PART I FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents CONMED CORPORATION's unaudited consolidated condensed financial statements as of June 30, 2023, including statements of comprehensive income (loss), balance sheets, statements of shareholders' equity, and cash flows, providing an overview of the company's financial performance and position during the reporting period [Consolidated Condensed Statements of Comprehensive Income (Loss)](index=3&type=section&id=Consolidated%20Condensed%20Statements%20of%20Comprehensive%20Income%20(Loss)) Statements of Comprehensive Income (Loss) | Metric (USD in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :---------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Sales | 317,652 | 277,190 | 613,121 | 519,516 | | Cost of Sales | 146,962 | 125,413 | 287,110 | 231,748 | | Gross Profit | 170,690 | 151,777 | 326,011 | 287,768 | | Operating Expenses | 143,272 | 127,319 | 285,894 | 240,866 | | Operating Income | 27,418 | 24,458 | 40,117 | 46,902 | | Interest Expense | 9,997 | 5,928 | 20,252 | 10,926 | | Other Expense | — | 112,011 | — | 112,011 | | Income (Loss) Before Income Taxes | 17,421 | (93,481) | 19,865 | (76,035) | | Provision for Income Taxes | 3,689 | 74,810 | 4,314 | 77,281 | | Net Income (Loss) | 13,732 | (168,291) | 15,551 | (153,316) | | Comprehensive Income (Loss) | 15,767 | (172,636) | 20,462 | (156,221) | | Basic Earnings Per Share | 0.45 | (5.65) | 0.51 | (5.18) | | Diluted Earnings Per Share | 0.43 | (5.65) | 0.49 | (5.18) | [Consolidated Condensed Balance Sheets](index=4&type=section&id=Consolidated%20Condensed%20Balance%20Sheets) Balance Sheets | Metric (USD in thousands) | June 30, 2023 | December 31, 2022 | | :---------------------- | :------------ | :---------------- | | **Assets** | | | | Cash and Cash Equivalents | 27,848 | 28,942 | | Accounts Receivable, Net | 229,256 | 191,345 | | Inventories | 327,309 | 332,320 | | Total Current Assets | 615,522 | 581,226 | | Property, Plant and Equipment, Net | 116,788 | 115,611 | | Goodwill | 815,634 | 815,429 | | Other Intangible Assets, Net | 665,584 | 681,799 | | Total Assets | 2,322,722 | 2,297,592 | | **Liabilities and Shareholders' Equity** | | | | Total Current Liabilities | 353,169 | 296,552 | | Long-Term Debt | 971,475 | 985,076 | | Deferred Income Taxes | 66,081 | 66,725 | | Other Long-Term Liabilities | 151,803 | 203,694 | | Total Liabilities | 1,542,528 | 1,552,047 | | Total Shareholders' Equity | 780,194 | 745,545 | | Total Liabilities and Shareholders' Equity | 2,322,722 | 2,297,592 | [Consolidated Condensed Statements of Shareholders' Equity](index=5&type=section&id=Consolidated%20Condensed%20Statements%20of%20Shareholders'%20Equity) Changes in Shareholders' Equity | Metric (USD in thousands) | June 30, 2023 | December 31, 2022 | | :---------------------- | :------------ | :---------------- | | Total Shareholders' Equity | 780,194 | 745,545 | | Net Income | 13,732 | 1,819 | | Net Gain on Cash Flow Hedges | 503 | 877 | | Net Pension Liability | 403 | 403 | | Foreign Currency Translation Adjustment | 1,129 | 1,596 | | Common Stock Issued Under Employee Plans | 11,697 | 2,600 | | Share-Based Compensation | 6,422 | 5,726 | | Dividends on Common Stock | (6,145) | (6,113) | [Consolidated Condensed Statements of Cash Flows](index=7&type=section&id=Consolidated%20Condensed%20Statements%20of%20Cash%20Flows) Statements of Cash Flows | Metric (USD in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :---------------------- | :----------------------------- | :----------------------------- | | Net Cash Provided by Operating Activities | 22,826 | 19,070 | | Net Cash Used in Investing Activities | (9,783) | (151,953) | | Net Cash Used in Financing Activities | (14,437) | 166,610 | | Cash and Cash Equivalents, End of Period | 27,848 | 53,152 | Consolidated Condensed Statements of Comprehensive Income (Loss) Key Data | Metric (USD in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :---------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Sales | 317,652 | 277,190 | 613,121 | 519,516 | | Cost of Sales | 146,962 | 125,413 | 287,110 | 231,748 | | Gross Profit | 170,690 | 151,777 | 326,011 | 287,768 | | Operating Expenses | 143,272 | 127,319 | 285,894 | 240,866 | | Operating Income | 27,418 | 24,458 | 40,117 | 46,902 | | Interest Expense | 9,997 | 5,928 | 20,252 | 10,926 | | Other Expense | — | 112,011 | — | 112,011 | | Income (Loss) Before Income Taxes | 17,421 | (93,481) | 19,865 | (76,035) | | Provision for Income Taxes | 3,689 | 74,810 | 4,314 | 77,281 | | Net Income (Loss) | 13,732 | (168,291) | 15,551 | (153,316) | | Comprehensive Income (Loss) | 15,767 | (172,636) | 20,462 | (156,221) | | Basic Earnings Per Share | 0.45 | (5.65) | 0.51 | (5.18) | | Diluted Earnings Per Share | 0.43 | (5.65) | 0.49 | (5.18) | Consolidated Condensed Balance Sheets Key Data | Metric (USD in thousands) | June 30, 2023 | December 31, 2022 | | :---------------------- | :------------ | :---------------- | | **Assets** | | | | Cash and Cash Equivalents | 27,848 | 28,942 | | Accounts Receivable, Net | 229,256 | 191,345 | | Inventories | 327,309 | 332,320 | | Total Current Assets | 615,522 | 581,226 | | Property, Plant and Equipment, Net | 116,788 | 115,611 | | Goodwill | 815,634 | 815,429 | | Other Intangible Assets, Net | 665,584 | 681,799 | | Total Assets | 2,322,722 | 2,297,592 | | **Liabilities and Shareholders' Equity** | | | | Total Current Liabilities | 353,169 | 296,552 | | Long-Term Debt | 971,475 | 985,076 | | Deferred Income Taxes | 66,081 | 66,725 | | Other Long-Term Liabilities | 151,803 | 203,694 | | Total Liabilities | 1,542,528 | 1,552,047 | | Total Shareholders' Equity | 780,194 | 745,545 | | Total Liabilities and Shareholders' Equity | 2,322,722 | 2,297,592 | Consolidated Condensed Cash Flow Statements Key Data | Metric (USD in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :---------------------- | :----------------------------- | :----------------------------- | | Net Cash Provided by Operating Activities | 22,826 | 19,070 | | Net Cash Used in Investing Activities | (9,783) | (151,953) | | Net Cash Used in Financing Activities | (14,437) | 166,610 | | Cash and Cash Equivalents, End of Period | 27,848 | 53,152 | [Notes to Consolidated Condensed Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Condensed%20Financial%20Statements) This section provides detailed notes to the consolidated condensed financial statements, covering key information such as company operations, accounting policies, new accounting pronouncements, business combinations, revenue recognition, comprehensive income, fair value of financial instruments, inventories, earnings per share, goodwill and other intangible assets, long-term debt, guarantees, pension plans, business segments, and legal proceedings, offering essential context and details for understanding the financial data [Note 1 - Operations](index=9&type=section&id=Note%201%20-%20Operations) - CONMED Corporation is a medical technology company providing surgical equipment and instruments for various specialties including orthopedics, general surgery, gynecology, thoracic, and gastroenterology[23](index=23&type=chunk) [Note 2 - Interim Financial Information](index=9&type=section&id=Note%202%20-%20Interim%20Financial%20Information) - Interim financial statements are prepared in accordance with GAAP and Form 10-Q instructions, including all normal recurring material adjustments, but do not contain all information and notes required for annual financial statements; management believes no specific events or circumstances as of July 27, 2023, require updating estimates or revising the carrying values of assets and liabilities[24](index=24&type=chunk)[25](index=25&type=chunk) [Note 3 - New Accounting Pronouncements](index=9&type=section&id=Note%203%20-%20New%20Accounting%20Pronouncements) - The company has not yet adopted ASU 2020-04 (extended by ASU 2022-06) issued by FASB, which provides guidance on reference rate reform; the company believes reference rate reform will not materially impact its consolidated financial statements as its senior credit agreement already includes provisions for LIBOR to SOFR transition[50](index=50&type=chunk) [Note 4 - Business Combinations](index=9&type=section&id=Note%204%20-%20Business%20Combinations) - On June 13, 2022, the company acquired In2Bones Global, Inc. for **$145.2 million** in cash, with potential contingent consideration up to **$110 million** based on revenue targets; on August 9, 2022, it acquired Biorez, Inc. for **$85.5 million** in cash, with potential contingent consideration up to **$165 million** based on revenue targets, both financed through cash on hand and long-term borrowings[51](index=51&type=chunk)[53](index=53&type=chunk) [Note 5 - Revenues](index=11&type=section&id=Note%205%20-%20Revenues) Net Sales by Geographic Market and Product Line (Six Months) | Market/Product Line | Six Months Ended June 30, 2023 (USD in thousands) | Six Months Ended June 30, 2022 (USD in thousands) | | :------------------ | :---------------------------------------------- | :---------------------------------------------- | | **Primary Geographic Markets** | | | | United States | 339,257 | 280,409 | | Europe, Middle East, and Africa | 114,298 | 104,835 | | Asia Pacific | 98,713 | 80,246 | | Americas (Excluding U.S.) | 60,853 | 54,026 | | **Product Line** | | | | Orthopedic Surgery | 271,966 | 227,698 | | General Surgery | 341,155 | 291,818 | | **Revenue Recognition Timing** | | | | Goods Transferred at a Point in Time | 589,011 | 497,037 | | Services Transferred Over Time | 24,110 | 22,479 | | Total Sales | 613,121 | 519,516 | Contract Liabilities Balance | Metric (USD in thousands) | June 30, 2023 | December 31, 2022 | | :---------------------- | :------------ | :---------------- | | Contract Liabilities | 18,604 | 19,114 | - Revenue recognized from beginning contract liabilities for the six months ended June 30, 2023, was **$7.6 million**, compared to **$7.0 million** for the same period in 2022[55](index=55&type=chunk) [Note 6 - Comprehensive Income (Loss)](index=12&type=section&id=Note%206%20-%20Comprehensive%20Income%20(Loss)) Components of Comprehensive Income (Loss) | Metric (USD in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :---------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income (Loss) | 13,732 | (168,291) | 15,551 | (153,316) | | Net Gain on Cash Flow Hedges | 503 | 4,662 | 1,381 | 5,744 | | Net Pension Liability | 403 | 490 | 806 | 1,012 | | Foreign Currency Translation Adjustment | 1,129 | (9,497) | 2,724 | (9,661) | | Comprehensive Income (Loss) | 15,767 | (172,636) | 20,462 | (156,221) | Accumulated Other Comprehensive Income (Loss) | Metric (USD in thousands) | June 30, 2023 | December 31, 2022 | | :---------------------- | :------------ | :---------------- | | Cash Flow Hedges Gain (Loss) | 3,878 | 2,497 | | Pension Liability | (22,943) | (23,749) | | Cumulative Translation Adjustment | (33,882) | (36,606) | | Accumulated Other Comprehensive Income (Loss) | (52,947) | (57,858) | [Note 7 - Fair Value of Financial Instruments](index=13&type=section&id=Note%207%20-%20Fair%20Value%20of%20Financial%20Instruments) - The company engages in derivative transactions solely for risk management, primarily using forward contracts to hedge foreign currency exposure and designating them as cash flow hedges; as of June 30, 2023, the notional amount of forward foreign exchange contracts designated as cash flow hedges was **$214,933 thousand**, and non-designated contracts were **$80,528 thousand**[58](index=58&type=chunk)[59](index=59&type=chunk)[60](index=60&type=chunk) Fair Value of Derivative Instruments | Metric (USD in thousands) | Fair Value of Assets as of June 30, 2023 | Fair Value of Liabilities as of June 30, 2023 | Net Fair Value as of June 30, 2023 | | :---------------------- | :--------------------------------------- | :------------------------------------------ | :--------------------------------- | | Hedge-Designated Forward Foreign Exchange Contracts | 8,085 | (2,967) | 5,118 | | Non-Hedge-Designated Forward Foreign Exchange Contracts | 15 | (224) | (209) | | Total Derivative Instruments | 8,100 | (3,191) | 4,909 | - The company values contingent consideration for the In2Bones and Biorez acquisitions using Level 3 inputs, primarily based on expected payment dates, discount rates, revenue volatility, and projected revenues; as of June 30, 2023, total contingent consideration was **$190,231 thousand**[143](index=143&type=chunk)[117](index=117&type=chunk) [Note 8 - Inventories](index=17&type=section&id=Note%208%20-%20Inventories) Inventory Composition | Metric (USD in thousands) | June 30, 2023 | December 31, 2022 | | :---------------------- | :------------ | :---------------- | | Raw Materials | 123,951 | 110,677 | | Work-in-Process | 27,797 | 26,166 | | Finished Goods | 175,561 | 195,477 | | Total | 327,309 | 332,320 | [Note 9 - Earnings (Loss) Per Share](index=17&type=section&id=Note%209%20-%20Earnings%20(Loss)%20Per%20Share) Earnings (Loss) Per Share Calculation | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income (Loss) (USD in thousands) | 13,732 | (168,291) | 15,551 | (153,316) | | Basic Earnings Per Share (USD) | 0.45 | (5.65) | 0.51 | (5.18) | | Diluted Earnings Per Share (USD) | 0.43 | (5.65) | 0.49 | (5.18) | | Basic Weighted Average Common Shares Outstanding (Thousands of shares) | 30,662 | 29,775 | 30,587 | 29,601 | | Diluted Weighted Average Common Shares Outstanding (Thousands of shares) | 31,795 | 29,775 | 31,499 | 29,601 | - Due to the company's net loss in 2022, potential dilutive shares were excluded from diluted earnings per share calculations; in 2023, approximately **1.8 million** (three months) and **1.7 million** (six months) anti-dilutive stock options and stock appreciation rights were excluded from diluted EPS calculations[146](index=146&type=chunk)[148](index=148&type=chunk) [Note 10 - Goodwill and Other Intangible Assets](index=18&type=section&id=Note%2010%20-%20Goodwill%20and%20Other%20Intangible%20Assets) Changes in Net Carrying Value of Goodwill | Metric (USD in thousands) | Amount | | :---------------------- | :----- | | Balance as of December 31, 2022 | 815,429 | | Foreign Currency Translation Adjustment | 205 | | Balance as of June 30, 2023 | 815,634 | Composition of Other Intangible Assets | Intangible Asset Category | Weighted-Average Amortization Period (Years) | Gross Carrying Amount as of June 30, 2023 (USD in thousands) | Accumulated Amortization as of June 30, 2023 (USD in thousands) | | :------------------------ | :------------------------------------------- | :----------------------------------------------------------- | :-------------------------------------------------------------- | | Customer and Distributor Relationships | 24 | 369,888 | (179,698) | | Sales Representative, Marketing, and Promotion Rights | 25 | 149,376 | (69,000) | | Developed Technology | 18 | 320,204 | (39,616) | | Patents and Other Intangible Assets | 16 | 81,139 | (53,253) | | Trademarks and Trade Names | Indefinite | 86,544 | — | | Total | | 1,007,151 | (341,567) | - Intangible asset amortization expense for the three and six months ended June 30, 2023, was **$8.8 million** and **$17.6 million**, respectively, primarily recognized in selling and administrative expenses and as a reduction of revenue[123](index=123&type=chunk) [Note 11 - Long-Term Debt](index=20&type=section&id=Note%2011%20-%20Long-Term%20Debt) Long-Term Debt Composition | Debt Type (USD in thousands) | June 30, 2023 | December 31, 2022 | | :------------------------- | :------------ | :---------------- | | Revolving Credit Facility | 54,000 | 70,000 | | Term Loan, Net | 133,961 | 133,858 | | 2.625% Convertible Senior Notes, Net | 69,768 | 69,568 | | 2.250% Convertible Senior Notes, Net | 783,292 | 781,166 | | Finance Leases | 86 | 230 | | Total Debt | 1,041,107 | 1,054,822 | | Less: Current Portion | 69,632 | 69,746 | | Total Long-Term Debt | 971,475 | 985,076 | - As of June 30, 2023, outstanding borrowings under the term loan were **$134.6 million**, revolving credit facility borrowings were **$54.0 million**, and available borrowing capacity was **$529.4 million**; the company is in full compliance with covenants and restrictions under its senior credit agreement[126](index=126&type=chunk)[153](index=153&type=chunk) - In June 2022, the company repurchased and cancelled **$275 million** principal amount of its 2.625% Convertible Senior Notes and issued **$800 million** principal amount of 2.250% Convertible Senior Notes, used to repurchase a portion of the 2.625% notes, repay revolving credit facility, repay term loan, and partially fund the In2Bones acquisition[155](index=155&type=chunk)[157](index=157&type=chunk) [Note 12 - Guarantees](index=22&type=section&id=Note%2012%20-%20Guarantees) - The company provides standard and extended warranties on its products, with standard warranties typically lasting one year and extended warranties one to three years; as of June 30, 2023, the standard warranty liability balance was **$1.871 million**[136](index=136&type=chunk)[163](index=163&type=chunk) [Note 13 - Pension Plan](index=23&type=section&id=Note%2013%20-%20Pension%20Plan) Net Periodic Pension Cost | Metric (USD in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :---------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Service Cost | 194 | 269 | 388 | 538 | | Interest Cost on Projected Benefit Obligation | 911 | 537 | 1,822 | 1,074 | | Expected Return on Plan Assets | (1,032) | (1,324) | (2,064) | (2,648) | | Net Amortization and Deferral | 532 | 648 | 1,064 | 1,296 | | Net Periodic Pension Cost | 605 | 130 | 1,210 | 260 | - The company does not anticipate making any pension contributions in 2023; non-service pension costs/(benefits) were not material for the three and six months ended June 30, 2023, and 2022[139](index=139&type=chunk) [Note 14 - Business Segment](index=23&type=section&id=Note%2014%20-%20Business%20Segment) - The company accounts for and reports as a single operating segment entity, engaged globally in the development, manufacture, and sale of surgical instruments and related equipment, with product lines including orthopedic surgery and general surgery[164](index=164&type=chunk) Consolidated Net Sales by Product Line | Product Line (USD in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :---------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Orthopedic Surgery | 140,790 | 120,182 | 271,966 | 227,698 | | General Surgery | 176,862 | 157,008 | 341,155 | 291,818 | | Consolidated Net Sales | 317,652 | 277,190 | 613,121 | 519,516 | [Note 15 - Legal Proceedings](index=23&type=section&id=Note%2015%20-%20Legal%20Proceedings) - The company faces various enforcement actions related to interactions with medical device manufacturers and healthcare providers, as well as claims related to product liability, patent infringement, and environmental regulations; the company is defending two lawsuits in Georgia state court related to ethylene oxide exposure and has obtained insurance coverage for indemnity claims[141](index=141&type=chunk)[142](index=142&type=chunk)[167](index=167&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk) - The Italian government enacted a medical device tax law in 2015, taxing revenues from sales to public hospitals; the company is challenging the imposition of this tax, arguing the law was never properly implemented, and currently cannot estimate the range of potential loss nor has it recorded related expenses[199](index=199&type=chunk)[200](index=200&type=chunk) PART II OTHER INFORMATION [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's discussion and analysis of the company's financial condition and results of operations, covering forward-looking statements, business overview, macroeconomic environment impact, critical accounting policies, consolidated results of operations, and liquidity and capital resources, detailing financial performance, key drivers, and future outlook for the reporting period [Overview](index=27&type=section&id=Overview) - CONMED Corporation is a medical technology company providing surgical equipment and instruments, with approximately **84%** of revenue derived from single-use product sales; international sales accounted for **45%** of consolidated net sales in the first half of 2023 and **46%** in the first half of 2022[176](index=176&type=chunk)[177](index=177&type=chunk) - The company continues to be impacted by the macroeconomic environment, facing inflationary pressures and supply chain challenges leading to increased manufacturing and operating costs, which are expected to persist into 2023; a warehouse management system implemented in Q4 2022 caused shipping delays and increased costs, but significantly improved in the first half of 2023[178](index=178&type=chunk)[179](index=179&type=chunk) [Consolidated Results of Operations](index=28&type=section&id=Consolidated%20Results%20of%20Operations) Consolidated Results of Operations as a Percentage of Net Sales | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Sales | 100.0 % | 100.0 % | 100.0 % | 100.0 % | | Cost of Sales | 46.3 % | 45.2 % | 46.8 % | 44.6 % | | Gross Profit | 53.7 % | 54.8 % | 53.2 % | 55.4 % | | Selling and Administrative Expense | 40.8 % | 41.8 % | 42.4 % | 42.1 % | | Research and Development Expense | 4.3 % | 4.1 % | 4.3 % | 4.3 % | | Operating Income | 8.6 % | 8.8 % | 6.5 % | 9.0 % | | Interest Expense | 3.1 % | 2.1 % | 3.3 % | 2.1 % | | Other Expense | — | 40.4 % | — | 21.6 % | | Income (Loss) Before Income Taxes | 5.5 % | (33.7)% | 3.2 % | (14.6)% | | Provision for Income Taxes | 1.2 % | 27.0 % | 0.7 % | 14.9 % | | Net Income (Loss) | 4.3 % | (60.7)% | 2.5 % | (29.5)% | [Net Sales](index=29&type=section&id=Net%20Sales) - Net sales increased by **14.6%** and **18.0%** for the three and six months ended June 30, 2023, respectively, primarily driven by products acquired from In2Bones and Biorez, growth in existing product lines, and significant improvements in warehouse management system performance[184](index=184&type=chunk) Net Sales Growth by Product Line (Six Months) | Product Line | 2023 (USD in millions) | 2022 (USD in millions) | Reported Growth Rate | Foreign Currency Impact | Constant Currency Growth Rate | | :----------- | :--------------------- | :--------------------- | :------------------- | :---------------------- | :---------------------------- | | Orthopedic Surgery | 272.0 | 227.7 | 19.4 % | 3.3 % | 22.7 % | | General Surgery | 341.1 | 291.8 | 16.9 % | 2.0 % | 18.9 % | | Net Sales | 613.1 | 519.5 | 18.0 % | 2.6 % | 20.6 % | | Single-Use Products | 514.0 | 431.8 | 19.0 % | 2.6 % | 21.6 % | | Capital Products | 99.1 | 87.7 | 13.0 % | 2.6 % | 15.6 % | - Orthopedic surgery sales grew by **17.1%** and **19.4%** for the three and six months, respectively, while general surgery sales increased by **12.6%** and **16.9%**, respectively[211](index=211&type=chunk)[230](index=230&type=chunk) [Cost of Sales](index=29&type=section&id=Cost%20of%20Sales) - Cost of sales increased to **$147 million** and **$287.1 million** for the three and six months ended June 30, 2023, respectively; gross margin decreased by **110 basis points to 53.7%** and **220 basis points to 53.2%**, respectively, primarily due to rising inflation in raw materials, freight, and other manufacturing costs, and increased inventory fair value amortization costs related to the In2Bones acquisition[185](index=185&type=chunk)[231](index=231&type=chunk) [Selling and Administrative Expense](index=30&type=section&id=Selling%20and%20Administrative%20Expense) - Selling and administrative expenses increased to **$129.7 million** and **$259.8 million** for the three and six months ended June 30, 2023, respectively; the increase was primarily due to new warehouse management system implementation costs, distribution agreement termination costs, contingent consideration fair value adjustments, and severance-related expenses[213](index=213&type=chunk)[251](index=251&type=chunk) - Selling and administrative expenses as a percentage of net sales decreased by **100 basis points to 40.8%** for the three months and increased by **30 basis points to 42.4%** for the six months[213](index=213&type=chunk) [Research and Development Expense](index=30&type=section&id=Research%20and%20Development%20Expense) - Research and development expenses increased to **$13.6 million** and **$26.1 million** for the three and six months ended June 30, 2023, respectively; as a percentage of net sales, it increased by **20 basis points to 4.3%** for the three months and remained unchanged at **4.3%** for the six months, primarily influenced by the timing of R&D projects[233](index=233&type=chunk) [Interest Expense](index=30&type=section&id=Interest%20Expense) - Interest expense increased to **$10.0 million** and **$20.3 million** for the three and six months ended June 30, 2023, respectively; the weighted-average borrowing rate increased from **2.37% to 3.09%** for the three months and from **2.30% to 3.11%** for the six months, primarily driven by the issuance of 2.250% notes in June 2022 and higher interest rates on the senior credit agreement[88](index=88&type=chunk) [Other Expense](index=30&type=section&id=Other%20Expense) - For the three and six months ended June 30, 2022, the company recorded **$103.1 million** in convertible premium expense for notes repurchased and cancelled, **$5.5 million** in hedge settlement expense, and **$3.4 million** in deferred financing cost write-offs[234](index=234&type=chunk) [Provision for Income Taxes](index=31&type=section&id=Provision%20for%20Income%20Taxes) - Effective tax rates for the three and six months ended June 30, 2023, were **21.2%** and **21.7%**, respectively, compared to **(80.0)%** and **(101.6)%** for the same periods in 2022; the change in rates is primarily due to the comparison of income before taxes in 2023 versus losses before taxes in 2022, which included non-deductible convertible premium and hedge fair value changes[216](index=216&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) - The company's liquidity needs primarily stem from capital investments, working capital requirements, and debt service; management believes cash flows from operating activities, existing cash and cash equivalents, and available borrowing capacity under the senior credit agreement are sufficient to meet foreseeable operating working capital, debt service, capital expenditure, dividend payment, and common stock repurchase requirements[91](index=91&type=chunk)[219](index=219&type=chunk) [Operating Cash Flows](index=31&type=section&id=Operating%20Cash%20Flows) - Net cash provided by operating activities for the six months ended June 30, 2023, was **$22.8 million**, compared to **$19.1 million** for the same period in 2022; key changes include decreased cash flow from accounts receivable, increased cash flow from inventories, decreased cash flow from other assets, increased cash flow from accounts payable, and decreased cash flow from other liabilities[252](index=252&type=chunk)[218](index=218&type=chunk) [Investing Cash Flows](index=32&type=section&id=Investing%20Cash%20Flows) - Net cash used in investing activities decreased by **$142.2 million** for the six months ended June 30, 2023, primarily due to **$142.6 million** paid for the In2Bones acquisition in 2022[93](index=93&type=chunk) [Financing Cash Flows](index=32&type=section&id=Financing%20Cash%20Flows) - Net cash used in financing activities for the six months ended June 30, 2023, was **$14.4 million**, compared to **$166.6 million** for the same period in 2022; key changes include reduced net repayments on the revolving credit facility, **$800 million** proceeds from 2.250% notes in 2022, **$275 million** paid to repurchase 2.625% notes in 2022, **$187.6 million** paid for hedge transactions in 2022, and increased net cash proceeds from common stock issued under employee plans in 2023[219](index=219&type=chunk)[94](index=94&type=chunk) [Other Liquidity Matters](index=32&type=section&id=Other%20Liquidity%20Matters) - As of June 30, 2023, outstanding borrowings under the term loan were **$134.6 million**, revolving credit facility borrowings were **$54.0 million**, and available borrowing capacity was **$529.4 million**; the company's Board of Directors authorized a **$200 million** stock repurchase program, with **$162.6 million** repurchased as of June 30, 2023, leaving **$37.4 million** available for repurchase[240](index=240&type=chunk)[241](index=241&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discloses quantitative and qualitative information regarding the company's market risks; as of the end of the reporting period, there were no material changes in the company's primary market risk exposures or management approaches - For the six months ended June 30, 2023, there were no material changes in the company's primary market risk exposures or management approaches[242](index=242&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) This section assesses the effectiveness of the company's disclosure controls and procedures and the status of internal control over financial reporting; management believes that as of the end of the reporting period, the company's disclosure controls and procedures were effective, and no material changes occurred in internal control over financial reporting - As of June 30, 2023, the company's Chief Executive Officer and Chief Financial Officer evaluated and concluded that disclosure controls and procedures were effective; no material changes occurred in internal control over financial reporting during the quarter[98](index=98&type=chunk) [Item 5. Other Information](index=33&type=section&id=Item%205.%20Other%20Information) This section provides other important information not detailed elsewhere in the report, including an executive's stock appreciation rights trading plan - On May 4, 2023, Heather Cohen, Executive Vice President, Chief Human Resources and Legal Officer, adopted a trading plan for **6,500** Stock Appreciation Rights (SARs) designed to satisfy the affirmative defense requirements of Rule 10b5-1(c), terminating on May 17, 2024[223](index=223&type=chunk) [Item 6. Exhibits](index=34&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the report, including various certification documents and XBRL files - Exhibits include certifications by the Chief Executive Officer and Chief Financial Officer filed pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, and XBRL taxonomy extension files (Schema, Label, Calculation, Presentation Linkbase Document, and Instance Document)[101](index=101&type=chunk)[102](index=102&type=chunk)[225](index=225&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk)[246](index=246&type=chunk) [Signatures](index=35&type=section&id=Signatures) This section confirms the report has been signed by the registrant's authorized representative and specifies the signing date - This report was signed by Todd W. Garner, Executive Vice President and Chief Financial Officer of CONMED CORPORATION, on July 27, 2023[103](index=103&type=chunk)[248](index=248&type=chunk)

Financial Performance & Guidance - CONMED increased full-year adjusted cash EPS guidance to $3.30 - $3.50, including a $0.20 - $0.25 FX headwind[5] - The company increased full-year revenue guidance to $1.205 billion - $1.250 billion, which includes currency headwinds estimated between 150 to 200 basis points[17] - Q1 2023 worldwide revenue was $295.5 million[13], representing a 21.9% year-over-year increase as reported and a 25.1% increase in constant currency, with recent acquisitions contributing 570 basis points to revenue growth[15] - Q1 2023 GAAP EPS was $0.06, compared to $0.47 in the prior year period[15], while adjusted EPS was $0.66, a 5.7% decrease from the prior year period[15] Revenue Breakdown - Domestic revenue accounted for $164.6 million, while international revenue was $130.9 million, representing 56% and 44% of total revenue, respectively[14] - Single-use products generated $249.3 million in revenue, while capital products contributed $46.2 million[52], with single-use products accounting for 84% of the total[52] - Orthopedic Surgery revenue was $131.2 million, and General Surgery revenue was $164.3 million[13] Strategic Initiatives & Market Focus - The company is focused on increasing market share in large and attractive markets[32] - CONMED is evolving its product mix toward higher-growth, higher-margin offerings[48] - CONMED implemented a Warehouse Management Software System (WMS) in Q4 2022, which caused shipping delays but is expected to increase capacity and efficiency[18]

CONMED Corporation (NYSE:CNMD) Q1 2023 Results Earnings Conference Call April 27, 2023 4:30 PM ET Company Participants Curt Hartman - Chair of the Board, President, and Chief Executive Officer Todd Garner - Executive Vice President and Chief Financial Officer Conference Call Participants Rick Wise - Stifel Financial Lilia-Celine Lozada - J.P. Morgan Ian Tolle - Bank of America Securities Vik Chopra - Wells Fargo Corporate & Investment Banking Matthew O'Brien - Piper Sandler Mike Matson - Needham & Company M ...

[PART I FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The unaudited consolidated condensed financial statements for Q1 2023 show a **21.9%** net sales increase to **$295.5 million**, but net income significantly decreased to **$1.8 million** due to higher costs and expenses, with total assets growing to **$2.32 billion** and operating cash flow turning negative at **($3.8) million** [Consolidated Condensed Statements of Comprehensive Income](index=3&type=section&id=Consolidated%20Condensed%20Statements%20of%20Comprehensive%20Income) For Q1 2023, net sales increased to **$295.5 million**, but operating income fell sharply to **$12.7 million**, and net income dropped to **$1.8 million**, resulting in diluted EPS of **$0.06** | Financial Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $295,468 | $242,327 | 21.9% | | Gross Profit | $155,321 | $135,991 | 14.2% | | Income from Operations | $12,699 | $22,444 | -43.4% | | Net Income | $1,819 | $14,975 | -87.9% | | Diluted EPS | $0.06 | $0.47 | -87.2% | [Consolidated Condensed Balance Sheets](index=4&type=section&id=Consolidated%20Condensed%20Balance%20Sheets) As of March 31, 2023, total assets reached **$2.32 billion**, with increases in accounts receivable and inventories, while total liabilities rose to **$1.57 billion** and shareholders' equity increased to **$752.5 million** | Balance Sheet Item | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $26,494 | $28,942 | | Total current assets | $610,088 | $581,226 | | Goodwill | $815,499 | $815,429 | | **Total Assets** | **$2,320,120** | **$2,297,592** | | **Liabilities & Equity** | | | | Total current liabilities | $320,686 | $296,552 | | Long-term debt | $995,276 | $985,076 | | **Total Liabilities** | **$1,567,667** | **$1,552,047** | | **Total Shareholders' Equity** | **$752,453** | **$745,545** | [Consolidated Condensed Statements of Cash Flows](index=6&type=section&id=Consolidated%20Condensed%20Statements%20of%20Cash%20Flows) Net cash used in operating activities was **($3.8) million** for Q1 2023, a significant decrease from the prior year, primarily due to lower net income and unfavorable working capital changes, while financing activities provided **$5.4 million** | Cash Flow Activity | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(3,847) | $328 | | Net cash used in investing activities | $(4,254) | $(3,687) | | Net cash provided by financing activities | $5,350 | $7,489 | | **Net (decrease) increase in cash** | **$(2,448)** | **$4,017** | [Notes to Consolidated Condensed Financial Statements](index=7&type=section&id=Notes%20to%20Consolidated%20Condensed%20Financial%20Statements) The notes detail key accounting policies, including the impact of 2022 acquisitions, revenue breakdown by segment, long-term debt structure, and the company's single business segment operation - The acquisitions of In2Bones and Biorez in 2022 are in preliminary purchase price allocation, with In2Bones contributing **$11.8 million** in net sales in Q1 2023, while Biorez sales were immaterial[79](index=79&type=chunk)[82](index=82&type=chunk)[84](index=84&type=chunk) - The company uses forward foreign exchange contracts to hedge currency fluctuations for intercompany sales and receivables, with **$199.0 million** notional amount outstanding as of March 31, 2023[61](index=61&type=chunk)[63](index=63&type=chunk)[91](index=91&type=chunk) - Total long-term debt as of March 31, 2023, was approximately **$1.06 billion**, primarily comprising a term loan, revolving credit facility, and two series of convertible notes[36](index=36&type=chunk) Revenue by Product Line | Revenue by Product Line | Q1 2023 (in thousands) | Q1 2022 (in thousands) | | :--- | :--- | :--- | | Orthopedic Surgery | $131,175 | $107,517 | | General Surgery | $164,293 | $134,810 | | **Total Sales** | **$295,468** | **$242,327** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the **21.9% sales growth** in Q1 2023 to reduced shipping delays and acquisitions, but gross margin declined by **350 basis points** due to inflation and acquisition costs, while liquidity is supported by **$504.2 million** available on the revolving credit facility [Consolidated Results of Operations](index=24&type=section&id=Consolidated%20Results%20of%20Operations) Net sales increased **21.9%** (25.1% in constant currency) for Q1 2023, driven by both Orthopedic and General Surgery segments, while gross profit margin fell to **52.6%**, and interest expense doubled to **$10.3 million** Product Line Sales | Product Line | Q1 2023 Sales (in millions) | As Reported % Change | Constant Currency % Change | | :--- | :--- | :--- | :--- | | Orthopedic surgery | $131.2 | 22.0% | 26.0% | | General surgery | $164.3 | 21.9% | 24.4% | | **Total Net sales** | **$295.5** | **21.9%** | **25.1%** | - Gross profit margins decreased by **350 basis points** from 56.1% to 52.6%, primarily due to inflation in raw materials, freight, and production costs, alongside **$2.1 million** in amortization of inventory step-up from the In2Bones acquisition[130](index=130&type=chunk) - The increase in Selling and Administrative expense was mainly driven by non-recurring costs, including **$4.4 million** for fair value adjustments to contingent consideration and **$4.3 million** for new warehouse management system implementation[126](index=126&type=chunk)[131](index=131&type=chunk) - Interest expense increased from **$5.0 million** to **$10.3 million** year-over-year, primarily due to the issuance of 2.250% Convertible Notes in June 2022 and higher interest rates on the senior credit agreement[133](index=133&type=chunk) [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) Net cash used in operating activities was **$3.8 million** for Q1 2023, a decline from the prior year, with **$504.2 million** available on the revolving credit facility and **$37.4 million** remaining for share repurchases - Net cash used in operating activities was **$3.8 million** in Q1 2023, compared to net cash provided of **$0.3 million** in Q1 2022, primarily due to lower net income and an increase in accounts receivable[139](index=139&type=chunk)[140](index=140&type=chunk) - As of March 31, 2023, the company had **$504.2 million** in available borrowings on its revolving credit facility and was in full compliance with all debt covenants[145](index=145&type=chunk)[146](index=146&type=chunk) - The company's share repurchase program has **$37.4 million** remaining under its **$200.0 million** authorization, with no shares repurchased during Q1 2023[149](index=149&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) There were no significant changes in the company's primary market risk exposures or their management during the three months ended March 31, 2023 - There were no significant changes in the company's primary market risk exposures, which include interest rate risk and foreign currency exchange risk, during the first quarter of 2023[151](index=151&type=chunk) [Item 4. Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report (March 31, 2023)[152](index=152&type=chunk) [PART II OTHER INFORMATION](index=28&type=section&id=PART%20II%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=28&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in lawsuits related to Ethylene Oxide exposure and is challenging an Italian medical device tax, but does not anticipate a material adverse effect on its financial condition - CONMED is defending two lawsuits in Georgia related to alleged personal injury from Ethylene Oxide exposure, with claims of **44 out of 51 plaintiffs** dismissed in one action, and strong defenses for remaining claims[101](index=101&type=chunk)[102](index=102&type=chunk) - The company is challenging a medical device tax passed by the Italian government in 2015, with payment postponed pending court rulings on the law's constitutionality, and no amounts remitted to date[105](index=105&type=chunk) - The company maintains commercial product liability insurance of **$35 million** per incident and in aggregate annually, which it believes is adequate[96](index=96&type=chunk) [Item 6. Exhibits](index=29&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications required by the Sarbanes-Oxley Act of 2002 and XBRL data files - Exhibits filed with the report include CEO and CFO certifications as required by the Sarbanes-Oxley Act of 2002 (Sections 302 and 906)[157](index=157&type=chunk)[158](index=158&type=chunk) [Signatures](index=30&type=section&id=Signatures) The report was duly signed on April 27, 2023, by Todd W. Garner, Executive Vice President and Chief Financial Officer of CONMED Corporation - The Form 10-Q was signed on April 27, 2023, by Todd W. Garner, Executive Vice President and Chief Financial Officer[161](index=161&type=chunk)[163](index=163&type=chunk)

Common Stock, $0.01 par value CNMD NYSE Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorte ...

CONMED Corporation (NYSE:CNMD) Q4 2022 Earnings Conference Call February 2, 2023 4:30 PM ET Company Participants Curt Hartman - Chair of the Board, President, and Chief Executive Officer Todd Garner - Executive Vice President and Chief Financial Officer Conference Call Participants Travis Steed - Bank of America Securities Robbie Marcus - JPMorgan Rick Wise - Stifel Matt O'Brien - Piper Sandler Young Li - Jefferies Mike Matson - Needham Matthew Mishan - KeyBanc Operator Good afternoon, everyone. Before the ...

Investor Presentation Curt R. Hartman Chair of the Board, President, and Chief Executive Officer Todd W. Garner Executive Vice President and Chief Financial Officer November 15, 2022 Forward-Looking Information This presentation contains forward-looking statements based on certain assumptions and contingencies that involve risks and uncertainties. The 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 ...

CONMED Corporation (NYSE:CNMD) Q3 2022 Earnings Conference Call October 26, 2022 4:30 PM ET Company Representatives Curt Hartman - Chair of the Board, President, Chief Executive Officer Todd Garner - Executive Vice President, Chief Financial Officer Conference Call Participants Mike Matson - Needham Young Li - Jefferies Robbie Marcus - J.P. Morgan Matthew Mishan - KeyBanc Matt O'Brien - Piper Sandler Rick Wise - Stifel Travis Steed - Bank of America Securities Operator Good afternoon, everyone. Before the c ...

Investor Presentation Q3 2022 Earnings Curt R. Hartman Chair of the Board, President, and Chief Executive Officer Todd W. Garner Executive Vice President and Chief Financial Officer October 26, 2022 Forward-Looking Information This presentation contains forward-looking statements based on certain assumptions and contingencies that involve risks and uncertainties. The forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and relate ...

[Filing Information](index=1&type=section&id=Filing%20Information) Provides key administrative details about the Form 10-Q filing, including filer status, shares outstanding, and reporting period - CONMED CORPORATION is a **large accelerated filer**, as indicated by the check mark[3](index=3&type=chunk)[4](index=4&type=chunk) - The number of shares outstanding of registrant's common stock, as of October 24, 2022, is **30,482,412 shares**[4](index=4&type=chunk) - The report is a **Form 10-Q** for the quarterly period ended **September 30, 2022**[5](index=5&type=chunk) [PART I FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) Presents the company's unaudited consolidated financial statements and management's discussion and analysis for the reporting period [Item 1. Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited consolidated condensed financial statements for CONMED Corporation, including the statements of comprehensive income (loss), balance sheets, statements of shareholders' equity, and statements of cash flows, along with detailed explanatory notes [Consolidated Condensed Statements of Comprehensive Income (Loss)](index=3&type=section&id=Consolidated%20Condensed%20Statements%20of%20Comprehensive%20Income%20(Loss)) Details the company's financial performance, including net sales, gross profit, operating income, net income, and diluted EPS over specified periods | Metric | Three Months Ended Sep 30, 2022 (in thousands) | Three Months Ended Sep 30, 2021 (in thousands) | Nine Months Ended Sep 30, 2022 (in thousands) | Nine Months Ended Sep 30, 2021 (in thousands) | | :---------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net Sales | $275,088 | $248,827 | $794,605 | $736,665 | | Gross Profit | $151,615 | $142,306 | $439,383 | $412,180 | | Income from Operations | $24,248 | $26,711 | $71,149 | $72,501 | | Net Income (Loss) | $46,150 | $14,948 | $(107,166) | $38,098 | | Diluted EPS | $1.48 | $0.47 | $(3.59) | $1.19 | [Consolidated Condensed Balance Sheets](index=4&type=section&id=Consolidated%20Condensed%20Balance%20Sheets) Presents the company's financial position, detailing assets, liabilities, and shareholders' equity at specific dates | Metric | September 30, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------- | :-------------------------------- | :------------------------------- | | Total Current Assets | $574,243 | $460,123 | | Property, Plant and Equipment, net | $113,720 | $108,863 | | Goodwill | $814,260 | $617,528 | | Other Intangible Assets, net| $689,453 | $471,049 | | Total Assets | $2,292,044 | $1,766,017 | | Total Current Liabilities | $208,579 | $196,646 | | Long-Term Debt | $1,036,438 | $672,407 | | Total Liabilities | $1,575,707 | $980,582 | | Total Shareholders' Equity | $716,337 | $785,435 | [Consolidated Condensed Statements of Shareholders' Equity](index=5&type=section&id=Consolidated%20Condensed%20Statements%20of%20Shareholders'%20Equity) Outlines changes in shareholders' equity, including net loss, dividends, and convertible note transactions | Item | Nine Months Ended Sep 30, 2022 (in thousands) | | :-------------------------------------------- | :-------------------------------------------- | | Balance at December 31, 2021 | $785,435 | | Net Loss | $(168,291) | | Dividends on common stock | $(17,865) |\ | Convertible note premium on extinguishment | $103,125 | | Settlement of convertible notes hedge transactions | $118,912 | | Issuance of convertible notes hedge transactions, net of tax | $(142,128) | | Issuance of warrants | $72,000 | | Balance at September 30, 2022 | $716,337 | - The adoption of ASU 2020-06 on January 1, 2022, resulted in a cumulative-effect adjustment of approximately **$(17.1) million** to shareholders' equity as of March 31, 2022[16](index=16&type=chunk) [Consolidated Condensed Statements of Cash Flows](index=7&type=section&id=Consolidated%20Condensed%20Statements%20of%20Cash%20Flows) Summarizes cash inflows and outflows from operating, investing, and financing activities for the reporting periods | Cash Flow Activity | Nine Months Ended Sep 30, 2022 (in thousands) | Nine Months Ended Sep 30, 2021 (in thousands) | | :---------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net Cash Provided by Operating Activities | $44,963 | $77,985 | | Net Cash Used in Investing Activities | $(243,211) | $(11,678) | | Net Cash Provided by (Used in) Financing Activities | $213,485 | $(60,759) | | Net Increase in Cash and Cash Equivalents | $12,507 | $4,155 | | Cash and Cash Equivalents at End of Period | $33,354 | $31,511 | - Key investing activities for the nine months ended September 30, 2022, included payments of **$(227.1) million** related to business acquisitions, net of cash acquired[20](index=20&type=chunk) - Significant financing activities for the nine months ended September 30, 2022, included proceeds from issuance of convertible notes of **$800.0 million**, payments to redeem convertible notes of **$(275.0) million**, and purchases of convertible notes hedge transactions of **$(187.6) million**[20](index=20&type=chunk) [Notes to Consolidated Condensed Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Condensed%20Financial%20Statements) Provides detailed explanations and disclosures supporting the unaudited consolidated condensed financial statements [Note 1 – Operations](index=9&type=section&id=Note%201%20%E2%80%93%20Operations) Describes CONMED Corporation's business as a medical technology company providing surgical devices and equipment - CONMED Corporation is a medical technology company providing surgical devices and equipment for minimally invasive procedures[23](index=23&type=chunk) - Products are used in specialties including orthopedics, general surgery, gynecology, thoracic surgery, and gastroenterology[23](index=23&type=chunk) [Note 2 - Interim Financial Information](index=9&type=section&id=Note%202%20-%20Interim%20Financial%20Information) Explains the basis of preparation for the unaudited interim financial statements and the use of management estimates - The accompanying unaudited consolidated condensed financial statements are prepared in accordance with GAAP for interim financial information and Form 10-Q instructions[24](index=24&type=chunk) - Preparation requires management to make estimates and assumptions, and actual results could differ materially[26](index=26&type=chunk) - The COVID-19 pandemic has introduced uncertainty and disruption in the global economy and financial markets, potentially impacting estimates[27](index=27&type=chunk) [Note 3 – New Accounting Pronouncements](index=9&type=section&id=Note%203%20%E2%80%93%20New%20Accounting%20Pronouncements) Discusses the adoption and impact of new accounting standards, particularly ASU 2020-06, on the financial statements - CONMED adopted ASU 2020-06 on January 1, 2022, simplifying accounting for convertible instruments[28](index=28&type=chunk) - The adoption of ASU 2020-06 resulted in an increase of approximately **$22.6 million** to long-term debt, a reduction of approximately **$37.9 million** to additional paid-in capital, and a cumulative-effect adjustment of approximately **$20.8 million** to retained earnings[28](index=28&type=chunk)[30](index=30&type=chunk) - The company has not adopted ASU 2020-04 (Reference Rate Reform) as of September 30, 2022, and does not believe it will have a significant impact[32](index=32&type=chunk) [Note 4 - Business Combinations](index=10&type=section&id=Note%204%20-%20Business%20Combinations) Details the acquisitions of In2Bones Global, Inc. and Biorez, Inc., including upfront payments and allocated goodwill - On June 13, 2022, CONMED acquired In2Bones Global, Inc. for an upfront payment of **$145.2 million** in cash, with potential earn-out payments up to **$110.0 million**[33](index=33&type=chunk) - On August 9, 2022, CONMED acquired Biorez, Inc. for an upfront payment of **$85.9 million** in cash, with potential earn-out payments up to **$165.0 million**[34](index=34&type=chunk) | Item | In2Bones (in thousands) | Biorez (in thousands) | | :---------------------------------- | :---------------------- | :-------------------- | | Goodwill | $139,816 | $59,176 | | Developed technology | $37,300 | $176,300 | | Distributor relationships | $27,600 | — | | Trademarks and tradenames | — | $1,600 | | Contingent consideration | $69,402 | $114,512 | [Note 5 - Revenues](index=12&type=section&id=Note%205%20-%20Revenues) Provides a breakdown of net sales by primary geographic markets and timing of revenue recognition | Primary Geographic Markets | Three Months Ended Sep 30, 2022 (in thousands) | Three Months Ended Sep 30, 2021 (in thousands) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | United States | $155,721 | $136,401 | | Europe, Middle East & Africa | $47,214 | $44,060 | | Asia Pacific | $45,465 | $43,630 | | Americas (excluding the United States) | $26,688 | $24,736 | | **Total sales from contracts with customers** | **$275,088** | **$248,827** | | Timing of Revenue Recognition | Three Months Ended Sep 30, 2022 (in thousands) | Three Months Ended Sep 30, 2021 (in thousands) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Goods transferred at a point in time | $263,731 | $238,187 | | Services transferred over time | $11,357 | $10,640 | | **Total sales from contracts with customers** | **$275,088** | **$248,827** | - Contract liability balances related to extended warranties were **$17.55 million** as of September 30, 2022, up from **$16.76 million** at December 31, 2021[41](index=41&type=chunk) [Note 6 – Comprehensive Income (Loss)](index=13&type=section&id=Note%206%20%E2%80%93%20Comprehensive%20Income%20(Loss)) Presents the components of comprehensive income (loss), including net income and other comprehensive income (loss) | Metric | Three Months Ended Sep 30, 2022 (in thousands) | Three Months Ended Sep 30, 2021 (in thousands) | Nine Months Ended Sep 30, 2022 (in thousands) | Nine Months Ended Sep 30, 2021 (in thousands) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net Income (Loss) | $46,150 | $14,948 | $(107,166) | $38,098 | | Other Comprehensive Income (Loss) | $(3,025) | $(1,192) | $(5,930) | $4,144 | | **Comprehensive Income (Loss)** | **$43,125** | **$13,756** | **$(113,096)** | **$42,242** | - Accumulated other comprehensive loss increased to **$(60.1) million** as of September 30, 2022, from **$(54.2) million** at December 31, 2021[43](index=43&type=chunk) [Note 7 – Fair Value of Financial Instruments](index=14&type=section&id=Note%207%20%E2%80%93%20Fair%20Value%20of%20Financial%20Instruments) Describes the company's use of foreign currency forward contracts and fair value measurements for financial instruments - CONMED uses foreign currency forward contracts for risk management, categorized as cash flow hedges and non-designated contracts[47](index=47&type=chunk)[48](index=48&type=chunk) | Contract Type | September 30, 2022 (in thousands) | December 31, 2021 (in thousands) | | :---------------------- | :-------------------------------- | :------------------------------- | | Cash flow hedge | $196,749 | $172,894 | | Non-designated | $37,057 | $38,897 | | Derivative Type | September 30, 2022 (Net Fair Value, in thousands) | December 31, 2021 (Net Fair Value, in thousands) | | :---------------------- | :------------------------------------------------ | :------------------------------------------------ | | Designated as hedged instruments | $18,788 | $4,822 | | Not designated as hedging instruments | $(71) | $(142) | | **Total Derivatives** | **$18,717** | **$4,680** | [Note 8 - Inventories](index=17&type=section&id=Note%208%20-%20Inventories) Details the composition of inventories, including raw materials, work-in-process, and finished goods | Inventory Type | September 30, 2022 (in thousands) | December 31, 2021 (in thousands) | | :---------------- | :-------------------------------- | :------------------------------- | | Raw materials | $111,431 | $83,386 | | Work-in-process | $26,967 | $17,449 | | Finished goods | $166,415 | $130,809 | | **Total** | **$304,813** | **$231,644** | [Note 9 – Earnings (Loss) Per Share](index=17&type=section&id=Note%209%20%E2%80%93%20Earnings%20(Loss)%20Per%20Share) Explains the calculation of basic and diluted earnings (loss) per share and the impact of convertible instruments | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | | :---------- | :------------------------------ | :------------------------------ | | Diluted EPS | $1.48 | $0.47 | | Metric | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :---------- | :----------------------------- | :----------------------------- | | Diluted EPS | $(3.59) | $1.19 | - As the Company was in a net loss position for the nine months ended September 30, 2022, no dilutive potential shares were included in the computation of diluted shares outstanding[68](index=68&type=chunk)[72](index=72&type=chunk) - Effective January 1, 2022, the Company adopted ASU 2020-06 and began using the if-converted method to compute diluted EPS[75](index=75&type=chunk) [Note 10 – Goodwill and Other Intangible Assets](index=19&type=section&id=Note%2010%20%E2%80%93%20Goodwill%20and%20Other%20Intangible%20Assets) Outlines changes in goodwill and other intangible assets, primarily due to recent business acquisitions - Goodwill increased to **$814.3 million** as of September 30, 2022, from **$617.5 million** at December 31, 2021, primarily due to **$199.0 million** from business acquisitions (In2Bones and Biorez)[79](index=79&type=chunk) | Intangible Asset Type | September 30, 2022 (Gross Carrying Amount, in thousands) | December 31, 2021 (Gross Carrying Amount, in thousands) | | :------------------------------ | :------------------------------------------------- | :------------------------------------------------- | | Customer and distributor relationships | $369,643 | $342,452 | | Sales representation, marketing and promotional rights | $149,376 | $149,376 | | Developed technology | $320,204 | $106,604 | | Patents and other intangible assets | $78,808 | $76,392 | | Trademarks and tradenames | $86,544 | $86,544 | | **Total** | **$1,004,575** | **$761,368** | - Amortization expense related to intangible assets totaled **$8.7 million** for the three months ended September 30, 2022, and **$24.9 million** for the nine months ended September 30, 2022[82](index=82&type=chunk) [Note 11 - Long-Term Debt](index=21&type=section&id=Note%2011%20-%20Long-Term%20Debt) Provides details on the company's long-term debt, including revolving credit, term loans, and convertible notes | Debt Type | September 30, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------- | :-------------------------------- | :------------------------------- | | Revolving line of credit | $53,000 | $140,000 | | Term loan | $133,807 | $226,196 | | 2.625% convertible notes | $69,469 | $317,896 | | 2.250% convertible notes | $780,102 | — | | **Total Long-Term Debt** | **$1,036,438** | **$672,407** | - On June 6, 2022, CONMED issued **$800.0 million** in **2.250% convertible notes** due in 2027[94](index=94&type=chunk) - On June 6, 2022, CONMED repurchased and extinguished **$275.0 million principal amount** of the **2.625% convertible notes**, and irrevocably elected to settle the remaining **$70.0 million** in cash[91](index=91&type=chunk) [Note 12 – Guarantees](index=23&type=section&id=Note%2012%20%E2%80%93%20Guarantees) Describes the company's product warranties and related provisions and costs - CONMED provides standard warranties (generally one year for capital equipment) and sells extended warranties (typically one to three years)[102](index=102&type=chunk) | Metric | Nine Months Ended Sep 30, 2022 (in thousands) | Nine Months Ended Sep 30, 2021 (in thousands) | | :-------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Balance as of January 1 | $2,344 | $1,826 | | Provision for warranties | $297 | $1,235 | | Claims made | $(624) | $(683) | | Balance as of September 30 | $2,017 | $2,378 | - Costs associated with extended warranty repairs were **$4.6 million** for the nine months ended September 30, 2022, compared to **$5.2 million** in the prior year[103](index=103&type=chunk) [Note 13 – Pension Plan](index=24&type=section&id=Note%2013%20%E2%80%93%20Pension%20Plan) Presents the net periodic pension cost and expected contributions for the company's pension plan | Metric | Nine Months Ended Sep 30, 2022 (in thousands) | Nine Months Ended Sep 30, 2021 (in thousands) | | :-------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Service cost | $807 | $744 | | Interest cost | $1,611 | $1,353 | | Expected return on plan assets | $(3,972) | $(3,867) | | Net amortization and deferral | $1,941 | $2,496 | | **Net Periodic Pension Cost** | **$387** | **$726** | - CONMED does not expect to make any **no pension contributions during 2022**[105](index=105&type=chunk) [Note 14 – Acquisition and Other Expense](index=24&type=section&id=Note%2014%20%E2%80%93%20Acquisition%20and%20Other%20Expense) Details significant non-operating expenses, including acquisition-related costs and debt extinguishment expenses | Item | Nine Months Ended Sep 30, 2022 (in thousands) | Nine Months Ended Sep 30, 2021 (in thousands) | | :---------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Acquisition costs included in cost of sales | $2,445 | — | | Acquisition costs included in selling and administrative expense | $6,306 | — | | 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 | $1,127 | | **Total Debt related costs included in other expense** | **$112,011** | **$1,127** | - During the nine months ended September 30, 2022, CONMED recognized **$2.4 million in inventory step-up adjustments** and **$6.3 million in consulting/legal/integration costs** related to the In2Bones and Biorez acquisitions[106](index=106&type=chunk)[107](index=107&type=chunk) [Note 15 — Business Segment](index=25&type=section&id=Note%2015%20%E2%80%94%20Business%20Segment) Reports net sales by product line, Orthopedic Surgery and General Surgery, as the company operates in a single segment - CONMED operates as a single operating segment, with product lines consisting of Orthopedic Surgery and General Surgery[113](index=113&type=chunk) | Product Line | Nine Months Ended Sep 30, 2022 (in thousands) | Nine Months Ended Sep 30, 2021 (in thousands) | | :------------------ | :-------------------------------------------- | :-------------------------------------------- | | Orthopedic surgery | $346,317 | $320,809 | | General surgery | $448,288 | $415,856 | | **Consolidated net sales** | **$794,605** | **$736,665** | - Orthopedic surgery accounted for **44%** and General surgery for **56%** of consolidated net sales for the nine months ended September 30, 2022[113](index=113&type=chunk) [Note 16 – Legal Proceedings](index=25&type=section&id=Note%2016%20%E2%80%93%20Legal%20Proceedings) Summarizes the status of ongoing legal matters, including product liability and breach of contract claims - CONMED successfully defended a breach of contract claim related to the EndoDynamix acquisition, with the court ruling in its favor on **June 30, 2022**[120](index=120&type=chunk) - The company is defending two Georgia State Court actions alleging personal injury from Ethylene Oxide exposure, with **44 of 53 plaintiffs' claims dismissed** in the Cobb County action on **June 15, 2022**[121](index=121&type=chunk)[122](index=122&type=chunk) - CONMED won rulings against Federal Insurance Company ('Chubb') for coverage of indemnification claims in both the Cobb County and Douglas County actions, though these decisions are under appeal[124](index=124&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on CONMED's financial performance, condition, and future outlook. It includes an overview of the business, discussion of the operating environment, critical accounting policies, detailed analysis of consolidated results of operations, non-GAAP financial measures, and an assessment of liquidity and capital resources [Forward-Looking Statements](index=28&type=section&id=Forward-Looking%20Statements) Highlights that the report contains forward-looking statements subject to risks and uncertainties that may cause actual results to differ - The report contains forward-looking statements about future financial condition, results of operations, and business, identified by words like 'anticipates', 'expects', 'estimates', 'intends', and 'believes'[129](index=129&type=chunk) - These statements are not guarantees of future performance and involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially[130](index=130&type=chunk) [Overview](index=29&type=section&id=Overview) Provides a general description of CONMED's business, product lines, and revenue structure - CONMED is a medical technology company providing devices and equipment for surgical procedures, with product lines in orthopedic surgery and general surgery[133](index=133&type=chunk) | Product Line | Three Months Ended Sep 30, 2022 (% of Net Sales) | Three Months Ended Sep 30, 2021 (% of Net Sales) | | :------------------ | :--------------------------------------------- | :--------------------------------------------- | | Orthopedic surgery | 43% | 42% | | General surgery | 57% | 58% | - Approximately **83% of revenues** are derived from the sale of single-use products, and international sales approximated **45% of consolidated net sales**[134](index=134&type=chunk) [Business Environment](index=29&type=section&id=Business%20Environment) Discusses external factors impacting the company, such as acquisitions, the COVID-19 pandemic, inflation, and supply chain challenges - CONMED completed the acquisitions of In2Bones Global, Inc. (June 13, 2022) and Biorez, Inc. (August 9, 2022)[135](index=135&type=chunk)[136](index=136&type=chunk) - The business continues to be impacted by the COVID-19 pandemic, leading to market variability and impacts on sales, suppliers, patients, and customers[138](index=138&type=chunk) - The company is experiencing higher manufacturing and operating costs due to inflationary pressures and ongoing supply chain challenges, exacerbated by the Russia-Ukraine conflict[138](index=138&type=chunk)[141](index=141&type=chunk) [Critical Accounting Policies](index=30&type=section&id=Critical%20Accounting%20Policies) Identifies key accounting policies requiring significant management judgment and estimates, such as goodwill and contingent consideration - Key critical accounting policies include those related to goodwill and intangible assets, contingent consideration, and pension benefit obligation[142](index=142&type=chunk) - Contingent consideration from acquisitions is recorded at fair value at the acquisition date and remeasured each reporting period using Level 3 inputs, with changes recognized as income or expense[143](index=143&type=chunk) [Consolidated Results of Operations](index=30&type=section&id=Consolidated%20Results%20of%20Operations) Analyzes the company's financial performance, including net sales, gross profit, and various operating expenses [Net Sales](index=31&type=section&id=Net%20Sales) Examines net sales performance by product line and the impact of foreign currency exchange rates | Product Line | Three Months Ended Sep 30, 2022 (in millions) | Three Months Ended Sep 30, 2021 (in millions) | As Reported % Change | Constant Currency % Change | | :------------------ | :-------------------------------------------- | :-------------------------------------------- | :------------------- | :------------------------- | | Orthopedic surgery | $118.6 | $105.7 | 12.2% | 14.0% | | General surgery | $156.5 | $143.1 | 9.4% | 10.7% | | **Total Net Sales** | **$275.1** | **$248.8** | **10.6%** | **12.1%** | | Product Line | Nine Months Ended Sep 30, 2022 (in millions) | Nine Months Ended Sep 30, 2021 (in millions) | As Reported % Change | Constant Currency % Change | | :------------------ | :------------------------------------------- | :------------------------------------------- | :------------------- | :------------------------- | | Orthopedic surgery | $346.3 | $320.8 | 8.0% | 9.0% | | General surgery | $448.3 | $415.9 | 7.8% | 8.7% | | **Total Net Sales** | **$794.6** | **$736.7** | **7.9%** | **8.8%** | - Single-use products sales increased **15.1%** (**16.7% constant currency**) for the three months ended September 30, 2022, while capital products sales decreased **8.5%** (**-7.3% constant currency**)[146](index=146&type=chunk) [Cost of Sales](index=31&type=section&id=Cost%20of%20Sales) Analyzes the cost of products sold and factors influencing gross profit margins, including inflation and acquisition adjustments - Cost of sales increased to $123.5 million for the three months ended September 30, 2022, and to $355.2 million for the nine months[150](index=150&type=chunk) - Gross profit margins decreased by **210 basis points** to **55.1%** for the three months and by **70 basis points** to **55.3%** for the nine months ended September 30, 2022[150](index=150&type=chunk) - Decreases in gross profit margins were driven by unfavorable production variances, inflation in raw materials and freight, and inventory step-up adjustments of **$2.1 million** (three months) and **$2.4 million** (nine months) related to the In2Bones acquisition[150](index=150&type=chunk)[106](index=106&type=chunk) [Selling and Administrative Expense](index=32&type=section&id=Selling%20and%20Administrative%20Expense) Reviews trends in selling and administrative expenses, including the impact of acquisition-related costs and legal fees - Selling and administrative expense increased to $114.6 million for the three months and $333.3 million for the nine months ended September 30, 2022[152](index=152&type=chunk) - As a percentage of net sales, it decreased to **41.7%** for the three months but increased to **41.9%** for the nine months ended September 30, 2022[152](index=152&type=chunk) - The increase for the nine months was primarily due to **$6.3 million** in acquisition-related consulting and legal fees and **$0.8 million** in legal fees for litigation settlement[154](index=154&type=chunk) [Research and Development Expense](index=32&type=section&id=Research%20and%20Development%20Expense) Discusses the company's investment in research and development, including the impact of recent acquisitions - Research and development expense increased to $12.8 million for the three months and $34.9 million for the nine months ended September 30, 2022[155](index=155&type=chunk) - As a percentage of net sales, it increased to **4.6%** for the three months but remained flat at **4.4%** for the nine months ended September 30, 2022[155](index=155&type=chunk) - The higher spend for the three months was mainly driven by the In2Bones and Biorez acquisitions and timing of projects[155](index=155&type=chunk) [Interest Expense](index=32&type=section&id=Interest%20Expense) Analyzes interest costs related to the company's debt, including the impact of new convertible notes and accounting changes - Interest expense increased to $8.5 million for the three months ended September 30, 2022, from $8.1 million in the prior year[156](index=156&type=chunk) - Interest expense decreased to $19.5 million for the nine months ended September 30, 2022, from $27.9 million in the prior year[157](index=157&type=chunk) - The nine-month decrease was primarily due to lower term loan and revolving credit facility borrowings, lower weighted average interest rates, and the elimination of **$7.6 million** in debt discount amortization due to ASU 2020-06[157](index=157&type=chunk) [Other Expense](index=32&type=section&id=Other%20Expense) Details non-operating expenses and unusual items - For the nine months ended September 30, 2022, other expense totaled **$112.0 million**, primarily from a **$103.1 million** conversion premium on 2.625% Notes extinguishment, **$5.5 million** for hedge settlement, and **$3.4 million** for deferred financing fees write-off[158](index=158&type=chunk) - For the three and nine months ended September 30, 2021, other expense was **$1.1 million** related to a loss on early extinguishment and third-party fees for the senior credit agreement[160](index=160&type=chunk) [Provision (Benefit) for Income Taxes](index=33&type=section&id=Provision%20(Benefit)%20for%20Income%20Taxes) Explains the income tax provision or benefit and the effective tax rates for the reporting periods - Income tax benefit was recorded at an effective tax rate of **(193.7)%** for the three months ended September 30, 2022, compared to an expense of **14.3%** in the prior year[162](index=162&type=chunk) - Income tax expense was recorded at an effective rate of **(77.7)%** for the nine months ended September 30, 2022, compared to **12.3%** in the prior year[162](index=162&type=chunk) - The lower effective tax rates in 2022 were primarily due to a Q2 2022 pretax loss from non-deductible conversion premium and hedge settlement[162](index=162&type=chunk) [Non-GAAP Financial Measures](index=33&type=section&id=Non-GAAP%20Financial%20Measures) Defines and explains the use of non-GAAP financial measures, such as constant currency net sales, for performance evaluation - CONMED uses 'constant currency' net sales as a non-GAAP measure to better measure the comparability of results between periods by removing the impact of foreign currency exchange rates[163](index=163&type=chunk) - This non-GAAP measure is an additional way of viewing net sales and should not be considered in isolation or as a substitute for reported GAAP net sales growth[164](index=164&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) Assesses the company's ability to meet its financial obligations and fund operations through cash flows and available capital [Operating cash flows](index=33&type=section&id=Operating%20cash%20flows) Analyzes cash generated from core business operations and factors influencing its changes - Net cash provided by operating activities decreased to **$45.0 million** for the nine months ended September 30, 2022, from **$78.0 million** in the prior year[166](index=166&type=chunk) - The decrease was mainly driven by lower cash flows from accounts receivable and increased inventory levels to mitigate supply chain challenges, partially offset by higher accounts payable[166](index=166&type=chunk) [Investing cash flows](index=34&type=section&id=Investing%20cash%20flows) Examines cash used for capital expenditures and business acquisitions - Net cash used in investing activities increased by **$231.5 million** to **$243.2 million** for the nine months ended September 30, 2022[168](index=168&type=chunk) - This increase was primarily due to **$144.7 million** for the In2Bones acquisition and **$82.4 million** for the Biorez acquisition, along with higher capital expenditures[168](index=168&type=chunk) [Financing cash flows](index=34&type=section&id=Financing%20cash%20flows) Details cash flows related to debt issuance, redemption, and other financing activities - Net cash provided by financing activities was **$213.5 million** for the nine months ended September 30, 2022, compared to net cash used of **$60.8 million** in the prior year[169](index=169&type=chunk) - Key activities included **$800.0 million** in proceeds from 2.250% Notes, **$275.0 million** paid to redeem 2.625% Notes, and **$187.6 million** to purchase hedges related to 2.250% Notes[169](index=169&type=chunk) [Other Liquidity Matters](index=34&type=section&id=Other%20Liquidity%20Matters) Discusses additional aspects of financial resources - Management believes cash flow from operations, cash on hand, and available borrowing capacity under the senior credit agreement will be adequate for anticipated operating working capital, debt service, capital expenditures, and dividends[170](index=170&type=chunk) - Available borrowings on the revolving credit facility were **$530.2 million** as of September 30, 2022[172](index=172&type=chunk) - The company has **$37.4 million** remaining available for share repurchases under its **$200.0 million** authorization[178](index=178&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) There were no significant changes in CONMED's primary market risk exposures or management strategies during the nine months ended September 30, 2022. Further details are referenced in the company's Annual Report on Form 10-K for the year ended December 31, 2021 - No significant changes in primary market risk exposures or management during the nine months ended September 30, 2022[180](index=180&type=chunk) - Reference is made to Item 7A of the Annual Report on Form 10-K for the year ended December 31, 2021, for a description of market risk disclosures[180](index=180&type=chunk) [Item 4. Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) CONMED's management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of September 30, 2022, and concluded they were effective. No material changes to internal control over financial reporting occurred during the quarter - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were **effective as of September 30, 2022**[181](index=181&type=chunk) - **No material changes** in internal control over financial reporting occurred during the quarter ended September 30, 2022[181](index=181&type=chunk) [PART II OTHER INFORMATION](index=35&type=section&id=PART%20II%20OTHER%20INFORMATION) Contains non-financial disclosures and administrative information not covered in the financial statements [Item 1. Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to the detailed discussion of legal proceedings provided in Note 16 of the Notes to Consolidated Condensed Financial Statements (Part I) and Item 3 of the company's 2021 Annual Report on Form 10-K - Reference is made to Note 16 of the Notes to Consolidated Condensed Financial Statements and Item 3 of the Company's Annual Report on Form 10-K for the year-ended December 31, 2021, for a description of legal matters[183](index=183&type=chunk) [Item 6. Exhibits](index=36&type=section&id=Item%206.%20Exhibits) Lists all supporting documents and certifications filed as part of the Form 10-Q report - Exhibit includes certifications of Curt R. Hartman (CEO) and Todd W. Garner (CFO) pursuant to Rule 13a-14(a) or Rule 15d-14(a) and 18 U.S.C. Section 1350[186](index=186&type=chunk) - Various XBRL taxonomy extension documents are included as exhibits[186](index=186&type=chunk) [Signatures](index=37&type=section&id=Signatures) Confirms the official submission of the Form 10-Q report by authorized company officers - The report was signed by Todd W. Garner, Executive Vice President and Chief Financial Officer, on behalf of CONMED CORPORATION[190](index=190&type=chunk) - The signing date of the report is **October 27, 2022**[190](index=190&type=chunk)