cnmd-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended			Commission File Number
March 31, 2024			001-39218

CONMED CORPORATION

(Exact name of the registrant as specified in its charter)


Delaware			16-0977505
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

11311 Concept Blvd	Largo,	Florida	33773
(Address of principal executive offices)			(Zip Code)

(727) 392-6464

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.01 par value	CNMD	NYSE

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 shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act (Check one).

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐

Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

The number of shares outstanding of registrant's common stock, as of April 22, 2024 is 30,800,747 shares.

CONMED CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED MARCH 31. 2024


PART I FINANCIAL INFORMATION
Item Number		Page

Item 1.	Financial Statements (unaudited)

	– Consolidated Condensed Statements of Comprehensive Income for the three months ended March 31, 2024 and 2023	1

	– Consolidated Condensed Balance Sheets as of March 31, 2024 and December 31, 2023	2

	– Consolidated Condensed Statements of Shareholders' Equity for the three months ended March 31, 2024 and 2023	3

	– Consolidated Condensed Statements of Cash Flows for the three months ended March 31, 2024 and 2023	4

	– Notes to Consolidated Condensed Financial Statements	5


Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25

Item 4.	Controls and Procedures	25

PART II OTHER INFORMATION

Item 1.	Legal Proceedings	26

Item 5.	Other Information	26

Item 6.	Exhibits	27


Signatures		28

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PART I FINANCIAL INFORMATION

Item 1.

CONMED CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited, in thousands except per share amounts)


	Three Months Ended
	March 31,
	2024		2023
Net sales	$	312,273	$	295,468

Cost of sales	140,308		140,147

Gross profit	171,965		155,321

Selling and administrative expense	123,358		130,083

Research and development expense	13,594		12,539

Operating expenses	136,952		142,622

Income from operations	35,013		12,699

Interest expense	9,594		10,255



Income before income taxes	25,419		2,444

Provision for income taxes	5,710		625

Net income	$	19,709	$	1,819

Comprehensive income	$	20,078	$	4,695


Per share data:

Net income
Basic	$	0.64	$	0.06
Diluted	0.63		0.06

Weighted average common shares
Basic	30,780		30,511
Diluted	31,272		31,204

See notes to consolidated condensed financial statements.

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CONMED CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited, in thousands except share and per share amounts)


	March 31, 2024		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	33,855	$	24,296
Accounts receivable, net	241,461		242,279
Inventories	322,298		318,324
Prepaid expenses and other current assets	38,110		30,750
Total current assets	635,724		615,649
Property, plant and equipment, net	117,951		120,722
Goodwill	806,276		806,844
Other intangible assets, net	641,310		649,484
Other assets	107,994		107,322
Total assets	$	2,309,255	$	2,300,021




LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt	$	692	$	708
Accounts payable	101,635		88,224
Accrued compensation and benefits	49,931		70,069
Other current liabilities	139,146		151,728
Total current liabilities	291,404		310,729

Long-term debt	990,110		973,140
Deferred income taxes	64,002		60,902
Other long-term liabilities	109,075		121,028
Total liabilities	1,454,591		1,465,799

Commitments and contingencies

Shareholders' equity:
Preferred stock, par value $0.01 per share;
authorized 500,000 shares; none outstanding	—		—
Common stock, par value $0.01 per share; 100,000,000 shares authorized; 31,299,194 shares issued in 2024 and 2023, respectively	313		313
Paid-in capital	458,024		446,535
Retained earnings	466,082		452,531
Accumulated other comprehensive loss	(49,801)		(50,170)
Less: 508,028 and 534,000 shares of common stock in treasury, at cost, in 2024 and 2023, respectively	(19,954)		(14,987)
Total shareholders’ equity	854,664		834,222
Total liabilities and shareholders’ equity	$	2,309,255	$	2,300,021

See notes to consolidated condensed financial statements.

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CONMED CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY

(Unaudited, in thousands except per share amounts)


	Common Stock			Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Shareholders’ Equity
	Shares	Amount
Balance at December 31, 2023	31,299	$	313	$	446,535	$	452,531	$	(50,170)	$	(14,987)	$	834,222
Common stock issued under employee plans				(562)						844		282
Stock-based compensation				6,240								6,240
Dividends on common stock ($0.20 per share)						(6,158)						(6,158)

Settlement of convertible notes hedge transactions				10,980						(10,980)		—
Settlement of convertible notes				(5,169)						5,169		—
Comprehensive income:
Cash flow hedging gain, net								4,448
Pension liability, net								301
Foreign currency translation adjustments								(4,380)
Net income						19,709
Total comprehensive income												20,078

Balance at March 31, 2024	31,299	$	313	$	458,024	$	466,082	$	(49,801)	$	(19,954)	$	854,664


	Common Stock			Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Shareholders’ Equity
	Shares	Amount
Balance at December 31, 2022	31,299	$	313	$	413,235	$	412,631	$	(57,858)	$	(22,776)	$	745,545
Common stock issued under employee plans				556						2,044		2,600
Stock-based compensation				5,726								5,726
Dividends on common stock ($0.20 per share)						(6,113)						(6,113)
Comprehensive income:
Cash flow hedging gain, net								877
Pension liability, net								403
Foreign currency translation adjustments								1,596
Net income						1,819
Total comprehensive income												4,695

Balance at March 31, 2023	31,299	$	313	$	419,517	$	408,337	$	(54,982)	$	(20,732)	$	752,453

See notes to consolidated condensed financial statements.

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CONMED CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)


	Three Months Ended
	March 31,
	2024		2023
Cash flows from operating activities:
Net income	$	19,709	$	1,819
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation	4,046		4,057

Amortization of deferred debt issuance costs	1,407		1,506
Amortization	13,992		13,877
Stock-based compensation	6,240		5,726

Deferred income taxes	1,865		(1,140)
Non-cash adjustment to fair value of contingent consideration liability	(6,545)		4,436



Increase (decrease) in cash flows from changes in assets and liabilities:
Accounts receivable	(908)		(20,666)
Inventories	(5,049)		(3,016)
Accounts payable	12,999		2,699
Accrued compensation and benefits	(19,829)		(5,722)
Other assets	(6,781)		(11,372)
Other liabilities	7,975		3,949
Net cash provided by (used in) operating activities	29,121		(3,847)

Cash flows from investing activities:

Purchases of property, plant and equipment	(2,035)		(4,254)


Net cash used in investing activities	(2,035)		(4,254)

Cash flows from financing activities:


Payments on revolving line of credit	(168,000)		(164,000)
Proceeds from revolving line of credit	254,000		173,000
Payments to redeem convertible notes	(70,000)		—

Payments related to contingent consideration	(26,928)		—

Dividends paid on common stock	(6,153)		(6,098)




Other, net	67		2,448
Net cash provided by (used in) financing activities	(17,014)		5,350

Effect of exchange rate changes on cash and cash equivalents	(513)		303

Net increase (decrease) in cash and cash equivalents	9,559		(2,448)

Cash and cash equivalents at beginning of period	24,296		28,942

Cash and cash equivalents at end of period	$	33,855	$	26,494

Non-cash investing and financing activities:


Dividends payable	$	6,158	$	6,113

See notes to consolidated condensed financial statements.

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CONMED CORPORATION

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited, in thousands except per share amounts)

Note 1 - Operations

CONMED Corporation (“CONMED”, the “Company”, “we” or “us”) is a medical technology company that provides devices and equipment for surgical procedures. The Company’s products are used by surgeons and other healthcare professionals in a variety of specialties including orthopedics, general surgery, gynecology, thoracic surgery and gastroenterology.

Note 2 - Interim Financial Information

The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for annual financial statements. The information herein reflects all normal recurring material adjustments, which are, in the opinion of management, necessary to fairly present the results for the periods presented. The consolidated condensed financial statements herein consist of all wholly-owned domestic and foreign subsidiaries with all significant intercompany transactions eliminated. Results for the period ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

The consolidated condensed financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes for the year ended December 31, 2023 included in our Annual Report on Form 10-K.

Use of Estimates

The preparation of the consolidated condensed financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and judgments which affect the reported amounts of assets, liabilities and related disclosures of contingent assets and liabilities at the date of the consolidated condensed financial statements and the reported amount of revenue and expenses during the reporting period. While there has been uncertainty and disruption in the global economy and financial markets, we are not aware of any specific event or circumstance that would require an update to our estimates or judgments or a revision of the carrying value of our assets or liabilities as of April 25, 2024, the date of issuance of this Quarterly Report on Form 10-Q. These estimates may change as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.

Note 3 - New Accounting Pronouncements

Recently Issued Accounting Standards, Not Yet Adopted

In December 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-09 - Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The standard requires disaggregated information about a reporting entity’s effective tax rate reconciliation in specified categories as well as information on income taxes paid. This ASU is effective for annual periods beginning after December 15, 2024 and early adoption is permitted. This ASU should be applied on a prospective basis with retrospective application permitted. We expect this ASU to only impact our disclosures with no impact to the consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07 - Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose significant segment expenses and other segment items on an annual and interim basis, and provide in interim periods all disclosures about a reportable segment's profit or loss and assets that are currently required annually. The ASU does not change how a public entity identifies its operating segments, aggregates them or applies the quantitative threshold to determine its reportable segments. The new disclosure requirements are also applicable to entities that account and report as a single operating segment entity. This ASU is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted and the guidance is to be applied retrospectively to all prior periods presented. We expect this ASU to only impact our disclosures with no impact to the consolidated financial statements.

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Recently Adopted SEC Rules

In March 2024, the SEC adopted the final rule under SEC Release Nos. 33-11275 and 34-99678, The Enhancement and Standardization of Climate-Related Disclosures for Investors, which will require registrants to provide certain climate-related information in their registration statements and annual reports. The disclosure requirements follow a phase-in timeline, with initial requirements beginning with the filing of the 2025 Form 10-K. We are currently evaluating the final rule to determine the impact on our disclosures. On April 4, 2024, the SEC issued an order staying the final rule pending the completion of judicial review of the petitions challenging the final rule filed in six different circuit courts, which have been consolidated for review by the U.S. Court of Appeals for the Eighth Circuit.

Note 4 - Revenues

The following tables present revenue disaggregated by primary geographic market where the products are sold, by product line and timing of revenue recognition:


	Three Months Ended						Three Months Ended
	March 31, 2024						March 31, 2023
	Orthopedic Surgery		General Surgery		Total		Orthopedic Surgery		General Surgery		Total
Primary Geographic Markets
United States	$	54,151	$	122,255	$	176,406	$	48,944	$	115,645	$	164,589
Europe, Middle East & Africa	33,205		27,652		60,857		33,120		22,896		56,016
Asia Pacific	26,228		18,159		44,387		30,121		15,986		46,107
Americas (excluding the United States)	21,328		9,295		30,623		18,990		9,766		28,756
Total sales from contracts with customers	$	134,912	$	177,361	$	312,273	$	131,175	$	164,293	$	295,468

Timing of Revenue Recognition
Goods transferred at a point in time	$	124,692	$	175,201	$	299,893	$	121,122	$	162,590	$	283,712
Services transferred over time	10,220		2,160		12,380		10,053		1,703		11,756
Total sales from contracts with customers	$	134,912	$	177,361	$	312,273	$	131,175	$	164,293	$	295,468

Contract liability balances related to the sale of extended warranties to customers are as follows:


	March 31, 2024		December 31, 2023

Contract liability	$	18,319	$	17,962

Revenue recognized during the three months ended March 31, 2024 and March 31, 2023 from amounts included in contract liabilities at the beginning of the period were $4.8 million and $4.2 million, respectively. There were no material contract assets as of March 31, 2024 and December 31, 2023.

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Note 5 - Comprehensive Income

Comprehensive income consists of the following:


	Three Months Ended March 31,
	2024		2023
Net income	$	19,709	$	1,819

Other comprehensive income:
Cash flow hedging gain, net of income tax (income tax expense of $1,423 and $280 for the three months ended March 31, 2024 and 2023, respectively)	4,448		877
Pension liability, net of income tax (income tax expense of $96 and $129 for the three months ended March 31, 2024 and 2023, respectively)	301		403
Foreign currency translation adjustment	(4,380)		1,596

Comprehensive income	$	20,078	$	4,695

Accumulated other comprehensive loss consists of the following:


	Cash Flow Hedging Gain (Loss)		Pension Liability		Cumulative Translation Adjustments		Accumulated Other Comprehensive Loss
Balance, December 31, 2023	$	117	$	(18,766)	$	(31,521)	$	(50,170)

Other comprehensive income (loss) before reclassifications, net of tax	5,499		—		(4,380)		1,119
Amounts reclassified from accumulated other comprehensive income (loss) before taxa	(1,387)		398		—		(989)
Income tax	336		(97)		—		239

Net current-period other comprehensive income (loss)	4,448		301		(4,380)		369

Balance, March 31, 2024	$	4,565	$	(18,465)	$	(35,901)	$	(49,801)


	Cash Flow Hedging Gain (Loss)		Pension Liability		Cumulative Translation Adjustments		Accumulated Other Comprehensive Loss
Balance, December 31, 2022	$	2,497	$	(23,749)	$	(36,606)	$	(57,858)

Other comprehensive income before reclassifications, net of tax	1,923		—		1,596		3,519
Amounts reclassified from accumulated other comprehensive income (loss) before taxa	(1,381)		532		—		(849)
Income tax	335		(129)		—		206

Net current-period other comprehensive income	877		403		1,596		2,876

Balance, March 31, 2023	$	3,374	$	(23,346)	$	(35,010)	$	(54,982)

(a) The cash flow hedging gain (loss) and pension liability accumulated other comprehensive loss components are included in sales or cost of sales and as a component of net periodic pension cost, respectively. Refer to Note 6 and Note 12, respectively, for further details.

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Note 6 - Fair Value of Financial Instruments

We enter into derivative instruments for risk management purposes only. We operate internationally and, in the normal course of business, are exposed to fluctuations in interest rates, foreign exchange rates and commodity prices. These fluctuations can increase the costs of financing, investing and operating the business. We use forward contracts, a type of derivative instrument, to manage certain foreign currency exposures.

By nature, all financial instruments involve market and credit risks. We enter into forward contracts with major investment grade financial institutions and have policies to monitor the credit risk of those counterparties. While there can be no assurance, we do not anticipate any material non-performance by any of these counterparties.

Foreign Currency Forward Contracts. We hedge forecasted intercompany sales denominated in foreign currencies through the use of forward contracts. We account for these forward contracts as cash flow hedges. To the extent these forward contracts meet hedge accounting criteria, changes in their fair value are not included in current earnings but are included in accumulated other comprehensive loss. These changes in fair value will be recognized into earnings as a component of sales or cost of sales when the forecasted transaction occurs.

We also enter into forward contracts to exchange foreign currencies for United States dollars in order to hedge our currency transaction exposures on intercompany receivables designated in foreign currencies. These forward contracts settle each month at month-end, at which time

SEC Form 10-Q filed by CONMED Corporation