Blistering ConMed report Corasanti/Conmed - disaster

Posted in the Utica Forum

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1 - 15 of 15 Comments Last updated Mar 20, 2014
OD Darling

United States

#1 Nov 9, 2013
This shows you how screwed up Utica is. Long the Observer Dispatch's darling, ConMed gets exposed as the usual utican family feast and moron hole.

November 4, 2013

Members of the Board of Directors
CONMED Corporation
525 French Road
Utica, New York 13502

Attention: General Counsel

Lady and Gentlemen:

Voce Capital Management LLC (“VCM”) is the investment advisor to Voce Catalyst Partners LP (“VCP” and, together with VCM,“Voce”), a shareholder of CONMED Corporation (“ConMed” or the “Company”).

We appreciate the time management has spent with us beginning in June of this year, including meetings in Utica, San Francisco and New York City. This has assisted us as we’ve analyzed ConMed’s businesses, operations and prospects. The conclusion of our research is that ConMed is a strategically attractive asset trapped within a dysfunctional public vehicle that will never achieve its potential in current form. Your shareholders have witnessed years of sub-par operational performance, lethargic leadership and missed opportunities. Serial acquisitions have obscured weak organic growth and provided cover for poor execution. As a result, ConMed today is an overly complex, subscale player surrounded by much larger and more successful competitors. Its margins and returns are comparatively weak and in long-term decline.

Perhaps most disturbing, ConMed suffers from a culture of nepotism, patronage and dystopian corporate governance that would be corrosive in a closely-held corporation but which is utterly corrupting in a public company. And therein lies the wellspring for so many of ConMed’s failures: ConMed is unquestionably family-run – the Corasanti clan members pull all the strings and pamper themselves royally – yet it’s not family-owned, as they hold very little of its stock. Their hegemony over ConMed could have never occurred without the docile cooperation of the very fiduciaries who were elected to protect shareholder interests: You, its Board of Directors.

***

Any analysis of ConMed’s corporate governance must begin with the recognition that, until July of this year, its Board of Directors has been inhabited exclusively by denizens of Utica, New York.1 Lest we receive hate mail from the Utica Chamber of Commerce, we preface our comments with nothing but kind words for this fine burg of 60,000 souls, astride the Mohawk River in central New York. ConMed was founded there in 1973 and it has remained the headquarters since.
OD Darling

United States

#2 Nov 9, 2013
Yet the ConMed of today is far different from 40 years ago. As the CEO’s statement on the website proclaims:“Beginning as a small, private company manufacturing ECG monitoring electrodes, we have become a large, publicly held, and diversified medical device organization … with approximately 50% of the Company's revenues generated in the United States and 50% from other world-wide locations.” Unfortunately ConMed’s corporate governance has not kept pace with this evolution.

Given the level of influence wielded by the family, one could be forgiven for thinking that the Company’s name is Corasanti Corporation. ConMed’s patriarch, Eugene R. Corasanti, stepped down as CEO in 2006 after installing his son, Joseph J. Corasanti, Esq., as his replacement. The elder Mr. Corasanti is now 83 years old yet continues as Chairman of the Board, a position he’s held since inception. As Chairman, he’s paid an annual retainer twice what an ordinary director would receive. He simultaneously serves as the Company’s Vice Chairman, pursuant to a separate employment agreement, and receives an additional salary of more than $100,000 per year and equity compensation which in 2012 totaled almost $150,000, for making himself “available to advise the Chief Executive Officer”(i.e., his son). Isn’t that what all directors are supposed to do as part of their job?

But it doesn’t stop there. E. Corasanti is collecting $3.7 million of deferred compensation as if he had retired in 2006, even though as a current employee of the Company he’s not retired and otherwise would not be entitled to receive it at this time. He also continues to enjoy “an automobile allowance, club memberships and life and health insurance benefits.” These benefits continue “during E. Corasanti’s life and the life of his wife.” Mrs. Corasanti’s specific contributions to ConMed’s success are unclear to us.

Like his father, J. Corasanti has a pretty nice gig. His annual compensation is approximately $2.5 million. Just like dad, he earns additional payments for his Board service – despite the fact that he’s also an employee. This is both inappropriate and unnecessary, given how handsomely he’s already paid as CEO.2 The Company continues to carry as a loan to father and son premiums paid by ConMed to purchase multi-million “split-dollar” life insurance policies for their benefit. In addition to the other perquisites lavished on top ConMed executives, J. Corasanti also has access to special life and health insurance policies and benefits for himself and his wife should she outlive him (coincidentally, just like her mother-in-law). And finally, he’s protected by a generous ($15mm) golden parachute. The apple, they say, never falls far from the tree.

ConMed’s employment practices reveal an alarming degree of nepotism and cronysim. For starters, was J. Corasanti – the family scion and a former attorney – really the best choice to replace E. Corasanti? One wonders whether there might have been candidates from outside the Company – or at least from outside the family – better suited to run a complex global medical device operation such as ConMed. Apparently J. Corasanti beat out at least one other candidate for the job: His brother, David Corasanti, who also works at ConMed. Given ConMed’s serial acquisitions, we also respectfully question whether William W. Abraham remains the optimal choice to lead ConMed’s corporate and business development activities – at age 82. Were Mr. Abraham to retire he’d still be able to keep close tabs on ConMed, as he has two sons-in law employed by the Company.
OD Darling

United States

#3 Nov 9, 2013
And while the Company hasn’t disclosed it in its filings, we’ve learned that J. Corasanti’s sister-in-law is also a member of ConMed’s senior management team. Heather L. Cohen is “Executive Vice President, Human Resources, Deputy General Counsel and Secretary.” In this role, she’s involved in managing the personnel dynamics and conflicts of interest at ConMed, including those between the Corasantis and the Company – despite the fact that Ms. Cohen herself is part of the family. We fail to see how she can discharge these responsibilities impartially and we particularly can’t understand how ConMed believes this isn’t material enough to warrant disclosure.

The boundary between business and personal expenses at ConMed is quite blurry. Several of the top executives are furnished with munificent perquisites, such as country club memberships, automobile leases and special insurance policies. There’s also a tradition of ConMed making payments to related parties, such as to E. Corasanti’s brother-in-law; to J. Corasanti’s father-in-law and brother-in-law; and to the law firm of a former director, Robert E. Remmell, throughout his tenure on the Board. Most recently, J. Corasanti used ConMed assets to promote the book of his wife, Michelle Cohen Corasanti,3 including the use of his staff’s time, corporate letterhead and Company email accounts. Shareholders wonder where the line is drawn between the assets of ConMed and the interests of the Corasanti family, or if there’s a line at all.

With all this incestuous behavior one might suppose Corasanti & Co. feel entitled because they own most of ConMed’s equity. Yet taken together, Messrs. Corasanti Senior and Junior collectively own 0.7% of ConMed’s common stock. Even if credited with the various options and other compensation awards they’ve granted themselves over the years, the total is still only 2.3%. As for the rest of the Directors, they collectively own about 0.2%(0.4% including options). In the past 10 years, only two Directors have ever bought a share of stock with their own money – for a grand total of 3000 shares purchased (1000 of which occurred in June of this year when a new Director joined). Mr. Daniels is a case in point: At age 79, he has inhabited the Board since 1992 and chairs the audit committee, yet holds 3400 shares of common stock.

The Board’s lack of alignment with shareholders, coddling of management and toothless oversight is highly relevant to the review of ConMed’s strategic positioning and financial and operational performance, which we take up next in turn.

***

ConMed’s essentially a roll-up. Since inception, it has completed 24 acquisitions totaling more than $1 billion. In the past decade, ConMed’s organic growth has been only 3% per annum and its market capitalization is less than what it collectively cost to acquire these businesses. The Company has had to pay increasing multiples over time to get deals done as the acquisition market has grown more competitive and the number of targets has declined. Its one truly successful acquisition, Linvatec, occurred over 15 years ago.

At the same time, ConMed has never divested anything. Units like Patient Care – the legacy business on which E. Corasanti founded ConMed from his kitchen table in the 1970s – appears to have more sentimental than economic value, with commoditized products, negative growth and operating losses. Management insists it needs to maintain the full portfolio of six businesses to absorb some $17 million of corporate overhead, but that simply begs the question as to whether corporate overhead is too high. It also illustrates how woefully subscale ConMed’s core businesses are.

Voce Capital Management LLC
J. Daniel Plants,
Managing Partner

More here....
http://www.wktv.com/news/local/Text-of-Voce-C...
The Truthesr

Utica, NY

#4 Nov 9, 2013
The same shit goes on at 99% of the Utica non profits.... Nothing is ever done to stop it, that's Utica and the good old boy network for ya
no one is safe

New Britain, CT

#5 Nov 9, 2013
That's how this area has always been ran as a whole.
Just like MV EDGE

United States

#6 Nov 9, 2013
This is just like the Mohawk Valley EDGE dog and phony show. It's not anything people there didn't already know.
Funny aside, my business partner holds two key patents on EEG sensors, a processor that uses FPGAs to decipher the human "keys" for EEG signals and an EEG mouse you plug and play. Unlimited uses in biomedical, and they don't use the sticky kind of pads just the metal dots. Right there in Utica. He asked me if we should consider talking to ConMed about his designs and I told him forget it. It's a pack of stupid gweedos and if you don't suck mayor whoever or Corasantis dick they're helpless to recognize what he's created. That and I think they'd be too stupid to recognize the importance of the designs and now he's in a deal with a competitor for a device made right in Utica first. Who the fk would offer those people anything? It's a freakshow. No different from any other company or organization in Utica/CNY. They don't hire the most qualified they hire brother vinny googootz and cuzzin louey.
Notice the Corasantis and the CEO shut the fk up and took it in the ass so weel because they know their jig is up. The Utica leeches only own a piddly 2.5% and have sucked down the entire profits for decades at investor's expense. They're aware now and sick of the parasite crew of Uticans they have clinging on like barnacles sopping up millions for themselves hahaha!
Priceless

Buffalo, NY

#7 Nov 11, 2013
This is a priceless example of the way the real business world looks at uticans. They even prefaced themselves so they wouldn't get the usual hate articles like the mayor does to forbes and moody when they talk about utica problems.
Neurologist

Baltimore, MD

#8 Nov 11, 2013
Just like MV EDGE wrote:
This is just like the Mohawk Valley EDGE dog and phony show. It's not anything people there didn't already know.
Funny aside, my business partner holds two key patents on EEG sensors, a processor that uses FPGAs to decipher the human "keys" for EEG signals and an EEG mouse you plug and play. Unlimited uses in biomedical, and they don't use the sticky kind of pads just the metal dots. Right there in Utica. He asked me if we should consider talking to ConMed about his designs and I told him forget it. It's a pack of stupid gweedos and if you don't suck mayor whoever or Corasantis dick they're helpless to recognize what he's created. That and I think they'd be too stupid to recognize the importance of the designs and now he's in a deal with a competitor for a device made right in Utica first. Who the fk would offer those people anything? It's a freakshow. No different from any other company or organization in Utica/CNY. They don't hire the most qualified they hire brother vinny googootz and cuzzin louey.
Notice the Corasantis and the CEO shut the fk up and took it in the ass so weel because they know their jig is up. The Utica leeches only own a piddly 2.5% and have sucked down the entire profits for decades at investor's expense. They're aware now and sick of the parasite crew of Uticans they have clinging on like barnacles sopping up millions for themselves hahaha!
I'm interested.
Tom

Utica, NY

#9 Nov 11, 2013
This story seems to have died down already. Why isn't the Observer Dispatch doing a full story on this? Who are the Board of Directors? How much do the other Board members get paid a year?
Geno

Utica, NY

#10 Nov 11, 2013
Tom wrote:
This story seems to have died down already. Why isn't the Observer Dispatch doing a full story on this? Who are the Board of Directors? How much do the other Board members get paid a year?
You are spot on. There will be a buyout, or shak-up of the board and upper management within one year.

Only reason why stock is rising is because of the potential for a buy-out.

Bottom line will be immediately improved by getting rid of outrageous management perks, salaries, and payouts. Management basically called out as inept.

Good bye to Utica if these guys are bought out though :-(
facts

New Britain, CT

#11 Nov 11, 2013
No story here. It was written up to intimidate and encourage the company to sell. The fact is the company keeps jobs in the MV and could do much better if it relocated. Cost of doing business in New York and Utica is outrageous and makes poor business sense. Losing Con Med would mean a loss of many local property/sales taxes both they and their employees pay. Pick and choose your battles on this one wisely.
Contact

Mount Vernon, NY

#12 Nov 12, 2013
Neurologist wrote:
<quoted text>
I'm interested.
Contact? I'll talk to him however he's got 2 groups in mind as it is.
Not so

Newark, NJ

#13 Nov 12, 2013
facts wrote:
No story here. It was written up to intimidate and encourage the company to sell. The fact is the company keeps jobs in the MV and could do much better if it relocated. Cost of doing business in New York and Utica is outrageous and makes poor business sense. Losing Con Med would mean a loss of many local property/sales taxes both they and their employees pay. Pick and choose your battles on this one wisely.
The cost of doing business isn't is much as one thinks. The state incentivizes companies to stay here and it's packages are just as competitive as any other state . The problem with Conmed is the leadership. Given its past performance it will fail anywhere. It's a good ship, just a bad captain and crew. He's totally inept. Doesn't have an interest in the business and as soon as the father passes , he'll sell to the first bidder
CONMED Territory Dictator

Cleveland, OH

#14 Mar 20, 2014
I just interviewed with a guy from CONMED (associate-entry level pos.) who thought he was a fukn doctor. Cringed at the word "Sales" continued to rip on people in pharma sales. Used a very condescending tone towards me because "I knew nothing about med sales" which wasn't even discussed. I was promoted heavily by recruiter after phone conversation because of my professional background and wonderful phone conversation. He was very direspectful in a condascending way using giggles and hollow perceptions. I barely said 2 words! CONMED preaches "join our team" "we will train you" "Athletic backgrounds a plus." This guy was the absolute opposite!! He shunned at my resume refuting my Master's of Science degree from an accredited school. I asked him about "Team".. he didn't acknowledge. I asked him about a product.. He rambled on about working hands on with Harvard doctors. I mean.. the position payed 40k with no benefits which is terrible when viewed next to their competitors. He told me maybe come back in a year... dafuq? I was in a good job stemming from a great career in sports making 80k just trying to get my foot in door with med sales. Dude was a GRADE A Jerkoff. I called the recruiter right after and played her a recording of our interview (yes i voice recorded the whole thing on my phone to diagnose it after). She was very apologetic and dissapointed for me. An hour passed an the man (DICTATOR) cowardly called me for a ride along!? I laughed and said "No thanks, your company does not have the culture and teamwork success I am looking for." Clearly the recruiter gave him the 3rd degree about how he represented himself and the company. Absolute disaster. Then I read the reviews on CONMED and realized how fowl of a reputation they have. No surprise. Anyway.. got hired by Stryker about 1 month after. The hiring process was challenging but fun and rewarding. CONMED is a joke and that dude can suk on a phat one.
Joker

Utica, NY

#15 Mar 20, 2014
40k with no benies!!! You might as well use your masters degree to wipe your ass with and get a job at McDonalds.

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