ex99-.htm

Sales for the third quarter ended September 30, 2009 were $175.5 million compared to $179.4 million in the same quarter of 2008. GAAP diluted earnings per share were $0.04 compared to $0.33 in the third quarter of 2008. Non-GAAP diluted earnings per share equaled $0.28 compared to non-GAAP diluted earnings per share of $0.37 in the 2008 third quarter. As discussed below under “Use of Non-GAAP Financial Measures,” the Company presents various non-GAAP financial measures in this release. Investors should consider non-GAAP measures in addition to, and not as a substitute for, or superior to, financial performance measures prepared in accordance with GAAP. Please refer to the attached reconciliation between GAAP and non-GAAP financial measures.

“The Company’s third quarter financial results, excluding unusual items, were substantially better than we had anticipated due to increased sales volumes and more favorable foreign currency exchange rates. Sequentially, compared to the second quarter of 2009, sales increased approximately $11.0 million, reversing the historical seasonal trend of a decline from the second to the third quarter due to reduced summer surgical activity. Both our single-use and capital equipment sales were considerably stronger in the third quarter as compared to the first half of the year. We believe the sales volume increases we delivered in the third quarter are an indication that the economic trends that adversely impacted our industry late last year and in the first six months of this year, are beginning to moderate,” commented Mr. Joseph J. Corasanti, President and Chief Executive Officer.

As previously announced, the Company has taken various cost-cutting actions in response to the current economic environment, including, most recently, consolidating a division’s administrative functions within the Corporate headquarters, delaying hiring for certain open positions, reducing production where the Company believes it has sufficient finished goods on hand, freezing the defined benefit pension plan for U.S. employees, and continuing with the previously announced manufacturing restructuring. Our transition to the new manufacturing site in Mexico is now substantially complete, but we expect to incur additional restructuring costs through the end of 2009 as we close two Upstate New York plants, as well as the divisional administrative office. Over the final three months of 2009, we expect that such costs will approximate $2.5 million for the manufacturing

International sales in the third quarter of 2009 were $77.2 million, representing 44.0% of total sales, and $223.8 million for the nine months ended September 30, 2009. Although currency exchange rates have improved compared to those of the first six months of 2009, compared to the rates in 2008, sales were reduced by $4.7 million in the third quarter of 2009, and $27.2 million for the nine months of 2009.

Mr. Corasanti added, “As we look to the completion of 2009, we expect that the improving business trends of the third quarter should continue into the last quarter of the year. Consequently, we anticipate that fourth quarter 2009 sales should approximate $178 - $183 million and that non-GAAP earnings per share should approximate $0.30 - $0.35. For 2010, we are basing our expectations on continued measured improvement in the general economy, as well as foreign currency exchange rates similar to those experienced in the third quarter of 2009. Sales in 2010 are anticipated to be $715 - $725 million with non-GAAP diluted earnings per share estimated to be $1.20 - $1.30.”

The non-GAAP estimates for the fourth quarter of 2009 exclude the additional amortization of bond discount required by recently issued Financial Accounting Standards Board (“FASB”) guidance, the manufacturing restructuring costs and facility consolidation expenses expected to be incurred in 2009. The 2010 non-GAAP estimates exclude the amortization of bond discount and unusual costs, if any.

In July 2009, the Company began the process of consolidating the administrative functions of the Endoscopic Technologies division from its offices in Massachusetts to the Corporate Headquarters in Utica, New York. The sales force and product portfolio remain unchanged and CONMED Endoscopic Technologies will continue to operate as a separate division of the Company. In connection with this consolidation, we incurred costs of $0.3 million in the third quarter of 2009, including severance and other transitional costs. In the fourth quarter of 2009 we expect to incur similar costs, including lease termination expense, of $1.8 million. The third quarter 2009 costs are included in the GAAP earnings per share set forth above, and are excluded from the non-GAAP amount, as well as from the fourth quarter non-GAAP EPS estimate.

During the third quarter of 2009, the Company announced a voluntary recall of certain model numbers of the PRO5 & PRO6 series battery handpieces and certain lots of the MC5057 Universal Cable used with certain of CONMED Linvatec’s electric powered handpieces. Current models of products are not affected. We have estimated that the recall costs will total approximately $6.0 million and have recorded this charge in the third quarter. The third quarter 2009 costs are included in the GAAP earnings per share set forth above, and are excluded from the non-GAAP amount.

During the first quarter of 2009, the Company repurchased and retired $9.9 million face value of its 2.5% Convertible Notes at a discount of approximately 21%. The repurchase was substantially funded by CONMED’s own cash resources. The transaction resulted in a pre-tax gain to the 2009 nine-month financial statements of approximately $1.1 million, which is included in the GAAP earnings per share set forth above, and excluded from the non-GAAP amount.

In March 2009, the Company gave notice that it would freeze the benefits of its defined benefit pension plan for United States employees. As has been widely reported, such plans have become increasingly difficult for companies to maintain because of the volatility in asset performance and required changes in the actuarial determination of plan liabilities. The Company’s first quarter 2009 financial statements include a non-cash net pre-tax gain of $1.9 million, comprised of a $4.4 million pension curtailment benefit offset by a $2.5 million first quarter pension charge. This net non-cash pre-tax gain is included in the nine-month GAAP earnings per share set forth above, and is excluded from the non-GAAP amount.

As previously disclosed, the Company continues with its plan for restructuring certain of its manufacturing operations by consolidating locations in New York and moving certain production lines to its new manufacturing site in Mexico. Such expenses amounted to $3.3 million in the third quarter of 2009 and $11.2 million for the first nine months of the year. These amounts are included in the GAAP earnings per share set forth above, and excluded from the non-GAAP amounts. In the fourth quarter of 2009 we expect such restructuring costs to approximate $2.5 million and are excluded from the non-GAAP EPS estimate.

As disclosed in the past, and in accordance with recently issued FASB guidance, beginning in 2009, the Company is required to record the amortization of the bond discount related to its convertible notes to bring the effective interest rate to a level approximating that of a non-convertible note of similar size and tenor. For the third quarter of 2009 and the first nine months of 2009, the Company recorded additional non-cash pre-tax interest charges of $1.0 million and $3.1 million, respectively. The pronouncement also requires that a similar adjustment be made in previously issued financial statements to facilitate comparative analysis. Accordingly, the 2008 financial statements have been adjusted and include additional interest expense of $1.2 million in the third quarter and $3.7 million for the first nine months. These charges are included in the GAAP earnings per share set forth above, and excluded from the non-GAAP amounts.

Management has disclosed financial measurements in this press announcement that present financial information that is not in accordance with Generally Accepted Accounting Principles (“GAAP”). These measurements are not a substitute for GAAP measurements, although Company management uses these measurements as aids in monitoring the Company’s on-going financial performance from quarter-to-quarter and year-to-year on a regular basis, and for benchmarking against other medical technology companies. Non-GAAP net income and non-GAAP earnings per share measure the income of the Company excluding unusual credits or charges that are considered by management to be outside of the normal on-going operations of the Company. Management uses and presents non-GAAP net income and non-GAAP earnings per share because management believes that in order to properly understand the Company’s short and long-term financial trends, the impact of unusual items should be eliminated from on-going operating activities. These adjustments for unusual items are derived from facts and circumstances that vary in frequency and impact on the Company’s results of operations. Management uses non-GAAP net income and non-GAAP earnings per share to forecast and evaluate the operational performance of the Company as well as to compare results of current periods to prior periods on a consistent basis. Non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. Investors should consider non-GAAP measures in addition to, and not as a substitute for, or superior to, financial performance measures prepared in accordance with GAAP.

CONMED is a medical technology company with an emphasis on surgical devices and equipment for minimally invasive procedures and patient monitoring. The Company’s products serve the clinical areas of arthroscopy, powered surgical instruments, electrosurgery, cardiac monitoring disposables, endosurgery and endoscopic technologies. They are used by surgeons and physicians in a variety of specialties including orthopedics, general surgery, gynecology, neurosurgery and gastroenterology. Headquartered in Utica, New York, the Company’s 3,200 employees distribute its products worldwide from several manufacturing locations.

This press release 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 performance on a going-forward basis. The forward-looking statements in this press release involve risks and uncertainties which could cause actual results, performance or trends, to differ materially from those expressed in the forward-looking statements herein or in previous disclosures. The Company believes that all forward-looking statements made by it have a reasonable basis, but there can be no assurance that management’s expectations, beliefs or projections as expressed in the forward-looking statements will actually occur or prove to be correct. In addition to general industry and economic conditions, factors that could cause actual results to differ materially from those discussed in the forward-looking statements in this press release include, but are not limited to: (i) the failure of any one or more of the assumptions stated above, to prove to be correct; (ii) the risks relating to forward-looking statements discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008; (iii) cyclical purchasing patterns from customers, end-users and dealers; (iv) timely release of new products, and acceptance of such new products by the market; (v) the introduction of new products by competitors and other competitive responses; (vi) the possibility that any new acquisition or other transaction may require the Company to reconsider its financial assumptions and goals/targets; and/or (vii) the Company’s ability to devise and execute strategies to respond to market conditions.

	Three Months Ended September 30,

								Constant
								Currency
	2008		2009		Growth			Growth
	(in millions)
Arthroscopy
Single-use	$	47.8	$	49.1		2.7	%		5.9	%
Capital		21.7		19.6		-9.7	%		-6.9	%
		69.5		68.7		-1.2	%		1.9	%

Powered Surgical Instruments
Single-use		19.0		19.0		0.0	%		4.2	%
Capital		19.8		18.3		-7.6	%		-4.5	%
		38.8		37.3		-3.9	%		-0.3	%

Electrosurgery
Single-use		17.4		17.8		2.3	%		3.4	%
Capital		6.1		6.3		3.3	%		4.9	%
		23.5		24.1		2.6	%		3.8	%

Endoscopic Technologies
Single-use		13.0		12.2		-6.2	%		-3.8	%
Endosurgery
Single-use and reposable		15.8		15.9		0.6	%		3.2	%
Patient Care
Single-use		18.8		17.3		-8.0	%		-7.4	%

Total
Single-use and reposable		131.8		131.3		-0.4	%		2.2	%
Capital		47.6		44.2		-7.1	%		-4.4	%
	$	179.4	$	175.5		-2.2	%		0.4	%

	Nine Months Ended September 30,

								Constant
								Currency
	2008		2009		Growth			Growth
	(in millions)
Arthroscopy
Single-use	$	150.6	$	142.0		-5.7	%		0.7	%
Capital		71.1		52.1		-26.7	%		-22.6	%
		221.7		194.1		-12.4	%		-6.8	%

Powered Surgical Instruments
Single-use		60.2		56.2		-6.6	%		1.7	%
Capital		58.9		47.4		-19.5	%		-14.1	%
		119.1		103.6		-13.0	%		-6.1	%

Electrosurgery
Single-use		54.1		52.0		-3.9	%		-1.7	%
Capital		22.1		17.1		-22.6	%		-18.6	%
		76.2		69.1		-9.3	%		-6.6	%

Endoscopic Technologies
Single-use		38.8		36.7		-5.4	%		-1.0	%
Endosurgery
Single-use and reposable		48.2		47.8		-0.8	%		3.3	%
Patient Care
Single-use		58.9		52.8		-10.4	%		-9.3	%

Total
Single-use and reposable		410.8		387.5		-5.7	%		-0.8	%
Capital		152.1		116.6		-23.3	%		-18.7	%
	$	562.9	$	504.1		-10.4	%		-5.6	%

	Three months ended				Nine months ended
	September 30,				September 30,
	(As Adjusted) 2008		2009		(As Adjusted) 2008		2009

Net sales	$	179,409	$	175,475	$	562,937	$	504,106

Cost of sales		84,721		85,674		268,584		254,017
Cost of sales, other- Note A		-		2,165		1,011		8,789

Gross profit		94,688		87,636		293,342		241,300

Selling and administrative		67,768		67,480		205,963		193,480
Research and development		8,668		7,705		25,435		23,590
Other expense – Note B		709		7,449		709		6,847
		77,145		82,634		232,107		223,917

Income from operations		17,543		5,002		61,235		17,383

Gain on early extinguishment of debt		-		-		-		1,083

Amortization of debt discount		1,243		1,018		3,667		3,076

Interest expense		2,444		2,042		8,057		5,297

Income before income taxes		13,856		1,942		49,511		10,093

Provision for income taxes		4,121		654		17,839		2,911

Net income	$	9,735	$	1,288	$	31,672	$	7,182

Per share data:

Net Income
Basic	$	0.34	$	0.04	$	1.10	$	0.25
Diluted		0.33		0.04		1.09		0.25

Weighted average common shares
Basic		28,864		29,093		28,718		29,060
Diluted		29,415		29,183		29,189		29,096

Note A –Included in cost of sales, other, in the nine months ended September 30, 2008 is a $1.0 million purchase accounting fair value adjustment for inventory acquired in connection with the purchase of our Italian distributor. Included in cost of sales, other, in the three and nine months ended September 30, 2009 is $2.2 million and $8.8 million, respectively, in costs related to the startup of a new manufacturing facility in Chihuahua, Mexico and the consolidation of the Company’s three Utica, New York area manufacturing sites into a single facility.

Note B –Included in other expense in the three and nine months ended September 30, 2008 are $0.7 million in costs related to the consolidation of the Company’s manufacturing and distribution sites. Included in other expense in the three months ended September 30, 2009 are $6.0 million in costs related to a voluntary product recall, $1.1 million in costs related to the consolidation of the Company’s distribution activities, and $0.3 million in costs related to the consolidation of the administrative functions of our Endoscopic Technologies division. Included in other expense in the nine months ended September 30, 2009 is a non-cash net pre-tax pension gain of $1.9 million, $6.0 million in costs related to a voluntary product recall, $2.4 million in costs related to the consolidation of the Company’s distribution activities, and $0.3 million in costs related to the consolidation of the administrative functions of our Endoscopic Technologies division.

	(As Adjusted)
	December 31,			September 30,
	2008			2009
Current assets:
Cash and cash equivalents	$	11,811		$	14,217
Accounts receivable, net		96,515			108,825
Inventories		159,976			164,929
Deferred income taxes		14,742			15,362
Other current assets		11,218			12,784
Total current assets		294,262			316,117

Property, plant and equipment, net		143,737			146,397
Goodwill		290,245			290,379
Other intangible assets, net		195,939			192,101
Other assets		7,478			6,488
Total assets	$	931,661		$	951,482

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Current portion of long-term debt	$	3,185		$	2,142
Other current liabilities		71,729			78,642
Total current liabilities		74,914			80,784

Long-term debt		182,739			182,917
Deferred income taxes		88,468			98,868
Other long-term liabilities		45,325			18,300
Total liabilities		391,446			380,869

Shareholders' equity:
Capital accounts		256,874			261,161
Retained earnings		314,373			320,835
Accumulated other comprehensive income (loss)		(31,032	)		(11,383	)
Total equity		540,215			570,613

Total liabilities and shareholders' equity	$	931,661		$	951,482

	Nine months ended
	September 30,
	(As Adjusted) 2008			2009
Cash flows from operating activities:
Net income	$	31,672		$	7,182
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization		23,847			26,991
Amortization of debt discount		3,667			3,076
Stock-based compensation expense		3,215			3,203
Deferred income taxes		16,626			2,805
Gain on early extinguishment of debt		-			(1,083	)
Sale of accounts receivable to (collections on behalf of) purchaser		(5,000	)		(3,000	)
Increase (decrease) in cash flows from changes in assets and liabilities:
Accounts receivable		(1,398	)		(5,326	)
Inventories		(2,973	)		(7,593	)
Accounts payable		(2,205	)		(1,928	)
Income taxes receivable (payable)		(953	)		(2,466	)
Accrued compensation and benefits		3,192			2,865
Other assets		(1,966	)		(1,228	)
Other liabilities		(8,038	)		2,281
Net cash provided by operating activities		59,686			25,779

Cash flow from investing activities:
Purchases of property, plant, and equipment		(25,707	)		(17,090	)
Payments related to business acquisitions		(22,033	)		(262	)
Net cash used in investing activities		(47,740	)		(17,352	)

Cash flow from financing activities:
Payments on debt		(1,328	)		(9,857	)
Proceeds of debt		-			7,000
Net proceeds from common stock issued under employee plans		7,048			360
Net change in cash overdrafts		-			(2,252	)
Net cash provided by (used in) financing activities		5,720			(4,749	)

Effect of exchange rate change
on cash and cash equivalents		2,537			(1,272	)

Net increase in cash and cash equivalents		20,203			2,406

Cash and cash equivalents at beginning of period		11,695			11,811

Cash and cash equivalents at end of period	$	31,898		$	14,217

	Three months ended
	September 30,
	(As Adjusted)
	2008			2009

Reported net income	$	9,735		$	1,288

New plant / facility consolidation costs included in cost of sales		-			2,165

Facility consolidation costs included in other expense		709			1,118

Product recall		-			5,992

Endoscopic Technologies division consolidation		-			339

Total other expense		709			7,449

Amortization of debt discount		1,243			1,018

Unusual expense before income taxes		1,952			10,632

Provision (benefit) for income taxes on unusual expense		(715	)		(3,837	)

Net income before unusual items	$	10,972		$	8,083


Per share data:

Reported net income
Basic	$	0.34		$	0.04
Diluted		0.33			0.04

Net income before unusual items
Basic	$	0.38		$	0.28
Diluted		0.37			0.28

Management has provided the above reconciliation of net income before unusual items and amortization of debt discount as an additional measure that investors can use to compare operating performance between reporting periods. Management believes this reconciliation provides a useful presentation of operating performance as discussed in the section “Use of Non-GAAP Financial Measures” above. We have included the amortization of debt discount in our analysis in order to facilitate comparison with the non-GAAP earnings guidance provided in the “Outlook” section of this and previous releases which exclude such expense.

	Nine months ended
	September 30,
	(As Adjusted)
	2008			2009

Reported net income	$	31,672		$	7,182

New plant / facility consolidation costs included in cost of sales		-			8,789

Fair value inventory purchase accounting adjustment
included in cost of sales		1,011			-

Pension gain, net		-			(1,882	)

Facility consolidation costs included in other expense		709			2,398

Product recall		-			5,992

Endoscopic Technologies division consolidation		-		339

Total other expense		709			6,847

Gain on early extinguishment of debt		-			(1,083	)

Amortization of debt discount		3,667			3,076

Unusual expense before income taxes		5,387			17,629

Provision (benefit) for income taxes on unusual expense		(1,974	)		(6,375	)

Net income before unusual items	$	35,085		$	18,436

Per share data:
Reported net income
Basic	$	1.10		$	0.25
Diluted		1.09			0.25

Net income before unusual items
Basic	$	1.22		$	0.63
Diluted		1.20			0.63


	NEWS RELEASE

	CONTACT:
	CONMED Corporation
	Robert Shallish
	Chief Financial Officer
	315-624-3206

	FD
	Investors: Evan Smith/Brian Ritchie
	212-850-5600