CONMED
Annual Report 2021

Plain-text annual report

Contents Introduction Company Financial Snapshot Letter to Shareholders Innovations and CONMED Making a Difference Board Members and Executive Officers Memoriam Additional Information GAAP to Non-GAAP Reconciliations CONMED 10K 4 5 6 8 10 12 13 14 16 4 Introduction Annual Report 2021 Partnership and Perseverance The last two years serve as a reminder that unpredictable change can happen at any time and that partnerships and trust are invaluable when faced with adversity. 2021 was initially expected to be a year filled with recovery. Instead, we facff ed prolonged barriers to interaction with our customers and vendors; but the trust and faith of our employees and partners helped us thrive during these unprecedented times. We sWW ought ways to be effective in an adapting world, and we succeeded in 2021 by nurturing and strengthening the bonds we had created. Through crisis comes change. We hWW ave facff ed new and unfamiliar challenges, but we have the people to ensure the forff ging of a safe pff sionals and the teams who support them on this path, and while we can’t predict tomorrow, our mission remains steadfast and true. ath forff ward. We wWW alk alongside healthcare profesff Enabling exceptional outcomes for patients is what we do. 5 FY 2021 Revenue Annual Report 2021 Company Snapshot $1.01BILLION Geographic Revenue Product Revenue Orthopedic Surggery 43% 45% International Revenue Employees Globally 3,800 General Surgery Genera al SurSurgergery 5y 7% Products used in the areas of advanced surgical and advanced endoscopic technologies. Orthopedic Surgery Surgical devices including capital, single-use, and im- plants used in the repair of soft tissue and joint injuries. Revenue ($ in Thousands) Adjusted Net Earnings per Share* *Adjusted net earnings per share is a non-GAAP measure. Refer to the “GAAP to Non-GAAP Reconciliations” section for the most directly comparable GAAP measure, GAAP diluted net earnings per share. 6 Letter to Shareholders Annual Report 2021 Annual Report 2021 Letter to Shareholders Whilemanagingthroughtheseissueshasthepotentialtobecomeanall-consumingtask, theCONMEDteamisfocusedonremaininggreatstewardsofyourcompanythroughour focusonpeople,innovativeproducts,andgrowingprofitability. Dear Shareholders, In 2021, CONMED recorded revenue of $1.01 billion, surpassing the billion-dollar level for the first time in our history. Revenue grew 17.2% as reported and 16.3% in constant currency when compared to the COVID-suppressed levels of 2020. Adjud sted net earnings per share finished the year at $3.21, an increase of 47.2% over 2020 adjud sted net earnings per share of $2.18. Throughout 2021, we continued to face turbulence brought about by the global pandemic. Still, in the face of this adversity, our Board and management team remained focused on the long- term growth and prosperity of CONMED. Central to that tenet remains the safety and well-being of our employees, which is supported by enhanced safety protocols matched to COVID-19 case volumes, free vaccination and wellness resources, and ongoing investments to enhance workplace engagement. Further, i r n 2021, we remained focused on creating innovative solutions for our customers and increasing our investment in digital strategy and an ESG agenda that we are proud of and can deliver—all while improving the company’s cash flow and financial strength. While global market conditions had an obvious impact to our financial performance, I am proud the year. We,WW like others, dealt with the of how our leaders managed the business throughout proliferation of COVID-19 variants, which impacted the global health system and led to workforce shortages, inflation, and transportation and logistics interruptions. I view all of these as circumstances to navigate as we continue to strengthen and grow the company for long-term success. In 2020, I used the words Agile and Resilient to describe our response to the pandemic. Looking back on 2021, the words that best describe our approach throughout the year are Partnership and Perseverance. We built and strengthened partnerships with external parties such as customers, suppliers, and local communities. We aWW lso further strengthened partnerships internally across the markets and geographies we serve, as we focused on ensuring our customers were fully supported throughout the year. Perseverance was a daily demand, as known challenges found kinship with new surprises and disrupted long-established processes and approaches. Our employees embraced these opportunities to drive change, advance our business, and, in the process, continue to strengthen our culture. Again, I could not be prouder of the people who represent our company and propelled us forward in 2021. 7 Looking Forward As we enter 2022, current circumstances still present us with a number of challenges, including the continued impact of COVID-19 and its variants, inflationary pressures, and staffing challenges within the healthcare community and the global workforce, just to name a few. While managing through these issues has the potential to become an all-consuming task, the CONMED team is focused on remaining great stewards of your company through our focus on people, innovative products, and growing profitability. Further, or ur continued investment in a comprehensive digital strategy and the development of a responsible ESG program will further sharpen our performance, strengthen our culture, and increase our stewardship of the company. As I noted last year, history has shown that in a crisis many companies emerge even stronger, ar dapting and overcoming the challenges presented. Given the actions we took and the results we delivered, I believe that CONMED continues to strengthen as an organization and is well positioned for success over the long-term. Closing 2022 is upon us, and we have all become pandemic veterans—a title none of us ever aspired to earn. My views of CONMED and our opportunities remain unchanged. Each employee of the company can impact the business and build a great career; each employee of the company will have the opportunity to make a difference for our customers and be a part of a growing business; and each employee of the company will benefit from a strong and growing culture with exceptional values. Behind all of these points are the people of CONMED, who I have emphasized from day one will define our success as a company. Because of them, I remain confident that CONMED will outperform in our chosen markets. On behalf of our management team and the Board of Directors, I thank you for your confidence in CONMED. Sincerely, Curt Hartman Chair of the Board, President and Chief Executive Officer *Constant currency net sales growth and adjusted net earnings per share are non-GAAP financial measures. Refer to the “GAAP to Non-GAAP Reconciliations” section for reconciliations to the most directly comparable GAAP financial measures, reported net sales and diluted net earnings per share. 8 Innovations and CONMED Making a Difference Annual Report 2021 anGuide® Cleaaaaaaa aaaaa A Cleeee eaa ner Solution Mainta ain high standards for medical device ning cleanin and storage is critical to patient safety. For gng category, reusable dilators, cleaning ed vicev one urdu pr oced es have come under heavy scrutiny by the CoC Joint ommission. EDME launched CleanGuide™ Disposable CONM OT EW Esos phageal Dilators - the first and only sterile- pack d,ed over-the-wire bougies available in the S United States. Closer Than Ever: The Role of VR! Digital Medical Education Generating a global buzz, this captivating technology was quickly integrated into our marketing strategies. We solidified efforts with the trademark VRthroscopy™ and secured a leadership position in next generation medical education. 9 MMMMMMMaaaakkkkkkkkiiiiiinnnnnngggggg AAAAAAAA DDDDDDDiiiiiiifffffffffffffffeeeeeeeeeeeerrrrrrreeeeeeeennnnnnnnncccccceeeeeeeee::::::: EEEEEnnnnnnvvvvvvvvviiiiiiiirrrrrrrrrooooooooooooonnnnnnnnmmmmmmeeeeeeeeeennnnnnntttttaaaaallll,,,,, SSSoooooooooooocccciiiiaaaaaalllllll,,,, aaaannnnnndddddddd GGGGGGGGGooooooovvvvvvveeeeeeeeeeeeerrrrrrnnnnnnnnnnnaaaaaaaaaaaaaannnnnnnccccccccceeeeeee Innn 2020002 21212121,,, COCOCOCCOCCOCCONMNMNMNMNMMMNMMMMMMMEDD susussussusuuusuusuupppppppppppppppppppppporororrororororororororo teteteteeteetetetetetetetetteet ddddddddddddddd TETETETETETEEAAMAMAAAMAMAAMAAMFFFFFFFuunuunnuunuuuunddd through aa mmononetetettarararyy dy dy dy dy dy doooonooooo ation. 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The clinical benefits of live, viable cells In 01820 , through our partnership with MTF, we launched CartiMax®, a v ble ia comb bined abilit ty with optimized handling characteristics enhance a surgeon’s to treat complex cartilage injuries. Last year, we had the opportunity to speak with patients impacted by CartiMax®. One story was recalled by Kelley, an OR nurse who enjoys playing competitive tennis. Kelley had a knee injury during a match and unfortunately suffered significant cartilage damage. She met with Dr. Deryk Jones who recommended CartiMax® for treatment. She underwent the procedure, rehab, and 10 months later was back on the competitive tennis court. 10 Board Members and Executive Officers Annual Report 2021 Board Members Curt R. Hartman Chair of the Board, President and Chief Executive Officer Martha Goldberg Aronson Lead Independent Director David Bronson Director Jerome J. Lande Director Brian P. Concannon Director Barbara J. Schwarzentraub Director rne Council LaVea Director Mark E. Tryniski Director Charles M. Farkas Director Dr. John L. Workman Director Annual Report 2021 11 Executive Officers Terence M. Bergé Vice President, Corporate Controller John E. (Jed) Kennedy* Group Executive Vice President Advanced Endoscopic Technologies Patrick J. Beyer President CONMED International & Global Orthopedics Brent Lalomia Executive Vice President Quality Assurance and Regulatory Affairs** Heather L. Cohen Executive Vice President Human Resources Sarah M. Oliker, Esq. Assistant General Counsel & Assistant Secretary Shanna Cotti-Osmanski Executive Vice President Information Technology Johonna Pelletier Treasurer & Vice President, Tax Todd W. Garner Executive Vice President & Chief Financial Offcer Stanley W. (Bill) Peters President Advanced Surgical and Advanced Endoscopic Technologies** Curt R. Hartman Chair of the Board, President and Chief Executive Officer Jackie Peterson Vice President Manufacturing and Advanced Engineering Daniel S. Jonas, Esq. Executive Vice President Legal Affairs, General Counsel & Secretary Peter K. Shagory Executive Vice President Strategy & Corporate Development *Effective April 1, 2022, Mr. Kennedy retired from this role. **This position is effective April 1, 2022 12 Memoriam Annual Report 2021 In Memoriam and in Recognition for Past Service to CONMED 2021 saw the passing of two of CONMED’s long-serving directors, whose sage counsel helped shape the Company. We note their contributions and passing below: William D. Matthews Director 1997 - 2008 A graduate of Union College, and then Cornell University Law School, William (“Bill”) Matthews first worked in the Division of Corporate Finance for the Securities and Exchange Commission before, ultimately, taking on a position in-house at Oneida, Ltd. Bill became General Counsel and then the Chief Executive Officer and Chair of Oneida’s Board, prior to serving on CONMED’s Board of Directors from 1997 through 2008. Bill was acutely aware of the challenges in creating and executing on a corporate strategy, and provided valuable counsel while on CONMED’s Board. Bill passed on November 21, 2021. Stuart J. Schwartz, M.D. Director 1998-2014 A graduate of Cornell University and SUNY Upstate Medical School, Stuart Schwartz performed his residency at University Hospital in Cleveland, followed by a urology residency at Yale New Haven Hospital. After serving in the Air Force, Dr. Schwartz engaged in the private practice of medicine in Utica, New YorkYY through 2014. Dr. Schwartz provided valuable advice concerning medical technology and procedures, and a common sense approach to business strategy. Stuart passed on September 14, 2021. . Dr. Schwartz served on CONMED’s Board from 1998 13 Additional Information CORPORATE OFFICE CONMED Corporation 11311 Concept Blvd. Largo, FL 33773 Phone: 1-866-4CONMED CUSTOMER SERVICE 1-866-4CONMED customerexperience@CONMED.com www.CONMED.com Ethics policy available at www.CONMED.com STOCK CONMED Corporation’s stock is traded on the New York Stock Exchange with the symbol: CNMD SHAREHOLDER INFO Interested shareholders may obtain a copy of the Company’s Annual Report without charge upon written request to: Investor Relations Department CONMED Corporation Attn: Todd Garner 11311 Concept Blvd. Largo, FL 33773 727-214-2975 Transfer Agent/Registrar Computershare Investor Services P.O. Box 505000 Louisville, KY 40233-5000 1-800-368-5948 www.computershare.com/investor 14 CONMED GAAP to Non-GAAP Reconcilliations Annual Report 2021 GAAPAA to Non-GAAPAA Reconciliations* Reconciliations of Reported Net Income to Adjusted Net Earnings (in thousands, except per share amounts, unaudited) Year Ended December 31, 2021 Selling & Administrative Expense Operating Income Interest Expense Other Expense $ 35,485 $ 1,127 Tax Expense $ 10,563 Effective Tax Rate 14.4% Net Income $ 62,542 Diluted EPS $ 1.94 As reported % of sales Restructuring and related costs Debt refinancing costs Adjusted gross profit % Amortization Adjusted net earnings % of sales Gross Profit $ 568,036 56.2% - - $ $ 568,036 56.2% 6,000 $ $ $ $ 414,754 41.0% (414) - 109,717 10.9% 414 - 414,340 $ 110,131 $ (27,133) 387,207 38.3% $ 33,133 143,264 14.2% $ - - 35,485 (13,943) 21,542 $ $ - (1,127) - - - 109 281 10,953 11,394 22,347 $ $ 305 846 63,693 $ 18.4% $ 35,682 99,375 $ 3.21 Diluted shares outstanding Additional potential dilutive shares from in-the-money convertible notes Diluted shares, as reported Convertible note hedges Diluted shares, as adjusted 30,437 1,779 32,216 (1,273) 30,943 As reported % of sales Plant underutilization costs Product rationalization costs Restructuring and related costs Acquisition and integration costs Manufacturing consolidation costs Adjusted gross profit % Amortization Adjusted net earnings % of sales As reported % of sales Acquisition and integration costs Manufacturing consolidation costs Debt refinancing costs Adjusted gross profit % Amortization Adjusted net earnings % of sales Gross Profit 460,300 $ 53.4% 6,586 2,169 1,087 2,820 3,993 476,955 55.3% 6,000 $ $ Year Ended December 31, 2020 Selling & Administrative Expense Operating Income Interest Expense Other Expense $ $ $ $ 373,817 43.3% - (2,095) (4,782) (1,192) - 365,748 $ (27,945) 337,803 39.2% $ 46,010 5.3% 6,586 4,264 5,869 4,012 3,993 70,734 33,945 104,679 12.1% $ 44,052 $ - - - - - 44,052 (13,414) 30,638 $ $ $ $ 355 - - - - - 355 - 355 Tax Expense/ (Benefit) $ (7,914) 739 460 1,807 888 485 (3,535) 13,037 9,502 $ $ Effective Tax Rate -493.9% Net Income $ 9,517 Diluted EPS $ 0.32 5,847 3,804 4,062 3,124 3,508 29,862 34,322 64,184 $ 12.9% $ $ 2.18 Year Ended December 31, 2019 Gross Profit 524,715 $ 54.9% 1,335 2,858 - $ $ 528,908 55.4% 6,000 Selling & Administrative Expense Operating Income $ $ $ $ 400,141 41.9% (13,066) - - 387,075 $ (26,075) 361,000 37.8% $ 79,114 8.3% 14,401 2,858 - 96,373 32,075 128,448 13.4% $ $ $ Interest Expense Other Expense 42,701 $ 5,188 Tax Expense $ 2,605 Effective Tax Rate 8.3% Net Income $ 28,620 Diluted EPS $ 0.97 - - - 42,701 (11,756) 30,945 $ $ - - (3,904) 1,284 - 1,284 3,609 354 1,149 7,717 10,590 18,307 $ $ 10,792 2,504 2,755 44,671 $ 19.0% $ 33,241 77,912 $ 2.64 Annual Report 2021 15 As reported % of sales Impairment charges Business acquisition costs Tax reform Gross profit % Amortization of intangible assets Adjusted net earnings % of sales As reported % of sales Restructuring costs Business acquisition costs Legal matters Tax reform Adjusted gross profit % Amortization of intangible assets Adjusted net earnings % of sales Gross Profit , 469,110 $ 54.6% - - - $ $ 469,110 , 54.6% 6,000 Gross Profit , 431,041 $ 54.1% 2,903 - - - $ $ , 433,944 54.5% 6,000 $ $ $ $ $ Selling & Administrative Expense , 355,617 3 41.4% - (2,372) - $ Research & Development Expense , 42,188 4 4.9% (4,212) - - 37,976 , 3 353,245 3 , $ ( 17,174) , 336,071 39.1% $ - , 37,976 3 4.4% $ Selling & Administrative Expense , 351,799 3 44.2% (1,347) (2,336) (17,480) - $ Research & Development Expense , 32,307 3 4.1% - - - - 32,307 , 3 330,636 3 , $ ( 15,295) , 315,341 39.6% $ - , 32,307 3 4.1% Net Sales 2021 , 1,010.6 $ $ 2020 862.5 8 Effective Tax Rate 1 9.3% Net Income 40,854 , $ Diluted EPS .41 1 2,095 1,217 912 5,078 4 17,761 62,839 , 2 1.9% $ 2 .18 Effective Tax Rate 93.1% - Net Income 55,487 $ , Diluted EPS .97 1 2,831 1,489 11,799 (32,058) 9,548 3 2 8.0% $ 13,765 53,313 , $ 1.89 Year Ended December 31, 2018 Operating Income , 71,305 7 8.3% 4,212 2,372 - 77,889 , 7 23,174 , 101,063 1 11.8% $ $ $ Other Expense - - $ - - - - - - - - $ $ Year Ended December 31, 2017 Operating Income , 46,935 4 5.9% 4,250 2,336 17,480 - 71,001 , 7 21,295 , 92,296 9 11.6% $ $ $ Other Expense - - $ - - - - - - - - - $ $ Sales Summary (in millions, unaudited) Tax Expense/ (Benefit) 9,799 9 $ , 2,117 1,155 (912) 12,159 , 1 5,413 17,572 , 1 $ $ Tax Expense/ (Benefit) (26,755) ) , ( 1,419 847 5,681 32,058 13,250 , 1 7,530 20,780 , 2 $ $ % Change from 2020 to 2021 Impact of Foreign Currency As Reported 1 7.2% -0.9% Constant Currency 16.3% *Refer to our 2021 Annual Report on Form 10-K, available both within this document and at www.CONMED.com, as well as our Form 8-K filings with the SEC on January 26, 2022, January 27, 2021, January 29, 2020, January 22, 2019 and February 1, 2018 for additional information regarding our non-GAAP measures. United States Securities and Exchange Commission Washington, D.C. 20549 Form 10-K ☒ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 or ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended: December 31, 2021 Commission file number: 001-39218 CONMED CORPORATION (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 11311 Concept Boulevard Largo, Florida (Address of principal executive offices) 16-0977505 (I.R.S. Employer Identification No.) 33773 (Zip Code) ((727)) 392-6464 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class g y Trading Symbol Name of each exchange on g g which registered Common Stock, $0.01 par value CNMD NYSE Yes ☒ Yes ☐ Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in RuleRR No ☐ 405 of the Securities Act. Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. No ☒ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act. ff Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ Yes ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). No ☒ As of June 30, 2021, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the shares of voting common stock held by non-affiliates of the registrant was approximately $2.9 billion based upon the closing price of the Company’s common stock on the NYSE Stock Market. The number of shares of the registrant's $0.01 par value common stock outstanding as of February 16, 2022 was 29,411,246. DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Definitive Proxy Statement and any other informational filings for the 2022 Annual Meeting of Shareholders are incorporated by reference into Part III of this report. CONMED CORPORATRR ION ANNUAL REPORT ON FORM 10-K FOR YEAR ENDED DECEMBER 31, 2021 TABLE OF CONTENTS Business Risk Factors Unresolved Staff Comments Properties Legal Proceedings Mine Safety Disclosures Part I Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities [Reserved] Management's Discussion and Analysis of Financial Condition and Results of Operations Quantitative and Qualitative Disclosures About Market Risk Financial Statements and Supplementary Data Changes In and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information Part III Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accounting Fees and Services Item 1. Item 1A. Item 1B. Item 2. Item 3. Item 4. Item 5. Item 6. Item 7. Item 7A. Item 8. m 9. Item 9A. Item 9B. Item 10. m 11. Item 12. m 13. Item 14. Item 15. Exhibits, Financial Statement Schedules Signatures Item 16. Form 10-K Summary Part IV 1 Pageg 2 8 19 19 19 19 20 21 22 29 29 29 30 30 31 31 31 31 31 32 33 75 CONMED CORPORATION Item 1. Business Forward Lookingii Statements This Annual Report e on Form 10-K for the Fiscii al Year Ended December 31, 2021 (“FormFF d in the Private Securities Litigation Reforme ”, any”, “we” or “us” — refereff the “CompCC OO (as such term is defineff forward-looking statementstt relating to CONME on (“CONMEDNN rr DEE Corporati “Company requires)s which are based on the beliefse available to our management. CC ”, “we” or “us” shall be deemed to include our direct and indirect subsidiaries unless the contextee of our management, as well as assumptions made by and informat Act of 1995) and informat nces to “CONMEDNN 10-K”) contains certain ion ”, the otherwiseii ion currentlyll ff ff ssions are intended to identifyi When used in thisii Form 10-K, the words “estimate”, “project”, “believe”, “anticipate exprex similarl forward-looking statements.tt uncertainties and other factors, including those identifieff d under the caption “Item 1A-Risk Factors” and elsewher Form 10-K which may cause our actual results,tt performance or achievements,tt or industryt from any future results, performanc the following: include, among others,rr ”, “intend”, “expect” and involve known and unknown risks,kk e in thisii ent Such factors sed or implied by such forward-looking statements.tt results, to be materially differff e or achievementstt expres These statementstt x r i ll skk to our business, financial condition and resultstt of operations to it,t continue; regulatory and/or administrative agencies may initiate enforcem ff ent ion and ongoing supply chain challenges; ff ; l customer purchasing patterns due to budgetary, staffff shortages and other constraints including lack of availability of sterilization withtt Ethyl ene Oxidedd (“EtO“ ”) or other tt tt quality of our management and business abilities and the judgment of our personnel, as well as our abilitytt to • • • • • • • • • • • • • • • • • • • • • • • • ii ff s e possibilitytt that United States or foreigni butors; e of new products; availabilitytt and cost of materials, including inflat ion security breach, including a cybersecuritytt breach; general economic and business conditions; compliance with and changes in regulatory requirements; thett COVID-19 global pandemic poses signifii cant riskii which may be heightened as the pandemic, government and hospital responses thett actions against us or our distri introduction and acceptanc thett thett risk of an informat competition; changes in customer preferences; changes in technology; thett c cyclica environmental compliance risks,kk compliance costs associated with the use of EtO; thett tt attract, thett future ff changes in foreign exchange and interest rates; thett changes in business strategy; thett appropriate high standards for screening and/or processing of such tissue the abilitytt propertytt thett trade tt weather related eventstt which may disrupt our operations; and various other in connection with our international operations; ff risk of pate protection measures, tariffi sff and other border taxeaa s, and importm factors refee renced in this Formrr 10-K. risk of a lack of allograft tissue levels of indebtedness and capita es at all levels of the Company; motivate, and retain employe intellectual property,tt including the riskii terms and deploy ment of capital;l al spending; availability,tt ff and enforce to defendff m s; e tt ii ii ability to evaluate, finance and integrate acquired businesses, products and companie m s; s due to reduced donations of such tissue ii s or due to tissue ii s not meeting the skk related to thefte or compromiseii of intellectual nt, product and other litigation as well as the cost associated with such litigati i on; x or export licensing requirements; See “Item 7-Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Item 1- Business” and “Item 1A-Risk Factors” for a further discussion of these factors. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We do not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this Form 10-K or to reflect the occurrence of unanticipated events. 2 General CONMED Corporation was incorporated under the laws of the State of New York in 1970 and became a Delaware corporation in May 2020. CONMED is a medical technology company that provides devices and equipment for surgical procedures. The Company’s products are used by surgeons and other healthcare professionals in a variety of specialties including orthopedics, general surgery, gynecology, thoracic surgery and gastroenterology. The Company’s 3,800 employees distribute its products worldwide from three primary manufacturing locations. In January 2021, we changed the designation of our headquarters from Utica, New York to Largo, Florida. We have historically used strategic business acquisitions, internal product development and distribution relationships to diversify our product offerings, increase our market share in certain product lines, realize economies of scale and take advantage of growth opportunit ies in the healthcare field. t We are committed to offering products with the highest standards of quality, technological excellence and customer n under the ISO international quality standards and other service. Substantially all of our facilities have attained certificatio domestic and international quality accreditations. ff Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to ) as // of charge through the Investor Relations section of our website (http:/ /www.c after such materials have been electronically filed with, or furnished to, the United States Securities and ) containing reports, In addition, the SEC maintains an Internet site (http:/www.sec.gov those reports are accessible freeff soon as practicablea Exchange Commission (the "SEC"). proxy and information statements and other information regarding issuers that file with the SEC. onmed.com p t g p COVID-19 Our business continues to be impacted by the COVID-19 pandemic as variants of the virus emerge, with hospitals and surgery centers reducing the number of, or postponing, non-urgent surgical procedures in order to minimize the risk of infection and allow for proper staffing. We continue to restrict access to our facilities while maintaining production and distribution. While revenues increased in 2021 compared to 2020, we believe we will continue to experience market variabia lity as a result of the pandemic that could influence sales, suppliers, patients and customers. There remains significant uncertainty related to the COVID-19 pandemic, including the duration and severity of future impacts to the business. See additional discussion under Item 1A Risk Factors and Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources. Business Strategy CONMED's vision is to empower healthcare providers worldwide to deliver exceptional outcomes for patients through the following initiatives: • • • Introduction of New Products and Product Enhancements. We pursue organic growth through developing new products and enhancing existing products. We seek to develop new technologies which improve the durability, performance and usability of existing products. In addition to our internal research and development efforts, we receive new ideas for products and technologies, particularly in procedure-specific areas, from surgeons, inventors and other healthcare professionals. Pursue Strategic Acquisitions. We pursue strategic acquisitions, distribution and similar arrangements in existing diversification and market and new growth markets to achieve increased operating efficiencies, geographic shed brand penetration. Targeted companies have historically included those with proven technologies and establia names which provide potential sales, marketing and manufacturing synergies. This includes the February 11, 2019 acquisition of Buffalo Filter. a Realize Manufacturing and Operating Efficiencies. We continually review our production systems for opportunities to reduce operating costs, consolidate product lines or process flows, reduce inventory and optimize existing processes. 3 • Geographic Diversification. We believe that significant growth opportunities exist for our surgical products outside our products include Europe, Latin America, Canada and the the United States. Principal international markets forff Asia/Pacific Rim. • Active Participation in the Medical Community. We believe that excellent working relationships with physicians us to gain an understanding of trends and emerging opportunities. Active and others in the medical industry enablea participation allows us to quickly respond to the changing needs of physicians and patients. In addition, we are an active sponsor of medical education both in the United States and internationally, offering training on new and innovative surgical techniques as well as other medical education programs on the use of our products. Products The following tablea ff sets forth the percentage of net sales for each of our product lines during each of the three years ended December 31: Orthopedic surgery General surgery Consolidated net sales Net sales (in thousands) Year Ended December 31, 2020 2019 2021 43 % 57 100 % 43 % 57 100 % 49 % 51 100 % $ 1,010,635 $ 862,459 $ 955,097 Orthopedi tt c Surgery We provide products that support sports medicine, the repair of soft tissue in the knee, hip, shoulder and increasingly In these procedures, we offer products such as TruShot® with Y-Knot® All-In-One Soft in the upper and lower extremities. Tissue Fixation System, Y-knot® All-Suture Anchors, and PopLok® Knotless Suture Anchors which provide unique clinical In addition to the implants, we offer the supporting solutions to orthopedic surgeons for the repair of soft tissue injuries. products that enablea surgeons to perform minimally invasive sports medicine surgeries. These products include powered resection instruments as well as fluid management and visualization systems and the related disposables which are marketed under a number of brands, including CONMED Linvatec®, Concept® and Shutt®. In sports medicine, we compete with Smith & Nephew, plc; Arthrex, Inc.; Stryker Corporation; Johnson & Johnson: DePuy Mitek, Inc. and Zimmer Biomet, Inc. We also provide our customers with a comprehensive line of battery-powered, autoclavablea , large and small bone power tool systems forff use in orthopedic, arthroscopic, oral/maxillofacial, podiatric, spinal and cardiothoracic surgeries. These products are marketed under the Hall® surgical brand name, a pioneer in power surgical tools in the United States. In powered instruments, our competition includes Stryker Corporation; Medtronic plc; Johnson & Johnson: DePuy Synthes, Inc.; and Zimmer Biomet, Inc. In 2021, approximately 71% of orthopedic surgery revenue came from single-use products that are expected to be recurring. General Surgery Our general surgery product line offers a large range of products in the areas of advanced surgical and advanced endoscopic technologies. Our advanced surgical product offering includes the leading clinical insufflation system (AirSeal®). AirSeal® includes the proprietary valveless access ports that deliver significant benefits to traditional minimally invasive surgery and robotic surgical procedures. The Buffalo Filter acquisition complemented the CONMED portfolio of smoke removal devices, which provides the Company with the broadest portfolio of disposablea al smoke evacuation products available in the medical device market today. In addition to AirSeal® and the Buffalo Filter® products, the Company manufactures and sells an extensive energy line and a broad offering of endomechanical products. The electrosurgical offering consists of monopolar and bipolar generators, argon beam coagulation generators, handpieces, smoke management systems and other accessories. Our line of instruments, including the Anchor1 line of tissue retrieval bags, trocars, suction endomechanical products offer a full irrigation devices, graspers, scissors and dissectors, used in minimally invasive surgery. Our competition includes Medtronic and capita ff 1 Anchor is a trademark of the Anchor Products Company, Addison, Illinois. 4 plc; Johnson & Johnson: Ethicon Endo-Surgery, Inc.; Stryker Endoscopy, Olympus, ERBE Elektromedizin GmbH; and Applied Medical Resources Corporation. Our advanced endoscopic technologies offering includes a comprehensive line of therapeutic and diagnostic products used in gastroenterology procedures which utilize flexible endoscopes, as well as patient monitoring products. In addition to these offerings, we offer a unique energy platform specifically designed for gastroenterology and pulmonology procedures. Devices include products for dilatation, hemostasis, biliary structuret management, infection prevention and patient monitoring. Patient monitoring includes ECG electrodes, EEG electrodes and cardiac defibrillation pads. Our competition includes Boston Scientific Corporation - Endoscopy; Cook Medical, Inc.; Merit Medical Endotek; Olympus, Inc.; STERIS Corporat ion - U.S. Endoscopy and Cantel Medical- Medivators, Inc., Cardinal and 3M Company. r In 2021, approximately 89% of general surgery revenue came from single-use products that are expected to be recurring. International Expanding our international presence is an important component of our long-term growth plan. Our products are sold in over 100 foreign countries. International sales efforts are coordinated through local country dealers (including sub- distributors or sales agents) or through direct in-country sales. We distribute our products through sales subsidiaries and branches with offices located in Australia, Austria, Belgium, Brazil, Canada, China, Denmark, Finland, France, Germany, Italy, Japan, Korea, the Netherlands, Poland, Spain, Sweden and the United Kingdom. In these countries, our sales are denominated in the local currency and amounted to approximately 34% of our total net sales in 2021. In the remaining countries where our products are sold through independent distributors, sales are denominated in United States dollars. Competition We compete in orthopedic and general surgery medical device markets across the world. Our competitors range from large manufacturers with multiple business units to smaller manufacturers with limited product offerings. We believe we have te product offerings and adequate market share to compete effectively in these markets. The global markets are a appropria constantly changing due to technological advances. We seek to closely align our research and development with our key business objectives, namely developing and improving products and processes, applying innovative technology to the manufacture of products for new global markets and reducing the cost of producing core products. The breadth of our product lines in our key product areas enablea s us to meet a wide range of customer requirements and preferences. This has enhanced our ability to market our products to surgeons, hospitals, surgery centers, group purchasing organizations ("GPOs"), integrated delivery networks ("IDNs") and other customers, particularly as instituti ons seek to reduce costs and minimize the number of suppliers. t Marketing A significant portion of our products are distributed domestically directly to more than 6,000 hospitals, surgery centers ons as well as through medical specialty distributors. We are not dependent on any single customer and other healthcare instituti and no single customer accounted for more than 10% of our net sales in 2021, 2020 and 2019. t A significant portion of our U.S. sales are to customers affiliated with GPOs, IDNs and other large national or regional accounts, as well as to the Veterans Administration and other hospitals operated by the Federal government. For hospital inventory management purposes, some of our customers prefer to purchase our products through independent third-party medical product distributors. Our employee sales representatives are extensively trained in our various product offerings. Each employee sales area and compensated on a commission basis or through a combination of salary representative is assigned a defined geographic In certain and commission. The sales force is supervised and supported by either area directors or district managers. geographie s, sales agent groups are used in the United States to sell our orthopedic products. These sales agent groups are paid a a commission for sales made to customers while home office sales and marketing management provide the overall direction and training for marketing and positioning of our products. Our sales professionals provide surgeons and other healthcare professionals with information relating to the technical features and benefits of our products. a 5 Our healthcare systems organization is responsible for interacting with large regional and national accounts (e.g. GPOs, IDNs, etc.). We have contracts with many such organizations and believe that the loss of any individual group purchasing contract would not materially impact our business. We sell to a diversified base of customers around the world and, therefore, believe there is no material concentration of credit risk. Manufacturing Raw material costs constitutet a substantial portion of our cost of production. Substantially all of our raw materials and select components used in the manufacturing process are procured from external suppliers. Where possible, we work closely ity. As a consequence of with multiple suppliers to ensure continuity of supply while maintaining high quality and reliabila supply chain best practices, new product development and acquisitions, we often form strategic partnerships with key suppliers. As a result, components and raw materials may be sole sourced. We continuously seek to manage our supply chain to mitigate supply disruptions that may pose an overall material adverse effect on our financial and operational performanc e. We seek to stock based on a number of factors, including experience, schedule production and maintain adequate levels of safetyt knowledge of customer ordering patterns, demand, manufacturing lead times and optimal quantities required to maintain the highest possible service levels. Customer orders are generally processed for immediate shipment and backlog of firm orders is therefore not generally material to an understanding of our business. ff Research and Development New and improved products play a critical role in our continued sales growth. Internal research and development efforts focus on the development of new products and technological and design improvements. We maintain close working relationships with surgeons, inventors and other healthcare professionals who often suggest to us new product and technology ideas, principally in procedure-specific areas. In certain cases, we seek to obtain rights to these ideas through negotiated agreements. Such agreements typically compensate the originator through payments based upon a percentage of licensed product net sales. Annual royalty expense approximated $2.0 million, $1.5 million and $2.0 million in 2021, 2020 and 2019, respectively. Amounts expended for Company research and development were approxim a ately $43.6 million, $40.5 million and $45.5 million during 2021, 2020 and 2019, respectively. Intellectual Property property, Patents and other proprietary rights, in general, are important to our business. We have rights to intellectual including United States patents and foreign equivalent patents which cover a wide range of our products with expiration dates from 2022 to 2040. We own a majori ty of these patents and have exclusive and non-exclusive licensing rights to the remainder. We believe that the development of new products and technological and design improvements to existing products will continue to be important to our competitive position. a t Government Regulation and Quality Systems The development, manufacture, sale and distribution of our products are subject to regulation by numerous agencies foreign counterparts. In the and legislative bodies, including the U.S. Food and Drug Administration ("FDA") and comparablea United States, these regulations were enacted under the Medical Device Amendments of 1976 to the Federal Food, Drug and Cosmetic Act and its subseu quent amendments, and the regulations issued or proposed thereunder. The FDA’s Quality System Regulations set forth requirements for our product design and manufacturing processes, require the maintenance of certain records, provide for on-site inspection of our facilities and continuing review by the FDA. Many of our products are also subjeu ct to industry-defined standards. Authorization to commercially market our products in the U.S. is granted by the FDA under a procedure referred to as a 510(k) pre-market notification and clearance or Premarket Approval ("PMA"). We believe that our products and processes presently meet applicable standards in all material respects. Medical device regulations continue to evolve world-wide. Products marketed in the European Union and other countries require preparation of technical files and design dossiers which demonstrate compliance with applicablea international regulations. As government regulations continue to change, there is a risk that the distribution of some of our products may be interrupted or discontinued if they do not meet the country specific requirements. 6 ff a We market our products in numerous foreign countries and therefore are subject to regulations affecting, among other ing requirements, import laws and on-site inspection by things, product standards, sterilization, packaging requirements, label independent bodies with the authority to issue or not issue certificatio ns we may require to be able to sell products in certain countries. Many of the regulations applicable to our devices and products in these countries are similar to those of the FDA. The member countries of the European Union (“EU”) follow the requirements under the EU Medical Device Regulation ("EU MDR") which replaced a single set of regulations in May 2017 for all member countries. EU MDR imposes stricter requirements for the marketing and sale of medical devices, including in the areas of clinical evaluation requirements, quality ing and post-market surveillance with an effective date of May 2021. During the transition period, medical systems, label devices with notified body certificates issued under the EU MDD prior to May 2021 may continue to be placed on the market or May 2024. These regulations require companies that wish to for the earlier of the remaining validity of the certificate ff manufacture and distribute medical devices in the European Union to maintain quality system certificatio ns through European Union recognized Notified Bodies. These Notified Bodies authorize the use of the CE Mark allowing free movement of our products throughout the member countries. Requirements pertaining to our products vary widely from country to country, ranging from simple product registrations to detailed submissions such as those required by the FDA. We believe that our products and quality procedures currently meet applicable standards for the countries in which they are marketed. a ff As noted above, 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. Refer to Note 13 for further discussion. We are also subject to various environmental health and safetyt laws and regulations both in the United States and internationally, as are our suppliers and sterilization service providers. Our operations involve the use of substances regulated under environmental laws, primarily in manufacturing and sterilization processes. We believe our policies, practices and procedures are properly designed to comply, in all material respects, with applicable environmental laws and regulations. We do not expect internal compliance with these requirements to have a material effeff ct on purchases of property, plant and equipment, cash flows, net income or our competitive position. Refer to Item 1A, Risk Factors, for further discussion of the use of outside EtO sterilization service providers. CONMED Workforce Overview One of CONMED's core values is our belief in the power of engaged talent. As of December 31, 2021, we had ately 3,800 full-time employees, including approximately 2,400 in operations and the remaining in sales, marketing, a approxim research and development and administration. We know that our people are our most important assets and crucial to our ability to deliver on our mission. Accordingly, the success and growth of our business depends in large part on our ability to attract, engage and develop a diverse population of talented employees at all levels of our organization. Talent Management and Succession Planning All levels of Company management are engaged in talent management practices. The Board reviews the Company’s people strategy in support of its business strategy at least annually and frequently discusses talent opportunities, including a detailed discussion of the Company’s global leadership talent and succession plans with a focus on key positions at the senior executive level. High-potential leaders are given exposure and visibility to Board members through formal presentations and informal events. More broadly, the Board is regularly updated on key talent indicators for the overall workforce, including diversity, recruitment and development programs. Compm etitive Pay and Benefitff stt Our compensation programs are designed to align the compensation of our employees with CONMED’s performance of our e. Our compensation and to provide the proper incentives to attract, retain and motivate employees to achieve positive results. The structuret compensation programs balances incentive earnings for both short-term and long-term performanc programs are evaluated regularly not only for market competitiveness but as importa ntly for equality and fairness. m ff 7 DDiversi yty dand Inclusion l A demonstrated commitment to diversity and inclusion is vital to CONMED's success as we seek out individuals who bring their unique capaa bia lities to our Company. We believe that diverse teams stimulate innovation, enhance our understanding of the needs of our global customer base and ultimately deliver better results for our stakeholders. We value individual strengths and are committed to hiring and retaining employees of all different backgrounds and experiences. Tracking representation of diversity in our workforce helps us to understand where our opportunities exist. These metrics are reviewed on a regular basis at the senior executive level. We also recognize that representation of diversity in the workforce is not enough to have the impact desired, so we encourage inclusion and belonging in addition to representation. DDevellopm tent Development at CONMED comes in many forms to serve the diverse interests and needs of our global workforce and to support our culture and strategy by ensuring the development of key skills. Development offerings include company-wide and job-specific in person and e-learning training, as well management and leadership training and coaching. Additionally, we offer tuition reimbursement programs to support ongoing education at all levels. Employees are encouraged to partner with their manager and HR representative to create an individual plan to guide their own learning and development path that incorporates CONMED development and training resources and opportunities. Employee Engagement Measuring our team members' engagement helps us understand what is working well and where we have opportunities to improve. CONMED utilizes an annual anonymous employee engagement survey both to measure engagement across the organization, and to provide a basis for the individual team action planning session. Survey results are reviewed both at the individual manager level and corporate wide at the senior executive level to continuously drive and support employee engagement. Managers at all levels are provided with training and coaching resources to act on insights gained through surveys and feedback sessions in partnership with their team members. Item 1A. Risk Factors An investment in our securities, including our common stock, involves a high degree of risk. Investors should carefully consider the specific factors set forth below as well as the other information included or incorporated by reference in this Form 10-K. See “Forward Looking Statements”. ii (i) Risks Related to Our Business ii and the Medical Device Industrytt Our financial performance is dependent on conditions tt in the healthcare tt industrytt and the broader economy.yy The results of our business are directly tied to the economic conditions in the healthcare industry and the broader economy as a whole. We will continue to monitor and manage the impact of the overall economic environment on the Company. In this regard, approximately 19% of our revenues are derived from the sale of capita al products. The sales of such products may be negatively impacted if hospitals and other healthcare providers are unable to secure the financing necessary to purchase these products or otherwise defer purchases. VV The COVID-19 .ee for an extended period of timeii ii continue global pandemic may pose signifii cant risks to our business ii if the pandemic, and various responses to it,tt The actions undertaken to reduce or respond to the spread of the virus, including its variants, have created and may continue to create significant disruptions with respect to the demand for non-urgent surgeries in hospitals and surgery centers and hospital and ambulatory surgery center operating volumes. As of the date of this report: 1. a In some geographie s or territories, our field-based sales representatives are limited in their ability to travel to service or call on customers, with in-person visits in many cases dependent on requests by physicians to cover surgeries, the policies of individual hospitals, surgery centers or other institutions, and the availabila ity of appropriate personal protective equipment, testing or vaccines; 8 2. Our office-based employees continue to work remotely, 3. Our manufacturing facilities and warehouses continue to operate with precautions, including increased hygiene and cleaning within facilities, social distancing and personal protective equipment. 4. Some hospitals have delayed certain procedures to reserve space for COVID patients, or have experienced slowdowns due to staffing shortages. As such, the COVID-19 pandemic has directly and indirectly adversely impacted the Company’s business, financial condition and operating results. The extent to which this will continue will depend on numerous evolving factors that are highly uncertain, rapidl y changing and cannot be predicted with precision or certainty at this time, including: a • • • • • • • • • • the duration and scope of the COVID-19 pandemic, including any resurgence of new strains, as well as the effectiveness of vaccines, and the extent to which they are administered; governmental, business and individual actions that have been, continue to be, or may in the future be taken in response to the COVID-19 pandemic including, for example, business and travel restrictions, quarantines, and slowdowns or delays of commercial activity; the effect of the COVID-19 pandemic on our partners and customers, including their conduct of surgeries, continued purchase of our products, or their decision to do so consistently at normal procedure volumes; t of the COVID-19 pandemic and the various responses thereto on the budgets and staffing ff the effecff and customers; of our partners our ability during the COVID-19 pandemic to continue operations in an efficient manner, as a result of periodic variations in demand and/or availability of raw materials from our suppliers; periodic reductions in demand for certain surgeries or for certain of our products; the effecff t of the COVID-19 pandemic on our supply chain’s reliabila ity and costs; costs incurred as a result of actions intended to protect the health and safetyt of our employees and continued operations, including enhanced cleaning processes and protocols designed to implement appropriate social distancing practices; our ability to comply with the financial covenants in our debt agreements if a material economic downturn as a result of the COVID-19 pandemic results in substantially increased indebtedness and/or lower earnings; and the exacerbation of negative impacts resulting from the COVID-19 pandemic. We continue to monitor our spending and expenses in light of the uncertainty concerning forecasting demand, and consequently revenues. While the results of operations support continued recovery, there remains uncertainty in the financial markets related to the COVID-19 pandemic which may have an impact on the demand for post-pandemic surgery levels that are difficul t to predict. If the downturn is more severe and prolonged than we currently expect, we may need to take further steps to reduce our costs, or to refinance our debt. ff Limi tt tat ions ii ii products. on the availabi liii tyii of Ethylh ene ll ii Oxide (“EtO”) sterilizati ll on services may limi tii our abiliii tyii ii to sellll certainii ell steril tt Approximately 32% of our products when measured in terms of revenues, are sterilized by third-party sterilizers using ethylene oxide, a chemical which, when present or used in high levels or concentrations, has raised some environmental concerns in some areas within the United States, with the result that some EtO sterilization facilities have closed, or are threatened with closure, either temporarily or permanently, in connection with government enforcement actions or enhanced regulations prompted by environmental concerns. We have been able to secure EtO sterilization services to date, and do not currently expect sterilization availability to have a material impact on our business. If, however, there are further restrictions on capac ity a or further government actions adverse to EtO sterilization, it is possible that we could be impacted materially in the future. t 9 As a manufact rr intertt nati urer of medical devices that onally,ll we face risks under domestic and foreigni u intertt actstt withii physicians and healthll care providers domesticallyll and regulationtt s,s includingdd thett Foreigni Corrupt Practictt es Act.tt Manufacturers of medical devices have been the subject of various investigations or enforcement actions relating to interactions with health care providers domestically or internationally. The interactions with domestic health care providers are subject to regulations, known as the Anti-Kickback Statutet , the Stark Act and the False Claims Act, that generally govern incentives for health care providers, or methods of reimbursement funded in whole or in part by the government. Similarly, the Foreign Corrupt Practices Act (“FCPA”), and similar foreign laws, prohibit certain conduct by manufacturers, generally described as bribery, with respect to interactions, either directly through foreign subsidiaries or indirectly through distributors, with health care providers who may be considered government officials because they are affiliated with public hospitals. The FCPA also imposes obligations on manufacturers listed on U.S. stock exchanges to maintain accurate books and records, and maintain internal accounting controls sufficient to provide assurance that transactions are accurately recorded, lawful and in accordance with management’s authorization. The FCPA can pose unique challenges for manufacturers who operate in foreign cultures where conduct prohibited by the FCPA may not be viewed as illegal in local jurisdictions, and because, in some cases, a United States manufacturer may face risks under the FCPA based on the conduct of third parties over whom the manufacturer may not have complete control. a In this regard, from time to time, the Company may receive an information request or subpoena from a government agency, such as the Securities and Exchange Commission, Department of Justice, Equal Employment Opportunity Commission, the the Occupational Safety and Health Administration, the United States Food and Drug Administration, the Department of Labor, Treasury Department or other federal and state agencies or foreign governments or government agencies. Alternatively, employees or private parties may provide us with reports of alleged misconduct. These information requests or subpoenas may or may not be routine inquiries, or may begin as informal or routine inquiries and over time develop into investigations or enforcement actions of various types under the FCPA or otherwise. Similarly, the employee and third party reports may prompt us to conduct internal investigations into the alleged misconduct. As a medical device company, CONMED’s operations and interactions with government hospitals, healthcare professionals and purchasers may be subject to various federal and state regulations, including the federal False Claims Act, which provides, in part, that the federal government may bring a lawsuit against any person or entity that it believes has knowingly presented, or caused to be presented, a false or fraudulent request for payment to the government, or has made or used, or caused to be made or used, a false statement or false record material to a false claim. In addition, in certain circumstances, private parties may bring so-called Qui Tam claims as plaintiffs purportedly on behalf of the government asserting claims arising under the False Claims Act. A violation of the False Claims Act may result in fines up to $11,000 for each false claim, plus up to three times the amount of damages sustained by the government, and may also provide the basis for the imposition of administrative penalties and exclusion from participation in federal healthcare programs. Many states have enacted false claims acts that are similar to the federal False Claims Act. No inquiry or claim that the Company currently faces or has faced to date, and no report of misconduct that the Companym has received to date, has had a material adverse effect on our financial condition, results of operations or cash flows. There can be no assurance, however, that any pending inquiries will not become investigations or enforcement actions, or the costs associated with responding to such inquiries, investigations, enforcement actions or investigations relating to reports of misconduct will not have a material adverse effect on our financial condition, results of operations or cash flows. ff ii Failure implim cations. to complym with regulatory requirements maya result in recalls, ll i loss of revenues, fines or materi all yll adverse tt Substantially all of our products are classified as class II medical devices subject to regulation by numerous agencies and international counterparts. As a legislative bodies, including the U.S. Food and Drug Administration ("FDA") and comparablea of medical devices, our manufacturing processes and facilities are subject to on-site inspection and continuing manufacturer review by the FDA for compliance with the Quality System Regulations. We may have future inspections at our sites and there can be no assurance that the costs of responding to such inspections will not be material. ff t Manufacturing and sales of our products outside the United States are also subject to international regulatory requirements which vary from country to country. Moreover, we are generally required to obtain regulatory clearance or approval prior to marketing a new product. The time required to obtain approvals from foreign countries may be longer or shorter than that required for FDA clearance, and requirements for such approvals may differ from FDA requirements. Failure to comply with a appli domestic and/or foreign regulatory requirements may result in: cablea • • • • finff es or other enforcement actions; recall or seizure of products; total or partial suspension of production; loss of certification; 10 • • • • withdrawal of existing product approvals or clearances; refusa l to approve or clear new applications or notices; ff increased quality control costs; or criminal prosecution. In addition to the Quality System Regulations, many of our products are also subject to industry-defined standards. We may not be able to comply with these regulations and standards due to deficiencies in component parts or our manufacturing processes. If we are not able to comply with the Quality System Regulations or industry-defined standards, we may not be able to fill customer orders and we may decide to cease production or sale of non-compliant products. Failure to produce products could affect our revenues, profit margins and could lead to loss of customers. Our products are subject to product recall and we have conducted product recalls in the past. Although no recall has had a material adverse effect on our business or financial condition, we cannot be certain that regulatory issues will not have a material adverse effect on our business, financial condition or results of operations in the future or that product recalls will not harm our reputation and our customer relationships. i The highly competm ittt ivtt e market for our products may creatett adverse pricingii pressures. The market for our products is highly competitive and our customers have alternative suppliers. Many of our competitors offer a range of products in areas other than those in which we compete, which may make such competitors more attractive to surgeons, hospitals, group purchasing organizations and others. In addition, many of our competitors are large, technically competent firms with substantial assets. Competitive pricing pressures or the introduction of new products by our competitors could have an adverse effect on our revenues. See “Products” in Item 1 - Business for a further discussion of these competitive forces. Factors which may influence our customers’ choice of competitor products include: • • • • • • changes in surgeon preferences; increases or decreases in healthcare spending related to medical devices; our inabila the introduction by competitors of new products or new features to existing products; the introduction by competitors of alternative surgical technology; and advances in surgical procedures, discoveries or developments in the healthcare industry. ity to supply products to them as a result of product recall, market withdrawal or back-order; Cost reductiontt efforts in the healthcare tt industrytt could put pressures on our prices and marginsii . In recent years, the healthcare industry has undergone significant change driven by various efforts to reduce costs. Such efforts include national healthcare reform, trends towards managed care, cuts in Medicare reimbursement for procedures, consolidation of healthcare distribution companies and collective purchasing arrangements by GPOs and IDNs. Demand and prices for our products may be adversely affecff ted by such trends. We use a variety of raw material sll our operatingn costs and adversely rr tt in our businesse impactm ii the competitiii ve positions of our products.tt i s, and signific ant shortages, tt inflatn iontt or price increases could increase r Our reliance on certain suppliers and commodity markets to secure raw materials used in our products exposes us to volatility in the prices and availability of raw materials. In some instances, we participate in commodity markets that may be subject to allocations by suppliers. A disrupti on in deliveries from our suppliers, price increases or decreased availability of raw materials or commodities could have an adverse effect on our ability to meet our commitments to customers or increase our operating efficiencies and/or costs. The increases in costs or availability of raw materials may be exacerbated as a result of the COVID-19 pandemic and ongoing global supply chain challenges. In addition, increased inflation in wages and materials may also increase our costs. We believe that our supply management practices are based on an appropriate balancing of the foreseeable risks and the costs of alternative practices. Nonetheless, price increases or the unavailability of some raw materials may have an adverse effecff t on our results of operations or financial condition. 11 We may not be able to keepee pace withii ,e which could cause us to lose tt acceptance ll technologico ii busines or to successfullyll al changen . s to competitors ii developo new products withii wideii market The market for our products is characterized by rapidly changing technology. Our future financial performance will depend in part on our ability to develop and manufacture new products on a cost-effective basis, to introduce them to the market on a timely basis and to have them accepted by surgeons and other healthcare professionals. new products. In addition, many of our competitors are We may not be able to keep pace with technology or to develop viablea substantially larger with greater financial resources which may allow them to more rapia dly develop new products. Factors which may result in delays of new product introductions or cancellation of our plans to manufacture and market new products include: • • • • research and development delays; capital and other financial constraints; delays in securing regulatory approvals; and changes in the competitive landscape, including the emergence of alternative products or solutions which reduce or eliminate the markets for pending products. Ordering patterns tt of our custome tt rs maya change resultill ngii in reductions in sales. Our hospital and surgery center customers purchase our products in quantities sufficient their anticipated demand. Likewise, our healthcare distributor customers purchase our products for ultimate resale to healthcare providers in quantities sufficient to meet the anticipated requirements of the distributors’ customers. Hospitals and customers may experience reduced demand if they reserve space for COVID patients or in response to staff shortages. Should inventories of our products owned by our hospital, surgery center and distributor customers grow to levels higher than their requirements, our customers may reduce the ordering of products from us. This could result in reduced sales. to meet (ii)i Risks Related to Our Indebtedness The terms of our indebtedness outstandi from timeii current and future operations, partictt ularlyll our abiliii tyii ngii tt to timeii ,e including our senior credit agreement, maya restrict our s to respond to changes or to take certain actions. tt The senior credit agreement contains, and future credit facilities are expected to contain, a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to respond to changes in our business or competitive activities, or to otherwise engage in acts that may be in our long-term best interest, including restrictions on our ability to: • • • • • • • • • • • • iates; incur indebtedness; allow for liens to be placed on our assets; make investments; engage in transactions with affilff make certain restricted payments; enter into certain restrictive agreements; enter into certain swapa agreements; change our line of business; pay dividends or make other distributions on, or redeem or repurchase, capita consolidate, merge or sell all or substantially all of our assets; prepay and/or modify the terms of certain indebtedness; and pursue acquisitions. al stock; These covenants, unless waived, may prevent us from pursuing and/or securing acquisitions, significantly limit our operating and financial flexibility and limit our ability to respond to changes in our business or competitive activities. Our ability to comply with such provisions may be affect In the event of any default under our credit agreement, the credit agreement lenders may elect to declare all amounts borrowed under our credit agreement, together with accrued interest, to be due and payablea If we were unable to repay such borrowings, the credit agreement lenders could . proceed against collateral securing the credit agreement which consists of substantially all of our property and assets. Our credit agreement also contains a material adverse effect clause which may limit our ability to access additional funding under our credit agreement should a material adverse change in our business occur. ed by events beyond our control. ff 12 We may not be able to generate sufficient cash to service our indebtedness, and, our leverage and debt service requiremii maya requireii us to adopt altell rnativtt e business tt strategi es. ii entstt As of December 31, 2021, we had $712.6 million of debt outstanding, representing 47% of total capita have sufficient cash flow availablea be forced to adopt an alternative strategy that may include actions such as foregoing acquisitions, reducing or delaying capita expenditures, selling assets, restructuring or refinancing our indebtedness or seeking additional equity capita certain that any of these strategies could be implemented on terms acceptablea and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” and Note 7. alization. We may not us to meet our obligations. If we are unable to service our indebtedness, we will al al. We cannot be to us, if at all. See “Management’s Discussion to enablea t The degree to which we are leveraged could have important consequences to investors, including but not limited to the following: • • • • • • t al expenditures, acquisitions, dividends and other purposes; a portion of our cash flow from operations must be dedicated to debt service and will not be available for operations, capita al, capita our ability to obtain additional financing in the future for working capita corporate purposes may be limited or impaired or may be at higher interest rates; we may be at a competitive disadvantage when compared to competitors that are less leveraged; we may be hindered in our ability to adjust rapidly to market conditions; our degree of leverage could make us more vulnerable in the event of a downturn in general economic conditions or other adverse circumstances applicable to us; and our interest expense could increase if interest rates in general increase because a portion of our borrowings, including our borrowings under our credit agreement, are and will continue to be at variablea al expenditures, acquisitions or general rates of interest. Our variablell antly.yy significi rate indebtednes tt s subjects us to interest rate riskii ,k which could cause our debt service obligati i ons to increase Borrowings under our senior credit agreement are at variable rates of interest and expose us to interest rate risk. If interest rates were to increase, our debt service obligations on the variabla e rate indebtedness would increase even though the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease. In the future, we may enter into interest rate swaps that involve the exchange of floating for fixed rate interest payments in order to reduce interest rate volatility. However, we may not maintain interest rate swaps with respect to all of our variable rate indebtedness, and any swapsa we enter into may not fully mitigate our interest rate risk. Our intertt est rates may be impactm edtt by the phase out of LIBOR. LIBOR, the London Interbank Offered Rate, is the basic rate of interest used in lending transactions between banks on the London interbank market and is widely used as a reference for setting the interest rate on loans globally. Certain of the interest rates applicablea to our seventh amended and restated senior credit agreement are calculated using LIBOR. On July 27, 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR. It is currently anticipated that LIBOR will be completely phased out by June 30, 2023. A reference rate based on the Secured Overnight Financing Rate, or another alternative benchmark rate, is expected to be established to replace LIBOR. While our nce rates in the event that seventh amended and restated credit agreement includes provisions for establia nce rate, any such alternative refereff LIBOR is no longer available or the determination is made to adopt an alternative refereff nce rently than LIBOR. The consequences of rate could be higher and more volatile than LIBOR or may otherwise perform diffeff the adoption of any such alternative reference rates cannot be predicted at this time and may result in exposure to additional interest rate risk and increase the cost of indebtedness under our seventh amended and restated credit agreement. shing alternative refereff Despiteii our current level of indebtedness, we and our subsidiarie could furthett ii to our financial r exacerbatett ii the risks ii conditiii on described above.ee s may stillll be able to incur substantial lyll more debt.tt Thisii tt u We may incur substa ntial additional indebtedness, including secured indebtedness. As of December 31, 2021, we have $442.5 million of availability under the senior credit agreement. If we incur secured indebtedness and such secured indebtedness is cy, liquidation or reorganization, our assets would be used to satisfy either accelerated or becomes subject to a bankrupt obligations with respect to the indebtedness secured thereby before any payment could be made on the debt that is not similarly secured. If new debt or other liabilities are added to our current debt levels, the related risks that we now face could intensify. Our senior credit agreement restricts our ability to incur additional indebtedness, including secured indebtedness, but if the facilities mature or are repaid, we may not be subject to such restrictions under the terms of any subsequent indebtedness. r 13 The conditiodd may adversely affect our financiali nal conversion features of our 2.625% Convertibleii tt condition. Notes due 2024 (the “ConCC vertiblell NoteNN s”), if trigger i ed, In the event the conditional conversion features of the Convertible Notes issued on January 29, 2019 are triggered, holders of the Convertible Notes will be entitled to convert the Convertible Notes at any time during specified periods at their option. If one or more holders elect to convert their Convertible Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock, we would be required to make cash payments to satisfy all or a portion of our conversion obligation based on the conversion rate, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their Convertible Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Convertible Notes as a current rather than long-term liabia lity, which could result in a material reduction of our net working capita al. Refer to Note 7 for further details on the Convertible Notes. The convertiblell notes hedge and warrant transactions that we entered into in connectiontt Notes may affect the value of the Convertibleii Notes and our common stock. tt withii the offeringn of the Convertibleii In connection with the offering of the Convertible Notes, we entered into convertible notes hedge transactions with certain option counterparties (each an “Option Counterparty”). The convertible notes hedge transactions are expected generally to reduce the potential dilution upon conversion of the Convertible Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Convertible Notes, as the case may be. We also entered into warrant transactions with each Option Counterparty. The warrant transactions could separately have a dilutive effeff ct on our common stock to the extent that the market price per share of our common stock exceeds the strike price of the warrants, unless we elect to settle the warrants in cash. In connection with establia shing its initial hedge of the convertible notes hedge and warrant transactions, each Option Counterparty or an affiliate thereof may have entered into various derivative transactions with respect to our common stock concurrently with or shortly after the pricing of the Convertible Notes. This activity could increase (or reduce the size of In addition, each Option any decrease in) the market price of our common stock or the Convertible Notes at that time. Counterparty or an affiliate thereof may modify its hedge position by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the Convertible Notes (and is likely to do so during any observation period related to a conversion of the Convertible Notes). This activity could also cause or avoid an increase or a decrease in the market price of our common stock or the Convertible Notes. In addition, if any such convertible notes hedge and warrant transactions fail to become effective, each Option Counterparty may unwind its hedge position with respect to our common stock, which could adversely affecff t the value of our common stock and the value of the Convertible Notes. We are subject to counterpart tt ytt risk withtt respect to the convertiblell notes hedge transactions. Each Option Counterparty to the convertible notes hedge transactions is a financial instituti on whose obligation to perform under the convertible notes hedge transaction will not be secured by any collateral. If an Option Counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under our transactions with the Option Counterparty. Our exposure will generally correlate to the increase in the market price and in the volatility of our common stock. In addition, upon a default by an Option Counterparty, we may sufferff adverse tax consequences and more dilution than we currently anticipate with respect to our common stock. Although these counterparties are large, reputablea ity or viabila U.S. financial institutions, we can provide no assurances as to the financial stabila ity of any Option Counterparty. ff t (iii)ii Risks ii Relatedtt to Our Acquisitionii tt StSS rtt ategy Our financial performanc tt and integrati ff on of newly acquired businesse ii . s or product lines ii e is subject to the risks inherent in any acquisition, including the effects of increased borrowing A key element of our business strategy has been to expand through acquisitions and we may seek to pursue additional acquisitions in the future. Our success in pursuing acquisitions depends on our ability to identify target companies or product lines that are available for sale, and, negotiating successful terms with the sellers, as the sellers may also be negotiating with other bidders with greater financial resources than we have. Even when we win a bid, our success is also dependent in part upon our ability to integrate acquired companies or product lines into our existing operations. We may not have sufficient management and other resources to accomplish the integration of our past and future acquisitions, which may strain our relationship with customers, suppliers, distributors, personnel or others. There can be no assurance that we will be able to identify and make acquisitions, or that we will be able to obtain financing for such acquisitions, on acceptablea In addition, while we are generally entitled to customary indemnification from sellers of businesses or coverage from representation and warranty insurance for any difficulties that may have arisen prior to our acquisition of each business, terms. 14 acquisitions may involve exposure to unknown liabilities and the amount and time for claiming under these indemnification provisions is often limited. As a result, our financial performanc e is now, and will continue to be, subject to various risks associated with the acquisition of businesses, including the financial effects associated with any increased borrowing required to fund such acquisitions or with the integration of such businesses. ff The terms of any future preferred equitytt or debt finaii ncingii maya give holdersrr of any preferred securities or debt securities on our company. rightsgg that are senior to rightstt of our common shareholdersrr or imposem tt more stringe nt operatingii tt restrictions Debt or equity financing may not be available to us on acceptablea terms. If we incur additional debt or raise equity through the issuance of preferred stock or convertible securities, the terms of the debt or the preferred stock issued may give the holders rights, preferences and privileges senior to those of holders of our common stock, particularly in the event of liquidation. The terms of the debt may also impose additional and more stringent restrictions on our operations. If we raise funds through the issuance of additional equity, the ownership percentage of our existing shareholders would be diluted. (iv)v Other Risks Related to Our Business ii We couldll experience a failure of a key information technology including a cybersecurityii sitestt associatedtt ll breach or failure of one or more key information technology , process or site or a breach of information security,yy s, networks, processes, systemtt for a breach of various datatt privacyc regulations. and could potentiallyll become liable or service providers, systemtt i i ll tt We rely extensively on information technology (“IT”) systems for the storage, processing, and transmission of our electronic, business-related, information assets used in or necessary to conduct business. We leverage our internal IT infrastructures, and those of our business partners or other third parties, to enablea , sustain, and support our global business activities. In addition, we rely on networks and services, including internet sites, data hosting and processing facilities and tools and other hardware, software and technical applications and platforms, some of which are managed, hosted, provided and/or used by third-parties or their vendors, to assist in conducting our business. The data we store and process may include customer payment information, personal information concerning our employees, confidential financial information, and other types of sensitive business-related information. In limited instances, we may also come into possession of information related to patients of our physician customers. Numerous and evolving cybersecurity threats pose potential risks to the security of our IT systems, networks and services, as well as the confidentiality, availability and integrity of our data. In addition, the laws and regulations governing security of data on IT systems and otherwise collected, processed, stored, transmitted, disclosed and disposed of by companies are evolving, adding another layer of complexity in the form of new requirements. We have made, and continue to make investments, seeking to address these threats, including monitoring of networks and systems, hiring of third party service providers with expertise in cybersecurity, employee training and security policies for employees and third-party providers. The techniques used in these attacks change frequently and may be difficult to detect for periods of time and difficult to anticipate by implementing adequate preventative measures. t Our worldwide operations mean that we are subject to laws and regulations, including data protection and cybersecurity laws and regulations, in many jurisdictions. For example, the European Union ("EU") General Data Protection Regulation ("GDPR") requires us to manage personal data in the EU and may impose fines of up to four percent of our global revenue in the event of Consumer Privacy Act imposes obligations on companies that conduct business in certain violations. Likewise, the California Californi a, and meet other requirements, with respect to the collection or sale of specified personal information. Other ff jurisdictions are also implementing or proposing a variety of data privacy laws and regulations. Further, there has been a developing trend of civil lawsuits and class actions relating to breaches of consumer data held by large companies or incidents arising from other cyber-attacks. Any data security breaches, cyber-attacks, malicious intrusions or significff ant disruptions could result in actions by regulatory bodies and/or civil litigation, any of which could materially and adversely affect our business, results of operations, financial condition, cash flows, reputation or competitive position. ff The costs of attempting to protect IT systems and data may increase, and there can be no assurance that these added security If our IT systems are damaged or cease to function efforts will prevent all breaches of our IT systems or thefts of our data. properly, the networks or service providers we rely upon fail to function properly, we fail to comply with an applicable law or regulation, such as the GDPR, or we or one of our third-party providers suffer a loss or disclosure of our business or stakeholder information due to any number of causes ranging from catastrophic events or power outages to improper data handling or security breaches and our business continuity plans do not effectively address these failures on a timely basis, we may be exposed to potential disruption in operations, loss of customers, reputational, competitive and business harm, and significant costs from remediation, litigation and regulatory actions. 15 We rely on a thirdii is not acceptedtt negativtt elyll impacm ted. party to obtain,ii process and distribu by the market or is not acceptedtt tt te sports medicineii allograft under numerous government regue ll tissii ue. If such tissue ii lations, our resultstt of operations cannot be obtained, ii could be tt A portion of our orthopedic revenues relate to our share of the service fees from the Musculoskeletal Transplant Foundation ("MTF") allograft tissues for which we have exclusive worldwide sales representation, marketing and promotion rights, as further described in our revenue recognition policy in Note 1. Our primary costs related to these revenues come from our commission expense and certain marketing costs. Our ability to increase the service fees may be constrained by certain factors which are outside of our control, such as the limited supply of donors and donated tissue that meets the quality standards of MTF. Similarly, under the terms of the agreement, MTF remains responsible for tissue procurement and processing, shipment of tissues and invoicing of service fees to customers. To the extent MTF’s performance does not meet customer expectations or replacement for MTF on otherwise fails, CONMED may be unable to increase the allograft service fees or to find a suitablea terms that are acceptable. The FDA and several states have statutory authority to regulate allograft processing and allograft-based materials. The FDA could identify deficiencies in future inspections of MTF or MTF's suppliers or promulgate future regulatory rulings that could disrupt our business, reducing profitability. t We distribuii products willii continue te some products for third-part e indefinit eltt y.ll ii ii m ytt companie s, and cannot ensure that our rights to distributett ytt such third-part ii While we generally own the products' designs and rights to the products we sell, in some cases we distribute products for third- parties. While these third-parties may have business reasons for contracting with us to distribute their products, we may face the risk that the third-parties may seek alternate distribution partners when their distribution contracts with us expire or are scheduled for renewal. If we lose the distribution rights to such products, we may not be able to find replacement products that are acceptablea to our customers, or to us. If we lose our patents or theye are heldll i become subject to liabil itll ytt and our competitiii ve position could be harmed. to be invalid,ii or if our products or services infringe ii on third party patents, we could Much of the technology used in the markets in which we compete is covered by patents. We have numerous U.S. patents and corresponding international patents on products expiring at various dates from 2022 through 2040 and have additional patent Property” for a further description of applications pending. See Item 1 Business “Research and Development” and “Intellectual The loss of our patents could reduce the value of the related products and any related competitive our patents. advantage. Competitors may also be abla e to design around our patents and to compete effectively with our products. In addition, the cost of enforcing our patents against third parties and defending our products against patent infringement actions by others could be substantial, and we may not prevail. t While we seek to take reasonable steps to avoid infringing on patents we do not own or license, we cannot be sure that our services and products do not infringe on the intellectual property rights of third parties, and we may have infringement claims asserted against us. These claims could cost us money, prevent us from offering some services or products, or damage our reputation. We cannot be certain that: • • • • pending patent applications will result in issued patents; patents issued to or licensed by us will not be challenged by competitors; our patents will be found advantage; or we will be successful in defending against pending or futuret ff to be valid or sufficiently broad to protect our technology or provide us with a competitive patent infringement claims asserted against our products. We may be sued for product liabil of any product liabiliii tyii claimll i s. itll ytt claimll s and our insurance coverage may be insuffiff cient to cover the nature and amount Even if our products are properly designed and perform as intended, we may be sued. The naturet of our products as medical devices, and the litigious environment, should be regarded as potential risks which could significantly and adversely affect our financial condition and results of operations. The insurance we maintain to protect against claims associated with the use of our products has deductibles and may not adequately cover the amount or naturet of any claim asserted against us. We are also exposed to the risk that our insurers may become insolvent or that premiums may increase substantially. See “Item 3 - Legal Proceedings” for a further discussion of the risk of product liability actions and our insurance coverage. 16 Damage to our physical properties as a resultll of windst tt orm, cause a financiali loss and a loss of customers. ii earthquake, fire or other natural or man-made disaster may Although we maintain insurance coverage for physical damage to our property and the resultant losses that could occur during a business interruption, we are required to pay deductibles and our insurance coverage is limited to certain caps.a For example, our deductible for windstorm damage to our Florida property amounts to 2% of any loss. Any increase in the frequency or severity of natural disaster events could result in increased insurance premiums. Further, while insurance reimburses us for our lost gross earnings during a business interruption, if we are unable to supply our customers with our products for an extended period of time, there can be no assurance that we will regain the customers’ business once the product supply is returned to normal. Our significant international operatingii tt . in countries outside the Uniteii d Statestt operations subject us to foreign currency fluctuations and other risks associatedtt withii A significant portion of our revenues, approximately 45% of 2021 consolidated net sales, were to customers outside the United States. We have sales subsidi aries in a significant number of countries in Europe as well as Australia, Canada, China, Japana and Korea. In those countries in which we have a direct presence, our sales are denominated in the local currency and those sales denominated in local currency amounted to approximately 34% of our total net sales in 2021. The remaining 11% of sales to customers outside the United States was on an export basis and transacted in United States dollars. u Because a significant portion of our operations consist of sales activities in jurisdictions outside the United States, 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. While we have a hedging strategy involving foreign currency forward contracts for 2021, our revenues and earnings are only partially protected from foreign currency translation if the United States dollar strengthens as compared with currencies such as the Euro. Further, as of the date of this Form 10-K, we have not entered into any foreign currency forward contracts beyond 2023. Our international presence exposes us to certain other inherent risks, including: • • • • • • • • imposition of limitations on conversions of foreign currencies into dollars or remittance of dividends and other payments by international subsidiaries; imposition or increase of withholding and other taxes on remittances and other payments by international subsidiaries; trade barriers and tariffs; compliance with economic sanctions, trade embargoes, export controls, and the customs laws and regulations of the many countries in which we operate; political risks, including political instabila reliance on third parties to distribute our products; hyperinflation in certain countries outside the United States; and imposition or increase of investment and other restrictions by foreign governments. ity; We cannot be certain that such risks will not have a material adverse effecff t on our business and results of operations. Our new products may fail to achieve expecxx ted levels of market rr tt acceptance. New product introductions may fail to achieve market acceptance. The degree of market acceptance forff will depend upon a number of factors, including: any of our products • • • • • • our ability to develop and introduce new products and product enhancements in the time frames we currently estimate; our ability to successfully implement new technologies; the market’s readiness to accept new products; having adequate financial and technological resources for future product development and promotion; the efficff the prices of our products compared to the prices of our competitors’ products. acy of our products; and If our new products do not achieve market acceptance, we may be unable to recover our investments and may lose business to competitors. In addition, some of the companies with which we now compete, or may compete in the future, have or may have more lities and significantly greater technical and personnel resources than extensive research, marketing and manufacturing capabi a 17 we do, and may be better positioned to continue to improve their technology in order to compete in an evolving industry. See “Products” in Item 1 - Business for a further discussion of these competm itive forces. Our Board of Direct tt may,a in the future, limi ors tii or discontinue ii ii ii payment of a dividend i on common stock. tt We have paid a quarterly dividend to our shareholders since 2012. However, we may not pay such dividends in the future at the prior rate, or at all. All decisions regarding our payment of dividends will be made by our Board of Directors from time to al requirements, applicable law, time, and are subject to an evaluation of our financial condition, results of operations and capita industry practice, contractual restraints and other business considerations. In addition, our senior credit agreement may restrict our ability to pay dividends, and the terms of agreements governing debt that we may incur in the future may also limit or prohibit dividend payments. We may not have sufficient surplus or net profits under Delaware law to be able to pay any dividends, which may result from extraordinary cash expenses, actual expenses exceeding contemplated costs, funding of capita or increases in reserves. al expenditures t tt Anti-tii akeov er provisions in our organization ii al documents and Delaware law could delay or prevent a change in control. Provisions of our certificate of incorporation and bylaws may delay or prevent a merger or acquisition that a shareholder may consider favorablea . These provisions include: • the ability of our board of directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without shareholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • the requirement that a special meeting of shareholders may be called only by the board of directors, the chair of the board of directors, the president, or stockholders holding at least 25% of our outstanding stock (subject to certain procedural and informational requirements), which may delay the ability of our shareholders to force consideration of a proposal or to take action; • the procedural safeguards in place in connection with stockholder action by written consent, including a requirement that stockholders of at least 25% of our outstanding common stock request that the board of directors set a record date to determine the stockholders entitled to act by written consent; • providing indemnification and exculpation rights to our directors and officers; • advance notice procedures that shareholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a shareholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us; and • exclusive forum provisions, including provisions providing for the Court of Chancery of the State of Delaware as the exclusive forum for bringing certain actions. As a Delaware corporation, we are also subject to Section 203 of the Delaware General Corporat ion Law, which provides that we may not engage in a business combination, such as a merger, consolidation, recapitalization, asset sale or disposition of stock, with any "interested stockholder" for a period of three years from the date that the interested stockholder first became an interested stockholder unless certain conditions are met. r Any provision of our certificate of incorporation and bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our shareholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock. Environi mental laws and regulati tt financial condition, e and resultsll of operations. ons and clima ll te change initiat ivtt es could materiallyll and adversely affect our business, tt ii Our business and facilities and those of our suppliers are subject to a number of federal, state, local and international laws and regulations governing the protection of human health and the environment. In addition, concern over climate change and sustainability has led to foreign and domestic legislative and regulatory initiatives directed at limiting carbon dioxide and other greenhouse gas emissions. A failure to comply with current or future environmental laws and regulations could result in fines or penalties. Any such expenses or liability could have a material adverse effect on our financial condition, results of operations or cash flows. 18 Our abilityii tt to attrac t and retain qualifiei d employees is cii ritiii cal to our success. CONMED’s employees are its most important resource, and in many areas of the medical industry,rr competition for qualified personnel is intense. CONMED seeks to attract talented and diverse new employees and retain and motivate its existing employees. If we are unable to continue to attract or retain qualified employees, including our executives, CONMED’s performance, including its competitive position, could be materially and adversely affected. Item 1B. Unresolved Staff Comments None. Item 2. Properties Facilities The following tablea ff sets forth certain information with respect to our principal operating facilities. We believe that our facilities are generally well maintained, are suitable to support our business and adequate forff present and anticipated needs. Location Square Feet Own or Lease Lease Expiration Utica, NY Largo, FL Chihuahua, Mexico Chihuahua, Mexico Lithia Springs, GA Brussels, Belgium Mississauga, Canada Greenwood Village, CO Westborough, MA Frenchs Forest, Australia 500,000 278,000 207,720 40,626 188,400 58,276 36,054 27,763 19,533 16,959 Own Own Lease Lease Lease Lease Lease Lease Lease Lease — — October 2024 March 2028 January 2025 June 2024 July 2031 July 2024 November 2025 July 2025 Our principal manufacturing facilities are located in Utica, NY, Largo, FL and Chihuahua, Mexico. Lithia Springs, GA and Brussels, Belgium are our principal distribution centers. We also maintain sales and administrative offices in countries throughout the world. Item 3. Legal Proceedings We are involved in various proceedings, legal actions and claims arising in the normal course of business, including property and other matters that are more fully described in Note 13. We proceedings related to product, labor and intellectual are not a party to any pending legal proceedings other than ordinary routine litigation incidental to our business. t Item 4. Mine Safety Disclosures . Not applicablea 19 PART II Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock, par value $.01 per share, is traded on the New York Stock Exchange ("NYSE"), effective February 10, 2020, under the symbol “CNMD”. Prior to this date, our common stock was traded on the NASDAQ Global 15, 2022, there were 484 registered holders of our common stock and Market under the same symbol. At Februaryrr approximately 43,137 accounts held in “street name”. Our Board of Directors has authorized a share repurchase program; see Note 9 for further details. The Board of Directors declared a quarterly cash dividend of $0.20 per share in 2020 and 2021. The fourth quarter dividend for 2021 was paid on January 5, 2022 to shareholders of record as of December 15, 2021. The total dividend payablea at December 31, 2021 was $5.9 million and is included in other current liabilities in the consolidated balance sheet. Future decisions as to the payment of dividends will be at the discretion of the Board of Directors. See "Item 1A. Risk Factors - Other Risk Factors Related to our Business - Our Board of Directors may, in the future, limit or discontinue payment of a dividend on common stock." Refer to Item 12 for information relating to compensation plans under which equity securities of CONMED ion are authorized for issuance. r Corporat 20 Performance Graph ff The performance graph below compares the cumulative five-year total shareholder return on the Company’s Common Stock with the cumulative total return of the S&P 500 Index and the Standard & Poor’s Health Care Equipment Index. In each case, the cumulative total return assumes reinvestment of dividends into the same class of equity securities at the freff quency with which dividends are paid on such securities during the applicable fisca l year. a Item 6. [Reserved] 21 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with our Consolidated FinFF ancial Statements att nd related notes contained elsewhere in this report. to This section of en 2021 and 2020. Discussions of 2019 items and year-to-year comparisons betwett ormFF 10-K can be found in “Management’s Discussion and Analysis on Form 10-K for the fiscff e iscusses 2021 and 2020 items and year-to-year comparisons en 2020 and 2019 that are not included of Financial Condition and Results of OperO ations” al year ended December 31, 2020. Item 7 of to he Company’s 10-K generally d ll Annual Report betwett in this Fii in Part II,II hitt s Fii ormFF m ll Overview of CONMED Corporation CONMED Corporation (“CONMED”, the “Company”, “we” or “us”) is a medical technology company that provides devices and equipment for surgical procedures. The Company’s products are used by surgeons and other healthcare professionals in a variety of specialties including orthopedics, general surgery, gynecology, thoracic surgery and gastroenterology. Our product lines consist of orthopedic surgery and general surgery. Orthopedic surgery consists of sports medicine instrumentation and small bone, large bone and specialty powered surgical instruments as well as, imaging systems forff use in minimally invasive surgical procedures and fees related to the promotion and marketing of sports medicine allograft tissue. General surgery consists of a complete line of endo-mechanical instrumentation for minimally invasive laparoscopi c and gastrointestinal procedures, smoke evacuation devices, a line of cardiac monitoring products as well as electrosurgical generators and related instruments. These product lines as a percentage of consolidated net sales are as follows: a Orthopedic surgery General surgery Consolidated net sales 2021 2020 2019 43 % 57 100 % 43 % 57 00 % 1 49 % 51 100 % A significant amount of our products are used in surgical procedures with approxim ately 81% of our revenues derived from the sale of single-use products. Our capita al equipment offerings also facilitate the ongoing sale of related single-use 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 45% in 2021, 44% in 2020 and 46% in 2019. a COVID-19 Our business continues to be impacted by the COVID-19 pandemic as variants of the virus emerge, with hospitals and surgery centers reducing the number of, or postponing, non-urgent surgical procedures in order to minimize the risk of infection and allow for proper staffing. We continue to restrict access to our facilities while maintaining production and distribution. While revenues increased in 2021 compared to 2020, we believe we will continue to experience market variability as a result of the pandemic that could influence sales, suppliers, patients and customers. There remains significant uncertainty related to the COVID-19 pandemic, including the duration and severity of future impacts to the business. See "Item 1A. Risk Factors" for more information. For additional discussion regarding COVID 19, see Liquidity and Capia tal Resources below. Critical Accounting Policies Preparation of our financial statements requires us to make estimates and assumptim ons which affect the reported amounts of assets, liabilities, revenues and expenses. Note 1 describes the significant accounting policies used in preparation of the consolidated finaff ncial 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. Actual results may or may not differ fromff these estimates. t 22 Goodwill and Intangible Assets 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. Factors that contribute to the recognition of goodwill include synergies that are expected to increase net sales and profits; acquisition of a talented workforce; cost savings opportunities; the strategic benefit of expanding our presence in core and adjacent markets; and diversifying our product portfolio. Customer and distributor relationships, trademarks, tradenames, developed technology, patents and other intangible assets primarily represent allocations of purchase price to identifiablea intangible assets of acquired businesses. Sales representation, marketing and promotional rights represent intangible assets created under our agreement with Musculoskeletal Transplant Foundation (“MTF”). Determining the fair value of intangible assets acquired as part of a business combination requires us to make significant estimates. These estimates include the amount and timing of projected future cash flows of each project or technology, revenue growth rates, projected cost of sales, customer attrition rates, the discount rate used to discount those cash flows to present value, the assessment of the asset’s useful life, and the consideration of legal, technical, regulatory, economic, and competitive risks. As these are significant estimates, we would obtain the assistance of a third-party valuation specialist in estimating fair values of intangible assets for significant acquisitions. 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 business. Estimates of fair value are based on the best information available as of the date of the assessment. We completed our goodwill impairment testing of our single reporting unit during the fourth quarter of 2021. We performed our impairment test utilizing the market capia talization approach to determine whether the fair value of a reporting unit is less than its carrying amount. Based upon our assessment, the fair value of our reporting unit continues to exceed carrying 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 to amortization are reviewed for impairment whenever events or changes in amortization. . The carrying amount of an intangible asset subject to circumstances indicate that its carrying amount may not be recoverablea amortization is not recoverablea if it exceeds the sum of the undiscounted cash flows expected to result from the use of the asset. An impaim rment loss is recognized by reducing the carrying amount of the intangible asset to its current fair value. Intangible assets subject For all other indefinite-lived intangible assets, we perforff m a qualitative impairment test. Based upon this assessment, we have determined that our indefinite-lived intangible assets are not impaired. See Note 6 for further discussion of goodwill and other intangible assets. Pension Plan We sponsor a defined benefit pension plan (the “pension plan”) that was frozen in 2009. It covered substantially all In conjunction with the pension plan, we recorded a pension our United States based employees at the time it was frozen. benefit obligation totaling $95.5 million as of December 31, 2021. In accounting for this pension plan, we are required to make a number of assumptim ons, including the discount rate and mortality. The discount rate represents the interest rate used in estimating the present value of projected cash flows to settle the Company’s pension obligations. The discount rate assumptim on is determined by using a full yield curve approach, which involves applying the specific spot rates along the yield curve used in the determination of the benefit obligation that correlates to the relevant projected cash flows. The mortality assumptim ons are based on the Pri-2012 Mortality Tabla es using the MP-2021 mortality improvement scale. In performing a sensitivity analysis on the pension benefit obligation, a 0.25% increase in our discount rate would decrease the pension benefit obligation by $2.6 million and a 0.25% decrease in the discount rate would increase the pension benefit obligation by $2.7 million. See Note 12 for further discussion of the pension plan. 23 Consolidated Results of Operations The following tablea presents, as a percentage of net sales, certain categories included in our consolidated statements of comprehensive income for the periods indicated: Net sales Cost of sales Gross profit Selling and administrative expense Research and development expense Income fromff operations Interest expense Other expense Income beforeff income taxes Provision (benefit) for income taxes Net income Net Sales Years Ended December 31, 2020 100.0 % 46.6 53.4 43.3 2021 100.0 % 43.8 56.2 41.0 2019 100.0 % 45.1 54.9 41.9 4.3 10.9 3.5 0.1 7.2 1.0 6.2 % 4.7 5.3 5.1 — 0.2 (0.9) 1.1 % 4.8 8.3 4.5 0.5 3.3 0.3 3.0 % The following tablea presents net sales by product line for the years ended December 31, 2021, 2020 and 2019: Orthopedic surgery General surgery Net sales Single-use products Capita al products Net sales Orthopedic surgery General surgery Net sales Single-use products Capita al products Net sales $ $ $ $ $ $ $ $ % Change from 2021 to 2020 Impact of Foreign Currency 2021 2020 As Reported 438.4 572.2 1,010.6 820.1 190.5 1,010.6 $ $ $ $ 374.7 487.8 862.5 703.0 159.5 862.5 17.0% 17.3% 17.2% 16.7% 19.5% 17.2% -1.3% -0.6% -0.9% -0.9% -1.1% -0.9% Constant Currency a 15.7% 16.7% 16.3% 15.8% 18.4% 16.3% % Change from 2020 to 2019 Impact of Foreign Currency 2020 2019 As Reported 374.7 487.8 862.5 703.0 159.5 862.5 $ $ $ $ 463.3 491.8 955.1 756.3 198.8 955.1 -19.1% -0.8% -9.7% -7.0% -19.8% -9.7% 0.7% 0.1% 0.4% 0.4% 0.2% 0.4% Constant Currency a -18.4% -0.7% -9.3% -6.6% -19.6% -9.3% (a) Refer to Non-GAAP Financial Measures below for further details. 24 Net sales increased 17.2% to $1,010.6 million in 2021 from $862.5 million in 2020 driven by increases across all product lines as the COVID-19 pandemic had a significant impact on sales during 2020 as hospitals and surgery centers deferred non-urgent surgeries. • • Orthopedic surgery sales increased 17.0% in 2021 to $438.4 million from $374.7 million in 2020 as procedure volumes returned to more normal levels in 2021 after a 2020 which was significantly impacted by the COVID-19 pandemic. t General surgeryrr sales increased 17.3% in 2021 to $572.2 million from $487.8 million in 2020. The increase was mainly driven by continued growth in our advanced surgical products, including our AirSeal® and Buffalo Filter® products, and our advanced endoscopic technology products. Cost of Sales Cost of sales was $442.6 million in 2021 compared to $402.2 million in 2020. Gross profit margins were 56.2% in 2021 and 53.4% in 2020. The increase in gross profit margin of 2.8 percentage points in 2021 was driven by an increase in sales and more favorablea product mix as well as the absence in 2021 of certain costs incurred in 2020 including the following: • • • • • $6.6 million in costs related to plant underutilization due to abnormally low production as a result of decreased sales caused by the COVID-19 pandemic; $4.0 million in costs related to the consolidation of manufacturing operations including winding down operations at certain locations and moving production lines to other facilities; $2.8 million in costs related to inventory step-up adjustments from a previous acquisition; $2.2 million in costs related to product rationalization; and $1.1 million in restructuring costs related to a voluntary separation arrangement as a result of the COVID-19 pandemic. Refer to Note 14 for further details. Selling and Administrative Expense Selling and administrative expense was $414.8 million in 2021 compared to $373.8 million in 2020. Selling and administrative expense as a percentage of net sales was 41.0% in 2021 and 43.3% in 2020. The decrease in selling and administrative expense as a percentage of net sales in 2021 was mainly driven by higher sales in 2021 while continuing to manage our expense levels in response to the COVID-19 pandemic. In addition, 2020 included the following expenses: • • • $4.8 million in severance costs related to a voluntary termination program and costs associated with the restructuring of our Orthopedic sales force; a $2.1 million write-off of field inventory used for customer demonstration and evaluation of products resulting from the product rationalization initiative; and $1.2 million in severance and integration costs mainly related to the Buffalo Filter acquisition. Research and Development Expense Research and development expense was $43.6 million in 2021 and $40.5 million in 2020. As a percentage of net sales, research and development expense was 4.3% in 2021 and 4.7% in 2020. The lower spend as a percentage of net sales in 2021 was driven by higher sales in 2021. Interest Expense Interest expense decreased to $35.5 million in 2021 compared to $44.1 million in 2020. The weighted average interest rates on our borrowings were 2.76% in 2021 decreasing from 3.65% in 2020. The decrease in interest expense is primarily due to decreases in our weighted average interest rates compared to prior year driven by lowering borrowings and lower interest rates as a result of the seventh amended and restated senior credit agreement. Other Expense 25 Other expense during the year ended December 31, 2021 was related to costs associated with our seventh amended and restated senior credit agreement entered into July 16, 2021, as further described in Note 7. These costs included $1.1 million related to a loss on the early extinguishment of debt and third party fees. Provision for Income Taxes A provision (benefit) for income taxes was recorded at an effective rate of 14.4% and (493.9)% in 2021 and 2020, respectively. As compared to the federal statutory rate of 21.0%, the 2021 effective tax rate was lower primarily due to benefits from federal tax items including stock compensation and changes in the valuation allowance relating to certain foreign operations. The 2020 effective tax rate was lower than the federal statutory rate primarily due to benefits from federal tax items including stock compensation and tax regulations regarding United States tax on foreign earnings at different rates as well as settlements with taxing authorities. A reconciliation of the United States statutory income tax rate to our effective tax rate is included in Note 8. Non-GAAP Financial Measures Net sales on a "constant currency" basis is a non-GAAP measure. The Company analyzes net sales on a constant currency basis to better measure the comparability of results between periods. To measure percentage sales growth in constant currency, the Company removes the impact of changes in foreign currency exchange rates that affect the comparability and trend of net sales. Because non-GAAP financial measures are not standardized, it may not be possible to compare this financial measure with other companies' non-GAAP financial measures having the same or similar names. This adjud sted financial measure should GAAP financial not be considered in isolation or as a substitute for reported net sales growth, the most directly comparablea measure. This non-GAAP financial measure is an additional way of viewing net sales that, when viewed with our GAAP results, provides a more complete understanding of our business. The Company strongly encourages investors and shareholders to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. Liquidity and Capital Resources Our liquidity needs arise primarily from capita al requirements and payments on indebtedness under the seventh amended and restated senior credit agreement, described below. 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 amended and restated 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. investments, working capita al We had total cash on hand at December 31, 2021 of $20.8 million, of which approximately $17.7 million was held by our foreign subsidiaries outside the United States with unremitted earnings. During 2021, we redeployed $28.2 million of cash from certain non-U.S. subsidiaries primarily for U.S. debt reduction which consisted primarily of earnings that were taxed in 2017 as part of the deemed repatriation toll charge implemented by Tax Reform. We may repatriate funds from certain foreign subsidiaries in the future. Refer to Note 8 for further details. Operating Cash Flows Our net working capita al position was $263.5 million at December 31, 2021. Net cash provided by operating activities was $111.8 million in 2021 and $64.5 million in 2020 generated on net income of $62.5 million in 2021 and $9.5 million in 2020. The increase in cash provided by operating activities in 2021 as compared to 2020 was mainly driven by higher sales and net income in 2021 as the COVID-19 pandemic had a negative impact on sales during 2020. Significant impacts to operating cash flows include: • • • • • based on the timing of sales and cash receipts; A decrease in cash flows from accounts receivablea A decrease in cash flows from inventory as we increased inventory levels to mitigate inventory supply challenges; A decrease in cash flows from other assets primarily related to higher field inventory requirements due to more sales force activity in 2021; An increase in cash flows from accounts payable is primarily due to the timing of payments; and An increase in cash from accrued compensation and benefits caused by higher commissions and incentive compensation accrual s associated with increased sales. r 26 Investing Cash Flows Net cash used in investing activities increased to $14.9 million in 2021 compared to $13.6 million in 2020 primarily due to higher capita al expenditures t in 2021 compared to 2020. Financing Cash Flows Financing activities in 2021 used cash of $101.5 million compared to $52.1 million in 2020. Below is a summaryrr of the significant financing activities impacting the change during 2021 compared to 2020: • We had net payments on our revolving line of credit of $67.0 million, inclusive of the impact of the seventh amended and restated senior credit agreement, compared to $13.0 million in net payments during 2020. • We had net payments on our term loan of $14.2 million, inclusive of a $52.4 million impact on both borrowings and repayments between independent counterparties associated with the seventh amended and restated credit agreement, compared to $13.3 million in payments during the prior year. • We paid $6.2 million and $2.7 million in 2021 and 2020, respectively, in contingent consideration related to prior acquisitions. Other Liquidity Matters Our cash balances and cash flows generated from operations may be used to fund strategic investments, business acquisitions, working capita al needs, research and development, common stock repurchases and payments of dividends to our shareholders. Management believes that cash flow from operations, including cash and cash equivalents on hand and available ity under our seventh amended and restated senior credit agreement, will be adequate to meet our anticipated borrowing capac a al expenditures, dividend payments and common stock operating working capita al requirements, debt service, funding of capita repurchases in the foreseeable future. In addition, management believes we could access capita al markets, as necessary, to fund future business acquisitions. We continue to monitor our spending and expenses in light of our expectation that our revenues will continue to be impacted by the pandemic. While the results of operations support continued recovery, there remains uncertainty in the financial markets related to the COVID-19 pandemic which may have an impact on the demand for post-pandemic surgery t to predict. If the downturn is more severe and prolonged than we currently expect, we may need to take levels that are difficul further steps to reduce our costs, or to refinance our debt. See “Item 1A. Risk Factors - Risks Related to Our Indebtedness." ff On July 16, 2021, we entered into a seventh amended and restated senior credit agreement which extends the maturity interest rate margins and of the term loan and revolving credit facilities to July 16, 2026 and reduced the applicablea commitment fees on the borrowings. There were $227.6 million in borrowings outstanding on the term loan facility as of December 31, 2021. There were $140.0 million in borrowings outstanding under the revolving credit facility as of December 31, 2021. Our available borrowings on the revolving credit facility at December 31, 2021 were $442.5 million with approximately $2.5 million of the facility set aside for outstanding letters of credit. The seventh amended and restated 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, 2021. We are also required, under certain circumstances, to make mandatory prepayments from net cash proceeds from any issuance of equity and asset sales. See Note 7 for further information on our financing agreements and outstanding debt obligations. Our Board of Directors has authorized a $200.0 million share repurchase program. Through December 31, 2021, we have repurchased a total of 6.1 million shares of common stock aggregating $162.6 million under this authorization and have $37.4 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 have not purchased any shares of common stock under the share repurchase program during 2021. We have financed the repurchases and may finance additional repurchases through operating cash flow and from available borrowings under our revolving credit facility. 27 The Board of Directors declared a quarterly cash dividend of $0.20 per share in 2020 and 2021. Future decisions as to the payment of dividends will be at the discretion of the Board of Directors. See "Item 1A. Risk Factors - Other Risk Factors Related to our Business - Our Board of Directors may, in the future, limit or discontinue payment of a dividend on common stock." We expect an increased level of capita al spending during the year ending December 31, 2022 compared to 2021. al spending will be monitored and controlled as the year progresses. We expect to use operating cash flows to satisfy al spending requirements. Capita capita The following tablea summarizes our contractual obligations for the next fivff e years and thereafter (amounts in thousands) as of December 31, 2021. Purchase obligations represent purchase orders for goods and services placed in the ordinary course of business. Payments Due by Period 1-3 Years Less than 1 Year 3-5 Years More than 5 Years Total Long-term debt Purchase obligations Lease obligations Total contractual obligations $ $ 712,569 141,854 22,741 877,164 $ $ 11,925 138,401 7,486 157,812 $ $ 380,775 3,337 10,635 394,747 $ $ 319,869 116 2,445 322,430 $ $ — — 2,175 2,175 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 Item 7A. “Quantitative and Qualitative Disclosures About Market Risk—kk Interest Rate Risk” and Note 7). The above tablea mately $0.2 million, the timing and certainty of recognition for which is not known (See Note 8). also does not include unrecognized tax benefits of approxi a Stock-based Compensation We have reserved shares of common stock for issuance to employees and directors under two shareholder-approved share-based compensation plans (the "Plans"). The Plans provide for grants of stock 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 stock options and SARs is equal to the quoted faiff r 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 generally non-transferable other than on death and generally become exercisable over a four 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 9). Total pre-tax stock-based compensation expense recognized in the consolidated statements of comprehensive income was $16.3 million, $13.1 million and $11.8 million for the years ended December 31, 2021, 2020 and 2019, respectively. to five year period fromff a ff Other Matters Through April 1, 2020, our credit facility allowed us to seek to sell products to certain customers in Iran in compliance by us and our lenders with applicable laws and regulations and subject to certain terms and conditions, including pre-approval of the identity of any distributor and prior review of each of the end-customers. We had sales to a third-party distributor in Iran during the first quarter of 2020. We limited such sales into Iran to products that qualified as “medical suppli es” within the meaning of the general license, or covered by specific licenses, provided by the Iranian Transactions and Sanctions Regulations set forth in the regulations promulgated by the Office of Foreign Assets Control (“OFAC”) of the United States Department of the Treasury set forth at 31 C.F.R. § 560.530. We have implemented certain controls and processes designed to ensure that the ultimate end-users for the products are those permitted under the OFAC general license, and that the sales and transactions with the Iranian distributor otherwise comply with the requirements of the OFAC regulations. The expected revenues and net profits associated with sales to the Iranian distributor were not material to our overall results of operations. u a We do not believe that our activities to date have been subject to required disclosure under Section 13(r) of the Securities Exchange Act of 1934 (the “Exchange Act”), which, among other things, requires disclosure of transactions and entered into with the Government of Iran that do not benefit from an OFAC license and with certain k activities knowingly 28 designated parties. If, however, activities are in the future discovered to be within the scope of the transactions and activities a capture d by Section 13(r) of the Exchange Act, we will make the required disclosures and notices. New Accounting Pronouncements See Note 17 for a discussion of new accounting pronouncements. Item 7A. 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 45% of our total 2021 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, Japan and Korea. In those countries in which we have a direct presence, our sales are denominated in the local currency amounting to approximately 34% of our total net sales in 2021. The remaining 11% of sales to customers outside the United States was on an export basis and transacted in United States dollars. Because a significant portion of our operations consist of sales activities in foreign jurisdictions, our financial results may be affect ed by factors such as changes in foreign currency exchange rates or weak economic conditions in the markets in ff which we distribute products. During 2021, foreign currency exchange rates, including the effects of the hedging program, caused sales to increase by approximately $8.2 million. We hedge forecasted intercompany sales denominated in foreign currencies through the use of forward contracts. We account for these forward contracts as cash flow hedges. To the extent these forward contracts meet hedge accounting criteria, changes in their fair value are not included in current earnings but are included in accumulated other comprehensive loss. These changes in fair value will be recognized into earnings as a component of sales or cost of sales when the forecasted transaction occurs. We also enter into forward contracts to exchange foreign currencies for United States dollars in order to hedge our currency transaction exposures on intercompany receivables 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. Refer to Note 16 for further discussion. Interest rate risk At December 31, 2021, we had approximately $367.6 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 2022 interest expense would increase, and income before income taxes would decrease by $4.1 than they did in 2021, million. Comparatively, if market interest rates for similar borrowings average 1.0% less in 2022 than they did in 2021, our interest expense would decrease, and income before income taxes would increase by $4.1 million. Item 8. Financial Statements and Supplementary Data Our 2021 Financial Statements are included in this Form 10-K beginning on page 39 and incorporated by reference herein. Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosures There were no changes in or disagreement with accountants on accounting and financial disclosure. 29 Item 9A. Controls and Procedures As of the end of the period covered by this report, an evaluation was carried out by CONMED Corporation’s management, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective as of the end of the period covered by this report. In addition, no change in our internal control over financial reporting (as defined in Rule 13a-15 under the Securities Exchange Act of 1934) occurred during the fourth quarter of the year ended December 31, 2021 that has materially affecff ted, or is reasonably likely to materially affect, our internal control over financial reporting. c Management’s Report on Internal Control over Financial Reporting and the Report of Independent Registered Publiu Accounting Firm thereon are set forth in Part IV, Item 15 of the Annual Report on Form 10-K. Item 9B. Other Information Not applicable. 30 Item 10. Directors, Executive Officers and Corporate Governance PART III The information required by this item is incorporated herein by reference to the sections captia oned “Proposal One: Election of Directors”, “Directors, Executive Officers, Other Company Officers and Nominees forff the Board of Directors”, “Delinquent Section 16(a) Reports", “Ethics Disclosure” and "Meetings of the Board of Directors and Committees, Leadership Structure and Risk Oversight” in CONMED Corporation’s definitive Proxy Statement or other informational filff ing to be filed with the Securities and Exchange Commission on or about April 15, 2022. Item 11. Executive Compensation The information required by this item is incorporated herein by reference to the sections captia oned “Compensation Discussion and Analysis”, “Compensation Committee Report on Executive Compensation”, “Summary Compensation Tablea ”, “Grants of Plan-Based Awards”, “Outstanding Equity Awards at Fiscal Year-End”, “Option Exercises and Stock Vested”, “Non-Qualified Deferred Compensation”, “Potential Payments on Termination or Change in Control”, “Director Compensation,” “Pay Ratio” and “Board of Directors and Compensation Committee Interlocks and Insider Participation; Certain Relationships and Related Transactions” in CONMED Corporation’s definitive Proxy Statement or other informational filing to be filed with the Securities and Exchange Commission on or about April 15, 2022. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this item is incorporated herein by reference to the section captia oned “Security Ownership of Certain Beneficial Owners and Management” in CONMED Corporation’s definitive Proxy Statement or other informational filing to be filed with the Securities and Exchange Commission on or about April 15, 2022. Information relating to shareholder approved compensation plans under which equity securities of CONMED Corporation are authorized forff issuance is set fort ff h below: Equity Compensation Plan Information 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 refleff cted in column (a)) (c) 3,264,061 $ — 3,264,061 80.79 — 80.79 3,398,344 — 3,398,344 Plan category Equity compensation plans approved by security holders Equity compensation plans not approved by security holders Total Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this item is incorporated herein by reference to the section captioned “Directors, Executive Officers and Nominees forff the Board of Directors” and “Board of Directors and Compensation Committee Interlocks and Insider Participation; Certain Relationships and Related Transactions” in CONMED Corporation’s definitive Proxy Statement or other informational filing to be filed with the Securities and Exchange Commission on or about April 15, 2022. Item 14. Principal Accounting Fees and Services The information required by this item is incorporated herein by reference to the section captia oned “Principal Accounting Fees and Services” in CONMED Corporation’s definitive Proxy Statement or other informational filff ing to be filed with the Securities and Exchange Commission on or about April 15, 2022. 31 PART IV Item 15. Exhibits, Financial Statement Schedules Index to Financial Statements (a)(1) List of Financial Statements Page in Form 10-K Management’s Report on Internal Control Over Financial Reporting Report of Independent Registered Public Accounting Firm (PCAOB ID 238) Consolidated Balance Sheets at December 31, 2021 and 2020 Consolidated Statements of Comprehensive Income forff 2020 and 2019 the Years Ended December 31, 2021, Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2021, 2020 and 2019 Consolidated Statements of Cash Flows forff 2019 the Years Ended December 31, 2021, 2020 and Notes to Consolidated Financial Statements (2) List of Financial Statement Schedules Valuation and Qualifying Accounts (Schedule II) for the Years Ended December 31, 2021, 2020 and 2019 All other schedules have been omitted because they are not applicable, or the required information is shown in the financial statements or notes thereto. (3) List of Exhibits The exhibits listed on the accompanying Exhibit Index on page 35 below are fileff d as part of this Form 10-K. 39 40 42 43 44 45 47 75 32 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CONMED CORPORATIRR ON y By: /s/ Curt R. Hartman Curt R. Hartman (Chair of the Board, President and Chief Executive Offiff cer) Date: rr February 22, 2022 33 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capac a ities and on the dates indicated. Signature g Title Date /s/ CURT R. HARTMAN Curt R. Hartman AA hair of the Board, President & C Chief Executive Officer /s/ TODD W. GARNERR R Todd W. Garner Executive Vice President and Chief Financial Officer /s/ TERENCE M. BERGE Terence M. Berge Vice President- Corporate Controller rr February 22, 2022 February 2rr 2, 2022 February 2rr 2, 2022 /s/ MARTHA GOLDBERG ARONSON Martha Goldberg Aronson Lead Independent Director Februaryrr 22, 2022 /s/ DAVID BRONSON David Bronson /s/ BRIAN P. CONCANNON Brian P. Concannon /s/ LAVERNE COUNCIL Laverne Council /s/ CHARLES M. FARKAS Charles M. Farkas /s/ JEROME J. LANDE AA Jerome J. Lande /s/ BARBARA SRR Barbara Schwarzentraub CHWARZENTRAUB RR /s/ MARK E. TRYNISKI Mark E. Tryniski rr /s/ JOHN L. WORKMAN John L. Workman rr February 22, 2022 February 22, 2022 February 22, 2022 February 22, 2022 February 22, 2022 February 22, 2022 February 22, 2022 February 22, 2022 Director Director Director Director Director Director Director Director 34 Exhibit No. Exhibit Index Description p 2.1 3.1 3.2 4.1* 10.1+ 10.2+ 10.3 10.4 10.5 10.6 10.7 10.8 10.9 10.10 10.11 - - - - - - - - - - - - - - Agreement and Plan of Merger, dated May 21, 2020, by and between CONMED Corporation, a New York corporation, and CONMED Corporation, a Delaware corporation (Incorporated by reference to Exhibit 2.1 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 22, 2020). By-laws of CONMED Corporation, a Delaware corporation (Incorporated by reference to Exhibit 3.2 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 22, 2020). Certificate of Incorporation of CONMED Corporation, a Delaware corporation (Incorporated by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 22, 2020 ). Description of the Common Stock of CONMED Corporation, a Delaware corporation. Employment Agreement between the Company and Curt R. Hartman, dated November 9, 2014 (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 10, 2014). Amendment Number 1 to Employment Agreement between CONMED Corporation and Curt R. Hartman dated December 28, 2020 (Incorporated by reference to Exhibit 10.2 of the Company's Annual Report on Form 10-K for the year ended December 31, 2020). Amended and Restated 1999 Long Term Incentive Plan (Incorporated by reference to Exhibit 4.3 of the Company’s Registration Statement on Form S-8 on November 3, 2009). 2002 Employee Stock Purchase Plan (Incorporated by reference to the Company’s Definitive Proxy Statement for the 2002 Annual Meeting filed with the Securities and Exchange Commission on April 17, 2002). Amendment to CONMED Corporation 2002 Employee Stock Purchase Plan (Incorporated by reference to Exhibit 10.11 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2005). CONMED Corporation Amended and Restated 2020 Employee Stock Purchase Plan (incorporated by reference to Exhibit E of the Registrant’s Proxy Statement on Schedule 14A filed on April 10, 2020). 2006 Stock Incentive Plan (Incorporated by reference to Exhibit 4.3 of the Company’s Registration Statement on Form S-8 on August 8, 2006). Amended and Restated 2007 Non-Employee Director Equity Compensation Plan of CONMED Corporation (Incorporated by reference to Exhibit 4.3 of the Company’s Registration Statement on Form S-8 on August 3, 2010). Amended and Restated Long Term Incentive Plan (Incorporated by reference to Exhibit 4.3 of the Company’s Registration Statement on Form S-8 on July 27, 2012). CONMED Corporation Executive Severance Plan (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 10-Q filed with the Securities and Exchange Commission on July 27, 2015). Amended and Restated 2015 Long-Term Incentive Plan (Incorporated by reference to Exhibit 4.3 of the Company's Registration Statement on Form S-8 on October 23, 2015). 35 10.12 10.13 10.14 10.15 10.16 10.17 10.18 10.19 10.20 10.21 10.22 10.23+ 10.24+ 10.25+ - - - - - - - - - - - - - Amended and Restated 2016 Non-Employee Director Equity Compensation Plan (Incorporated by reference to Exhibit 4.3 of the Company's Registration Statement on Form S-8 on October 28, 2016). Amended and Restated 2020 Non-Employee Director Equity Compensation Plan of CONMED Corporation (incorporated by reference to Exhibit D of the Registrant’s Proxy Statement on Schedule 14A filed on April 10, 2020). 2018 Long-Term Incentive Plan (incorporated by reference to Exhibit 4.3 of the Registrants Form S-8 filed on November 5, 2018). Guarantee and Collateral Agreement, dated August 28, 2002, made by CONMED Corporation and certain of its subsidiaries in favor of JP Morgan Chase Bank (Incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002). First Amendment to Guarantee and Collateral Agreement, dated June 30, 2003, made by CONMED Corporation and certain of its subsidiaries in favor of JP Morgan Chase Bank and the several banks and other financial institutions or entities from time to time parties thereto (Incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003). Second Amendment to Guarantee and Collateral Agreement, dated April 13, 2006, made by CONMED Corporation and certain of its subsidiaries in favor of JP Morgan Chase Bank and the several banks and other financial institutions or entities from time to time parties thereto (Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 19, 2006). Third Amendment to Guarantee and Collateral Agreement, dated as of January 17, 2013, made by CONMED Corporation and certain of its subsidiaries in favor of JP Morgan Chase Bank (Incorporated by reference to Exhibit 4.6 of the Company's Annual Report on Form 10-K for the year ended December 31, 2012). Fourth Amendment to Guarantee and Collateral Agreement, dated as of January 4, 2016, made by CONMED Corporation and certain of its subsidiaries in favor of JP Morgan Chase Bank (Incorporated by reference to Exhibit 10.2 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 4, 2016). Fifth Amendment to Guarantee and Collateral Agreement, dated as of July 16, 2021, made by CONMED Corporation and certain of its subsidiaries in favor of JPMorgan Chase Bank, N.A., as administrative agent (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 16, 2021). Seventh Amended and Restated Credit Agreement, dated as of July 16, 2021, among CONMED Corporation, the foreign subsidiary borrowers from time to time party thereto, the several lenders from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 16, 2021). Sports Medicine Joint Development and Distribution Agreement by and between Musculoskeletal Transplant Foundation, Inc. and CONMED Corporation dated as of January 3, 2012 (Incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K dated January 3, 2012). Employment Agreement between the Company and Patrick Beyer, dated April 25, 2019 (Incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2019). Offer Letter from CONMED Corporation to Todd W. Garner dated January 2, 2018. (Incorporated by reference to Exhibit 10.2 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 2, 2018). Amendment Number 1 to Offer Letter from CONMED Corporation to Todd W. Garner dated December 28, 2020 (Incorporated by reference to Exhibit 10.27 on the Company's Annual Report on Form 10-K for the year ended December 31, 2020). 36 10.26 10.27 10.28 10.29 10.30 10.31 10.32 10.33 10.34 10.35 10.36 10.37 10.38 10.39 10.40 - - - - - - - - - - - - - - - Stock Option Inducement Award (incorporated by reference to Exhibit 4.3 of the Registrants Form S-8 filed on February 27, 2018). Restricted Stock Unit Inducement Award (incorporated by reference to Exhibit 4.4 of the Registrants Form S-8 filed on February 27, 2018). Securities Purchase Agreement, dated as of December 13, 2018, by and between CONMED Corporation and Filtration Group FGC LLC (Incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on December 13, 2018). Indenture, dated as of January 29, 2019, by and between CONMED Corporation and MUFG Union Bank, N.A., as trustee (Incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 29, 2019). Base Notes Hedge Transaction Confirmation, dated as of January 24, 2019, between CONMED Corporation and Barclays Bank PLC (Incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 29, 2019). Base Notes Hedge Transaction Confirmation, dated as of January 24, 2019, between CONMED Corporation and Bank of America, N.A (Incorporated by reference to Exhibit 10.2 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 29, 2019). Base Notes Hedge Transaction Confirmation, dated as of January 24, 2019, between CONMED Corporation and Wells Fargo Bank, National Association (Incorporated by reference to Exhibit 10.3 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 29, 2019). Base Notes Hedge Transaction Confirmation, dated as of January 24, 2019, between CONMED Corporation and J.P. Morgan Securities LLC, as agent for JPMorgan Chase Bank, National Association, London Branch (Incorporated by reference to Exhibit 10.4 of the Company's Current Report on Form 8- K filed with the Securities and Exchange Commission on January 29, 2019). Base Warrant Transaction Confirmation, dated as of January 24, 2019, between CONMED Corporation and Barclays Bank PLC (Incorporated by reference to Exhibit 10.5 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 29, 2019). Base Warrant Transaction Confirmation, dated as of January 24, 2019, between CONMED Corporation and Bank of America, N.A (Incorporated by reference to Exhibit 10.6 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 29, 2019). Base Warrant Transaction Confirmation, dated as of January 24, 2019, between CONMED Corporation and Wells Fargo Bank, National Association (Incorporated by reference to Exhibit 10.7 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 29, 2019). Base Warrant Transaction Confirmation, dated as of January 24, 2019, between CONMED Corporation and J.P. Morgan Securities LLC, as agent for JPMorgan Chase Bank, National Association, London Branch (Incorporated by reference to Exhibit 10.8 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 29, 2019). Additional Notes Hedge Transaction Confirmation, dated as of January 25, 2019, between CONMED Corporation and Barclays Bank PLC (Incorporated by reference to Exhibit 10.9 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 29, 2019). Additional Notes Hedge Transaction Confirmation, dated as of January 25, 2019, between CONMED Corporation and Bank of America, N.A. (Incorporated by reference to Exhibit 10.10 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 29, 2019). Additional Notes Hedge Transaction Confirmation, dated as of January 25, 2019, between CONMED Corporation and Wells Fargo Bank, National Association (Incorporated by reference to Exhibit 10.11 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 29, 2019). 37 10.41 10.42 10.43 10.44 10.45 14 21* 23* 31.1* 31.2* 32.1* 101.INS* 101.SCH* 101.CAL* 101.DEF* 101.LAB* 101.PRE* 104* - - - - - - - - - - - - - - - - Additional Notes Hedge Transaction Confirmation, dated as of January 25, 2019, between CONMED Corporation and J.P. Morgan Securities LLC, as agent for JPMorgan Chase Bank, National Association, London Branch (Incorporated by reference to Exhibit 10.12 of the Company's Current Report on Form 8- K filed with the Securities and Exchange Commission on January 29, 2019). Additional Warrant Transaction Confirmation, dated as of January 25, 2019, between CONMED Corporation and Barclays Bank PLC (Incorporated by reference to Exhibit 10.13 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 29, 2019). Additional Warrant Transaction Confirmation, dated as of January 25, 2019, between CONMED Corporation and Bank of America, N.A. (Incorporated by reference to Exhibit 10.14 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 29, 2019). Additional Warrant Transaction Confirmation, dated as of January 25, 2019, between CONMED Corporation and Wells Fargo Bank, National Association (Incorporated by reference to Exhibit 10.15 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 29, 2019). Additional Warrant Transaction Confirmation, dated as of January 25, 2019, between CONMED Corporation and J.P. Morgan Securities LLC, as agent for JPMorgan Chase Bank, National Association, London Branch (Incorporated by reference to Exhibit 10.16 of the Company's Current Report on Form 8- K filed with the Securities and Exchange Commission on January 29, 2019). Code of Ethics. The CONMED code of ethics may be accessed via the Company’s website at http:t www.conmed.com/en/about-us/ investors/investor-relations a // Subsidiaries of the Registrant. Consent of Independent Registered Public Accounting Firm. Certification of Curt R. Hartman pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Certification of Todd W. Garner. pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Certifications of Curt R. Hartman and Todd W. Garner pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. XBRL Taxonomy Extension Schema Document XBRL Taxonomy Extension Calculation Linkbase Document XBRL Taxonomy Extension Definition Linkbase Document XBRL Taxonomy Extension Labea l Linkbase Document XBRL Taxonomy Extension Presentation Linkbase Document Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document (included in Exhibit 101) * Filed herewith + Management contract or compensatory plan or arrangement 38 MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING shing and maintaining adequate internal control over The management of CONMED Corporation is responsible for establia financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliabila ity 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 detail, accurately and fairly reflect transactions and dispositions of pertain to the maintenance of records that, in reasonablea 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 assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that reasonablea could have a material effeff ct 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, 2021. 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”, released in 2013. Management has concluded that based on its assessment, CONMED’s internal control over financial reporting was effective as of December 31, 2021. The effectiveness of the Company’s internal control over financial reporting as of December 31, 2021 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein. t /s/ Curt R. Hartman Curt R. Hartman Chair of the Board, President and Chief Executive Offiff cer /s/ Todd W. Garner Todd W. Garner Executive Vice President and Chief Financial Officer 39 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of CONMED Corporation Opinions on the Financ ii ial Statemtt ents and Intertt nal rr Control over Financ ii ee ial Reporti ngii We have audited the accompanying consolidated balance sheets of CONMED Corporation and its subsidiaries (the "Company") as of December 31, 2021 and 2020, and the related consolidated statements of comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). e In our opinion, the consolidated financial statements referredr to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 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, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. e Basis for Opinions ii The Company's management is responsible for these consolidated 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 the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are freeff of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. 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. Definitiontt and Limi taii ii tions of Internal tt tt Control over Financial Reportingii ity of financial reporting and the preparation of financial statements forff A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliabila 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 of the company are being made only in accordance with authorizations of management and directors of the expenditures t 40 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. Criticatt l Auditdd MattMM ers tt The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Valuation of the Pension Benefie t Obligati i on As described in Note 12 to the consolidated financial statements, the Company’s consolidated pension benefit obligation was $95.5 million as of December 31, 2021. Management's discount rate and mortality assumptim ons are the significant assumptim ons in determining the projected benefit obligation of the Company’s pension plan. The discount rate assumption is determined by management using a full yield curve approach, which involves applying the specific spot rates along the yield curve used in the determination of the benefit obligation that correlates to the relevant projected cash flows. The mortality assumptim ons are based on a mortality tabla e using the mortality improvement scale. The principal considerations for our determination that performing procedures relating to the valuation of the pension benefit obligation is a critical audit matter are (i) the significant judgment by management to determine the pension benefit obligation, (ii) significant auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptim ons related to discount rate and mortality, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the valuation of the pension benefit obligation, including controls over management's methodology, significant assumptim ons, and data. These procedures also included, among others, (i) testing the completeness and accuracy of underlying data used in the valuation of the pension benefit obligation and (ii) the involvement of professionals with specialized skill and knowledge to assist in (a) testing management’s process for determining the pension benefit obligation, (b) evaluating the appropriateness of the methodology used by management, and (c) evaluating the reasonableness of the discount rate and mortality significant assumptim ons. /s/ PricewaterhouseCoopers LLP Rochester, New York February 22, 2022 We have served as the Company’s auditor since 1982. 41 CONMED CORPORATRR ION CONSOLIDATED BALANCE SHEETS December 31, 2021 and 2020 (In thousands except share and per share amounts) assets: ASSETS r Current Cash and cash equivalents Accounts receivable, less allowance for doubtful accounts of $4,528 in 2021 and $3,876 in 2020 Inventories 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 Other current liabilities Total current liabilities Long-term debt Deferred income taxes Other long-term liabilities Total liabilities Commitments and contingencies (Note 13) 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; 31,299,194 issued in 2021 and 2020, respectively Paid-in capia tal Retained earnings Accumulated other comprehensive loss Less: Treasury stock, at cost; 1,925,893 and 2,410,045 shares in 2021 and 2020, respectively Total shareholders' equity Total liabilities and shareholders' equity 2021 2020 $ 20,847 $ 27,356 $ $ 183,882 231,644 23,750 460,123 108,863 9,657 617,528 471,049 98,797 1,766,017 12,249 58,197 60,488 65,712 196,646 672,407 68,537 42,992 980,582 $ $ 177,152 194,868 17,278 416,654 111,407 6,842 618,440 501,537 96,793 1,751,673 18,415 53,310 50,171 68,305 190,201 735,221 57,875 59,338 1,042,635 — — 313 396,771 496,605 (54,203) 313 382,628 457,417 (63,681) (54,051) 785,435 1,766,017 $ (67,639) 709,038 1,751,673 $ The accompanying notes are an integral part of the consolidated financial statements. 42 CONMED CORPORATRR ION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Years Ended December 31, 2021, 2020 and 2019 (In thousands except per share amounts) Net sales Cost of sales Gross profit 2020 2019 $ 1,010,635 $ 862,459 $ 955,097 442,599 402,159 430,382 568,036 460,300 524,715 Selling and administrative expense 414,754 373,817 400,141 Research and development expense 43,565 40,473 45,460 Operating expenses Income fromff operations Interest expense Other expense 458,319 414,290 445,601 109,717 46,010 79,114 35,485 44,052 42,701 1,127 355 5,188 Income beforeff income taxes 73,105 1,603 31,225 Provision (benefit) for income taxes 10,563 (7,914) 2,605 Net income Per share data: Basic Diluted Other comprehensive income (loss), before income tax: Cash flow hedging Pension liability Foreign currency translation adjustments Other comprehensive income (loss), before income tax Provision (benefit) for income taxes related to items in other comprehensive income Other comprehensive income (loss), net of income tax Comprehensive income $ $ $ $ $ $ $ 62,542 $ 9,517 $ 28,620 2.14 1.94 12,660 9,163 (7,072) 14,751 5,273 9,478 72,020 $ $ $ $ $ $ 0.33 0.32 $ $ 1.01 0.97 (8,489) $ (6,499) 6,963 (8,025) $ (4,736) 35 25 (4,676) (3,621) (4,404) $ (1,136) (3,540) 5,113 $ 25,080 The accompanying notes are an integral part of the consolidated financial statements. 43 CONMED CORPORATRR ION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Years Ended December 31, 2021, 2020 and 2019 (In thousands) Common Stock Shares Amount Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock (88,895) $ Balance at December 31, 2018 31,299 $ 313 $ 341,738 $ 464,851 $ (55,737) $ Common stock issued under employee plans Stock-based compensation Dividends on common stock ($.80 per share) Convertible notes discount, net Convertible notes debt issuance costs Convertible notes hedge, net Issuance of warrants Comprehensive income (loss): Cash flow hedging loss, net Pension liability, net Foreign currency translation adjustments Net income Total comprehensive income Balance at December 31, 2019 Common stock issued under employee plans Stock-based compensation Dividends on common stock ($.80 per share) Comprehensive income (loss): Cash flow hedging loss, net Pension liability, net Foreign currency translation adjustments Net income Total comprehensive income Balance at December 31, 2020 Common stock issued under employee plans Stock-based compensation Dividends on common stock ($.80 per share) Comprehensive income (loss): Cash flow hedging gain, net Pension liability, net Foreign currency translation adjustments Net income Total comprehensive income Balance at December 31, 2021 (3,843) 11,779 39,145 (1,233) (38,829) 30,567 (22,627) 28,620 8,158 (3,592) 27 25 31,299 $ 313 $ 379,324 $ 470,844 $ (59,277) $ (80,737) $ (9,807) 13,111 13,098 (22,944) 9,517 (6,438) (4,929) 6,963 31,299 $ 313 $ 382,628 $ 457,417 $ (63,681) $ (67,639) $ (2,192) 16,335 13,588 (23,354) 62,542 9,601 6,949 (7,072) 31,299 $ 313 $ 396,771 $ 496,605 $ (54,203) $ (54,051) $ The accompanying notes are an integral part of the consolidated financial statements. 44 Shareholders’ Equity 662,270 4,315 11,779 (22,627) 39,145 (1,233) (38,829) 30,567 25,080 710,467 3,291 13,111 (22,944) 5,113 709,038 11,396 16,335 (23,354) 72,020 785,435 CONMED CORPORATRR ION CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 2021, 2020 and 2019 (In thousands) Cash flows fromff e Net incom operating activities: Adjustments to reconcile net income to net cash provided by operating activities: 2021 2020 2019 $ 62,542 $ 9,517 $ 28,620 Depreciation Amortization of debt discount Amortization of deferred debt issuance costs Amortization Stock-based compensation Impairment charges Deferred income taxes Loss on early extinguishment of debt Increase (decrease) in cash flows fromff liabilities, net of acquired assets: Accounts receivable Inventories Accounts payablea Income taxes Accrued compensation and benefits Other assets Other liabia lities Net cash provided by operating activities changes in assets and Cash flows from investing activities: Purchases of property, plant and equipment Payments related to business and asset acquisitions, net of cash acquired Proceeds from sale of a facility Net cash used in investing activities Cash flows from financing activities: Payments on term loan Proceeds from term loan Payments on revolving line of credit Proceeds from revolving line of credit Proceeds from convertible notes Payments on mortgage notes Payments related to contingent consideration Payments related to debt issuance costs Dividends paid on common stock Purchases of convertible notes hedges Proceeds from issuance of warrants Other, net Net cash provided by (used in) finaff ncing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents 16,494 10,217 3,726 54,249 16,335 — 3,005 899 (9,159) (37,806) 4,890 (1,675) 11,067 (24,005) 991 111,770 (14,866) — — (14,866) (66,654) 52,411 (393,753) 326,753 — — (6,222) (2,000) (23,256) — — 11,173 (101,548) (1,865) (6,509) 18,044 9,692 3,723 54,581 13,111 — (14,234) — 13,920 (30,397) (2,977) (1,644) (4,123) (8,170) 3,488 64,531 (13,013) (3,852) 3,227 (13,638) (13,250) — (212,000) 199,000 — — (2,671) (3,153) (22,818) — — 2,833 (52,059) 2,666 1,500 Cash and cash equivalents at beginning of year 27,356 25,856 18,688 8,302 3,454 53,635 11,779 312 (6,310) 300 (13,943) (117) 38 (1,867) 9,957 (22,263) 4,548 95,133 (20,066) (367,596) — (387,662) (154,312) 265,000 (484,000) 392,000 345,000 (836) (6,466) (16,210) (22,600) (51,198) 30,567 3,936 300,881 (7) 8,345 17,511 Cash and cash equivalents at end of year $ 20,847 $ 27,356 $ 25,856 45 Non-cash investing and finan cing activities: Contractual obligations from asset acquisition Dividends payable ff Supplemental disclosures of cash flow information: Cash paid during the year for: ff Interest Income taxes 2021 2020 2019 — $ — $ 5,874 5,775 5,639 5,684 $ 21,797 8,559 $ 30,448 9,120 27,274 10,576 $ $ accompanying notes are an integral part of the consolidated financial statements. 46 CONMED CORPORATRR ION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands except per share amounts) Note 1 — Operations and Significant Accounting Policies Organization and operations CONMED Corporation (“CONMED”, the “Company”, “we” or “us”) is a medical technology company that provides devices and equipment for surgical procedures. The Company’s products are used by surgeons and other healthcare professionals in a variety of specialties including orthopedics, general surgery, gynecology, thoracic surgery and gastroenterology. 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. The Company considered COVID-19 related impacts on its estimates, as appropriate, within its consolidated financial statements and there may be changes to those estimates in future periods. The Company believes that the accounting estimates are appropriate after giving consideration to the increased uncertainties surrounding the severity and duration of the COVID-19 pandemic. Due to the inherent uncertainty involved in making estimates, actual periods may differ from those estimates. results reported in futuret t 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 and net realizable value determined on the FIFO (first-in, first-out) cost method. We write-off excess and obsolete inventory resulting from the inability to sell our products at prices in excess of ity of the costs of our products and record a current carrying costs. We make estimates regarding the future recoverabila provision for excess and obsolete inventories based on historical experience and expected futuret 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 Leasehold improvements Machinery and equipment 12 to 40 years Shorter of life of asset or life of lease 2 to 15 years 47 Leases The Company leases various manufacturing facilities, office facilities and equipment under operating and finance leases. We determine if an arrangement is a lease at inception. Right-of-use ("ROU") assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. We use the implicit rate when readily determinablea . As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Certain of our leases include variable lease payments, mainly when a lease is tied to an index rate. These variable lease payments are recorded as expense in the period incurred and are not material. The Company has lease agreements with lease and non-lease components, which we account for separately. For certain equipment leases, we apply a portfolio approach to efficiently account for the operating lease ROU assets and lease liabilities. We also elected the short-term lease exemption and do not recognize leases with terms less than one year on the balance sheet. The related short-term lease expense is not material. Our leases have remaining lease terms of one year to ten years, some of which include options to extend the leases for up to five years, and some of which include options to terminate the leases within one year. We only account for such extensions or early terminations when it is reasonably certain we will exercise such options. Refer to Note 5 for further detail on leases. The Company places certain of our capita al equipment with customers on a loaned basis and at no charge in exchange for commitments to purchase related single-use products over time periods generally ranging from one to three years. Placed equipment is loaned and subject to returnt if minimum single-use purchases are not met. The Company accounts for these placements as operating leases but applies a practical expedient and does not separate the non-lease and lease components from the combined component. Accordingly, the Company accounts for the combined component as a single performanc e obligation with revenue recognized upon shipment of the related single use-products. The cost of the equipment is amortized over its estimated usefulff life which is generally five years. ff Goodwill and other intangible assets 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. Factors that contribute to the recognition of goodwill include synergies expected to increase net sales and profits; acquisition of a talented workforce; cost savings opportunities; the strategic benefit of expanding our presence in core and adjacent markets; and diversifying our product portfolio. Customer and distributor relationships, trademarks, tradenames, developed technology, patents and other intangible assets primarily represent allocations of purchase price to identifiablea intangible assets of acquired businesses. Sales representation, marketing and promotional rights represent intangible assets created under our agreement with Musculoskeletal Transplant Foundation (“MTF”). 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 business. Estimates of fair value are based on the best information available as of the date of the assessment. We completed our goodwill impairment testing of our single reporting unit during the fourth quarter of 2021. We performed our impairment test utilizing the market capitalization approach to determine whether the fair value of a reporting unit is less than its carrying amount. Based upon our assessment, the fair value of our reporting unit continues to exceed carrying 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. 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 recoverablea if it exceeds the sum of the undiscounted cash flows expected to result from the use of the asset. An impaim rment loss is recognized by reducing the carrying amount of the intangible asset to its current fair value. to amortization are reviewed forff Intangible assets subject For all other indefinite-lived intangible assets, we perforff m a qualitative impairment test. Based upon this assessment, we have determined that our indefinite-lived intangible assets are not impaired. 48 Other long-lived assets We review other long-lived assets consisting of property, plant and equipment and field inventory for impairment whenever events or circumstances indicate that such carrying amounts may not be recoverablea If the sum of the expected . future undiscounted cash flows is less than the carryrr ing amount of the asset, an impairment loss is recognized by reducing the recorded value to its current fair value. The Company maintains field inventory consisting of capita al equipment for customer demonstration and evaluation purposes. Field inventory is generally not sold to customers but rather continues to be used over its useful life for demonstration, evaluation and loaner purposes. An annual wear and tear provision has been recorded on field inventory. The net book value of such equipment at December 31, 2021 and 2020 is $42.5 million and $43.3 million, respectively. Translation of foreign currency financial statements rates of Assets and liabilities of foreign subsidiaries have been translated into United States dollars at the applicablea 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. 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. We record these forward contracts at fair value with resulting gains and losses included in selling and administrative expense in the consolidated statements of comprehensive income. Income taxes ff Deferred income tax assets and liabilities are based on the difference between the financial statement and tax basis of as measured by the enacted tax rates that are anticipated to assets and liabilities and operating loss and tax credit carryforwards be in effect in the respective jurisdictions when these difference s 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 taxabla e income, considering the feasibility of ongoing tax planning strategies and the realizability of tax loss carryforwards following tax law ordering rules. Valuation allowances related to deferred tax assets may be impacted by changes to tax laws, changes to statutory tax rates, reversal of temporary differences and ongoing and future taxabla e income levels. ff rr t Deferff red income taxes are not provided on the unremitted earnings of certain subsidiaries outside of the United States earned after December 31, 2017 as 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 futuret dividend distributions. Revenue recognition The Company recognizes revenue when we have satisfiedff e obligation by transferring a promised good or service (that is an asset) to a customer. An asset is transferred when the customer obtains control of that asset. The following policies apply to our majoa r categories of revenue transactions: ff a performanc 49 • Revenue is recognized when product is shipped at which point the performance obligation is satisfied and the customer obtains control of the product. • We place certain of our capita al equipment with customers on a loaned basis and at no charge in exchange 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 capita al equipment shipment as the equipment is loaned and subject to returnt 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 which is generally fiveff years. • We recognize revenues in accordance with the terms of our agreement with MTF on a net basis as our role is that of an agent earning a commission or fee. MTF is responsible for the sourcing, processing and distribution of allograft tissue for sports medicine procedures while the Company represents, markets and promotes MTF’s sports medicine allograft tissues to customers. The Company is paid a fee by MTF which is calculated as a percentage of the net amounts invoiced by MTF to customers for sports medicine allograft tissues. The Company accounts for the services provided e obligations and each service is recognized over time as MTF to MTF as a series of distinct performanc simultaneously receives and consumes the benefit. ff • • • Product returns are only accepted at the discretion of the Company and in accordance with our “Returned t Policy”. Historically, the level of product returns has not been significant. We accrue for sales returns, allowances based upon an analysis of historical customer returns conditions. Goods rebates and and credits, rebates, discounts and current market t t Our terms of sale to customers generally do not include any obligations to perform future services. Limited warranties al equipment sales and provisions for warrantyt are provided at the time of product sale based are provided for capita 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 $17.0 million, $14.6 million and $15.4 million for 2021, 2020 and 2019, 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. We do so by applying historical loss rates to our accounts receivable aging schedule to estimate expected adjusted expected credit losses for specifically identified and forecasted credit losses. credit losses. We further Historically, losses on accounts receivable have not been material. Management believes that the allowance for doubtful accounts is adequate to provide for probablea losses resulting from accounts receivable. ff • We sell extended warranties to customers that are typically for a period of one to three years. The related revenue is recorded as a contract liabia lity and recognized over the life of the contract on a straight-line basis, which is reflective of our obligation to stand ready to provide repair services. Please refer to Note 10 for further detail on revenue. 50 Earnings 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 during the computation of basic and diluted earnings per share at ff sets forth December 31, 2021, 2020 and 2019, respectively: the period. The following tablea d Net income Basic-weighted average shares outstanding Effect of dilutive potential securities 2021 2020 2019 $ 62,542 $ 9,517 $ 28,620 29,162 28,581 28,325 3,054 883 1,170 Diluted-weighted average shares outstanding 32,216 29,464 29,495 Net income (per share) Basic Diluted $ $ 2.14 1.94 $ 0.33 0.32 1.01 0.97 The shares used in the calculation of diluted EPS exclude options and stock appre ciation rights ("SARs") to purchase shares where the exercise price was greater than the average market price of common shares for the year and the effect of the mately 0.6 million, 1.4 million and 0.7 million at inclusion would be anti-dilutive. Such shares aggregated approxi a December 31, 2021, 2020 and 2019, respectively. As more fully described in Note 7, our 2.625% convertible notes dued in 2024 into a combination of cash and (the “Notes”) are convertible under certain circumstances, as defined in the indenture, CONMED common stock. a t The following is intended to describe the impact of the Notes and related hedge transactions on the calculation of diluted EPS. Additional shares to be issued pursuant to the terms of the Notes and related hedge transactions, if any, would occur at maturity. The calculation of diluted EPS would include potential diluted shares uponu conversion of the Notes when the average market price per share of our common stock for the period, is greater than the conversion price of the Notes of $88.80. We intend to settle in cash the principal outstanding and use the treasury stock method when calculating their potential dilutive ff effect , if any. During the year ended December 31, 2021, our average share price exceeded the conversion price of the Notes and we included in our diluted share count 1.3 million shares assumed to be issued if the Notes were converted. During the years ended December 31, 2020 and 2019, our average share price had not exceeded the conversion price of the Notes; therefore, under the net share settlement method, there were no potential shares issuablea under the Notes to be used in the calculation of diluted EPS. We previously entered into convertible note hedge transactions to increase the effective conversion price of the Notes to $114.92. However, our convertible notes hedges are not included when calculating potential dilutive shares since their effff ecff t is always anti-dilutive. Concurrently with entering into the hedge transactions, we also previously entered into warrant transactions under which we agreed to sell shares of our common stock at $114.92. The calculation of diluted EPS also includes potential diluted shares to be issued under the warrants when the average market price per share of our common stock for the period is greater than $114.92. During the year ended December 31, 2021, our average share price exceeded $114.92 and we therefore included in our diluted share count an additional 0.5 million shares assumed to be issued under the warrants. During the years ended December 31, 2020 and 2019, our average share price had not under the warrants to be used in the calculation of diluted exceeded $114.92; therefore, there were no potential shares issuablea EPS. 51 Stock-based compensation All share-based payments to employees, including grants of employee stock options, restricted stock units, performance share units and stock appre 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. ciation rights are recognized in the financial statements at their a 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 al to the extent any gain was previously recorded, otherwise the loss is recorded to retained earnings. to paid in capita Accumulated other comprehensive loss Accumulated other comprehensive loss consists of the following: Cash Flow Hedging Gain (Loss) Pension Liability Foreign Currency Translation Adjustments Accumulated Other Comprehensive Loss Balance, December 31, 2018 $ 4,085 $ (31,718) $ (28,104) $ (55,737) Other comprehensive income (loss) before reclassifications, net of tax Amounts reclassified fromff comprehensive income before tax(a) Income tax accumulated other 2,936 (2,158) (8,607) 2,079 2,881 (696) Net current-period other comprehensive income (loss) (3,592) 27 25 — — 25 803 (5,726) 1,383 (3,540) Balance, December 31, 2019 $ 493 $ (31,691) $ (28,079) $ (59,277) Other comprehensive income (loss) before reclassifications, net of tax Amounts reclassified fromff comprehensive income (loss) before tax(a) Income tax accumulated other (5,393) (7,068) 6,963 (5,498) (1,378) 333 2,821 (682) — — 1,443 (349) Net current-period other comprehensive income (loss) (6,438) (4,929) 6,963 (4,404) Balance, December 31, 2020 $ (5,945) $ (36,620) $ (21,116) $ (63,681) Other comprehensive income (loss) before reclassifications, net of tax Amounts reclassified fromff comprehensive income (loss) before tax(a) Income tax accumulated other 6,560 4,426 (7,072) 4,010 (969) 3,327 (804) — — 3,914 7,337 (1,773) Net current-period other comprehensive income (loss) 9,601 6,949 (7,072) 9,478 Balance, December 31, 2021 $ 3,656 $ (29,671) $ (28,188) $ (54,203) (a) The cash flow hedging gain (loss) and pension liability accumulated other comprehensive income components are included in sales or cost of sales and as a component of net periodic pension cost, respectively. Refer to Note 16 and Note 12, respectively, for further details. 52 Note 2 – Business Acquisitions rr On February 11, 2019 we acquired Buffalff o Filter, LLC and all of the issued and outstanding common stock of Palmerton Holdings, Inc. from Filtration Group FGC LLC (the "Buffalo Filter Acquisition") forff approximately $365 million in cash. Buffalo Filter develops, manufactures and markets smoke evacuation technologies that are complementary to our general surgery offering. The business combination was funded through a combination of cash on hand and long-term borrowings as further described in Note 7. The unaudited pro forma information for the year ended December 31, 2019, assuming the Buffalo Filter Acquisition occurred as of January 1, 2018 is presented below. This information has been prepared for comparative purposes only and does not purport to be indicative of the results of operations which actually would have resulted had the Buffalo Filter acquisition occurred on the dates indicated, or which may result in the futff ure. t Net sales Net income $ 2019 960,115 44,361 These pro forma results include certain adjustments, primarily due to increases in amortization expense due to fair value adjustments of intangible assets, increases in interest expense due to additional borrowings incurred to finance the acquisition, and acquisition related costs including transaction costs such as legal, accounting, valuation and other professional services as well as integration costs such as severance and retention. Net sales associated with Buffalo Filter of $49.6 million have been recorded in the consolidated statement of It is impracticabla e to determine the earnings recorded in the the year ended December 31, 2019 as these amounts are not separately the year ended December 31, 2019. comprehensive income forff consolidated statement of comprehensive income forff measured. Note 3 — Inventories Inventories consist of the following at December 31: Raw materials Work in process Finished goods Note 4 — Property, Plant and Equipment Property, plant and equipment consist of the following at December 31: Land Building and improvements Machinery and equipment Construction in progress Less: Accumulated depreciation 2021 83,386 17,449 130,809 231,644 2021 4,027 95,518 256,478 16,601 372,624 (263,761) 108,863 2020 71,807 15,864 107,197 194,868 2020 4,027 93,886 243,810 15,680 357,403 (245,996) 111,407 $ $ $ $ $ $ $ $ Internal-use software, included in gross machinery and equipment at December 31, 2021 and 2020 was $49.1 million and $50.3 million, respectively, with related accumulated depreciation of $45.3 million and $42.9 million, respectively. Internal use software depreciation expense was $3.3 million, $4.7 million and $4.8 million for the years ended December 31, 2021, 2020 and 2019, respectively. Also, during 2020, we sold a vacant facility forff $3.2 million. 53 Note 5 – Leases Lease costs for the year ended December 31, consist of the following: Operating lease cost: Straight-line lease cost Right-of-use asset impairment cost Total operating lease cost Finance lease cost: Depreciation Interest on lease liabilities Total finance lease cost Total lease cost 2021 2020 2019 $ 7,720 $ 7,255 $ — 7,720 389 30 419 — 7,255 355 33 388 7,780 312 8,092 238 27 265 $ 8,139 $ 7,643 $ 8,357 Supplemental balance sheet information related to leases as of December 31, is as follows: 2021 2020 Operating leases Other assets Other current liabilities Other long-term liabilities Total operating lease liabila ities Finance leases Property, plant and equipment, gross Accumulated depreciation Property, plant and equipment, net Current portion of long-term debt Long-term debt Total finance lease liabila ities $ $ $ $ $ $ $ 19,425 7,162 12,726 19,888 1,984 (1,145) 839 324 240 564 $ $ $ $ $ $ $ 21,659 7,469 14,756 22,225 1,762 (825) 937 197 390 587 Weighted average remaining lease term (in years) Operating leases Finance leases Weighted average discount rate Operating leases Finance leases 3.90 years 3.05 years 3.76 years 3.22 years 5.02 % 4.47 % 5.00 % 4.93 % 54 Supplemental cash flowff information related to leases forff the year ended December 31, was as foll ff ows: 2021 2020 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ Financing cash flows from finance leases Right-of-use assets obtained in exchange for lease obligations: Operating leases Finance leases Maturities of lease liabila ities as of December 31, 2021 are as folff lows: 7,791 $ 287 7,535 $ 373 4,704 305 4,242 76 8,459 380 12,800 563 Finance Lease Operating Lease 2022 2023 2024 2025 2026 Thereafter Total lease payments Less imputed interest Total lease liabila ities $ $ $ 324 188 62 8 5 1 588 (24) 7,162 5,830 4,555 1,637 795 2,174 22,153 (2,265) 564 $ 19,888 As of December 31, 2021, we have entered into approximately $0.1 million of operating leases that have not yet commenced. As of December 31, 2021 we have not entered into any finaff nce leases that have not yet commenced. Note 6 – Goodwill and Other Intangible Assets The changes in the net carrying amount of goodwill forff the years ended December 31, are as follows: Balance as of January 1, Goodwill adjustment resulting from business combinations Foreign currency translation Balance as of December 31, 2021 618,440 $ 2020 618,042 $ — (1,009) (912) 1,407 $ 617,528 $ 618,440 Total accumulated goodwill losses aggregated $107.0 million at December 31, 2021 and 2020, respectively. During 2019, the Company acquired a distributor and in 2020 recorded a measurement period adjustment related to the acquired distributor. impairment 55 Other intangible assets consist of the following: Intangible assets with definite lives: Customer and distributor relationships Sales representation, marketing and promotional rights Patents and other intangible assets Developed technology Intangible assets with indefinite lives: December 31, 2021 December 31, 2020 Weighted Average Amortization Period (Years) 22 24 5 2 16 16 Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization $ 342,452 $ (152,934) $ 342,639 $ (134,555) 1 49,376 (60,000) 149,376 (54,000) 76,392 (50,890) 73,516 (48,882) 106,604 (26,495) 106,604 (19,705) s Trademarks and tradename 6,544 8 — 86,544 — $ 761,368 $ (290,319) $ 758,679 $ (257,142) Amortization expense related to intangible assets which are subject to amortization totaled $33.3 million, $34.2 million and $32.3 million for the years ending December 31, 2021, 2020 and 2019, respectively, and is included as a reductd ion of revenue (for amortization related to our sales representation, marketing and promotional rights) and in selling and administrative expense (for all other intangible assets) in the consolidated statements of comprehe nsive income. m The estimated amortization expense related to intangible assets at December 31, 2021 and for each of the five succeeding years is as follows: 2022 2023 2024 2025 2026 Amortization included in expense Amortization recorded as a reduction of revenue $ $ 26,397 25,665 24,947 25,140 24,651 $ 6,000 6,000 6,000 6,000 6,000 Total 32,397 31,665 30,947 31,140 30,651 Note 7 — Long Term Debt Long-term debt consists of the following at December 31: Revolving line of credit Term loan, net of deferre respectively ff d debt issuance costs of $1,373 and $1,668 in 2021 and 2020, 2.625% convertible notes, net of deferred debt issuance costs of $3,700 and $5,475 in 2021 and 2020, respectively, and unamortized discount of $23,404 and $33,620 in 2021 and 2020, respectively Financing leases Total debt Less: Current portion Total long-term debt 2021 2020 $ 140,000 $ 207,000 226,196 240,145 317,896 564 684,656 12,249 672,407 $ 305,904 587 753,636 18,415 735,221 $ On July 16, 2021, we entered into a seventh amended and restated senior credit agreement consisting of: (a) a $233.5 ility and (b) a $585.0 million revolving credit facility. The revolving credit facility will terminate and the million term loan facff in quarterly installments will expire on July 16, 2026. The term loan is payablea ff loans outstanding under the term loan facility and borrowings under the revolving credit facility increasing over the term of the facility. Proceeds from the term loan facility were used to repay the then existing senior credit agreement. Interest rates are at LIBOR (subject to 0.125% floor) plus an interest rate margin of 1.50% (1.625% at December 31, 2021). For borrowings where we elect to use the alternate base rate, the initial base rate is the greatest of (i) the Prime Rate, (ii) the Federal Funds Rate plus 0.50% or (iii) the one-month Adjusted LIBOR plus 1.00%, plus, in each case, an interest rate margin. ff There were $227.6 million in borrowings outstanding on the term loan facility as of December 31, 2021. There were $140.0 million in borrowings outstanding under the revolving credit facility as of December 31, 2021. Our available borrowings on the revolving credit facility at December 31, 2021 were $442.5 million with approximately $2.5 million of the facility set aside for outstanding letters of credit. The carrying amounts of the term loan and revolving credit facility approximate faiff r value. ff The seventh amended and restated senior credit agreement is collateralized by substantially all of our personal property and assets. The seventh amended and restated 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, 2021. We are also required, under certain circumstances, to make mandatory prepayments from net cash proceeds from any issuance of equity and asset sales. On January 29, 2019, we issued $345.0 million in 2.625% convertible notes dued Interest is semi-annually in arrears on February 1 and August 1 of each year, commencing August 1, 2019. The Notes will payablea ted unsecured obligations mature on February 1, 2024, unless earlier repurchased or converted. The Notes represent subordina and are convertible under certain circumstances, as defined in the indenture, into a combination of cash and CONMED common stock. The Notes may be converted at an initial conversion rate of 11.2608 shares of our common stock per $1,000 principal mately $88.80 per share of common stock). Holders of the amount of Notes (equivalent to an initial conversion price of approxi Notes may convert the Notes at their option at any time on or after November 1, 2023 through the second scheduled trading day preceding the maturity date. Holders of the Notes will also have the right to convert the Notes prior to November 1, 2023, but only upon the occurrence of specified events. The conversion rate is subject to anti-dilution adjustments if certain events occur. A portion of the net proceeds from the offering of the Notes were used as part of the financing for the Buffalo Filter acquisition and $21.0 million were used to pay the cost of certain convertible notes hedge transactions as further described below. in 2024 (the "Notes"). u a t Our effective borrowing rate forff nonconvertible debt at the time of issuance of the Notes was estimated to be 6.14%, which resulted in $51.6 million of the $345.0 million aggregate principal amount of Notes issued, or $39.1 million after taxes, being attributablea to equity. For the years ended December 31, 2021, 2020 and 2019, we have recorded interest expense related to the amortization of debt discount on the Notes of $10.2 million, $9.7 million and $8.3 million respectively, at the effective interest rate of 6.14%. The debt discount on the Notes is being amortized through February 2024. For the years ended December 31, 2021, 2020 and 2019, we have recorded interest expense on the Notes of $9.1 million, $9.1 million and $8.4 million, respectively, at the contractual coupon rate of 2.625%. t 57 The estimated fair value of the Notes was approximately $576.0 million as of December 31, 2021 based on a market r value was determined based on l bids and offers of the Notes in an over-the-counter market transaction on the last business day of the approach which represents a Level 2 valuation in the fair value hierarchy. The estimated faiff the estimated or actuat period. t In connection with the offering of the Notes, we entered into convertible note hedge transactions with a number of ons (each, an “option counterparty”). The convertible note hedge transactions cover, subject to anti-dilution financial instituti adjustments substantially similar to those applicable to the Notes, the number of shares of our common stock underlying the Notes. Concurrently with entering into the convertible note hedge transactions, we also entered into separate warrant transactions with each option counterparty whereby we sold to such option counterparty warrants to purchase, subject to customary anti-dilution adjustments, the same number of shares of our common stock. The convertible note hedge transactions are expected generally to reduce the potential dilution upon conversion of the Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Notes, as the case may be, in the event that the market price per share of our common stock, as measured under the terms of the convertible note hedge transactions, is greater than the strike price of the convertible note hedge transactions, which initially corresponds to the conversion price of the Notes and is subject to anti-dilution adjustments substantially similar to those applicable to the conversion rate of the Notes. If, however, the market price per share of our common stock, as measured under the terms of the warrant transactions, exceeds the strike price ($114.92) of the warrants, there would nevertheless be dilution to the extent that such market price exceeds the strike price of the warrants, unless we elect to settle the warrants in cash. See additional discussion regarding a new accounting standard and related impact on our Notes in Note 17. The scheduled maturities of long-term debt outstanding at December 31, 2021 are as follows: 2022 2023 2024 2025 2026 $ 11,925 14,906 365,869 23,850 296,019 The above amounts exclude debt discount,deferred debt issuance costs and financing leases. Note 8 — Income Taxes The provision (benefit) forff income taxes forff the years ended December 31, 2021, 2020 and 2019 consists of the following: Current tax expense (benefit): Federal State Foreign Deferred income tax expense (benefit): Federal State Foreign 2021 2020 2019 $ (97) $ 609 7,046 7,558 3,466 1,449 (1,910) 3,005 (729) $ 86 6,963 6,320 (12,253) (1,173) (808) (14,234) 96 444 8,375 8,915 (3,970) (938) (1,402) (6,310) Provision (benefit) for income taxes $ 10,563 $ (7,914) $ 2,605 58 A reconciliation between income taxes computed at the statutory federal rate and the provision (benefit) forff income taxes for the years ended December 31, 2021, 2020 and 2019 follows: Tax provision at statutory t rate based on income beforeff income taxes 21.0 % 21.0 % 21.0 % 2021 2020 2019 Stock-based compensation Federal research credit Valuation allowance US tax on worldwide earnings at different rates Settlement of taxing authority examinations Tax treaty protocols Non deductible/non-taxable items Foreign income taxes State income taxes, net of federal tax benefit Other, net (9.4) (2.3) (2.2) (0.4) — — 0.8 3.1 3.7 0.1 (267.7) (15.4) (124.2) (4.0) 49.7 (123.7) (122.9) — 28.6 79.9 (24.5) (10.1) 1.9 7.9 (7.7) (2.9) 2.8 4.5 0.3 (0.1) 14.4 % (493.9)% 8.3 % The Company has elected to account for Global Intangible Low Tax Income ("GILTI") using the period cost method. The net impact of GILTI including the allowable GILTI deduction is presented in the rate reconciliation as a component of “US ion (“FDII”). tax on worldwide earnings at different rates” and is offseff t in part by the Foreign Derived Intangible Income deductd 59 The tax effeff cts of the significant temporary differences which comprise the deferred income tax assets and liabilities at December 31, 2021 and 2020 are as follow ff s: Assets: alized research and development Inventory Net operating losses Capita Deferred compensation Accounts receivable Compensation and benefits Accrued pension Research and development credit Convertible notes hedge Lease liabilities Other Less: valuation allowances Liabilities: Goodwill and intangible assets Depreciation State taxes Unremitted forei Convertible notes debt discount Lease right-of-use assets gn earnings ff $ 2021 2020 $ 4,694 18,383 4,173 2,563 3,147 6,583 3,930 15,542 4,869 3,573 5,741 (786) 72,412 106,065 2,546 11,833 2,449 4,915 3,484 131,292 4,649 22,197 5,187 2,240 2,784 7,540 5,348 13,540 6,999 4,452 6,793 (2,721) 79,008 104,119 2,512 9,614 2,423 7,060 4,313 130,041 Net liability $ (58,880) $ (51,033) Income beforeff income taxes consists of the folff lowing U.S. and foreign income: U.S. income Foreign income Total income 2021 2020 2019 $ $ 45,260 27,845 73,105 $ $ (16,026) $ 17,629 1,603 $ 5,332 25,893 31,225 As of December 31, 2021, the amount of federal net operating loss carryfrr orwa rd was $15.7 million and begins to the amount of federal research credit carryforward available was $15.5 ff expire in 2027. As of December 31, 2021, million. These credits begin to expire in 2027. We have accrued tax liabia lities related to the amount of unremitted earnings at December 31, 2017 and certain subsequent unremitted earnings as these are not considered permanently reinvested. Deferred taxes have not been accrued on unremitted earnings subsequent to December 31, 2017 that are considered permanently reinvested. The amount of such untaxed foreign earnings for the periods occurring after December 2017 totaled $20.3 million. If we were to repatriate these funds, we would be required to accrue and pay taxes on such amounts. The Company has estimated foreign withholding taxes of $0.9 million would be due if these earnings were repatriated. 60 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 t returns have been examined by the Internal Revenue Service (“IRS”) for calendar years ending through 2019. 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. t The following tablea summarizes the activity related to our unrecognized tax benefits forff the years ending December 31,: Balance as of January 1, 2021 2020 2019 $ 200 $ 2,170 $ 3,073 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 lapsea limitations of statute of — — — — 1,650 (1,970) (2,404) — (149) Balance as of December 31, $ 200 $ 200 $ 2,170 If the total unrecognized tax benefits of $0.2 million at December 31, 2021 were recognized, it would reduce our annual effective tax rate. The amount of interest accrued in 2019, 2020 and 2021 related to these unrecognized tax benefits was income taxes in the consolidated statements of comprehensive not material and is included in the provision (benefit) forff income. Note 9 – Shareholders’ Equity On February 29, 2012, the Board of Directors adopted a cash dividend policy and declared an initial quarterly dividend of $0.15 per share. On October 28, 2013, the Board of Directors increased the quarterly dividend to $0.20 per share. The total dividend per share was $0.80 for each of 2021, 2020 and 2019. The fourth quarter dividend for 2021 was paid on January 5, was $5.9 million and $5.8 million at 2022 to shareholders of record as of December 15, 2021. The total dividend payablea December 31, 2021 and 2020, respectively, and is included in other current liabilities in the consolidated balance sheet. 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, 2021 and 2020, no preferred stock had been issued. Our Board of Directors has authorized a $200.0 million share repurchase program. Through December 31, 2021, we have repurchased a total of 6.1 million shares of common stock aggregating $162.6 million under this authorization and have $37.4 million remaining available forff 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 2021, 2020, and 2019 we did not repurchase any shares. share repurchases. The repurchase program calls forff We have reserved 6.7 million shares of common stock for issuance to employees and directors under two shareholder approved share-based compensation plans (the "Plans") of which approximately 3.4 million shares remain availablea for grant at December 31, 2021. The exercise price on all outstanding stock options and stock appreciation rights (“SARs”) is equal to the quoted faiff r 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 generally non-transferable other than on death and generally become exercisable over a 4 to 5 year period from date of grant. Stock options and SARs expire 10 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. 61 Total pre-tax stock-based compensation expense recognized in the consolidated statements of comprehensive income was $16.3 million, $13.1 million and $11.8 million forff the years ended December 31, 2021, 2020 and 2019, respectively. These amounts are included in selling and administrative expense. Tax related benefits of $3.9 million, $3.2 million and $2.8 million the exercise of were also recognized for the years ended December 31, 2021, 2020 and 2019, respectively. Cash received fromff stock options was $19.6 million, $13.7 million and $7.7 million for the years ended December 31, 2021, 2020 and 2019, 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 stock 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 off f each stock option and SAR grant. The risk free interest rate is based on the stock option and SAR grant date forff a traded U.S. The expected annual dividend yield is based on the Company's Treasury bond with a maturi anticipated cash dividend payouts. The expected life represents the period of time that the stock options and SARs are expected to be outstanding based on a study of historical data of option holder exercise and termination behavior. Forfeitures are recognized as incurred. ty date closest to the expected life.ff t The following tablea illustrates the assumptim ons used in estimating fair value in the years ended December 31, 2021, 2020 and 2019: Grant date fair value of stock options and SARs Expected stock price volatility Risk-free interest rate Expected annual dividend yield Expected life of options & SARs (years) $ 2020 2019 $ 42.47 39.27 0.81 0.64 % % % 5.5 $ 22.62 6.89 % 2 0 .89 % .82 % 0 5.5 20.59 26.59 % 2.58 % 1.08 % 5.6 following tabla e illustrates the stock option and SAR activity for the year ended December 31, 2021: Outstanding at December 31, 2020 Granted Forfeited Exercised Outstanding at December 31, 2021 Exercisable at December 31, 2021 Stock options & SARs expected to vest Number of Shares (in 000’s) Weighted- Average Exercise Price 3,336 $ 66.76 701 $ (177) $ (596) $ 3,264 1,284 1,980 $ $ $ 123.21 82.35 51.59 80.79 59.40 94.67 The weighted average remaining contractual term forff at December 31, 2021 was 7.0 years and 5.5 years, respectively. The aggregate intrinsic value of SARs and stock options outstanding and exercisable at December 31, 2021 was $199.0 million and $105.8 million, respectively. The aggregate intrinsic value of stock options and SARs exercised during the years ended December 31, 2021, 2020 and 2019 was $49.2 million, $26.6 million and $17.0 million, respectively. SARs and stock options outstanding and exercisablea 62 The folff lowing table illustrates the RSU activity for the year ended December 31, 2021: Outstanding at December 31, 2020 Granted Vested Forfeited Outstanding at December 31, 2021 Number of Shares (in 000’s) Weighted- Average Grant-Date Fair Value 61 $ 77.03 21 $ (30) $ (1) $ 129.94 73.11 55.96 51 $ 101.55 The weighted average fair value of RSU awards granted in the years ended December 31, 2021, 2020 and 2019 was $129.94, $85.45 and $78.64, respectively. The total faiff r value of RSUs and PSUs vested was $2.2 million, $6.2 million and $2.8 million for the years ended December 31, 2021, 2020 and 2019, respectively. As of December 31, 2021, there was $45.4 million of total unrecognized compensation cost related to nonvested stock options, SARs and RSUs granted under the Plans which is expected to be recognized over a weighted average period of 3.5 years. We offer to our employees a shareholder-approved Employee Stock Purchase Plan (the “Employee Plan”), under which we reserved 1.0 million shares of common stock for issuance to our employees. The Employee Plan provides employees with the opportunity to invest from 1% to 10% of their annual salary to purchase shares of CONMED common stock at a purchase price equal to 95% of the fair market value of the common stock on the exercise date. During 2021, we issued approximately 13,024 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 10 — Revenues The following tablea s present revenue disaggregated by product line and timing of revenue recognition for the years ended December 31, 2021, 2020 and 2019: Orthopedic Surgery General Surgery Total 2021 Timing of Revenue Recognition Goods transferred at a point in time Services transferredr over time Total sales from contracts with customers $ $ 398,963 39,461 438,424 $ $ 567,244 4,967 572,211 Orthopedic Surgery General Surgery 2020 Timing of Revenue Recognition Goods transferred at a point in time Services transferredr over time Total sales from contracts with customers $ $ 340,318 34,387 374,705 $ $ 484,147 3,607 487,754 $ $ $ $ 966,207 44,428 1,010,635 Total 824,465 37,994 862,459 63 Orthopedic Surgery General Surgery Total 2019 Timing of Revenue Recognition Goods transferred at a point in time Services transferredr over time Total sales from contracts with customers $ $ 426,893 36,429 463,322 $ $ 489,313 2,462 491,775 $ $ 916,206 38,891 955,097 Revenue disaggregated by primary geographic market where the products are sold is included in Note 11. Contract liabila ity balances related to the sale of extended warranties to customers are as follows: December 31, 2021 December 31, 2020 Contract Liabila ity $ 16,760 $ 13,666 Revenue recognized during years ended December 31, 2021, 2020 and 2019 from amounts included in contract liabilities at the beginning of the period were $10.3 million, $9.3 million and $6.8 million, respectively. There were no material contract assets as of December 31, 2021 and December 31, 2020. Note 11 — Business Segments and Geographic Areas We are accounting and reporting for our business as a single operating segment entity engaged in the development, manufacturing and sale on a global basis of surgical devices and related equipment. Our chief operating decision maker (the CEO) evaluates the various global product portfolios on a net sales basis and evaluates profitability, investment, cash flow metrics and allocates resources on a consolidated worldwide basis due to shared infrastructuret and resources. Our product lines consist of orthopedic surgery and general surgery. Orthopedic surgery consists of sports medicine instrumentation and small bone, large bone and specialty powered surgical instruments as well as imaging systems forff use in minimally invasive surgical procedures and fees related to sales representation, promotion and marketing of sports medicine allograft tissue. General surgery crr c and gastrointestinal procedures, smoke evacuation devices, a line of cardiac monitoring products as well as electrosurgical generators and related instruments. These product lines' net sales and primary geographic market where the products are sold, are as follows for the a years ended December 31, 2021, 2020 and 2019: onsists of a complete line of endo-mechanical instrumentation for minimally invasive laparoscopi a Orthopedic Surgery General Surgery Total 2021 Primary Geographic Markets United States Europe, Middle East & Africa Asia Pacificff Americas (excluding the United States) Total sales from contracts with customers $ $ $ 158,553 108,457 107,590 63,824 $ 393,980 81,238 63,628 33,365 552,533 189,695 171,218 97,189 438,424 $ 572,211 $ 1,010,635 Orthopedic Surgery General Surgery Total 2020 Primary Geographic Markets United States Europe, Middle East & Africa Asia Pacificff Americas (excluding the United States) Total sales from contracts with customers $ $ 139,715 $ 342,349 $ 90,998 93,636 50,356 70,086 46,961 28,358 374,705 $ 487,754 $ 482,064 161,084 140,597 78,714 862,459 64 Orthopedic Surgery General Surgery Total 2019 Primary Geographic Markets United States Europe, Middle East & Africa Asia Pacificff Americas (excluding the United States) Total sales from contracts with customers $ $ 179,419 $ 337,246 $ 118,301 101,333 64,269 64,248 59,277 31,004 463,322 $ 491,775 $ 516,665 182,549 160,610 95,273 955,097 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, 2021 and 2020. No single customer represented over 10% of our consolidated net sales for the years ended December 31, 2021, 2020 and 2019. Note 12 — Employee Benefit Plans We sponsor an employee savings plan (“401(k) plan”) covering substantially all of our United States based employees. We also sponsor a defined benefit pension plan (the “pension plan”) that was frozen in 2009. It covered substantially all our United States based employees at the time it was frozen. ff Total employer contributions to the 401(k) plan were $9.2 million, $8.9 million and $9.1 million during the years ended December 31, 2021, 2020 and 2019, respectively. We use a December 31, measurement date forff our pension plan. Cumulative gains and losses in excess of 10% of the greater of the benefit obligation or the market-related value of assets are amortized on a straight-line basis over the lesser of the expected average remaining life expectancy of the plan's participants or 12 years. The limit of 12 years is adjusted to reflect the percentage change in the average remaining service period for the plan's active membership. The following tablea pension plan at December 31: provides a reconciliation of the projected benefit obligation, plan assets and funded statust of the Accumulated benefit obligation Change in benefit obligation Projected benefit obligation at beginning of year Service cost Interest cost Actuarial loss (gain) Benefits paid Settlements Projected benefit obligation at end of year gain on plan assets Change in plan assets Fair value of plan assets at beginning of year Actual t Benefits paid Settlements Fair value of plan assets at end of year Funded status 65 2020 95,508 $ 101,242 101,242 991 1,803 (3,427) (2,703) (2,398) 95,508 76,940 7,565 (2,703) (2,398) 79,404 $ $ $ $ 92,052 717 2,555 10,963 (1,933) (3,112) 101,242 75,321 6,664 (1,933) (3,112) 76,940 (16,104) $ (24,302) $ $ $ $ $ $ The projected benefit obligation decreased $5.7 million as of December 31, 2021 mainly dued to the increase in the discount rate from 2.44% at December 31, 2020 to 2.81% at December 31, 2021. Amounts recognized in the consolidated balance sheets consist of the following at December 31,: Other long-term liabilities Accumulated other comprehensive loss 2021 2020 $ (16,104) $ (39,122) (24,302) (48,285) Accumulated other comprehensive loss for the years ended December 31, 2021 and 2020 consists of net actuarial losses not yet recognized in net periodic pension cost (before income taxes). The following actuarial assumptions were used to determine our accumulated and projected benefit obligations as of December 31,: Discount rate 2021 2020 2.81 % 2.44 % Other changes in plan assets and benefit obligations recognized in other comprehensive income in 2021 and 2020 are as follows: rial loss (gain) Current year actuat Amortization of actuarial loss ) Total recognized in other comprehensive income (loss 2021 2020 $ $ 5,836 3,327 9,163 $ $ (9,320) 2,821 (6,499) Net periodic pension cost for the years ended December 31, consists of the folff lowing: Service cost Interest cost on projected benefit obligation Expected return on plan assets Amortization of loss Net periodic pension cost 2021 2020 2019 $ $ 991 1,803 (5,155) 3,327 966 $ $ 717 2,555 (5,021) 2,821 1,072 $ $ 1,010 3,130 (4,725) 2,881 2,296 Non-service cost of $0.4 million and $1.3 million is included in other expense in the consolidated statements of the year comprehensive income for the years ended 2020 and 2019, respectively. Non-service pension cost was immaterial forff ended 2021. The following actuarial assumptim ons were used to determine our net periodic pension benefit cost forff the years ended December 31,: Discount rate on benefit obligation Effective rate forff Expected return on plan assets interest on benefit obligation 2021 2020 2019 2.44 % 1.83 % 7.00 % 3.33 % 2.88 % 7.00 % 4.37 % 4.01 % 7.50 % Company’s discount rate and mortality assumptions are the significant assumptions in determining the projected benefit obligation of the Company’s pension plan. The discount rate represents the interest rate used in estimating the present value of projected cash flows to settle the Company’s pension obligations. The discount rate assumption is determined by management using a full ch, which involves applying the specific spot rates along the yield curve used in the determination of the benefit obligation that correlates to the relevant projected cash flows. yield curve approa a ff 66 Mortality assumptions are based on published mortality studies developed primarily based on past experience of the projected longevity trends. The mortality assumptim ons used for 2021 and 2020 are based on broad population and modified forff the Pri-2012 Mortality Tables using the MP-2021 and MP-2020, respectively, mortality improvement scales. In determining the expected returnt 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 In addition, we consult with financial and investment management professionals in developing appropriate performance. 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 futuret benefit payment requirements. The allocation of plan assets by category is as follows at December 31,: Equity securities Debt securities Total Percentage of Pension Plan Assets 2021 2020 Target Allocation 2022 73 % 27 % 100 % 76 % 24 % 100 % 75 % 25 % 100 % As of December 31, 2021, the pension plan held 27,562 shares of our common stock, which had a faiff r value of $3.9 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 a deemed appropri ate. FASB guidance defines fair value and establia ework for measuring fair value and related disclosure shes a framff requirements as described in Note 16. Following is a description of the valuation methodologies used for our pension assets. There have been no changes in the methodologies used at December 31, 2021 and 2020: Common Stock: 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. Fixed Income Securities: 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. Money Market Fund: These investments are public investment vehicles valued using the Net Asset Value (NAV). Mutual Funds: These investments are public investment vehicles valued using the Net Asset Value (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 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 pension plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptim ons to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. ff 67 The folff lowing table sets forth the value of the pension plan's assets as of December 31, 2021 and December 31, 2020: Investments measured at fair value: Level 1 Common Stock Fixed Income Securities Total Investments measured at fair value Investments measured at NAV: Money Market Fund Mutual Funds Total Investments measured at NAV 2021 2020 $ $ 9,767 20,272 30,039 1,098 48,267 49,365 9,185 17,848 27,033 915 48,992 49,907 Total Investments $ 79,404 $ 76,940 We do not expect to make any contributions to our pension plan for 2022. summarizes the benefits and settlements expected to be paid by our pension plan in each of the The following tablea next five years and in aggregate forff the following five years. The expected payments are estimated based on the same assumptions used to measure the Company’s projected benefit obligation at December 31, 2021 and reflect the impact of expected futuret employee service. 2022 2023 2024 2025 2026 2027-2031 Note 13 — Legal Matters and Contingencies $6,427 5,801 5,627 5,890 6,026 26,543 From time to time, the Company may receive an information request, subpoena or warrant from a government agency such as the Securities and Exchange Commission, Department of Justice, Equal Employment Opportunity Commission, the Occupational Safety and Health Administration, the United States Food and Drug Administration, the Department of Labor, the Treasury Department or other fede ral and state agencies or foreign governments or government agencies. These information requests, subpoenas or warrants may or may not be routine inquiries, or may begin as routine inquiries and over time develop into enforcement actions of various types. Likewise, if we receive reports of alleged misconduct from employees and third parties, we investigate as appropriate. a ff Manufacturers of medical devices have been the subject of various enforcement actions relating to interactions with health care providers domestically or internationally whereby companies are claimed to have provided health care providers with inappropria te incentives to purchase their products. Similarly, the Foreign Corrupt Practices Act ("FCPA") imposes a obligations on manufacturers with respect to interactions with health care providers who may be considered government officials based on their affiliation with public hospitals. The FCPA also requires publicly listed manufacturers to maintain accurate books and records, and maintain internal accounting controls sufficient to provide assurance that transactions are accurately recorded, lawful and in accordance with management's authorization. The FCPA poses unique challenges both because manufacturers operate in foreign cultures in which conduct illegal under the FCPA may not be illegal in local jurisdictions, and because, in some cases, a United States manufacturer may face risks under the FCPA based on the conduct of third parties over whom the manufacturer may not have complete control. While CONMED has not experienced any material enforcement action to date, there can be no assurance that the Company will not be subject to a material enforcement action in the future lawyers and other consultants, that are ff material to the Company’s results of operations in the course of responding to a future , or that the Company will not incur costs including, in the form of fees forff inquiry or investigation. ff 68 Manufacturers of medical products may face exposure to significant product liabila as well as patent infringement and other claims incurred in the ordinary course of business. To date, we have not experienced any claims that have been material to our financial statements or financial condition, but any such claims arising in the future could have a ity material adverse effect on our business, results of operations or cash flows. We currentl insurance of $35 million per incident and $35 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 availablea y maintain commercial product liabila at a reasonable cost. to us in the futuret ity claims, r 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.t Likewise, the operations of our suppliers and sterilizers are subject to similar environmental laws and regulations. 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 forff 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 lawfulne ss of the party’s activities. While we do not believe that the present costs of environmental compliance and remediation are material, there can be no assurance that future compliance or remedial obligations would not have a material adverse effecff t on our financial condition, results of operations or cash flows. ff In 2014, the Company acquired EndoDynamix, Inc. The agreement governing the terms of the acquisition provides that, if various conditions are met, certain contingent payments relating to the first commercial sale of the products (the milestone payment), as well as royalties based on sales (the revenue based payments), are due to the seller. In 2016, we notified the seller that there was a need to redesign the product, and that, as a consequence, the first commercial sale had been delayed. Consequently, the payment of contingent milestone and revenue-based payments were delayed. On January 18, 2017, the seller provided notice (the "Notice") seeking $12.7 million under a liquidated damages clause, which essentially represents the seller's view as to the sum of the projected contingent milestone and revenue-based payments on an accelerated basis. CONMED responded to the Notice denying that there was any basis for acceleration of the payments due under the acquisition agreement. On February 22, 2017, the representative of the former shareholders of EndoDynamix filed a complaint in Delaware Chancery Court claiming breach of contract with respect to the duty to commercialize the product and seeking the contingent payments on the Company's decision to redesign basis to support an accelerated basis. We believe that there was a substantive contractual the product, such that there was no legitimate basis for seeking the liquidated damages. In the third quarter of 2018, the Company decided to halt the development of the EndoDynamix clip applier and recorded a charge to write off assets and released a previously accrued contingent consideration liability. In court filings the Plaintiffsff claim to seek liquidated damages, as well as additional damages up to $24.8 million. A non-jury trial in the Delaware Chancery Court commenced on March 18, 2021, and testimony concluded on April 7, 2021. The parties have submitted post-trial briefs, the Court heard oral arguments at a hearing on September 16, 2021 and requested additional briefs which are expected to be filed at the end of February 2022. The Court will thereafter issue a ruling. The Company has not recorded any expense related to potential damages in connection with this matter because the Company does not believe any potential loss is probable. We expect to defend the claims asserted by the sellers of EndoDynamix, although there can be no assurance that we will prevail in the trial and/or any resulting appeals. u t CONMED is defending two Georgia State Court actions. The first in Cobb County was filed by various employees, former employees, contract workers and others against CONMED, and against a contract sterilizer. The second action in Douglas County is against CONMED’s landlord and other allegedly related entities. Plaintiffsff in the lawsuits allege personal injury and related claims purportedly arising from or relating to exposure to Ethylene Oxide, a chemical used to sterilize certain products. CONMED is defending the claims asserted directly against it and is providing indemnification for certain other defendants based on contractual provisions. CONMED has submitted all of the claims for insurance coverage. One insurer is providing coverage for certain of the claims asserted directly against the Company. CONMED is currently in litigation with one of the other insurers regarding coverage for certain of the indemnification claims. Both actions are in their early stages and discovery has not yet started. The Company’s motion to dismiss in the Cobb County action was heard on January 10, 2022. CONMED believes it has strong defenses to the claims and will vigorously defend itself and all parties it is indemnifying. As with any litigation, there are risks, including the risk that CONMED may not prevail with respect to the defense of the underlying claims, or with respect to securing adequate insurance coverage for the indemnification claims. The Company is unable to estimate any range of possible loss at this time, and has not recorded any expense related to potential damages in connection with this matter because the Company does not believe any potential loss is probable. From time to time, we are also subject to negligence and other claims arising out of the ordinary conduct of our business, including, for example, accidents our employees may experience within the course of their employment or otherwise. We are currently defending one such claim, which we expect to be fully covered by insurance, involving potentially significant personal injuries. The Company is unable to estimate any range of possible loss at this time, and therefore has not recorded any liability related to potential damages in connection with this matter. 69 ff We record reserves sufficien t to cover probable and estimablea losses associated with any such pending claims. We do not expect that the resolution of any pending claims, investigations or reports of alleged misconduct 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, investigations or reports of misconduct, 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. ff Note 14 — Acquisition and Other Expense Acquisition and other expense for the year ended December 31, consists of the following: 2021 2020 2019 Plant underutilization costs Manufacturing consolidation costs Acquisition and integration costs Product rationalization costs - inventory t Restruct uring r costs Acquisition and other expense included in cost of sales Restructuring and related costs Product rationalization costs - fieff ld inventory Acquisition and integration costs Acquisition and other expense included in selling and administrative expense Debt refinancing costs included in other expense $ $ $ $ $ — $ 6,586 $ — — — — 3,993 2,820 2,169 1,087 — $ 16,655 $ $ 4,782 2,095 1,192 414 $ — — 414 1,127 $ $ — 2,858 1,335 — — 4,193 — — 13,066 8,069 $ 13,066 — $ 3,904 During 2020, we recorded a $6.6 million charge to cost of sales related to plant underutilization due to abnormally low production as a result of decreased sales caused by the COVID-19 pandemic. During 2020, we incurred $4.0 million in costs related to the consolidation of manufacturing operations which were charged to cost of sales. These costs included winding down operations at certain locations and moving production lines to ilities. During 2019, we incurred $2.9 million in severance and other costs related to the consolidation of certain other facff manufacturing operations which were charged to cost of sales. During 2020, we recognized costs forff inventory step-up adjustments and other costs related to a previous acquisition of $2.8 million. During 2019, we incurred $1.3 million in costs for inventory adjustments and other costs associated with the acquisition of Buffalo Filter as further described in Note 2. These costs were charged to cost of sales. ff During 2020, we performed an analysis of our product lines and determined certain catalog numbers, principally al equipment, would be discontinued and consolidated into existing product offerings. We consequently recorded related to capita a $2.2 million charge to cost of sales to write-off inventory of the discontinued products. In addition, we incurred $2.1 million in costs related to the write-off of field inventory used for customer demonstration and evaluation of the discontinued products which we charged to selling and administrative expense. During 2020, we incurred $1.1 million in restructuring costs related to a voluntary separation arrangement with employees as a result of the COVID-19 pandemic which were charged to cost of sales based on the job function of the affected employees. Substantially all of the costs associated with the voluntary separation arrangement were paid during 2020. During 2021 and 2020, we recorded charges of $0.4 million and $3.8 million, respectively, related to the restructuring of our sales force which consisted primarily of termination payments to Orthopedic distributors made in exchange for ongoing assistance to transition to employee-based sales representatives and severance that was charged to selling and administrative expense. ff t 70 During 2020, we recorded $0.9 million in restructuring charges principally related to a voluntary separation arrangement with employees as a result of the COVID-19 pandemic which were charged to selling and administrative expense based on the naturet of the costs and function of the affected employees. Substantially all of the costs associated with the voluntary separation arrangement were paid during 2020. d During 2020 and 2019, we incurred $1.2 million and $13.1 million, respectively, in costs associated with the February 11, 2019 acquisition of Buffalo Filter as further described in Note 2 that were included in selling and administrative expense. These costs include investment banking fees, consulting fees, legal fees, severance and integration related costs. During 2021, we recorded $1.1 million related to a loss on early extinguishment and third party feeff s associated with the seventh amended and restated senior credit agreement as further described in Note 7. These costs were included in other expense. During 2019, we incurred a $3.6 million charge related to commitment fees paid to certain of our lenders, which provided a finaff ncing commitment for the Buffalo Filter acquisition and recorded a loss on the early extinguishment of debt of $0.3 million in conjunction with the sixth amended and restated senior credit agreement. Note 15 — Guarantees We provide warranties on certain of our products at the time of sale and sell extended warranties. The standard al equipment is generally one year and our extended warranties typically vary from one to three olicies is based upon a review of historical warranty and service claim warranty pt years. Liability under service and warranty p t experience. Adjustments are made to accruals as claim data and historical experience warrant. eriod for our capita Changes in the carrying amount of standard warranties forff the year ended December 31, are as follow ff s: Balance as of January 1, Provision for warranties Claims made Balance as of December 31, 2021 2020 2019 1,826 $ 2,186 $ 1,585 1,458 (940) 783 (1,143) 1,699 (1,098) 2,344 $ 1,826 $ 2,186 $ $ Costs associated with extended warranty repairs are recorded as incurred and amounted to $6.8 million, $6.1 million and $5.3 million for the years ended December 31, 2021, 2020 and 2019 respectively. Note 16 – Fair Value Measurement We enter into derivative instruments forff risk management purposes only. We operate internationally and, in the normal course of business, are exposed to flucff tuations 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 forei gn currency exposures. ff t By nature, rd 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. ncial instruments involve market and credit risks. We enter into forwa all finaff ff Foreign Currency Forward Contracts. We hedge forecasted intercompany sales denominated in forei gn 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. ff We also enter into forward contracts to exchange foreign currencies for United States dollars in order to hedge our currency transaction exposures. 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. ff 71 The folff lowing table presents the notional contract amounts forff forward contracts outstanding: Forward exchange contracts Forward exchange contracts As of FASB ASC Topic 815 Designation Cash flow hedge $ Non-designated December 31, 2021 December 31, 2020 172,894 $ 38,897 154,504 42,380 The remaining time to maturity as of December 31, 2021 is within two years for hedge designated foreign exchange contracts and approxi a mately one month forff non-hedge designated forwa ff rd exchange contracts. Statement of comprehensive income presentation p p i Derivatives desidd gnat ed as cash floff w hedgesd Foreign exchange contracts designated as cash flow hedges had the following effects on accumulated other comprehensive income (loss) ("AOCI") and net earnings on our consolidated statements of comprehensive income and our consolidated balance sheets: Amount of Gain (Loss) Recognized in AOCI Consolidated Statements of Comprehensive Income Amount of Gain (Loss) Reclassified from AOCI Years Ended Total Amount of Line Item Presented Years Ended Derivative Instrument 2021 2020 2019 Location of amount reclassified 2021 2020 2019 2021 2020 2019 Foreign exchange contracts $ 8,650 $ (7,111) $ 3,871 Net Sales $1,010,635 $862,459 $955,097 $ (5,421) $ 1,997 $ 7,969 Cost of Sales 442,599 402,159 430,382 1,411 (619) 638 Pre-tax gain (loss) $ 8,650 $ (7,111) $ 3,871 Tax expense (benefit) 2,090 (1,718) 935 Net gain (loss) $ 6,560 $ (5,393) $ 2,936 $ (4,010) $ 1,378 $ 8,607 (969) 333 2,079 $ (3,041) $ 1,045 $ 6,528 At December 31, 2021, $3.7 million of net unrealized gains on forward contracts accounted for as cash flow hedges, and included in accumulated other comprehensive loss, are expected to be recognized in earnings in the next twelve months. Derivatives not designated as cash flow hedges Net gains and losses from derivative instruments not accounted for as hedges offset by gains and losses on our intercompany receivables on our consolidated statements of comprehensive income were: Derivative Instrument Location on Consolidated Statements of Comprehensive Income 2021 2020 2019 Years Ended rd contracts Net loss on currency forwa Net gain (loss) on currency transaction exposures ff Selling and administrative expense $ (451) $ (2,269) $ (573) Selling and administrative expense $ (1,832) $ 646 $ (653) 72 Balance sheet presentation p We record these forwa ff rd foreign exchange contracts at fair ff value. The following tablea s summarize the fair value for forward foreign exchange contracts outstanding at December 31, 2021 and 2020: December 31, 2021 Derivatives designated as hedging instruments: Location on Consolidated Balance Sheet Asset Fair Value Liabilities Fair Value Net Fair Value Foreign exchange contracts Foreign exchange contracts Prepaid expenses and other current assets Other long-term liabilities $ $ 5,331 82 5,413 $ $ (430) $ 4,901 (161) (591) $ (79) 4,822 Derivatives not designated as hedging instruments: Foreign exchange contracts Other current liabilities 38 (180) (142) Total derivatives $ 5,451 $ (771) $ 4,680 December 31, 2020 Derivatives designated as hedging instruments: Location on Consolidated Balance Sheet Asset Fair Value Liabilities Fair Value Net Fair Value Foreign exchange contracts Foreign exchange contracts Other current liabilities Other long-term liabilities $ $ 1,500 23 1,523 $ $ (8,826) $ (7,326) (535) (512) (9,361) $ (7,838) Derivatives not designated as hedging instruments: Foreign exchange contracts Other current liabilities 25 (150) (125) Total derivatives $ 1,548 $ (9,511) $ (7,963) Our forward foreign exchange contracts are subject to a master netting agreement and qualify for netting in the consolidated balance sheets. Fair Value Disclosure. FASB guidance defines fair ework 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 faiff r value measurement assumes that the transaction to sell an asset or transfer a liabia lity 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 liabila ity. Fair value is defined based upon an exit price model. value and establia shes a framff ff Valuation Hierarchy. A valuation hierarchy was establia shed for disclosure of the inputs to the valuations used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as foll ows. Level 1 inputs are quoted prices identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities (unadjusted) in active markets forff in active markets, quoted prices for identical or similar assets in markets that are not active, inputs other than quoted prices that the asset or liability, including interest rates, yield curves and credit risks, or inputs that are derived are observable forff principally fromff or corroborated by observable market data through correlation. Level 3 inputs are unobservable inputs based on our own assumptim ons used to measure assets and liabilities at fair value. A finff ancial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. There have been no significant changes in the assumptim ons. ff Valuation Techniques. Assets and liabilities carried at fair ff December 31, 2021 consist of forward ff foreign exchange contracts. The Company values its forff warr value and measured on a recurring basis as of rd foreign exchange contracts 73 using quoted prices for similar assets. The most significant assumption is quoted currency rates. The value of the forward foreign exchange contract assets and liabilities were valued using Level 2 inputs and are listed in the tabla e above. rr The carrying and variablea payablea long-term debt approximate fair value. amounts reported in our balance sheets for cash and cash equivalents, accounts receivable, accounts Note 17 - New Accounting Pronouncements Recently Issued Accounting Standards, Not Yet Adopted In March 2020, the FASB issued ASU 2020-04, Reference Rate Reformff (Topic 848): Facilitation of the Effects of on Financial Reporting, which provides optional guidance if certain criteria are met for entities that Reference Rate Reformff have contracts, hedging relationships, and other transactions that reference LIBOR or other reference rates expected to be discontinued as a result of reference rate reform. This ASU is effective as of March 12, 2020 through December 31, 2022. The Company has not adopted the ASU as of December 31, 2021. Our seventh amended and restated senior credit agreement includes language to address the change from LIBOR to an alternative base rate, therefore we do not believe reference rate reform will have a significant impact on our consolidated financial statements, however we will continue to monitor our transition away from LIBOR and the potential to elect to apply this guidance in our consolidated financial statements in the event that we are impacted by reference rate reform. In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible instruments by removing certain separation models requiring separate accounting for embedded conversion features which will result in more convertible debt nts accounted for as a single liabia lity. The ASU eliminates certain settlement conditions that are required for equity r instrume classification to qualify for the derivative scope exception. The ASU addresses how convertible instruments are accounted for in the calculation of diluted earnings per share by using the if-converted method. The ASU is effective for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company will adopt this standard on January 1, 2022 using the modified retrospective method. The adoption of this new guidance is estimated to result in an increase of approximately $22.6 million to long-term debt in the consolidated balance the full principal amount of the convertible notes outstanding net of issuance costs, a reduction of sheets, approximately $37.9 million to additional paid-in capita al, net of estimated income tax effects, to remove the equity component separately recorded for the conversion features associated with the convertible notes, a decrease to deferred tax liabilities, net of approximately $5.5 million, and a cumulative-effect adjustment of approximately $20.8 million, net of estimated income tax effect s, to the beginning balance of retained earnings as of January 1, 2022. The adoption of this new guidance is anticipated to ff reduce interest expense by approximately $10.4 million during the year ended December 31, 2022. Additionally, the modified retrospective approach will result in an increase in the dilutive share count as a result of calculating the impact of dilution from the Company's convertible notes using the if-converted method. to reflect 74 SCHEDULE II—Valuation and Qualifying Accounts (In thousands) Description Balance at Beginning of Period Additions Charged to Costs and Expenses Deductions Balance at End of Period 2021 Allowance for bad debts t Sales returns allowance Deferred tax asset and valuation allowance 2020 Allowance for bad debts t Sales returns allowance Deferred tax asset and valuation allowance 2019 Allowance for bad debts t Sales returns allowance Deferred tax asset and valuation allowance Item 16. Form 10-K Summary $ 3,876 $ 2,305 $ (1,653) $ 3,684 2,721 1,261 (504) 621 (2,556) $ 2,786 $ 1,611 $ (521) $ 3,667 1,732 384 989 (367) — $ 2,660 $ 852 $ (726) $ 3,246 1,159 518 573 (97) — 4,528 4,441 786 3,876 3,684 2,721 2,786 3,667 1,732 Registrants may voluntarily provide a summary of information required by Form 10-K under this Item 16. The Company has elected not to include such summary information. 75 Description of Common Stock Exhibit 4.1 The following is a description of the general terms, provisions and rights of the common stock, par value $0.01 ("Common Stock"), of CONMED Corporation, a Delaware corporation (the "Company," "we," "us," and "our"), related ”) and provisions of the Company’s certificate of incorporation (the “Certificate applicable Delaware law. This description is qualified in its entirety by, and should be read in conjunction with, the Certificate ff of Incorporation and Bylaws, which have been publicly filed with the Securities and Exchange Commission, and applicable Delaware law. ”) and bylaws (the “Bylaws p of Incorporation y ff Authorized Shares We have the authority to issue an aggregate of 100,000,000 shares of Common Stock. As of February 16, 2022, there were 31,299,194 shares of our Common Stock issued and 29,411,246 shares of our Common Stock outstanding. Dividend Rights Subject to the preferences, limitations and relative rights of holders of our preferred stock, the holders of Common Stock are entitled to share ratably in dividends if, when and as declared by our board of directors out of funds legally available therefor. Voting Rights Subject to the preferences, limitations and relative rights of holders of our preferred stock, the holders of Common Stock are entitled to one vote for each share held of record on all matters at all meetings of stockholders. Liquidation Rights Subject to the preferences, limitations and relative rights of holders of our preferred stock, the holders of Common Stock are entitled, in the event of our liquidation, dissolution or winding-up, to share ratably in the distribution of assets remaining afteff r payment of debts and expenses. Absence of Other Rights Our Common Stock has no sinking fund or redemption provisions or preemptive, conversion or exchange rights. Anti-Takeover Effects of Our Certificate of Incorporation and Bylaws Our Certificate of Incorporation and Bylaws contain provisions that may delay, defer or discourage another party from acquiring control of us. We expect that these provisions, some of which are summarized below, will discourage coercive takeover practices or inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with the board of directors, which we believe may result in an improvement of the terms of any such acquisition in favor of our stockholders. However, they also give the board of directors the power to discourage acquisitions that some stockholders may favor. srr Special Meetings of Stockholder ll Our Bylaws provide that special meetings of stockholders may be called by the board of directors, the chair of the board of directors, if any, the lead independent director of the board of directors, if any, or the president, or upon the request of stockholders holding at least 25% of the Company's outstanding stock entitled to vote, subject to certain procedural and informational requirements for calling special meetings of stockholders set forth in the Bylaws. Stockholder l Action by Written Consent Our Certificate of Incorporation provides that stockholders can take action by written consent if stockholders holding not less than the minimum number of votes required to authorize or take such action consent, subject to certain procedural safeguards set forth in the Certificate of Incorporation, including a requirement that the holders of at least 25% of the Company’s outstanding Common Stock (provided that such shares are determined to be Net Long Shares (as defined in the Bylaws) that have been held continuously for at least one year) request that the Board set a record date to determine the stockholders entitled to act by written consent. Advance Notice Requirementstt kk for Stockholde r Proposalsll and Director Nominations Our Bylaws require compliance with advance notice procedures for stockholder proposals and director nominations to be brought before an annual meeting of the stockholders. Exclusive Forum Our Bylaws provide that unless the Company consents in writing to the selection of an alternate forum, (a) the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a breach of fiduciary duty owed by any of our directors, officers, employees, or stockholders to the Company or our stockholders; (iii) any action asserting a claim arising pursuant to the Delaware General ion Law (the “DGCL”), our Certificate of Incorporation or our Bylaws; (iv) any action to interpret, apply, enforce or r Corporat determine the validity of our Certificate of Incorporation or our Bylaws; or (v) any action asserting a claim against us that is governed by the internal affairs doctrine (or, if the Court of Chancery does not have jurisdiction, then the Superior Court of the State of Delaware, or if no state court in Delaware has jurisdiction, the federal district court for the District of Delaware); and (b) the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended. Amendment to Certifii cate of Incorporation and Bylaws Delaware law provides generally that a majori ty vote of all the outstanding shares entitled to vote thereon at a meeting of stockholders is required to approve amendments to a corporation’s certificate of incorporation, unless a corporation’s certificate of incorporation requires a greater percentage. a Delaware law provides generally that by-laws may be amended, adopted or repealed by the vote of a majori ty of the of incorporation or by-laws provide otherwise. shares cast at a meeting of the Company’s stockholders, unless the certificate Our Bylaws provide that they may be amended, altered or repealed by a majori ty vote of the outstanding shares of the Company entitled to vote thereon. Additionally, if permitted under the corporation’s certificate of incorporation, under Delaware law the board of directors may also amend, adopt or repeal the Company’s by-laws. Our Certificate of Incorporation provides that the Bylaws may be amended, altered, or repealed by our board of directors without stockholder approval; provided, however, that any by-law adopted by the board of directors may be amended or repealed by our stockholders. ff a a Delaware Anti-Takeover Statute We are subjeu ct to Section 203 of the DGCL. Accordingly, we may not engage in a business combination, such as a merger, consolidation, recapitalization, asset sale or disposition of stock, with any “interested stockholder” for a period of three years from the date that the interested stockholder first became an interested stockholder unless certain conditions are met. Indemnification and Limitations on Liability of Officff ers and Directors Our Certificate of Incorporation and Bylaws require the indemnification of directors and officers by the Company to the fullest extent permitted by law, but our Bylaws provide that no indemnification is required with respect to any settlement or disposition of a proceeding unless the Company has given its prior consent to such settlement/disposition. Our Bylaws also permit us to indemnify employees and to advance expenses to any person entitled to indemnification upon request. Section 102(b)(7) of the DGCL permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability for (i) any breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) payments of unlawful dividends or unlawful stock purchases or redemptions, or (iv) any transaction from which the director derived an improper personal benefit.ff Our Certificate of Incorporation contains a provision eliminating the personal liability of directors for monetary damages to the fullest extent permitted by law. Listing The Company's Common Stock is listed on the New York Stock Exchange under the trading symbol "CNMD." Transfer Agent and Registrar The transfer agent and registrar for our Common Stock is Computershare Investor Services. CONMED Corporation Subsidiaries of the Registrant Name y State or Country of Incorporation p EXHIBIT 21 ories, Inc. a Aspen Laborat Buffalff o Filter LLC CONMED Andover Medical, Inc. CONMED Austria GmbH CONMED Denmark ApS CONMED Deutschland GmbH CONMED Endoscopic Technologies, Inc. CONMED Finland Oy CONMED France SAS CONMED Iberia SL CONMED Italia SrL CONMED Japana K. K. CONMED Linvatec Australia PTY Ltd CONMED Linvatec (Beijii ng) Medical Appliances Co., Ltd CONMED Linvatec Biomaterials Oy CONMED Switzerland GmbH CONMED U.K. Ltd. Consolidated Medical Equipment Company S. de R.L. de C.V. EndoDynamix, Inc. GWH Limited Partnership Conmed do Brasil Comércio Importação e Exportação de Produtos Médicos Hospitalares Ltda. Largo Lakes I Limited Partnership Linvatec Corporation Linvatec Belgium NV Linvatec Canada ULC CONMED Europe BV CONMED Korea Ltd. Linvatec Nederland B.V. Linvatec Polska Sp. z.o.o Linvatec Conmed Sweden AB Palmerton Holdings, Inc. SurgiQuest, Inc. Viking Systems, Inc. Linvatec India Private Limited Colorado Delaware New York Austria Denmark Germany Massachusetts Finland France Spain Italy Japana Australia China Finland Switzerland United Kingdom Mexico Delaware Florida Brazil Delaware Florida Belgium Canada Belgium Korea Netherlands Poland Sweden New York Delaware Delaware India CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-78987, 333-90444, 333-124202, 333-136453, 333-145150, 333-162834, 333-168493, 333-182878, 333-207582, 333-214299, 333-223258 and 333-228171) of CONMED Corporation of our report dated February 22, 2022 relating to the consolidated financial statements, tiveness of internal control over financial reporting, which appears in this Form 10-K. financial statement schedule and the effecff EXHIBIT 23 /s/ PricewaterhouseCoopers LLP Rochester, New York February 22, 2022 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 Exhibit 31.1 I, Curt R. Hartman, certify that: 1. I have reviewed this annual report on Form 10-K of CONMED Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establia shing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forff external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual ted, or is reasonably likely to materially affect, the registrant's internal control report) that has materially affecff over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. February 22, 2022 /s/ Curt R. Hartman Curt R. Hartman Chair of the Board, President and Chief Executive Offiff cer CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 Exhibit 31.2 I, Todd W. Garner, certify that: 1. I have reviewed this annual report on Form 10-K of CONMED Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establia shing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of external purposes in accordance with financial reporting and the preparation of financial statements forff generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affecff ted, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. February 22, 2022 /s/ Todd W. Garner Todd W. Garner Executive Vice President and Chief Financial Officer Exhibit 32.1 CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (SUBSECTIONS (a) AND (b) OF SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE) r 63 of title Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chaptea 18, United States Code), each of the undersigned officers of CONMED Corporation, a Delaware corporation (the “Corporation”), does hereby certify that: The Annual Report on Form 10-K for the year ended December 31, 2021 (the “Form 10-K”) of the Corporation fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Corporation. Date: Februaryrr 22, 2022 Date: Februaryrr 22, 2022 /s/ Curt R. Hartman Curt R. Hartman Chair of the Board, President and Chief Executive Officer /s/ Todd W. Garner Todd W. Garner Executive Vice President and Chief Financial Officer 11311 Concept Blvd. Largo, Florida 33773 Toll Free: 1-866-4CONMED International: 727-214-3000 www.CONMED.com customerexperience@CONMED.com internationalorders@CONMED.com 

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