Conmed Surpasses Zacks Estimate

Conmed Corporation (CNMD - Analyst Report) reported third quarter 2009 earnings per share of 28 cents, surpassing the Zacks Consensus Estimate of 17 cents. However, earnings per share were lower than the year-ago earnings of 37 cents.

Sales
Net sales for the reported quarter were $175.5 million, declining roughly 2.2% year over year. Excluding an unfavorable foreign currency translation (FX), net sales increased marginally by 0.4% year over year. Single-use and reposable sales contributed roughly 75% to total sales and declined 0.4% year over year. Capital equipment sales contributed the balance and declined 7.1% year over year.

The decline in net sales can be primarily attributed to the current economic turbulence that resulted in patients deferring their elective procedures. The decline was broad-based across major products.

Arthroscopy sales declined 1.2% year over year to $68.7 million. Powered Surgical Instruments sales declined 3.9% year over year to $37.3 million. Both Endoscopic Technologies and Patient Care also registered a decline in revenues. The negative sales growth was partly offset by higher demand for the company’s Electrosurgery and Endosurgery products.

Margins
Conmed witnessed a contraction in margins in the reported quarter. Gross margin declined 290 basis points (bps) year over year to 49.9%. Selling and administrative expenses as a percentage of sales increased 70 bps year over year to 38.5%. Research and development expenses as a percentage of sales declined 40 bps year over year to 4.4%. Lower gross margin coupled with higher operating expenses lowered the operating margin 690 bps year over year to 2.9%.

Balance Sheet
Conmed ended the quarter with cash and cash equivalents of roughly $14.2 million, an increase of approximately 20% in the first nine months of the year. The company’s outstanding long-term debt was $182.9 million at the end of the quarter.

Guidance
Conmed has provided guidance for the next quarter and full fiscal 2010. For the fourth quarter of 2009, net sales are estimated in the range of $178 to $183 million. Earnings per share should be roughly between 30 and 35 cents.

For fiscal 2010, net sales are estimated in the range of $715 to $725 million. Earnings per share should be between $1.20 and $1.30.

Conmed is a major medical products manufacturer specializing in surgical instruments and devices. Its main competitors include Stryker Corporation (SYK - Analyst Report) and Smith & Nephew (SNN - Snapshot Report).

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