CONMED Corporation Annual Report 2012

FY2012 Annual Report · CONMED Corporation

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Building On The Past

| Looking To The Future

2012 Annual Report

Our products are the result of creative collaborations between our finest medical device designers and medical professionals from around the world. Education and professional partnerships are giving us success in patient outcomes and market adoption. Long-term strategies are paying dividends, and a spirit of innovation infuses everything we do. We are new.Table of Contents

Financial Highlights .................................................................................................................................................................................. 2

Letter to the Shareholders .................................................................................................................................................................. 4

Building On The Past | Looking To The Future ........................................................................................................................ 6

Market for CONMED’s Common Stock and Related Stockholder Matters .............................................................. 10

Five Year Summary of Selected Financial Data ...................................................................................................................... 11

Management’s Discussion and Analysis of Financial Condition and Results of Operations .............................12

Management’s Report on Internal Control Over Financial Reporting .......................................................................... 21

Report of Independent Registered Public Accounting Firm .............................................................................................. 22

Consolidated Balance Sheets .......................................................................................................................................................... 23

Consolidated Statements of Comprehensive Income .......................................................................................................... 24

Consolidated Statements of Shareholders’ Equity ................................................................................................................ 25

Consolidated Statements of Cash Flows .................................................................................................................................... 26

Notes to Consolidated Financial Statements ........................................................................................................................... 27

Board of Directors ................................................................................................................................................................................ 42

Corporate Officers .................................................................................................................................................................................43

Shareholder Information ....................................................................................................................................................................43

CONMED Corporation | Annual Report 2012Net Sales (in $ millions)

1
7
6
7

2
2
4
7

3
4
9
6

1
5
2
7

7
3
1
7

7
4
9
6

8
6
4
6

3
7
1
6

4
8
5
5

1
7
9
4

$800.00 --

$700.00 --

$600.00 --

$500.00 --

$400.00 --

$300.00 --

$200.00 --

$100.00 --

Financial
Highlights

Building On The Past | Looking To The FutureRetained Earnings (in $ millions)

Cash from Operations (in $ millions)

Net Income (in $ millions)

0
7
5
6 2
7
2
2

$400.00 --

$350.00 --

$300.00 --

$250.00 --

$200.00 --

$150.00 --

$100.00 --

$50.00 --

5
4
9
1

0
4
5
4 3
5
2
3

4
4
1
3

3
6
7
2

8
1
4
2

9
7
7
3

4
4
5
3

$120.00 --

$100.00 --

0
3
0
1

2
5
9

$80.00 --

8
4
7

4
8
5

$60.00 --

4
2
4

4
9
2

$40.00 --

1
2
3

1
3
3

$20.00 --

7
4
6

9
5
6

1
1
6

0
0
4

5
8
3

2
8
3

3
0
3

0
5
2

1
2
1

5
0
4

8
0

2
5
1

CONMED Corporation | Annual Report 2012Letter to the Shareholders

March 2013

To My Fellow Shareholders:

2012 marked several important milestones for CONMED

Our strategy, which brought us to achieve these milestones,

Corporation. We celebrated our 25th year as a publicly traded

remains the same: continued focus on organic growth through the

company. During that span, revenues increased from $12 million

introduction of innovative products, coupled with complementary

to more than $767 million in 2012. In fact, we had our strongest

acquisitions, along with improved margins as a result of initiatives

sales quarter in the fourth quarter of 2012, with revenues exceeding

to reduce costs and increase operating efficiencies.

$200 million for the first time in Company history. In addition to

record revenues, CONMED also achieved record earnings in 2012.

Our record sales, earnings and

long-term track record reflect the

Our growth in financial performance is matched by our growing

key attributes that make CONMED

presence as a global company. When we first went public, our

an attractive and well-positioned

sales were principally domestic and we had no operations outside

company in the markets we serve:

the United States. Today, we have employees selling our products

in 16 countries outside the U.S., including China, with distributors

representing our products in another 100+. In 2012 we benefited

from our newly acquired sales offices in Denmark, Finland and

Sweden, as well as increasing growth in Latin America and China.

• We are a technology-based

surgical device company serving

surgeons and healthcare facilities

around the world, with sales

exceeding three-quarters of $1

Our cash flows, which have historically been strong, continue to

billion. We hold Number 2 or

grow. Cash provided by operating activities in 2012 totaled

3 market positions in our key

$95.2 million. This cash generation is a very healthy 12.4% of sales

product lines.

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for the full year 2012.

• CONMED has consciously

Joseph J. Corasanti

Based on our strong cash flow generation and our optimistic

shifted its mix to single-use products that provide an ongoing

outlook for continued future operational success, in early 2012 our

stream of sales every day. These comprise about 80% of our

Board of Directors adopted a cash dividend policy and declared an

sales. The remaining 20% comes from capital equipment sales

initial quarterly cash dividend of $0.15 per share. We expect to pay

that drive the use of our single-use products in a razor/razor

future cash dividends on a quarterly basis. Based on the current

blade model.

quarterly cash dividend, the total annual dividend rate equals $0.60

per share, which is equivalent to a dividend yield of approximately

2% based on the price of CONMED stock as of the date of this

letter. This decision by the Board reflects its long-term confidence

in the future of our business, and a desire to ensure all shareholders

benefit appropriately from our success. Of course, any decision

to pay future cash dividends will be subject to Board approval and

will depend on CONMED’s future earnings, cash flow, financial

condition, financial covenants and other relevant factors. To put

this in perspective, the amount of cash we used to pay dividends

declared in 2012 was greater than CONMED’s revenues when it

first went public 25 years ago.

• Over 60% of our sales come from the orthopedic specialties

of Sports Medicine and Powered Surgical Instruments, markets

that enjoy relatively attractive growth rates. Our fastest-growing

product line, Sports Medicine Joint Repair, is focused on surgical

procedure devices that assist surgeons in repairing soft tissue

injuries in joints. New initiatives, such as our successful

Shoulder Restoration System and the newly established

relationship with the Musculoskeletal Transplant Foundation

(MTF) for the promotion of allograft tissue, have driven the

positive growth trends.

Building On The Past | Looking To The Future

• CONMED is truly a global company with a 50/50 split of

revenue growth, while our continued plans to improve operational

sales between U.S. and international markets. We are focused

efficiency will keep expenses in check. Although earnings growth

on growing sales in emerging markets such as Asia and the

in 2013 will be hampered by the new 2.3% medical device excise

Americas, which grew 16% in the fourth quarter of 2012 and

tax on products sold in the U.S., and by foreign currency translation

8% for the full year 2012.

• Finally, CONMED has delivered over 15% growth in adjusted

earnings per share in each of the last three years. This solid

earnings performance and our strong cash flow allow us to

re-invest internally, seek product and tuck-in acquisitions, and to

rates that are less favorable than those in 2012, we are optimistic

about CONMED’s long-term future. We are committed to best-

in-class product development and service to our customers, and

creating value for our shareholders. We look forward to the future

with determination and confidence.

return cash to shareholders through dividends and selective share

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

repurchases. In addition to our regular dividend, the Company

announced a $50 million stock repurchase program in October

2012 and we are repurchasing CONMED’s stock in the open

market, subject to market conditions and provisions of our credit

Sincerely,

agreement.

Looking to the future, we believe modestly improving global

economies coupled with our new products will result in greater

Joseph J. Corasanti

President & Chief Executive Officer

Reconciliation of Reported Net Income to Non-GAAP Net Income Before Unusual Items
and Amortization of Debt Discount1
(In thousands except per share amounts) (Unaudited)

CONMED Corporation

Reported net income
Facility consolidation costs included in cost of sales
Termination of a product offering
Total cost of sales, other
Administrative consolidation costs
Costs associated with purchase of a distributor
Costs associated with legal arbitration
Costs associated with purchase of a business

Total other expense
Impairment of goodwill
Loss on early extinguishment of debt
Amortization of debt discount
Total unusual expense before income taxes
Provision (benefit) for income taxes on unusual expense
Net income before unusual items and amortization of debt discount

Per share data:
Reported net income

Basic
Diluted

Net income before unusual items and amortization of debt discount

Basic
Diluted

2010
30,346
$
_________
2,397
2,489
_________
4,886
_________
2,176

—
—
—
_________
2,176
_________
—
_________
79
_________
4,244
_________
11,385
(4,139 )
_________
$
37,592
_________
_________

3,467

2012
2011
$
$ 40,481
752
_________
_________
3,467 7,052
—
—
_________
_________
7,052
_________
_________
792
6,497
300 704
1,555
—
1,194
—
_________
_________
1,092
9,950
_________
_________
60,302 —
_________
_________
—
—
_________
_________
3,903 —
_________
_________
17,002
68,764
(5,829 )
(26,515 )
_________
_________
$ 51,654
$ 43,001
_________
_________
_________
_________

$
$

1.06
1.05

$ 0.03
0.03
$

1.31
1.30

$ 1.52
1.50
$

$
$

1.43
1.41

1.83
1.80

1 This table is provided to reconcile certain financial disclosures. Management has provided the above reconciliation of net income before unusual items and amortization of debt
discount as an additional measure that investors can use to compare operating performance between reporting periods. Management believes this reconciliation provides a useful
presentation of operating performance.

CONMED Corporation | Annual Report 2012

Building On The Past
Looking To The Future

During 2012, CONMED reached many corporate milestones, from celebrating our 25th year on the

NASDAQ market to expanding our global reach with employees selling our products in 16 countries.

These important landmarks continue to pave the way to fulfill our mission in delivering instruments and

technologies preferred by physicians and patients worldwide, while providing the highest quality education

and support to our clinical partners. Whether that means a reduction in recovery time, less pain for the

patient, the ability to make a once difficult procedure easier, or the opportunity to bring a procedure

to a new and more challenging patient-population, our purpose is to provide clinicians with tools and

technologies that enhance productivity and improve patient outcomes.

We are redefining what it means to advance minimally invasive and orthopedic surgery. In addition to

putting our products in the hands of medical professionals, we are teaching them the latest techniques and

seeking their input on product design. We’re also finding collaborative partners who can work with us to

provide solutions greater than the sum of our parts. We anticipate the needs of medical providers and

patients, giving them answers before they even ask.

We have built it all on a solid foundation of: strong fundamentals and shareholder profits; controlled

acquisition and organic growth; and a clear vision and a talented workforce. With ground breaking new

products, faster innovation, and more profitable partnerships, the future is ours to shape. Together.

25 Years on the NASDAQ

We proudly rang the bell at NASDAQ this last August. It

was an honor to celebrate our 25th year on the world’s

first electronic stock market, the second largest exchange

by market capitalization. This tremendous milestone

speaks volumes about our corporate strength. Through

recessions, international crises and global changes in

healthcare delivery systems, we have thrived. From

simple beginnings in 1973 to a company with more than

$767 million in sales worldwide, we have capitalized on

our strengths year after year. With careful planning, a

calculated balance between risk and reward, and strategic

execution, we have continued to grow the company and

deliver value. In the years ahead, we will continue to be a

reliable and profitable investment for our shareholders by

providing targeted solutions to our customers worldwide.

CONMED Corporation Board of Directors and Management Team
Ring the Opening Bell to Celebrate 25 Years on the NASDAQ

Building On The Past | Looking To The Future
50 Years in the Making

In 1963, two physicians changed the course of surgical medicine.

Inventions by Dr. Terry Tanner, founder of Concept Inc., and

Dr. Robert Hall, founder of Hall® Power, both brands of which are

now part of CONMED, led to incredible advances in arthroscopic

and orthopedic surgery. This year we’re honoring these pioneers, in

addition to all the surgeons and inventors we have partnered with in

the last 50 years.

Our heritage is rooted in our commitment to the research and

development of state-of-the-art products, and is reflected in our

partnership with

surgeons, for surgeons.

This collaboration has

led to many firsts over the years. From the firsts in disposable

shaver blades, bendable blades and disposable cannulae

to the new Lithium Battery introduced in 2012, powerful

enough to last through an entire procedure without charging.

We have a history of invention, cooperation and leadership,

focusing on better patient outcomes.

With an eye on the future, we will

continue our clinical partnerships

to develop and deliver better

instruments and technologies for

doctors and patients worldwide.

CONMED Corporation | Annual Report 2012A Groundbreaking Collaboration

In January 2012, we announced a strategic partnership with the Musculoskeletal Transplant Foundation

(MTF), the world’s largest tissue bank. This uniquely positions us to offer surgeons allograft tissues for their

sports medicine and other arthroscopic procedures. CONMED

is also the exclusive worldwide distributor of MTF’s Cascade®

Platelet-Rich Plasma (PRP), which uses a patient’s own blood

components to aid in the healing process.

This strategic relationship has already had a positive effect on

our earnings, and advances our already strong competitive

position within sports medicine. Moreover, the MTF product

line is increasing the visibility of our brands among surgeons,

providing a broader product offering for potential new

customer relationships and allowing us to deliver enhanced

benefits to patients.

Cascade® PRP Fibrin Membrane and Allopatch HD®
Human Dermis.*

Advancing the Future through Focused Surgeon
Training:

The Centers for Orthopedic Education

At CONMED, our commitment to advancing the future of minimally invasive surgery is also demonstrated

in our focus on surgeon training. To share the latest innovations we have expanded our Center for

Orthopedic Education in Largo, Florida, and more recently, opened a new one in New York City.

Additionally, our Educational Center in Germany provides access to our programs for European surgeons.

These advanced educational facilities feature multiple hands-on learning environments, state-of-the-art

didactic auditoriums, and a showcase for CONMED’s products.

Surgeon-specific lab experiences take a practical approach to teaching new skills and techniques. Didactic

courses provide demonstrations, discussions and best practices in the field and offer surgeons an opportunity

to use CONMED products. Courses include electrosurgery, arthroscopy, endoscopy, otolaryngology, and

orthopedic surgical techniques, and address issues surgeons face daily in the operating room. Participants

leave with a better understanding of CONMED products and provide us crucial insights into their needs.

*Cascade® is a registered trademark of Cascade Medical Enterprises, LLC

Building On The Past | Looking To The FutureTeaching. Learning. Growing.

In addition to our learning centers, we participate in more than 400 medical association courses and

workshops annually, and co-sponsor a series of learning centers in conjunction with various medical

organizations worldwide.

Not only do we support the learning of new techniques and use of new equipment,

we also educate on better ways to reduce clinical hazards and risks and help medical

professionals identify ways to streamline and manage their operating theaters for better

productivity. Our medical education materials include a wealth of information in print

and video.

We never stop learning, and we never stop growing. That’s how we build from the past and

look toward the future. Together.

CONMED Corporation | Annual Report 2012Market 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, 2013,
there were 791 registered holders of our common stock and approximately 5,426 accounts held in “street name”.

The following table sets forth quarterly high and low sales prices for the years ended December 31, 2011 and 2012, as reported by the
NASDAQ Stock Market.

2011

2012

High

Period
________________________________________________________________________________________________________
First Quarter
Second Quarter
Third Quarter
Fourth Quarter

$ 25.33
25.99
20.81
24.19

$ 27.47
29.00
29.38
27.83

$ 30.47
30.42
29.25
29.33

$ 26.00
26.03
25.85
25.71

High

Low

Our Board of Directors has authorized a share repurchase program; see Note 7 to the Consolidated Financial Statements.

On February 29, 2012, the Board of Directors adopted a cash dividend policy and declared an initial quarterly dividend of $0.15 per
share. During 2012, the Company declared total dividends of $0.60 per share. 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 condition and certain limitations on cash
dividends contained in debt agreements.

Information relating to compensation plans under which equity securities of CONMED Corporation are authorized for issuance is set
forth below:

Equity Compensation Plan Information

Plan category

Equity compensation plans
approved by security holders

Equity compensation plans
not approved by security holders

Total

Number of securities
to be issued upon exercise
of outstanding options,
warrants and rights
(a)

Weighted-average exercise price
of outstanding options,
warrants and rights
(b)

Number of securities remaining
available for future issuance under
equity compensation plans (excluding
securities reflected in column (a))
(c)

2,289,951

25.35

1,424,766

—
__________

2,289,951
__________

—
__________

$
25.35
__________

_________

—

1,424,766
_________

Building On The Past | Looking To The Future

Five Year Summary of Selected Financial Data (As Adjusted) (1)

(In thousands, except per share data)
Years Ended December 31,
Statements of Operations Data(2):

Net sales
Income from operations
Net income

Per Share Data:

Basic earnings per share
Diluted earnings per share
Dividends per share of common stock

Weighted Average Number of Common Shares

In Calculating:

Basic earnings per share
Diluted earnings per share

Other Financial Data:

Depreciation and amortization
Capital expenditures

Balance Sheet Data (at period end):

Cash and cash equivalents
Total assets
Long-term obligations
Total shareholders’ equity

2008

2009

2010

2011

2012

$ 742,183
75,259
39,989

$ 694,739
28,269
12,137

$ 713,723
57,093
30,346

$ 725,077 $ 767,140
65,210
40,481

8,274
752

1.39
1.37
—

0.42
0.42
—

1.06
1.05
—

0.03 $
0.03
—

1.43
1.41
0.60

28,796
29,227

29,074
29,142

28,715
28,911

28,246
28,633

28,301
28,653

$ 37,159
35,879

$ 41,283
21,444

$ 41,807
14,732

$ 42,687 $ 46,616
21,532

17,552

$ 11,811
931,661
316,532
540,215

$ 10,098
958,413
302,791
576,515

$ 12,417
985,773
219,344
586,563

$ 26,048 $ 23,720
1,084,462
935,594
354,956
231,339
606,998
573,071

(1) In May 2008, the FASB issued guidance which specifies that issuers of convertible debt instruments that permit or require the issuer to pay cash upon

conversion should separately account for the liability and equity components in a manner that will reflect the entity’s nonconvertible debt borrowing rate when
interest cost is recognized in subsequent periods. The Company is required to apply the guidance retrospectively to all past periods presented. We adopted this
guidance on January 1, 2009 related to our 2.50% convertible senior subordinated notes due 2024 (“the Notes”).

(2) Results of operations of acquired businesses have been recorded in the financial statements since the date of acquisition.

CONMED Corporation | Annual Report 2012

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
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 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:

to provide optimal blade control and a more even cut; DetachaTip®
III with a new composite shaft and internal ratcheting mechanism
provides a more ergonomic, more reliable, safer alternative for
Endoscopic manual instruments. Hip Preservation System™, from
access to repair, the system is committed to optimizing patient
outcomes by providing a comprehensive solution of joint preserving
instrumentation and techniques; the Hall® Surgical Lithium Power
Battery System offers lithium-ion battery technology which will
provide greater power and longevity during surgery when compared
to present batteries and the Altrus® Thermal Tissue Fusion System
which utilizes thermal energy to seal, cut, grasp, and dissect vessels
up to 7mm in size utilizing a closed feedback loop between the
energy source and the single-use handpiece to precisely control the
desired effect on tissue.

Arthroscopy
Powered Surgical Instruments
Electrosurgery
Endosurgery
Patient Care
Endoscopic Technologies
Consolidated Net Sales

2010
40 %
20
14
9
10
7

2011
40 %
20
14
10
9
7
_____ _____ _____
100 % 100 % 100 %
_____ _____ _____
_____ _____ _____

2012
43 %
20
12
10
8
7

A significant amount of our products are used in surgical procedures
with approximately 80% 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 and Mexico. We market our products both domestically
and internationally directly to customers and through distributors.
International sales approximated 48%, 50% and 50% in 2010, 2011
and 2012, 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
noninvasive) procedures are important trends which are driving the
long-term 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 as continued innovation and
commercialization of new proprietary products and processes are
essential elements of our long-term growth strategy. Our reputation
as an innovator is exemplified by recent new product introductions
such as the Genesys PressFT™ biocomposite Suture Anchor, a
bioabsorbable anchor for use in arthroscopic stabilization procedures
of the shoulder and labral repair of the hip; Y-Knot™ All-suture
Anchor, a suture anchor implant comprised entirely of high strength
suture for instability repair procedures in the shoulder and hip as well
as for small joint repairs in the extremities; M-Class Blades, our new
line of large bone blades that are engineered with beveled center
teeth, course middle teeth and fine outer teeth that work together

Business Challenges

Significant volatility in the financial markets and foreign currency
exchange rates as well as depressed economic conditions in both
domestic and international markets, have presented significant
business challenges since the second half of 2008. While we
returned to revenue growth in 2010, 2011 and 2012 and are
cautiously optimistic that the domestic economic environment
is improving, conditions in Europe and elsewhere may present
significant business challenges for the Company. While there can be
no assurance that improvement in the overall economic environment
will be sustained, we will continue to monitor and manage the
impact of the overall economic environment on the Company.

Over the past few years we successfully completed certain of
our operational restructuring plans whereby we consolidated
manufacturing and distribution centers as well as restructured certain
of our administrative functions. We continue to restructure both
operations and administrative functions as necessary throughout the
organization. However, we cannot be certain such activities will be
completed in the estimated time period or that planned cost savings
will be achieved.

Our facilities are subject to periodic inspection by the United States
Food and Drug Administration (“FDA”) and foreign regulatory
agencies or notified bodies for, among other things, conformance
to Quality System Regulation and Current Good Manufacturing
Practice (“CGMP”) requirements and foreign or international
standards. We are committed to the principles and strategies of
systems-based quality management for improved CGMP compliance,
operational performance and efficiencies through our Company-wide
quality systems initiatives. However, there can be no assurance that
our actions will ensure that we will not receive a warning letter or be
the subject of other regulatory action, which may include consent
decrees or fines, that we will not conduct product recalls or that we
will not experience temporary or extended periods during which we
may not be able to sell products in foreign countries.

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.

Building On The Past | Looking To The Future

Revenue Recognition

Goodwill and Intangible Assets

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 on a

loaned basis in return for commitments to purchase related single-
use products over time periods generally ranging from one to three
years. In these circumstances, no revenue is recognized upon
capital equipment shipment as the equipment is loaned and subject
to return if certain minimum single-use purchases are not met.
Revenue is recognized upon the sale and shipment of the related
single-use products. The cost of the equipment is amortized over
its estimated useful life.

• Service revenues earned by the Company related to the sale of
sports medicine allograft tissue are recorded in accordance with
the contractual terms of our agreement with Musculoskeletal
Transplant Foundation (“MTF”). These revenues are recorded net
of amortization of the acquired assets.

• 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 $12.1 million, $13.0
million and $12.8 million for 2010, 2011 and 2012, 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, 2012 is adequate to provide for
probable losses resulting from accounts receivable.

Inventory Valuation

We write-off 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 have a history of growth through acquisitions. Assets and
liabilities of acquired businesses are recorded 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 $256.8 million and other
intangible assets of $190.8 million as of December 31, 2012.

In accordance with FASB guidance, goodwill and intangible assets
deemed to have indefinite lives are not amortized, but are subject to
at least annual impairment testing. It is our policy to perform our
annual impairment testing in the fourth quarter. The identification
and measurement of goodwill impairment involves the estimation
of the fair value of our reporting units. 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 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. During 2012,
we completed our goodwill impairment testing with data as of
October 1, 2012. We adopted the Step 0 qualitative impairment test
in accordance with ASC 350 whereby we assess qualitative factors to
determine whether the existence of events or circumstances leads to
a determination that it is more likely than not that the fair value of
a reporting unit is less than its carrying amount. Our last goodwill
impairment testing, performed as of October 1, 2011, under the
Step 1 method for our CONMED Electrosurgery, CONMED
Endosurgery and CONMED Linvatec reporting units, utilized
CONMED Corporation’s EBITDA multiple adjusted for a market-
based control premium with the resultant fair values exceeding
carrying values by 42% to 107%. Based upon our qualitative
assessment, we believe the fair value of these reporting units continue
to exceed carrying values by a substantial margin.

During 2011, we estimated the fair value of the CONMED Patient
Care reporting unit utilizing both a market-based approach and
an income approach. Under the income approach, we utilized a
discounted cash flow valuation methodology and measured the
goodwill impairment in accordance with ASC 350. The first step
of the impairment test determined the carrying value exceeded
fair value and therefore we proceeded to Step 2. Under Step 2, we
calculated the amount of impairment loss by measuring the amount
the carrying value of goodwill exceeded the implied fair value
of the goodwill. We determined the goodwill of our CONMED
Patient Care reporting unit was impaired as a result of lower future
earnings due to pricing pressures in a number of our product lines
and consequently we recorded a goodwill impairment charge of
$60.3 million to reduce the carrying amount of the reporting unit’s
goodwill to its implied fair value.

Intangible assets with a finite life are amortized over the estimated
useful life of the asset and are evaluated each reporting period to
determine whether events and circumstances warrant a revision
to the remaining period of amortization. Intangible assets subject
to amortization are reviewed for impairment whenever events or
changes in circumstances indicate that its carrying amount may
not be recoverable. The carrying amount of an intangible asset
subject to amortization is not recoverable if it exceeds the sum of the
undiscounted cash flows expected to result from the use of the asset.
An impairment loss is recognized by reducing the carrying amount
of the intangible asset to its current fair value.

CONMED Corporation | Annual Report 2012Customer relationship assets arose principally as a result of the 1997
acquisition of Linvatec Corporation. These assets represent the
acquisition date fair value of existing customer relationships based on
the after-tax income expected to be derived during their estimated
remaining useful life. The useful lives of these customer relationships
were not and are not limited by contract or any economic, regulatory
or other known factors. The estimated useful life of the Linvatec
customer relationship assets was determined as of the date of
acquisition as a result of a study of the observed pattern of historical
revenue attrition during the 5 years immediately preceding the
acquisition of Linvatec Corporation. This observed attrition pattern
was then applied to the existing customer relationships to derive
the future expected retirement of the customer relationships. This
analysis indicated an annual attrition rate of 2.6%. Assuming an
exponential attrition pattern, this equated to an average remaining
useful life of approximately 38 years for the Linvatec customer
relationship assets. Customer relationship intangible assets arising
as a result of other business acquisitions are being amortized over
a weighted average life of 15 years. The weighted average life for
customer relationship assets in aggregate is 33 years.

We evaluate the remaining useful life of our customer relationship
intangible assets each reporting period in order to determine whether
events and circumstances warrant a revision to the remaining period
of amortization. In order to further evaluate the remaining useful
life of our customer relationship intangible assets, we perform an
analysis and assessment of actual customer attrition and activity
as events and circumstances warrant. This assessment includes
a comparison of customer activity since the acquisition date and
review of customer attrition rates. In the event that our analysis of
actual customer attrition rates indicates a level of attrition that is in
excess of that which was originally contemplated, we would change
the estimated useful life of the related customer relationship asset
with the remaining carrying amount amortized prospectively over the
revised remaining useful life.

We test our customer relationship assets for recoverability whenever
events or changes in circumstances indicate that the carrying amount
may not be recoverable. Factors specific to our customer relationship
assets which might lead to an impairment charge include a significant
increase in the annual customer attrition rate or otherwise significant
loss of customers, significant decreases in sales or current-period
operating or cash flow losses or a projection or forecast of losses.
We do not believe that there have been events or changes in
circumstances which would indicate the carrying amount of our
customer relationship assets might not be recoverable.

For all other indefinite lived intangible assets, we perform a Step 0
qualitative impairment test in accordance with ASC 350. Based
upon this assessment, we have determined that it is unlikely that our
indefinite lived intangible assets are impaired.

See Note 4 to the Consolidated Financial Statements for further
discussion of goodwill and other intangible assets.

Pension Plan

We sponsor a defined benefit pension plan covering substantially
all our United States based employees. The pension plan was
frozen during the first quarter of 2009. 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.

The weighted-average discount rate used to measure pension
liabilities and costs is set by reference to the Citigroup Pension
Liability Index. However, this index gives only an indication of
the appropriate discount rate because the cash flows of the bonds
comprising the index do not match precisely the projected benefit
payment stream of the plan. For this reason, we also consider the
individual characteristics of the plan, such as projected cash flow
patterns and payment durations, when setting the discount rate. The
rates used in determining 2012 and 2013 pension expense are 4.30%
and 3.90%, respectively.

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.

Pension expense in 2013 is expected to be $1.0 million compared
to expense of $2.0 million in 2012. In addition, we expect to
contribute approximately $7.5 million to the pension plan for the
2013 plan year.

See Note 9 to the Consolidated Financial Statements for further
discussion.

Stock-based Compensation

All share-based payments to employees, including grants of employee
stock options, restricted stock units, performance share units and
stock appreciation rights are recognized in the financial statements
based at their fair values. Compensation expense is generally
recognized using a straight-line method over the vesting period.
Compensation expense for performance share units is recognized
using the graded vesting method.

Income Taxes

The recorded future tax benefit arising from deductible temporary
differences and tax carryforwards is approximately $34.9 million at
December 31, 2012. Management believes that earnings during the
periods when the temporary differences become deductible will be
sufficient to realize the related future income tax benefits.

The Company is subject to taxation in the United States and various
states and foreign jurisdictions. Taxing authority examinations can
involve complex issues and may require an extended period of time
to resolve. Our Federal income tax returns have been examined
by the Internal Revenue Service (“IRS”) for calendar years ending
through 2011. Tax years subsequent to 2011 are subject to future
examination.

The American Taxpayer Relief Act of 2012 was signed into law on
January 2, 2013. The legislation was not enacted or substantively
enacted (as defined for accounting purposes) until January of 2013,
meaning that the appropriate accounting period for this change in
law is 2013. Tax benefits relating to 2012 of approximately $0.8
million resulting from renewed business tax provisions retroactive to
January 1, 2012 are not recorded as a benefit in 2012, but will be
recorded as a discrete tax item in the first quarter of 2013.

Building On The Past | Looking To The FutureConsolidated Results of Operations

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

Years Ended December 31,

2010 2011

2012

Net sales
Cost of sales
Gross margin
Selling and administrative expense
Research and development expense
Impairment of goodwill
Other expense
Income from operations
Loss on early extinguishment of debt
Amortization of debt discount
Interest expense
Income (loss) before income taxes
Provision (benefit) for income taxes
Net income

______ ______ ______

100.0 % 100.0 % 100.0 %
48.8 48.3 47.1
______ ______ ______
51.2 51.7 52.9
38.7 38.1 39.4
4.0
4.2
3.7
8.3 —
—
1.3
0.2
0.3
8.0
8.5
1.1
— — —
0.5 —
0.6
0.7
0.9
1.0
______ ______ ______
7.8
(0.3 )
6.4
2.1
2.5
(0.4 )
______ ______ ______
4.3 % 0.1 % 5.3 %
______ ______ ______
______ ______ ______

2012 Compared to 2011

Sales for 2012 were $767.1 million, an increase of $42.0 million
(5.8%) compared to sales of $725.1 million in 2011 with the
increases occurring in all product lines except Patient Care and
Electrosurgery. The distribution agreement with Musculoskeletal
Transplant Foundation (“MTF”) accounted for a 3.9% annual sales
increase. In local currency, excluding the effects of the hedging
program, sales increased 5.7%. Sales of capital equipment
decreased $6.3 million (-3.9%) to $153.6 million in 2012 from
$159.9 million in 2011; sales of single-use and reposable products
increased $48.3 million (8.5%) to $613.5 million in 2012 from
$565.2 million in 2011. In local currency, excluding the effects of
the hedging program, sales of capital equipment decreased 3.8%
while single-use and reposable products increased 8.4%. We believe
the overall decline in capital sales is driven by capital purchasing
constraints in hospitals due to depressed economic conditions.

Cost of sales increased to $361.3 million in 2012 as compared
to $350.1 million in 2011. Gross profit margins increased 1.2
percentage points to 52.9% in 2012 as compared to 51.7% in
2011. The increase in gross profit margins of 1.2 percentage
points is primarily a result of the distribution agreement we entered
into during 2012 with MTF as further described in Note 4 to the
Consolidated Financial Statements (1.5 percentage points) and
product mix offset by the impact of unfavorable foreign exchange
rates on sales and higher restructuring charges than the same period
a year ago.

Selling and administrative expense increased to $302.5 million
in 2012 compared to $276.6 million in 2011. Selling and
administrative expense as a percentage of net sales increased to
39.4% in 2012 from 38.1% in 2011. This increase of 1.3 percentage
points is primarily attributable to higher selling expenses mainly
related to our MTF distribution agreement and acquisition of our
former distributor for the Nordic region of Europe.

Research and development expense was $28.2 million in 2012
compared to $28.7 million in 2011. As a percentage of net sales,
research and development expense decreased to 3.7% in 2012
compared to 4.0% in 2011. The decrease of 0.3 percentage points is
mainly a result of relatively flat spending on increased sales in 2012.

During 2011, we recorded a $60.3 million charge for the impairment
of goodwill related to the CONMED Patient Care operating unit.

Refer to Note 4 to the Consolidated Financial Statements for further
details.

As discussed in Note 11 to the Consolidated Financial Statements,
other expense in 2012 consisted of a $6.5 million charge related to
administrative consolidation expenses in our CONMED Linvatec
operating segment, a charge of $0.7 million related to the purchase
of the Company’s former distributor for the Nordic region of
Europe, $1.6 million in costs associated with a contractual dispute
with a former distributor and $1.2 million in costs associated with the
purchase of Viking Systems, Inc.. Other expense in 2011 consisted
of a $0.8 million charge related to the consolidation of certain of our
administrative functions in our Utica, NY facility and a $0.3 million
charge related to the purchase of the Company’s former distributor
for the Nordic region of Europe.

Amortization of debt discount was $3.9 million in 2011. The debt
discount on the Notes was amortized through November 2011.

Interest expense was $5.7 million in 2012 compared to $6.7 million
in 2011. The decrease in interest expense is due to lower weighted
average interests rates on higher weighted average borrowings
outstanding in 2012 as compared to the same period a year ago.
The weighted average interest rates on our borrowings decreased to
3.03% in 2012 as compared to 3.66% in 2011.

A provision for income taxes was recorded at an effective rate of
31.9% in 2012 and -132.6% in 2011 as compared to the Federal
statutory rate of 35.0%. Income tax expense recorded in 2012
was higher than recorded in the same period a year ago as a result
of increased pre-tax earnings, offset by higher earnings in foreign
jurisdictions where the tax rates are lower than the statutory federal
rate and tax benefits recorded in 2012 as a result of determinations
received from multiple taxing authorities. A reconciliation of the
United States statutory income tax rate to our effective tax rate is
included in Note 6 to the Consolidated Financial Statements.

2011 Compared to 2010

Sales for 2011 were $725.1 million, an increase of $11.4 million
(1.6%) compared to sales of $713.7 million in 2010 with the
increases occurring in all product lines except Patient Care. In
local currency, excluding the effects of the hedging program, sales
increased 0.7%. Sales of capital equipment decreased $5.3 million
(-3.2%) to $159.9 million in 2011 from $165.2 million in 2010;
sales of single-use and reposable products increased $16.7 million
(3.0%) to $565.2 million in 2011 from $548.5 million in 2010. In
local currency, excluding the effects of the hedging program, sales
of capital equipment decreased 3.9% while single-use and reposable
products increased 2.1%. We believe the overall decline in capital
sales is driven by capital purchasing constraints in hospitals due to
depressed economic conditions.

Cost of sales increased to $350.1 million in 2011 as compared
to $348.3 million in 2010. Gross profit margins increased 0.5
percentage points to 51.7% in 2011 as compared to 51.2% in 2010.
The increase in gross profit margins of 0.5 percentage points results
from the impact of favorable foreign currency exchange rates on
sales and product mix.

Selling and administrative expense remained relatively flat at
$276.6 million in 2011 compared to $276.5 million in 2010. Foreign
currency exchange rates (when compared to the foreign currency
exchange rates in the same period a year ago) increased expense
approximately $5.3 million. Selling and administrative expense
as a percentage of net sales decreased to 38.1% in 2011 from
38.7% in 2010. This decrease of 0.6 percentage points is primarily
attributable to the consolidation of administrative functions during

CONMED Corporation | Annual Report 2012

2010 and the first quarter of 2011 which more than offset the impact
of unfavorable foreign currency exchange rates on expenses.

Research and development expense was $28.7 million in 2011
compared to $29.7 million in 2010. As a percentage of net sales,
research and development expense decreased to 4.0% in 2011
compared to 4.2% in 2010. The decrease of 0.2 percentage points
is mainly driven by decreased spending on our CONMED Linvatec
products.

a single reportable 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 reportable segment for 2010, 2011 and 2012:

CONMED Endosurgery, CONMED Electrosurgery and
CONMED Linvatec

During 2011, we recorded a $60.3 million charge for the impairment
of goodwill related to the CONMED Patient Care operating unit.
Refer to Note 4 to the Consolidated Financial Statements for further
details.

Net sales
Income from operations
Operating margin

2010

2012
$ 596,923 $ 610,075 $ 650,273
81,848
89,093
77,271

2011

12.9 %

14.6 %

12.6 %

As discussed in Note 11 to the Consolidated Financial Statements,
other expense in 2011 consisted of a $0.8 million charge related
to the consolidation of administrative functions in our Utica, NY
facility, and a charge of $0.3 million related to the purchase of the
Company’s former distributor for the Nordic region of Europe.
Other expense in 2010 consisted of a $1.5 million charge related
to the consolidation of administrative functions in our CONMED
Linvatec operating segment and a $0.7 million charge related to a
lease impairment on our Chelmsford, Massachusetts facility.

During 2010, we repurchased and retired $3.0 million of our 2.50%
convertible senior subordinated notes (the “Notes”) for $2.9 million
and recorded a loss on the early extinguishment of debt of
$0.1 million. See additional discussion under Management’s
Discussion and Analysis of Financial Condition and Results of
Operations—Liquidity and Capital Resources and Note 5 to the
Consolidated Financial Statements.

Amortization of debt discount in 2011 was $3.9 million compared to
$4.2 million in 2010.

Interest expense was $6.7 million in 2011 compared to $7.1 million
in 2010. Interest expense decreased due to lower weighted average
borrowings outstanding in 2011 as compared to the same period
a year ago offset by higher weighted average interest rates. The
weighted average interest rates on our borrowings (inclusive of the
finance charge on our accounts receivable sale facility) increased to
3.66% in 2011 as compared to 3.18% in 2010.

A provision for income taxes was recorded at an effective rate of
-132.6% in 2011 and 33.5% in 2010 as compared to the Federal
statutory rate of 35.0%. Actual income tax expense recorded in
2011 was $2.3 million lower than income tax expense as computed
at the Federal statutory rate. Actual income tax expense recorded in
2010 was $0.7 million lower than income tax expense as computed at
the Federal statutory rate. Income tax expense was primarily lower
in 2011 as a result of Federal foreign tax credit benefit recorded in
2011 associated with the repatriation of foreign earnings to the
United States, which decreased tax expense by $1.3 million. A
reconciliation of the United States statutory income tax rate to our
effective tax rate is included in Note 6 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 segments:
CONMED Endoscopic Technologies, CONMED Endosurgery,
CONMED Electrosurgery, CONMED Linvatec and CONMED
Patient Care. Based upon the aggregation criteria for segment
reporting, we have grouped our CONMED Endosurgery, CONMED
Electrosurgery and CONMED Linvatec operating segments into

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 $40.6 million (14.0%) in 2012 to
$330.5 million from $289.9 million in 2011 mainly due to the
distribution agreement with MTF and increased sales of procedure
specific products. In local currency, excluding the effects of
the hedging program, sales increased 14.0%. Sales of capital
equipment increased $0.1 million (0.2%) to $63.1 million in
2012 from $63.0 million in 2011; sales of single-use products
increased $40.5 million (17.8%) to $267.4 million in 2012 from
$226.9 million in 2011. In local currency, excluding the effects
of the hedging program, sales of capital equipment increased
0.8% and single-use products increased 17.7%. Arthroscopy
sales increased $1.5 million (0.5%) in 2011 to $289.9 million
from $288.4 million in 2010 due to higher procedure specific
product sales offset by lower sales of our video imaging products
for arthroscopy and general surgery. In local currency, excluding
the effects of the hedging program, sales decreased 0.7%. Sales
of capital equipment decreased $12.2 million (-16.2%) to $63.0
million in 2011 from $75.2 million in 2010; sales of single-use
products increased $13.7 million (6.4%) to $226.9 million in
2011 from $213.2 million in 2010. In local currency, excluding
the effects of the hedging program, sales of capital equipment
decreased 17.0% while single-use products increased 5.1%.

• Powered surgical instrument sales increased $2.1 million (1.4%)
in 2012 to $150.0 million from $147.9 million in 2011 mainly
driven by increases in our large bone burs and blades and small
bone handpiece products. In local currency, excluding the effects
of the hedging program, sales increased 1.3%. Sales of capital
equipment decreased $1.8 million (-2.6%) to $67.6 million in
2012 from $69.4 million in 2011; sales of single-use products
increased $3.9 million (5.0%) in 2012 to $82.4 million compared
to $78.5 million in 2011. In local currency, excluding the effects
of the hedging program, sales of capital equipment decreased
2.7% while single-use products increased 4.9%. Powered surgical
instrument sales increased $5.6 million (3.9%) in 2011 to
$147.9 million from $142.3 million in 2010 mainly driven by
increases in our large bone handpiece products. In local currency,
excluding the effects of the hedging program sales increased 2.6%.
Sales of capital equipment increased $5.0 million (7.8%) to
$69.4 million in 2011 from $64.4 million in 2010; sales of single-
use products increased $0.6 million (0.8%) in 2011 to $78.5 million
compared to $77.9 million in 2010. In local currency, excluding
the effects of the hedging program, sales of capital equipment
increased 6.9% while single-use products decreased 0.9%.

• Electrosurgery sales decreased $2.9 million (-2.9%) in 2012 to
$95.7 million from $98.6 million in 2011 mainly due to lower

Building On The Past | Looking To The Future

generator sales offset by sales of our new vessel sealing products
and increased sales of our smoke management products. In
local currency, excluding the effects of the hedging program sales
decreased 3.0%. Sales of capital equipment decreased $4.6 million
(-16.7%) to $22.9 million in 2012 from $27.5 million in 2011;
sales of single-use products increased $1.7 million (2.4%) to
$72.8 million in 2012 from $71.1 million in 2011. In local
currency, excluding the effects of the hedging program, sales of
capital equipment decreased 17.0% while single-use products
increased 2.4%. Electrosurgery sales increased $1.4 million (1.4%)
in 2011 to $98.6 million from $97.2 million in 2010 mainly due to
higher generator sales and our new smoke evacuation accessories.
In local currency, excluding the effects of the hedging program
sales increased 1.0%. Sales of capital equipment increased
$1.9 million (7.4%) to $27.5 million in 2011 from $25.6 million in
2010; sales of single-use products decreased $0.5 million (-0.7%)
to $71.1 million in 2011 from $71.6 million in 2010. In local
currency, excluding the effects of the hedging program, sales
of capital equipment increased 7.5% while single-use products
decreased 1.3%.

• Endosurgery sales remained relatively flat with a $0.3 million
(0.4%) increase in 2012 to $74.0 million from $73.7 million in
2011. In local currency, excluding the effects of the hedging
program sales increased 0.1%. Endosurgery sales increased
$4.7 million (6.8%) in 2011 to $73.7 million from $69.0 million in
2010 mainly due to increased unit volumes of single-use products.
In local currency, excluding the effects of the hedging program,
sales increased 6.4%.

• Operating margins as a percentage of net sales decreased 2.0

percentage points to 12.6% in 2012 compared to 14.6% in 2011.
The decrease in operating margins is principally a result of
administrative consolidation expenses in our CONMED Linvatec
operating segment, costs associated with the acquisition of our
former distributor for the Nordic region of Europe, costs associated
with a contractual dispute with a former distributor, higher selling
expenses and costs associated with the purchase of Viking Systems,
Inc. (3.0 percentage points). These increases are offset by higher
gross margins mainly due to the distribution agreement with MTF
(1.0 percentage points).

• Operating margins as a percentage of net sales increased 1.7

percentage points to 14.6% in 2011 compared to 12.9% in 2010.
The increase in operating margins is primarily due to higher gross
margins (1.0 percentage points) mainly driven by favorable foreign
currency exchange rates on sales and product mix resulting from
lower capital sales in our Arthroscopy product line and higher
sales in our Endosurgery operating unit, lower research and
development spending on our CONMED Linvatec products (0.3
percentage points) and lower overall selling and administrative
expenses (0.4 percentage points).

CONMED Patient Care

Net sales
Income (loss) from operations
Operating margin

2010
$ 68,283
(38 )
(0.1 )%

2011
$ 65,651
(62,878 )

2012
$ 63,697
(2,210 )

(95.8 )%

(3.5 )%

Product offerings include a line of vital signs and cardiac monitoring
products including pulse oximetry equipment & sensors, ECG
electrodes and cables, cardiac defibrillation & pacing pads and blood
pressure cuffs. We also offer a complete line of suction instruments
& tubing for use in the operating room, as well as a line of IV
products.

• Patient Care sales decreased $2.0 million (-3.0%) in 2012 to

$63.7 million compared to $65.7 million in 2011 principally due

to decreased sales of ECG electrodes. In local currency, excluding
the effects of the hedging program, sales decreased 3.0%. Patient
Care sales decreased $2.6 million (-3.8%) in 2011 to $65.7 million
compared to $68.3 million in 2010 principally due to decreased
sales of ECG electrodes and IV devices. In local currency,
excluding the effects of the hedging program, sales decreased
4.1%.

• Operating margins as a percentage of net sales increased 92.3

percentage points to -3.5% in 2012 compared to -95.8% in 2011.
The increase in operating margins is primarily driven by the
prior year including a $60.3 million charge for the impairment of
goodwill (91.9 percentage points) and $0.6 million in administrative
restructuring charges (0.9 percentage points), and lower research
and development spending (1.4 percentage points) offset by
decreases in gross margins mainly due to lower sales volumes (1.1
percentage points) and higher selling expenses (0.8 percentage
points).

• Operating margins as a percentage of net sales decreased 95.7

percentage points to -95.8% in 2011 compared to -0.1% in 2010.
The decrease in operating margins is primarily driven by the
$60.3 million charge for the impairment of goodwill (91.9
percentage points), $0.6 million in administrative restructuring
charges (0.9 percentage points) and decreases in gross margins
mainly due to lower sales volumes (6.3 percentage points) offset by
lower selling and administrative expenses (2.9 percentage points)
and lower research and development spending (0.5 percentage
points).

CONMED Endoscopic Technologies

Net sales
Income (loss) from operations
Operating margin

2010
$ 48,517
(1,315 )

2011

2012
$ 49,351 $ 53,170
2,738

273
0.6 %

5.1 %

(2.7 )%

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 sales increased $3.9 million (7.9%) in
2012 to $53.2 million from $49.3 million in 2011 due to higher
sales across most product lines. In local currency, excluding the
effects of the hedging program, sales increased 7.5%. Endoscopic
Technologies sales increased $0.8 million (1.6%) in 2011 to $49.3
million from $48.5 million in 2010 principally due to higher biliary
and polypectomy sales. In local currency, excluding the effects of
the hedging program, sales increased 1.2%.

• Operating margins as a percentage of net sales increased

4.5 percentage points to 5.1% in 2012 from 0.6% in 2011. The
increase in operating margins of 4.5 percentage points in 2012 is
primarily due to higher gross margins (1.1 percentage points), the
prior year including $0.2 million in administrative restructuring
charges (0.4 percentage points) and lower overall selling and
administrative expenses as a percentage of sales during 2012 (3.0
percentage points).

• Operating margins as a percentage of net sales increased

3.3 percentage points to 0.6% in 2011 from (-2.7%) in 2010. The
increase in operating margins of 3.3 percentage points in 2011 is
primarily due to overall lower selling and administrative expenses
(2.8 percentage points), the prior year including a lease impairment
charge related to the Chelmsford, Massachusetts facility (1.4 percentage
points) and higher gross margins (0.6 percentage points) due to
favorable foreign currency exchange rates on sales offset by increased
spending in research and development (1.1 percentage points) and $0.2
million in administrative restructuring charges during the first quarter
of 2011 (0.4 percentage points).

CONMED Corporation | Annual Report 2012

Liquidity and Capital Resources

Our liquidity needs arise primarily from capital investments, working
capital requirements and payments on indebtedness under the
senior credit agreement. We have historically met these liquidity
requirements with funds generated from operations and borrowings
under our revolving credit facility. In addition, we have historically
used term borrowings, including borrowings under the 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 had total cash on hand at December 31, 2012 of $23.7 million,
of which approximately $19.6 million was held by our foreign
subsidiaries outside the United States. During the fourth quarter
of 2011, we repatriated $16.2 million of foreign earnings to the
United States. We do not intend to repatriate additional funds held
outside of the United States in the future. If we were to repatriate
these funds, we would be required to accrue and pay taxes on such
amounts.

Operating Cash Flows

Our net working capital position was $223.7 million at December 31,
2012. Net cash provided by operating activities was $38.2 million in
2010, $103.0 million in 2011 and $95.2 million in 2012 generated on
net income of $30.3 million in 2010, $0.8 million in 2011 and
$40.5 million in 2012.

The decrease in cash provided by operating activities in 2012
as compared to 2011 is primarily the result of $6.5 million in
contributions made to our pension plan in the first quarter of 2012
and the use of several tax attributes during 2011 resulting in higher
payments on income taxes during 2012 offset by improved inventory
management resulting in less use of cash.

Investing Cash Flows

Net cash used in investing activities during 2012, consisted primarily
of a $64.1 million payment associated with the distribution and
development agreement with MTF, a payment of $22.1 million
related to the acquisition of Viking Systems, Inc. (“Viking
acquisition”) and capital expenditures. See Note 16 to the
Consolidated Financial Statements for further discussion of the
Viking acquisition. Capital expenditures were $14.7 million,
$17.6 million and $21.5 million in 2010, 2011 and 2012, respectively.
Capital expenditures are expected to approximate $20.0 million in
2013.

Financing Cash Flows

Net cash used in financing activities during 2012 consisted of the
following: $10.2 million in proceeds from the issuance of common
stock under our equity compensation plans and employee stock
purchase plan (See Note 7 to the Consolidated Financial Statements),
$73.0 million in borrowings on our revolving credit facility under
our senior credit agreement, $3.9 million in repurchases of treasury
stock, $53.6 million in repayments of term borrowings under our
senior credit agreement, $12.9 million in dividend payments related
to our common stock, and $1.0 million in repayments on our
mortgage notes.

letters of credit. As noted in Note 4 to the Consolidated Financial
Statements, we entered into a distribution and development
agreement with MTF on January 3, 2012 and used cash on hand
and available borrowings under our revolving credit facility to fund
the up front payment of $63.0 million. We expect to fund the
remaining $84.0 million in contingent payments, including the
$34.0 million paid on January 3, 2013, through cash on hand and
available borrowings under our revolving credit facility as these
payments come due over the next four years.

Borrowings outstanding on the revolving credit facility were due
and payable on November 30, 2015. Interest rates on the revolving
credit facility portion of the senior credit agreement were at LIBOR
plus 1.75% (2.22% at December 31, 2012) or an alternative base
rate. For those borrowings where the Company elected to use the
alternative base rate, the base rate would have been the greater of
the Prime Rate or the Federal Funds Rate in effect on such date plus
a margin of 1.00% for borrowings under the revolving credit facility.

On January 17, 2013, we entered into an amended and restated
$350.0 million senior credit agreement (the “amended and restated
senior credit agreement”). The amended and restated senior credit
agreement consists of a $350.0 million revolving credit facility
expiring on January 17, 2018. The amended and restated senior
credit agreement was used to repay borrowings outstanding on
the revolving credit facility under the then existing senior credit
agreement. Initial interest rates are at LIBOR plus 1.50% 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, the Federal Funds Rate in effect on such date plus
0.50%, or the one month Eurocurrency rate plus 1%, plus 0.50%.

The senior credit agreement is collateralized by substantially all
of our personal property and assets. 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, 2012. We are also required, under certain circumstances, to
make mandatory prepayments from net cash proceeds from any
issuance of equity and asset sales.

We have a mortgage note outstanding in connection with the
property and facilities utilized by our CONMED Linvatec subsidiary
bearing interest at 8.25% per annum with semiannual payments of
principal and interest through June 2019. The principal balance
outstanding on the mortgage note aggregated $8.6 million at
December 31, 2012. The mortgage note is collateralized by the
CONMED Linvatec property and facilities.

On November 15, 2011 holders of the 2.50% convertible senior
subordinated notes due 2024 (“the Notes”) put to us and we were
required to repurchase $111.8 million of the Notes at par;
$0.2 million remains outstanding at December 31, 2012. We used
cash on hand and borrowings under our revolving credit facility
to fund the repurchase. During 2010, we repurchased and retired
$3.0 million of the Notes for $2.9 million and recorded a loss on the
early extinguishment of debt of $0.1 million. The Notes represent
subordinated unsecured obligations and are convertible under certain
circumstances, as defined in the indenture for the Notes, into a
combination of cash and CONMED common stock. The Notes
mature on November 15, 2024 and are redeemable by us at any
time. Holders of the Notes have the right to put to us some or all
of the Notes for repurchase on November 15, 2014 and 2019 and,
provided the terms of the indenture for the Notes are satisfied, we
will be required to repurchase the Notes.

Building On The Past | Looking To The FutureOur Board of Directors has authorized a $200.0 million share
repurchase program. Through December 31, 2012, we have
repurchased a total of 4.1 million shares of common stock
aggregating $95.1 million under this authorization and have
$104.9 million remaining available for share repurchases. 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 repurchased $3.9 million under the share repurchase program in
2012. We have financed the repurchases and may finance additional
repurchases through operating cash flow and from available
borrowings under our revolving credit facility.

Management believes that cash flow from operations, including 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.

Restructuring

During 2010, 2011 and 2012, we continued our operational
restructuring plan which includes the transfer of additional
production lines from manufacturing facilities located in the United
States to our manufacturing facility in Chihuahua, Mexico. During
the second quarter of 2012, we began the consolidation of our
Finland operations into our Largo, Florida and Utica, New York
manufacturing facilities. For the years ending December 31, 2010,
2011 and 2012, we charged $2.4 million, $3.5 million, and
$7.1 million, respectively, to cost of goods sold within our CONMED
Linvatec operating segment. These costs include severance and
other charges associated with the transfer of production to Mexico
and consolidation of our Finland operations. We have recorded an
accrual in current liabilities of $3.6 million at December 31, 2012
mainly related to severance and lease impairment costs associated
with the restructuring. We expect this phase of our plan and related
cash payments to be substantially completed in 2013.

During 2010 and 2012, we consolidated certain administrative
functions in our CONMED Linvatec operating segment and
incurred $1.5 million and $6.5 million, respectively, in related
costs consisting principally of severance charges. These costs were
charged to other expense.

During 2011, we consolidated certain administrative functions in
our Utica, New York facility and incurred $0.8 million in related
costs consisting principally of severance charges. These costs were
charged to other expense.

We plan to continue to restructure both operations and
administrative functions as necessary throughout the organization.
As the restructuring plan progresses, we will incur additional charges,
including employee termination and other exit costs. We estimate
restructuring costs will approximate $8.0 million to $10.0 million in
2013 and will be charged to cost of goods sold and other expense.

Refer to Note 15 to the Consolidated Financial Statements for
further discussions regarding restructuring.

Contractual Obligations

The following table summarizes our contractual obligations for the
next five years and thereafter (amounts in thousands) as of December
31, 2012 as adjusted for the refinancing of the obligations under
the amended and restated credit agreement on January 17, 2013.
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, 2012.

Payments Due by Period
Less than

Total

3-5 More than
Years 5 Years
$ 161,852 $ 1,050 $ 2,601 $ 2,791 $ 155,410

1 Year Years

1-3

84,000 34,000 33,333 16,667
—

338

—
—

32,749 7,128 10,788 6,806 8,027
________ _______ _______ _______ _______

$ 318,659 $ 81,898 $ 47,060 $ 26,264 $ 163,437
________ _______ _______ _______ _______
________ _______ _______ _______ _______

Long-term debt
Contingent
consideration
Purchase obligations 40,058 39,720
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 5 to
the Consolidated Financial Statements). The above table also does
not include unrecognized tax benefits of approximately $0.6 million,
the timing and certainty of recognition for which is not known. (See
Note 6 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”), performance
share units (“PSUs”) 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 and PSUs are valued at the market value of the
underlying stock on the date of grant. Stock options, SARs, RSUs
and PSUs 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 7 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

Approximately 50% of our total 2012 consolidated net sales were
to customers outside the United States. We have sales subsidiaries
in a significant number of countries in Europe as well as Australia,
Canada, China and Korea. In those countries in which we have
a direct presence, our sales are denominated in the local currency
amounting to approximately 35% of our total net sales in 2012. The
remaining 15% of sales to customers outside the United States was
on an export basis and transacted in United States dollars.

CONMED Corporation | Annual Report 2012

they did in 2012, our interest expense would decrease, and income
before income taxes would increase by $1.5 million.

Business Forward-Looking Statements

This Annual Report for the Fiscal Year Ended December 31,
2012 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 (“CONMED”,
the “Company”, “we” or “us” — references to “CONMED”, the
“Company”, “we” or “us” shall be deemed to include our direct
and indirect subsidiaries unless the context otherwise requires) 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;

• changes in foreign exchange and interest rates;

• 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;

• 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;

• the risk of a lack of allograft tissues due to reduced donations of
such tissues or due to tissues not meeting the appropriate high
standards for screening and/or processing of such tissues;

• changes in regulatory requirements; and

• various other factors referenced in this Annual Report.

Because a significant portion of our operations consist of sales
activities in foreign jurisdictions, 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. During 2012, changes in foreign currency exchange
rates, net of the effects of the hedging program, decreased sales
by approximately $4.4 million and income before income taxes by
approximately $0.8 million, compared to 2011 rates.

We hedge forecasted intercompany sales denominated in foreign
currencies through the use of forward contracts. We account for
these forward contracts as cash flow hedges. To the extent these
forward contracts meet hedge accounting criteria, changes in their
fair value are not included in current earnings but are included in
accumulated other comprehensive loss. These changes in fair value
will be recognized into earnings as a component of sales or cost of
sales when the forecasted transaction occurs. The notional contract
amounts for forward contracts outstanding at December 31, 2012
which have been accounted for as cash flow hedges totaled
$90.3 million. Net realized gains (losses) recognized for forward
contracts accounted for as cash flow hedges approximated
$2.0 million, $(4.7) million and $3.8 million for the years ended
December 31, 2010, 2011, and 2012 respectively. Net unrealized
losses on forward contracts outstanding which have been accounted
for as cash flow hedges and which have been included in other
comprehensive income totaled $1.1 million at December 31, 2012.
It is expected these unrealized losses will be recognized in the
consolidated statement of comprehensive income in 2013.

We also enter into forward contracts to exchange foreign currencies
for United States dollars in order to hedge our currency transaction
exposures on intercompany receivables denominated in foreign
currencies. These forward contracts settle each month at month-
end, at which time we enter into new forward contracts. We have
not designated these forward contracts as hedges and have not
applied hedge accounting to them. The notional contract amounts
for forward contracts outstanding at December 31, 2012 which
have not been designated as hedges totaled $47.3 million. Net
realized gains (losses) recognized in connection with those forward
contracts not accounted for as hedges approximated $0.3 million,
$0.0 million and $(2.1) million for the years ended December 31,
2010, 2011, and 2012, respectively, offsetting gains (losses) on our
intercompany receivables of $(0.7) million, $(0.3) million and
$0.8 million for the years ended December 31, 2010, 2011, and
2012, respectively. These gains and losses have been recorded in
selling and administrative expense in the consolidated statements of
comprehensive income.

We record these forward foreign exchange contracts at fair value; the
net fair value for forward foreign exchange contracts outstanding at
December 31, 2012 was $1.9 million and is included in other current
liabilities in the Consolidated Balance Sheets.

Refer to Note 13 in the Consolidated Financial Statements for
further discussion.

Interest Rate Risk

At December 31, 2012, we had approximately $153.0 million of
variable rate long-term debt outstanding under our senior credit
agreement. Assuming no repayments, if market interest rates for
similar borrowings averaged 1.0% more in 2013 than they did in
2012, interest expense would increase, and income before income
taxes would decrease by $1.5 million. Comparatively, if market
interest rates for similar borrowings average 1.0% less in 2013 than

Building On The Past | Looking To The FutureManagement’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,
2012. 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, 2012. The effectiveness of the Company’s internal control over
financial reporting as of December 31, 2012 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting
firm, as stated in their report which appears herein.

Joseph J. Corasanti
President and
Chief Executive Officer

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

CONMED Corporation | Annual Report 2012

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of CONMED Corporation

In our opinion, the consolidated balance sheets and the related consolidated statements of comprehensive income, consolidated statements
of shareholders’ equity, and consolidated statements of cash flows present fairly, in all material respects, the financial position of CONMED
Corporation and its subsidiaries at December 31, 2012 and December 31, 2011, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 2012 in conformity with accounting principles generally accepted in the United
States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting
as of December 31, 2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for
maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying “Management’s Report On Internal Control Over Financial Reporting”. Our responsibility is to
express opinions on these financial statements and on the Company’s internal control over financial reporting based on our integrated audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of
material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the
financial statements included 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. Our
audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed
risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits
provide 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.

PricewaterhouseCoopers LLP
Albany, New York
February 25, 2013

Building On The Past | Looking To The FutureConsolidated Balance Sheets

December 31, 2011 and 2012
(In thousands except share and per share amounts)

Assets
Current assets:

Cash and cash equivalents
Accounts receivable, less allowance for doubtful

accounts of $1,183 in 2011 and $1,203 in 2012

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

Total current assets

Property, plant and equipment, net
Deferred income taxes
Goodwill
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
Other current liabilities

Total current liabilities

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

Total liabilities

Commitments and contingencies
Shareholders’ equity:

Preferred stock, par value $.01 per share; authorized
500,000 shares, none issued or outstanding

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

31,299,203 and 31,299,194 issued in 2011 and 2012, respectively

Paid-in capital
Retained earnings
Accumulated other comprehensive loss
Less: Treasury stock, at cost; 3,358,078 and 2,925,801 shares in

2011 and 2012, respectively

Total shareholders’ equity
Total liabilities and shareholders’ equity

See notes to consolidated financial statements.

2011

2012

$ 26,048

$ 23,720

135,641
168,438
—
10,283
16,314
_________
356,724
_________

139,187
2,389
234,815
195,531
6,948
_________
$ 935,594
_________
_________

$ 54,557
21,162
31,142
6,470
17,853
_________
131,184
_________

88,952
92,785
49,602
_________
362,523
_________

139,124
156,228
191
11,931
14,993
_________
346,187
_________

139,041
1,057
256,821
190,809
150,547
_________
$ 1,084,462
_________
_________

1,050
23,622
33,511
—
64,325
_________
122,508
_________

160,802
107,518
86,636
_________
477,464
_________

—

313
321,994
354,439
(26,348 )

(77,327 )
_________
573,071
_________
$ 935,594
_________
_________

313
324,322
377,907
(27,581 )

(67,963 )
_________
606,998
_________
$ 1,084,462
_________
_________

CONMED Corporation | Annual Report 2012

Consolidated Statements of Comprehensive Income

Years Ended December 31, 2010, 2011 and 2012
(In thousands except per share amounts)

Net sales
Cost of sales
Gross profit
Selling and administrative expense
Research and development expense
Impairment of goodwill
Other expense

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

Per share data:

Basic
Diluted

Dividends per share of common stock

Other comprehensive income (loss), before tax:
Foreign currency translation adjustments
Pension liability
Cash flow hedging gain (loss)
Other comprehensive income (loss), before tax
Provision (benefit) for income taxes related to items of other comprehensive income

Comprehensive income (loss)

See notes to consolidated financial statements.

2010
$ 713,723
348,339
_________
365,384
_________
276,463
29,652
—
2,176
_________

308,291
_________
57,093
79
4,244
7,113
_________
45,657
15,311
_________
$ 30,346
_________
_________

2011
$ 725,077
350,143
_________
374,934
_________
276,615
28,651
60,302
1,092
_________

366,660
_________
8,274
—
3,903
6,676
_________
(2,305 )
(3,057 )
_________
$
752
_________
_________

2012
$ 767,140
361,297
_________
405,843
_________
302,469
28,214
—
9,950
_________

340,633
_________
65,210
—
—
5,730
_________
59,480
18,999
_________
$ 40,481
_________
_________

$
$

1.06
1.05

—

$
$

0.03
0.03

—

$
$

1.43
1.41

0.60

65
(3,489 )
(2,096 )
_________
24,826
(2,064 )
_________

(1,937 )
(20,250 )
6,690
_________
(14,745 )
(5,010 )
_________

1,995
1,387
(6,507 )
_________
37,356
(1,892 )
_________

$
26,890
_________
_________

$
(9,735 )
_________
_________

$
39,248
_________
_________

Building On The Past | Looking To The Future

Consolidated Statements of Shareholders’ Equity

Years Ended December 31, 2010, 2011 and 2012
(In thousands)

Common Stock

Amount

Paid-in
Capital

Accumulated
Other

Retained Comprehensive Treasury Shareholders’
Earnings

Stock

Equity

Loss

Balance at December 31, 2009

313 $ 317,366 $ 325,370 $ (12,405 ) $ (54,129 ) $ 576,515
________ ________ ________ ________ ________ ________ ________
________ ________ ________ ________ ________ ________ ________

31,299 $

Common stock issued under employee plans
Repurchase of treasury stock
Tax benefit arising from common stock issued

under employee plans

Retirement of 2.50% convertible notes
Stock-based compensation
Comprehensive income (loss):

Foreign currency translation adjustments
Pension liability (net of income tax

benefit of $1,289)

Cash flow hedging loss (net of income tax

benefit of $775)

Net income

Total comprehensive income

(2,376 )

(1,696 )

5,791
(22,977 )

1,719
(22,977 )

227
(34 )
4,223

(2,200 )

(1,321 )

26,890
________ ________ ________ ________ ________ ________ ________

30,346

Balance at December 31, 2010

313 $ 319,406 $ 354,020 $ (15,861 ) $ (71,315 ) $ 586,563
________ ________ ________ ________ ________ ________ ________
________ ________ ________ ________ ________ ________ ________

31,299 $

Common stock issued under employee plans
Repurchase of treasury stock
Tax benefit arising from common stock issued

under employee plans
Stock-based compensation
Comprehensive income (loss):

Foreign currency translation adjustments
Pension liability (net of income tax

benefit of $7,482)

Cash flow hedging gain (net of income tax

expense of $2,472)

Net income

(3,849 )

(333 )

9,009
(15,021 )

4,827
(15,021 )

1,197
5,240

(1,937 )

(12,768 )

4,218

752

Total comprehensive income (loss)

________ ________ ________ ________ ________ ________ ________

(9,735 )

Balance at December 31, 2011

313 $ 321,994 $ 354,439 $ (26,348 ) $ (77,327 ) $ 573,071
________ ________ ________ ________ ________ ________ ________
________ ________ ________ ________ ________ ________ ________

31,299 $

Common stock issued under employee plans
Repurchase of treasury stock
Tax benefit arising from common stock issued

under employee plans
Stock-based compensation
Dividends on common stock
Comprehensive income (loss):

Foreign currency translation adjustments
Pension liability (net of income tax expense of $512)
Cash flow hedging loss (net of income tax benefit

of $2,404)

Net income

13,287
(3,923 )

8,910
(3,923 )

1,052
5,653
(17,013 )

(4,377 )

1,052
5,653

(17,013 )

40,481

1,995
875

(4,103 )

Total comprehensive income

39,248
________ ________ ________ ________ ________ ________ ________

Balance at December 31, 2012

313 $ 324,322 $ 377,907 $ (27,581 ) $ (67,963 ) $ 606,998
________ ________ ________ ________ ________ ________ ________
________ ________ ________ ________ ________ ________ ________

31,299 $

See notes to consolidated financial statements.

CONMED Corporation | Annual Report 2012

Consolidated Statements of Cash Flows

Years Ended December 31, 2010, 2011 and 2012
(In thousands)

Cash flows from operating activities:

Net income
Adjustments to reconcile net income to net cash
provided by operating activities:

Depreciation
Amortization of debt discount
Amortization, all other
Stock-based compensation
Deferred income taxes
Sale of accounts receivable to (collections on behalf of) purchaser
Income tax benefit of stock option exercises
Excess tax benefit from stock option exercises
Loss on early extinguishment of debt
Impairment of goodwill

Increase (decrease) in cash flows from changes in assets and liabilities,
net of effects from acquisitions:
Accounts receivable
Inventories
Accounts payable
Income taxes
Accrued compensation and benefits
Other assets
Other liabilities

Net cash provided by operating activities

Cash flows from investing activities:

Payments related to business acquisitions and distribution agreements,

net of cash acquired
Proceeds from sale of property
Purchases of property, plant and equipment

Cash flows from financing activities:

Net cash used in investing activities

Net proceeds from common stock issued under employee plans
Repurchase of common stock
Excess tax benefit from stock option exercises
Payments on senior credit agreement
Proceeds of senior credit agreement
Payments on mortgage notes
Payments on senior subordinated notes
Payments related to issuance of debt
Dividends paid on common stock
Other, net

Net cash provided by (used in) financing activities

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

Non-cash financing activities:
Dividends payable
Supplemental disclosures of cash flow information:

Cash paid during the year for:

Interest
Income taxes

See notes to consolidated financial statements.

2010

2011

2012

$ 30,346
_________

$
752
_________

$
40,481
_________

17,392
4,244
20,171
4,223
13,158
(29,000 )
227
(485 )
79
—

18,519
3,903
20,265
5,240
(13,098 )
—
1,197
(1,363 )
—
60,302

18,635
—
27,981
5,653
12,946
—
1,052
(1,206 )
—
—

9,342
(20,317 )
(4,645 )
(692 )
2,516
332
(8,648 )
_________
7,897
_________
38,243
_________

8,464
(7,850 )
2,649
4,838
1,673
(4,243 )
1,745
_________
102,241
_________
102,993
_________

1,687
3,810

259
(6,497 )
767
(1,210 )
(9,159 )
_________
54,718
_________
95,199
_________

(5,289 )
—
(14,732 )
_________
(20,021 )
_________

(4,191 )
—
(17,552 )
_________
(21,743 )
_________

(86,253 )
1,836
(21,532 )
_________
(105,949 )
_________

2,452
(22,977 )
485
(1,350 )
12,000
(824 )
(2,933 )
(2,525 )
—
66
_________
(15,606 )
_________
(297 )
_________
2,319
10,098
_________
$
12,417
_________
_________

6,117
(15,021 )
1,363
(1,350 )
58,000
(894 )
(111,766 )
—
—
(3,148 )
_________
(66,699 )
_________
(920 )
_________
13,631
_________
$ 26,048
_________
_________

10,165
(3,923 )
1,206
(53,588 )
73,000
(969 )
(100 )
—
(12,862 )
(1,576 )
_________
11,353
_________
(2,931 )
_________
(2,328 )
26,048
_________
$
23,720
_________
_________

12,417

—

4,256

6,025
3,257

$ 5,797
4,760

5,038
10,953

Building On The Past | Looking To The Future

Notes to Consolidated Financial Statements (in thousands except per share amounts)

Note 1 — Operations and Significant Accounting Policies

Organization and operations

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.

Inventories

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

We write-off excess and obsolete inventory resulting from the
inability to sell our products at prices in excess of current carrying
costs. 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.

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

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 $256.8 million and other
intangible assets of $190.8 million as of December 31, 2012.

We have a history of growth through acquisitions. Assets and
liabilities of acquired businesses are recorded at their estimated fair

Customer relationship assets arose principally as a result of the 1997
acquisition of Linvatec Corporation. These assets represent the

CONMED Corporation | Annual Report 2012acquisition date fair value of existing customer relationships based on
the after-tax income expected to be derived during their estimated
remaining useful life. The useful lives of these customer relationships
were not and are not limited by contract or any economic, regulatory
or other known factors. The estimated useful life of the Linvatec
customer relationship assets was determined as of the date of
acquisition as a result of a study of the observed pattern of historical
revenue attrition during the 5 years immediately preceding the
acquisition of Linvatec Corporation. This observed attrition pattern
was then applied to the existing customer relationships to derive
the future expected retirement of the customer relationships. This
analysis indicated an annual attrition rate of 2.6%. Assuming an
exponential attrition pattern, this equated to an average remaining
useful life of approximately 38 years for the Linvatec customer
relationship assets. Customer relationship intangible assets arising
as a result of other business acquisitions are being amortized over
a weighted average life of 15 years. The weighted average life for
customer relationship assets in aggregate is 33 years.

We test our customer relationship assets for recoverability whenever
events or changes in circumstances indicate that the carrying amount
may not be recoverable. Factors specific to our customer relationship
assets which might lead to an impairment charge include a
significant increase in the annual customer attrition rate or otherwise
significant loss of customers, significant decreases in sales or current-
period operating or cash flow losses or a projection or forecast of
losses. We do not believe that there have been events or changes
in circumstances which would indicate the carrying amount of our
customer relationship assets might not be recoverable.

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.

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 $0.3 million and $0.2 million at December 31, 2011
and 2012, 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 loss. Transaction
gains and losses are included in net income.

Foreign exchange and hedging activity

We manage our foreign currency transaction risks through the
use of forward contracts to hedge forecasted cash flows associated
with foreign currency transaction exposures. We account for these
forward contracts as cash flow hedges. To the extent these forward
contracts meet hedge accounting criteria, changes in their fair value
are not included in current earnings but are included in accumulated
other comprehensive loss. These changes in fair value will be
reclassified into earnings as a component of sales or cost of sales
when the forecasted transaction occurs.

Income taxes

Deferred income tax assets and liabilities are based on the difference
between the financial statement and tax basis of assets and liabilities
and operating loss and tax credit carryforwards as measured by the
enacted tax rates that are anticipated to be in effect in the respective
jurisdictions when these differences reverse. The deferred income
tax provision generally represents the net change in the assets
and liabilities for deferred income taxes. A valuation allowance is
established when it is necessary to reduce deferred income tax assets
to amounts for which realization is likely. 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 ongoing and future taxable income levels.

Deferred income taxes are not provided on the unremitted earnings
of subsidiaries outside of the United States when it is expected that
these earnings are permanently reinvested. Such earnings may
become taxable upon a repatriation of assets from a subsidiary
or the sale or liquidation of a subsidiary. Deferred income taxes
are provided when the Company no longer considers subsidiary
earnings to be permanently invested, such as in situations where the
Company’s subsidiaries plan to make future dividend distributions.

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:

Building On The Past | Looking To The Future• We place certain of our capital equipment with customers on a

• Product returns are only accepted at the discretion of the

• Our terms of sale to customers generally do not include any

• 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 $12.1 million,
$13.0 million and $12.8 million for 2010, 2011 and 2012,
respectively.

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

Earnings and dividends per share

Basic earnings per share (“basic EPS”) is computed by dividing
net income by the weighted average number of common 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,
performance share units and stock appreciation rights (“SARs”)
during the period. The following table sets forth the computation
of basic and diluted earnings per share at December 31, 2010, 2011
and 2012, respectively:

Net income

Basic-weighted average
shares outstanding
Effect of dilutive potential

securities

Diluted-weighted average
shares outstanding

Basic EPS

Diluted EPS

2010

2011

2012

$ 30,346 $
________ _______
________ _______

752 $ 40,481
_______
_______

28,715

28,246

28,301

________ _______

387

196

352
_______

28,911

28,633
________ _______
________ _______
$
________ _______
________ _______
$
________ _______
________ _______

1.05 $

1.06 $

0.03 $

28,653
_______
_______
1.43
_______
_______
1.41
_______
_______

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 1.5 million, 0.7 million and 0.4 million at
December 31, 2010, 2011 and 2012, respectively.

On February 29, 2012, the Board of Directors adopted a cash
dividend policy and declared an initial quarterly dividend of
$0.15 per share. The initial quarterly dividend of $4.3 million was
paid on April 5, 2012 to shareholders of record as of March 15,
2012. The second quarter dividend for 2012 of $4.3 million was
paid on July 6, 2012 to shareholders of record as of June 15, 2012.
The third quarter dividend for 2012 of $4.3 million was paid on
October 5, 2012 to shareholders of record as of September 14,
2012. The fourth quarter dividend for 2012 was paid on January
7, 2013 to shareholders of record as of December 17, 2012. The
total dividend payable at December 31, 2012 was $4.3 million and is
included in other current liabilities in the consolidated balance sheet.

Stock-based compensation

We issue shares under our stock-based compensation plans out of
treasury stock whereby treasury stock is reduced by the weighted
average cost of such treasury stock. To the extent there is a
difference between the cost of the treasury stock and the exercise
price of shares issued under stock-based compensation plans, we
record gains to paid in capital; losses are recorded to paid in capital
to the extent any gain was previously recorded, otherwise the loss is
recorded to retained earnings.

Accumulated other comprehensive loss

Accumulated other comprehensive loss consists of the following:

Cash Flow
Hedging
Gain (Loss)

Cumulative

Accumulated
Other

Pension Translation Comprehensive
Liability Adjustments

Loss

Balance,
December 31, 2011 $

________

2,973 $ (31,250 ) $

1,929 $ (26,348 )
________ ________ ________

Pension liability,
net of income tax

Cash flow hedging

—

875

—

875

loss, net of
income tax

Foreign currency
translation
adjustments

(4,103 )

—

(4,103 )

________

—

1,995
________ ________ ________

1,995

—

Balance,
December 31, 2012 $

________
________

(1,130 ) $ (30,375 ) $

3,924 $ (27,581 )
________ ________ ________
________ ________ ________

Note 2 — Inventories

Inventories consist of the following at December 31,:

Raw materials
Work in process
Finished goods

2011

2012

$ 52,351 $ 45,115
14,229
15,499
100,588
96,884
________ ________
$ 168,438 $ 156,228
________ ________
________ ________

CONMED Corporation | Annual Report 2012

Note 3 — Property, Plant and Equipment

Property, plant and equipment consist of the following at
December 31,:

2011

2012

Land
Building and improvements
Machinery and equipment
Construction in progress

Less: Accumulated depreciation

6,310

4,367 $ 4,243
92,775
90,360
176,102
163,923
5,508
________ ________
264,960
278,628
(125,773 ) (139,587 )
________ ________
$ 139,187 $ 139,041
________ ________
________ ________

We lease various manufacturing facilities, office facilities and
equipment under operating leases. Rental expense on these
operating leases was approximately $5,830, $6,221, and $6,416 for
the years ended December 31, 2010, 2011 and 2012, respectively.
The aggregate future minimum lease commitments for operating
leases at December 31, 2012 are as follows:

2013

2014

2015

2016

2017

Thereafter

$ 7,128

5,787

5,001

3,531

3,275

8,027

Note 4 — 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
Goodwill resulting from business

acquisitions

Foreign currency translation
Balance as of December 31,

2011

2012

$ 295,068 $ 234,815
—

(60,302 )

— 22,021
(15 )
49
________ ________
$ 234,815 $ 256,821
________ ________
________ ________

During the fourth quarter of 2011 we performed our annual
goodwill impairment testing. We estimated the fair value of the
CONMED Patient Care reporting unit utilizing both a market-based
approach and an income approach. Under the income approach, we
utilized a discounted cash flow valuation methodology and measured
the goodwill impairment in accordance with ASC 350. The first
step of the impairment test determined the carrying value exceeded
fair value and therefore we proceeded to Step 2. Under Step 2, we
calculated the amount of impairment loss by measuring the amount
the carrying value of goodwill exceeded the implied fair value of the
goodwill. We determined the goodwill of our CONMED Patient
Care reporting unit was impaired as a result of lower future earnings
due to pricing pressures in a number of our product lines and
consequently we recorded a goodwill impairment charge of $60.3
million to reduce the carrying amount of the unit’s goodwill to its
implied fair value.

Total accumulated impairment losses (associated with our
CONMED Patient Care and CONMED Endoscopic Technologies
reporting units) aggregated $106,991 at both December 31, 2011
and 2012, respectively.

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

CONMED Electrosurgery
CONMED Endosurgery
CONMED Linvatec
Balance as of December 31,

2011

2012

$ 16,645 $ 16,645
42,439
42,439
197,737
175,731
________ ________
$ 234,815 $ 256,821
________ ________
________ ________

During 2012, we acquired Viking Systems, Inc. and recorded
goodwill of $22.0 million to our CONMED Linvatec reporting unit.
Refer to Note 16 for further details.

Other intangible assets consist of the following:

Dec. 31, 2011

Dec. 31, 2012

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

$ 133,965 $ (45,112 ) $ 135,690 $ (50,083 )

52,702

(34,368 )

54,412

(37,554 )

88,344

88,344
—
________ ________
________
$ 275,011 $ (79,480 ) $ 278,446 $ (87,637 )
________ ________
________
________ ________
________

—
________
________
________

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 29 years. Customer relationships are being amortized
over a weighted average life of 33 years. Patents and other intangible
assets are being amortized over a weighted average life of 14 years.

Trademarks and tradenames were recognized principally in
connection with the 1997 acquisition of Linvatec Corporation.
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, our trademarks and
tradenames intangible assets are not amortized.

During 2011, CONMED acquired our former distributor in the
Nordic region of Europe. The fair value of this acquisition included
assets of $6.4 million related to customer relationships. During
2011, we also purchased patents totaling $3.0 million and recorded a
related deferred tax liability of $1.8 million.

On January 3, 2012, the Company entered into a Sports Medicine
Joint Development and Distribution Agreement (the “JDDA”)
with Musculoskeletal Transplant Foundation (“MTF”) to obtain (i)
MTF’s worldwide promotional rights with respect to allograft tissues
within the field of sports medicine, and (ii) an exclusive license to an
autograft (patient’s own) blood Platelet-Rich Plasma (“PRP”) therapy
technology and products (collectively, the “Transaction”). The initial
consideration from the Company included a $63.0 million up-front
payment for the rights and certain assets, with an additional $84.0
million contingently payable over a four year period depending
on MTF meeting supply targets. On January 3, 2013, we paid
$34.0 million of the additional consideration; $16.7 million of the
additional consideration is due within the next fiscal year with the
remainder due in equal installments in each year thereafter. At
December 31, 2012, the gross carrying amount of this arrangement
amounted to $149.4 million and the related accumulated

Building On The Past | Looking To The Future

amortization was $6.0 million. This has been recorded in other
assets and is being amortized on a straight line basis over the 25 year
term of the JDDA. Amortization expense is recorded as a reduction
to sales. The $84.0 million related to the contingent payment was
accrued in other current and other long term liabilities as we believe
it is probable MTF will meet the supply targets.

Amortization expense related to intangible assets for the year ending
December 31, 2012 and estimated amortization expense for each of
the five succeeding years is as follows:

2012

2013

2014

2015

2016

2017

$ 7,807

7,836

7,211

6,821

6,719

6,707

Note 5 — Long-Term Debt

Long-term debt consists of the following at December 31,:

Revolving line of credit
Term loan borrowings on
senior credit facility
2.50% convertible senior
subordinated notes

Mortgage notes

Total long-term debt
Less: Current portion

2011

2012

$ 80,000 $ 153,000

53,588

—

327
9,594

227
8,625
________ ________
143,509
161,852
1,050
________ ________
$ 88,952 $ 160,802
________ ________
________ ________

54,557

Our senior credit agreement at December 31, 2012 consisted of a
$250.0 million revolving credit facility. There were $153.0 million
in borrowings outstanding on the revolving credit facility as of
December 31, 2012. Our available borrowings on the revolving
credit facility at December 31, 2012 were $87.2 million with
approximately $9.8 million of the facility set aside for outstanding
letters of credit. As described in Note 4, we entered into a
distribution and development agreement with Musculoskeletal
Transplant Foundation (“MTF”) on January 3, 2012 and used cash
on hand and available borrowings under our revolving credit facility
to fund the up front payment of $63.0 million. We expect to fund
the remaining $84.0 million in contingent payments, including the
$34.0 million paid on January 3, 2013, through cash on hand and
available borrowings under our revolving credit facility as these
payments come due over the next four years.

Borrowings outstanding on the revolving credit facility were due
and payable on November 30, 2015. Interest rates on the revolving
credit facility portion of the senior credit agreement were at LIBOR
plus 1.75% (2.22% at December 31, 2012) 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 a margin
of 1.00% for borrowings under the revolving credit facility.

other activities, including acquisitions and dispositions. We are
also required, under certain circumstances, to make mandatory
prepayments from net cash proceeds from any issuance of equity and
asset sales.

As further described in Note 17, on January 17, 2013, we
entered into an amended and restated $350.0 million senior credit
agreement (the “amended and restated senior credit agreement”).
The amended and restated senior credit agreement consists of a
$350.0 million revolving credit facility expiring on January 17, 2018.

On November 15, 2011 holders of the 2.50% convertible senior
subordinated notes due 2024 (“the Notes”) put to us and we
were required to repurchase $111.8 million of the Notes at par;
$0.2 million remains outstanding at December 31, 2012. We used
cash on hand and borrowings under our revolving credit facility
to fund the repurchase. During 2010, we repurchased and retired
$3.0 million of the Notes for $2.9 million and recorded a loss on the
early extinguishment of debt of $0.1 million. The Notes represent
subordinated unsecured obligations and are convertible under certain
circumstances, as defined in the indenture for the Notes, into a
combination of cash and CONMED common stock. The Notes
mature on November 15, 2024 and are redeemable by us at any
time. Holders of the Notes have the right to put to us some or all
of the Notes for repurchase on November 15, 2014 and 2019 and,
provided the terms of the indenture for the Notes are satisfied, we
will be required to repurchase the Notes.

Our effective borrowing rate for nonconvertible debt at the time of
issuance of the Notes was estimated to be 6.67%, which resulted in
$34.6 million of the $150.0 million aggregate principal amount of
Notes issued, or $21.8 million after taxes, being attributable to equity.
For the years ended December 31, 2010 and 2011, we recorded
interest expense related to the amortization of debt discount on
the Notes of $4.2 million and $3.9 million, respectively, at the
effective interest rate of 6.67%. The debt discount on the Notes was
amortized through November 2011. For the years ended December
31, 2010, 2011 and 2012, we recorded interest expense on the Notes
of $2.8 million, $2.5 million, and $0.0 million respectively, at the
contractual coupon rate of 2.50%.

The scheduled maturities of long-term debt outstanding at
December 31, 2012 are as follows:

2013

2014

2015

2016

2017

$ 1,050

1,367

1,234

1,339

1,452

Thereafter 155,410

CONMED Corporation | Annual Report 2012

Note 6 — Income Taxes

The provision (benefit) for income taxes for the years ended
December 31, 2010, 2011 and 2012 consists of the following:

2010

2011

2012

Current tax expense (benefit):
Federal
State
Foreign

Deferred income tax expense

503
(717 ) $ 3,021 $
374
232
2,638
5,176
________ ________ ________
6,053
2,153

1,596
5,424

10,041

(benefit)

(13,098 ) 12,946
13,158
________ ________ ________

Provision (benefit) for

income taxes

$ 15,311 $ (3,057 ) $ 18,999
________ ________ ________
________ ________ ________

A reconciliation between income taxes computed at the statutory
federal rate and the provision for income taxes for the years ended
December 31, 2010, 2011 and 2012 follows:

2010

2011

2012

Tax provision (benefit) at
statutory rate based on income
before income taxes
State income taxes, net of

federal tax benefit

Stock-based compensation
Foreign income taxes
Impact of repatriation of

foreign earnings

Research & development credit
Settlement of taxing authority
examinations
Non deductible/non-taxable

35.00 %

(35.00 )% 35.00 %

2.55
0.01
0.07

—
(1.83 )

22.73
(1.61 )
1.35

1.56
(0.16 )
(5.44 )

(57.51 )
(32.25 )

—
—

(3.27 )

(6.55 )

(0.80 )

items
Other, net

1.22
(0.22 )

(13.28 )
(10.50 )
________ ________ ________
(132.62 )% 31.94 %
________ ________ ________
________ ________ ________

1.33
0.45

33.53 %

The tax effects of the significant temporary differences which
comprise the deferred income tax assets and liabilities at
December 31, 2011 and 2012 are as follows:

2011

2012

Assets:

Inventory

Net operating losses
Capitalized research and development
Deferred compensation
Accounts receivable
Employee benefits
Accrued pension
Research and development credit
Other

Liabilities:
Goodwill and intangible assets
Depreciation
State taxes
Contingent interest

Net liability

—

4,288 $ 4,370
191
2,410
2,905
2,759
5,915
9,020
3,378
3,973
________ ________
34,921
________ ________

4,561
2,631
2,968
5,984
9,530
1,696
2,604
34,262

101,514

9,500
2,975

111,770
13,146
4,157
378
________ ________
114,375 129,451
________ ________
$ (80,113 ) $ (94,530 )
________ ________
________ ________

386

Income before income taxes consists of the following U.S. and
foreign income:

U.S. income
Foreign income

Total income

2012

2010
2011
$ 37,953 $ (20,521 ) $ 33,121
7,704 18,216 26,359
________ ________ ________
$ 45,657 $ (2,305 ) $ 59,480
________ ________ ________
________ ________ ________

The amount of Federal Research and Development credit
carryforward available is $3.4 million. These credits begin to expire
in 2027.

Deferred tax amounts include approximately $3.3 million of future
tax benefits associated with state tax credits which have an indefinite
carryforward period.

As a result of the contingent interest deferred tax liability realized
upon the convertible notes repurchase during the fourth quarter of
2011, the Company reevaluated our unremitted foreign earnings and
tax credit carryforwards. Based upon this assessment, we repatriated
$16.2 million of foreign earnings to the United States. The company
recorded a net tax benefit of $1.3 million in 2011 to recognize the
tax liabilities and related foreign tax credit benefits associated with
the repatriation. It is our intention to permanently reinvest the
remaining amount of unremitted foreign earnings.

U.S. income and foreign withholding taxes have not been recognized
on the excess of the amount for financial reporting over the tax basis
of investments in foreign subsidiaries that are essentially permanent
in duration. The amount of such temporary differences totaled
$58.8 million as of December 31, 2012. It is not practicable given
the complexities of the hypothetical foreign tax credit calculation to
determine the tax liability on this temporary difference.

We recognize tax liabilities in accordance with the provisions
for accounting for uncertainty in income taxes. Such guidance
prescribes 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.

The following table summarizes the activity related to our
unrecognized tax benefits for the years ending December 31,:

Balance as of January 1,
Increases for positions
taken in prior periods
Increases for positions taken in
current periods
Decreases in unrecorded tax
positions related to settlement
with the taxing authorities
Decreases in unrecorded tax
positions related to lapse of
statute of limitations
Balance as of December 31,

2010

2011

2012

1,869 $ 1,330 $ 2,343

283

166

789

1,129

(757 )

—

(1,857 )

—

(58 )
________ ________ ________
$
1,330 $ 2,343 $ 1,587
________ ________ ________
________ ________ ________

(59 )

If the total unrecognized tax benefits of $1.6 million at
December 31, 2012 were recognized, it would reduce our annual
effective tax rate. The amount of interest accrued in 2012 related

Building On The Past | Looking To The Future

to these unrecognized tax benefits was not material and is included
in the provision for income taxes in the consolidated statements of
comprehensive income. It is reasonably possible that the amount
of unrecognized tax benefits, each of which are individually
insignificant, could change in the next 12 months as a result of the
anticipated completion of taxing authority examinations and lapse
of statute of limitations. The range of change in unrecognized tax
benefits is estimated between $0.0 million and $1.1 million.

Note 7 — 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, 2011 and 2012, no preferred
stock had been issued.

Our Board of Directors has authorized a $200.0 million share
repurchase program. Through December 31, 2012, we have
repurchased a total of 4.1 million shares of common stock
aggregating $95.1 million under this authorization and have $104.9
million remaining available for share repurchases. 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
2012, we repurchased 0.1 million shares for an aggregate cost of
$3.9 million. During 2011, we repurchased 0.7 million shares for an
aggregate cost of $15.0 million. During 2010, we repurchased
1.2 million shares for an aggregate cost of $23.0 million.

We have reserved 7.0 million shares of common stock for issuance
to employees and directors under three shareholder-approved share-
based compensation plans (the “Plans”) of which approximately
1.4 million shares remain available for grant at December 31,
2012. The exercise price on all outstanding options and stock
appreciation rights (“SARs”) is equal to the quoted fair market value
of the stock at the date of grant. Restricted stock units (“RSUs”)
and performance stock units (“PSUs”) are valued at the market
value of the underlying stock on the date of grant. Stock options,
SARs, RSUs and PSUs 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.
The issuance of shares pursuant to the exercise of stock options
and SARs and vesting of RSUs and PSUs are from the Company’s
treasury stock.

Total pre-tax stock-based compensation expense recognized in the
consolidated statements of comprehensive income was $4.2 million,
$5.2 million and $5.7 million for the years ended December 31,
2010, 2011 and 2012, respectively. This amount is included in
selling and administrative expenses on the consolidated statements
of comprehensive income. Tax related benefits of $1.6 million, $1.9
million and $2.1 million were also recognized for the years ended
December 31, 2010, 2011 and 2012, respectively. Cash received
from the exercise of stock options was $2.0 million, $5.6 million and
$9.6 million for the years ended December 31, 2010, 2011 and 2012,
respectively, and is reflected in cash flows from financing activities in
the consolidated statements of cash flows.

The Company uses the Black-Scholes option pricing model to
estimate the fair value of options and SARs at the date of grant.
Use of a valuation model requires management to make certain
assumptions with respect to select model inputs. 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 risk free interest rate is based on the option and SAR grant date

for a traded U.S. Treasury bond with a maturity date closest to the
expected life. The expected annual dividend yield is based on the
Company’s anticipated cash dividend payouts. The expected life
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 assumptions used in estimating fair
value in the years ended December 31, 2010, 2011 and 2012.

Fair value of options & SARs
Expected stock price volatility
Risk-free interest rate
Expected annual dividend yield
Expected life of options (years)

2011
2010
$ 7.72 $ 10.43 $ 7.38

2012

36.72 %
2.07 %
— %
6.4

35.52 %
1.59 %
— %
6.3

35.84 %
0.62 %
2.00 %
6.4

The following table illustrates the stock option and SAR activity for
the year ended December 31, 2012.

Outstanding at December 31, 2011
Granted
Forfeited
Exercised
Outstanding at December 31, 2012

Exercisable at December 31, 2012

Number
of Shares
(in 000’s) Exercise Price

Weighted-
Average

2,129
159
(31 )
(488 )
_________
1,769
_________
_________
1,289
_________
_________

$
24.58
$
26.09
23.20
$
22.22
$
_________
$
25.35
_________
_________
$
25.97
_________
_________

The weighted average remaining contractual term for stock options
and SARs outstanding and exercisable at December 31, 2012 was
4.7 years and 3.4 years, respectively. The aggregate intrinsic value of
stock options and SARs outstanding and exercisable at December 31,
2012 was $6.0 million and $4.0 million, respectively. The aggregate
intrinsic value of stock options and SARs exercised during the years
ended December 31, 2010, 2011 and 2012 was $1.2 million,
$2.0 million and $3.3 million, respectively.

The following table illustrates the RSU and PSU activity for the year
ended December 31, 2012.

Outstanding at December 31, 2011
Granted
Vested
Forfeited
Outstanding at December 31, 2012

Number
of Shares
(in 000’s)

508
272
(158 )
(101 )
_________
521
_________
_________

Weighted-
Average
Grant-Date
Fair Value
23.43
$
26.18
$
24.03
$
25.83
$
_________
$
24.25
_________
_________

The weighted average fair value of awards of RSUs and PSUs
granted in the years ended December 31, 2010, 2011 and 2012 was
$19.26, $27.48 and $26.18, respectively.

The total fair value of shares vested was $2.8 million, $3.6 million
and $4.4 million for the years ended December 31, 2010, 2011 and
2012, respectively.

As of December 31, 2012, there was $12.9 million of total
unrecognized compensation cost related to nonvested stock options,
SARs, RSUs and PSUs granted under the Plan which is expected to
be recognized over a weighted average period of 3.4 years.

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

CONMED Corporation | Annual Report 2012

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 reportable segments:

2010

2011

2012

CONMED Linvatec,
Electrosurgery, and
Endosurgery
CONMED Patient Care
CONMED Endoscopic
Technologies
Corporate
Income from operations
Loss on early

extinguishment of debt
Amortization of debt discount
Interest expense
Income (loss) before income

taxes

$ 77,271 $ 89,093 $ 81,848
(2,210 )

(62,878 )

(38 )

2,738
(1,315 )
(17,166 )
(18,825 )
________ ________ ________
65,210
57,093

273
(18,214 )
8,274

—
—
5,730
________ ________ ________

79
4,244
7,113

—
3,903
6,676

$ 45,657 $
(2,305 ) $ 59,480
________ ________ ________
________ ________ ________

Net sales information for geographic areas consists of the following:

United States
Canada
United Kingdom
Japan
Australia
All other countries
Total

2012

2010

2011
$ 371,914 $ 364,588 $ 382,256
65,794
73,746
61,593
32,106
31,653
31,576
34,178
32,226
33,997
40,122
40,835
34,564
181,850
204,653
188,289
________ ________ ________
$ 713,723 $ 725,077 $ 767,140
________ ________ ________
________ ________ ________

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, 2011 and 2012.
No single customer represented over 10% of our consolidated net
sales for the years ended December 31, 2010, 2011 and 2012.

Note 9 — 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 United States based employees. The pension plan was frozen in
2009.

Total employer contributions to the 401(k) plan were $6.5 million,
$6.3 million and $6.7 million during the years ended December 31,
2010, 2011 and 2012, respectively.

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 2012, we issued approximately 20,775 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 8 — Business Segments and Geographic Areas

CONMED conducts its business through five principal operating
segments, 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.
Our CONMED Endosurgery, CONMED Electrosurgery and
CONMED Linvatec operating segments also have similar economic
characteristics and therefore qualify for aggregation. Our
CONMED Patient Care and CONMED Endoscopic Technologies
operating segments do not qualify for aggregation since their
economic characteristics do not meet the criteria for aggregation as a
result of the lower overall operating income (loss) in these segments.

CONMED Endosurgery, CONMED Electrosurgery and CONMED
Linvatec consist of a single aggregated reportable 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 & 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:

2012

2010

2011
$ 288,421 $ 289,878 $ 330,567
149,968
147,849
142,288
________ ________ ________
480,535
437,727
430,709
95,743
98,632
97,210
73,995
73,716
69,004
________ ________ ________

610,075
65,651

650,273
63,697

Arthroscopy
Powered Surgical Instruments
CONMED Linvatec
CONMED Electrosurgery
CONMED Endosurgery
CONMED Linvatec,
Electrosurgery, and Endosurgery 596,923
CONMED Patient Care
68,283
CONMED Endoscopic
Technologies
Total

48,517
53,170
________ ________ ________
$ 713,723 $ 725,077 $ 767,140
________ ________ ________
________ ________ ________

49,351

Total assets, capital expenditures, depreciation and amortization
information are impracticable to present by reportable segment
because the necessary information is not available.

Building On The Past | Looking To The Future

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 loss
Benefits paid
Projected benefit obligation at

end of year

Change in plan assets
Fair value of plan assets at
beginning of year
Actual gain (loss) on plan assets
Employer contributions
Benefits paid
Fair value of plan assets at end of year
Funded status

2011

2012

$ 82,289 $ 85,363
________ ________
________ ________

$ 66,136 $ 82,289
277
3,429
2,790
(3,422 )
________ ________

281
3,519
15,305
(2,952 )

$ 82,289 $ 85,363
________ ________

(2,145 )
1,610
(2,952 )

$ 55,309 $ 51,822
5,866
8,497
(3,422 )
________ ________
$ 51,822 $ 62,763
________ ________
$ (30,467 ) $ (22,600 )
________ ________
________ ________

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

Accrued long-term pension liability
Accumulated other comprehensive loss

2011

2012

$ 30,467 $ 22,600
(48,176 )

(49,563 )

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

2011
4.30%
8.00%

2012
3.90%
8.00%

Accumulated other comprehensive loss for the years ended
December 31, 2011 and 2012 consists of net actuarial losses of
$49,563 and $48,176, respectively, not yet recognized in net periodic
pension cost (before income taxes).

Other changes in plan assets and benefit obligations recognized in
other comprehensive income in 2012 are as follows:

Current year actuarial loss
Amortization of actuarial loss
Total recognized in other
comprehensive loss

(1,489 )
$
2,876
________

$
1,387
________
________

The estimated portion of net actuarial loss in accumulated other
comprehensive loss that is expected to be recognized as a component
of net periodic pension cost in 2013 is $2.9 million.

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

Service cost
Interest cost on projected
benefit obligation
Return on plan assets
Amortization of loss

Net periodic pension cost

2010
$

2011

2012

219 $

281 $

277

3,519
(4,378 )
1,578

3,429
3,585
(4,566 )
(4,227 )
1,313
2,876
________ ________ ________
$
1,000 $ 2,016
________ ________ ________
________ ________ ________

890 $

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

2010
5.86%
8.00%
N/A

2011
5.41%
8.00%
N/A

2012
4.30%
8.00%
N/A

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,:

Equity securities
Debt securities
Total

Percentage of Pension Target

Plan Assets

2011

2012

69 %
31
_______
100 %
_______
_______

76 %
24
_______
100 %
_______
_______

Allocation
2013

75 %
25
_______
100 %
_______
_______

As of December 31, 2012, the Plan held 27,562 shares of our
common stock, which had a fair value of $0.8 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.

The following table sets forth the fair value of Plan assets as of
December 31,:

Common Stock
Money Market Fund
Mutual Funds
Fixed Income Securities
Total Assets at Fair Value

2011

2012

$ 21,893 $ 25,124
5,209
12,461
14,112
22,810
3,356 9,620
________ ________
$ 51,822 $ 62,763
________ ________
________ ________

FASB guidance, defines fair value, establishes a framework for measuring
fair value and related disclosure requirements. A valuation hierarchy was
established for disclosure of the inputs to the valuations used to measure
fair value. This hierarchy prioritizes the inputs into three broad levels as
follows. Level 1 inputs are quoted prices (unadjusted) in active markets for
identical assets or liabilities. Level 2 inputs are quoted prices for similar
assets and liabilities in active markets, quoted prices for identical or similar
assets in markets that are not active, inputs other than quoted prices that
are observable for the asset or liability, including interest rates, yield
curves and credit risks, or inputs that are derived principally from or

CONMED Corporation | Annual Report 2012

corroborated by observable market data through correlation.
Level 3 inputs are unobservable inputs based on our own
assumptions used to measure assets and liabilities at fair value. A
financial asset or liability’s classification within the hierarchy is
determined based on the lowest level input that is significant to the
fair value measurement.

Following is a description of the valuation methodologies used for
assets measured at fair value. There have been no changes in the
methodologies used at December 31, 2011 and 2012:

Common Stock:

Money Market
Fund:

Mutual Funds:

Fixed Income
Securities:

Common stock is valued at the closing price
reported on the common stock’s respective stock
exchange and is classified within level 1 of the
valuation hierarchy.

These investments are public investment
vehicles valued using $1 for the Net Asset Value
(NAV). The money market fund is classified
within level 2 of the valuation hierarchy.

These investments are public investment
vehicles valued using the NAV provided by
the administrator of the fund. The NAV
is based on the value of the underlying assets
owned by the fund, minus its liabilities, and
then divided by the number of shares
outstanding. The NAV is a quoted price in an
active market and is classified within level 1
of the valuation hierarchy.

Valued at the closing price reported on the active
market on which the individual securities are traded
and are classified within level 1 of the valuation
hierarchy.

The methods described above may produce a fair value calculation
that may not be indicative of net realizable value or reflective
of future fair values. Furthermore, while the Plan believes its
valuation methods are appropriate and consistent with other market
participants, the use of different methodologies or assumptions to
determine the fair value of certain financial instruments could result
in a different fair value measurement at the reporting date.

The following table sets forth by level, within the fair value hierarchy,
the Plan’s assets at fair value as of December 31, 2011 and
December 31, 2012:

December 31, 2011
Common Stock
Money Market Fund
Mutual Funds
Fixed Income Securities

December 31, 2012
Common Stock
Money Market Fund
Mutual Funds
Fixed Income Securities

Total

Level 1
Level 2
$ 21,893 $ — $ 21,893
12,461
14,112
3,356
________ ________ ________
$ 39,361 $ 12,461 $ 51,822
________ ________ ________
________ ________ ________

—
14,112
3,356

12,461
—
—

Total

Level 1
Level 2
$ 25,124 $ — $ 25,124
5,209
—
22,810
22,810
9,620
9,620
________ ________ ________
$ 57,554 $
5,209 $ 62,763
________ ________ ________
________ ________ ________

5,209
—
—

We expect to contribute approximately $7.5 million to our pension
plan for the 2013 Plan year.

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, 2012 and
reflect the impact of expected future employee service.

2013

2014

2015

2016

2017

$ 2,503

2,901

2,989

2,756

3,359

2018-2022

21,336

Note 10 — 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 Securities and Exchange Commission, Equal Employment
Opportunity Commission, the Occupational Safety and Health
Administration, the Department of Labor, the Treasury Department,
or other federal and state agencies or foreign governments or
government agencies. These subpoenas 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, maximum policy limits and certain
exclusions in the respective policies or required as a matter of law.
In some cases we may be entitled to indemnification by third parties.
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, or indemnification
obligations of a third party, we establish reserves sufficient 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, results
of operations or cash flows. There can be no assurance, however,
that future claims or investigations, or the costs associated with
responding to such claims or investigations, especially claims and
investigations not covered by insurance, will not have a material
adverse effect on our financial condition, results of operations or
cash flows.

Manufacturers of medical products may face exposure to significant
product liability claims. To date, we have not experienced any
product liability claims that have been 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 million per incident and $25 million in the
aggregate annually, which we believe is adequate. This coverage
is on a claims-made basis. There can be no assurance that claims
will not exceed insurance coverage, that the carriers will be solvent
or that such insurance will be available to us in the future at a
reasonable cost.

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

Building On The Past | Looking To The Future

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

In September 2012, Bonutti Skeletal Innovations, LLC, filed a
complaint in the United States District Court for the Middle District
of Florida against CONMED and CONMED Linvatec. The
Complaint asserts that certain CONMED Linvatec products infringe
patents allegedly owned by Bonutti Skeletal Innovations. On the
same day that it sued CONMED, Bonutti Skeletal Innovations sued
several other orthopedic companies. CONMED and CONMED
Linvatec believe that the products in question do not infringe the
patents-in-suit, and CONMED and CONMED Linvatec intend to
vigorously defend the claims. A range of potential losses cannot be
estimated at this time.

Note 11 — Other Expense

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

2010

2011

2012

Administrative consolidation
costs
Costs associated with purchase
of a distributor
Costs associated with
legal arbitration

Costs associated with purchase
of a business

$ 2,176 $

792 $ 6,497

—

300

704

—

1,555

1,194
________ ________ ________

—

Other expense

1,092 $ 9,950
$ 2,176 $
________ ________ ________
________ ________ ________

During 2010, we recorded a lease impairment charge of $0.7 million
related to our Chelmsford, Massachusetts facility.

During 2010 and 2012, we consolidated certain administrative
functions in our CONMED Linvatec operating segment and
incurred $1.5 million and $6.5 million, respectively, in related costs
consisting principally of severance charges.

During 2011, we consolidated certain administrative functions in our
Utica, New York facility and incurred $0.8 million in related costs
consisting principally of severance charges.

During 2011, we purchased the Company’s former distributor
for the Nordic region of Europe. We incurred $0.3 million and
$0.7 million in 2011 and 2012, respectively, in charges associated
with this purchase.

During 2012, we incurred legal costs related to a contractual dispute
with a former distributor. The dispute was resolved in the second
quarter of 2012. We incurred costs totaling $1.6 million.

During 2012, we acquired Viking Systems Inc. as further described
in Note 16. We incurred a total of $1.2 million in costs associated
with the purchase.

Note 12 — 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,

2012

2011

2010
3,363 $ 3,618
$ 3,383 $
________ ________ ________
4,163
3,510
(4,145 )
(3,530 )
________ ________ ________
$ 3,363 $
3,618 $ 3,636
________ ________ ________
________ ________ ________

4,344
(4,089 )

Note 13 — Fair Value Measurement

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

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

Foreign Currency Forward Contracts. We hedge forecasted
intercompany sales denominated in foreign currencies through the
use of forward contracts. We account for these forward contracts
as cash flow hedges. To the extent these forward contracts meet
hedge accounting criteria, changes in their fair value are not
included in current earnings but are included in accumulated other
comprehensive loss. These changes in fair value will be recognized
into earnings as a component of sales or cost of sales when the
forecasted transaction occurs. The notional contract amounts for
forward contracts outstanding at December 31, 2012 which have
been accounted for as cash flow hedges totaled $90.3 million. Net
realized gains (losses) recognized for forward contracts accounted
for as cash flow hedges approximated $2.0 million, $(4.7) million
and $3.8 million for the years ended December 31, 2010, 2011,
and 2012, respectively. Net unrealized losses on forward contracts
outstanding which have been accounted for as cash flow hedges
and which have been included in other comprehensive income
totaled $1.1 million at December 31, 2012. It is expected these
unrealized losses will be recognized in the consolidated statement of
comprehensive income in 2013.

CONMED Corporation | Annual Report 2012

We record these forward foreign exchange contracts at fair value;
the following table summarizes the fair value for forward foreign
exchange contracts outstanding at December 31, 2011 and
December 31, 2012:

Liabilities
Fair Balance Sheet Fair
Location
Value

Net
Fair
Value Value

Asset

Location

December Balance Sheet
31, 2011
Derivatives
designated
as hedged
instruments:
Foreign
exchange
contracts

Prepaid expenses
and other current
assets

Prepaid expenses
and other current
(326 ) $ 4,716
$
assets
______ ______

$ 5,042
______

Derivatives
not designated
as hedging
instruments:
Foreign
exchange
contracts
Total
derivatives

Prepaid expenses
and other current
assets

41
______

(54
______ ______

(95 )

)

Asset

Location

December Balance Sheet
31, 2012
Derivatives
designated
as hedged
instruments:
Foreign
exchange
contracts

Other current
liabilities

$ 5,083
______
______

$
(421 ) $ 4,662
______ ______
______ ______

Liabilities
Fair Balance Sheet Fair
Location
Value

Net
Fair
Value Value

Other current
liabilities

$
(457 )
______

$ 2,249 $ 1,792
______ ______

Derivatives
not designated
as hedging
instruments:
Foreign
exchange
contracts

Total
derivatives

Other current
liabilities

Other current

—
______

liabilities

150
150
______ ______

$ (457 )
______
______

$ 2,399 $ 1,942
______ ______
______ ______

Our forward foreign exchange contracts are subject to a master
netting agreement and qualify for netting in the consolidated balance
sheets. Accordingly, at December 31, 2011 and December 31, 2012
we have recorded the net fair value of $4.7 million in prepaids and
other current assets and $1.9 million in other current liabilities,
respectively.

Fair Value Disclosure. FASB guidance defines fair value,
establishes a framework for measuring fair value and related
disclosure requirements. This guidance applies when fair value
measurements are required or permitted. The guidance indicates,
among other things, that a fair value measurement assumes that
the transaction to sell an asset or transfer a liability occurs in the
principal market for the asset or liability or, in the absence of a
principal market, the most advantageous market for the asset or
liability. Fair value is defined based upon an exit price model.

Valuation Hierarchy. A valuation hierarchy was established
for disclosure of the inputs to the valuations used to measure fair
value. This hierarchy prioritizes the inputs into three broad levels

as follows. Level 1 inputs are quoted prices (unadjusted) in active
markets for identical assets or liabilities. Level 2 inputs are quoted
prices for similar assets and liabilities in active markets, quoted prices
for identical or similar assets in markets that are not active, inputs
other than quoted prices that are observable for the asset or liability,
including interest rates, yield curves and credit risks, or inputs that
are derived principally from or corroborated by observable market
data through correlation. Level 3 inputs are unobservable inputs
based on our own assumptions used to measure assets and liabilities
at fair value. A financial asset or liability’s classification within
the hierarchy is determined based on the lowest level input that is
significant to the fair value measurement.

Valuation Techniques. Assets and liabilities carried at fair value
and measured on a recurring basis as of December 31, 2012 consist
of forward foreign exchange contracts. The value of the forward
foreign exchange contract assets and liabilities and the Notes were
determined within Level 2 of the valuation hierarchy and are listed
in the table above.

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
approximate fair value. The fair value of the Notes approximated
$0.3 million and $0.2 million at December 31, 2011 and December
31, 2012, respectively, based on their quoted market price. See
Note 5 for additional discussion of the Notes.

Note 14 — New Accounting Pronouncements

In May 2011, the FASB issued new authoritative guidance to
provide a consistent definition of fair value and ensure that fair
value measurements and disclosure requirements are similar between
GAAP and International Financial Reporting Standards. This
guidance changes certain fair value measurement principles and
enhances the disclosure requirements for fair value measurements.
We adopted this guidance effective January 1, 2012. The
implementation of this new guidance did not have a material impact
on our consolidated financial statements.

In June 2011, the FASB amended its guidance on the presentation
of comprehensive income in financial statements to improve the
comparability, consistency and transparency of financial reporting
and to increase the prominence of items that are recorded in other
comprehensive income. The new accounting guidance requires
entities to report components of comprehensive income in either (1)
a continuous statement of comprehensive income or (2) two separate
but consecutive statements. We adopted this guidance effective
January 1, 2012.

In July 2012, the FASB issued ASU 2012-02 which provides an entity
the option to first assess qualitative factors to determine whether
it is necessary to perform a more detailed impairment analysis for
indefinite-lived intangible assets other than goodwill. If an entity
believes, as a result of its qualitative assessment, that it is more-
likely-than-not the asset is impaired, then a quantitative impairment
test is required. Otherwise, no further testing is required. The
implementation of this new guidance did not have a material impact
on our consolidated financial statements.

In February 2013, the FASB issued Accounting Standards
Update, Comprehensive Income (Topic 220): Presentation of
Items Reclassified out of Accumulated Other Comprehensive
Income. This guidance requires enhanced disclosures relating to
reclassifications out of accumulated other comprehensive income.
This guidance is effective for interim and annual periods beginning
after December 15, 2012. The implementation of this new guidance

Building On The Past | Looking To The Future

is not expected to have a material impact on our consolidated
financial statements.

Note 15 — Restructuring

During 2010, 2011, and 2012 we incurred the following restructuring
costs:

2010

2011

2012

2,397 $ 3,467 $ 7,052
$
Facility consolidation costs
Termination of a product offering
—
2,489
________ ________ ________
Restructuring costs included

—

in cost of sales

$
4,886 $ 3,467 $ 7,052
________ ________ ________
________ ________ ________

Administrative consolidation costs $
Restructuring costs included in
other expense

6,497
________ ________ ________

2,176 $

792 $

$
792 $ 6,497
________ ________ ________
________ ________ ________

2,176 $

During 2008, we announced a plan to restructure certain of our
operations. During 2010, 2011 and 2012, we continued our
operational restructuring plan which includes the transfer of
additional production lines from manufacturing facilities located
in the United States to our manufacturing facility in Chihuahua,
Mexico. During the second quarter of 2012, we began the
consolidation of our Finland operations into our Largo, Florida
and Utica, New York manufacturing facilities. For the years ending
December 31, 2010, 2011 and 2012, we charged $2.4 million,
$3.5 million, and $7.1 million, respectively, to cost of goods sold
within our CONMED Linvatec operating segment. These costs
include severance and other charges associated with the transfer of
production to Mexico and consolidation of our Finland operations.
We have recorded an accrual in current liabilities of $3.6 million at
December 31, 2012 mainly related to severance and lease impairment
costs associated with the restructuring. We expect this phase of our
plan and related cash payments to be substantially completed in 2013.

As part of our ongoing restructuring, the Company discontinued
certain product offerings within our CONMED Linvatec portfolio.
These product offerings include the service arms and service
managers associated with our integrated operating room systems
and equipment line. During 2010, we incurred $2.5 million in costs
associated with this termination of a product offering which were
charged to cost of goods sold.

Restructuring costs included in other expense are described more fully
in Note 11.

Note 16 – Business Acquisition

On September 24, 2012, we purchased Viking Systems, Inc. (“Viking
acquisition”) for approximately $22.5 million in cash. Viking Systems,
Inc. developed, manufactured and marketed visualization solutions for
minimally invasive surgeries.

The following table summarizes the estimated fair values of the assets
acquired and liabilities assumed as a result of the Viking acquisition.
The allocation of purchase price is preliminary and therefore subject
to adjustment in future periods.

Cash
Accounts receivable
Inventory
Prepaid expenses and other current assets
Property, plant & equipment, net
Customer relationships
Patents
Goodwill
Total assets acquired
Accounts payable
Deferred income taxes
Other liabilities
Total liabilities assumed

Net assets acquired

390
1,349
2,562
151
117
1,725
1,100
22,021
________
29,415
________
1,324
827
4,736
________
6,887
________
$ 22,528
________
________

The goodwill recorded as part of the acquisition is primarily a
result of planned synergies. The goodwill is recorded as part of our
CONMED Linvatec operating segment and is not deductible for tax
purposes.

The weighted average amortization period for intangible assets
acquired is 9 years. Patents are being amortized over a weighted
average life of 9 years. Customer relationships are being amortized
over a weighted average life of 10 years.

The unaudited pro forma statements of operations for the years
ended December 31, 2011 and 2012, assuming the Viking acquisition
occurred as of January 1, 2011 are presented below. These pro
forma statements of operations have been prepared for comparative
purposes only and do not purport to be indicative of the results
of operations which actually would have resulted had the Viking
acquisition occurred on the dates indicated, or which may result in
the future.

Net sales
Net income

Earnings per share:
Basic
Diluted

2011

2012

$ 735,857 $ 774,239
38,018

(2,176 )

(0.08 ) $
(0.08 )

1.34
1.33

Net sales of $3.4 million and a pre-tax loss of $1.5 million have been
recorded in the consolidated statement of comprehensive income for
the year ended December 31, 2012 related to the Viking acquisition.

Note 17 – Subsequent Events

CONMED Corporation | Annual Report 2012

Note 18 — Selected Quarterly Financial Data (Unaudited)

Selected quarterly financial data for 2011 and 2012 are as follows:

Three Months Ended

2011
Net sales
Gross profit
Net income (loss)

EPS: Basic

Diluted

2012
Net sales
Gross profit
Net income

EPS: Basic

Diluted

March
$ 183,450
95,716
8,995

.32
.31

March
$ 194,316
100,911
9,968

.36

.35

June
$ 183,236
91,455
8,680

.31
.30

June
$ 189,695
99,732
10,296

.36

September
$ 172,814
91,311
8,211

.29
.29

September
$ 181,885
97,913
9,320

.33

.32

December
$ 185,577

96,452
(25,134 )

(.90 )
(.90 )

December
$ 201,244
107,287
10,897

.38

Items Included In Selected Quarterly Financial Data:

2011

2012

First Quarter
During the first quarter of 2011, we incurred $0.8 million in costs
associated with the moving of additional product lines to our
manufacturing facility in Chihuahua, Mexico. These costs were
charged to cost of goods sold – see Note 15.

First Quarter
During the first quarter of 2012, we incurred $1.5 million in costs
associated with the moving of additional product lines to our
manufacturing facility in Chihuahua, Mexico. These costs were
charged to cost of goods sold – see Note 15.

During the first quarter of 2011, we recorded a charge of
$0.7 million to other expense related to consolidating certain
administrative functions in our Utica, New York facility consisting
principally of severance charges – see Note 11 and Note 15.

During the first quarter of 2012, we recorded a charge of
$0.3 million to other expense related to consolidating certain
administrative functions in our CONMED Linvatec operating
segment – see Note 11 and Note 15.

During the first quarter of 2012, we incurred $0.7 million in costs
associated with the purchase of the Company’s former distributor for
the Nordic region of Europe – see Note 11.

During the first quarter of 2012, we recorded a charge of $1.0
million to other expense related to legal costs associated with a
contractual dispute with a former distributor – see Note 11.

Second Quarter
During the second quarter of 2012, we incurred $1.2 million in
costs associated with the moving of additional product lines to our
manufacturing facility in Chihuahua, Mexico and consolidation of
our Finland operations into our Largo, Florida and Utica, New York
manufacturing facilities. These costs were charged to cost of goods
sold – see Note 15.

During the second quarter of 2012, we recorded a charge of
$1.2 million to other expense related to consolidating certain
administrative functions in our CONMED Linvatec operating
segment – see Note 11 and Note 15.

During the second quarter of 2012, we recorded a charge of
$0.5 million to other expense related to legal costs associated with a
contractual dispute with a former distributor – see Note 11.

Second Quarter
During the second quarter of 2011, we incurred $1.0 million in
costs associated with the moving of additional product lines to our
manufacturing facility in Chihuahua, Mexico. These costs were
charged to cost of goods sold – see Note 15.

During the second quarter of 2011, we recorded a charge of
$0.1 million to other expense related to consolidating certain
administrative functions in our Utica, New York facility consisting
principally of severance charges – see Note 11 and Note 15.

Third Quarter
During the third quarter of 2011, we incurred $0.8 million in
costs associated with the moving of additional product lines to our
manufacturing facility in Chihuahua, Mexico. These costs were
charged to cost of goods sold – see Note 15.

Fourth Quarter
During the fourth quarter of 2011, we incurred $0.9 million in
costs associated with the moving of additional product lines to our
manufacturing facility in Chihuahua, Mexico. These costs were
charged to cost of goods sold – see Note 15.

During the fourth quarter of 2011, after completing our annual
goodwill impairment testing, we determined that the goodwill of
our Patient Care operating unit was impaired and consequently
we recorded a goodwill impairment charge of $60.3 million – see
Note 4.

During the fourth quarter of 2011, we purchased the Company’s
former distributor for the Nordic region of Europe. We incurred
$0.3 million in charges associated with this purchase – see Note 11.

Building On The Past | Looking To The Future

Third Quarter
During the third quarter of 2012, we incurred $1.8 million in
costs associated with the moving of additional product lines to our
manufacturing facility in Chihuahua, Mexico and consolidation of
our Finland operations into our Largo, Florida and Utica, New York
manufacturing facilities. These costs were charged to cost of goods
sold – see Note 15.

During the third quarter of 2012, we recorded a charge of
$1.9 million to other expense related to consolidating certain
administrative functions in our CONMED Linvatec operating
segment – see Note 11 and Note 15.

During the third quarter of 2012, we recorded a charge of
$0.7 million to other expense related to the acquisition of Viking
Systems, Inc. – see Notes 11 and 16.

Fourth Quarter
During the fourth quarter of 2012, we incurred $2.5 million in
costs associated with the moving of additional product lines to our
manufacturing facility in Chihuahua, Mexico and consolidation of
our Finland operations into our Largo, Florida and Utica, New York
manufacturing facilities. These costs were charged to cost of goods
sold – see Note 15.

During the fourth quarter of 2012, we recorded a charge of
$3.1 million to other expense related to consolidating certain
administrative functions in our CONMED Linvatec operating
segment – see Note 11 and Note 15.

During the fourth quarter of 2012, we recorded a charge of
$0.5 million to other expense related to the acquisition of Viking
Systems, Inc. – see Notes 11 and 16.

CONMED Corporation | Annual Report 2012
Board of Directors

1. Eugene R. Corasanti is Vice Chairman of the Company and Chairman of the Board of Directors. Mr. Eugene 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. Eugene Corasanti was an independent public accountant. Mr. Eugene 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. Joseph Corasanti has been a Director of the Company since May 1994. Mr.
Joseph Corasanti is also on the Board of Directors of II-VI, Inc. (NASDAQ: IIVI) and is a member of the audit committee. 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, Los Angeles, California. Mr. Joseph Corasanti is admitted to the
State Bar of New York and California. Mr. Joseph 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. Mr. Daniels is the Chairman of the Audit Committee, and
also serves on the Compensation Committee.

4. Jo Ann Golden joined the Board of Directors in May 2003. Ms. Golden is a certified public accountant and through her retirement in July
2012 was the managing partner of the New Hartford, NY office of Dermody Burke and Brown, CPAs, LLC. Ms. Golden is also on the Board
of Directors of the Bank of Utica. 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. Ms. Golden serves on the Audit Committee.

5. Stephen M. Mandia has served as a Director of the Company since July 2002. He is the President of Mandia International Trading
Corp. Mr. Mandia also has served as Chairman of the Board of Directors of Sovena USA, formerly East Coast Olive Oil Corp., now a
subsidiary of Sovena Group since January 1, 2010 and currently serves as the Chairman of the Board of Eva Gourmet. He previously served
as Chief Executive Officer of Sovena USA from 1991 to December 31, 2009. Mr. Mandia holds a B.S. degree from Bentley College, having
also undertaken undergraduate studies at Richmond College in London. Mr. Mandia is the Chairman of the Corporate Governance and
Nominating Committee, and also serves on the Compensation Committee.

6. 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. Dr. Schwartz is the Chairman of the Compensation Committee, and also serves on the Corporate
Governance and Nominating Committee.

7. Mark E. Tryniski has served as a Director of the Company since May 2007 and the Lead Independent Director since May 2009. He
is the President and Chief Executive Officer of Community Bank System, Inc. (NYSE:CBU), where he served as Executive Vice President
and Chief Operating Officer from February 2004 through August 2006. From June 2003 through February 2004, Mr. Tryniski was the
Chief Financial Officer. Prior to joining Community Bank in June 2003, Mr. Tryniski was a partner with PricewaterhouseCoopers LLP. Mr.
Tryniski also serves on the Board of Directors of the Independent Bankers Association of New York State. Mr. Tryniski holds a B.S. degree
from the State University of New York at Oswego. Mr. Tryniski serves on the Audit Committee as well as the Corporate Governance and
Nominating Committee.

Building On The Past | Looking To The FutureStock

CONMED Corporation’s stock is traded on the NASDAQ
Global Select Stock Market with the symbol: CNMD

Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP
677 Broadway
Albany, NY 12207

General Counsel
Daniel S. Jonas, Esq.
525 French Road
Utica, NY 13502

Special Counsel
Sullivan & Cromwell, LLP
125 Broad Street
New York, NY 10004

Corporate Officers

Joseph J. Corasanti, Esq.
President & Chief Executive Officer

William W. Abraham
Executive Vice President, Business Development

Terence M. Bergé
Corporate Vice President, Treasurer & Assistant Controller

Heather L. Cohen, Esq.
Executive Vice President, Human Resources, Deputy General
Counsel & Secretary

Joseph G. Darling
Executive Vice President, Commercial Operations

Daniel S. Jonas, Esq.
Executive Vice President, Legal Affairs & General Counsel

Gregory R. Jones
Executive Vice President, Quality Assurance/Regulatory Affairs

Luke A. Pomilio
Executive Vice President, Controller & Corporate
General Manager

Robert D. Shallish, Jr.
Executive Vice President, Finance & Chief Financial Officer

Mark D. Snyder
Executive Vice President, Manufacturing Operations
& Supply Chain

Shareholder Information

Interested shareholders may obtain a copy of the Company’s
Annual Report 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
800-368-5948
www.rtco.com

Corporate Office

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

CONMED Corporation | Annual Report 2012
Notes

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525 French Road | Utica, NY 13502 | U.S.A.