend of net sales. To measure earnings performance on a consistent and comparable basis, the Company excludes certain items that affect the comparability of operating results and the trend of earnings. These adjustments are irregular in timing, may not be indicative of past and future performance and are therefore excluded to allow investors to better understand underlying operating trends.

Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. These adjusted financial measures should not be considered in isolation or as a substitute for reported sales growth, gross profit, cost of sales, selling and administrative expenses, operating income (loss), interest expense, other expense, income tax expense (benefit), effective income tax rate, net income (loss), diluted shares and diluted net earnings (loss) per share, the most directly comparable GAAP financial measures. These non-GAAP financial measures are an additional way of viewing aspects of the Company’s operations that, when viewed with GAAP results and the reconciliations to corresponding GAAP financial measures above, provide a more complete understanding of the business. The Company strongly encourages investors and shareholders to review its financial statements and publicly filed reports in their entirety and not to rely on any single financial measure.

We are unable to present a quantitative reconciliation of our expected diluted net earnings per share to expected adjusted diluted net earnings per share as we are unable to predict with reasonable certainty and without unreasonable effort the impact and timing of acquisition, integration and other charges. The financial impact of these items is uncertain and is dependent on various factors, including timing, and could be material to our consolidated condensed statements of income.

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