Conmed Corporation (CNMD) reported fourth quarter and full fiscal 2009 results. For the quarter, earnings per share were 37 cents, surpassing the Zacks Consensus Estimate of 32 cents and the year-ago earnings of 34 cents. In fiscal 2009, earnings per share were $1.00, lower than the year-ago earnings of $1.54.

Quarterly results

Total sales in the fourth quarter increased 6.4% year over year to $190.6 million. Growth was registered across all major business segments.

Arthroscopy sales increased 8.0% year over year to $75.7 million. Powered Surgical Instruments sales increased 10.4% year over year to $40.4 million. Electrosurgery sales increased 6.6% year over year to $25.9 million.

Single-use and reposable revenues increased 5.8% year over year to $141.3 million. Capital equipment sales increased 7.9% year over year to $49.3 million.

Gross margin increased 70 basis points (bps) year over year to 50.4%. Selling and administrative expenses as a percentage of sales increased 110 bps year over year to 38.2%. Research and development expenses as a percentage of sales remained flat at 4.3%. Other expense as a percentage of sales increased 160 bps year over year to 2.1%.

Higher operating expenses were primarily responsible for a lower operating margin that declined 210 bps year over year to 5.7%.

Fiscal year results

Total revenues in fiscal 2009 were $694.7 million, declining roughly 6.4% year over year. Arthroscopy sales declined 7.6% year over year to $269.8 million. Powered Surgical Instruments sales declined 7.5% year over year to $144.0 million. Electrosurgery sales declined 5.5% year over year to $95.0 million.

Gross margin in fiscal 2009 declined 290 bps year over year to 48.6%. Operating margin declined 600 bps year over year to 4.1%.

Balance Sheet

Conmed ended fiscal 2009 with cash and cash equivalents of roughly $9.2 million, declining 22% year over year. The company had an outstanding debt of approximately $184.4 million at the end of fiscal 2009.

Outlook

Conmed has provided guidance for the first quarter and full fiscal 2010. For the first quarter, sales should range between $175 million and $180 million. Earnings per share should be in the range of 24 cents to 29 cents. For fiscal 2010, Conmed expects total revenues in the range of $715 million to $725 million. Earnings per share should be in the range of $1.20 to $1.30.

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

Presently, we have a ‘Neutral’ recommendation on Conmed.

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