CONMED Corporation Annual Report 2006

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FY2006 Annual Report · CONMED Corporation

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n M A P P I N G T H E F U T U R E

A N N U A L R E P O R T 2 0 0 6

contents

FINANcIAL HIGHLIGHTs

LETTER TO sHAREHOLdERs: THE YEAR IN REvIEw

INTELLEcTUAL PROPERTIEs

NEw PROdUcT OFFERINGs

FOcUs ON QUALITY

9 MARkET FOR cONMEd’s cOMMON sTOck ANd RELATEd sTOckHOLdER MATTERs

FIvE YEAR sUMMARY OF sELEcTEd FINANcIAL dATA

10 MANAGEMENT’s dIscUssION ANd ANALYsIs OF FINANcIAL cONdITION ANd

REsULTs OF OPERATIONs

19 MANAGEMENT’s REPORT ON INTERNAL cONTROL OvER FINANcIAL REPORTING

20 REPORT OF INdEPENdENT REGIsTEREd PUbLIc AccOUNTING FIRM

21 cONsOLIdATEd bALANcE sHEETs

22 cONsOLIdATEd sTATEMENTs OF OPERATIONs

23 cONsOLIdATEd sTATEMENTs OF sHAREHOLdERs’ EQUITY

24 cONsOLIdATEd sTATEMENTs OF cAsH FLOws

25 NOTEs TO cONsOLIdATEd FINANcIAL sTATEMENTs

36 bOARd OF dIREcTORs bIOGRAPHIEs

Ibc OFFIcERs, sHAREHOLdER INFORMATION, sUbsIdIARIEs

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“Annual revenues grew 4.8% to $646.8 million,
a new record for the Company.”

financial highlights

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NET sALEs (IN $ MILLIONs)

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NET INcOME (IN $ MILLIONs)

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RETAINEd EARNINGs (IN $ MILLIONs)

J o s e p h J. c o r a s a n t i

letter to shareholders n the year in review

Dear Shareholders,

The Company’s 2006 financial results exceeded our
expectations and gave us cause to be excited and optimistic
about 2007 and beyond. Our 2006 financial expectations
were set in the 4th quarter of 2005.

In last year’s annual report, we noted that the latter part of 2005, particularly the fourth quarter

of 2005, was much weaker than we had anticipated due to a number of internal and external

factors. At that time, we believed the Company’s results in 2006 would rebound from the

fourth quarter 2005 low-point as a result of initiatives to improve profits as well as from an

expected increase in the number of surgeries creating improved demand for our products.

Throughout 2006 management focused on specific goals for improving our business. These

included selective price increases, improving manufacturing efficiencies, enhanced monitoring

of product quality, and increased research and development efforts. Further, as expected,

during 2006 the demand for our surgical products appeared to return to what we would

characterize as normal, historical levels. As a result, CONMED’s financial results, excluding

various transition and unusual items, improved each quarter in 2006 when compared to the

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fourth quarter of 2005. Here are a few of the financial highlights:

• Annual revenues grew 4.8% to $646.8 million, a new record for the Company.

• Net cash provided by operations increased from $42.4 million to $64.6 million, which on a

per share basis equates to $2.31 per share in 2006.

• The fourth quarter of 2006 was our best performing quarter of the year, with record

quarterly revenues of $169.9 million and a gross margin percentage of 51% excluding

unusual items (48.4% on a GAAP basis), setting the stage, we believe, for further

improvement in 2007.

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These solid financial results are based on the strong performance

Another exceptional performance was turned in by our

seen across our product lines:

Arthroscopy, representing 35% of our sales, delivered strong growth

of 7.9%, fueled by our innovative imaging products. Introduced

in 2004, the Enhanced Definition system gave surgeons superior

image quality along with ease of sterilization through its ability to

Electrosurgery line, growing 10.6% over 2005, largely driven by

sales of our market-leading System 5000®. Endosurgery’s growth

of 4.1% was primarily a result of sales increases outside the United

States. Although our Patient Care line had flat sales in 2006

compared to 2005, we began to see higher improved profitability

through selective price increases and moderation in raw material

withstand the rigors of the steam autoclave. Just recently, in February

costs changes.

2007, facilitated by our technological experience, we introduced the

IM4000, the first true High Definition video system for surgery on

The Endoscopic Technologies line continues to present challenges

the market. We expect the strong sales to continue in 2007.

as a result of competitive pricing and manufacturing difficulties.

While some companies may claim to have “High Definition”

imaging, our product was the first on the market that satisfied the

criteria established by the Advanced Television Systems Committee

We have addressed both of these issues by focusing on efficient,

cost-effective manufacturing with extensive quality monitoring.

We expect to see improvements on this product line during 2007.

(“ATSC”), an international body whose member organizations

We strengthened our balance sheet in 2006. We reduced our debt

represent the broadcast, broadcast equipment, motion picture,

by a total of $39 million, resulting from our strong cash flow.

consumer electronics, computer, cable, satellite, and semiconductor

Accordingly, our debt-to-total-book-capitalization ratio at

industries. The ATSC has established the recognized criteria for

December 31, 2006 decreased to 37.8% from 40.4% at

High Definition imaging: 720 or 1080 vertical pixel count, together

December 31, 2005. This is well within our targeted range of

with the 16:9 aspect ratio. The CONMED Linvatec IM4000 video

35%-45%. Additionally, we saw improvement in our working capital

system offers the user the option of either 720p, 1080i or 1080p

investment as measured by fewer days’ sales in receivables and

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pixel count and scan options, with a 16:9 aspect ratio. The IM4000

greater inventory turns.

is the only video system on the market as of this date that meets the

ATSC standard for true high definition images.

Eugene R. Corasanti

Our Powered Instruments line increase of 3.9% was a result

of the new MicroChoice® line for small bone procedures, and

the introduction of the new Mpower™ line for large bone

procedures. This line experienced sequential and accelerating

sales increases during 2006, culminating in the 13.7% growth rate

in the fourth quarter.

2006 was also the year in which Eugene R. Corasanti, CONMED’s

founder, stepped down as Chief Executive Officer. Although

any attempt to summarize the impact he has had is doomed to

understate his accomplishments, I would be remiss if I did not

mark this milestone in some way. Gene founded a company in

a single room, and through years of careful stewardship, built a

multi-national company that is a recognized leader in its field.

E u g e n e R. c o r a s a n t i

In doing so, Gene was a responsible member of his community,

Our HD video camera system has launched, as well as our new

increasing employment in our Upstate New York home to its current

powered instrument line on MicroChoice® and Mpower™. We are

level of over 1,100 employees with an additional 2,100 employees

continuing to invest in cardiac output monitoring and expect our

worldwide. There are few companies with as many employees who

new “ECOM” cardiac output monitor to be released by year-end.

have been loyal and stable members of the Company as CONMED

Continued research and development investment is being made in

has. This is a testament to the balance Gene brought to the working

all of our business units with the focus being placed in the area of

environment and culture at CONMED.

procedure specific arthroscopy, HD video for general surgery, biliary

products for GI Endoscopy and specialty products for Electrosurgery.

While the Company has grown dramatically as a result of

acquisitions, we have never placed the Company at risk while

We are also investing in our sales force. We expect to add 30 sales

seeking growth. This is a direct result of one of Gene’s most

representatives to our Orthopedic sales force in 2007 and have already

important principles: focus not only on what CONMED stands

added seven sales representatives to our Electrosurgery group.

to gain in any transaction, but also on what CONMED stands to

lose. We are still focused on growth, but we are equally focused on

growing responsibly, since we will not put at risk what Gene has

built up over the past 30 years.

Our business model has proven to be solid: growth through servicing

customers with top-notch products and technologies which are

market-leading. Our management team has never been as strong as

it is today. We continue to adhere to the strategy that has brought us

While Gene’s stepping down from the Chief Executive Officer

to where we are today, which has been to focus on achieving growth

position is an important moment in CONMED’s history, Gene

from both internal, organic increases and acquisitions.

will continue to serve as Chairman of the Board of Directors. We

will never depart from the founding principles Gene provided

for CONMED—and fortunately, with Gene continuing to serve

as Chairman, he will be in a position to help us remember the

principles and strategies that made this company strong.

The Outlook

We look forward to the future and continue to make strategic

investments in our business for future growth. Our research

and development spending has increased to 4.7% of sales and is
producing results. We have launched our PRO2
line and have made additional software improvements to it, making

® pulse oximetry

it the best blood oximetry level monitor available on the market.

As always, we thank you for your continued trust and support.

Joseph J. Corasanti

President, Chief Executive Officer

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intellectual properties

On August 4,
2006, CONMED
hosted Deputy
Under Secretary
of Commerce for
Intellectual Property
and Deputy Director
of the U.S. Patent
and Trademark Office
(“USPTO”) Stephen

M. Pinkos, who lead a roundtable
discussion concerning the importance
of intellectual property protection in the
global market, the dangers of piracy and
counterfeiting, and the creation of jobs in
the knowledge-based U.S. economy.

Mr. Pinkos also sought CONMED’s advice and comments

concerning possible improvements to the process for obtaining

patent or trademark protection. Mr. Pinkos selected CONMED,

the only company in the country selected for this recognition,

because of its role as a leader in this area, with 500 U.S. patents

and over 200 registered U.S. trademarks.

As reflected in the graphs below, CONMED has increased its

investment in research and development, which produces the

intellectual property critical to our mission, both in absolute and

relative terms.

Our investment in intellectual property cannot be measured by

the number of patents or trademarks, or even the number of

engineers working on research development. The better measure

is qualitative: how innovative are the new technologies that

CONMED is developing? Time will be the test, but the products

we have been releasing deliver an element of technology that few

companies offer.

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2003
REsEARcH ANd dEvELOPMENT sPENdING (IN $ MILLIONs)

2002

2004

2005

2006

new product offerings

CONMED continues to innovate, bringing
out its largest set of new product offerings yet.

New products can be the lifeblood of any organization, whether they

are obtained through acquisitions or internal development processes.

Historically, CONMED has been weighted toward the acquisition

approach, which has proven to be successful for us. We recognize,

however, the need for balance.

Toward that end, in 2004 we began a concentrated effort to step

up our internal development programs by significantly increasing

our research and development funding. In 2003, our research and

development spending was 3.5% of revenue. By the end of 2006,

we had elevated our spending for research and development to

4.7% of revenue.

capture blood oxygenation levels, versus the traditional method of
shining light through an appendage such as a finger. PRO2
problems with the conventional finger probe method, such as when

® addresses

burn or trauma patients might not have accessible appendages, or

when circulation problems in patients with peripheral vascular disease

can compromise results.

As a leading player in the continuously advancing Arthroscopy market,

CONMED must remain focused on developing instruments and

devices that enhance functionality for our customers. The world

of Sports Medicine offers a prime example. In 2006 we launched

multiple products that offer improved capabilities to the Arthroscopist.

The Spectrum® II Tissue Repair System is a patented suture-passing

device that allows for precise suture placement in any arthroscopic

shoulder procedure. The Dry-Doc® Cannula System improves

arthroscopic surgical access with its unique, patented design of a

One of the exciting results of these increased efforts is our family

semi-flexible inner tube covered with an accordion-like outer sleeve.

of multi-specialty Endoscopic Video Systems. What was once a very

Additionally, we introduced the Bio Mini-Revo™ Shoulder Anchor

specialty-driven market where Arthroscopists, Urologists and General

with its proprietary Self-Reinforced polymer technology that is

Surgeons each had their own systems has turned into a situation

pre-loaded with our new Hi-Fi™ high-strength suture, making the

where hospitals have demanded single systems that can meet all the

product suitable for all shoulder instability procedures.

unique needs of each specialty. CONMED had previously been a

leader in Arthroscopy, with research and development efforts that

yielded the first fully autoclavable video systems. Recognizing the

multi-specialty trend and developing appropriate products to open

up the entire market to us has kept CONMED well ahead of the

curve. Additionally, the trend in the consumer marketplace for high

definition imagery was surely destined for the medical markets. As

we have noted, CONMED’s investment in this area has resulted in

the release of our IM4000 High Definition video system, the only

video system on the market as of this date that meets the recognized

industry standard for true high definition images.

® Pulse Reflectance Oximetry system is another example

The PRO2
of our internal product development efforts. Our proprietary design

utilizes a flat sensor that measures light reflected from tissue to

Powered Surgical Instruments are also critical tools for orthopedic

surgeons. In 2006 CONMED enhanced its reputation for innovation

under our Hall® instrumentation brand with the introduction of

the Mpower™ and MicroPower™ systems. Mpower™ is one of

the most versatile systems on the market today, a battery-powered

surgical instrument system that merges the power of a large bone

handpiece with the size and design of a small bone handpiece. The

MicroPower™ is an electric powered instrument system for small

bone procedures, combining the latest in pencil grip technology with

a comprehensive multi-specialty attachment.

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focus on quality

While CONMED’s commitment to
quality is long-standing, our thinking has
shifted to a more forward-leaning vision
of preparing for future growth.

Over the past two years, we have created a Corporate Regulatory

Affairs Group, whose responsibilities for quality and regulatory

compliance span all of the Company’s divisions and all of the

countries in which we operate. Our approach to Compliance is

three-pronged.

First, each division has a quality assurance group working with the

operations groups to meet regulatory compliance obligations. This

is the day-to-day work that makes the difference in the operating

room when our products must work—and do. While United States

regulatory affairs compliance is handled at the division level, we have

also created a centralized global regulatory affairs group to support

our expanding global market reach and to oversee our product

regulatory strategies in international markets. Rather than have all

our divisions tracking the same developments in registration and

other requirements throughout the world and duplicating the same

work many times over, we are shifting this responsibility to a single

organization. The increased focus will improve the depth of our

knowledge of foreign requirements, and will eliminate inefficiencies

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while freeing up resources to improve our focus on domestic

regulatory affairs and quality assurance at the division level.

Second, we have created the CONMED Quality College, which

is the engine for our training efforts. The Quality College will

cLOckwIsE FROM TOP cENTER: scott dillenback, vP,
cONMEd Quality college; Ira duesler, director, corporate
RA; Terry chan, vP, RA/QA cONMEd Endoscopic Technology;
dirk stevens, Ph.d.,vP, RA/QA—NY; Jane Metcalf, vP,
corporate Regulatory Affairs; Michael Taggart, vP, RA/QA
cONMEd Linvatec; beth Zis, director, corporate RA; shawn
Riedel, vP, RA/QA cONMEd Electrosurgery; NOT sHOwN:
Michael chellson - director corporate Quality systems &
Regulatory Assessments,

focus on three areas: (i) educating our employees concerning the

CONMED Quality College was launched in 2006 throughout

specific regulations that apply to CONMED as a medical device

the Company, and is already making a difference.

manufacturer, and reinforcing that training; (ii) developing skills

in problem-solving and failure analysis theory, so we can solve

Finally, we have launched an internal Quality Audit Group, which

problems the right way the first time; and (iii) reinforcing the

seeks to visit each facility at least once a year to make sure our

regulations and process through evaluation of case studies. The

regulatory performance is strong.

market For conmed’S common Stock and related Stockholder matterS

Our common stock, par value $.01 per share, is traded on the NASDAQ Stock Market under the symbol “CNMD.” At January 31, 2007,
there were 1,076 registered holders of our common stock and approximately 8,683 accounts held in “street name.”

The following table sets forth quarterly high and low sales prices for the years ended December 31, 2005 and 2006, as reported by the
NASDAQ Stock Market.

2005

2006

Period
________________________________________________________________________________________________________
First Quarter
Second Quarter
Third Quarter
Fourth Quarter

High
$ 30.16
32.58
31.81
27.85

High
$ 24.00
22.05
21.29
23.32

Low
$ 26.69
29.27
27.44
22.55

Low
$ 18.09
18.75
19.19
21.10

We did not pay cash dividends on our common stock during 2005 or 2006 and do not currently intend to pay dividends for the foreseeable
future. Future decisions as to the payment of dividends will be at the discretion of the Board of Directors, subject to conditions then existing,
including our financial requirements and condition and the limitation and payment of cash dividends contained in debt agreements.

Our Board of Directors has authorized a share repurchase program; see Note 8 to the Consolidated Financial Statements.

Information relating to compensation plans under which equity securities of CONMED Corporation are authorized for issuance is set forth in
the section captioned “Equity Compensation Plans” in CONMED Corporation’s definitive Proxy Statement or other informational filing for
our 2007 Annual Meeting of Stockholders and all such information is incorporated herein by reference.

Five Year SummarY oF Selected Financial data

(In thousands, except per share data)
Years Ended December 31,

Statements of Operations Data(1):

Net sales
Income (loss) from operations
Net income (loss)
Earnings (loss) per share:

Basic
Diluted

Weighted average number of common shares in calculating:

Basic earnings (loss) per share
Diluted earnings (loss) per share

Other Financial Data:

Depreciation and amortization
Capital expenditures

Balance Sheet Data (at period end):

2002

2003

2004

2005

2006

$ 453,062
79,349
34,151

$ 497,130
79,955
32,082

$ 558,388
63,161
33,465

$ 617,305 $ 646,812
(4,603 )
(12,507 )

63,748
31,994

1.25
1.23

1.11
1.10

1.13
1.11

1.09 $
1.08

(.45 )
(.45 )

27,337
27,827

28,930
29,256

29,523
30,105

29,300
29,736

27,966
27,966

$ 22,370
13,384

$ 24,854
9,309

$ 26,868
12,419

$ 30,786 $ 29,851
21,895

16,242

Cash and cash equivalents
Total assets
Long-term debt (including current portion)
Total shareholders’ equity

5,626
742,140
257,387
386,939

5,986
805,058
264,591
433,490

4,189
872,825
294,522
447,983

3,454 $

$
903,783
306,851
453,006

3,831
861,571
267,824
440,354

(1) Results of operations of acquired businesses have been recorded in the financial statements since the date of acquisition. See additional discussion in Note 2 to the Consolidated

Financial Statements.

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management’S diScuSSion and analYSiS oF Financial condition
and reSultS oF operationS
The following discussion should be read in conjunction with the
Five Year Summary of Selected Financial Data, and our Consolidated
Financial Statements and related notes contained elsewhere in this
Annual Report.

Overview of CONMED Corporation

CONMED Corporation (“CONMED,” the “Company,” “we”
or “us”) is a medical technology company with an emphasis on
surgical devices and equipment for minimally invasive procedures
and 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. These product lines and the percentage of
consolidated revenues associated with each, are as follows:

Arthroscopy
Powered Surgical Instruments
Electrosurgery
Patient Care
Endosurgery
Endoscopic Technologies

Consolidated Net Sales

2004
37%
23
15
14
8
3

2005
34%
22
14
12
8
10
______ ______ ______
100%
______ ______ ______
______ ______ ______

2006
35%
21
15
12
8
9

100%

A significant amount of our products are used in surgical procedures
with approximately 75% of our revenues derived from the sale of
disposable products. Our capital equipment offerings also facilitate
the ongoing sale of related disposable products and accessories, thus
providing us with a recurring revenue stream. We manufacture
substantially all of our products in facilities located in the United
States, Mexico and Finland. We market our products both
domestically and internationally directly to customers and through
distributors. International sales approximated 35%, 37% and 39% in
2004, 2005 and 2006, respectively.

Business Environment and Opportunities

The aging of the worldwide population along with lifestyle
changes, continued cost containment pressures on healthcare
systems and the desire of clinicians and administrators to use less
invasive (or non-invasive) procedures are important trends which
are driving the growth in our industry. We believe that with our
broad product offering of high quality surgical and patient care
products, we can capitalize on this growth for the benefit of the
Company and our shareholders.

In order to further our growth prospects, we have historically used
strategic business acquisitions and exclusive distribution relationships
to continue to diversify our product offerings, increase our market
share and realize economies of scale.

We have a variety of research and development initiatives focused
in each of our principal product lines. Among the most significant
of these efforts is the Endotracheal Cardiac Output Monitor
(“ECOM”). Our ECOM product offering is expected to provide an
innovative alternative to catheter monitoring of cardiac output with
a specially designed endotracheal tube which utilizes proprietary
bio-impedance technology. Also of significance are our research and
development efforts in the area of tissue-sealing for electrosurgery.

Continued innovation and commercialization of new proprietary
products and processes are essential elements of our long-term
growth strategy. In February 2007, we unveiled several new products
at the American Academy of Orthopedic Surgeons Annual Meeting
which we believe will further enhance our Arthroscopy product

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offerings. Our reputation as an innovator is exemplified by these
recent product introductions, which include the following: the
IM4000 High Definition Camera System, our first high definition
camera system utilized in arthroscopic and multi-specialty
endoscopy; the 24K Irrigation System, a high end irrigation system
that provides fluid to the joint space for irrigation, distention, and
hemostasis during an arthroscopic procedure; the Hip Arthroscopy
Kit used for diagnosis and treatment of hip pain; and the Hi-Fi
Suture Cutter, specifically designed to cut high strength sutures
utilized with or without attached anchors for soft tissue repair.

Business Challenges

In September 2004, we acquired the business operations of
the Endoscopic Technologies Division of C.R. Bard, Inc. (the
“Endoscopic Technologies acquisition”) for aggregate consideration
of $81.3 million in cash. The acquired business has enhanced
our product offerings by adding a comprehensive line of single-
use medical devices employed by gastrointestinal and pulmonary
physicians to diagnose and treat diseases of the digestive tract and
lungs using minimally invasive endoscopic techniques. The transfer
of the Endoscopic Technologies production lines from C.R. Bard
facilities to CONMED facilities has proven to be more time-
consuming, costly and complex than was originally anticipated.
Operational issues associated with the transfer of production lines
have resulted in backorders, which combined with increased
competition and pricing pressures in the marketplace have resulted
in decreased sales, lower than anticipated gross margins and
operating losses. As a result of these factors, during our fourth
quarter 2006 goodwill impairment testing, we determined that the
goodwill of our Endoscopic Technologies business was impaired and
consequently we recorded an impairment charge of $46.7 million to
reduce the carrying amount of this business to its fair value. We have
taken corrective action to resolve the operational issues associated
with product shortages and are continuing our efforts to ensure a
return to sales growth and profitability.

Our facilities are subject to periodic inspection by the United States
Food and Drug Administration (“FDA”) for, among other things,
conformance to Quality System Regulation and Current Good
Manufacturing Practice (“CGMP”) requirements. Following an
inspection, the FDA typically provides its observations, if any, in
the form of a Form 483 (Notice of Inspectional Observations) with
specific observations concerning potential violation of regulations. In
December 2004, the FDA initiated an inspection of our Largo, Florida
manufacturing facility. Following the inspection, the FDA issued to
us a Form 483 which included observations related to our corrective
and preventive action procedures for nonconforming products and
other quality problems. Although we responded to the Form 483 to
address and correct the deficiencies, the FDA further issued a warning
letter in June 2005 relating to these observations. We subsequently
responded to the FDA with a plan of the corrective actions that we had
taken or proposed to take. In that response, we committed to further
developing and implementing, in a timely manner, the principles and
strategies of systems-based quality management for improved CGMP
compliance, operational performance and efficiencies. We consider
the receipt of a warning letter to be an important regulatory event.
Accordingly, we have undertaken corrective actions that have involved
significant additional costs to the Company. In May 2006, the FDA
initiated a re-inspection of our Largo, Florida manufacturing facility
to verify issues related to the June 2005 warning letter and December
2004 Form 483 observations had been corrected. No further Form 483
observations were issued by FDA during the May 2006 inspection. We
will continue implementing and monitoring continuous improvement
activities through our Company-wide quality systems initiative.
However, there can be no assurance that the actions undertaken by

the Company will ensure that we will not receive an additional Form
483 or warning letter, or other regulatory actions which may include
consent decrees or fines.

We remain in litigation against Johnson & Johnson and several of
its subsidiaries, including Ethicon, Inc. for violation of federal and
state antitrust laws. The lawsuit claims that Johnson & Johnson
engaged in illegal and anticompetitive conduct with respect to sales
of product used in endoscopic surgery, resulting in higher prices
to consumers and the exclusion of competition. We have sought
relief which includes an injunction restraining Johnson & Johnson
from continuing its anticompetitive practice as well as receiving the
maximum amount of damages allowed by law. While we believe
that our claims are well-grounded in fact and law, there can be no
assurance that we will be successful in our claim. In addition, the
costs associated with pursuing this claim have been substantial. See
Note 11 to the Consolidated Financial Statements.

Critical Accounting Policies

Preparation of our financial statements requires us to make estimates
and assumptions which affect the reported amounts of assets,
liabilities, revenues and expenses. Note 1 to the Consolidated
Financial Statements describes the significant accounting policies
used in preparation of the Consolidated Financial Statements.
The most significant areas involving management judgments and
estimates are described below and are considered by management
to be critical to understanding the financial condition and results of
operations of CONMED Corporation.

Revenue Recognition

Revenue is recognized when title has been transferred to the
customer which is at the time of shipment. The following policies
apply to our major categories of revenue transactions:
• Sales to customers are evidenced by firm purchase orders. Title and
the risks and rewards of ownership are transferred to the customer
when product is shipped under our stated shipping terms. Payment
by the customer is due under fixed payment terms.

• We place certain of our capital equipment with customers in

return for commitments to purchase disposable products over
time periods generally ranging from one to three years. In these
circumstances, no revenue is recognized upon capital equipment
shipment and we recognize revenue upon the disposable product
shipment. The cost of the equipment is amortized over the term of
individual commitment agreements.

• Product returns are only accepted at the discretion of the Company
and in accordance with our “Returned Goods Policy.” Historically
the level of product returns has not been significant. We accrue
for sales returns, rebates and allowances based upon an analysis
of historical customer returns and credits, rebates, discounts and
current market conditions.

• Our terms of sale to customers generally do not include any
obligations to perform future services. Limited warranties are
provided for capital equipment sales and provisions for warranty
are provided at the time of product sale based upon an analysis of
historical data.

• Amounts billed to customers related to shipping and handling have
been included in net sales. Shipping and handling costs included in
selling and administrative expense were $9.3 million, $11.2 million
and $14.3 million for 2004, 2005 and 2006, respectively.

• We sell to a diversified base of customers around the world and,
therefore, believe there is no material concentration of credit risk.

• We assess the risk of loss on accounts receivable and adjust the
allowance for doubtful accounts based on this risk assessment.
Historically, losses on accounts receivable have not been material.
Management believes that the allowance for doubtful accounts
of $1.2 million at December 31, 2006 is adequate to provide for
probable losses resulting from accounts receivable.

Inventory Reserves

We maintain reserves for excess and obsolete inventory resulting
from the inability to sell our products at prices in excess of current
carrying costs. The markets in which we operate are highly
competitive, with new products and surgical procedures introduced
on an on-going basis. Such marketplace changes may result in our
products becoming obsolete. We make estimates regarding the future
recoverability of the costs of our products and record a provision
for excess and obsolete inventories based on historical experience,
expiration of sterilization dates and expected future trends. If actual
product life cycles, product demand or acceptance of new product
introductions are less favorable than projected by management,
additional inventory write-downs may be required. We believe that
our current inventory reserves are adequate.

Business Acquisitions

We have a history of growth through acquisitions. Assets and
liabilities of acquired businesses are recorded under the purchase
method of accounting at their estimated fair values as of the date
of acquisition. Goodwill represents costs in excess of fair values
assigned to the underlying net assets of acquired businesses. Other
intangible assets primarily represent allocations of purchase price
to identifiable intangible assets of acquired businesses. We have
accumulated goodwill of $290.5 million and other intangible assets
of $191.1 million at December 31, 2006.

In accordance with Statement of Financial Accounting Standards
No. 142, “Goodwill and Other Intangible Assets,” (“SFAS 142”),
goodwill and intangible assets deemed to have indefinite lives are not
amortized, but are subject to at least annual impairment testing. The
identification and measurement of goodwill impairment involves
the estimation of the fair value of our businesses. Estimates of fair
value are based on the best information available as of the date of the
assessment, which primarily incorporate management assumptions
about expected future cash flows and contemplate other valuation
techniques. Future cash flows may be affected by changes in industry
or market conditions or the rate and extent to which anticipated
synergies or cost savings are realized with newly acquired entities.

Intangible assets with a finite life are amortized over the estimated
useful life of the asset. Intangible assets which continue to be subject
to amortization are also evaluated to determine whether events
and circumstances warrant a revision to the remaining period of
amortization. An intangible asset is determined to be impaired when
estimated undiscounted future cash flows indicate that the carrying
amount of the asset may not be recoverable. An impairment loss is
recognized by reducing the recorded value to its current fair value. It is
our policy to perform annual impairment tests in the fourth quarter.

During the fourth quarter of 2006, after completing our annual
goodwill impairment analysis, we determined that the goodwill of
our CONMED Endoscopic Technologies business was impaired
and consequently we recorded a goodwill impairment charge of
$46.7 million.

See Note 2 to the Consolidated Financial Statements for further
discussion of business acquisitions; see Note 5 to the Consolidated
Financial Statements for further discussion of goodwill and other
intangible assets.

n
11

Pension Plan

We sponsor a defined benefit pension plan covering substantially
all our employees. Major assumptions used in accounting for the
plan include the discount rate, expected return on plan assets,
rate of increase in employee compensation levels and expected
mortality. Assumptions are determined based on Company data
and appropriate market indicators, and are evaluated annually as of
the plan’s measurement date. A change in any of these assumptions
would have an effect on net periodic pension costs reported in the
consolidated financial statements.

n n n n n n

Higher market interest rates have resulted in us increasing the
discount rate used in determining pension expense from 5.55% in
2006 to 5.90% in 2007. This change in assumption will result in
lower pension expense during 2007. This rate was determined by
using the Citigroup Pension Liability Index rate which, we believe,
is a reasonable indicator of our plan’s future payment stream.

We have used an expected rate of return on pension plan assets of
8.0% for purposes of determining the net periodic pension benefit
cost. In determining the expected return on pension plan assets,
we consider the relative weighting of plan assets, the historical
performance of total plan assets and individual asset classes and
economic and other indicators of future performance. In addition,
we consult with financial and investment management professionals
in developing appropriate targeted rates of return.

We have estimated our rate of increase in employee compensation
levels at 3.0% consistent with our internal budgeting.

As of December 31, 2004, we changed from the 1984 Unisex Pension
mortality table to the 1994 Group Annuity Reserving mortality table
for purposes of determining expected mortality. This change in
assumption resulted in higher pension expense in 2005.

Based on these and other factors, 2007 pension expense is estimated
at approximately $6.2 million compared to $6.9 million in 2006.
Actual expense may vary significantly from this estimate.

We expect to contribute approximately $12.0 million to our pension
plan in 2007.

During the year ended December 31, 2006, we adopted Statement
of Financial Accounting Standards No. 158, “Employers’ Accounting
for Defined Benefit Pension and Other Postretirement Plans – an
amendment of FASB Statements No. 87, 88, 106, and 132(R)”
(“SFAS 158”) which requires balance sheet recognition of the
overfunded or underfunded status of pension and postretirement
benefit plans. The effects of adopting SFAS 158 were an increase in
total liabilities of approximately $8.5 million and a reduction to total
shareholders’ equity of approximately $5.3 million.

See Note 10 to the Consolidated Financial Statements for
further discussion.

Stock-Based Compensation

We adopted Statement of Financial Accounting Standards No. 123
(revised 2004), “Share-Based Payment” (“SFAS 123R”) effective
January 1, 2006. SFAS 123R requires that all share-based payments
to employees, including grants of employee stock options, restricted
stock units and stock appreciation rights, be recognized in the
financial statements based on their fair values. Prior to January 1,
2006, we accounted for stock-based compensation in accordance
with Accounting Principles Board Opinion No. 25 “Accounting for
Stock Issued to Employees” (“APB 25”). No compensation expense
was recognized for stock options under the provisions of APB 25
since all options granted had an exercise price equal to the market
value of the underlying stock on the grant date.

SFAS 123R was adopted using the modified prospective transition
method. Under this method, the provisions of SFAS 123R apply to
all awards granted or modified after the date of adoption. In addition,
compensation expense must be recognized for any nonvested stock
option awards outstanding as of the date of adoption. We recognize
such expense using a straight-line method over the vesting period.
Prior periods have not been restated.

n
12

use of a simplified method to calculate the beginning pool of excess
tax benefits available to absorb tax deficiencies recognized subsequent
to the adoption of SFAS 123R.

See Note 8 to the Consolidated Financial Statements for
further discussion.

Income Taxes

The recorded future tax benefit arising from net deductible temporary
differences and tax carryforwards is approximately $35.0 million at
December 31, 2006. Management believes that our earnings during
the periods when the temporary differences become deductible will be
sufficient to realize the related future income tax benefits.

During the third quarter of 2006, we filed our United States federal
income tax return for 2005. As a result of the filing, we identified
a greater benefit than was originally anticipated associated with the
extraterritorial income exclusion rules and research and development
tax credit. The net effect of these adjustments was a $0.7 million
reduction in income tax expense in 2006.

We have established a valuation allowance to reflect the uncertainty
of realizing the benefits of certain net operating loss carryforwards
recognized in connection with an acquisition. Any subsequently
recognized tax benefits associated with the valuation allowance
would be allocated to reduce goodwill. In assessing the need for a
valuation allowance, we estimate future taxable income, considering
the feasibility of ongoing tax planning strategies and the realizability
of tax loss carryforwards. Valuation allowances related to deferred tax
assets may be impacted by changes to tax laws, changes to statutory
tax rates and future taxable income levels.

See Note 7 to the Consolidated Financial Statements for
further discussion.

Results of Operations

The following table presents, as a percentage of net sales, certain
categories included in our consolidated statements of income (loss)
for the periods indicated:

Years Ended December 31,

2004 2005 2006

Net sales

100.0% 100.0% 100.0%

Cost of sales
Gross margin
Selling and administrative expense
Research and development expense
Goodwill impairment
Write-off of purchased in-process
research and development assets
Other expense (income), net

Income (loss) from operations
Loss on early extinguishment of debt
Interest expense
Income (loss) before income taxes
Provision (benefit) for income taxes
Net income (loss)

49.3
_______ _______ _______
50.7
35.1
4.1
—

48.6
51.4
32.8
3.6
—

51.6
48.4
36.3
4.7
7.2

2.9
0.8
11.3
0.1
2.3
8.9
2.9
6.0%

—
—
1.0
0.8
_______ _______ _______
10.5
(0.6)
—
0.1
2.6
3.0
_______ _______ _______
7.9
(3.7 )
2.7
(1.8 )
_______ _______ _______
5.2%
(1.9 )%
_______ _______ _______
_______ _______ _______

2006 Compared to 2005

Sales for 2006 were $646.8 million, an increase of $29.5 million
(4.8%) compared to sales of $617.3 million in 2005 with the increase
occurring in all product lines except Endoscopic Technologies.
Favorable foreign currency exchange rates in 2006 compared to 2005
accounted for $4.5 million of the increase.

Cost of sales increased to $334.0 million in 2006 compared to
$304.3 million in 2005, primarily as a result of the increased sales
volumes discussed above. Gross profit margins decreased
2.3 percentage points from 50.7% in 2005 to 48.4% in 2006. The
total decrease of 2.3 percentage points is comprised of 1.2 percentage
points attributable to decreased gross margins in our Endoscopic
Technologies business, 0.7 percentage points attributable to decreased
gross margins in our Patient Care business with the remaining
0.4 percentage point decrease attributable to decreased gross margins
in our Endosurgery business. The Endoscopic Technologies
business was acquired as a result of the Endoscopic Technologies
acquisition and involved the transfer of substantially all of the
Endoscopic Technologies production lines from C.R. Bard facilities
to CONMED facilities. This transfer has proven to be more time-
consuming, costly and complex than was originally anticipated.
In addition, production and operational issues at an assembly
operation in Mexico under contract to CONMED have resulted
in product shortages and backorders. These operational issues, in
combination with increased competition and pricing pressures in
the marketplace have resulted in decreased sales and gross margins.
The decreases in gross margin percentage attributable to Patient Care
and Endosurgery are primarily a result of significant cost increases
experienced in the second half of 2005 and in 2006 with respect to
certain commodity and petroleum-based raw materials such as plastic
resins and polymers used in the production of many of our products
as well as higher spending related to quality assurance.

Selling and administrative expense increased to $234.8 million in
2006 compared to $216.7 million in 2005. Selling and administrative
expense as a percentage of net sales increased to 36.3% in 2006 from
35.1% in 2005. This increase of 1.2 percentage points is primarily
attributable to expensing stock options and other share-based
payments in 2006 (0.6 percentage points) due to the adoption of
SFAS 123R (see Note 8 to the Consolidated Financial Statements);
increased administrative expenses associated with higher distribution
costs (0.2 percentage points) due in part to higher petroleum prices;
higher pension costs (0.2 percentage points) due primarily as a result
of a decrease in the pension discount rate (see “Pension Plan” section
of “Critical Accounting Estimates” above); increased spending on
corporate quality systems and management (0.1 percentage points)
to continue to maintain appropriate regulatory compliance; and other
increases in selling and administrative costs (0.1 percentage points).

Research and development expense was $30.7 million in 2006
compared to $25.5 million in 2005. As a percentage of net sales,
research and development expense increased to 4.7% in 2006
from 4.1% in 2005. The increase of 0.6 percentage points reflects an
increased emphasis on new product development across all of our
product lines with the most significant increases occurring in the
areas of arthroscopy and powered instruments (0.3 percentage points).

As discussed above, the transfer of the Endoscopic Technologies
production lines from C.R. Bard facilities to CONMED facilities
has proven to be more time-consuming, costly and complex than
was originally anticipated. In addition, production and operational
issues at an assembly operation in Mexico under contract to
CONMED have resulted in product shortages and backorders.
These operational issues, in combination with increased competition
and pricing pressures in the marketplace have resulted in decreased
sales and gross margins and operating losses. As a result of these
factors, during our fourth quarter 2006 goodwill impairment testing,
we determined that the goodwill of our Endoscopic Technologies
business was impaired and consequently we recorded an impairment

charge of $46.7 million to reduce the carrying amount of this
business to its fair value. We estimated the fair value of the
Endoscopic Technologies business using a discounted cash flow
valuation methodology and measured the goodwill impairment in
accordance with SFAS 142.

As discussed in Note 12 to the Consolidated Financial Statements,
other expense in 2006 consisted of the following: $0.6 million in
costs related to the closing of a manufacturing plant; $0.6 million
in costs related to the write-off of inventory in settlement of a
patent dispute; a $1.4 million charge related to the termination of
our surgical lights product offering; and $2.6 million in Endoscopic
Technologies acquisition and transition-integration related charges.
Other expense in 2005 consisted of $1.5 million of expenses
associated with the termination of our surgical lights product
offering; $4.1 million in Endoscopic Technologies acquisition and
transition-integration related charges; $0.7 million in environmental
settlement costs; and $0.8 million of expense related to the loss on an
equity investment.

During 2006, we recorded $0.7 million in losses on the early
extinguishment of debt in connection with the refinancing of
our senior credit agreement. See additional discussion under
Management’s Discussion and Analysis of Financial Condition and
Results of Operations—Liquidity and Capital Resources and Note 6
to the Consolidated Financial Statements.

Interest expense in 2006 was $19.1 million compared to $15.6 million
in 2005. The increase in interest expense is primarily a result of higher
weighted average borrowings outstanding in 2006 as compared to 2005
and higher weighted average interest rates on our borrowings (5.53%
in 2006 as compared to 4.69% in 2005) inclusive of the finance charge
on our accounts receivable sale facility. The increase in weighted
average interest rates on our borrowings is primarily a result of market
increases in interest rates on our variable rate debt.

A provision for income taxes was recorded at an effective rate of
(48.7)% in 2006 and 33.6% in 2005. The effective rate for 2006 was
lower than 2005. As a result of the settlement of our 2001 through
2004 income taxes as a result of IRS examinations, we adjusted our
reserves to consider positions taken in our income tax returns for
periods subsequent to 2004. The settlement and adjustment to our
reserves resulted in a $1.5 million reduction in income tax expense
in 2006. During the third quarter of 2006, we filed our United
States federal income tax return for 2005. As a result of the filing, we
identified a greater benefit than was originally anticipated associated
with the extraterritorial income exclusion rules and research and
development tax credit resulting in a $0.7 million reduction in
income tax expense. The net effect of these adjustments was a
$2.2 million reduction in income tax expense in 2006 as compared
to the same period a year ago. A reconciliation of the United States
statutory income tax rate to our effective tax rate is included in
Note 7 to the Consolidated Financial Statements.

2005 Compared to 2004

Sales for 2005 were $617.3 million, an increase of $58.9 million
(10.5%) compared to sales of $558.4 million in 2004 with the
increase occurring in all product lines except Patient Care. The
Endoscopic Technologies acquisition accounted for $43.2 million
of the increase and favorable foreign currency exchange rates in
2005 compared to 2004 accounted for $3.6 million. The Endoscopic
Technologies acquisition is described more fully in Note 2 to the
Consolidated Financial Statements.

n
13

Cost of sales increased to $304.3 million in 2005 compared to
$271.5 million in 2004, primarily as a result of the increased
sales volumes discussed above. Gross profit margins decreased
0.7 percentage points from 51.4% in 2004 to 50.7% in 2005
primarily as a result of significant cost increases with respect to
certain commodity and petroleum-based raw materials such as
plastic resins and polymers used in the production of many of our

n n n n n n

products and higher spending related to quality assurance. These
higher costs (approximately 1.2 percentage points) more than offset
the improvement in margins we experienced as a result of the
addition of the higher margin products acquired in the Endoscopic
Technologies acquisition (0.5 percentage points).

Selling and administrative expense increased to $216.7 million in 2005
as compared to $183.2 million in 2004. Selling and administrative
expense as a percentage of net sales increased to 35.1% in 2005 from
32.8% in 2004. This increase of 2.3 percentage points is primarily
attributable to increased administrative expenses associated with
higher distribution costs (0.4 percentage points) due in part to higher
petroleum prices; higher pension costs (0.2 percentage points)
due primarily as a result of changes in actuarial assumptions (see
“Pension Plan” section of “Critical Accounting Estimates” above);
increased spending on corporate quality systems and management
(0.2 percentage points) to ensure we continue to maintain appropriate
regulatory compliance; increased selling and marketing costs
associated with the Endoscopic Technologies business (0.3 percentage
points); other increases in selling and administrative costs
(1.2 percentage points) including the Johnson & Johnson litigation.
See Note 11 to the Consolidated Financial Statements.

Research and development expense was $25.5 million in 2005
compared to $20.2 million in 2004. As a percentage of net sales,
research and development expense increased to 4.1% in 2005 from
3.6% in 2004. The increase of 0.5 percentage points in research and
development expense as a percentage of sales is principally a result
of increased spending on the development of our PRO2
pulse oximetry system and ECOM endotracheal cardiac output
monitor for our Patient Care business (0.2 percentage points) and
the addition of the Endoscopic Technologies business in September
2004 (0.3 percentage points).

® reflectance

As discussed in Note 2 to the Consolidated Financial Statements,
we wrote-off $16.4 million of purchased in-process research and
development assets associated with the Endoscopic Technologies
acquisition in 2004.

As discussed in Note 12 to the Consolidated Financial Statements,
other expense in 2005 consisted of the following: $1.5 million
of expenses associated with the termination of our surgical
lights product offering; $4.1 million of Endoscopic Technologies
acquisition and transition-integration related charges; $0.7 million
in environmental settlement costs; and $0.8 million of expense
related to the loss on an equity investment. Other expense in 2004
consisted primarily of $2.4 million of expenses associated with the
termination of our surgical lights product offering and $1.5 million
of Endoscopic Technologies acquisition and transition-integration
related charges.

During 2004, we recorded $0.8 million in losses on the early
extinguishment of debt related to the refinancing of a portion
of the term loans under our senior credit agreement through
the issuance of 2.50% convertible senior subordinated notes.
See additional discussion under Management’s Discussion and
Analysis of Financial Condition and Results of Operations—
Liquidity and Capital Resources and Note 6 to the Consolidated
Financial Statements.

Interest expense in 2005 was $15.6 million compared to $12.8 million
in 2004. The increase in interest expense is primarily a result of
higher weighted average borrowings outstanding in 2005 as compared
to 2004 and higher weighted average interest rates on our borrowings
(4.69% in 2005 as compared to 4.17% in 2004) inclusive of the
finance charge on our accounts receivable sale facility. The increase
in weighted average interest rates on our borrowing is primarily a
result of our increased borrowings against our revolving credit
facility coupled with market increases in interest rates on our variable
rate debt.

n
14

A provision for income taxes was recorded at an effective rate of 33.6%
in 2005 and 32.5% in 2004. The effective rate for 2005 was higher
than 2004 because the 2004 effective tax rate reflected an adjustment
to the estimated benefit to be realized from the extraterritorial income
exclusion tax rules on foreign sales. A reconciliation of the United
States statutory income tax rate to our effective tax rate is included in
Note 7 to the Consolidated Financial Statements.

Operating Segment Results

Segment information is prepared on the same basis that we review
financial information for operational decision-making purposes.
We conduct our business through five principal operating units:
CONMED Endoscopic Technologies, CONMED Endosurgery,
CONMED Electrosurgery, CONMED Linvatec and CONMED
Patient Care. Based upon the aggregation criteria for segment
reporting under Statement of Financial Accounting Standards
No. 131 “Disclosures about Segments of an Enterprise and Related
Information” (“SFAS 131”), we have grouped our CONMED
Endosurgery, CONMED Electrosurgery and CONMED Linvatec
operating units into a single segment. The economic characteristics
of CONMED Patient Care and CONMED Endoscopic
Technologies do not meet the criteria for aggregation due to the
lower overall operating income (loss) of these segments.

The following tables summarize the Company’s results of operations
by segment for 2004, 2005 and 2006:

CONMED Endosurgery, CONMED Electrosurgery and
CONMED Linvatec

Net sales
Income from operations
Operating margin

2006

2004

2005
________ _________ ________
$ 466,771 $ 482,591 $ 515,937
69,295 70,193
77,538
13.6%
16.6%

14.4%

Product offerings include a complete line of endo-mechanical
instrumentation for minimally invasive laparoscopic procedures,
electrosurgical generators and related surgical instruments,
arthroscopic instrumentation for use in orthopedic surgery and small
bone, large bone and specialty powered surgical instruments.
• Arthroscopy sales increased $16.8 million (7.9%) in 2006 to

$228.2 million from $211.4 million in 2005, on increased sales
of our resection and video imaging products for arthroscopy and
general surgery, and our integrated operating room systems and
equipment; Arthroscopy sales increased $6.5 million (3.2%) in
2005 to $211.4 million from $204.9 million in 2004, on increased
sales of our procedure specific, resection and video imaging
products for arthroscopy and general surgery, and our integrated
operating room systems and equipment.

• Powered Surgical Instrument sales increased $5.1 million (3.9%)

in 2006 to $137.2 million from $132.0 million in 2005, on
increased sales of small bone and large bone powered instrument
products offset by slight decreases in our specialty powered
instrument products; Powered Surgical Instrument sales increased
$3.4 million (2.7%) in 2005 to $132.0 million from $128.6 million
in 2004, on increased sales of our PowerPro® line of large bone
powered instrument products and our PowerProMax™ line of
small bone powered instrument products.

• Electrosurgery sales increased $9.3 million (10.6%) in 2006 to

$97.8 million from $88.5 million in 2005, on increased sales of our
System 5000™ electrosurgical generator, ABC® and UltraClean™
disposable surgical products; Electrosurgery sales increased
$2.6 million (3.0%) in 2005 to $88.5 million from $85.9 million
in 2004, on increased sales of the System 5000™ and Ultraclean™.

• Endosurgery sales increased $2.1 million (4.1%) in 2006 to $52.8
million from $50.7 million in 2005, as a result of increased sales
of our hand held instruments, skin staplers, suction/irrigation
products and various laparoscopic instrument products and

systems; Endosurgery sales increased $3.2 million (6.9%) in
2005 to $50.7 million from $47.4 million in 2004, on increased
sales of our skin staplers, suction/irrigation products and various
laparoscopic instrument products and systems.

• Operating margins as a percentage of net sales decreased

0.8 percentage points to 13.6% in 2006 compared to 14.4% in 2005
largely as a result of increased research and development spending
(0.6 percentage points) in the CONMED Linvatec product lines.
The remaining 0.2 percentage point decline in operating margin
is due to decreased gross margins in the CONMED Endosurgery
product lines as a result of significant cost increases experienced
in the second half of 2005 and in 2006 with respect to certain
commodity and petroleum-based raw materials such as plastic
resins and polymers used in the production of the Endosurgery
product lines as well as higher spending related to quality assurance.

• Operating margins decreased 2.2 percentage points to 14.4% in
2005 compared to 16.6% in 2004 due to increased selling and
administrative expense comprised of higher distribution costs
(0.4 percentage points), higher pension expense (0.2 percentage
points) and other increases (0.6 percentage points); and decreased
gross margin percentage (1.0 percentage points) in the CONMED
Linvatec product lines as a result of higher than planned
production variances.

CONMED Patient Care

Net sales
Income (loss) from operations
Operating margin

2006

2004

2005
________ _________ ________
$ 75,879 $ 75,879 $ 75,883
(759 )
(1.0% )

5,734
7.6%

7,314
9.6%

Product offerings include a line of vital signs and cardiac monitoring
products including pulse oximetry equipment and sensors, ECG
electrodes and cables, cardiac defibrillation and pacing pads and
blood pressure cuffs. We also offer a complete line of reusable
surgical patient positioners and suction instruments and tubing
for use in the operating room, as well as a line of IV products and
hydrogel-based wound care dressings.
• Patient Care net sales and the net sales of its principal ECG and
suction instruments product lines remained flat in 2006 when
compared to 2005 and 2004 while increased sales of defibrillator
pads and blood pressure cuffs have offset decreases in other patient
care products during the same periods.

• Operating margins as a percentage of net sales decreased

8.6 percentage points to (1.0%) in 2006 compared to 7.6% in
2005 primarily as a result of decreased gross margins. Gross
margins declined 6.1 percentage points in 2006 as compared to
2005 as a result of significant cost increases experienced in the
second half of 2005 and in 2006 with respect to certain commodity
and petroleum-based raw materials such as plastic resins and
polymers as well as higher spending related to quality assurance.
In addition, as a percentage of net sales, research and development
expense increased 0.9 percentage points in 2006 compared to 2005
®
as a result of increased spending on the development of our PRO2
reflectance pulse oximetry system and ECOM endotracheal cardiac
output monitor. Selling and administrative expenses increased
1.6 percentage points in 2006 compared to 2005 as a result of
higher distribution costs (0.5 percentage points), a charge to write-
off inventory in settlement of a patent dispute (0.8 percentage
points) and other increases (0.3 percentage points).

• Operating margins decreased 2.0 percentage points to 7.6% in 2005
compared to 2004 primarily as a result of decreased gross margins
(1.7 percentage points) as discussed above. The remaining decrease
in operating margin in 2005 compared to 2004 (0.3 percentage
points) is a result of increased spending on the PRO2
ECOM projects.

® and

CONMED Endoscopic Technologies

Net sales
Income (loss) from operations
Operating Margin

2006

2004

2005
________ _________ ________
$ 15,738 $ 58,835 $ 54,992
(5,513 ) (63,399 )
(19,177 )
(9.4% ) (115.3% )
(121.9% )

Product offerings include a comprehensive line of minimally
invasive endoscopic diagnostic and therapeutic instruments used in
procedures which require examination of the digestive tract.
• Endoscopic Technologies net sales declined $3.8 million (6.5%)
in 2006 to $54.9 million from $58.8 million in 2005, principally
due to lower sales in our forceps products as a result of increased
competition and pricing pressures as well as production and
operational issues which have resulted in product shortages and
backorders. In addition, we experienced lower sales as a result of
the discontinuation of our agreement with Xillix Technologies
Corporation to distribute the ONCO-Life™ product. The increase
in sales in 2005 compared to 2004 of $43.2 million is a result of the
inclusion of a full year of Endoscopic Technologies sales in 2005
following the Endoscopic Technologies acquisition in 2004.
• Operating margins as a percentage of net sales declined from

(9.4%) in 2005 to (115.3%) in 2006. Selling and administrative
and research and development expenses increased 5.0 and
1.4 percentage points, respectively, as expenses increased while net
sales declined. Additionally, as discussed above, production and
operational issues associated with the transfer of production lines
from C.R. Bard to CONMED have resulted in product shortages
and backorders, reduced sales and a decrease in gross margin of
14.5 percentage points. As a result of these factors and the resulting
operating losses, we determined during our testing of goodwill in
the fourth quarter of 2006, that the goodwill of our Endoscopic
Technologies business was impaired, resulting in an impairment
charge of $46.7 million (85.0 percentage points). Operating
margins increased to (9.4%) in 2005 from (121.9%) in 2004
principally due to the inclusion in 2004 of an in-process research
and development charge of $16.4 million.

Liquidity and Capital Resources

Our liquidity needs arise primarily from capital investments,
working capital requirements and payments on indebtedness under
our senior credit agreement. We have historically met these liquidity
requirements with funds generated from operations, including sales
of accounts receivable and borrowings under our revolving credit
facility. In addition, we use term borrowings, including borrowings
under our senior credit agreement and borrowings under separate
loan facilities, in the case of real property purchases, to finance our
acquisitions. We also have the ability to raise funds through the sale
of stock or we may issue debt through a private placement or public
offering. We generally attempt to minimize our cash balances on
hand and use available cash to pay down debt or repurchase our
common stock.

Operating Cash Flows

Our net working capital position was $174.7 million at
December 31, 2006. Net cash provided by operating activities was
$74.8 million, $42.4 million and $64.6 million for 2004, 2005 and
2006, respectively.

Net cash provided by operating activities increased $22.1 million in
2006 as compared to 2005 on a $44.5 million decline in net income
due to the non-cash nature of the goodwill impairment charge
recognized in 2006 coupled with a lower rate of growth in inventory
levels during 2006 as compared to 2005. The decline in inventory
growth is due to the planned build-up of inventories during 2005
associated with the transition in manufacturing of the product lines
acquired as a result of the Endoscopic Technologies acquisition; this
transition was completed during 2006.

n
15

n n n n n n

Investing Cash Flows

Capital expenditures were $12.4 million, $16.2 million and
$21.9 million for 2004, 2005 and 2006, respectively. The continued
increase in capital expenditures in 2006 as compared to 2005 and
2004 is primarily due to ongoing expansion of our manufacturing
and distribution capacity as a result of the Endoscopic Technologies
acquisition and other infrastructure and technology upgrades
including the ongoing implementation of an enterprise business
software application. Capital expenditures are expected to
approximate $15.0 million in 2007.

The sale of an equity investment resulted in proceeds of
$1.2 million in 2006. The purchase of a distributor’s business
resulted in a $2.5 million payment in 2006. Payments related to
business acquisitions in 2005 totaled $0.4 million and are additional
cash consideration paid for a business acquisition as a result of a
purchase price adjustment. Investing cash flows in 2004 consisted
primarily of $81.3 million in payments related to the Endoscopic
Technologies acquisition.

Financing Cash Flows

Net cash provided by (used in) financing activities during 2006
consisted of the following: $2.7 million in proceeds from the
issuance of common stock under our stock option plans and
employee stock purchase plan (see Note 8 to the Consolidated
Financial Statements); $7.8 million used to repurchase our common
stock under our Board of Directors approved stock repurchase
program described below; $130.2 million in repayments of term
borrowings under our senior credit agreement; $43.0 million in
repayments under the revolving credit facility of our senior credit
agreement and $1.3 million in payments related to the issuance
of long-term debt. These payments were offset by a $1.2 million
net change in cash overdrafts and proceeds of $135.0 million from
the term loan portion of our amended and restated senior credit
agreement as described below.

During 2006, we entered into an amended and restated $235.0 million
senior credit agreement (the “amended and restated senior credit
agreement”). The amended and restated senior credit agreement
consists of a $100.0 million revolving credit facility and a
$135.0 million term loan. There were no borrowings outstanding
on the revolving credit facility as of December 31, 2006. Our available
borrowings on the revolving credit facility at December 31, 2006
were $93.0 million with approximately $7.0 million of the facility set
aside for outstanding letters of credit. There were $103.0 million in
borrowings outstanding on the term loan at December 31, 2006. The
proceeds of the term loan portion of the amended and restated senior
credit agreement were used to repay borrowings outstanding on the
term loan and revolving credit facility of $142.5 million under the
previously existing senior credit agreement. In connection with the
refinancing, we recorded a $0.7 million loss on early extinguishment
of debt of which $0.2 million related to the write-off of unamortized
deferred financing costs under the previously existing senior credit
agreement and $0.5 million related to financing costs associated with
the amended and restated senior credit agreement.

The scheduled principal payments on the term loan portion of
the amended and restated senior credit agreement are $1.4 million
annually through December 2011, increasing to $95.5 million in 2012
with the remaining balance outstanding due and payable on April 12,
2013. We may also be required, under certain circumstances, to make
additional principal payments based on excess cash flow as defined in
the senior credit agreement. Interest rates on the term loan portion
of the senior credit agreement are at LIBOR plus 2.00% (7.35% at
December 31, 2006) or an alternative base rate; interest rates on the
revolving credit facility portion of the senior credit agreement are at
LIBOR plus 2.00% or an alternative base rate. For those borrowings
where the Company elects to use the alternative base rate, the base
rate will be the greater of the Prime Rate or the Federal Funds Rate in

effect on such date plus 0.50%, plus a margin of 0.75% for term loan
borrowings or 0.50% for borrowings under the revolving credit facility.

The amended and restated senior credit agreement is collateralized
by substantially all of our personal property and assets, except for
our accounts receivable and related rights which are pledged in
connection with our accounts receivable sales agreement. The
senior credit agreement contains covenants and restrictions which,
among other things, require the maintenance of certain financial
ratios, and restrict dividend payments and the incurrence of certain
indebtedness and other activities, including acquisitions and
dispositions. We were in full compliance with these covenants and
restrictions as of December 31, 2006. We are also required, under
certain circumstances, to make mandatory prepayments from net
cash proceeds from any issue of equity and asset sales.

Mortgage notes outstanding in connection with the property and
facilities utilized by our CONMED Linvatec subsidiary consist
of a note bearing interest at 7.50% per annum with semi-annual
payments of principal and interest through June 2009 (the “Class A
note”); and a note bearing interest at 8.25% per annum compounded
semi-annually through June 2009, after which semi-annual payments
of principal and interest will commence, continuing through June
2019 (the “Class C note”). The principal balances outstanding on
the Class A note and Class C note aggregated $5.2 million and
$9.6 million, respectively, at December 31, 2006. These mortgage
notes are secured by the CONMED Linvatec property and facilities.

During 2004, we completed an offering of $150.0 million in 2.50%
convertible senior subordinated notes (the “Notes”) due 2024.
The Notes represent subordinated unsecured obligations and are
convertible under certain circumstances, as defined in the bond
indenture, into a combination of cash and CONMED common
stock. Upon conversion, the holder of each Note will receive the
conversion value of the Note payable in cash up to the principal
amount of the Note and CONMED common stock for the Note’s
conversion value in excess of such principal amount. Amounts
in excess of the principal amount are at an initial conversion rate,
subject to adjustment, of 26.1849 shares per $1,000 principal amount
of the Note (which represents an initial conversion price of $38.19
per share). The Notes mature on November 15, 2024 and are not
redeemable by us prior to November 15, 2011. Holders of the Notes
will be able to require that we repurchase some or all of the Notes
on November 15, 2011, 2014 and 2019.

The Notes contain two embedded derivatives. The embedded
derivatives are recorded at fair value in other long-term liabilities
and changes in their value are recorded through the consolidated
statements of operations. The embedded derivatives have a nominal
value, and it is our belief that any change in their fair value would
not have a material adverse effect on our business, financial condition
or results of operations.

Proceeds from the offering and cash on hand were used to repay
$82.2 million on the term loan and a further $45.0 million in
borrowings then outstanding on the revolving credit facility under
our senior credit agreement. Additionally, in conjunction with the
Notes offering, we repurchased $30.0 million of our common
stock in privately negotiated transactions. As a result of the
$82.2 million prepayment on the term loan, we recorded
$0.8 million in losses on the early extinguishment of debt related
to the write-off of unamortized deferred financing fees.

Our Board of Directors has authorized a share repurchase program
under which we may repurchase up to $100.0 million of our
common stock, although no more than $50.0 million may be
purchased in any calendar year. The repurchase program calls for
shares to be purchased in the open market or in private transactions
from time to time. We may suspend or discontinue the share
repurchase program at any time. During 2006, we repurchased
$7.8 million in common stock in order to offset the dilutive effect

n
16

of the issuance of shares under our employee stock option and
employee stock purchase plans. We have financed the repurchases
and may finance additional repurchases through the proceeds
from the issuance of common stock under our stock option plans,
from operating cash flow and from available borrowings under our
revolving credit facility.

Management believes that cash flow from operations, including
accounts receivable sales, cash and cash equivalents on hand and
available borrowing capacity under our senior credit agreement
will be adequate to meet our anticipated operating working capital
requirements, debt service, funding of capital expenditures and
common stock repurchases in the foreseeable future. See Forward
Looking Statements.

Off-Balance Sheet Arrangements

We have entered into an accounts receivable sales agreement
pursuant to which we and certain of our subsidiaries sell on an
ongoing basis certain accounts receivable to CONMED Receivables
Corporation (“CRC”), a wholly-owned, bankruptcy-remote,
special-purpose subsidiary of CONMED Corporation. CRC may
in turn sell up to an aggregate $50.0 million undivided percentage
ownership interest in such receivables (the “asset interest”) to
a bank (the “purchaser”). The purchaser’s share of collections
on accounts receivable are calculated as defined in the accounts
receivable sales agreement, as amended. Effectively, collections on
the pool of receivables flow first to the purchaser and then to CRC,
but to the extent that the purchaser’s share of collections may be
less than the amount of the purchaser’s asset interest, there is no
recourse to CONMED or CRC for such shortfall. For receivables
which have been sold, CONMED Corporation and its subsidiaries
retain collection and administrative responsibilities as agent for
the purchaser. As of December 31, 2005 and 2006, the undivided
percentage ownership interest in receivables sold by CRC to the
purchaser aggregated $40.0 million and $44.0 million, respectively,
which has been accounted for as a sale and reflected in the balance
sheet as a reduction in accounts receivable. Expenses associated with
the sale of accounts receivable, including the purchaser’s financing
costs to purchase the accounts receivable, were $1.0 million,
$1.9 million and $2.3 million, in 2004, 2005 and 2006, respectively,
and are included in interest expense.

There are certain statistical ratios, primarily related to sales dilution
and losses on accounts receivable, which must be calculated and
maintained on the pool of receivables in order to continue selling
to the purchaser. The pool of receivables is in full compliance with
these ratios. Management believes that additional accounts receivable
arising in the normal course of business will be of sufficient quality
and quantity to meet the requirements for sale under the accounts
receivables sales agreement. In the event that new accounts receivable
arising in the normal course of business do not qualify for sale, then
collections on sold receivables will flow to the purchaser rather than
being used to fund new receivable purchases. To the extent that
such collections would not be available to CONMED in the form
of new receivables purchases, we would need to access an alternate
source of working capital, such as our $100 million revolving credit
facility. Our accounts receivable sales agreement, as amended, also
requires us to obtain a commitment (the “purchaser commitment”)
from the purchaser to fund the purchase of our accounts receivable.
The purchaser commitment was amended effective October 23,
2006 whereby it was extended through October 31, 2008 under
substantially the same terms and conditions.

Contractual Obligations

The following table summarizes our contractual obligations for the
next five years and thereafter (amounts in thousands). Purchase
obligations represent purchase orders for goods and services placed
in the ordinary course of business. There were no capital lease
obligations as of December 31, 2006.

Payments Due by Period
1-3
Years

Less than
1 Year

3-5 More than
Years

Total

5 Years
$ 267,824 $ 3,148 $ 6,534 $ 4,418 $ 253,724

56,185 56,051

134

—

13,304
2,279
_______ _______ _______ _______ _______

3,265

4,874

2,886

$ 337,313 $ 62,464 $ 11,542 $ 7,304 $ 256,003
_______ _______ _______ _______ _______
_______ _______ _______ _______ _______

Long-term debt
Purchase
obligations
Operating lease
obligations
Total contractual
obligations

In addition to the above contractual obligations, we are required to
make periodic interest payments on our long-term debt obligations
(see additional discussion under “Quantitative and Qualitative
Disclosures About Market Risk—Interest Rate Risk” and Note 6
to the Consolidated Financial Statements). We expect there to be
approximately $4.5 million in required contributions to our pension
plan in 2007. See Note 10 to the Consolidated Financial Statements.

Stock-Based Compensation

We have reserved shares of common stock for issuance to employees
and directors under three shareholder-approved share-based
compensation plans (the “Plans”). The Plans provide for grants of
options, stock appreciation rights (“SARs”), dividend equivalent
rights, restricted stock, restricted stock units (“RSUs”), and other
equity-based and equity-related awards. The exercise price on all
outstanding options and SARs is equal to the quoted fair market
value of the stock at the date of grant. RSUs are valued at the market
value of the underlying stock on the date of grant. Stock options,
SARs and RSUs are non-transferable other than on death and
generally become exercisable over a five year period from date of
grant. Stock options and SARs expire ten years from date of grant.
SARs are only settled in shares of the Company’s stock. See Note 8
to the Consolidated Financial Statements.

New Accounting Pronouncements

See Note 14 to the Consolidated Financial Statements for a
discussion of new accounting pronouncements.

Quantitative and Qualitative Disclosures About Market Risk

Market risk is the potential loss arising from adverse changes in
market rates and prices such as commodity prices, foreign currency
exchange rates and interest rates. In the normal course of business,
we are exposed to various market risks, including changes in foreign
currency exchange rates and interest rates. We manage our exposure
to these and other market risks through regular operating and
financing activities and as necessary through the use of derivative
financial instruments.

Foreign Currency Risk

A significant portion of our operations consist of sales activities in
foreign jurisdictions. As a result, our financial results may be affected
by factors such as changes in foreign currency exchange rates or weak
economic conditions in the markets in which we distribute products.
As of December 31, 2006, we have not entered into any foreign
exchange forward or option contracts designed to hedge the effect of
foreign currency transactions. We have mitigated the effect of foreign
currency exchange rate risk by transacting a significant portion of
our foreign sales in United States dollars. During 2006, changes in
foreign currency exchange rates increased sales by approximately
$4.5 million and income (loss) before income taxes by approximately
$2.5 million. In the future, we will continue to evaluate our foreign
currency exposure and assess the need to enter into derivative
contracts which hedge foreign currency transactions.

n
17

n n n n n n

Interest Rate Risk

At December 31, 2006, we had approximately $103.0 million of
variable rate long-term debt under our senior credit agreement;
we are not a party to any interest rate swap agreements as of
December 31, 2006. Assuming no repayments other than our 2007
scheduled term loan payments, if market interest rates for similar
borrowings average 1.0% more in 2007 than they did in 2006,
interest expense would increase, and income (loss) before income
taxes would decrease by $1.5 million. Comparatively, if market
interest rates for similar borrowings average 1.0% less in 2007 than
they did in 2006, our interest expense would decrease, and income
(loss) before income taxes would increase by $1.5 million.

Forward-Looking Statements

This Annual Report contains certain forward-looking statements (as
such term is defined in the Private Securities Litigation Reform Act
of 1995) and information relating to CONMED Corporation which
are based on the beliefs of our management, as well as assumptions
made by and information currently available to our management.

When used in this Annual Report, the words “estimate,” “project,”
“believe,” “anticipate,” “intend,” “expect” and similar expressions are
intended to identify forward-looking statements. These statements
involve known and unknown risks, uncertainties and other factors,
which may cause our actual results, performance or achievements,
or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the
following:
• general economic and business conditions;
• cyclical customer purchasing patterns due to budgetary and other

constraints;

• changes in customer preferences;
• competition;
• changes in technology;
• the introduction and acceptance of new products;
• the ability to evaluate, finance and integrate acquired businesses,

products and companies;
• changes in business strategy;
• the availability and cost of materials;
• the possibility that United States or foreign regulatory and/or

administrative agencies may initiate enforcement actions against us
or our distributors;

• future levels of indebtedness and capital spending;
• changes in foreign exchange and interest rates;
• quality of our management and business abilities and the judgment

of our personnel;

• the availability, terms and deployment of capital;
• the risk of litigation, especially patent litigation as well as the cost

associated with patent and other litigation; and

• changes in regulatory requirements.

You are cautioned not to place undue reliance on these forward-
looking statements, which speak only as of the date hereof. We do
not undertake any obligation to publicly release any revisions to
these forward-looking statements or to reflect the occurrence of
unanticipated events.

n
18

management’S report on internal control over Financial reporting

The management of CONMED Corporation is responsible for establishing and maintaining adequate internal control over financial reporting.
Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles. Our
internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to
permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and
that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could
have a material effect on our financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Management assessed the effectiveness of CONMED’s internal control over financial reporting as of December 31,
2006. In making its assessment, management utilized the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”) in Internal Control - Integrated Framework. Management has concluded that based on its assessment, CONMED’s
internal control over financial reporting was effective as of December 31, 2006. Management’s assessment of the effectiveness of CONMED’s
internal control over financial reporting as of December 31, 2006 has been audited by PricewaterhouseCoopers LLP, an independent registered
public accounting firm, as stated in their report which appears on page 20.

Joseph J. Corasanti
President and
Chief Executive Officer

Robert D. Shallish, Jr.
Vice President-Finance and
Chief Financial Officer

n
19

n n n n n n

report oF independent regiStered puBlic accounting Firm

To the Board of Directors and Shareholders of CONMED Corporation:

We have completed integrated audits of CONMED Corporation’s consolidated financial statements and of its internal control over financial
reporting as of December 31, 2006, in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our
opinions, based on our audits, are presented below.

Consolidated financial statements and financial statement schedule

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects,
the financial position of CONMED Corporation and its subsidiaries at December 31, 2006 and 2005, and the results of their operations
and their cash flows for each of the three years in the period ended December 31, 2006 in conformity with accounting principles generally
accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under
Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated
financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our
audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 8 to the consolidated financial statements, the Company changed the manner in which it accounts for share-based
compensation in 2006. As discussed in Note 10 to the consolidated financial statements, the Company changed the manner in which it
accounts for its defined benefit pension plan in 2006.

Internal control over financial reporting

Also, in our opinion, management’s assessment, included in “Management’s Report on Internal Control Over Financial Reporting” appearing
on page 19, that the Company maintained effective internal control over financial reporting as of December 31, 2006 based on criteria
established in Internal Control - Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2006 based on criteria established in Internal Control -
Integrated Framework, issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions
on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We
conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes
obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design
and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A
company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that,
in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.

n
20

PricewaterhouseCoopers LLP

Syracuse, New York
February 27, 2007

conSolidated Balance SheetS

December 31, 2005 and 2006
(In thousands except share and per share amounts)

Assets
Current assets:

Cash and cash equivalents
Accounts receivable, less allowance for doubtful

accounts of $1,522 in 2005 and $1,210 in 2006

Inventories
Income taxes receivable
Deferred income taxes
Prepaid expenses and other current assets

Total current assets

Property, plant and equipment, net
Goodwill, net
Other intangible assets, net
Other assets

Total assets

Liabilities and Shareholders’ Equity

Current liabilities:

Current portion of long-term debt
Accounts payable
Accrued compensation and benefits
Income taxes payable
Accrued interest
Other current liabilities

Total current liabilities

Long-term debt
Deferred income taxes
Other long-term liabilities

Total liabilities

Commitments and contingencies

Shareholders’ equity:

2005

2006

3,454

3,831

83,327
152,428
—
12,887
3,419
_________
255,515
_________

104,224
335,651
191,402
16,991
_________
$ 903,783
_________
_________

4,208
31,084
12,461
4,706
1,095
8,578
_________
62,132
_________

302,643
62,554
23,448
_________
450,777
_________

75,120
151,687
747
15,212
3,286

_________
249,883
_________

116,480
290,512
191,135
13,561
_________
$ 861,571
_________
_________

3,148
41,823
17,712
—
727
11,795
_________
75,205
_________

264,676
51,004
30,332
_________
421,217
_________

Preferred stock, par value $.01 per share; authorized

500,000 shares, none outstanding

Common stock, par value $.01 per share; 100,000,000 authorized;

31,137,119 and 31,304,203, issued in 2005 and 2006, respectively

Paid-in capital
Retained earnings
Accumulated other comprehensive income (loss)
Less: Treasury stock, at cost; 2,944,905 and 3,321,545 shares in

2005 and 2006, respectively

Total shareholders’ equity

Total liabilities and shareholders’ equity

n
21

—

311
278,281
259,932
(9,736 )

313
284,858
247,425
(8,612 )

(75,782 )
_________
453,006
_________
$ 903,783
_________
_________

(83,630 )
_________
440,354
_________
$ 861,571
_________
_________

See notes to consolidated financial statements.

n n n n n n

conSolidated StatementS oF operationS

Years Ended December 31, 2004, 2005 and 2006
(In thousands except per share amounts)

Net sales

Cost of sales

Gross profit

Selling and administrative expense

Research and development expense

Impairment of goodwill

Write-off of purchased in-process research and development assets

Other expense

Income (loss) from operations

Loss on early extinguishment of debt

Interest expense

Income (loss) before income taxes

Provision (benefit) for income taxes

Net income (loss)

Earnings (loss) per share

Basic

Diluted

2004

2005

2006

$ 558,388

$ 617,305

$ 646,812

271,496
_________

304,284
_________

333,966
_________

286,892
_________

313,021
_________

312,846
_________

183,183

216,685

234,832

20,205

—

16,400

25,469

—

30,715

46,689

—

3,943
_________

7,119
_________

5,213
_________

223,731
_________

249,273
_________

317,449
_________

63,161

825

63,748

—

(4,603 )

678

12,774
_________

15,578
_________

19,120
_________

49,562

48,170

(24,401 )

16,097
_________

16,176
_________

(11,894 )
_________

$ 33,465
_________
_________

$ 31,994
_________
_________

$ (12,507 )
_________
_________

1.13

1.11

1.09

1.08

(.45 )

n
22

See notes to consolidated financial statements.

conSolidated StatementS oF ShareholderS’ equitY

Years Ended December 31, 2004, 2005 and 2006
(In thousands)

Common Stock
____________________
Amount

Paid-in Retained Comprehensive Treasury Shareholders’
Capital Earnings Income (Loss) Stock

Equity

Accumulated
Other

Balance at December 31, 2003

29,141 $

________

_______

291 $ 237,076 $ 194,473 $ 2,069 $

(419 ) $ 433,490
________ ________ ________ ________ _________

Common stock issued under employee plans

995

15,578

Common stock issued under employee plans

1,001

16,988

________

_______

24,997
________ ________ ________ ________ _________

30,136 $

________
________

_______
_______

301 $ 256,551 $ 227,938 $ (6,399 ) $ (30,408 ) $ 447,983
________ ________ ________ ________ _________
________ ________ ________ ________ _________

Tax benefit arising from common stock issued
under employee plans

Repurchase of common stock

Comprehensive income:

Foreign currency translation adjustments

Cash flow hedging (net of income tax benefit of $82)

Minimum pension liability (net of income tax benefit

of $5,630)

Net income

Total comprehensive income

Balance at December 31, 2004

Tax benefit arising from common stock issued
under employee plans

Repurchase of common stock

Comprehensive income:

Foreign currency translation adjustments

Minimum pension liability (net of income tax

expense of $172)

Net income

Total comprehensive income

Balance at December 31, 2005

Tax benefit arising from common stock issued
under employee plans

Stock-based compensation

Repurchase of common stock

Comprehensive income (loss):

Foreign currency translation adjustments

Minimum pension liability (net of income tax

expense of $1,330)

Net income (loss)

Total comprehensive income (loss)

Adjustment to initially apply SFAS No. 158

(net of income tax benefit of $3,132)

Balance at December 31, 2006

15,588

3,897

(29,989 )

16,998

4,742

(45,374 )

3,897

2,133

(146 )

(10,455 )

33,465

4,742

(3,657 )

320

31,994

139

3,709

3,375

3,092

(12,507 )

2,731

139

3,709

(7,848 )

n
23

(6,040 )

________

_______

(5,343 )
________ ________ ________ ________ _________

(5,343 )

31,304 $

________
________

_______
_______

313 $ 284,858 $ 247,425 $ (8,612 ) $ (83,630 ) $ 440,354
________ ________ ________ ________ _________
________ ________ ________ ________ _________

See notes to consolidated financial statements.

Common stock issued under employee plans

167

2,729

________

_______

28,657
________ ________ ________ ________ _________

31,137 $

________
________

_______
_______

311 $ 278,281 $ 259,932 $ (9,736 ) $ (75,782 ) $ 453,006
________ ________ ________ ________ _________
________ ________ ________ ________ _________

n n n n n n

conSolidated StatementS oF caSh FlowS

Years Ended December 31, 2004, 2005 and 2006
(In thousands)

Cash flows from operating activities:
Net income (loss)

Adjustments to reconcile net income (loss) to net cash
provided by operating activities:

Depreciation
Amortization
Stock-based compensation
Goodwill impairment
Deferred income taxes
Income tax benefit of stock option exercises
Excess tax benefits from stock-based compensation
Contributions to pension plans less than net pension cost

Write-off of purchased in-process research and development assets

Loss on extinguishment of debt
Loss on sale of equity investment

Increase (decrease) in cash flows from changes in assets and liabilities,
net of effects from acquisitions:

Sale of accounts receivable
Accounts receivable
Inventories
Accounts payable
Income taxes payable
Accrued compensation and benefits
Accrued interest
Other assets
Other liabilities

Net cash provided by operating activities

Cash flows from investing activities:

Payments related to business acquisitions, net of cash acquired
Proceeds from sale of equity investment
Purchases of property, plant and equipment, net

Net cash used in investing activities

Cash flows from financing activities:
Net proceeds from common stock issued under employee plans

Excess tax benefits from stock-based compensation
Repurchase of common stock
Payments on senior credit agreement
Proceeds of senior credit agreement
Payments on mortgage notes
Proceeds from issuance of 2.50% convertible senior subordinated notes
Payments related to issuance of debt

Net change in cash overdrafts

Net cash provided by (used in) financing activities

n
24

Effect of exchange rate changes on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

Supplemental disclosures of cash flow information:

Cash paid during the year for:

Interest
Income taxes

2004

2005

2006

$ 33,465
_________

$ 31,994
_________

$ (12,507 )
_________

10,962
15,906
—
—
4,301
3,897
—
3,619
16,400
825
—

12,466
18,320
—
—
10,128
4,742
—
2,062
—
—
794

11,738
18,113
3,709
46,689
(12,289 )
139
(139 )
1,877
—
203
—

5,000
(19,144 )
1,441
4,350
(2,532 )
1,626
469
(3,884 )
(1,861 )
_________
41,375
_________
74,840
_________

(9,000 )
266
(33,620 )
8,273
675
(194 )
347
(4,402 )
(417 )
_________
10,440
_________
42,434
_________

4,000
(126 )
(9,380 )
7,016
(1,944 )
5,251
(368 )
(1,582 )
4,172
_________
77,079
_________
64,572
_________

(81,645 )
—
(12,419 )
_________

(372 )
—
(16,242 )
_________

(2,466 )
1,205
(21,895 )
_________

(94,064 )
_________

(16,614 )
_________

(23,156 )
_________

15,200
—
(29,989 )
(114,937 )
—
(5,132 )
150,000
(5,848 )
6,209
_________
15,503
_________
1,924
_________
(1,797 )
5,986
_________
$
4,189
_________
_________

16,998
—
(45,374 )
(29,917 )
43,000
(754 )
—
(185 )
(6,102 )
_________
(22,334 )
_________
(4,221 )
_________
(735 )
4,189
_________
$
3,454
_________
_________

2,731
139
(7,848 )
(173,160 )
135,000
(867 )
—
(1,260 )
1,166
_________
(44,099 )
_________
3,060
_________
377
3,454
_________
$
3,831
_________
_________

$ 12,680
11,994

$ 13,794
3,921

$ 18,247
2,168

Supplemental disclosures of non-cash investing and financing activities:
We assumed $3.5 million in liabilities in connection with a business acquisition in 2004 described more fully in Note 2.

See notes to consolidated financial statements.

noteS to conSolidated Financial StatementS

Note 1 — Operations and Significant Accounting Policies

Organization and Operations

CONMED Corporation (“CONMED,” the “Company,” “we”
or “us”) is a medical technology company with an emphasis on
surgical devices and equipment for minimally invasive procedures
and 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.

Principles of consolidation

The consolidated financial statements include the accounts of
CONMED Corporation and its controlled subsidiaries. All significant
intercompany accounts and transactions have been eliminated.

Use of estimates

The preparation of 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, related
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amount of revenues and
expenses during the reporting period. Estimates are used in
accounting for, among other things, allowances for doubtful
accounts, rebates and sales allowances, inventory allowances,
purchased in-process research and development, pension benefits,
goodwill and intangible assets, contingencies and other accruals.
We base our estimates on historical experience and on various
other assumptions which are believed to be reasonable under the
circumstances. Due to the inherent uncertainty involved in making
estimates, actual results reported in future periods may differ from
those estimates. Estimates and assumptions are reviewed periodically,
and the effect of revisions are reflected in the consolidated financial
statements in the period they are determined to be necessary.

Cash and cash equivalents

We consider all highly liquid investments with an original maturity
of three months or less to be cash equivalents.

Accounts receivable sale

$1.9 million and $2.3 million, in 2004, 2005 and 2006, respectively,
and are included in interest expense.

There are certain statistical ratios, primarily related to sales dilution
and losses on accounts receivable, which must be calculated and
maintained on the pool of receivables in order to continue selling
to the purchaser. The pool of receivables is in full compliance with
these ratios. Management believes that additional accounts receivable
arising in the normal course of business will be of sufficient quality
and quantity to meet the requirements for sale under the accounts
receivable sales agreement. In the event that new accounts receivable
arising in the normal course of business do not qualify for sale, then
collections on sold receivables will flow to the purchaser rather than
being used to fund new receivable purchases. To the extent that
such collections would not be available to CONMED in the form
of new receivables purchases, we would need to access an alternate
source of working capital, such as our $100.0 million revolving credit
facility. Our accounts receivable sales agreement, as amended, also
requires us to obtain a commitment (the “purchaser commitment”)
from the purchaser to fund the purchase of our accounts receivable.
The purchaser commitment was amended effective October 23,
2006 whereby it was extended through October 31, 2008 under
substantially the same terms and conditions.

Inventories

Inventories are valued at the lower of cost or market. Cost is
determined on the FIFO (first-in, first-out) method of accounting.

Property, plant and equipment

Property, plant and equipment are stated at cost and depreciated
using the straight-line method over the following estimated useful
lives:

Building and improvements 40 years
Leasehold improvements
Machinery and equipment 2 to 15 years

Shorter of life of asset or life of lease

Goodwill and other intangible assets

Goodwill represents the excess of purchase price over fair value
of identifiable net assets of acquired businesses. Other intangible
assets primarily represent allocations of purchase price to identifiable
intangible assets of acquired businesses. Because of our history of
growth through acquisitions, goodwill and other intangible assets
comprise a substantial portion (55.9% at December 31, 2006) of our
total assets.

Goodwill and intangible assets deemed to have indefinite lives are
not amortized. All other intangible assets are amortized over their
estimated useful lives. We perform impairment tests of goodwill
and indefinite-lived intangible assets and evaluate the useful lives of
acquired intangible assets subject to amortization. These tests and
evaluations are performed in accordance with Statement of Financial
Accounting Standards No. 142 “Goodwill and Other Intangible
Assets” (“SFAS 142”). It is our policy to perform annual impairment
tests in the fourth quarter. These tests resulted in an impairment
charge of $46.7 million in the fourth quarter ending December 31,
2006. See Note 5 for additional discussion.

Other long-lived assets

We review asset carrying amounts for impairment (consisting of
intangible assets subject to amortization and property, plant and
equipment) whenever events or circumstances indicate that such
carrying amounts may not be recoverable. If the sum of the expected
future undiscounted cash flows is less than the carrying amount of
the asset, an impairment loss is recognized by reducing the recorded
value to its current fair value.

n
25

n n n n n n

Equity investments

We have an investment in the common stock of another company
in our industry which represents less than 20% of the voting stock
of this company and in which we do not have the ability to exercise
significant influence. We have accounted for this investment
under the cost method. We review this investment for impairment
whenever events or circumstances indicate that the carrying amounts
of this investment may not be recoverable. If the sum of the expected
future undiscounted cash flows were less than the carrying amount
of the investment, an impairment loss would be recognized by
reducing the recorded value to its current fair value.

Fair value of financial instruments

The carrying amounts reported in our balance sheets for cash and
cash equivalents, accounts receivable, accounts payable and long-
term debt excluding the 2.50% convertible senior subordinated notes
(the “Notes”) approximate fair value. The fair value of the Notes
approximated $132.0 million and $133.7 million at December 31,
2005 and 2006, respectively, based on their quoted market price.

Translation of foreign currency financial statements

Assets and liabilities of foreign subsidiaries have been translated into
United States dollars at the applicable rates of exchange in effect
at the end of the period reported. Revenues and expenses have
been translated at the applicable weighted average rates of exchange
in effect during the period reported. Translation adjustments are
reflected in accumulated other comprehensive income (loss).
Transaction gains and losses are included in net income (loss).

Income taxes

We provide for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, “Accounting
for Income Taxes” (“SFAS 109”). Under the liability method
specified by SFAS 109, deferred tax assets and liabilities are based on
the difference between the financial statement and tax basis of assets
and liabilities as measured by the tax rates that are anticipated to be
in effect when these differences reverse. The deferred tax provision
generally represents the net change in the assets and liabilities for
deferred tax. A valuation allowance is established when it is necessary
to reduce deferred tax assets to amounts for which realization is
more likely than not.

Revenue recognition

Revenue is recognized when title has been transferred to the
customer which is at the time of shipment. The following policies
apply to our major categories of revenue transactions:

• Sales to customers are evidenced by firm purchase orders. Title and
the risks and rewards of ownership are transferred to the customer
when product is shipped under our stated shipping terms. Payment
by the customer is due under fixed payment terms.

n
26

• We place certain of our capital equipment with customers in

• Our terms of sale to customers generally do not include any
obligations to perform future services. Limited warranties are

provided for capital equipment sales and provisions for warranty
are provided at the time of product sale based upon an analysis of
historical data.

• We sell to a diversified base of customers around the world and,
therefore, believe there is no material concentration of credit risk.

Earnings (loss) per share

Basic earnings per share (“basic EPS”) is computed by dividing net
income (loss) by the weighted average number of shares outstanding
for the reporting period. Diluted earnings per share (“diluted EPS”)
gives effect to all dilutive potential shares outstanding resulting from
employee stock options, restricted stock units and stock appreciation
rights during the period. In the 2006 period, incremental shares are
not included in computing diluted EPS because to do so would have
reduced the net loss per share. The following table sets forth the
calculation of basic and diluted earnings per share at December 31,
2004, 2005 and 2006, respectively:

Net income (loss)
Basic-weighted average
shares outstanding
Effect of dilutive potential securities
Diluted-weighted average
shares outstanding

Basic EPS

Diluted EPS

2004

2005

2006

$ 33,465 $ 31,994 $ (12,507)
_______ _______ _______
_______ _______ _______

29,523 29,300 27,966
—
_______ _______ _______

582

436

30,105 29,736 27,966
_______ _______ _______
_______ _______ _______
$
(.45 )
_______ _______ _______
_______ _______ _______
$
(.45 )
_______ _______ _______
_______ _______ _______

1.13 $

1.11 $

1.09 $

1.08 $

The shares used in the calculation of diluted EPS exclude options to
purchase shares where the exercise price was greater than the average
market price of common shares for the year. Such shares aggregated
approximately 0.1 million and 0.6 million at December 31, 2004
and 2005, respectively. Upon conversion of our 2.50% convertible
senior subordinated notes (the “Notes”), the holder of each Note
will receive the conversion value of the Note payable in cash up to
the principal amount of the Note and CONMED common stock for
the Note’s conversion value in excess of such principal amount. As of
December 31, 2006, our share price has not exceeded the conversion
price of the Notes, therefore the conversion value was less than
the principal amount of the Notes. Under the net share settlement
method and in accordance with Emerging Issues Task Force (“EITF”)
Issue 04-8, “The Effect of Contingently Convertible Debt on
Diluted Earnings per Share,” there were no potential shares issuable
under the Notes to be used in the calculation of diluted EPS. The
maximum number of shares we may issue with respect to the Notes
is 5,750,000. See Note 6 for further discussion of the Notes.

Stock-based compensation

with Accounting Principles Board Opinion No. 25 “Accounting for
Stock Issued to Employees” (“APB 25”). No compensation expense
was recognized for stock options under the provisions of APB 25
since all options granted had an exercise price equal to the market
value of the underlying stock on the grant date.

and had no alternative future use. Accordingly, the entire amount
of in-process research and development assets were written-off
in accordance with FASB Interpretation No. 4. The $16.4 million
write-off of purchased in-process research and development assets is
deductible for income tax purposes.

We elected to adopt the alternative transition method, as permitted
by FASB Staff Position No. FAS 123R-3 “Transition Election Related
to Accounting for Tax Effects of Share-Based Payment Awards,” to
calculate the tax effects of stock-based compensation pursuant to
SFAS 123R for those employee awards that were outstanding upon
adoption of SFAS 123R. The alternative transition method allows the
use of a simplified method to calculate the beginning pool of excess
tax benefits available to absorb tax deficiencies recognized subsequent
to the adoption of SFAS 123R. See Note 8 for additional discussion.

Accumulated other comprehensive income (loss)

The unaudited pro forma statement of operations for the year
ended December 31, 2004, assuming the Endoscopic Technologies
acquisition occurred as of January 1, 2004 is presented below. This
pro forma statement of operations has been prepared for comparative
purposes only and does not purport to be indicative of the results of
operations which actually would have resulted had the Endoscopic
Technologies acquisition occurred on the dates indicated, or which
may result in the future.

Net sales
Net income
Net income per share
Basic
Diluted

2004
$ 604,566
33,749

$
$

1.14
1.12

Goodwill associated with the Endoscopic Technologies acquisition
was determined to be impaired in the fourth quarter of 2006 as a
result of our annual impairment testing resulting in a $46.7 million
impairment charge. See Note 5 for additional discussion.

Accumulated other comprehensive income (loss) consists of the
following:

Cumulative Accumulated Other

Note 3 — Inventories
Inventories consist of the following at December 31,:

Pension Translation Comprehensive
Liability Adjustments
399
(10,135 ) $

Income (loss)
$ (9,736 )

—

3,092

3,375

—

3,092

Balance, December 31, 2005
Foreign currency
translation adjustments
Minimum pension liability
(net of income taxes)
Adjustments to initially apply
SFAS 158 (net of income
taxes)

(5,343 )

—
________ ________

(5,343 )
_________

Balance, December 31, 2006 (12,386 ) $ 3,774
________ ________
________ ________

$ (8,612 )
_________
_________

Note 2 — Business Acquisitions

Assets and liabilities of acquired businesses are recorded under the
purchase method of accounting at their estimated fair values as of the
date of acquisition. Goodwill represents costs in excess of fair values
assigned to the underlying net assets of acquired businesses. The
results of operations of acquired businesses have been included in the
consolidated statements of operations since the date of acquisition.

In September 2004, we acquired the business operations of
the Endoscopic Technologies Division of C.R. Bard, Inc. (the
“Endoscopic Technologies acquisition”) for aggregate consideration
of $81.3 million in cash. We funded the Endoscopic Technologies
acquisition through available cash on hand of $31.3 million with an
additional $50.0 million drawn under our revolving credit facility
(see Note 6). Included in cost of sales during 2004 and 2005 is
$2.3 million and $0.5 million, respectively, of expense which
represents the step-up to fair value recorded relating to the sale of
inventory acquired through the Endoscopic Technologies acquisition.
The acquired business enhanced our product offerings by adding
a comprehensive line of single-use medical devices employed by
gastrointestinal and pulmonary physicians to diagnose and treat
diseases of the digestive tract and lungs using minimally invasive
endoscopic techniques.

As determined by management with the assistance of a third-party
valuation, $16.4 million of the Endoscopic Technologies acquisition
purchase price represents the fair value of development-stage projects
for which the related products, as of the acquisition date had not
reached technological feasibility, had not received regulatory approval

Raw materials
Work in process
Finished goods

2005

2006
$ 45,991 $ 50,225
16,472 17,815
89,965 83,647
________ ________
$ 152,428 $ 151,687
________ ________
________ ________

Note 4 — Property, Plant and Equipment
Property, plant and equipment consist of the following at December 31,:

Land
Building and improvements
Machinery and equipment
Construction in progress

Less: Accumulated depreciation

2006
2005
4,200 $ 4,200
80,713 84,944
95,300 101,218
7,086 11,281
________ ________
187,299 201,643
(83,075 ) (85,163 )
________ ________
$ 104,224 $ 116,480
________ ________
________ ________

We lease various manufacturing facilities, office facilities and
equipment under operating leases. Rental expense on these operating
leases was approximately $2,649, $2,727 and $3,269 for the years
ended December 31, 2004, 2005 and 2006, respectively. The
aggregate future minimum lease commitments for operating leases at
December 31, 2006 are as follows:

2007

2008

2009

2010

2011

Thereafter

$ 3,265

2,944

1,930

1,608

1,278

2,279

n
27

n n n n n n

Note 5 — Goodwill and Other Intangible Assets

The changes in the net carrying amount of goodwill for the years
ended December 31, are as follows:

Balance as of January 1,
Goodwill impairment
Adjustments to goodwill resulting from
business acquisitions finalized
Foreign currency translation
Balance as of December 31,

2005

2006
$ 334,483 $ 335,651
— (46,689 )

372
796

1,705
( 155 )
________ ________
$ 335,651 $ 290,512
________ ________
________ ________

Goodwill associated with each of our principal operating units at
December 31, is as follows:

CONMED Electrosurgery
CONMED Endoscopic Technologies
CONMED Endosurgery
CONMED Linvatec
CONMED Patient Care
Balance as of December 31,

2005

2006

$ 16,645 $ 16,645
46,649
—
42,404 42,419
175,853 173,007
54,100 58,441
________ ________
$ 335,651 $ 290,512
________ ________
________ ________

The Endoscopic Technologies acquisition described in Note 2
involved the transfer of substantially all of the Endoscopic
Technologies production lines from C.R. Bard facilities to
CONMED facilities. This transfer has proven to be more time-
consuming, costly and complex than was originally anticipated. In
addition, production and operational issues at an assembly operation
in Mexico under contract to CONMED have resulted in product
shortages and backorders. These operational issues, in combination
with increased competition and pricing pressures in the marketplace
have resulted in decreased sales and gross margins and operating
losses. As a result of these factors, during our fourth quarter 2006
goodwill impairment testing, we determined that the goodwill of
our Endoscopic Technologies operating unit was impaired and
consequently we recorded a goodwill impairment charge of
$46.7 million to reduce the carrying amount of the unit to its fair
value. We estimated the fair value of the Endoscopic Technologies
operating unit using a discounted cash flow valuation methodology
and measured the goodwill impairment in accordance with SFAS 142.

Other intangible assets consist of the following:

____________________ ____________________

Dec. 31, 2005

Dec. 31, 2006

Gross

Carrying Accumulated Carrying Accumulated
Amount Amortization Amount Amortization

Amortized
intangible assets:
Customer
relationships
Patents and other
intangible assets
Unamortized
intangible assets:
Trademarks and
tradenames

n
28

$ 110,612 $ (21,317 )

$ 113,376 $ (24,498 )

37,344

(22,581 )

39,609

(24,696 )

87,344
—
________ ________
$ 235,300 $ (43,898 )
________ ________
________ ________

87,344
—
________ ________
$ 240,329 $ (49,194 )
________ ________
________ ________

Other intangible assets primarily represent allocations of purchase
price to identifiable intangible assets of acquired businesses. The
weighted average amortization period for intangible assets which are
amortized is 25 years. Customer relationships are being amortized
over a weighted average life of 36 years. Patents and other intangible
assets are being amortized over a weighted average life of 12 years.

Customer relationship assets were acquired primarily in connection
with the 1997 acquisition of Linvatec Corporation, 2003 Bionx
acquisition and 2004 Endoscopic Technologies acquisition. These
assets represent the value associated with business expected to be
generated from acquired customers as of the acquisition date. Asset
values were determined by measuring the present value of the
projected future earnings attributable to these assets. Additionally,
while the useful lives of these assets are not limited by contract or
any other economic, regulatory or other known factors, the weighted
average useful life of 36 years was determined as of acquisition
date by historical customer attrition. In accordance with SFAS 142
and as clarified by EITF Issue 02-17, “Recognition of Customer
Relationship Intangible Assets Acquired in a Business Combination,”
customer relationships evidenced by customer purchase orders
are contractual in nature and therefore continue to be recognized
separate from goodwill and are amortized over their weighted
average 36 year life.

Trademarks and tradenames were recognized in connection with the
1997 acquisition of Linvatec Corporation, 2003 Bionx acquisition
and 2004 Endoscopic Technologies acquisition. We continue to
market products, release new product and product extensions
and maintain and promote these trademarks and tradenames in
the marketplace through legal registration and such methods as
advertising, medical education and trade shows. It is our belief that
these trademarks and tradenames will generate cash flow for an
indefinite period of time. Therefore, in accordance with SFAS 142,
our trademarks and tradenames intangible assets are not amortized.

Amortization expense related to intangible assets for the year ending
December 31, 2006 and estimated amortization expense for each of
the five succeeding years is as follows:

2006

2007

2008

2009

2010

2011

$ 5,296

5,555

5,534

4,984

4,777

Note 6 — Long-term Debt
Long-term debt consists of the following at December 31,:

2005
$ 43,000 $

2006
—
Revolving line of credit
Term loan borrowings on senior credit facility
98,147 102,988
2.50% Convertible senior subordinated notes 150,000 150,000
Mortgage notes
15,704 14,836
________ ________
306,851 267,824
3,148
________ ________
$ 302,643 $ 264,676
________ ________
________ ________

Total long-term debt
Less: Current portion

4,208

During 2006, we entered into an amended and restated
$235.0 million senior credit agreement (the “amended and restated
senior credit agreement”). The amended and restated senior credit
agreement consists of a $100.0 million revolving credit facility and a
$135.0 million term loan. There were no borrowings outstanding on
the revolving credit facility as of December 31, 2006. Our available
borrowings on the revolving credit facility at December 31, 2006
were $93.0 million with approximately $7.0 million of the facility set
aside for outstanding letters of credit. There were $103.0 million in
borrowings outstanding on the term loan at December 31, 2006. The
proceeds of the term loan portion of the amended and restated senior
credit agreement were used to repay borrowings outstanding on the
term loan and revolving credit facility of $142.5 million under the
previously existing senior credit agreement. In connection with the
refinancing, we recorded a $0.7 million loss on early extinguishment

not have a material adverse effect on our business, financial condition
or results of operations.

The scheduled maturities of long-term debt outstanding at
December 31, 2006 are as follows:

2007

2008

2009

2010

2011

3,148

3,349

3,185

2,174

2,244

Thereafter

253,724

Note 7 — Income Taxes

The provision for income taxes for the years ended December 31,
2004, 2005 and 2006 consists of the following:

Current tax expense:
Federal
State
Foreign

Deferred income tax expense
Provision for income taxes

2004

2005

2006

$ 9,138 $ 3,083 $ (2,582 )
1,006
795
975
1,683
1,846
2,170
________ ________ ________
11,796
270
6,048
(12,164 )
10,128
4,301
________ ________ ________
$ 16,097 $ 16,176 $ (11,894 )
________ ________ ________
________ ________ ________

A reconciliation between income taxes computed at the statutory
federal rate and the provision for income taxes for the years ended
December 31, 2004, 2005 and 2006 follows:
2004

2005

2006

Tax provision at statutory rate based
on income (loss) before income taxes 35.00%
(5.30)
Extraterritorial income exclusion
State income taxes
2.75
—
Stock-based compensation
Research and development credit
(.64)
Settlement of taxing authority
examinations
Other nondeductible permanent
differences
Other, net

.36
.31

—

35.00% (35.00)%
(2.78)
.66
—
(.53)

(5.39)
(3.24)
3.49
(3.87)

—

(6.08)

.85
.38

1.81
(.46)

________ ________ ________
33.58% (48.74)%
________ ________ ________
________ ________ ________

32.48%

n
29

of debt of which $0.2 million related to the write-off of unamortized
deferred financing costs under the previously existing senior credit
agreement and $0.5 million related to financing costs associated with
the amended and restated senior credit agreement.

The scheduled principal payments on the term loan portion
of the amended and restated senior credit agreement are
$1.4 million annually through December 2011, increasing to
$95.5 million in 2012 with the remaining balance outstanding due
and payable on April 12, 2013. We may also be required, under
certain circumstances, to make additional principal payments based
on excess cash flow as defined in the senior credit agreement.
Interest rates on the term loan portion of the senior credit agreement
are at LIBOR plus 2.00% (7.35% at December 31, 2006) or an
alternative base rate; interest rates on the revolving credit facility
portion of the senior credit agreement are at LIBOR plus 2.00% or
an alternative base rate. For those borrowings where the Company
elects to use the alternative base rate, the base rate will be the greater
of the Prime Rate or the Federal Funds Rate in effect on such date
plus 0.50%, plus a margin of 0.75% for term loan borrowings or
0.50% for borrowings under the revolving credit facility.

The amended and restated senior credit agreement is collateralized
by substantially all of our personal property and assets, except for
our accounts receivable and related rights which are pledged in
connection with our accounts receivable sales agreement. The
amended and restated credit agreement contains covenants and
restrictions which, among other things, require the maintenance
of certain financial ratios, and restrict dividend payments and the
incurrence of certain indebtedness and other activities, including
acquisitions and dispositions. We were in full compliance with
these covenants and restrictions as of December 31, 2006. We are
also required, under certain circumstances, to make mandatory
prepayments from net cash proceeds from any issue of equity and
asset sales.

Mortgage notes outstanding in connection with the property and
facilities utilized by our CONMED Linvatec subsidiary consist of a
note bearing interest at 7.50% per annum with semi-annual payments
of principal and interest through June 2009 (the “Class A note”); and a
note bearing interest at 8.25% per annum compounded semi-annually
through June 2009, after which semi-annual payments of principal and
interest will commence, continuing through June 2019 (the “Class C
note”). The principal balances outstanding on the Class A note and
Class C note aggregated $5.2 million and $9.6 million, respectively, at
December 31, 2006. These mortgage notes are collateralized by the
CONMED Linvatec property and facilities.

The Notes contain two embedded derivatives. The embedded
derivatives are recorded at fair value in other long-term liabilities
and changes in their value are recorded through the Consolidated
Statements of Operations. The embedded derivatives have a nominal
value, and it is our belief that any change in their fair value would

n n n n n n

The tax effects of the significant temporary differences which
comprise the deferred tax assets and liabilities at December 31, 2005
and 2006 are as follows:

Assets:

Inventory

Net operating losses
Deferred compensation
Accounts receivable
Accrued pension
Research and development credit
State taxes
Other
Valuation allowance

Liabilities:
Goodwill and intangible assets
Depreciation
Employee benefits
State taxes
Contingent interest

Net liability

2005

2006

$ 10,913 $ 10,899
8,663 13,707
2,680
1,931
3,134
865
7,259
5,457
—
1,980
—
156
2,043
2,400
(6,160 )
(6,892 )
________ ________
24,069 34,966
________ ________

63,601 59,969
5,329
5,568
103
722
—
1,116
2,729
5,357
________ ________
73,736 70,758
________ ________
$ (49,667 ) $ (35,792 )
________ ________
________ ________

Earnings before income (loss) taxes consists of the following U.S.
and foreign income (loss):

U.S. income (loss)
Foreign income
Total income (loss)

2004

2005

2006
$ 45,876 $ 42,653 $ (29,659 )
5,258
________ ________ ________
$ 49,562 $ 48,170 $ (24,401 )
________ ________ ________
________ ________ ________

3,686

5,517

The net operating loss carryforwards of acquired subsidiaries begin
to expire in 2008. We have established a valuation allowance to reflect
the uncertainty of realizing the benefits of certain net operating loss
carryforwards recognized in connection with an acquisition. Any
subsequently recognized tax benefits associated with the valuation
allowance would be allocated to reduce goodwill.

We operate in multiple taxing jurisdictions, both within and outside
the United States. We face audits from these various tax authorities
regarding the amount of taxes due. Such audits can involve complex
issues and may require an extended period of time to resolve. Our
United States federal income tax returns have been examined by the
Internal Revenue Service (“IRS”) for calendar years ending through
2004. During 2006, as a result of the settlement of our 2001 through
2004 income taxes as a result of IRS examinations, we adjusted our
reserves to consider positions taken in our income tax return for
periods subsequent to 2004. The net effect of these adjustments
and the settlement of the 2001 through 2004 IRS examinations,
was a $1.5 million reduction in income tax expense in 2006.
During the third quarter of 2006, we filed our United States federal
income tax return for 2005. As a result of the filing, we identified
a greater benefit than was originally anticipated associated with the
extraterritorial income exclusion rules and research and development
tax credit resulting in a $0.7 million reduction in income tax expense.
The net effect of these adjustments was a $2.2 million reduction in
income tax expense in 2006.

Note 8 — Shareholders’ Equity

Our shareholders have authorized 500,000 shares of preferred stock,
par value $.01 per share, which may be issued in one or more series by
the Board of Directors without further action by the shareholders. As
of December 31, 2005 and 2006, no preferred stock had been issued.

In November 2004, we repurchased 1.1 million shares of our
common stock in privately negotiated transactions at an aggregate
cost of $30.0 million. This repurchase coincided with our 2.50%
convertible senior subordinated notes transaction (see Note 6).

n
30

On February 15, 2005, our Board of Directors authorized a share
repurchase program under which we may repurchase up to
$50.0 million of our common stock, although no more than
$25.0 million could be purchased in any calendar year. The
Board subsequently amended this program on December 2, 2005
to authorize repurchases up to $100.0 million of our common
stock, although no more than $50.0 million may be purchased in
any calendar year. The repurchase program calls for shares to be
purchased in the open market or in private transactions from time to
time. We may suspend or discontinue the share repurchase program
at any time. We have repurchased a total of 2.2 million shares of
common stock as of December 31, 2006 under this authorization.

Prior to January 1, 2006, we accounted for stock-based compensation
in accordance with Accounting Principles Board Opinion No. 25
“Accounting for Stock Issued to Employees” (“APB 25”). No
compensation expense was recognized for stock options under the
provisions of APB 25 since all options granted had an exercise price
equal to the market value of the underlying stock on the grant date.

We have elected to adopt the alternative transition method, as
permitted by FASB Staff Position No. FAS 123R-3 “Transition
Election Related to Accounting for Tax Effects of Share-Based
Payment Awards,” to calculate the tax effects of stock-based
compensation pursuant to SFAS 123R for those employee awards
that were outstanding upon adoption of SFAS 123R. The alternative
transition method allows the use of a simplified method to calculate
the beginning pool of excess tax benefits available to absorb tax
deficiencies recognized subsequent to the adoption of SFAS 123R.

Prior to the adoption of SFAS 123R, we reported all tax benefits
resulting from the exercise of stock options as operating cash flows
in the Consolidated Statements of Cash Flows. SFAS 123R requires
cash flows resulting from the tax deductions in excess of the related
compensation cost recognized in the financial statements (excess
tax benefits) to be classified as financing cash flows. In accordance
with SFAS 123R, excess tax benefits recognized in periods after the
adoption date have been classified as financing cash flows. Excess tax
benefits recognized in periods prior to the adoption date are classified
as operating cash flows.

During the second quarter of 2006, the shareholders approved the
2006 Stock Incentive Plan (“the 2006 Plan”). Awards under this plan
may be made to any officer, director, employee, consultant or to any
other individual who may perform services for the Company and its
subsidiaries and affiliates selected by the committee that administers
the 2006 Plan. The 2006 Plan provides for grants of options, stock
appreciation rights (“SARs”), dividend equivalent rights, restricted
stock, restricted stock units (“RSUs”), and other equity-based and
equity-related awards.

We have reserved 4.7 million shares of common stock for issuance
to employees and directors under three shareholder-approved share-
based compensation plans (the “Plans”) of which approximately
785,000 shares remain available for grant at December 31, 2006. The
exercise price on all outstanding options and SARs is equal to the
quoted fair market value of the stock at the date of grant. RSUs are
valued at the market value of the underlying stock on the date of
grant. Stock options, SARs and RSUs are non-transferable other than

on death and generally become exercisable over a five year period
from date of grant. Stock options and SARs expire ten years from date
of grant. SARs are only settled in shares of the Company’s stock.

Total pre-tax stock-based compensation expense recognized in the
Consolidated Statements of Operations was $3.7 million for the
year ended December 31, 2006. This amount is included in selling
and administrative expenses on the Consolidated Statements of
Operations. Tax related benefits of $440 were also recognized for
the year ended December 31, 2006. Cash received from the exercise
of stock options was $14.4 million, $15.9 million and $1.7 million
for the years ended December 31, 2004, 2005 and 2006, respectively
and is reflected in cash flows from financing activities in the
Consolidated Statements of Cash Flows.

The weighted average fair value of awards of options and SARs
granted in the years ended December 31, 2004, 2005 and 2006
was $14.59, $16.51 and $8.92, respectively. The fair value of these
options and SARs was estimated at the date of grant using a Black-
Scholes option pricing model with the following weighted-average
assumptions for options and SARs granted in the years ended
December 31, 2004, 2005 and 2006, respectively: risk-free interest rate
of 4.04%, 4.16% and 5.13%; volatility factor of the expected market
price of the Company’s common stock of 51.20%, 53.26% and
37.79%; a weighted-average expected life of the option and SAR of 7.3
years, 5.7 years and 5.7 years; and that no dividends would be paid on
common stock. The risk free interest rate is based on the option and
SAR grant date for a traded zero-coupon U.S. Treasury bond with
a maturity date equal to the expected life. Expected volatilities are
based upon historical volatility of the Company’s stock over a period
equal to the expected life of each option and SAR grant. The expected
life selected for options and SARs granted during the year ended
December 31, 2006 represents the period of time that the options and
SARs are expected to be outstanding based on a study of historical
data of option holder exercise and termination behavior.

The following table illustrates the stock option and SAR activity for
the years ended December 31, 2004, 2005 and 2006:

Outstanding at December 31, 2003
Granted
Forfeited
Exercised
Outstanding at December 31, 2004
Granted
Forfeited
Exercised
Outstanding at December 31, 2005
Granted
Forfeited
Exercised
Outstanding at December 31, 2006

Exercisable at December 31, 2006

Number Weighted-Average
of Shares
3,994
659
(152 )
(940 )
_______
3,561
504
(26 )
(954 )
_______
3,085
265
(69 )
(115 )
_______
3,166
_______
_______
2,243
_______
_______

Exercise Price
$ 17.55
25.03
19.16
15.28
_______
$ 19.45
30.75
24.33
16.67
_______
$ 22.12
20.04
23.29
14.80
_______
$ 22.23
_______
_______
$ 21.57
_______
_______

The weighted average remaining contractual term for stock options
and SARs outstanding and exercisable at December 31, 2006 was
6.1 years and 5.3 years, respectively. The aggregate intrinsic value of
stock options and SARs outstanding and exercisable at December 31,
2006 was $8.8 million and $7.1 million, respectively. The aggregate
intrinsic value of stock options exercised during the year ended
December 31, 2005 and 2006 was $12.9 million and $0.7 million,
respectively.

The following table illustrates the RSU activity as of December 31,
2006, including changes during the year ended December 31, 2006.
There were no RSUs granted prior to 2006.

Number
of Shares

Weighted-Average
Grant-Date
Fair Value

RSUs outstanding at
December 31, 2005
Granted
Vested
Forfeited
Outstanding at December 31, 2006

—
145
—
(1 )
________
144
________
________

—
$ 20.21

19.93
________
$ 20.22
________
________

As of December 31, 2006, there was $9.9 million of total unrecognized
compensation cost related to nonvested stock options, SARs and RSUs
granted under the Plan which is expected to be recognized over
5.0 years (weighted average period of 1.8 years).

The following table illustrates the effect on net earnings and earnings
per share as if we had applied the fair value recognition provisions
of SFAS 123R to stock-based employee compensation for the years
ended December 31, 2004 and 2005. The pro forma disclosures
are based on the fair value of awards at the grant date, amortized to
expense over the service period.

Net income — as reported

Pro forma stock-based employee
compensation expense, net of related
income tax effect
Net income — pro forma

Earnings per share — as reported:
Basic
Diluted
Earnings per share — pro forma:
Basic
Diluted

2004

2005

$ 33,465 $ 31,994
_________ _________

(4,598 )

(4,075 )
_________ _________
$ 28,867 $ 27,919
_________ _________
_________ _________

$
$

1.13 $
1.11 $

0.98 $
0.96 $

1.09
1.08

0.95
0.94

We offer to our employees a shareholder-approved Employee Stock
Purchase Plan (the “Employee Plan”), under which we have reserved
1.0 million shares of common stock for issuance to our employees.
The Employee Plan provides employees with the opportunity to
invest from 1% to 10% of their annual salary to purchase shares of
CONMED common stock through the exercise of stock options
granted by the Company at a purchase price equal to 95% of the
fair market value of the common stock on the exercise date. During
2006, we issued approximately 52,000 shares of common stock under
the Employee Plan. No stock-based compensation expense has been
recognized in the accompanying consolidated financial statements as
a result of common stock issuances under the Employee Plan.

Note 9 — Business Segments and Geographic Areas

CONMED conducts its business through five principal operating
units: CONMED Endoscopic Technologies, CONMED
Endosurgery, CONMED Electrosurgery, CONMED Linvatec
and CONMED Patient Care. We believe each of our segments
are similar in the nature of products, production processes,
customer base, distribution methods and regulatory environment.
In accordance with Statement of Financial Accounting Standards
No. 131 “Disclosures About Segments of an Enterprise and
Related Information” (“SFAS 131”), our CONMED Endosurgery,
CONMED Electrosurgery and CONMED Linvatec operating units
also have similar economic characteristics and therefore qualify for
aggregation under SFAS 131. Our CONMED Patient Care and
CONMED Endoscopic Technologies operating units do not qualify
for aggregation under SFAS 131 since their economic characteristics
do not meet the criteria for aggregation as a result of the lower
overall operating income (loss) in these segments.

n
31

n n n n n n

CONMED Endosurgery, CONMED Electrosurgery and CONMED
Linvatec consist of a single aggregated segment comprising a complete
line of endo-mechanical instrumentation for minimally invasive
laparoscopic procedures, electrosurgical generators and related surgical
instruments, arthroscopic instrumentation for use in orthopedic surgery
and small bone, large bone and specialty powered surgical instruments.
CONMED Patient Care product offerings include a line of vital
signs and cardiac monitoring products as well as suction instruments
and tubing for use in the operating room. CONMED Endoscopic
Technologies product offerings include a comprehensive line of
minimally invasive endoscopic diagnostic and therapeutic instruments
used in procedures which require examination of the digestive tract.

The following is net sales information by product line and reportable
segment:

Arthroscopy
Powered Surgical Instruments
Electrosurgery
Endosurgery
CONMED Endosurgery,
Electrosurgery, and Linvatec
CONMED Patient Care
CONMED Endoscopic
Technologies
Total

2006

2004

2005
$ 204,887 $ 211,397 $ 228,195
132,045 137,150
128,572
88,455 97,809
85,912
50,694 52,783
47,400
_________ _________ _________

466,771 482,591 515,937
75,879 75,883
75,879

15,738
58,835 54,992
_________ _________ _________
$ 558,388 $ 617,305 $ 646,812
_________ _________ _________
_________ _________ _________

Total assets, capital expenditures, depreciation and amortization
information are not available by reportable segment.

The following is a reconciliation between segment operating income
(loss) and income (loss) before income taxes. The Corporate line
includes corporate related items not allocated to operating units:

2004

2005

2006

7,314

CONMED Endosurgery,
$ 77,538 $ 69,295 $ 70,193
Electrosurgery and Linvatec
5,734
(759 )
CONMED Patient Care
(5,513 ) (63,399 )
CONMED Endoscopic Technologies (19,177 )
(5,768 ) (10,638 )
(2,514 )
Corporate
_________ _________ _________
(4,603 )
63,748
63,161
Income (loss) from operations
—
825
Loss on early extinguishment of debt
678
15,578 19,120
12,774
Interest expense
_________ _________ _________
Income (loss) before income taxes $ 49,562 $ 48,170 $ (24,401 )
_________ _________ _________
_________ _________ _________

Net sales information for geographic areas consists of the following:

United States
Canada
United Kingdom
Japan
Australia
All other countries

Total

2006

2004

2005
$ 364,819 $ 390,050 $ 396,953
36,111 43,104
27,384
30,117 32,542
27,120
22,073 25,451
19,793
23,237 27,249
17,536
101,736
115,717 121,513
_________ _________ _________
$ 558,388 $ 617,305 $ 646,812
_________ _________ _________
_________ _________ _________

n
32

Sales are attributed to countries based on the location of the
customer. There were no significant investments in long-lived assets
located outside the United States at December 31, 2005 and 2006.
No single customer represented over 10% of our consolidated net
sales for the years ended December 31, 2004, 2005 and 2006.

We use a December 31, measurement date for our pension plan.
Gains and losses are amortized on a straight-line basis over the
average remaining service period of active participants. The following
table provides a reconciliation of the projected benefit obligation,
plan assets and funded status of the pension plan at December 31,:

Accumulated Benefit Obligation

Change in benefit obligation
Projected benefit obligation at
beginning of year
Service cost
Interest cost
Actuarial (gain)/loss
Benefits paid

Projected benefit obligation at end of year

2005

2006

$ 44,971 $ 46,066
________ ________
________ ________

4,503
2,575
517
(5,047 )

$ 48,872 $ 51,420
5,444
2,905
(1,176 )
(4,052 )
________ ________
$ 51,420 $ 54,541
________ ________

Change in plan assets
Fair value of plan assets at beginning of year $ 33,188 $ 33,252
Actual gain on plan assets
2,694
Employer contribution
5,000
(4,052 )
Benefits paid
________ ________
$ 33,252 $ 36,894
________ ________

Fair value of plan assets at end of year

1,611
3,500
(5,047 )

Funded status
Funded status
Unrecognized net actuarial loss
Unrecognized transition liability
Unrecognized prior service cost
Additional minimum pension liability

Accrued pension cost

$ 18,168 $ 17,647
(27,536 )
—
(40 )
—
5,535
—
15,592
—
________ ________
$ 11,719 $ 17,647
________ ________
________ ________

Amounts recognized in the consolidated balance sheets consist of the
following at December 31,:

Accrued pension liability
Accumulated other comprehensive
income (loss)

Net amount recognized

2005

2006

$ 11,719 $ 17,647

(15,592 ) (19,644 )
________ ________
$ (3,873 ) $ (1,997 )
________ ________
________ ________

The following actuarial assumptions were used to determine our
accumulated and projected benefit obligations as of December 31,:

Discount rate
Expected return on plan assets
Rate of compensation increase

2005
5.55%
8.00%
3.00%

2006
5.90%
8.00%
3.00%

The following table illustrates the effects of adopting SFAS No. 158,
“Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans – an amendment of FASB Statements No. 87,
88, 106, and 132(R)” on each of the balance sheet line items:

Accrued pension liability
Deferred income taxes
Total liabilities
Accumulated other
comprehensive income (loss)
Shareholders’ equity

Before
After
Application
Application
of SFAS 158 Adjustment of SFAS 158
$ 8,475 $ 17,647
$
51,004
(3,132 )
421,217
5,343

9,172
54,136
415,874

(3,269 )
445,697

(5,343 )
(5,343 )

(8,612 )
440,354

Note 10 — Employee Benefit Plans

We sponsor an employee savings plan (“401(k) plan”) and a defined
benefit pension plan (the “pension plan”) covering substantially all
our employees.

Total employer contributions to the 401(k) plan were $1.8 million,
$2.2 million and $2.3 million during the years ended December 31,
2004, 2005 and 2006, respectively.

Accumulated other comprehensive income (loss) for the year
ended December 31, 2006 consists of the following items not yet
recognized in net periodic pension cost (before income taxes):
Net actuarial loss
Transition liability
Prior service cost

$ 24,792
36
(5,184 )
_________

Accumulated other comprehensive income (loss)

$ 19,644

_________
_________

Net periodic pension cost for the years ended December 31, consists
of the following:

Service cost—benefits earned
during the period
Interest cost on projected
benefit obligation
Return on plan assets
Transition amount
Prior service cost
Amortization of loss
Net periodic pension cost

2004

2005

2006

$ 3,144 $ 4,503 $ 5,444

2,377

2,651
(2,562 ) (2,548 )
4
(351 )
1,303

2,905
(2,694 )
4
(351 )
1,569
________ ________ ________
$ 3,619 $ 5,562 $ 6,877
________ ________ ________
________ ________ ________

4
(351 )
1,007

The following actuarial assumptions were used to determine our net
periodic pension benefit cost for the years ended December 31,:

Discount rate
Expected return on plan assets
Rate of compensation increase

2004
6.25%
8.00%
3.00%

2005
5.75%
8.00%
3.00%

2006
5.55%
8.00%
3.00%

In determining the expected return on pension plan assets,
we consider the relative weighting of plan assets, the historical
performance of total plan assets and individual asset classes and
economic and other indicators of future performance. In addition,
we consult with financial and investment management professionals
in developing appropriate targeted rates of return.

Asset management objectives include maintaining an adequate
level of diversification to reduce interest rate and market risk and
providing adequate liquidity to meet immediate and future benefit
payment requirements.

The allocation of pension plan assets by category is as follows at
December 31,:

Percentage of Pension Target

Equity securities
Debt securities
Total

Plan Assets

2005
64%
36
_____
100%
_____
_____

2006
71%
29
______
100%
______
______

Allocation
2007
75%
25
_____
100%
_____
_____

As of December 31, 2006, the Plan held 27,562 shares of our
common stock, which had a fair value of $0.6 million. We believe
that our long-term asset allocation on average will approximate the
targeted allocation. We regularly review our actual asset allocation
and periodically rebalance the pension plan’s investments to our
targeted allocation when deemed appropriate.

We expect to contribute approximately $12.0 million to our pension
plan in 2007.

The estimated portion of net loss, net prior service cost, and
transition obligation in accumulated other comprehensive income
(loss) that is expected to be recognized as a component of net period
benefit cost in 2007 is $1,263, ($351) and $4, respectively.

The following table summarizes the benefits expected to be paid
by our pension plan in each of the next five years and in aggregate
for the following five years. The expected benefit payments are
estimated based on the same assumptions used to measure the
Company’s projected benefit obligation at December 31, 2006
and reflect the impact of expected future employee service.

2007
2008
2009
2010
2011
2012-2016

1,629
2,445
2,004
2,562
2,279
16,358

Note 11 — Legal Matters

From time to time, we are a defendant in certain lawsuits alleging
product liability, patent infringement, or other claims incurred in

the ordinary course of business. Likewise, from time to time, the
Company may receive a subpoena from a government agency such as
the Equal Employment Opportunity Commission, Occupational Safety
and Health Administration, the Department of Labor, the Treasury
Department, and other federal and state agencies or foreign governments
or government agencies. These subpoenae may or may not be routine
inquiries, or may begin as routine inquiries and over time develop
into enforcement actions of various types. The product liability claims
are generally covered by various insurance policies, subject to certain
deductible amounts and maximum policy limits. When there is no
insurance coverage, as would typically be the case primarily in lawsuits
alleging patent infringement or in connection with certain government
investigations, we establish sufficient reserves to cover probable losses
associated with such claims. We do not expect that the resolution of any
pending claims or investigations will have a material adverse effect on
our financial condition or results of operations.

Manufacturers of medical products may face exposure to significant
product liability claims. To date, we have not experienced any
product liability claims that are material to our financial statements
or condition, but any such claims arising in the future could have a
material adverse effect on our business or results of operations.
We currently maintain commercial product liability insurance of
$25.0 million per incident and $25.0 million in the aggregate annually,
which we believe is adequate. This coverage is on a claims-made basis.

Our operations are subject, and in the past have been subject, to a
number of environmental laws and regulations governing, among
other things, air emissions, wastewater discharges, the use, handling
and disposal of hazardous substances and wastes, soil and groundwater
remediation and employee health and safety. In some jurisdictions
environmental requirements may be expected to become more
stringent in the future. In the United States certain environmental
laws can impose liability for the entire cost of site restoration upon
each of the parties that may have contributed to conditions at the site
regardless of fault or the lawfulness of the party’s activities. While we
do not believe that the present costs of environmental compliance
and remediation are material, there can be no assurance that future
compliance or remedial obligations could not have a material adverse
effect on our financial condition or results of operations.

In November 2003, we commenced litigation against Johnson &
Johnson and several of its subsidiaries, including Ethicon, Inc. for
violation of federal and state antitrust laws. The lawsuit claims that
Johnson & Johnson engaged in illegal and anticompetitive conduct
with respect to sales of product used in endoscopic surgery, resulting
in higher prices to consumers and the exclusion of competition.
We have sought relief which includes an injunction restraining
Johnson & Johnson from continuing its anticompetitive practice
as well as receiving the maximum amount of damages allowed
by law. The discovery phase is now essentially completed, and
Johnson & Johnson filed a motion for summary judgment which
was denied by the Court by Order dated May 2, 2006. This Order
does not represent a determination on the merits with respect to the
Company’s claims against Johnson & Johnson, but rather represents
a determination that the Company has produced sufficient evidence
to warrant submitting the case to a jury. The Company expects to
submit briefs on certain evidentiary matters in the next few weeks,
with the case currently scheduled for a jury trial to commence on
April 23, 2007. There can be no assurance that the case will in fact
proceed to trial on that date. The Company believes that its claims
are well-grounded in fact and law, but there can be no assurance that
it will be successful in its claims in a trial before a jury.

On April 7, 2006, CONMED received a copy of a complaint filed
in the United States District for the Northern District of New
York on behalf of a purported class of former CONMED Linvatec
sales representatives. The complaint alleges that the former sales
representatives were entitled to, but did not receive, severance
in 2003 when CONMED Linvatec restructured its distribution

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n n n n n n

channels. We believe that the maximum exposure related to this
complaint is $2.5 to $3.0 million, not including any interest, fees
or costs that might be awarded if the five named plaintiffs were
to prevail on their own behalf as well as on behalf of all members
of the purported class. CONMED Linvatec did not generally
pay severance during the 2003 restructuring because the former
sales representatives were offered sales positions with CONMED
Linvatec’s new manufacturer’s representatives. Other than three of
the five named plaintiffs in the class action, nearly all of CONMED
Linvatec’s former sales representatives accepted such positions.

The Company has filed motions which, if granted, would result in the
dismissal of the case, subject to any appeals the plaintiffs could pursue.
The Court held a hearing on the Company’s motions on January 5,
2007, and took the matter under advisement. There is no fixed time
frame within the Court must rule on the motions. The Company
believes there is no merit to the claims asserted in the Complaint.

Note 12 — Other Expense

Other expense for the year ended December 31, consists of the
following:

2005

2004

2006
Acquisition transition related costs $ 1,547 $ 4,108 $ 2,592
1,448
Termination of product offering
—
Environmental settlement costs
Loss on equity investment
—
Write-off of inventory in
settlement of a patent dispute
Closure of manufacturing facility

1,519
698
794

2,396
—
—

—
—

595
578
________ ________ ________
$ 3,943 $ 7,119 $ 5,213
________ ________ ________
________ ________ ________

Other expense (income)

On September 30, 2004, we completed the Endoscopic Technologies
acquisition. As part of the acquisition, manufacturing of the acquired
products was conducted in various C.R. Bard facilities under a
transition agreement. The transition of the manufacturing of these
products from C.R. Bard facilities to CONMED facilities was
completed during 2006. During the years ended December 31, 2004,
2005 and 2006, we incurred $1.5 million, $4.1 million and $2.6 million,
respectively, of acquisition and transition-integration related charges
associated with the Endoscopic Technologies acquisition which have
been recorded in other expense. These expenses consist of severance,
acquisition, transition and integration related charges.

During the quarter ended December 31, 2004, we elected to
terminate our surgical lights product line. We instituted a customer
replacement program whereby all currently installed surgical
lights have been or will be replaced by CONMED. The entire
cost of the replacement program, including the write-off of the
remaining surgical lights inventory, purchase of new surgical lights
from an alternative supplier and installation costs are expected to
approximate $5.8 million. Through December 31, 2006, we recorded
charges totaling $5.3 million related to the surgical lights customer
replacement program (including $2.4 million, $1.5 million and
$1.4 million in the years ended December 31, 2004, 2005 and 2006,
respectively). It is anticipated that the remaining $0.5 million in
costs will be incurred during 2007 as the surgical lights customer
replacement program is completed.

During the quarter ended June 30, 2005, we entered into a settlement
of certain environmental claims related to the operations of one of our
subsidiaries during the 1980s, before it was acquired by CONMED,
at a site other than the one it currently occupies. The current
owner alleged that the acquired subsidiary caused environmental
contamination of the property. In order to avoid litigation, we agreed
to reimburse the owner for a certain percentage of past remediation
costs, and to participate in the funding of the remediation activities.
The total sum of past costs, including attorney’s fees, together with
the current estimate of future costs, amounts to approximately $0.7
million and has been recorded in other expense for the year ended

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34

December 31, 2005. We believe any future costs incurred in excess of
amounts already expensed would be covered by insurance.

During the quarter ended December 31, 2005, we incurred a
$0.8 million loss on the sale of an equity investment. This
investment had a carrying value of $2.0 million and was sold in
January 2006 for $1.2 million resulting in a $0.8 million loss.

During the quarter ended June 30, 2006, we were notified by
Dolphin Medical, Inc. (“Dolphin”), that it would discontinue its
Dolphin ONE® product line as a result of an agreement between
Dolphin and Masimo Corporation in which Masimo agreed to release
Dolphin and its affiliates from certain patent infringement claims.
We sell the Dolphin ONE® and certain other pulse oximetry
products manufactured by Dolphin under a distribution agreement.
As a result of the product line discontinuation, we recorded a
$0.6 million charge to other expense to write-off on-hand inventory of
the discontinued product line. We do not expect the discontinuation
of Dolphin ONE® to have a material impact on our financial position,
results of operations, or cash flows. This matter does not affect the
majority of our pulse oximetry products and also does not affect sales
of our proprietary PRO2

® pulse oximetry product line.

During 2006, we elected to close our facility in Montreal, Canada
which manufactured products for our CONMED Linvatec line of
integrated operating room systems and equipment. The products
which had been manufactured in the Montreal facility will now largely
be purchased from a third party vendor. The closing of this facility is
scheduled to be completed during the first quarter of 2007. We estimate
the total cost of the closure to be in the range of $2.5 million to $3.0
million. During the year ended December 31, 2006, we incurred a
total of $1.9 million in costs associated with this closure, of which $1.3
million relates to the write-off of inventory and is included in cost of
goods sold. The remaining $0.6 million primarily relates to severance
expense, which we have recorded in other expense. It is anticipated the
remaining costs will be incurred during the first quarter of 2007 and
will consist of severance, lease and other closure-related costs.

Note 13 — Guarantees

We provide warranties on certain of our products at the time of sale.
The standard warranty period for our capital and reusable equipment
is generally one year. Liability under service and warranty policies
is based upon a review of historical warranty and service claim
experience. Adjustments are made to accruals as claim data and
historical experience warrant.

Changes in the carrying amount of service and product warranties
for the year ended December 31, are as follows:

Balance as of January 1,
Provision for warranties
Claims made

Balance as of December 31,

2006

2004

2005
$ 3,588 $ 3,524 $ 3,416
________ ________ ________
5,774
(5,573 )
________ ________ ________
$ 3,524 $ 3,416 $ 3,617
________ ________ ________
________ ________ ________

4,035
(4,025 ) (4,143 )

3,961

Note 14 — New Accounting Pronouncements

In June 2006, the FASB issued FASB Interpretation No. 48
“Accounting for Uncertainty in Income Taxes (an interpretation
of FASB Statement No. 109)” which is effective for fiscal
years beginning after December 15, 2006 with earlier adoption
encouraged. This interpretation was issued to clarify the accounting
for uncertainty in income taxes recognized in the financial
statements by prescribing a recognition threshold and measurement
attribute for the financial statement recognition and measurement
of a tax position taken or expected to be taken in a tax return. We
are currently evaluating our tax positions and anticipate that this
interpretation will result in a cumulative effect credit adjustment to
opening retained earnings of approximately $0.3 million.

In August 2006, the Pension Protection Act of 2006 (the “Pension
Act”) was signed into law by President Bush. Under the Pension

Act, companies will be required to fully fund the value of accrued
benefits in their pension plans over a seven-year period. We are
currently assessing the Pension Act and its potential impact on
pension funding pending further regulations and guidance to be
released by the Internal Revenue Service, Department of Labor and
Department of Treasury.

In September 2006, the FASB issued Statement of Financial
Accounting Standard No. 157, “Fair Value Measurements” which
is effective for fiscal years beginning after November 15, 2007 and
for interim periods within those years. This statement defines fair
value, establishes a framework for measuring fair value and expands

the related disclosure requirements. We are currently evaluating the
potential impact of this statement.

In September 2006, the SEC staff issued Staff Accounting Bulletin
No. 108, “Considering the Effects of Prior Year Misstatements
when Quantifying Misstatements in Current Year Financial
Statements” (“SAB 108”). SAB 108 was issued to provide interpretive
guidance on how the effects of the carryover or reversal of prior
year misstatements should be considered in quantifying a current
year misstatement. We adopted the provisions of SAB 108 effective
December 31, 2006. The adoption of SAB 108 did not have an
impact on our financial position or results of operations.

Note 15 — Selected Quarterly Financial Data (Unaudited)

Selected quarterly financial data for 2005 and 2006 are as follows:

2005
Net sales
Gross profit
Net income
EPS: Basic

Diluted

2006
Net sales
Gross profit
Net income (loss)
EPS: Basic

Diluted

March
$ 155,859
80,475
10,765
.37
.36

March
$ 158,466
77,900
4,340
.15
.15

Three Months Ended
June
$ 158,276
82,124
10,508
.36
.35

September
$ 149,970
75,954
7,914
.27
.26

June
$ 163,473
77,774
3,414
.12
.12

September
$ 154,981
74,731
3,332
.12
.12

December
$ 153,200
74,468
2,807
.10
.10

December
$ 169,892
82,441
(23,593 )
(.84 )
(.84 )

Unusual Items Included In Selected Quarterly Financial Data:
2005
First quarter
During the first quarter of 2005, we recorded $0.5 million of Endoscopic
Technologies acquisition-related charges in cost of sales—see Note 2.

During the first quarter of 2005, we recorded a charge of $0.5 million
related to our termination of our surgical lights product line and
$1.4 million of acquisition and transition-integration related costs
associated with the Endoscopic Technologies acquisition to other
expense—see Note 12.

Second quarter
During the second quarter of 2005, we recorded a charge of
$0.4 million related to our termination of our surgical lights product
line; $1.4 million of acquisition and transition-integration related
costs associated with the Endoscopic Technologies acquisition; and
$0.7 million related to a settlement of certain environmental claims
to other expense—see Note 12.

Third quarter
During the third quarter of 2005, we recorded a charge of $0.1 million
related to our termination of our surgical lights product line and
$0.7 million of acquisition and transition-integration related costs
associated with the Endoscopic Technologies acquisition to other
expense—see Note 12.

Fourth quarter
During the fourth quarter of 2005, we recorded a charge of
$0.5 million related to our termination of our surgical lights product
line; $0.6 million of acquisition and transition-integration related
costs associated with the Endoscopic Technologies acquisition and
a $0.8 million charge related to the loss on the sale of an equity
investment to other expense—see Note 12.

The decline in net income in the fourth quarter is a result of a
decrease in gross profit margin as a result of increased costs associated
with higher raw material costs and increased spending related to
quality assurance. We also incurred significantly higher selling and
administrative costs associated with higher distribution costs as well
as increased spending on corporate quality systems and management
and the Johnson & Johnson litigation—see Note 11.

2006
First quarter
During the first quarter of 2006, we recorded a charge of $0.1 million
related to our termination of our surgical lights product line and
$0.5 million of acquisition and transition-integration related costs
associated with the Endoscopic Technologies acquisition to other
expense—see Note 12.

Second quarter
During the second quarter of 2006, we recorded a charge of
$0.6 million related to the write-off of inventory in settlement of
a patent dispute and $1.0 million of acquisition and transition-
integration related costs associated with the Endoscopic Technologies
acquisition to other expense—see Note 12.

During the second quarter of 2006, we recorded a loss on the early
extinguishment of debt of $0.7 million—see Note 6.

Third quarter
During the third quarter of 2006, we recorded a charge of
$0.4 million related to severance payments due to the closing
of a manufacturing plant, $1.0 million in charges related to the
termination of our surgical lights product line, and $0.6 million of
acquisition and transition-integration related costs associated with the
Endoscopic Technologies acquisition to other expense—see Note 12.

Fourth quarter
During the fourth quarter of 2006, we recorded a charge of
$1.3 million to cost of sales to write-off inventory related to the
closing of a manufacturing plant. In addition, we recorded
$0.1 million in severance costs due to the closing of a manufacturing
plant, $0.4 million in charges related to the termination of our
surgical lights product line, and $0.5 million of acquisition and
transition-integration related costs associated with the Endoscopic
Technologies acquisition to other expense—see Note 12.

During the fourth quarter of 2006, after completing our annual
goodwill impairment testing, we determined that the goodwill of
our Endoscopic Technologies operating unit was impaired and
consequently we recorded a goodwill impairment charge of
$46.7 million—see Note 5.

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35

n n n n n n

board of directors n biographies

1 EUGENE R. cORAsANTI is Vice Chairman of the Company and Chairman of the Board of Directors.
Mr. Corasanti also served as the Company’s Chief Executive Officer from its founding until 2006, as well as President
and Chief Operating Officer from its founding until August 1999. Prior to the founding of the Company, Mr. Corasanti
was an independent public accountant. Mr. Corasanti holds a B.B.A. degree in Accounting from Niagara University.
Eugene R. Corasanti’s son, Joseph J. Corasanti, is President and Chief Executive Officer and a Director of the Company.

2 JOsEPH J. cORAsANTI has served as President and Chief Executive Officer since January 1, 2007, having served
as President and Chief Operating Officer from August 1999 through December 2006. Mr. Corasanti has been a Director of
the Company since May 1994. Mr. Corasanti is also on the Board of Directors of II-VI, Inc. He previously served as General
Counsel and Vice President-Legal Affairs, and Executive Vice-President/General Manager of the Company. Prior to that
time he was an Associate Attorney with the law firm of Morgan, Wenzel & McNicholas. Mr. Corasanti holds a B.A. degree
in Political Science from Hobart College and a J.D. degree from Whittier College School of Law. Joseph J. Corasanti is the
son of Eugene R. Corasanti, Vice Chairman and Chairman of the Board of Directors.

3 bRUcE F. dANIELs has served as a Director of the Company since August 1992. Mr. Daniels is a retired
executive. From August 1974 to June 1997, Mr. Daniels held various executive positions, including a position as
Controller with Chicago Pneumatic Tool Company. Mr. Daniels holds a B.S. degree in Business from Utica College of
Syracuse University.

4 JO ANN GOLdEN joined the Board of Directors in 2003. Ms. Golden is a certified public accountant and managing
partner of the New Hartford, NY office of Dermody Burke and Brown, CPAs, LLC. Ms. Golden is past President of the
New York State Society of CPAs and the New York State Society’s Foundation for Accounting Education. She also served
as Secretary and Vice President of the State Society and was a member of the governing Council of the American Institute
of Certified Public Accountants, where she served on the Global Credential Survey Task Force in 2001. Ms. Golden holds
a B.A. degree from the State University College at New Paltz, and a B.S. degree in Accounting from Utica College of
Syracuse University.

5 sTEPHEN M. MANdIA has served as a Director of the Company since July 2002. Mr. Mandia has been Chief
Executive Officer of East Coast Olive Oil Corp. since 1991. Mr. Mandia also possesses financial ownership and sits on the
Board of Gem Packing Corp., Utica Plastics, LLC, ECOO Realty Corp., Olive Transport Corp. and Northside Gourmet
Corp. Mr. Mandia holds a B.S. degree from Bentley College, having also undertaken undergraduate studies at Richmond
College in London.

6 wILLIAM d. MATTHEws has served as a Director of the Company since August 1997. From 1986 until retiring
from the positions in 1999, Mr. Matthews was the Chairman of the Board and the Chief Executive Officer of Oneida
Ltd. Mr. Matthews is the Chairman of the Board of Directors and a member of the audit committee of Oneida Financial
Corporation, and a former director of Coyne Textile Services. Mr. Matthews holds a B.A. degree from Union College and
an L.L.B. degree from Cornell University School of Law.

7 sTUART J. scHwARTZ has served as a Director of the Company since May 1998. Dr. Schwartz is a retired
physician. From 1969 to December 1997 he was engaged in private practice as a urologist. Dr. Schwartz holds a B.A.
degree from Cornell University and an M.D. degree from SUNY Upstate Medical College, Syracuse.

n
36

officers n shareholder information n subsidiaries

executive and Senior officers
Joseph J. corasanti, esq.
President and cEO
william w. abraham
senior vice President
thomas m. acey
Treasurer and secretary
daniel S. Jonas, esq.
General counsel and vice President –
Legal Affairs
alexander r. Jones
vice President – corporate sales
Jane e. metcalf
vice President – corporate Regulatory
Affairs
david r. murray
President – cONMEd Electrosurgery
luke a. pomilio
vice President – corporate controller
robert d. Shallish, Jr.
vice President – Finance and chief
Financial Officer
John J. Stotts
vice President – cONMEd Patient care
dennis m. werger
vice President, General Manager –
cONMEd Endoscopic Technologies
Frank r. williams
vice President – cONMEd Endosurgery
gerald g. woodard
President – cONMEd Linvatec

Shareholder information
interested shareholders may
obtain a copy of the company’s
Form 10-k without charge upon
written request to:
Investor Relations department
cONMEd corporation
525 French Road
Utica, NY 13502

transfer agent/registrar
Registrar and Transfer company
10 commerce drive
cranford, NJ 07016

Stock
The NAsdAQ stock Market® stock
symbol: cNMd

independent registered public
accounting Firm
Pricewaterhousecoopers LLP
One Lincoln center
syracuse, NY 13202

general counsel
daniel s. Jonas, Esq.
525 French Road
Utica, NY 13502

Special counsel
sullivan & cromwell
125 broad street
New York, NY 10004

corporate offices
cONMEd corporation
525 French Road
Utica, NY 13502
Phone (315) 797-8375
Fax (315) 797-0321
customer service
1-800-448-6506
email: info@conmed.com
website: www.conmed.com

ethics policy
Available at www.conmed.com

operating Subsidiaries
cONMEd Electrosurgery
cONMEd Endoscopic Technologies
cONMEd Integrated systems canada
cONMEd Linvatec
cONMEd Linvatec Australia
cONMEd Linvatec Austria
cONMEd Linvatec belgium
cONMEd Linvatec biomaterials
cONMEd Linvatec canada
cONMEd Linvatec deutschland
cONMEd Linvatec Europe
cONMEd Linvatec France
cONMEd Linvatec Israel
cONMEd Linvatec korea
cONMEd Linvatec Nederland
cONMEd Linvatec Poland
cONMEd Linvatec spain
cONMEd Linvatec U.k.
cONMEd Receivables corporation

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525 FRENcH ROAd, UTIcA, NY 13502 UsA