Conmed Corporation (CNMD) reported second-quarter fiscal 2010 adjusted earnings per share of 32 cents, comfortably beating the Zacks Consensus Estimate of 26 cents while surpassing year-ago earnings of 17 cents. Restructuring expenses include costs of transferring product lines to the company’s new manufacturing facility in Chihuahua, Mexico.

Net income sailed to $7.3 million (or 25 cents a share), representing an astounding five-fold year-over-year growth. Results were boosted by forecast-beating top-line growth and cost synergies from the company’s ongoing restructuring initiatives.

Revenues

Revenues soared 10% year over year to $181.1 million, well ahead of the Zacks Consensus Estimate of $177 million. Growth was fueled by healthy contributions from major business segments such as Arthroscopy (37% of sales), Powered Surgical (20%) and Electrosurgery (14%).

Arthroscopy revenues increased 21.6% year over year to $61.6 million. Powered Surgical Instruments sales increased 6.6% year over year to $33.5 million while revenues from Electrosurgery rose 5.7% year over year to $22.7 million.

Total Single-use and reposable revenues increased 7% year over year to $129.2 million, while consolidated revenues from capital equipment increased 21.2% to $35.4 million.

Margins

Gross margin improved to 51.7% from 46.9% a year ago as the company spent less on the Mexican manufacturing facility. Higher gross margin led to an increase in operating margin, which increased to 8.2% from 3% a year ago.

Cash flow & Share Repurchases

Conmed generated $18.5 million (roughly 10% of sales) in cash flows from operation in the quarter, which was utilized to buy back shares and repay debt. The company repurchased roughly 475,000 shares during the quarter for $9.5 million and also bought back and retired convertible notes worth $3 million.

Outlook

Conmed has maintained its revenues and adjusted earnings guidance for fiscal 2010. The company continues to expect total revenues in the range of $715 million to $725 million and adjusted EPS between $1.20 and $1.30.

For the third quarter, revenues are projected between $174 million and $179 million with adjusted EPS in the range of 25 – 30 cents. The company believes the seasonality factor would trim third quarter revenues on a sequential basis.

Conmed is a major medical products manufacturer specializing in surgical instruments and devices. The company operates in a highly-competitive orthopedic surgery markets against much larger, technically-competent companies, such as Johnson & Johnson (JNJ), Smith & Nephew (SNN), Stryker Corporation (SYK).

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