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, 2024
Commission file number: 001-39218
CONMED CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
16-0977505
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
11311 Concept Boulevard
Largo, Florida
33773
(Address of principal executive offices)
(Zip Code)
(727) 392-6464
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock, $0.01 par value
CNMD
NYSE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ 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.
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. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any
of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
As of June 30, 2024, 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 $1.6 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 12, 2025 was 30,908,835.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Definitive Proxy Statement and any other informational filings for the 2025 Annual Meeting of Shareholders are incorporated by reference into
Part III of this report.
CONMED CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR YEAR ENDED DECEMBER 31, 2024
TABLE OF CONTENTS
Part I
Page
Item 1.
Business
2
Item 1A.
Risk Factors
8
Item 1B.
Unresolved Staff Comments
20
Item 1C.
Cybersecurity
20
Item 2.
Properties
21
Item 3.
Legal Proceedings
21
Item 4.
Mine Safety Disclosures
21
Part II
Item 5.
Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
22
Item 6.
[Reserved]
23
Item 7.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
24
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
30
Item 8.
Financial Statements and Supplementary Data
31
Item 9.
Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure
31
Item 9A.
Controls and Procedures
31
Item 9B.
Other Information
31
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
32
Part III
Item 10.
Directors, Executive Officers and Corporate Governance
33
Item 11.
Executive Compensation
33
Item 12.
Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
33
Item 13.
Certain Relationships and Related Transactions, and Director Independence
33
Item 14.
Principal Accounting Fees and Services
33
Part IV
Item 15.
Exhibits, Financial Statement Schedules
34
Signatures
35
Item 16.
Form 10-K Summary
82
1
CONMED CORPORATION
Item 1. Business
Forward Looking Statements
This Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (“Form 10-K”) contains certain forward-looking statements (as
such term is defined in the Private Securities Litigation Reform Act of 1995) and information relating to CONMED Corporation (“CONMED”, the
“Company”, “we” or “us” — references to “CONMED”, the “Company”, “we” or “us” shall be deemed to include our direct and indirect subsidiaries
unless the context otherwise requires) which are based on the beliefs of our management, as well as assumptions made by and information currently
available to our management.
When used in this Form 10-K, the words “estimate”, “project”, “believe”, “anticipate”, “intend”, “expect” and similar expressions are intended
to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors, including those identified
under the caption “Item 1A-Risk Factors” and elsewhere in this Form 10-K which may cause our actual results, performance or achievements, or industry
results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following:
•
general economic and business conditions, including, without limitation, a potential economic downturn, supply chain challenges and constraints,
including the availability and cost of materials, the effects of inflation, and increased interest rates;
•
compliance with and changes in regulatory requirements;
•
the failure of any enterprise-wide software programs or information technology systems, or potential disruption associated with updating or
implementing new software programs or information technology systems;
•
the risk of an information security breach, including a cybersecurity breach;
•
pandemics and health crises, and the responses thereto by governments and hospitals;
•
the possibility that United States or foreign regulatory and/or administrative agencies may initiate enforcement actions against us or our
distributors;
•
the introduction and acceptance of new products;
•
the ability to advance our product lines, including challenges and uncertainties inherent in product research and development, and the uncertain
impact, outcome and cost of ongoing and future clinical trials and market studies;
•
competition;
•
laws and government regulations;
•
changes in customer preferences;
•
changes in technology;
•
cyclical customer purchasing patterns due to budgetary, staffing and other constraints;
•
environmental compliance risks, including lack of availability of sterilization with Ethylene Oxide (“EtO”) or other compliance costs associated
with the use of EtO;
•
the quality of our management and business abilities and the judgment of our personnel, as well as our ability to attract, motivate, and retain
employees at all levels of the Company;
•
the availability, terms and deployment of capital;
•
current and future levels of indebtedness and capital spending;
•
changes in foreign exchange and interest rates;
•
the ability to evaluate, finance and integrate acquired businesses, products and companies;
•
changes in business strategy;
•
the risk of a lack of allograft tissues due to reduced donations of such tissues or due to tissues not meeting the appropriate high standards for
screening and/or processing of such tissues;
•
the ability to defend and enforce intellectual property, including the risks related to theft or compromise of intellectual property in connection with
our international operations;
•
the risk of patent, product and other litigation as well as the cost associated with such litigation;
•
trade protection measures, tariffs and other border taxes, and import or export licensing requirements;
•
weather related events which may disrupt our operations; and
•
various other factors referenced in this Form 10-K.
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
2
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.
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 3,900 employees distribute its products worldwide from three primary manufacturing locations. Our headquarters are
located in 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 opportunities in the healthcare field.
We are committed to offering products with the highest standards of quality, technological excellence and customer service. Substantially all of
our facilities have attained certification under the ISO international quality standards and other domestic and international quality accreditations.
Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports are accessible
free of charge through the Investor Relations section of our website (http://www.conmed.com) as soon as practicable after such materials have been
electronically filed with, or furnished to, the United States Securities and Exchange Commission (the "SEC"). In addition, the SEC maintains an Internet
site (http:/www.sec.gov) containing reports, proxy and information statements and other information regarding issuers that file with the SEC.
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 and new growth markets to
achieve increased operating efficiencies, geographic diversification and market penetration. Targeted companies have historically included those
with proven technologies and established brand names which provide potential sales, marketing and manufacturing synergies. This includes the
acquisitions of In2Bones Global, Inc. ("In2Bones") in June 2022 and Biorez, Inc. ("Biorez") in August 2022.
•
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.
•
Geographic Diversification. We believe that significant growth opportunities exist for our surgical products outside the United States. Principal
international markets for our products include Europe, Latin America, Canada and the Asia/Pacific Rim.
•
Active Participation in the Medical Community. We believe that working relationships with physicians and others in the medical industry
enable us to gain an understanding of trends and emerging opportunities. Active 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.
3
Products
The following table sets forth the percentage of net sales for each of our product lines during each of the three years ended December 31:
Year Ended December 31,
2024
2023
2022
Orthopedic surgery
42 %
43 %
44 %
General surgery
58
57
56
Consolidated net sales
100 %
100 %
100 %
Net sales (in thousands)
$
1,307,015
$
1,244,744
$
1,045,472
Orthopedic Surgery
We design, manufacture and globally distribute products which enable orthopedic surgeons to surgically address sports medicine injuries in the
knee, hip, shoulder and lower extremities. In these procedures, we offer products such as BioBrace , TruShot with Y-Knot All-In-One Soft Tissue
Fixation System, Y-Knot All-Suture Anchors, and Argo™ Knotless Suture Anchors which provide unique clinical solutions to orthopedic surgeons for the
augmentation and repair of soft tissue injuries. In addition to implants, we offer supporting products that enable 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
single-use products which are marketed under a number of brands, including CONMED Linvatec , Concept and Shutt . Our product offering for the
extremity market includes a portfolio of arthroplasty, biologic, fracture and fixation systems for foot and ankle surgery with products such as the Quantum
Total Ankle System and the CoLink plating system. We compete with Smith & Nephew, plc; Arthrex, Inc.; Stryker Corporation; Johnson & Johnson:
DePuy Mitek, Inc.; Zimmer Biomet, Inc.; Paragon 28, Inc. and Treace Medical Concepts, Inc.
We also provide our customers with a comprehensive line of battery-powered, autoclavable, large and small bone power tool systems for 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 2024, approximately 77% 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 single-use and capital 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 endomechanical products offer a full line of
instruments, including the Anchor line of tissue retrieval bags, trocars, suction irrigation devices, graspers, scissors and dissectors, used in minimally
invasive surgery. Our competition includes Medtronic plc; Johnson & Johnson: Ethicon Endo-Surgery, Inc.; Stryker Endoscopy; Olympus Corporation;
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 dilation, hemostasis, biliary, stricture management,
infection prevention and patient monitoring. Patient monitoring includes ECG electrodes, EEG electrodes and cardiac defibrillation pads. Our competition
includes Boston
Anchor is a trademark of the Anchor Products Company, Addison, Illinois.
®
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1
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Scientific Corporation - Endoscopy; Cook Medical, Inc.; Merit Medical Endotek; Olympus Corporation; STERIS Corporation - U.S. Endoscopy; Cantel
Medical- Medivators, Inc.; Cardinal Health Inc. and 3M Company.
In 2024, approximately 91% 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 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 32% of our consolidated net sales in 2024. 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 appropriate product offerings and adequate market
share to compete effectively in these markets. The global markets are 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 enables 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 institutions seek to reduce costs and minimize the number of suppliers.
Marketing
A significant portion of our products are distributed domestically directly to more than 6,000 hospitals, surgery centers and other healthcare
institutions as well as through medical specialty distributors. We are not dependent on any single customer and no single customer accounted for more than
10% of our net sales in 2024, 2023 and 2022.
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 device distributors.
Our employee sales representatives are extensively trained in our various product offerings. Each employee sales representative is assigned a
defined geographic area and compensated on a commission basis or through a combination of salary and commission. The sales force is supervised and
supported by either area directors or district managers. In certain geographies, sales agent groups are used in the United States to sell our orthopedic
products. These sales agent groups are paid 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.
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.
5
Manufacturing
Raw material costs constitute a substantial portion of our cost of production. A substantial portion of our raw materials and select components
used in the manufacturing process are procured from external suppliers. We use a risk based approach when assessing sourcing strategies that include
multisource, inventory redundancy and other strategies in accordance with our quality standards to manage continuity of supply. As a result of supply
chain best practices, new product development, intellectual property and acquisitions, we often form strategic partnerships with key suppliers. This may
result in components and raw materials being 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 performance. We seek to schedule production and maintain adequate levels of safety
stock based on a number of factors, including experience, 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.
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 $6.8 million, $5.3 million and $3.2 million in 2024, 2023 and 2022,
respectively.
Amounts expended for Company research and development were approximately $54.4 million, $52.6 million and $47.2 million during 2024, 2023
and 2022, respectively.
Intellectual Property
Patents and other proprietary rights, in general, are important to our business. We have rights to intellectual property, including United States
patents and foreign equivalent patents which cover a wide range of our products with expiration dates from 2025 to 2043. We own a majority 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.
Government Regulation and Quality Systems
The development, manufacture, sale and distribution of our products are subject to regulation by numerous agencies and legislative bodies,
including the U.S. Food and Drug Administration ("FDA") and comparable foreign counterparts. In the United States, these regulations were enacted
under the Medical Device Amendments of 1976 to the Federal Food, Drug and Cosmetic Act and its subsequent 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 subject 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 member countries of the European Union ("EU") and other
countries require preparation of technical files and design dossiers which demonstrate compliance with applicable 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.
We market our products in numerous countries outside the United States and therefore are subject to regulations affecting, among other things,
product standards, sterilization, packaging requirements, labeling requirements, import laws and on-site inspection by independent bodies with the
authority to issue or not issue certifications 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 EU follow the requirements under the EU Medical
Device Regulation ("EU MDR") which replaced prior regulations with a single set of regulations in May 2017 for all member countries. EU MDR
6
imposes stricter requirements for the marketing and sale of medical devices, including in the areas of clinical evaluation requirements, quality systems,
labeling and post-market surveillance with an effective date of May 2021. During the transition period, medical devices with notified body certificates
issued under the EU Medical Device Directive prior to May 2021 may continue to be placed on the market for the earlier of the remaining validity of the
certificate or December 2028. These regulations require companies that wish to manufacture and distribute medical devices in the European Union to
maintain quality system certifications 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.
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 14 for further discussion.
We are also subject to various environmental health and safety 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 effect on purchases of property, plant
and equipment, cash flows, net income (loss) 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, 2024, we had approximately 3,900 full-time
employees, including approximately 2,400 in operations and the remaining in sales, marketing, 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 of Directors ("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.
Competitive Pay and Benefits
Our compensation programs are designed to align the compensation of our employees with CONMED’s performance and to provide the proper
incentives to attract, retain and motivate employees to achieve positive results. For those employees eligible for incentive earnings, our compensation
programs are balanced to ensure earnings are tied to short-term and long-term performance. Our benefits offerings vary from country to country, dependent
on local market practices. We regularly evaluate our benefits offerings to ensure their competitiveness as well as equity and fairness.
CONMED is committed to pay equity for all employees. We conduct an annual review of our pay equity globally by role, location, and gender,
and also by ethnic diversity in the U.S. If pay equity issues are identified that cannot be explained by historical performance, time in role, tenure, or other
job-related factors, we work to address the inequity in a timely fashion.
Diversity and Inclusion
A demonstrated commitment to diversity and inclusion is vital to CONMED's success as we seek out individuals who bring their unique
capabilities to our Company. We believe that diverse teams stimulate innovation, enhance our understanding
7
of the needs of our global customer base and ultimately deliver better results for our stakeholders. We value individual strengths and we believe that hiring
and retaining employees of all different backgrounds and experiences permits us to better serve our customers, shareholders and other stakeholders. 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.
Development
CONMED recognizes that development is most effective when customized to an employee’s unique experiences and interests. In this spirit,
CONMED employees and managers utilize various tools such as the annual performance review process and individual development plans to facilitate a
specific individual’s career growth.
On an annual basis, we offer a performance review workshop for employees. This workshop was developed to encourage employees to adopt a
growth mindset while reflecting on their accomplishments and setting goals for the upcoming year.
Because our managers are the crucial link in our employee’s growth and development, CONMED leaders complete a global interactive on-line
training program, which includes topics such as diversity of thought, developing employees’ strengths, and employee relations.
Employee Engagement
Measuring our team members’ engagement helps us understand what is working well and where we have opportunities to improve. CONMED
utilizes the Gallup Q12 Employee Engagement Survey both to measure engagement across the organization, and to provide a basis for individual team
action planning sessions.
In May 2024, 98% of our global workforce participated in the survey, and all team members were invited to participate in subsequent team action
planning sessions. During these sessions, survey results are reviewed and discussed. Additionally, the team agrees upon action items they can take to
improve their engagement and make CONMED an even better place to work. Following these sessions, managers meet with their teams periodically to
discuss progress on agreed upon action items. Due to the commitment of our global team members, CONMED’s global engagement average overall score
increased year-over-year.
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”.
(i) Risks Related to Our Business and the Medical Device Industry
Our financial performance is dependent on conditions in the healthcare industry and the broader economy. Our business and financial performance
could be adversely affected, directly or indirectly, by a potential economic downturn.
The results of our business are directly tied to the economic conditions in the healthcare industry and the broader economy as a whole. We believe that the
health care industry will continue to be impacted by judicial decisions, increasing regulation, political and legal action at both the federal and state/local
levels in the United States and internationally, and US executive orders, and it is uncertain how such developments will affect our business. We will
continue to monitor and manage the impact of the overall economic environment on the Company.
Market volatility and uncertainty related to inflation and its effects, which could potentially contribute to poor economic conditions, may contribute to or
enhance some of the risks described herein. Any of these effects, or others that we are not able to predict, could adversely affect our business, financial
condition or results of operations. Any deterioration in global economic conditions could also have material adverse effects on our business, financial
condition or results of operations, even if our direct exposure to the affected region is limited. Global political trends could increase the probability of a
deterioration in global economic conditions.
In this regard, approximately 15% of our 2024 revenues are derived from the sale of capital 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.
8
Public health crises have had, and may continue to have, an adverse effect on certain aspects of our business, financial condition, or results of
operations. The nature and extent of future impacts are highly uncertain and unpredictable.
We face a wide variety of risks related to public health crises, epidemics, pandemics or similar events, which could have an adverse effect on certain
aspects of our business, financial condition, or results of operations. For example, during the COVID-19 pandemic, in some geographies or territories, our
field-based sales representatives were limited in their ability to travel to service or call on customers. Further, some hospitals delayed certain procedures to
reserve space for COVID-19 patients or experienced slowdowns due to staffing shortages. If a new health epidemic or outbreak were to occur, we could
experience broad and varied impacts similar to the impact of COVID-19, including adverse impacts to our workforce and supply chain, inflationary
pressures and increased costs, schedule or production delays, market volatility and other financial impacts. If any of these were to occur, our future results
and performance could be adversely impacted.
Limitations on the availability of Ethylene Oxide (“EtO”) sterilization services may limit our ability to sell certain sterile products.
Approximately 31% of our products when measured in terms of revenues for 2024, 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 capacity or further
government actions adverse to EtO sterilization, it is possible that we could be impacted materially in the future.
As a medical device manufacturer that interacts with physicians and health care providers domestically and internationally, we face risks under
domestic and foreign laws and regulations, including the Foreign Corrupt Practices Act and similar statutes in other countries, and government
enforcement actions more generally.
Manufacturers of medical devices have been the subject of various investigations and enforcement actions relating to interactions with health care
providers, both domestically and internationally. The interactions with domestic health care providers are subject to various federal and state laws and
regulations, including the federal Anti-Kickback Statute, which prohibits entities from knowingly and willfully soliciting, offering, receiving or paying
remuneration (including kickbacks or bribes) in exchange for or to induce the referral of an individual for the purchase, order, lease or recommendation of
any good, item or service for which payment may be made under federal healthcare programs; and the federal civil False Claims Act, which prohibits
individuals or entities from knowingly presenting or causing to be presented false or fraudulent claims for payment or knowingly using false statements to
obtain payment from the federal government. Suits filed under the False Claims Act may be brought by “relators” or “whistleblowers” on behalf of the
government, who may share in amounts paid by the entity to the government in fines or settlement. Also, many states have enacted laws similar to the
federal Anti-Kickback Statute and the False Claims Act, and some of these may be broader in scope in that some extend to all payors.
The Foreign Corrupt Practices Act (“FCPA”) prohibits U.S. companies and their representatives from offering or making payments to foreign officials for
the purpose of securing a business advantage; and in many countries, the healthcare professionals with whom we regularly interact may meet the definition
of a foreign government official for purposes of this law. Similar anti-bribery laws are in effect in many of the countries in which we operate. 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 that 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 (i.e.,
distributors) over whom the manufacturer may not have complete control.
We also must comply with a variety of other laws that impose extensive tracking and reporting related to all transfers of value provided to certain
healthcare professionals and others. Any failure to comply with these laws and regulations could subject us or our officers and employees to criminal and
civil financial penalties.
Furthermore, due to the nature of our business, which includes the sourcing, marketing and manufacturing of medical devices, we regularly become
involved in disputes, litigation and regulatory matters. Litigation is inherently unpredictable, disruptive, and time consuming, and we cannot predict the
timing, outcome or impact of any such investigations. For example, we voluntarily informed the U.S. Department of Justice ("DOJ") of potential issues
with certain royalty payments related to surgeons involved in design teams. We are fully cooperating with the DOJ and their review of this matter.
Although we are
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currently unable to predict the outcome of the investigations or the potential impact, if any, on our business, financial condition, and results of operations,
the impacts could potentially be significant and material. Any adverse outcome in one or more of these investigations could include the commencement of
civil and/or criminal proceedings, substantial fines, penalties, and/or administrative remedies, including exclusion from government reimbursement
programs and/or entry into Corporate Integrity Agreements (CIAs) with governmental agencies. In addition, resolution of any of these matters could
involve the imposition of additional, costly compliance obligations.
These laws and regulations are broad in scope and are subject to evolving interpretation and we have in the past been, and in the future could be, required to
incur substantial costs to investigate, audit and monitor compliance or to alter our practices. We continue to implement enhancements to our overall
compliance program in light of evolving interpretations of laws and regulations. Violations or alleged violations of these laws could result in litigation, and
we may be subject to criminal or civil penalties and sanctions, including substantial fines, imprisonment of current or former employees and exclusion from
participation in governmental healthcare programs.
No inquiry or claim that we currently face or have faced to date, and no report of misconduct that we have received to date, has had a material adverse
effect on our business, financial condition or results of operations. 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 business, financial condition or results of operations.
Failure to comply with regulatory requirements may result in recalls, loss of revenues, fines or other materially adverse implications.
As a manufacturer of medical devices, we are governed by a global regulatory environment that is increasingly stringent, unpredictable and complex. The
products and services we design, develop, manufacture and market are subject to rigorous regulation by the FDA and numerous other supranational,
national, federal, regional, state and local governmental authorities.
We have ongoing responsibilities under FDA regulations, the EU MDR and other supranational, national, federal, regional, state and local requirements.
These requirements relate to quality systems, recordkeeping, labeling, promotional and marketing requirements, adverse event reporting regulations and
other matters, which are subject to continual review and are monitored rigorously through periodic inspections by regulators, which may result in
observations (such as on FDA Form 483), and in some cases warning letters, that require corrective action or other forms of enforcement. There can be no
assurance that the costs of responding to such inspections will not be material. Additionally, the availability of designated European notified body services
to certify compliance with the new EU MDR requirements is limited, which may delay the marketing approval for some of our products under the EU
MDR (and, potentially, the UK MDR). Furthermore, regulators strictly regulate the promotional claims that we may make about approved or cleared
products.
We incur significant costs to comply with regulations, including the EU MDR. If we fail to comply with applicable regulatory requirements, we may be
subject to a range of sanctions, including substantial fines, warning letters that require corrective action, product seizures, recalls, import restrictions, the
suspension of product manufacturing or sales, revocation of approvals, exclusion from future participation in government healthcare programs, substantial
fines and criminal prosecution.
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.
Our manufacturing processes and facilities are subject to FDA’s Quality System Regulations ("QSR"), and many of our products are 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 QSR 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 business, financial condition or results of operations 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, financial condition or results of operations, 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.
The highly competitive market for our products may create adverse pricing pressures.
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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 inability to supply products as a result of product recall, market withdrawal or back-order;
•
the introduction by competitors of new products or new features to existing products such as a replacement for AirSeal ;
•
the introduction by competitors of alternative surgical technology; and
•
advances in surgical procedures, discoveries or developments in the healthcare industry.
Cost reduction efforts in the healthcare industry could put pressures on our prices and margins.
In recent years, the healthcare industry has undergone significant change driven by various efforts to reduce costs. In the U.S., 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.
In addition to U.S. initiatives to reduce healthcare costs and expenses, we experience similar pricing pressure in other countries in which we do business.
These initiatives are sponsored by government agencies, legislative bodies and the private sector and include price regulation and competitive pricing. For
example, China has implemented a volume-based procurement (“VBP”) process designed to reduce medical spending, which has in the past resulted in,
and could in the future result in, reduced margins on covered devices and products, required renegotiation of distributor arrangements, and incurrence of
inventory-related charges. In cases where our product is not selected in VBP, sales of that product are substantially impacted. Similarly, the Italian Public
Administration has implemented a Pay Back Law to obtain reimbursement from the medical device industry to contribute to government overspending on
medical devices beginning in 2015. Additional cost reduction and recovery strategies are likely to be proposed in various jurisdictions, the effects of which
are difficult to predict, but may have a material adverse effect on our business, financial condition or results of operations.
With a global footprint and supply chain, our results and operations could be adversely affected by raw material shortages, inflation, price increases,
economic or geopolitical developments, including protectionist trade policies such as tariffs, or other events.
We use a variety of raw materials in our businesses, and 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. Significant shortages or inflation could increase our operating costs and
adversely impact the competitive positions of our products. In some instances, we participate in commodity markets that may be subject to allocations by
suppliers.
In addition, risks exist in our supply chain including the number of suppliers that provide a limited number of materials, and a sole source and single source
arrangements due to the quality, intellectual property or geopolitical considerations or constraints associated with regulatory requirements. If suppliers are
unable or unwilling to deliver materials, products or services as a result of financial difficulties, acquisition by a third party, natural disasters or otherwise,
we may not be able to manufacture or have available one or more products during such period of unavailability and our business could suffer.
In certain cases, we may not be able to establish additional or replacement suppliers for such materials or service providers for such services in a timely or
cost-effective manner, often as a result of FDA and other regulations that require, among other things, validation of materials, components and services
prior to their use in or with our products. In certain instances, we have been unable to meet our commitments to customers due to supply chain challenges,
which has led to loss of sales. An inability to meet demand due to supply chain challenges has in the past resulted in, and could in the future result in, an
adverse impact to our reputation, the competitive position of our products and our business, and increase in our operating efficiencies and/or costs.
The increases in costs or availability of raw materials may be exacerbated as a result of the conflicts in Ukraine and the Middle East and ongoing global
supply chain challenges. In addition, increased inflation in wages and materials and the imposition of
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tariffs may also increase our costs, or retaliatory tariffs imposed by other governments would 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. Where possible, we have
addressed increasing supply chain costs in pricing, yet continued cost pressures and raw material availability have had and may continue to have an adverse
effect on our business, financial condition or results of operations.
We may not be able to keep pace with technological change or to successfully develop new products with wide market acceptance, which could cause us
to lose business to competitors.
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, to fund studies and otherwise develop
clinical data to support the efficacy of our products, and to have them accepted by surgeons and other healthcare professionals.
Changes in the competitive landscape, including the development of new or competitive technologies may reduce or eliminate demand for our products and
affect our financial performance. Our products also could be rendered obsolete or uneconomical by our failure to successfully develop or introduce new
products and technologies, the inability to keep pace with technology, or the obsolescence of components for our existing product portfolio. In addition,
many of our competitors are substantially larger with greater financial resources which may allow them to more rapidly develop or acquire new products.
Additional factors that may result in delays of new product introductions or cancellation of our plans to manufacture and market new or existing products
or which may impact adoption and market acceptance of our products include:
•
research and development delays or failures;
•
capital and other financial constraints;
•
delays or failures in securing regulatory approvals; and
•
the potential inability to secure clinical data demonstrating the efficacy of our products or to develop such data on a timely basis.
Ordering patterns of our customers may change resulting in reductions in sales.
Our hospital and surgery center customers purchase our products in quantities sufficient to meet 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 reduce demand for surgical products if they reserve space for patients or experience staff shortages
or disputes due to public health crises, pandemics, epidemics or similar events. 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.
(ii) Risks Related to Our Indebtedness
The terms of our indebtedness outstanding from time to time, including our senior credit agreement, may restrict our current and future operations,
particularly our ability to respond to changes or to take certain actions.
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:
•
incur indebtedness;
•
allow for liens to be placed on our assets;
•
make investments;
•
engage in transactions with affiliates;
•
make certain restricted payments or enter into certain restrictive agreements;
•
enter into certain swap agreements;
•
change our line of business;
•
pay dividends or make other distributions on, or redeem or repurchase, capital stock;
•
consolidate, merge or sell all or substantially all of our assets;
•
prepay and/or modify the terms of certain indebtedness; and
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•
pursue acquisitions.
These covenants, unless waived, may prevent us from pursuing and/or securing acquisitions, significantly limit our operating and financial flexibility
and/or limit our ability to respond to changes in our business or competitive activities. Our ability to comply with such provisions may be affected by
events beyond our control. 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 payable. 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.
We may not be able to generate sufficient cash to service our indebtedness and other obligations, and, our leverage and debt service requirements may
require us to adopt alternative business strategies.
As of December 31, 2024, we had $914.6 million of debt outstanding, representing 48% of total capitalization. In particular, on June 6, 2022, we completed
an $800 million offering of the 2.250% Convertible Notes due 2027 (the "2.250% Notes" or the “Convertible Notes”) through a private offering pursuant to
Rule 144A (the “2.250% Notes Offering”). We may not have sufficient cash flow available to enable us to meet our obligations. If we are unable to service
our indebtedness, we will be forced to adopt an alternative strategy that may include actions such as foregoing acquisitions, reducing or delaying capital
expenditures, selling assets, restructuring or refinancing our indebtedness or seeking additional equity capital. We cannot be certain that any of these
strategies could be implemented on terms acceptable to us, if at all. See “Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Liquidity and Capital Resources” and Note 8.
The degree to which we are leveraged could have important consequences to investors, including but not limited to the following:
•
a portion of our cash flow from operations must be dedicated to debt service and will not be available for operations, capital expenditures,
acquisitions, dividends and other purposes;
•
our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or general 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 variable rates of interest.
Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.
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 variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income (loss) 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 swaps we enter into may not fully mitigate our interest rate risk.
Despite our current level of indebtedness, we and our subsidiaries may still be able to incur substantially more debt. This could further exacerbate the
risks to our financial condition described above.
We may incur substantial additional indebtedness, including secured indebtedness. As of December 31, 2024, we have $583.4 million of availability under
the senior credit agreement. If we incur secured indebtedness and such secured indebtedness is either accelerated or becomes subject to a bankruptcy,
liquidation or reorganization, our assets would be used to satisfy 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.
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The conditional conversion features of our 2.250% Notes if triggered, may adversely affect our financial condition.
In the event the conditional conversion features of the 2.250% Notes issued on June 6, 2022 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, 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 liability, which could result in a material
reduction of our net working capital. Refer to Note 8 for further details on the Convertible Notes.
The convertible notes hedge and warrant transactions that we entered into in connection with the offering of the Convertible Notes may affect the value
of the Convertible Notes and our common stock.
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 effect 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 establishing 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 any decrease in) the market price of our common stock or the Convertible Notes at
that time. In addition, each Option 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 affect the value of our common stock and the value of the Convertible Notes.
We are subject to counterparty risk with respect to the convertible notes hedge transactions.
Each Option Counterparty to the convertible notes hedge transactions is a financial institution 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 suffer adverse tax consequences and more dilution than we currently anticipate with respect to our common stock. Although these counterparties
are large, reputable U.S. financial institutions, we can provide no assurances as to the financial stability or viability of any Option Counterparty.
(iii) Risks Related to Our Acquisition Strategy
Our financial performance is subject to the risks inherent in any acquisition, including the effects of increased borrowing and integration of newly
acquired businesses or product lines.
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, to identify risks in the
diligence process and, to negotiate successful terms with the sellers, as the sellers may also be negotiating with other bidders with greater financial
resources. 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 acceptable terms. 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,
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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 performance 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.
The terms of any future preferred equity or debt financing may give holders of any preferred securities or debt securities rights that are senior to rights
of our common shareholders or impose more stringent operating restrictions on our company.
Debt or equity financing may not be available to us on acceptable 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) Other Risks Related to Our Business
We could experience a failure of a key information technology system, process or site or a breach of information security, including a cybersecurity
breach or failure of one or more key information technology systems, networks, processes, associated sites or service providers, and could potentially
become liable for a breach of various data privacy regulations.
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
enable, 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. In addition, we currently maintain cybersecurity insurance, although the cost of
cybersecurity insurance has been increasing and there can be no assurances that we will continue to maintain cybersecurity insurance at the same levels of
coverage, or at all. 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.
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 certain violations. In addition, legal requirements standards for cross-border
personal data transfers from outside the United States are constantly changing, including the revisions made by the European Economic Area (“EEA”) that
require the use of revised Standard Contractual Clauses (“SCCs”) for international data transfers from the EEA. The SCCs are required to be used for new
agreements involving the cross-border transfer of personal data from the EEA and must be supplemented by an assessment and due diligence of the legal
and regulatory landscape of the jurisdiction of the data importer, the channels used to transmit personal data and any sub-processors that may receive
personal data. The UK has developed its own set of SCCs that must be used for transfers of personal data from the UK to the U.S. In July 2023, the
European Commission determined that the Data Privacy Framework (“DPF”), a replacement for the invalidated EU-US Privacy Shield, ensures an
adequate level of protection for EU personal data transferred to the United States. Compliance with these changes and any future changes to data transfer or
privacy requirements could potentially require us to make significant technological and operational changes, any of which could result in substantial costs,
and failure to comply with applicable data protection and transfer or privacy laws requirements could subject us to fines or regulatory oversight.
Likewise, the California Consumer Privacy Act ("CCPA") imposes obligations on companies that conduct business in California, and meet other
requirements, with respect to the collection or sale of specified personal information. In November 2020, voters in the State of California approved the
California Privacy Rights Act (“CPRA”), a ballot measure that amends and supplements the CCPA by, among other things, expanding certain rights
relating to personal information and its use, collection, deletion, and disclosure by covered businesses. Compliance with the CCPA, the CPRA, and other
state statutes, common law,
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or regulations designed to protect consumer, employee, or job applicant personal information could potentially require substantive technology infrastructure
and process changes across many of our businesses. Other 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 significant disruptions could result in actions by
regulatory bodies and/or civil litigation, any of which could materially and adversely affect our business, financial condition, results of operations,
reputation or competitive position.
The costs of protecting IT systems and data may increase, and there can be no assurance that these added security efforts will prevent all breaches of our IT
systems or thefts of our data. We may also be exposed to potential disruption in operations, loss of customers, reputational, competitive and business harm,
and significant costs from remediation, litigation and regulatory actions if our business continuity plans do not effectively address the following failures on
a timely basis:
•
our IT systems are damaged or cease to function 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.
We rely on various software programs and information technology systems to run our business, some of which may be old or no longer supported and
requiring replacements or updates. The failure of any of these software systems or information technology systems to operate properly, or disruptions
associated with updating or implementing new software or information technology systems, may have a material adverse effect on our business,
financial condition or results of operations.
We rely on various software programs and information technology systems to run our business, some of which may be old, have suffered outages, or may
no longer be supported. System disruptions could cause the Company to incur incremental costs and expenses in connection with resolving ongoing or
implementation issues. To the extent that these disruptions recur and/or persist over time, this could negatively impact our competitive position and our
relationships with our customers and thus could have a material adverse effect on our business, financial condition or results of operations. For example, in
the fourth quarter of 2022, we launched a new warehouse management system (“WMS”), which caused service level disruptions that impacted our ability
to ship certain quantities of finished goods to customers. Although we believe sales are no longer being delayed or lost as a result of WMS issues, there can
be no assurances that such issues will not re-occur.
We rely on a third party to obtain, process and distribute sports medicine allograft tissue. If such tissue cannot be obtained, is not accepted by the
market or is not accepted under numerous government regulations, our results of operations could be negatively impacted.
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 otherwise fails, we may be unable to increase the
allograft service fees or to find a suitable replacement for MTF on 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 have an adverse effect on our business, financial condition
or results of operations.
We distribute some products for third-party companies, and cannot ensure that our rights to distribute such third-party products will continue
indefinitely.
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 acceptable to our customers, or to us.
16
If we lose our patents or they are held to be invalid, or if our products or services infringe on third party patents, we could become subject to liability
and our competitive position could be harmed.
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 2025 through 2043 and have additional patent applications pending. See Item 1 Business “Research and
Development” and “Intellectual Property” for a further description of our patents. The loss of our patents could reduce the value of the related products and
any related competitive advantage. Competitors may also be able 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.
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 to be valid or sufficiently broad to protect our technology or provide us with a competitive advantage; or
•
we will be successful in defending against pending or future patent infringement claims asserted against our products.
We may be sued for product liability claims and our insurance coverage may be insufficient to cover the nature and amount of any product liability
claims.
Even if our products are properly designed and perform as intended, we may be sued. The nature 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 nature
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.
Damage to our physical properties as a result of hurricanes, tornadoes, earthquakes, fires, droughts, extreme temperatures, flooding or other natural
or man-made disaster may cause a financial loss and a loss of customers.
Our manufacturing facilities or our suppliers’ manufacturing facilities could be damaged or disrupted by, among other things, a natural disaster, terrorist
activity, interruption of utilities or public health crises (such as the COVID-19 pandemic). Although we have obtained property damage and business
interruption insurance where we deem appropriate, a major catastrophe (such as a fire, flood, hurricane or other natural disaster) in any of the areas where
we or our suppliers conduct operations could result in a prolonged interruption of all or a substantial portion of our business. For example, the path of
Hurricane Helene temporarily impacted our manufacturing facility in Largo, Florida and our distribution center in Lithia Springs, Georgia. Any disruption
resulting from these events could cause significant delays in shipments of products and the loss of sales and customers. We may not have insurance to
adequately compensate us for any of these events.
Shifts in weather patterns caused by climate change are expected to increase the frequency, severity or duration of certain adverse weather conditions and
natural disasters, such as hurricanes, tornadoes, earthquakes, fires, droughts, extreme temperatures or flooding. These shifts could cause more significant
business and supply chain interruptions, damage to our products and facilities as well as the infrastructure of hospitals, medical care facilities and other
customers, reduced workforce availability, increased costs of raw materials and components, increased liabilities and decreased revenues than what we
have experienced in the past from such events.
Our insurance coverage is limited to certain caps, and our insurance may not be adequate to cover future losses.
We maintain insurance coverage for physical damage to our property and casualty losses, product liability, cybersecurity and data privacy losses. We also
maintain third-party insurance for resultant losses that could occur during a business interruption. However, we are required to pay deductibles, and our
insurance coverage is limited to certain caps, therefore our insurance may not be adequate to cover future losses. Any increase in the frequency or severity
of natural disaster events could result in increased insurance premiums.
17
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 operations subject us to foreign currency fluctuations and other risks associated with operating in countries outside the
United States.
A significant portion of our revenues, approximately 43% of 2024 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 and those sales denominated in local currency amounted to approximately 32% of our total
net sales in 2024. 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 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 2024, 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 2026. 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 instability;
•
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.
We cannot be certain that such risks will not have a material adverse effect on our business and results of operations.
Our new products may fail to achieve expected levels of market acceptance.
New product introductions may fail to achieve market acceptance. The degree of market acceptance for any of our products will depend upon a number of
factors, including:
•
our ability to develop and introduce new products and product enhancements on a timely basis;
•
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 efficacy of our products;
•
the extent to which we have, are able to fund and develop, clinical data surrounding the use and efficacy of our products; and
•
the prices of our products compared to the prices of our competitors’ products.
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 extensive research, marketing and
manufacturing capabilities and significantly greater technical and personnel resources than 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 competitive forces.
Our Board of Directors may, in the future, limit or discontinue payment of a dividend on common stock.
18
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 time, and are subject to an evaluation of our financial
condition, results of operations and capital requirements, applicable law, 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 capital expenditures or increases in
reserves.
Anti-takeover provisions in our organizational 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 favorable. 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 Corporation 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.
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.
Violations of environmental, social and governance laws and regulations and climate change initiatives could materially and adversely affect our
business, financial condition, and results of operations.
Our business and facilities and those of our suppliers are subject to a number of federal, state, local and international laws and regulations governing
environmental, social and governance (“ESG”) matters. Governments, investors, customers, employees and other stakeholders have been increasingly
focused on corporate responsibility practices and disclosures, and expectations in this area continue to rapidly evolve. Implementation of measures to meet
ESG requirements and expectations involves risks and uncertainties, requires investments and depends in part on third party performance or data that is
outside our control.
The quickly evolving landscape could result in greater regulatory requirements or expectations of us and cause us to undertake costly initiatives to satisfy
such new criteria. If we fail to comply with current or future ESG laws and regulations, we could be subject to fines or penalties, and/or be prohibited from
selling our products in certain countries. Moreover, the increasing attention to corporate responsibility initiatives could also result in reduced demand for
our products, reduced profits and increased litigation and exposure.
If we are unable to satisfy evolving criteria, investors and other stakeholders may conclude that our policies and/or actions with respect to corporate
responsibility matters are inadequate. If we fail or are perceived to have failed to comply with corporate
19
responsibility laws and regulations, meet evolving expectations or accurately disclose our progress, we could face legal and regulatory proceedings and our
reputation, business, financial condition and results of operations could be adversely impacted.
Our ability to attract and retain qualified employees is critical to our success.
Our employees are our most important resource, and in many areas of the medical industry, competition for qualified personnel is intense. We seek
to attract talented and diverse new employees and retain and motivate our existing employees. If we are unable to continue to attract or retain qualified
employees, including our executives, our performance, including our competitive position, could be materially and adversely affected.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
We take an active role in ensuring the confidentiality, integrity, and availability of data, systems, processes, applications, and products. We are
diligent when it comes to safeguarding the data of our strategic partners, employees, existing and future customers, and our teams throughout the globe. We
take the protection of proprietary information, intellectual property, and sensitive information seriously, making it our commitment to provide
comprehensive prevention, detection, and response capabilities, in order to maintain integrity.
We manage cyber risk and assess internal maturity capabilities by leveraging the National Institute of Standards and Technology (NIST)
framework, in conjunction with the Center for Internet Security (CIS) top 18 risk framework. Internal and external assessments are conducted for best
practice benchmarking. Outputs from these assessments are used to develop strategic priorities, and to develop tactical action plans to continue to mature
our cyber posture. CONMED leverages technologies, external consultants and vendors to support our risk management strategies, threat insights, trends,
and mitigation approaches. In addition, CONMED has published corporate policies that support our cybersecurity efforts, such as our employee handbook,
and has proactively implemented protection measures such as endpoint encryption, endpoint monitoring (EDR), remote access, VPN, and multi-factor
authentication. Policies and procedures must go through a controlled review process by senior management to ensure relevant updates are being
incorporated in our policies.
The Board of Directors oversees management’s processes for identifying and mitigating risks, including cybersecurity risks, to help align our risk
exposure with our strategic objectives. Our executive management team along with our Chief Information Security Officer (CISO) are responsible for
managing cybersecurity risk, including assessing cyber maturity and development of short and long-term strategies. Our CISO has extensive leadership and
experience within the cybersecurity space. We invest in the growth and development of our security team's expertise through hands-on training, technical
industry certifications and security domain specific conferences. Security is approached as a unified company strategy, where everyone in the organization
plays a key role in the success of our programs. Through required phishing training and awareness campaigns, policy and procedures training, and periodic
multi-level tabletop exercise scenarios, we continue to improve identification, reporting, response, recovery, and prevention of threats. We engage in
penetration testing, provided by external entities to ensure our internal processes and controls are validated.
We continue to invest in IT Security to improve technical capabilities, streamline response effectiveness, and harden preventive, detection, and
response measures, while growing the core security organization to support business growth efforts.
We build our security program with the intent of a global reach and a global customer base at the top of our minds. Cybersecurity risk factors are
evaluated, prioritized, and connected to annual strategic priorities. Strategic priorities are comprised of critical cybersecurity efforts in an ongoing effort to
mitigate internal or external risks factors, and drive maturity objectives. We have developed and continue to develop strategic and tactical cyber capabilities
to provide a modern approach to protecting the partnerships we have built our business around. This is, and will continue to be, an ongoing effort to
provide and implement cyber best practices. Our Audit Committee is briefed semi-annually by our management team to provide awareness around IT
environmental risk factors, cyber posture, global threat landscape, and changing regulatory requirements. Decisions are then made based on all assessed
risk factors, including cyber maturity growth, strategic personnel, and appropriate cyber capability. All critical response activities are assessed and
communicated from executive management to the Audit Committee which then reports to the Board of Directors.
During the fiscal year ended December 31, 2024 and through the date of the filing of this Form 10-K, we have not identified any specific risks
from cybersecurity threats that have materially affected, or are reasonably likely to affect, our
20
business strategy, results of operations, or financial condition. The risk factors related to cybersecurity threats identified to be reasonably likely to affect,
our business strategy, results of operations, or financial condition are included in “Item 1A. Risk Factors - Other Risks Related to Our Business”.
Item 2. Properties
Facilities
The following table 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 for present and anticipated needs.
Location
Square Feet
Own or Lease
Lease Expiration
Utica, NY
500,000
Own
—
Largo, FL
278,000
Own
—
Lithia Springs, GA
330,000
Lease
September 2034
Chihuahua, Mexico
207,720
Lease
October 2029
Chihuahua, Mexico
40,626
Lease
March 2028
Brussels, Belgium
58,276
Lease
June 2030
Mississauga, Canada
36,054
Lease
July 2036
Greenwood Village, CO
27,763
Lease
April 2025
Westborough, MA
19,533
Lease
November 2025
Frenchs Forest, Australia
16,959
Lease
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 proceedings related to
product, labor and intellectual property and other matters that are more fully described in Note 14. We are not a party to any pending legal proceedings
other than ordinary routine litigation incidental to our business.
Item 4. Mine Safety Disclosures
Not applicable.
21
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") under the symbol “CNMD”. At January 31,
2025, there were 445 registered holders of our common stock and approximately 84,334 accounts held in “street name”.
Our Board of Directors has authorized a share repurchase program; see Note 10 for further details.
The Board of Directors declared a quarterly cash dividend of $0.20 per share in 2023 and 2024. The fourth quarter dividend for 2024 was paid on
January 3, 2025 to shareholders of record as of December 20, 2024. The total dividend payable at December 31, 2024 was $6.2 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 Corporation are authorized for
issuance.
22
Performance Graph
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 frequency with which dividends are paid on such securities during the applicable fiscal year.
Item 6. [Reserved]
23
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 Financial Statements and related notes contained elsewhere in this
report.
This section of this Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023. Discussions
of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Form 10-K can be found in “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2023.
Amounts reported in millions within this Form 10-K are computed based on the amounts in thousands, and therefore, the sum of the components
may not equal the total amount reported in millions due to rounding. Additionally, certain columns and rows within tables may not sum due to rounding.
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 lower
extremities instrumentation and implants, small bone, large bone and specialty powered surgical instruments as well as imaging systems for use in
minimally invasive surgical procedures and service 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 laparoscopic 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:
2024
2023
2022
Orthopedic surgery
42 %
43 %
44 %
General surgery
58
57
56
Consolidated net sales
100 %
100 %
100 %
A significant amount of our products are used in surgical procedures with approximately 85% of our revenues derived from the sale of single-use
products. Our capital 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 43% in 2024, 44% in 2023 and 45% in
2022.
Business Environment
The Company has been and continues to be impacted by the macro-economic environment and we are experiencing higher manufacturing and
operating costs caused by inflationary pressures and ongoing supply chain challenges. We work with suppliers to mitigate these impacts; however, we
expect these challenges to continue in 2025. This will likely continue to impact our results of operations and we therefore have engaged a consulting firm to
evaluate and propose improvements in our manufacturing operations. See "Item 1A. Risk Factors" for more information.
The Company has not been materially impacted by the conflicts in Ukraine and the Middle East. The Company has no direct operations in these
regions with our business limited to selling to third party distributors. Total revenues and accounts receivable associated with sales to third party
distributors in these regions are not material to the consolidated financial statements. We will continue to monitor and adjust our business strategy in
response to the conflicts in these regions.
Critical Accounting Policies
Preparation of our financial statements requires us to make estimates and assumptions which affect the reported amounts of assets, liabilities,
revenues and expenses. Note 1 describes the significant accounting policies used in preparation of the consolidated financial statements. The most
significant areas involving management judgments and estimates are described
24
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 from these estimates.
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 identifiable 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 timing and amount of cash flow projections, including revenue growth
rates, obsolescence rate, EBITDA margin, the customer attrition rate, royalty rate and discount rates. 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 2024. 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. Intangible assets subject to amortization are reviewed for
impairment whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. The carrying amount of an intangible
asset subject to amortization is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of the asset. An
impairment loss is recognized by reducing the carrying amount of the intangible asset to its current fair value.
For all other indefinite-lived intangible assets, we perform a qualitative impairment test. Based upon this assessment, we have determined that our
indefinite-lived intangible assets are not impaired.
See Note 7 for further discussion of goodwill and other intangible assets.
Contingent Consideration
Certain acquisitions involve potential payments of future consideration that is contingent upon the acquired businesses reaching certain
performance milestones. The Company records contingent consideration at fair value at the date of acquisition based on the consideration expected to be
transferred, estimated as the probability-weighted future cash flows, discounted back to present value. The fair value of contingent consideration is
measured using projected payment dates, discount rates, revenue volatilities, and projected revenues. Projected revenues are based on the Company’s most
recent internal operational budgets and long-range strategic plans. The discount rate used is determined at the time of measurement in accordance with
accepted valuation methodologies. Changes in projected revenues, revenue volatilities, discount rates, and projected payment dates may result in
adjustments to the fair value measurements. Contingent consideration is remeasured each reporting period using Level 3 inputs, and the change in fair
value, including accretion for the passage of time, is recognized as income or expense within selling and administrative expense in the consolidated
statements of comprehensive income (loss). The fair value of contingent consideration at December 31, 2024 was $11.2 million for the In2Bones
acquisition and $61.0 million for the Biorez acquisition. Contingent consideration payments made soon after the acquisition date are classified as investing
activities in the consolidated statements of cash flows. Contingent consideration payments not made soon after the acquisition date that are related to the
acquisition date fair value are reported as financing activities in the consolidated statements of cash flows, and amounts paid in excess of the original
acquisition date fair value are reported as operating activities in the consolidated statements of cash flows. See Note 16 for further discussion of contingent
consideration.
Pension Plan
25
We 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. In conjunction with the pension plan, we recorded a pension benefit obligation totaling $69.2 million as of
December 31, 2024. In accounting for this pension plan, we are required to make a number of assumptions, 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 assumption 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 assumptions are based on the Pri-2012
Mortality Tables 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 $1.3 million and a 0.25% decrease in the discount rate would increase the pension benefit obligation by $1.4 million. See Note 13 for further
discussion of the pension plan.
Consolidated Results of Operations
The following table presents, as a percentage of net sales, certain categories included in our consolidated statements of comprehensive income
(loss) for the periods indicated:
Years Ended December 31,
2024
2023
2022
Net sales
100.0 %
100.0 %
100.0 %
Cost of sales
43.9
45.7
45.4
Gross profit
56.1
54.3
54.6
Selling and administrative expense
36.6
40.4
43.4
Research and development expense
4.2
4.2
4.5
Income from operations
15.3
9.7
6.7
Interest expense
2.9
3.2
2.8
Other expense
—
—
10.7
Income (loss) before income taxes
12.5
6.5
(6.8)
Provision for income taxes
2.3
1.3
0.9
Net income (loss)
10.1 %
5.2 %
(7.7)%
Net Sales
The following table presents net sales by product line for the years ended December 31, 2024, 2023 and 2022:
% Change from
2023 to 2024
2024
2023
As Reported
Impact of
Foreign
Currency
Constant
Currency
Orthopedic surgery
$
544.0
$
533.1
2.0 %
0.5 %
2.5 %
General surgery
763.0
711.6
7.2 %
0.3 %
7.5 %
Net sales
$
1,307.0
$
1,244.7
5.0 %
0.3 %
5.3 %
Single-use products
$
1,112.1
$
1,038.5
7.1 %
0.3 %
7.4 %
Capital products
194.9
206.2
-5.5 %
0.4 %
-5.1 %
Net sales
$
1,307.0
$
1,244.7
5.0 %
0.3 %
5.3 %
a
26
% Change from
2022 to 2023
2023
2022
As Reported
Impact of
Foreign
Currency
Constant
Currency
Orthopedic surgery
$
533.1
$
461.5
15.5 %
2.2 %
17.7 %
General surgery
711.6
584.0
21.9 %
1.5 %
23.4 %
Net sales
$
1,244.7
$
1,045.5
19.1 %
1.8 %
20.9 %
Single-use products
$
1,038.5
$
874.9
18.7 %
1.8 %
20.5 %
Capital products
206.2
170.6
20.9 %
1.9 %
22.8 %
Net sales
$
1,244.7
$
1,045.5
19.1 %
1.8 %
20.9 %
Refer to Non-GAAP Financial Measures below for further details.
Net sales increased 5.0% in 2024 due to growth in both the orthopedic surgery and general surgery product lines.
•
Orthopedic surgery sales increased 2.0% in 2024 as a result of growth in our sports medicine and BioBrace product offerings.
•
General surgery sales increased 7.2% in 2024 as a result of growth in our AirSeal and biliary product offerings.
Cost of Sales
Cost of sales was $574.0 million in 2024 compared to $568.5 million in 2023. Gross profit margins were 56.1% in 2024 and 54.3% in 2023. The
increase in gross profit margin of 1.8 percentage points in 2024 was mainly due to favorable product mix as well as during 2023 we incurred costs for the
amortization of inventory step-up to fair value of $8.6 million related to the In2Bones acquisition.
Selling and Administrative Expense
Selling and administrative expense was $478.3 million in 2024 compared to $503.0 million in 2023. Selling and administrative expense as a
percentage of net sales was 36.6% in 2024 and 40.4% in 2023.
The decrease in selling and administrative expense as a percentage of net sales in 2024 was primarily driven by:
•
a decrease of $38.6 million in costs related to fair value adjustments to contingent consideration ($41.0 million of income in 2024 compared to
$2.4 million of income in 2023), see Note 16;
•
$6.8 million in costs related to the implementation of a new warehouse management system during 2023. These costs mainly consisted of
incremental freight, labor and professional fees; and
•
efficiency improvements in our distribution sites.
These decreases were partially offset by $5.1 million in costs incurred during 2024 for third party services pertaining to the review of potential
issues with certain royalty payments to surgeons involved in design teams.
Salesforce and commissions, marketing, general & administrative costs and amortization expense in 2024 were in line with 2023 as a percentage
of sales.
Research and Development Expense
Research and development expense was $54.4 million in 2024 and $52.6 million in 2023. As a percentage of net sales, research and development
expense was 4.2% in both 2024 and 2023. The increase in spending in 2024 compared to 2023 was related to the timing of projects.
a
(a)
®
®
27
Interest Expense
Interest expense decreased to $37.3 million in 2024 compared to $39.8 million in 2023. The weighted average interest rates on our borrowings
were 3.15% in 2024 increasing from 3.12% in 2023. The decrease in interest expense in 2024 was driven by lower weighted average borrowings
outstanding during 2024.
Provision for Income Taxes
A provision for income taxes was recorded at an effective rate of 18.8% and 20.3% in 2024 and 2023, respectively. As compared to the federal
statutory rate of 21.0%, the 2024 effective tax rate was lower primarily due to the change in fair value of contingent consideration that is excluded from
income for tax purposes, federal tax benefits from the research credit and US tax on worldwide earnings at different rates. These benefits were offset by
state tax expense and foreign tax expense from jurisdictions with higher statutory tax rates. The 2023 effective tax rate was lower primarily due to federal
tax benefits from the research credit and US tax on worldwide earnings at different rates. These benefits were offset by state tax expense and foreign tax
expense from jurisdictions with higher statutory tax rates. A reconciliation of the United States statutory income tax rate to our effective tax rate is included
in Note 9.
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 adjusted financial measure should not be considered in isolation or as a substitute for
reported net sales growth, the most directly comparable GAAP financial 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.
EBITDA is also a non-GAAP measure and is defined as earnings before income tax, interest expense, depreciation and amortization.
Liquidity and Capital Resources
Our liquidity needs arise primarily from capital investments, working capital requirements and payments on indebtedness under the seventh
amended and restated senior credit agreement and outstanding convertible notes. We have historically met these liquidity requirements with funds
generated from operations, borrowings under our revolving credit facility and issuances of debt in the capital markets. 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, including payments of contingent consideration. We also have the ability to raise funds through
the sale of stock or we may issue debt through a private placement or public offering.
We had total cash on hand at December 31, 2024 of $24.5 million, of which approximately $20.2 million was held by our foreign subsidiaries
outside the United States with unremitted earnings. During 2024, we redeployed $9.0 million of cash from certain non-U.S. subsidiaries primarily for U.S.
debt reduction. We may repatriate funds from certain foreign subsidiaries in the future. Refer to Note 9 for further details.
Operating Cash Flows
Our net working capital position was $361.9 million at December 31, 2024. Net cash provided by operating activities was $167.0 million in 2024
and $125.3 million in 2023 generated on net income of $132.4 million in 2024 and $64.5 million in 2023. The change in cash provided by operating
activities in 2024 as compared to 2023 was mainly driven by higher net income. In addition, below is a summary of significant changes in assets and
liabilities:
•
An increase in cash flows from accounts receivable due to timing of sales and cash receipts compared to the same period a year ago;
•
A decrease in cash flows from inventory as we increased inventory due to supply chain challenges; and
28
•
A decrease in cash flows from accrued compensation and benefits as a result of higher incentive compensation payments during 2024 compared to
2023.
Investing Cash Flows
Net cash used in investing activities decreased by $6.9 million in the year ended December 31, 2024 mainly due to capital expenditures being
lower at $13.1 million in 2024 compared to $19.0 million in the year ended December 31, 2023.
Financing Cash Flows
Financing activities in 2024 used cash of $151.0 million compared to $110.4 million in 2023. Below is a summary of the significant financing
activities impacting the change during 2024 compared to 2023:
•
During 2024, we repaid the remaining $70.0 million outstanding on the 2.625% Notes.
•
During 2024, we paid $56.9 million in contingent consideration related to the In2Bones and Biorez acquisitions compared to $13.9 million in
2023.
•
During 2024, we had net payments on our revolving line of credit of $2.0 million, compared to $68.0 million in 2023.
•
During 2024, we had net cash proceeds of $5.5 million related to stock issued under employee plans compared to $18.1 million in 2023.
•
During 2024, we did not make any payments on our term loan compared to $20.0 million in payments in 2023.
Other Liquidity Matters
Our cash balances and cash flows generated from operations may be used to fund strategic investments, business acquisitions, including
contingent consideration payments, working capital 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 borrowing capacity under
our seventh amended and restated senior credit agreement, will be adequate to meet our anticipated operating working capital requirements, debt service,
funding of capital expenditures, dividend payments and common stock repurchases in the foreseeable future. In addition, management believes we could
access capital markets, as necessary, to fund future business acquisitions.
We are also being impacted by the macro-economic environment and we are experiencing higher manufacturing and operating costs caused by
inflationary pressures and ongoing supply chain challenges. We continue to monitor our spending and expenses in light of these factors. However, we may
need to take further steps to reduce our costs, or to refinance our debt. See “Item 1A. Risk Factors - Risks Related to Our Indebtedness."
There were $114.6 million in borrowings outstanding on the term loan facility as of December 31, 2024. There were no borrowings outstanding
under the revolving credit facility as of December 31, 2024. Our available borrowings on the revolving credit facility at December 31, 2024 were $583.4
million with approximately $1.6 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, 2024. We are also required, under certain circumstances,
to make mandatory prepayments from net cash proceeds from any issuance of equity and asset sales.
In February 2024, we repaid the $70.0 million then outstanding of the 2.625% Notes through borrowings on our revolving credit facility and
issued 0.1 million shares of our common stock.
See Note 8 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, 2024, 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
2024. We have financed the repurchases and may finance additional repurchases through operating cash flow and from available borrowings under our
revolving credit facility.
29
The Board of Directors declared a quarterly cash dividend of $0.20 per share in 2023 and 2024. Future decisions as to the payment of dividends
will be at the discretion of the Board of Directors. See "Item 1A. Risk Factors - Other Risks 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 capital spending during the year ending December 31, 2025 compared to 2024. Capital spending will be
monitored and controlled as the year progresses. We expect to use operating cash flows to satisfy capital spending requirements.
The following table summarizes our contractual obligations for the next five years and thereafter (amounts in thousands) as of December 31,
2024. Purchase obligations represent purchase orders for goods and services placed in the ordinary course of business. Contingent consideration
represents the fair value of the current and non-current portions that while not certain if and/or when the payments will be made, are our best estimate of
such payments.
Payments Due by Period
Total
Less than
1 Year
1-3
Years
3-5
Years
More than
5 Years
Long-term debt
$
914,588
$
—
$
914,588
$
—
$
—
Contingent consideration payments
72,217
35,397
36,820
—
—
Purchase obligations
156,971
153,634
3,327
10
—
Lease obligations
53,711
8,808
14,852
10,966
19,085
Total contractual obligations
$
1,197,487
$
197,839
$
969,587
$
10,976
$
19,085
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—Interest Rate Risk” and Note 8). The above table also
does not include unrecognized tax benefits of approximately $1.2 million, the timing and certainty of recognition for which is not known (See Note 9).
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 fair market value of the stock at the date of grant. RSUs are valued at the market value of the underlying
stock on the date of grant. PSUs are valued using a Monte Carlo valuation model at the date of grant. Stock options, SARs, and RSUs are generally non-
transferable other than on death and generally become exercisable over a four to five year period from date of grant. PSUs are generally non-transferable
other than on death and cliff vest after three years from date of grant. Stock options and SARs expire ten years from date of grant. SARs are only settled in
shares of the Company’s stock (See Note 10). Total pre-tax stock-based compensation expense recognized in the consolidated statements of comprehensive
income (loss) was $25.6 million, $24.3 million and $21.7 million for the years ended December 31, 2024, 2023 and 2022, respectively.
New Accounting Pronouncements
See Note 2 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 43% of our total 2024 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, Brazil, Canada, China, Japan and
30
Korea. In those countries in which we have a direct presence, our sales are denominated in the local currency amounting to approximately 32% of our total
net sales in 2024. 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 affected by factors
such as changes in foreign currency exchange rates or weak economic conditions in the markets in which we distribute products. During 2024, foreign
currency exchange rates, including the effects of the hedging program, caused sales to decrease by approximately $4.0 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, 2024, we had approximately $114.6 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 2025 than they did in 2024, interest expense
would increase, and income before income taxes would decrease by $1.1 million. Comparatively, if market interest rates for similar borrowings average
1.0% less in 2025 than they did in 2024, our interest expense would decrease, and income before income taxes would increase by $1.1 million.
Item 8. Financial Statements and Supplementary Data
Our 2024 Financial Statements are included in this Form 10-K beginning on page 44 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.
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, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Management’s Report on Internal Control over Financial Reporting and the Report of Independent Registered Public Accounting Firm thereon are
set forth in Part IV, Item 15 of the Annual Report on Form 10-K.
Item 9B. Other Information
During the quarter ended December 31, 2024, none of the members of our Board of Directors or Executive Officers adopted, modified or
terminated a trading arrangement intended to satisfy the affirmative defense of Rule 10b5-1(c), under the Securities Exchange Act of 1934.
31
We have adopted an insider trading policy governing the purchase, sale and other disposition of our securities by members of our Board of
Directors, Executive Officers and employees, and by the Company. We believe this policy is reasonably designed to promote compliance with insider
trading laws, rules and regulations and listing standards applicable to the Company. A copy of our insider trading policy is filed as Exhibit 19 to this Form
10-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
32
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this item is incorporated herein by reference to the sections captioned “Proposal One: Election of Directors”,
“Executive Officers” and “Delinquent Section 16(a) Reports" in CONMED Corporation’s definitive Proxy Statement or other informational filing to be
filed with the Securities and Exchange Commission on or about April 8, 2025.
Item 11. Executive Compensation
The information required by this item is incorporated herein by reference to the sections captioned “Compensation Discussion and Analysis”,
“Compensation Committee Report on Executive Compensation”, “Summary Compensation Table”, "Pay Versus Performance", “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”, “Non-Employee 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 8, 2025.
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 captioned “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 8, 2025.
Information relating to shareholder approved compensation plans under which equity securities of CONMED Corporation are authorized for
issuance is set forth below:
Equity Compensation Plan Information
Plan category
Number of securities to be
issued upon exercise of
outstanding options, warrants
and rights
(a)
Weighted-average exercise
price of outstanding options,
warrants and rights
(b)
Number of securities
remaining available for future
issuance under equity
compensation plans (excluding
securities reflected in column
(a))
(c)
Equity compensation plans approved
by security holders
3,864,128
$
93.00
2,170,925
Equity compensation plans not
approved by security holders
—
—
—
Total
3,864,128
$
93.00
2,170,925
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 Nominees”, “Executive Officers” 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 8, 2025.
Item 14. Principal Accounting Fees and Services
The information required by this item is incorporated herein by reference to the section captioned “Principal Accounting Fees and Services” in
CONMED Corporation’s definitive Proxy Statement or other informational filing to be filed with the Securities and Exchange Commission on or about
April 8, 2025.
33
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
44
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)
45
Consolidated Balance Sheets at December 31, 2024 and 2023
47
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2024, 2023 and 2022
48
Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2024, 2023 and 2022
49
Consolidated Statements of Cash Flows for the Years Ended December 31, 2024, 2023 and 2022
50
Notes to Consolidated Financial Statements
52
(2)
List of Financial Statement Schedules
Valuation and Qualifying Accounts (Schedule II) for the Years Ended December 31, 2024, 2023 and 2022
82
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 37 below are filed as part of this Form 10-K.
34
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 CORPORATION
By: /s/ Patrick J. Beyer
Patrick J. Beyer
(President and Chief Executive Officer)
Date:
February 18, 2025
35
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 capacities and on the dates indicated.
Signature
Title
Date
/s/ PATRICK J. BEYER
President and
Patrick J. Beyer
Chief Executive Officer
February 18, 2025
(Principal Executive Officer)
/s/ TODD W. GARNER
Executive Vice President, Finance and
Todd W. Garner
Chief Financial Officer
February 18, 2025
(Principal Financial and Principal Accounting Officer)
/s/ MARTHA GOLDBERG ARONSON
Martha Goldberg Aronson
Chair of the Board
February 18, 2025
/s/ DAVID BRONSON
David Bronson
Director
February 18, 2025
/s/ BRIAN P. CONCANNON
Brian P. Concannon
Director
February 18, 2025
/s/ LAVERNE COUNCIL
Laverne Council
Director
February 18, 2025
/s/ CHARLES M. FARKAS
Charles M. Farkas
Director
February 18, 2025
/s/ BARBARA SCHWARZENTRAUB
Barbara Schwarzentraub
Director
February 18, 2025
/s/ JOHN L. WORKMAN
John L. Workman
Director
February 18, 2025
36
Exhibit Index
Exhibit No.
Description
2.1
-
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).
3.1
-
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).
3.2
-
Amended and Restated Certificate of Incorporation of CONMED Corporation (Incorporated by reference to Exhibit 3.1 of the
Company's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on July 27, 2023).
4.1*
-
Description of the Common Stock of CONMED Corporation, a Delaware corporation.
10.1
-
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).
10.2
-
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).
10.3
-
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).
10.4
-
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).
10.5
-
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).
10.6
-
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).
10.7
-
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).
10.8
-
First Amendment, dated June 6, 2022, to the 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 10.25 of the
Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on June 7, 2022).
37
10.9
-
Second Amendment, dated August 1, 2022, to the 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 10.2 of the
Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on August 2, 2022).
10.10
-
Third Amendment, dated December 20, 2022, to the 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 December 27, 2022).
10.11
-
Fourth Amendment, dated July 19, 2024, to the 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 Quarterly Report on Form 10-Q for the quarter ended June 30, 2024).
10.12
-
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).
10.13
-
Supplemental Indenture, dated as of June 6, 2022, to the Indenture, dated January 29, 2019, by and between CONMED
Corporation and U.S. Bank Trust Company, National Association, as successor to MUFG Union Bank, N.A. as trustee
(Incorporated by reference to Exhibit 4.2 of the Company's Current Report on Form 8-K filed with the Securities and Exchange
Commission on June 7, 2022).
10.14
-
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).
10.15
-
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).
10.16
-
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).
10.17
-
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).
10.18
-
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).
10.19
-
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).
10.20
-
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).
10.21
-
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).
38
10.22
-
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).
10.23
-
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).
10.24
-
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).
10.25
-
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).
10.26
-
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).
10.27
-
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).
10.28
-
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).
10.29
-
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).
10.30
-
Indenture, dated as of June 6, 2022, by and between CONMED Corporation and U.S. Bank Trust Company, National
Association, 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 June 7, 2022).
10.31
-
Base Note Hedge Transaction Confirmation, dated as of June 1, 2022, between CONMED Corporation and Barclays Bank PLC,
through its agent Barclays Capital Inc. (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 June 7, 2022).
10.32
-
Base Note Hedge Transaction Confirmation, dated as of June 1, 2022, 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 June 7, 2022).
10.33
-
Base Note Hedge Transaction Confirmation, dated as of June 1, 2022, among CONMED Corporation, Jefferies International
Limited and Jefferies LLC, as agent (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 June 7, 2022).
10.34
-
Base Note Hedge Transaction Confirmation, dated as of June 1, 2022, between CONMED Corporation and JPMorgan Chase
Bank, National Association (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 June 7, 2022).
39
10.35
-
Base Note Hedge Transaction Confirmation, dated as of June 1, 2022, between CONMED Corporation and Nomura Global
Financial Products Inc., through its agent Nomura Securities International, Inc. (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 June 7, 2022).
10.36
-
Base Note Hedge Transaction Confirmation, dated as of June 1, 2022, between CONMED Corporation and Wells Fargo Bank,
National Association (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 June 7, 2022).
10.37
-
Base Warrant Transaction Confirmation, dated as of June 1, 2022, between CONMED Corporation and Barclays Bank PLC,
through its agent Barclays Capital Inc. (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 June 7, 2022).
10.38
-
Base Warrant Transaction Confirmation, dated as of June 1, 2022, between CONMED Corporation and Bank of America, N.A.
(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 June 7, 2022).
10.39
-
Base Warrant Transaction Confirmation, dated as of June 1, 2022, among CONMED Corporation, Jefferies International
Limited and Jefferies LLC, as agent (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 June 7, 2022).
10.40
-
Base Warrant Transaction Confirmation, dated as of June 1, 2022, between CONMED Corporation and JPMorgan Chase Bank,
National Association (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 June 7, 2022).
10.41
-
Base Warrant Transaction Confirmation, dated as of June 1, 2022, between CONMED Corporation and Nomura Global
Financial Products Inc., through its agent Nomura Securities International, Inc. (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 June 7, 2022).
10.42
-
Base Warrant Transaction Confirmation, dated as of June 1, 2022, between CONMED Corporation and Wells Fargo Bank,
National Association (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 June 7, 2022).
10.43
-
Additional Note Hedge Transaction Confirmation, dated as of June 2, 2022, between CONMED Corporation and Barclays Bank
PLC, through its agent Barclays Capital Inc. (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 June 7, 2022).
10.44
-
Additional Note Hedge Transaction Confirmation, dated as of June 2, 2022, 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 June 7, 2022).
10.45
-
Additional Note Hedge Transaction Confirmation, dated as of June 2, 2022, among CONMED Corporation, Jefferies
International Limited and Jefferies LLC, as agent (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 June 7, 2022).
10.46
-
Additional Note Hedge Transaction Confirmation, dated as of June 2, 2022, between CONMED Corporation and JPMorgan
Chase Bank, National Association (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 June 7, 2022).
10.47
-
Additional Hedge Transaction Confirmation, dated as of June 2, 2022, between CONMED Corporation and Nomura Global
Financial Products Inc., through its agent Nomura Securities International, Inc. (Incorporated by reference to Exhibit 10.17 of
the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on June 7, 2022).
40
10.48
-
Additional Note Hedge Transaction Confirmation, dated as of June 2, 2022, between CONMED Corporation and Wells Fargo
Bank, National Association (Incorporated by reference to Exhibit 10.18 of the Company's Current Report on Form 8-K filed
with the Securities and Exchange Commission on June 7, 2022).
10.49
-
Additional Warrant Transaction Confirmation, dated as of June 2, 2022, between CONMED Corporation and Barclays Bank
PLC, through its agent Barclays Capital Inc. (Incorporated by reference to Exhibit 10.19 of the Company's Current Report on
Form 8-K filed with the Securities and Exchange Commission on June 7, 2022).
10.50
-
Additional Warrant Transaction Confirmation, dated as of June 2, 2022, between CONMED Corporation and Bank of America,
N.A. (Incorporated by reference to Exhibit 10.20 of the Company's Current Report on Form 8-K filed with the Securities and
Exchange Commission on June 7, 2022).
10.51
-
Additional Warrant Transaction Confirmation, dated as of June 2, 2022, among CONMED Corporation, Jefferies International
Limited and Jefferies LLC, as agent (Incorporated by reference to Exhibit 10.21 of the Company's Current Report on Form 8-K
filed with the Securities and Exchange Commission on June 7, 2022).
10.52
-
Additional Warrant Transaction Confirmation, dated as of June 2, 2022, between CONMED Corporation and JPMorgan Chase
Bank, National Association (Incorporated by reference to Exhibit 10.22 of the Company's Current Report on Form 8-K filed
with the Securities and Exchange Commission on June 7, 2022).
10.53
-
Additional Warrant Transaction Confirmation, dated as of June 2, 2022, between CONMED Corporation and Nomura Global
Financial Products Inc., through its agent Nomura Securities International, Inc. (Incorporated by reference to Exhibit 10.23 of
the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on June 7, 2022).
10.54
-
Additional Warrant Transaction Confirmation, dated as of June 2, 2022, between CONMED Corporation and Wells Fargo Bank,
National Association (Incorporated by reference to Exhibit 10.24 of the Company's Current Report on Form 8-K filed with the
Securities and Exchange Commission on June 7, 2022).
10.55
-
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).
10.56
-
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).
10.57
-
Agreement and Plan of Merger, dated as of May 4, 2022, by and among CONMED Corporation, Odyssey Merger Sub, Inc.,
In2Bones Global, Inc. and Sheryl Moroschak, solely in her capacity as representative of In2Bones’ equity holders (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 May 5, 2022).
10.58
-
Agreement and Plan of Merger, dated as of August 1, 2022, by and among CONMED Corporation, Prometheus Merger Sub,
Inc., Biorez, Inc. and Shareholder Representative Services LLC, a Colorado limited liability company, solely in its capacity as
representative, agent and attorney-in-fact of Biorez’s securityholders (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 August 2, 2022).
10.59
-
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).
10.60
-
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).
10.61
-
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).
41
10.62
-
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).
10.63
-
2018 Long-Term Incentive Plan (incorporated by reference to Exhibit 4.3 of the Registrants Form S-8 filed on November 5,
2018).
10.64
-
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).
10.65
-
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).
10.66
-
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).
10.67
-
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).
10.68
-
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).
10.69
-
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).
10.70
-
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).
10.71
-
CONMED Corporation Executive Bonus Plan (Incorporated by reference to Exhibit A of the Registrant's Proxy Statement on
Schedule 14A filed on April 13, 2017).
10.72+
-
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).
10.73+
-
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).
10.74+
-
Letter Agreement, by and between CONMED and Curt R. Hartman, dated October 30, 2024. (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 October 30,
2024).
10.75+
-
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).
10.76+
-
Amendment Number 1 to Service Agreement, by and between CONMED U.K. Limited and Pat Beyer, dated April 24, 2024
(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 April 24, 2024).
10.77+
-
Amendment Number 2 to Service Agreement, by and between CONMED U.K. Limited and Pat Beyer, dated October 30, 2024
(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 October 30, 2024).
42
10.78+
-
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).
10.79+
-
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).
10.80+
-
Letter Agreement, by and between CONMED and Heather Cohen, dated April 19, 2024 (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 April 24, 2024).
14
-
Code of Ethics. The CONMED code of ethics may be accessed via the Company’s website at https://www.conmed.com/en-
us/corporate-footer/policies
19*
-
Insider Trading Policy
21*
-
Subsidiaries of the Registrant.
23*
-
Consent of Independent Registered Public Accounting Firm.
31.1*
-
Certification of Patrick J. Beyer 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.
31.2*
-
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.
32.1*
-
Certifications of Patrick J. Beyer 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.
97
-
Policy for the Recovery of Erroneously Awarded Incentive-Based Compensation (Incorporated by reference to Exhibit 97 of the
Company's Annual Report on Form 10-K for the year ended December 31, 2023)
101.INS*
-
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.
101.SCH*
-
XBRL Taxonomy Extension Schema Document
101.CAL*
-
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*
-
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*
-
XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
-
XBRL Taxonomy Extension Presentation Linkbase Document
104*
-
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
43
MANAGEMENT’S REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING
The management of CONMED Corporation is responsible for establishing and maintaining adequate internal control over financial reporting. Internal
control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external reporting purposes in accordance with generally accepted accounting principles. Our internal control over financial
reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and
dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance
with accounting principles generally accepted in the United States of America, and that receipts and expenditures are being made only in accordance with
authorizations of management and the directors of the Company; and provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. Because of its inherent limitations,
internal control over financial reporting may not prevent or detect misstatements. Management assessed the effectiveness of CONMED’s internal control
over financial reporting as of December 31, 2024. 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, 2024. The effectiveness of the Company’s
internal control over financial reporting as of December 31, 2024 has been audited by PricewaterhouseCoopers LLP, an independent registered public
accounting firm, as stated in their report which appears herein.
/s/ Patrick J. Beyer
Patrick J. Beyer
President and
Chief Executive Officer
/s/ Todd W. Garner
Todd W. Garner
Executive Vice President, Finance and
Chief Financial Officer
44
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of CONMED Corporation
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of CONMED Corporation and its subsidiaries (the "Company") as of December 31, 2024
and 2023, and the related consolidated statements of comprehensive income (loss), shareholders’ equity and cash flows for each of the three years in the
period ended December 31, 2024, 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, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of
December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 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, 2024, based on criteria established in Internal Control - Integrated
Framework (2013) issued by the COSO.
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for convertible instruments in 2022.
Basis for Opinions
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 free 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.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures
45
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use,
or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Critical Audit Matters
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 Contingent Consideration from the Biorez and In2Bones Acquisitions
As described in Notes 1 and 16 to the consolidated financial statements, as of December 31, 2024, the fair value of the contingent consideration liabilities
from the Biorez, Inc. (Biorez) and In2Bones Global, Inc. (In2Bones) acquisitions are $61.0 million and $11.2 million, respectively. The contingent
consideration was recorded at fair value at the date of acquisition based on the consideration expected to be transferred, estimated as the probability-
weighted future cash flows, discounted back to present value. Contingent consideration is remeasured each reporting period using Level 3 inputs, and the
change in fair value, including accretion for the passage of time, is recognized as income or expense within selling and administrative expense in the
consolidated statements of comprehensive income (loss). The fair value of contingent consideration is measured using projected payment dates, discount
rates, revenue volatilities and projected revenues.
The principal considerations for our determination that performing procedures relating to the valuation of contingent consideration from the Biorez and
In2Bones acquisitions is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the contingent
consideration liabilities; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant
assumptions related to discount rates, revenue volatilities, and projected revenues; 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 contingent consideration. These
procedures also included, among others (i) reading the purchase agreements and (ii) testing management’s process for developing the fair value estimate of
the contingent consideration liabilities. Testing management’s process included (i) evaluating the appropriateness of the valuation methods used by
management; (ii) testing the completeness and accuracy of the underlying data used in the valuation methods; and (iii) evaluating the reasonableness of the
significant assumptions related to discount rates, revenue volatilities and projected revenues. Evaluating the reasonableness of the projected revenues
involved considering (i) the past performance of the acquired businesses; (ii) the consistency with external market and industry data; and (iii) whether the
projected revenues were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to
assist in the evaluation of (i) the appropriateness of the valuation methods and (ii) the reasonableness of the assumptions related to discount rates and
revenue volatilities.
/s/ PricewaterhouseCoopers LLP
Fairport, New York
February 18, 2025
We have served as the Company’s auditor since 1982.
46
CONMED CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 2024 and 2023
(In thousands except share and per share amounts)
2024
2023
ASSETS
Current assets:
Cash and cash equivalents
$
24,459
$
24,296
Accounts receivable, less allowance for doubtful
accounts of $5,739 in 2024 and $6,034 in 2023
237,733
242,279
Inventories
346,719
318,324
Prepaid expenses and other current assets
31,096
30,750
Total current assets
640,007
615,649
Property, plant and equipment, net
115,793
120,722
Deferred income taxes
11,069
11,211
Goodwill
805,358
806,844
Other intangible assets, net
617,663
649,484
Other assets
116,357
96,111
Total assets
$
2,306,247
$
2,300,021
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt
$
715
$
708
Accounts payable
102,248
88,224
Accrued compensation and benefits
65,368
70,069
Other current liabilities
109,799
151,728
Total current liabilities
278,130
310,729
Long-term debt
905,066
973,140
Deferred income taxes
74,076
60,902
Other long-term liabilities
86,294
121,028
Total liabilities
1,343,566
1,465,799
Commitments and contingencies (Note 14)
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 2024 and 2023, respectively
313
313
Paid-in capital
476,575
446,535
Retained earnings
560,277
452,531
Accumulated other comprehensive loss
(58,857)
(50,170)
Less: Treasury stock, at cost;
397,860 and 534,000 shares in
2024 and 2023, respectively
(15,627)
(14,987)
Total shareholders' equity
962,681
834,222
Total liabilities and shareholders' equity
$
2,306,247
$
2,300,021
The accompanying notes are an integral part of the consolidated financial statements.
47
CONMED CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Years Ended December 31, 2024, 2023 and 2022
(In thousands except per share amounts)
2024
2023
2022
Net sales
$
1,307,015
$
1,244,744
$
1,045,472
Cost of sales
573,983
568,499
474,227
Gross profit
733,032
676,245
571,245
Selling and administrative expense
478,280
503,040
454,039
Research and development expense
54,426
52,602
47,152
Operating expenses
532,706
555,642
501,191
Income from operations
200,326
120,603
70,054
Interest expense
37,297
39,775
28,905
Other expense
—
—
112,011
Income (loss) before income taxes
163,029
80,828
(70,862)
Provision for income taxes
30,606
16,369
9,720
Net income (loss)
$
132,423
$
64,459
$
(80,582)
Per share data:
Basic
$
4.29
$
2.10
$
(2.68)
Diluted
$
4.25
$
2.04
$
(2.68)
Other comprehensive income (loss), before income tax:
Cash flow hedging
$
5,517
$
(3,141)
$
(1,530)
Pension liability
2,489
6,576
7,817
Foreign currency translation adjustments
(14,753)
5,085
(8,418)
Other comprehensive income (loss), before income tax
$
(6,747)
$
8,520
$
(2,131)
Provision for income taxes related to items in other comprehensive income (loss)
1,940
832
1,524
Other comprehensive income (loss), net of income tax
$
(8,687)
$
7,688
$
(3,655)
Comprehensive income (loss)
$
123,736
$
72,147
$
(84,237)
The accompanying notes are an integral part of the consolidated financial statements.
48
CONMED CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years Ended December 31, 2024, 2023 and 2022
(In thousands)
Common Stock
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Treasury
Stock
Shareholders’
Equity
Shares
Amount
Balance at December 31, 2021
31,299 $
313 $
396,771 $
496,605 $
(54,203) $
(54,051) $
785,435
Common stock issued under employee plans
3,385
5,385
8,770
Stock-based compensation
21,729
21,729
Dividends on common stock ($.80 per share)
(24,183)
(24,183)
Shares issued for the settlement of convertible notes
(25,890)
25,890
—
Convertible notes premium on extinguishment
103,125
103,125
Settlement of convertible notes hedge transactions
118,912
118,912
Settlement of warrants
(96,758)
(96,758)
Issuance of convertible notes hedge transactions, net of
tax
(142,128)
(142,128)
Issuance of warrants
72,000
72,000
Comprehensive income (loss):
Cash flow hedging loss, net
(1,159)
Pension liability, net
5,922
Foreign currency translation adjustments
(8,418)
Net income (loss)
(80,582)
Total comprehensive income (loss)
(84,237)
Cumulative effect of change in accounting principle
(37,911)
20,791
(17,120)
Balance at December 31, 2022
31,299 $
313 $
413,235 $
412,631 $
(57,858) $
(22,776) $
745,545
Common stock issued under employee plans
9,043
7,789
16,832
Stock-based compensation
24,257
24,257
Dividends on common stock ($.80 per share)
(24,559)
(24,559)
Comprehensive income (loss):
Cash flow hedging loss, net
(2,380)
Pension liability, net
4,983
Foreign currency translation adjustments
5,085
Net income
64,459
Total comprehensive income
72,147
Balance at December 31, 2023
31,299 $
313 $
446,535 $
452,531 $
(50,170) $
(14,987) $
834,222
Common stock issued under employee plans
(1,329)
5,171
3,842
Stock-based compensation
25,558
25,558
Dividends on common stock ($.80 per share)
(24,677)
(24,677)
Settlement of convertible notes hedge transactions
10,980
(10,980)
—
Settlement of convertible notes
(5,169)
5,169
—
Comprehensive income (loss):
Cash flow hedging gain, net
4,180
Pension liability, net
1,886
Foreign currency translation adjustments
(14,753)
Net income
132,423
Total comprehensive income
123,736
Balance at December 31, 2024
31,299 $
313 $
476,575 $
560,277 $
(58,857) $
(15,627) $
962,681
We recorded the cumulative impact of adopting 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 in 2022.
The accompanying notes are an integral part of the consolidated financial statements.
(1)
(1)
49
CONMED CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2024, 2023 and 2022
(In thousands)
2024
2023
2022
Cash flows from operating activities:
Net income (loss)
$
132,423
$
64,459
$
(80,582)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation
16,605
16,200
16,055
Amortization of deferred debt issuance costs
5,700
6,058
4,910
Amortization
55,252
55,674
53,464
Stock-based compensation
25,558
24,257
21,729
Deferred income taxes
12,202
700
(6,042)
Non-cash adjustments to fair value of contingent consideration liability
(41,048)
(2,421)
2,518
Loss on early extinguishment of debt
—
—
3,426
Loss on convertible notes conversion premium
—
—
103,125
Loss on convertible notes hedge transactions settlement
—
—
5,460
Increase (decrease) in cash flows from changes in assets and
liabilities, net of acquired assets:
Accounts receivable
(1,619)
(47,068)
(5,203)
Inventories
(31,633)
14,071
(78,564)
Accounts payable
14,713
14,849
13,302
Income taxes
(193)
(3,921)
6,726
Accrued compensation and benefits
(2,834)
14,425
(8,968)
Other assets
(13,910)
(21,845)
(17,735)
Other liabilities
(4,248)
(10,090)
(256)
Net cash provided by operating activities
166,968
125,348
33,365
Cash flows from investing activities:
Purchases of property, plant and equipment
(13,084)
(19,032)
(21,785)
Payments related to business acquisitions, net of cash acquired
—
—
(227,744)
Other
—
(1,000)
—
Net cash used in investing activities
(13,084)
(20,032)
(249,529)
Cash flows from financing activities:
Payments on term loan
—
(20,000)
(92,981)
Payments on revolving line of credit
(753,000)
(760,000)
(530,000)
Proceeds from revolving line of credit
751,000
692,000
460,000
Payments to redeem convertible notes
(70,000)
—
(275,000)
Proceeds from convertible notes
—
—
800,000
Payments related to contingent consideration
(56,879)
(13,867)
(798)
Payments related to debt issuance costs
(303)
—
(21,830)
Dividends paid on common stock
(24,651)
(24,502)
(23,960)
Purchases of convertible notes hedges
—
—
(187,600)
Proceeds from issuance of warrants
—
—
72,000
Proceeds from settlement of convertible notes hedge transactions
—
—
86,228
Payment for settlement of warrants
—
—
(69,534)
Other, net
2,833
15,937
8,475
Net cash provided by (used in) financing activities
(151,000)
(110,432)
225,000
Effect of exchange rate changes on cash and cash equivalents
(2,721)
470
(741)
Net increase (decrease) in cash and cash equivalents
163
(4,646)
8,095
Cash and cash equivalents at beginning of year
24,296
28,942
20,847
Cash and cash equivalents at end of year
$
24,459
$
24,296
$
28,942
50
2024
2023
2022
Non-cash investing and financing activities:
Contingent consideration
$
—
$
—
$
183,914
Dividends payable
6,180
6,153
6,098
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest
$
32,654
$
33,687
$
26,081
Income taxes
15,221
19,879
9,074
The accompanying notes are an integral part of the consolidated financial statements.
51
CONMED CORPORATION
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. While there has been uncertainty and
disruption in the global economy and financial markets, we are not aware of any specific event or circumstance that would require an update to our
estimates or judgments or a revision of the carrying value of our assets or liabilities as of February 18, 2025, the date of issuance of this Annual Report on
Form 10-K. These estimates may change, as new events occur and additional information is obtained. Actual results could differ materially from these
estimates under different assumptions or conditions.
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 current carrying costs. We make
estimates regarding the future recoverability of the costs of our products and record a provision for excess and obsolete inventories based on historical
experience and expected future trends.
Property, plant and equipment
Property, plant and equipment are stated at cost and depreciated using the straight-line method over the following estimated useful lives:
Building and improvements
12 to 40 years
Leasehold improvements
Shorter of life of asset or life of lease
Machinery and equipment
2 to 15 years
52
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 determinable. 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 12 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 6 for further detail on leases.
The Company places certain of our capital 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 return 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
performance obligation with revenue recognized upon shipment of the related single-use products. The cost of the equipment is amortized over its
estimated useful life which is generally five years.
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 identifiable
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 2024. 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. Intangible assets subject to amortization are reviewed for
impairment whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. The carrying amount of an intangible
asset subject to amortization is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of the asset. An
impairment loss is recognized by reducing the carrying amount of the intangible asset to its current fair value.
For all other indefinite-lived intangible assets, we perform a qualitative impairment test. Based upon this assessment, we have determined that our
indefinite-lived intangible assets are not impaired.
53
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 recoverable. If the sum of the expected future undiscounted cash flows is less than the
carrying amount of the asset, an impairment loss is recognized by reducing the recorded value to its current fair value.
The Company maintains field inventory consisting of capital 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, 2024 and 2023 is $42.2 million and $43.4
million, respectively.
Contingent consideration
Certain acquisitions involve potential payments of future consideration that is contingent upon the acquired businesses reaching certain
performance milestones. The Company records contingent consideration at fair value at the date of acquisition based on the consideration expected to be
transferred, estimated as the probability-weighted future cash flows, discounted back to present value. The fair value of contingent consideration is
measured using projected payment dates, discount rates, revenue volatilities and projected revenues. Projected revenues are based on the Company’s most
recent internal operational budgets and long-range strategic plans. The discount rate used is determined at the time of measurement in accordance with
accepted valuation methodologies. Changes in projected revenues, revenue volatilities, discount rates, and projected payment dates may result in
adjustments to the fair value measurements. Contingent consideration is remeasured each reporting period using Level 3 inputs, and the change in fair
value, including accretion for the passage of time, is recognized as income or expense within selling and administrative expense in the consolidated
statements of comprehensive income (loss). Contingent consideration payments made soon after the acquisition date are classified as investing activities in
the consolidated statements of cash flows. Contingent consideration payments not made soon after the acquisition date that are related to the acquisition
date fair value are reported as financing activities in the consolidated statements of cash flows, and amounts paid in excess of the original acquisition date
fair value are reported as operating activities in the consolidated statements of cash flows.
Pension Plan
We 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. In conjunction with the pension plan, we recorded a pension benefit obligation totaling $69.2 million as of
December 31, 2024. In accounting for this pension plan, we are required to make a number of assumptions, 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 assumption 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 assumptions are based on the Pri-2012
Mortality Tables using the MP-2021 mortality improvement scale.
Translation of foreign currency financial statements
Assets and liabilities of foreign subsidiaries have been translated into United States dollars at the applicable rates of exchange in effect at the end
of the period reported. Revenues and expenses have been translated at the applicable weighted average rates of exchange in effect during the period
reported. Translation adjustments are reflected in accumulated other comprehensive loss. Transaction gains and losses are included in net income (loss).
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. These cash flows are recorded in
operating activities in the consolidated statements of cash flows.
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
54
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 (loss).
Income taxes
Deferred income tax assets and liabilities are based on the difference between the financial statement and tax basis of assets and liabilities and
operating loss and tax credit carryforwards as measured by the enacted tax rates that are anticipated to be in effect in the respective jurisdictions when these
differences reverse. The deferred income tax provision generally represents the net change in the assets and liabilities for deferred income taxes. A
valuation allowance is established when it is necessary to reduce deferred income tax assets to amounts for which realization is likely. In assessing the need
for a valuation allowance, we estimate future taxable income, considering the feasibility of ongoing tax planning strategies and the realizability of tax loss
carryforwards 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 taxable income levels.
Deferred 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 future dividend distributions.
Revenue recognition
The Company recognizes revenue when we have satisfied a performance 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 major categories of revenue
transactions:
•
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 capital 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 capital
equipment shipment as the equipment is loaned and subject to return if certain minimum single-use purchases are not met. Revenue is recognized
upon the sale and shipment of the related single-use products. The cost of the equipment is amortized over its estimated useful life which is
generally five 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 to MTF as a series of distinct performance obligations and each service is recognized over time as MTF simultaneously receives
and consumes the benefit.
•
Product returns are only accepted at the discretion of the Company and in accordance with our “Returned Goods Policy”. Historically, the level of
product returns has not been significant. We accrue for sales returns, rebates and allowances based upon an analysis of historical customer returns
and credits, rebates, discounts and current market conditions.
•
Our terms of sale to customers generally do not include any obligations to perform future services. Limited warranties are provided for capital
equipment sales and provisions for warranty are provided at the time of product sale based upon an analysis of historical data.
•
Amounts billed to customers related to shipping and handling have been included in net sales. Shipping and handling costs included in selling and
administrative expense were $27.0 million, $26.3 million and $21.7 million for 2024, 2023 and 2022, respectively.
55
•
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 credit losses. We further adjusted expected credit
losses for specifically identified and forecasted credit losses. Historically, losses on accounts receivable have not been material. Management
believes that the allowance for doubtful accounts is adequate to provide for probable losses resulting from accounts receivable.
•
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 liability
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 11 for further detail on revenue.
Earnings (loss) per share
Basic earnings (loss) per share (“basic EPS”) is computed by dividing net income (loss) by the weighted average number of common shares
outstanding for the reporting period. Diluted earnings (loss) per share (“diluted EPS”) gives effect to all dilutive potential shares. As the Company was in a
net loss position for the year ended December 31, 2022, there were no dilutive potential shares included in the computation of diluted shares outstanding.
The following table sets forth the computation of basic and diluted earnings (loss) per share at December 31, 2024, 2023 and 2022, respectively:
2024
2023
2022
Net income (loss)
$
132,423
$
64,459
$
(80,582)
Basic-weighted average shares outstanding
30,846
30,668
30,040
Stock Compensation
304
727
—
Warrants
—
11
—
Convertible notes
—
142
—
Diluted-weighted average shares outstanding
31,150
31,548
30,040
Net income (loss) (per share)
Basic
$
4.29
$
2.10
$
(2.68)
Diluted
4.25
2.04
(2.68)
The shares used in the calculation of diluted EPS exclude stock options to purchase shares and stock appreciation rights where the exercise price
was greater than the average market price of common shares for the year and the effect of the inclusion would be anti-dilutive. Such shares aggregated
approximately 3.2 million and 1.7 million at December 31, 2024 and 2023, respectively. As the Company was in a net loss position for the year ended
December 31, 2022, there were no anti-dilutive shares. Effective with our adoption of Accounting Standard Update ("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 ("ASU 2020-06") on January 1, 2022 (see Note 2), the Company began using the if-
converted method to compute diluted EPS. Under the if-converted method, in the calculation of diluted EPS, the numerator is adjusted for interest expense
applicable to the convertible notes (net of tax) and the denominator is adjusted to include additional common shares assuming the principal portion of the
notes and the conversion premium are settled in common shares, when permitted or required. Under the if-converted method, when convertible notes
require the principal to be paid in cash, then only the conversion premium affects the calculation of diluted EPS.
Stock-based compensation
56
All share-based payments to employees, including grants of employee stock options, restricted stock units, performance share units and stock
appreciation rights are recognized in the financial statements at their fair values. Compensation expense is generally recognized using a straight-line
method over the vesting period. Compensation expense for performance share units is recognized using the graded vesting method.
We issue shares under our stock based compensation plans out of treasury stock whereby treasury stock is reduced by the weighted average cost of
such treasury stock. To the extent there is a difference between the cost of the treasury stock and the exercise price of shares issued under stock based
compensation plans, we record gains to paid in capital; losses are recorded to paid in capital to the extent any gain was previously recorded, otherwise the
loss is recorded to retained earnings.
Accumulated other comprehensive loss
Accumulated other comprehensive loss consists of the following:
Cash Flow
Hedging
Gain (Loss)
Pension
Liability
Foreign Currency
Translation
Adjustments
Accumulated
Other
Comprehensive Loss
Balance, December 31, 2021
$
3,656
$
(29,671)
$
(28,188)
$
(54,203)
Other comprehensive income (loss) before reclassifications, net of
tax
10,981
3,961
(8,418)
6,524
Amounts reclassified from accumulated other comprehensive
income (loss) before tax
(16,024)
2,589
—
(13,435)
Income tax
3,884
(628)
—
3,256
Net current-period other comprehensive income (loss)
(1,159)
5,922
(8,418)
(3,655)
Balance, December 31, 2022
$
2,497
$
(23,749)
$
(36,606)
$
(57,858)
Other comprehensive income (loss) before reclassifications, net of
tax
4,158
3,370
5,085
12,613
Amounts reclassified from accumulated other comprehensive
income (loss) before tax
(8,630)
2,129
—
(6,501)
Income tax
2,092
(516)
—
1,576
Net current-period other comprehensive income (loss)
(2,380)
4,983
5,085
7,688
Balance, December 31, 2023
$
117
$
(18,766)
$
(31,521)
$
(50,170)
Other comprehensive income (loss) before reclassifications, net of
tax
8,279
681
(14,753)
(5,793)
Amounts reclassified from accumulated other comprehensive
income (loss) before tax
(5,410)
1,591
—
(3,819)
Income tax
1,311
(386)
—
925
Net current-period other comprehensive income (loss)
4,180
1,886
(14,753)
(8,687)
Balance, December 31, 2024
$
4,297
$
(16,880)
$
(46,274)
$
(58,857)
(a) The cash flow hedging gain (loss) and pension liability accumulated other comprehensive income (loss) 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 13, respectively, for further details.
Note 2 - New Accounting Pronouncements
(a)
(a)
(a)
57
Recently Adopted Accounting Standards
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07 - Segment
Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose significant segment expenses and other
segment items on an annual and interim basis, and provide in interim periods all disclosures about a reportable segment's profit or loss and assets that are
currently required annually. The ASU does not change how a public entity identifies its operating segments, aggregates them or applies the quantitative
threshold to determine its reportable segments. The new disclosure requirements are also applicable to entities that account and report as a single operating
segment entity. This ASU is effective for our December 31, 2024 Form 10-K and will become effective for interim periods within 2025. This ASU only
impacted our disclosures with no impact to the consolidated financial statements. Refer to Note 12 for the disclosures related to our single operating
segment.
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 ("ASU 2020-
06"), 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 instruments accounted for as a single liability. The ASU eliminates certain settlement
conditions that are required for equity 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 Company adopted this standard on January 1, 2022
using the modified retrospective method.
Recently Issued Accounting Standards, Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03 - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40).
The standard requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes on an annual and interim
basis. Any relevant expense caption presented on the face of the income statement within continuing operations are required to be disaggregated by the
following natural expense categories: (1) purchases of inventory, (2) employee compensation, (3), depreciation, and (4) intangible asset amortization. This
ASU can be adopted prospectively or retrospectively and is effective for annual periods beginning after December, 15 2026 and interim periods within
fiscal years beginning after December 15, 2027. We expect this ASU to only impact our disclosures with no impact to the consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09 - Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The standard requires
disaggregated information about a reporting entity’s effective tax rate reconciliation in specified categories as well as information on income taxes paid.
This ASU is effective for annual periods beginning after December 15, 2024 and early adoption is permitted. This ASU should be applied on a prospective
basis with retrospective application permitted. We expect this ASU to only impact our disclosures with no impact to the consolidated financial statements.
Note 3 – Business Acquisitions
On June 13, 2022, we acquired In2Bones Global, Inc. ("In2Bones") and all of its stock (the "In2Bones Acquisition") for an aggregate upfront
payment of $145.2 million in cash. In addition, there are potential earn-out payments to In2Bones’ equity holders in an amount up to $110.0 million based
on the achievement of certain revenue targets for In2Bones products during the sixteen (16) successive quarters commencing on July 1, 2022. In2Bones
was a global developer, manufacturer and distributor of medical devices for the treatment of disorders and injuries of the lower (foot and ankle) extremities.
The In2Bones Acquisition was funded through a combination of cash on hand and long-term borrowings as further described in Note 8. Proforma
information for In2Bones is immaterial for disclosure for the years ended December 31, 2023 and 2022. Purchase accounting has been completed for the
In2Bones Acquisition.
On August 9, 2022, we acquired Biorez, Inc. ("Biorez") and all of its stock (the "Biorez Acquisition") for an aggregate upfront payment of
$85.5 million in cash. We paid $84.5 million as of December 31, 2024, with a $1.0 million holdback, pursuant to the merger agreement for the Biorez
Acquisition. In addition, there are potential earn-out payments to Biorez’ equity holders in an amount up to $165.0 million based on the achievement of
certain revenue targets for Biorez products during the sixteen (16) successive quarters commencing on October 1, 2022. Biorez was a medical device start-
up focused on advancing the healing of soft tissue using its proprietary BioBrace implant technology. The Biorez Acquisition was funded through a
combination of cash on hand and long-term borrowings. Proforma information for Biorez is immaterial for
®
58
disclosure for the years ended December 31, 2023 and 2022. Purchase accounting has been completed for the Biorez Acquisition.
We incurred costs for the amortization of inventory step-up to fair value of $8.6 million and $4.5 million during the years ended December 31,
2023 and 2022, respectively, related to the In2Bones acquisition, which are included in cost of sales. Inventory step-up to fair value for the In2Bones
acquisition was fully amortized as of December 31, 2023. During 2023, we recognized $0.8 million in integration costs and professional fees related to the
In2Bones and Biorez acquisitions that were included in selling and administrative expense. During 2022, we recognized $10.1 million in consulting fees,
legal fees and other integration related costs associated with the acquisitions of In2Bones and Biorez, which were included in selling and administrative
expense.
Note 4 - Inventories
Inventories consist of the following at December 31:
2024
2023
Raw materials
$
114,728
$
107,262
Work in process
31,300
29,463
Finished goods
200,691
181,599
$
346,719
$
318,324
Note 5 - Property, Plant and Equipment
Property, plant and equipment consist of the following at December 31:
2024
2023
Land
$
4,027
$
4,027
Building and improvements
100,937
100,299
Machinery and equipment
295,839
283,470
Construction in progress
20,409
25,088
421,212
412,884
Less: Accumulated depreciation
(305,419)
(292,162)
$
115,793
$
120,722
Internal-use software, included in gross machinery and equipment at December 31, 2024 and 2023 was $50.3 million and $50.0 million,
respectively, with related accumulated depreciation of $48.1 million and $47.1 million, respectively. Internal use software depreciation expense was $1.4
million, $1.7 million and $2.1 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Note 6 - Leases
Lease costs for the years ended December 31, consist of the following:
2024
2023
2022
Operating lease cost:
Straight-line lease cost
$
8,933
$
8,118
$
7,685
Right-of-use asset impairment cost
606
—
—
Total operating lease cost
9,539
8,118
7,685
Finance lease cost:
Depreciation
380
344
396
Interest on lease liabilities
101
55
17
Total finance lease cost
481
399
413
Total lease cost
$
10,020
$
8,517
$
8,098
59
Supplemental balance sheet information related to leases as of December 31, is as follows:
2024
2023
Operating leases
Other assets
$
39,839
$
16,606
Other current liabilities
$
8,093
$
7,509
Other long-term liabilities
33,282
9,897
Total operating lease liabilities
$
41,375
$
17,406
Finance leases
Property, plant and equipment, gross
$
3,015
$
3,901
Accumulated depreciation
(676)
(1,304)
Property, plant and equipment, net
$
2,339
$
2,597
Current portion of long-term debt
$
715
$
708
Long-term debt
1,159
1,657
Total finance lease liabilities
$
1,874
$
2,365
Weighted average remaining lease term (in years)
Operating leases
7.48 years
4.93 years
Finance leases
2.88 years
3.76 years
Weighted average discount rate
Operating leases
5.65 %
5.56 %
Finance leases
4.86 %
4.79 %
Supplemental cash flow information related to leases for the years ended December 31, was as follows:
2024
2023
2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$
8,532
$
8,178
$
7,383
Financing cash flows from finance leases
725
436
313
Right-of-use assets obtained in exchange for lease obligations:
Operating leases
32,235
5,864
5,167
Finance leases
128
2,523
—
60
Maturities of lease liabilities as of December 31, 2024 are as follows:
Finance Lease
Operating Lease
2025
$
715
$
8,093
2026
712
7,153
2027
472
6,515
2028
97
5,718
2029
4
5,147
Thereafter
2
19,083
Total lease payments
2,002
51,709
Less imputed interest
(128)
(10,334)
Total lease liabilities
$
1,874
$
41,375
As of December 31, 2024, we had a $10.3 million operating lease that had not yet commenced and we have not entered into any finance leases
that have not yet commenced.
Note 7 – Goodwill and Other Intangible Assets
The changes in the net carrying amount of goodwill for the years ended December 31, are as follows:
2024
2023
Balance as of January 1,
$
806,844
$
815,429
Foreign currency translation and other adjustments
(1,486)
(8,585)
Balance as of December 31,
$
805,358
$
806,844
The 2023 change in goodwill includes an immaterial correction of $9.0 million to record deferred tax assets associated with the deductibility of
contingent consideration related to purchase accounting from 2022.
Total accumulated goodwill impairment losses aggregated $107.0 million at December 31, 2024 and 2023, respectively.
61
Other intangible assets consist of the following:
December 31, 2024
December 31, 2023
Weighted Average
Amortization
Period (Years)
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
Intangible assets with definite lives:
22
Customer and distributor relationships
24
$
369,774
$
(205,013)
$
369,930
$
(188,486)
Sales representation, marketing and promotional rights
25
149,376
(78,000)
149,376
(72,000)
Patents and other intangible assets
16
85,392
(55,802)
82,594
(54,120)
Developed technology
18
320,204
(54,812)
320,204
(44,558)
Intangible assets with indefinite lives:
Trademarks and tradenames
86,544
—
86,544
—
$
1,011,290
$
(393,627)
$
1,008,648
$
(359,164)
Amortization expense related to intangible assets which are subject to amortization totaled $34.7 million, $35.2 million and $33.7 million for the
years ending December 31, 2024, 2023 and 2022, respectively, and is included as a reduction 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 comprehensive income (loss).
The estimated amortization expense related to intangible assets at December 31, 2024 for each of the five succeeding years is as follows:
Amortization
included in expense
Amortization
recorded as a
reduction of revenue
Total
2025
$
29,492
$
6,000
$
35,492
2026
29,636
6,000
35,636
2027
30,693
6,000
36,693
2028
33,822
6,000
39,822
2029
33,037
6,000
39,037
62
Note 8 - Long-Term Debt
Long-term debt consists of the following at December 31:
2024
2023
Revolving line of credit
$
—
$
2,000
Term loan, net of deferred debt issuance costs of $354 and $524 in 2024 and 2023, respectively
114,234
114,064
2.625% convertible notes
—
70,000
2.250% convertible notes, net of deferred debt issuance costs of $10,327 and $14,581 in 2024 and 2023,
respectively
789,673
785,419
Finance leases
1,874
2,365
Total debt
905,781
973,848
Less: Current portion
715
708
Total long-term debt
$
905,066
$
973,140
Seventh Amended and Restated Senior Credit Agreement
On July 16, 2021, we entered into a seventh amended and restated senior credit agreement consisting of: (a) a $233.5 million term loan facility and
(b) a $585.0 million revolving credit facility. The revolving credit facility will terminate and the loans outstanding under the term loan facility will expire
on July 16, 2026. The term loan was payable in quarterly installments increasing over the term of the facility. During 2022, we made a $90.0 million
prepayment on the term loan facility resulting in the elimination of such quarterly payments with the remaining balance due upon the expiration of the term
loan facility. The $90.0 million prepayment was accounted for as an extinguishment and resulted in a write-off to other expense of unamortized debt
issuance costs of $0.5 million. Proceeds from the term loan facility and borrowings under the revolving credit facility were used to repay the then existing
senior credit agreement. On July 19, 2024, we amended our seventh amended and restated senior credit agreement to exclude from the calculation of
consolidated fixed charges the $70.0 million payment we made in February 2024 of our then-outstanding 2.625% Notes. Interest rates are at the Term
Secured Overnight Financing Rate plus 0.114% ("Adjusted Term SOFR") (4.489% at December 31, 2024) plus an interest rate margin of 1.125% (5.614%
at December 31, 2024). 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 Term SOFR plus 1.00%, plus, in each case, an interest rate margin.
There were $114.6 million in borrowings outstanding on the term loan facility as of December 31, 2024. There were no borrowings outstanding
under the revolving credit facility as of December 31, 2024. Our available borrowings on the revolving credit facility at December 31, 2024 were $583.4
million with approximately $1.6 million of the facility set aside for outstanding letters of credit. The carrying amounts of the term loan and revolving credit
facility approximate fair value.
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, 2024. We are also required, under certain circumstances, to make mandatory
prepayments from net cash proceeds from any issuance of equity and asset sales.
2.625% Convertible Notes
On January 29, 2019, we issued $345.0 million aggregate principal amount of 2.625% convertible notes ("2.625% Notes") that were due in 2024.
Interest was payable semi-annually in arrears on February 1 and August 1 of each year, commencing August 1, 2019. The 2.625% Notes were scheduled to
mature on February 1, 2024, unless earlier repurchased or converted.
The 2.625% Notes represented subordinated unsecured obligations and were convertible under certain circumstances, as defined in the indenture,
into a combination of cash and CONMED common stock. The 2.625% Notes were converted at an initial conversion rate of 11.2608 shares of our
common stock per $1,000 principal amount of 2.625% Notes (equivalent to an initial conversion price of approximately $88.80 per share of common
stock). Holders of the 2.625% Notes could have converted the 2.625% 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 2.625% Notes also had the right to convert the 2.625% Notes prior to November 1, 2023,
but only upon the occurrence of specified events. The conversion rate was subject to anti-dilution adjustments if certain events occurred. A portion of the
net proceeds from the offering of the 2.625% Notes was used as part of the financing for the
63
Buffalo Filter acquisition and $21.0 million was used to pay the cost of certain convertible notes hedge transactions as further described below.
In June 2022, the Company repurchased and extinguished $275.0 million principal amount of the 2.625% Notes for aggregate consideration
consisting of $275.0 million in cash and approximately 0.9 million shares of the Company's common stock. During the year ended December 31, 2022, the
Company recorded a loss on extinguishment of $103.1 million to other expense based on the fair value of the shares of the Company’s common stock
issued in connection with the extinguishment. This loss was not deductible for tax purposes. We also recorded a write-off to other expense of unamortized
debt issuance costs related to the 2.625% Notes of $2.9 million. Concurrently, the Company entered into a Supplemental Indenture related to the remaining
$70.0 million in 2.625% Notes, in which the Company irrevocably elected to settle the principal value of those 2.625% Notes in cash. In February 2024,
the Company repaid the remaining $70.0 million then outstanding of the 2.625% Notes through borrowings on our revolving credit facility and issued
0.1 million shares of the Company's common stock.
For the years ended December 31, 2024, 2023 and 2022, we recorded interest expense on the 2.625% Notes of $0.2 million, $1.8 million and $4.8
million, respectively, at the contractual coupon rate of 2.625%.
2.250% Convertible Notes
On June 6, 2022, we issued $800.0 million aggregate principal amount of 2.250% convertible notes (the "2.250% Notes"). Interest is payable
semi-annually in arrears on June 15 and December 15 of each year, commencing December 15, 2022. The 2.250% Notes will mature on June 15, 2027,
unless earlier repurchased or converted. The 2.250% Notes represent subordinated unsecured obligations and are convertible under certain circumstances,
as defined in the indenture, into a combination of cash and CONMED common stock, with the principal required to be paid in cash. The 2.250% Notes
may be converted at an initial conversion rate of 6.8810 shares of our common stock per $1,000 principal amount of the 2.250% Notes (equivalent to an
initial conversion price of approximately $145.33 per share of common stock). Holders of the 2.250% Notes may convert the 2.250% Notes at their option
at any time on or after March 15, 2027 through the second scheduled trading day preceding the maturity date. Holders of the 2.250% Notes will also have
the right to convert the 2.250% Notes prior to March 15, 2027, but only upon the occurrence of specified events. The conversion rate is subject to anti-
dilution adjustments if certain events occur. A portion of these proceeds were used to repurchase and extinguish a portion of the 2.625% Notes, pay off our
then outstanding balance on our revolving line of credit, pay down $90.0 million of our term loan and partially pay for the In2Bones Acquisition. In
addition, approximately $115.6 million of the proceeds were used to pay the cost of certain convertible notes hedge transactions related to the 2.250%
Notes.
For the year ended December 31, 2024, 2023, and 2022 we have recorded interest expense on the 2.250% Notes of $18.0 million, $18.0 million
and $10.3 million, respectively, at the contractual coupon rate of 2.250%.
The estimated fair value of the 2.250% Notes was approximately $744.1 million as of December 31, 2024 based on a market approach which
represents a Level 2 valuation in the fair value hierarchy. The estimated fair value was determined based on the estimated or actual bids and offers of the
2.250% Notes in an over-the-counter market transaction on the last business day of the year.
Convertible Notes Hedge Transactions
In connection with the offerings of the 2.625% and 2.250% Notes, we entered into convertible notes hedge transactions with a number of financial
institutions (each, an “option counterparty”). The convertible notes hedge transactions cover, subject to anti-dilution adjustments substantially similar to
those applicable to the respective Notes, the number of shares of our common stock underlying the 2.625% and 2.250% Notes. Concurrent with entering
into the convertible notes 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.
In connection with the repurchase and extinguishment of $275.0 million principal amount of the 2.625% Notes, the Company entered into
agreements with the option counterparties to terminate a corresponding portion of the hedges on the 2.625% Notes. The transactions had a net fair value
due the Company on execution date of $22.2 million which was recorded as an adjustment to Paid-in Capital. The Company recorded a $5.5 million charge
to other expense as a result of a subsequent decline in fair value between execution date and settlement date with the Company receiving net cash of $16.7
million. The termination of the convertible notes hedge resulted in the release of the related deferred tax asset. In connection with the issuance of 2.250%
Notes, the Company purchased hedges for $187.6 million ($142.1 million net of tax) and received proceeds from the issuance of warrants totaling
$72.0 million, recorded to paid-in capital.
Upon maturity in February 2024 of the remaining 2.625% Notes and settlement of the related hedges, the Company received 0.1 million shares
from the option counterparties.
The convertible notes 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
64
case may be, in the event that the market price per share of our common stock, as measured under the terms of the convertible notes hedge transactions, is
greater than the strike price of the convertible notes 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 ($251.53 for the 2.250% Notes) of the warrants, there
would nevertheless be dilution to the extent that such market price exceeds the strike price of the warrants as noted in Note 1, unless we elect to settle the
warrants in cash.
The scheduled maturities of long-term debt outstanding at December 31, 2024 are as follows:
2025
$
—
2026
114,588
2027
800,000
2028
—
2029
—
The above amounts exclude deferred debt issuance costs and finance leases.
Note 9 - Income Taxes
The provision for income taxes for the years ended December 31, 2024, 2023 and 2022 consists of the following:
2024
2023
2022
Current tax expense :
Federal
$
4,084
$
2,066
$
98
State
2,875
3,826
1,582
Foreign
11,445
9,777
14,082
18,404
15,669
15,762
Deferred income tax expense (benefit):
Federal
10,351
2,826
(4,096)
State
681
(893)
(1,636)
Foreign
1,170
(1,233)
(310)
12,202
700
(6,042)
Provision for income taxes
$
30,606
$
16,369
$
9,720
65
A reconciliation between income taxes computed at the statutory federal rate and the provision for income taxes for the years ended December 31,
2024, 2023 and 2022 follows:
2024
2023
2022
Tax provision at statutory rate based on income before income taxes
21.0 %
21.0 %
21.0 %
State income taxes, net of federal tax benefit
1.6
2.9
(1.4)
Foreign income taxes
1.6
2.8
(1.8)
Non-deductible/non-taxable items
0.9
2.0
(2.9)
US tax on worldwide earnings at different rates
(1.8)
(3.1)
(1.8)
Federal research credit
(1.5)
(3.0)
2.4
Contingent consideration
(4.6)
(1.8)
—
Valuation allowance
—
(0.5)
2.5
Stock-based compensation
1.6
—
1.5
Non-deductible premium on extinguishment and change in fair value of convertible
notes
—
—
(32.2)
Other, net
—
—
(1.0)
18.8 %
20.3 %
(13.7)%
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 tax on worldwide earnings at different rates”.
66
The tax effects of the significant temporary differences which comprise the deferred income tax assets and liabilities at December 31, 2024 and
2023 are as follows:
2024
2023
Assets:
Inventory
$
5,771
$
4,577
Net operating losses
1,700
2,809
Capitalized research and development
20,615
16,573
Deferred compensation
3,305
3,114
Accounts receivable
3,796
4,002
Compensation and benefits
14,754
18,234
Accrued pension
1,556
1,658
Research and development credit
2,972
13,090
Interest limitation
26,234
18,332
Convertible notes hedge
21,205
28,765
Lease liabilities
7,772
3,033
Other
4,482
6,290
114,162
120,477
Liabilities:
Goodwill and intangible assets
155,931
153,692
Depreciation
1,120
2,248
State taxes
10,670
9,732
Unremitted foreign earnings
1,893
1,557
Lease right-of-use assets
7,555
2,939
177,169
170,168
Net liability
$
(63,007)
$
(49,691)
Income (loss) before income taxes consists of the following U.S. and foreign income (loss):
2024
2023
2022
U.S. income (loss)
$
124,401
$
51,568
$
(96,114)
Foreign income
38,628
29,260
25,252
Total income (loss)
$
163,029
$
80,828
$
(70,862)
As of December 31, 2024, the amount of federal net operating loss carryforward was $1.2 million and begins to expire in 2027. As of
December 31, 2024, the amount of federal research credit carryforward available was $3.0 million. These credits begin to expire in 2029.
We have accrued tax liabilities 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 $34.8 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
$1.2 million would be due if these earnings were repatriated.
The Company is subject to taxation in the United States and various states and foreign jurisdictions. Taxing authority examinations can involve
complex issues and may require an extended period of time to resolve. Our federal income tax returns have been examined by the Internal Revenue Service
(“IRS”) for calendar years ending through 2022.
67
We recognize tax liabilities in accordance with the provisions for accounting for uncertainty in income taxes. Such guidance prescribes a
recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in
a tax return.
The following table summarizes the activity related to our unrecognized tax benefits for the years ending December 31,:
2024
2023
2022
Balance as of January 1,
$
1,704
$
200
$
200
Increases for positions taken in prior periods
—
1,504
—
Decreases in unrecorded tax positions related to settlement with the taxing authorities
(350)
—
—
Decreases in unrecorded tax positions related to lapse of statute of limitations
(200)
—
—
Balance as of December 31,
$
1,154
$
1,704
$
200
If the total unrecognized tax benefits of $1.2 million at December 31, 2024 were recognized, it would reduce our annual effective tax rate. The
amount of interest accrued in 2022, 2023 and 2024 related to these unrecognized tax benefits was not material and is included in the provision for income
taxes in the consolidated statements of comprehensive income (loss).
Note 10 - 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 2024, 2023
and 2022. The fourth quarter dividend for 2024 was paid on January 3, 2025 to shareholders of record as of December 20, 2024. The total dividend payable
was $6.2 million at both December 31, 2024 and 2023, 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, 2024 and 2023, no preferred stock had been issued.
Our Board of Directors has authorized a $200.0 million share repurchase program. Through December 31, 2024, 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. During 2024, 2023, and 2022 we did not repurchase any shares.
We have reserved 6.0 million shares of common stock for issuance to employees and directors under two shareholder approved share-based
compensation plans (the "Plans") of which approximately 2.2 million shares remain available for grant at December 31, 2024. The exercise price on all
outstanding stock options and stock appreciation rights (“SARs”) is equal to the quoted fair market value of the stock at the date of grant. Restricted stock
units (“RSUs”) are valued at the market value of the underlying stock on the date of grant. Performance stock units (“PSUs”) are valued using a Monte
Carlo valuation model at the date of grant. Stock options, SARs and RSUs are generally non-transferable other than on death and generally become
exercisable over a 4 to 5 year period from date of grant. PSUs are generally non-transferable other than on death and cliff vest after 3 years 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.
Total pre-tax stock-based compensation expense recognized in the consolidated statements of comprehensive income (loss) was $25.6 million,
$24.3 million and $21.7 million for the years ended December 31, 2024, 2023 and 2022, respectively. These amounts are included in selling and
administrative expense. Tax related benefits of $3.9 million, $4.0 million and $3.8 million were also recognized for the years ended December 31, 2024,
2023 and 2022, respectively. Cash
68
received from the exercise of stock options was $3.4 million, $16.2 million and $8.9 million for the years ended December 31, 2024, 2023 and 2022,
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 of each stock option and SAR grant. The risk-free interest rate is based on the
stock option and SAR grant date for a traded U.S. Treasury bond with a maturity date closest to the expected life. The expected annual dividend yield is
based on the Company's anticipated cash dividend payouts. The expected life represents the period of time that the 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.
The following table illustrates the assumptions used in estimating fair value in the years ended December 31, 2024, 2023 and 2022:
2024
2023
2022
Grant date fair value of stock options and SARs
$
33.04
$
40.18
$
49.88
Expected stock price volatility
43.01 %
41.84 %
38.45 %
Risk-free interest rate
4.21 %
4.14 %
1.68 %
Expected annual dividend yield
1.00 %
0.82 %
0.56 %
Expected life of options and SARs (years)
5.5
5.4
5.4
The following table illustrates the stock option and SAR activity for the year ended December 31, 2024:
Number
of
Shares
(in 000’s)
Weighted-
Average
Exercise
Price
Outstanding at December 31, 2023
3,764
$
93.82
Granted
687
$
79.39
Forfeited
(358)
$
100.21
Exercised
(223)
$
52.98
Outstanding at December 31, 2024
3,870
$
93.00
Exercisable at December 31, 2024
2,280
$
86.40
Stock options & SARs expected to vest
1,590
$
102.46
The weighted average remaining contractual term for SARs and stock options outstanding and exercisable at December 31, 2024 was 5.9 years
and 4.4 years, respectively. The aggregate intrinsic value of SARs and stock options outstanding and exercisable at December 31, 2024 were both $12.9
million. The aggregate intrinsic value of stock options and SARs exercised during the years ended December 31, 2024, 2023 and 2022 was $5.1 million,
$12.9 million and $13.6 million, respectively.
69
The following table illustrates the RSU and PSU activity for the year ended December 31, 2024:
Number
of
Shares
(in 000’s)
Weighted-
Average
Grant-Date
Fair Value
Outstanding at December 31, 2023
67
$
129.32
Granted
91
$
95.80
Vested
(16)
$
114.17
Forfeited
(12)
$
107.81
Outstanding at December 31, 2024
130
$
109.59
The weighted average fair value of RSU and PSU awards granted in the years ended December 31, 2024, 2023 and 2022 was $95.80, $127.59 and
$136.35, respectively.
The total fair value of RSUs vested was $1.8 million, $2.4 million and $2.6 million for the years ended December 31, 2024, 2023 and 2022,
respectively.
As of December 31, 2024, there was $51.6 million of total unrecognized compensation cost related to nonvested stock options, SARs, PSUs and
RSUs granted under the Plans which is expected to be recognized over a weighted average period of 2.95 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 2024, we issued approximately 27,124 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 11 - Revenues
The following tables present revenue disaggregated by product line and timing of revenue recognition for the years ended December 31, 2024,
2023 and 2022:
2024
Orthopedic Surgery
General Surgery
Total
Timing of Revenue Recognition
Goods transferred at a point in time
$
502,336
$
754,070
$
1,256,406
Services transferred over time
41,652
8,957
50,609
Total sales from contracts with customers
$
543,988
$
763,027
$
1,307,015
2023
Orthopedic Surgery
General Surgery
Total
Timing of Revenue Recognition
Goods transferred at a point in time
$
494,002
$
704,041
$
1,198,043
Services transferred over time
39,156
7,545
46,701
Total sales from contracts with customers
$
533,158
$
711,586
$
1,244,744
70
2022
Orthopedic Surgery
General Surgery
Total
Timing of Revenue Recognition
Goods transferred at a point in time
$
422,648
$
577,625
$
1,000,273
Services transferred over time
38,880
6,319
45,199
Total sales from contracts with customers
$
461,528
$
583,944
$
1,045,472
Revenue disaggregated by primary geographic market where the products are sold is included in Note 12.
Contract liability balances related to the sale of extended warranties to customers are as follows:
December 31, 2024
December 31, 2023
Contract Liability
$
18,424
$
17,962
Revenue recognized during years ended December 31, 2024, 2023 and 2022 from amounts included in contract liabilities at the beginning of the
period were $13.9 million, $12.5 million and $11.5 million, respectively. There were no material contract assets as of December 31,
2024 and December 31, 2023.
Note 12 - Business Segment and Geographic Areas
We account and report 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. The Company derives revenue globally and manages the business on a consolidated basis due to shared
infrastructure and resources. Our chief operating decision maker ("CODM"), the President and Chief Executive Officer, 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.
Our product lines consist of orthopedic surgery and general surgery. Orthopedic surgery consists of sports medicine and lower extremities
instrumentation and implants, small bone, large bone and specialty powered surgical instruments as well as imaging systems for use in minimally invasive
surgical procedures and fees related to sales representation, promotion and marketing of sports medicine allograft tissue. General surgery consists of a
complete line of endo-mechanical instrumentation for minimally invasive laparoscopic 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 years ended December 31, 2024, 2023 and 2022:
2024
Orthopedic Surgery
General Surgery
Total
Primary Geographic Markets
United States
$
210,670
$
537,554
$
748,224
Europe, Middle East & Africa
132,106
110,958
243,064
Asia Pacific
119,766
74,918
194,684
Americas (excluding the United States)
81,446
39,597
121,043
Total sales from contracts with customers
$
543,988
$
763,027
$
1,307,015
2023
Orthopedic Surgery
General Surgery
Total
Primary Geographic Markets
United States
$
199,568
$
500,592
$
700,160
Europe, Middle East & Africa
127,637
98,616
226,253
Asia Pacific
123,043
74,358
197,401
Americas (excluding the United States)
82,910
38,020
120,930
Total sales from contracts with customers
$
533,158
$
711,586
$
1,244,744
71
2022
Orthopedic Surgery
General Surgery
Total
Primary Geographic Markets
United States
$
173,176
$
405,777
$
578,953
Europe, Middle East & Africa
113,649
84,288
197,937
Asia Pacific
103,353
59,124
162,477
Americas (excluding the United States)
71,350
34,755
106,105
Total sales from contracts with customers
$
461,528
$
583,944
$
1,045,472
Sales are attributed to countries based on the location of the customer. We held $139.9 million and $127.3 million of long-lived assets in the
United States at December 31, 2024 and 2023, respectively. We held $22.9 million and $18.3 million of long-lived assets in Mexico at December 31, 2024
and 2023, respectively. There were no significant investments in long-lived assets in other countries outside the United States at December 31, 2024 and
2023. No single customer represented over 10% of our consolidated net sales for the years ended December 31, 2024, 2023 and 2022.
The accounting policies of our single operating segment are the same as those described in Note 1. The CODM assesses performance for the
single operating segment and decides how to allocate resources and make investment decisions based on net income (loss), consistent with what is reported
on the consolidated statements of comprehensive income (loss). Net income is used to monitor budget versus actual results. The CODM also uses net
income in competitive analysis by benchmarking to CONMED’s competitors. The competitive analysis along with the monitoring of budgeted versus
actual results are used in assessing performance of the single segment.
The following table includes significant segment expenses for the years ended December 31, 2024, 2023 and 2022:
Years Ended
December 31,
2024
2023
2022
Net sales
$
1,307,015
$
1,244,744
$
1,045,472
Cost of sales
573,983
568,499
474,227
Salesforce and commission expense
225,886
215,799
186,596
Marketing expense
65,338
60,918
56,027
Distribution expense
50,183
53,701
44,874
General and administrative expense
117,463
111,235
96,108
Stock-based compensation expense
25,558
24,257
21,729
Amortization expense
28,629
29,068
27,791
Non-cash
adjustments
to
fair
value
of
contingent
consideration liability
(41,048)
(2,421)
2,518
Research and development expense
54,426
52,602
47,152
Interest expense
37,297
39,775
28,905
Loss on convertible notes and related hedge transactions
—
—
112,011
Provision for income taxes
30,606
16,369
9,720
Other segment items
6,271
10,483
18,396
Net income (loss)
$
132,423
$
64,459
$
(80,582)
Other segment items consist of restructuring and related costs in 2024, 2023 and 2022; third party services pertaining to review of potential issues with
certain royalty payments to surgeons involved in design teams in 2024; income/expense related to the termination of a distributor agreement in 2024 and
2023; lease impairment costs in 2024; acquisition and integration costs in 2023 and 2022; software implementation costs in 2023 and 2022; and a legal
settlement in 2022.
(b)
(a)
(a)
72
Loss on convertible notes and related hedge transactions consists of loss on early extinguishment of debt, loss on convertible notes conversion premium
and loss on convertible notes hedge transactions settlement in 2022.
Total assets for the Company's single operating segment are the same as presented on the Company's consolidated balance sheet, which is used to
measure segment performance.
Note 13 - 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.
Total employer contributions to the 401(k) plan were $8.0 million, $8.2 million and $9.9 million during the years ended December 31, 2024, 2023
and 2022, respectively.
We use a December 31, measurement date for 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 10.85 and 11.13 years at December 31, 2024 and 2023, respectively. The limits of 10.85 and 11.13 years, respectively, are adjusted
to reflect the percentage change in the average remaining service period for the plan's active membership.
The following table provides a reconciliation of the projected benefit obligation, plan assets and funded status of the pension plan at December 31:
2024
2023
Accumulated benefit obligation
$
69,235
$
70,588
Change in benefit obligation
Projected benefit obligation at beginning of year
$
70,588
$
71,203
Service cost
721
776
Interest cost
3,452
3,646
Actuarial gain
(1,373)
(806)
Benefits paid
(3,112)
(3,018)
Settlements
(1,041)
(1,213)
Projected benefit obligation at end of year
$
69,235
$
70,588
Change in plan assets
Fair value of plan assets at beginning of year
$
65,896
$
62,356
Actual gain (loss) on plan assets
3,930
7,771
Benefits paid
(3,112)
(3,018)
Settlements
(1,041)
(1,213)
Fair value of plan assets at end of year
$
65,673
$
65,896
Funded status
$
(3,562)
$
(4,692)
The projected benefit obligation decreased $1.4 million from December 31, 2023 to December 31, 2024 mainly due to interest rate changes.
Amounts recognized in the consolidated balance sheets consist of the following at December 31,:
2024
2023
Other long-term liabilities
$
(3,562)
$
(4,692)
Accumulated other comprehensive loss
(22,281)
(24,770)
(b)
73
Accumulated other comprehensive loss for the years ended December 31, 2024 and 2023 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,:
2024
2023
Discount rate
5.65 %
5.15 %
Other changes in plan assets and benefit obligations recognized in other comprehensive income in 2024 and 2023 are as follows:
2024
2023
Current year actuarial loss
$
898
$
4,447
Amortization of actuarial loss
1,591
2,129
Total recognized in other comprehensive income (loss)
$
2,489
$
6,576
Net periodic pension cost for the years ended December 31, consists of the following:
2024
2023
2022
Service cost
$
721
$
776
$
1,077
Interest cost on projected benefit obligation
3,452
3,646
2,148
Expected return on plan assets
(4,405)
(4,130)
(5,295)
Amortization of loss
1,591
2,129
2,589
Net periodic pension cost
$
1,359
$
2,421
$
519
Non-service pension cost/(benefit) was immaterial for the years ended 2024, 2023 and 2022.
The following actuarial assumptions were used to determine our net periodic pension benefit cost for the years ended December 31,:
2024
2023
2022
Discount rate on benefit obligation
5.15 %
5.41 %
2.81 %
Effective rate for interest on benefit obligation
5.08 %
5.34 %
2.33 %
Expected return on plan assets
7.00 %
7.00 %
7.00 %
The 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 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.
Mortality assumptions are based on published mortality studies developed primarily based on past experience of the broad population and
modified for projected longevity trends. The mortality assumptions used for 2024 and 2023 are based on the Pri-2012 Mortality Tables using the MP-2021
mortality improvement scale.
In determining the expected return on pension plan assets, we consider the relative weighting of plan assets, the historical performance of total
plan assets and individual asset classes and economic and other indicators of future performance.
Asset management objectives include maintaining an adequate level of diversification to reduce interest rate and market risk and providing
adequate liquidity to meet immediate and future benefit payment requirements.
The allocation of plan assets by category is as follows at December 31,:
74
Percentage of Pension
Plan Assets
Target
Allocation
2024
2023
2025
Equity securities
71 %
72 %
75 %
Debt securities
29 %
28 %
25 %
Total
100 %
100 %
100 %
As of December 31, 2024, the pension plan held 27,562 shares of our common stock, which had a fair value of $1.9 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 deemed appropriate.
FASB guidance defines fair value and establishes a framework for measuring fair value and related disclosure 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, 2024 and 2023:
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 assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the
reporting date.
The following table sets forth the value of the pension plan's assets as of December 31, 2024 and December 31, 2023:
2024
2023
Investments measured at fair value:
Level 1
Common Stock
$
7,797
$
7,926
Fixed Income Securities
17,016
16,735
Total Investments measured at fair value
24,813
24,661
Investments measured at NAV:
Money Market Fund
1,885
1,834
Mutual Funds
38,975
39,401
Total Investments measured at NAV
40,860
41,235
Total Investments
$
65,673
$
65,896
We do not expect to make any contributions to our pension plan for 2025.
75
The following table summarizes the benefits and settlements expected to be paid by our pension plan in each of the next five years and in
aggregate for the following five years. The expected payments are estimated based on the same assumptions used to measure the Company’s projected
benefit obligation at December 31, 2024.
2025
$6,059
2026
6,076
2027
5,672
2028
5,541
2029
5,367
2030-2034
25,803
Note 14 - Legal Proceedings
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 federal 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 or third parties, we
investigate as appropriate.
Manufacturers of medical devices have been the subject of various investigations and enforcement actions relating to interactions with health care
providers domestically or internationally whereby companies are claimed to have provided health care providers with inappropriate incentives to purchase
their products. Similarly, the Foreign Corrupt Practices Act ("FCPA") prohibits U.S. companies and their representatives from offering or making payments
to foreign officials for the purpose of securing a business advantage; and in many countries, the healthcare professionals with whom we regularly interact
may meet the definition of a foreign government official for purposes of this law. Similar anti-bribery laws are in effect in many of the countries in which
we operate. 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 that 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 (e.g., distributors) 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, or that the
Company will not incur costs including, in the form of fees for lawyers and other consultants, that are material to the Company’s results of operations in the
course of responding to a future inquiry or investigation.
In addition, as a manufacturer of U.S. FDA-approved devices reimbursable by federal healthcare programs, we are subject to the Physician
Payments Sunshine Act, which requires us to annually report certain payments and other transfers of value we make to U.S.-licensed physicians, U.S.
teaching hospitals or other U.S. covered recipients. Any failure to comply with these laws and regulations could subject us or our officers and employees to
criminal and civil financial penalties.
Manufacturers of medical devices may face exposure to significant product liability claims, 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 material adverse effect on our business, results of operations or cash flows. We currently
maintain commercial product liability 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 available to us in the future at a reasonable cost.
Our operations are subject, and in the past have been subject, to a number of environmental laws and regulations governing, among other things,
air emissions; wastewater discharges; the use, handling and disposal of hazardous substances and wastes; soil and groundwater remediation and employee
health and safety. 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
for the entire cost of site restoration upon each of the parties that may have contributed to conditions at the site regardless of fault or the lawfulness of the
party’s activities. While we do not believe that the present costs of environmental compliance and
76
remediation are material, there can be no assurance that future compliance or remedial obligations would not have a material adverse effect on our financial
condition, results of operations or cash flows.
CONMED had been defending two Georgia State Court actions. The first action was filed in May 2020 in Cobb County by various current and
former employees, contract workers and others against CONMED and a contract sterilizer (the “Cobb County Action”). Plaintiffs alleged personal injury
and related claims purportedly arising from or relating to exposure to Ethylene Oxide, a chemical used to sterilize certain products. All claims against
CONMED in the Cobb County Action have now been dismissed, however, CONMED is indemnifying its sterilization provider who remains in the case.
The second action was filed in April 2021 in Douglas County against CONMED’s current and former landlord and property managers (the “Douglas
County Action”). Plaintiffs alleged the same injuries as in the Cobb County Action. In July 2024, CONMED reached an agreement to settle this matter for
an amount covered by CONMED’s insurance, and this litigation was dismissed in November 2024.
CONMED submitted the foregoing claims for insurance coverage by its insurance carrier Federal Insurance Company (“Chubb”). CONMED
litigated two lawsuits against Chubb relative to its coverage of these claims: one involving CONMED’s claim for coverage for the indemnification claims
arising from the Cobb County Action, and the other concerning CONMED’s claim for coverage for the indemnification claims arising from the Douglas
County Action. With respect to the Cobb County Action, the Court has ruled in favor of CONMED with respect to coverage for the indemnification of
CONMED’s sterilization provider. With respect to the Douglas County Action, the parties entered a settlement agreement in which Chubb agreed to pay
CONMED’s defense fees. As a result of a dispute with respect to the amount of CONMED’s defense fees, CONMED commenced a third action against
Chubb to enforce the terms of the settlement agreement.
The government of Italy passed a law in late 2015 to tax medical device companies on revenue derived from sales to public hospitals. The tax is
calculated and based on provincial spending over and above certain thresholds. The Italy medical device tax represents variable consideration in the form
of a retroactive discount potentially owed to the customer, which is ultimately the Italian government. Since the law was enacted through September 2022,
the Italian government essentially made no effort to administer or collect the tax. A lack of interpretative guidance and the complexity of the law resulted in
uncertainty as to the actual amount of liability. In September 2022, the Italian government passed a further decree which, amongst other provisions,
delegated administration and collection to the provincial level for the years 2015 – 2018. The Company challenged the imposition of the medical device tax
in Italy, as did many other medical device companies, on the grounds that the law was never implemented properly with regulations. On July 22, 2024, the
Italian Constitutional Court determined the tax to be constitutional, however, a 52% discount on amounts due for the years 2015-2018 was granted as part
of the ruling. The Company has used its best estimate to record reserves related to the tax. No amounts have been remitted to date.
In December 2023, the Company voluntarily informed the U.S. Department of Justice (“DOJ”) of potential issues with certain royalty payments
related to surgeons involved in design teams. The Company is fully cooperating with the DOJ and their review of the matter.
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,
automobile or other accidents our employees may experience within the course of their employment or otherwise and which may, on occasion, involve
potentially significant personal injuries or other exposures.
We record reserves sufficient to cover probable and estimable losses associated with pending claims. With respect to the matters described above,
except as noted related to the medical device tax in Italy, the Company is unable to estimate a range of possible loss at this time, nor does it believe any
potential loss is probable, and as a result has not recorded any reserves related to the potential outcomes in connection with these matters. 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, investigations or reports of alleged misconduct, or the costs
associated with responding to such claims, investigations or reports of alleged misconduct, especially when not covered by insurance, will not have a
material adverse effect on our financial condition, results of operations or cash flows.
Note 15 - Guarantees
We provide warranties on certain of our products at the time of sale and sell extended warranties. The standard warranty period for our capital
equipment is generally one year and our extended warranties typically vary from one to three years. Liability under service and warranty policies is based
upon a review of historical warranty and service claim experience. Adjustments are made to accruals as claim data and historical experience warrant.
77
Changes in the carrying amount of standard warranties for the years ended December 31, are as follows:
2024
2023
2022
Balance as of January 1,
$
1,802
$
1,944
$
2,344
Provision for warranties
506
614
224
Claims made
(863)
(756)
(624)
Balance as of December 31,
$
1,445
$
1,802
$
1,944
Costs associated with extended warranty repairs are recorded as incurred and amounted to $4.9 million, $4.8 million and $5.9 million for the years
ended December 31, 2024, 2023 and 2022 respectively.
Note 16 - Fair Value Measurement
We enter into derivative instruments for risk management purposes only. We operate internationally and, in the normal course of business, are
exposed to fluctuations in interest rates, foreign exchange rates and commodity prices. These fluctuations can increase the costs of financing, investing and
operating the business. We use forward contracts, a type of derivative instrument, to manage certain foreign currency exposures.
By nature, all financial instruments involve market and credit risks. We enter into forward contracts with major investment grade financial
institutions and have policies to monitor the credit risk of those counterparties. While there can be no assurance, we do not anticipate any material non-
performance by any of these counterparties.
Foreign Currency Forward Contracts. We hedge forecasted intercompany sales denominated in foreign currencies through the use of forward
contracts. We account for these forward contracts as cash flow hedges. To the extent these forward contracts meet hedge accounting criteria, changes in
their fair value are not included in current earnings but are included in accumulated other comprehensive loss. These changes in fair value will be
recognized into earnings as a component of sales or cost of sales when the forecasted transaction occurs.
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.
The following table presents the notional contract amounts for forward contracts outstanding:
As of
FASB ASC Topic 815
Designation
December 31, 2024
December 31, 2023
Forward exchange contracts
Cash flow hedge
$
224,177
$
223,839
Forward exchange contracts
Non-designated
38,892
55,789
The remaining time to maturity as of December 31, 2024 is within two years for hedge designated foreign exchange contracts and approximately
one month for non-hedge designated forward exchange contracts.
78
Statement of comprehensive income (loss) presentation
Derivatives designated as cash flow hedges
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 (loss) and our consolidated balance sheets:
Amount of Gain Recognized in
AOCI
Consolidated Statements of Comprehensive Income (Loss)
Amount of Gain Reclassified
from AOCI
Years Ended
Total Amount of Line Item Presented
Years Ended
Derivative Instrument
2024
2023
2022
Location of
amount
reclassified
2024
2023
2022
2024
2023
2022
Foreign exchange contracts
$
10,928 $
5,489 $
14,494
Net Sales
$
1,307,015 $
1,244,744 $
1,045,472
$
4,285 $
3,790 $
15,085
Cost of Sales
573,983
568,499
474,227
1,125
4,840
939
Pre-tax gain
$
10,928 $
5,489 $
14,494
$
5,410 $
8,630 $
16,024
Tax expense
2,649
1,331
3,513
1,311
2,092
3,884
Net gain
$
8,279 $
4,158 $
10,981
$
4,099 $
6,538 $
12,140
At December 31, 2024, $4.1 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 gain (loss) from derivative instruments not accounted for as hedges and loss on our intercompany receivables on our consolidated statements
of comprehensive income (loss) were:
Years Ended
Derivative Instrument
Location on Consolidated Statements of
Comprehensive Income (Loss)
2024
2023
2022
Net gain (loss) on currency forward contracts
Selling and administrative expense
$
608
$
(891)
$
(240)
Net loss on currency transaction exposures
Selling and administrative expense
$
(3,043)
$
(1,305)
$
(1,950)
79
Balance sheet presentation
We record these forward foreign exchange contracts at fair value. The following tables summarize the fair value for forward foreign exchange
contracts outstanding at December 31, 2024 and 2023:
December 31, 2024
Location on Consolidated Balance Sheet
Asset Fair
Value
Liabilities
Fair
Value
Net
Fair
Value
Derivatives designated as hedging instruments:
Foreign exchange contracts
Prepaid expenses and other current assets
$
8,702
$
(3,294)
$
5,408
Foreign exchange contracts
Other assets
388
(124)
264
$
9,090
$
(3,418)
$
5,672
Derivatives not designated as hedging instruments:
Foreign exchange contracts
Other current liabilities
33
(110)
(77)
Total derivatives
$
9,123
$
(3,528)
$
5,595
December 31, 2023
Location on Consolidated Balance Sheet
Asset Fair
Value
Liabilities
Fair
Value
Net
Fair
Value
Derivatives designated as hedging instruments:
Foreign exchange contracts
Prepaid expenses and other current assets
$
3,761
$
(3,197)
$
564
Foreign exchange contracts
Other long-term liabilities
24
(433)
(409)
$
3,785
$
(3,630)
$
155
Derivatives not designated as hedging instruments:
Foreign exchange contracts
Other current liabilities
39
(209)
(170)
Total derivatives
$
3,824
$
(3,839)
$
(15)
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 value and establishes a framework for measuring fair value and related disclosure
requirements. This guidance applies when fair value measurements are required or permitted. The guidance indicates, among other things, that a fair value
measurement assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a
principal market, the most advantageous market for the asset or liability. Fair value is defined based upon an exit price model.
Valuation Hierarchy. A valuation hierarchy was established for disclosure of the inputs to the valuations used to measure fair value. This
hierarchy prioritizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or
liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in markets that are
not active, inputs other than quoted prices that are observable for the asset or liability, including interest rates, yield curves and credit risks, or inputs that
are derived principally from or corroborated by observable market data through correlation. Level 3 inputs are unobservable inputs based on our own
assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the
lowest level input that is significant to the fair value measurement. There have been no significant changes in the assumptions.
80
Valuation Techniques. Assets and liabilities carried at fair value and measured on a recurring basis as of December 31, 2024 consist of forward
foreign exchange contracts and contingent consideration. The Company values its forward foreign exchange contracts 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 table above.
The Company values contingent consideration from the In2Bones and Biorez acquisitions using Level 3 inputs. The contingent consideration was
recorded at fair value at the date of acquisition based on the consideration expected to be transferred, estimated as the probability-weighted future cash
flows, discounted back to present value. The fair value of contingent consideration is measured using projected payment dates, discount rates, revenue
volatilities, and projected revenues. The recurring Level 3 fair value measurements of contingent consideration for which the liabilities are recorded include
the following significant unobservable inputs as of December 31, 2024:
Assumptions
Unobservable Input
In2Bones
Biorez
Discount rate
7.75%
13.38%
Revenue volatility
19.60%
21.97%
Projected year of payment
2025-2026
2025-2026
Adjustments to the fair value of contingent consideration during 2024 for In2Bones were driven principally by the level of In2Bones revenue and
reflect various factors, including a delayed recovery from supply chain constraints, delays in product registrations and integration disruptions. Biorez
adjustments to fair value of contingent consideration during 2024 principally relate to the level of Biorez revenue driven by the expected timing of clinical
trial results. Changes in the fair value of contingent consideration liabilities for years ended December 31, 2024 and December 31, 2023 are as follows:
In2Bones
Biorez
Balance at January 1, 2023
$
70,198
$
116,234
Payments
(13,867)
—
Changes in fair value of contingent consideration
(14,938)
12,517
Balance at December 31, 2023
$
41,393
$
128,751
Payments
(3,029)
(53,850)
Changes in fair value of contingent consideration
(27,168)
(13,880)
Balance at December 31, 2024
$
11,196
$
61,021
Contingent consideration of $35.4 million and $36.8 million is included in other current liabilities and other long-term liabilities, respectively, in
the consolidated balance sheet at December 31, 2024. Contingent consideration of $77.6 million and $92.5 million is included in other current liabilities
and other long-term liabilities, respectively, in the consolidated balance sheet at December 31, 2023.
The carrying amounts reported in our balance sheets for cash and cash equivalents, accounts receivable, accounts payable and variable long-term
debt approximate fair value.
81
SCHEDULE II—Valuation and Qualifying Accounts
(In thousands)
Additions
Balance at
Beginning of
Period
Charged to
Costs and
Expenses
Charged to
Other
Accounts
Balance at End
of Period
Description
Deductions
2024
Allowance for bad debts
$
6,034
$
2,557
$
—
$
(2,852)
$
5,739
Sales returns and
allowance
6,646
—
—
(686)
5,960
Deferred tax asset
valuation allowance
—
—
—
—
—
2023
Allowance for bad debts
$
5,508
$
1,525
$
—
$
(999)
$
6,034
Sales returns and
allowance
6,388
1,533
—
(1,275)
6,646
Deferred tax asset
valuation allowance
543
—
—
(543)
—
2022
Allowance for bad debts
$
4,528
$
1,400
$
230
$
(650)
$
5,508
Sales returns and
allowance
4,441
2,923
—
(976)
6,388
Deferred tax asset
valuation allowance
786
—
1,571
(1,814)
543
During 2022, allowances were assumed as part of the In2Bones acquisition.
Item 16. Form 10-K Summary
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.
(1)
(1)
82
Exhibit 4.1
Description of Common Stock
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 provisions of the Company’s certificate of incorporation (the
“Certificate of Incorporation”) and bylaws (the “Bylaws”) and applicable Delaware law. This description is qualified in its entirety by, and should be read
in conjunction with, the Certificate of Incorporation and Bylaws, which have been publicly filed with the Securities and Exchange Commission, and
applicable Delaware law.
Authorized Shares
We have the authority to issue an aggregate of 100,000,000 shares of Common Stock. As of February 12, 2025, there were 31,299,194 shares of our
Common Stock issued and 30,908,835 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 after 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.
Special Meetings of Stockholders
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 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 Requirements for Stockholder Proposals 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 Corporation Law (the “DGCL”), our Certificate of Incorporation or our Bylaws; (iv) any action to interpret,
apply, enforce or 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 Certificate of Incorporation and Bylaws
Delaware law provides generally that a majority 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.
Delaware law provides generally that by-laws may be amended, adopted or repealed by the vote of a majority of the shares cast at a meeting of the
Company’s stockholders, unless the certificate of incorporation or by-laws provide otherwise. Our Bylaws provide that they may be amended, altered or
repealed by a majority 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.
Delaware Anti-Takeover Statute
We are subject 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 Officers 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 or officer 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 or officer, except for liability for (i)
any breach of the director’s or officer'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) a director for payments of unlawful dividends or unlawful stock purchases or redemptions, (iv)
any transaction from which the director or officer derived an improper personal benefit, or (v) an officer in any action by or in the right of the corporation.
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.
EXHIBIT 19
Insider Trading Policy
1.
Policy Statement
This Insider Trading Policy (this “Policy”) is designed to prevent insider trading or allegations of insider trading, to protect the reputation of CONMED, its
subsidiaries, and affiliated entities (collectively, the “Company”) for integrity and ethical conduct and to help the Company’s personnel avoid the severe
consequences associated with violations of insider trading laws. It is the policy of the Company to comply with all applicable securities laws when
transacting in its own securities. The Company will not engage in transactions in respect of its securities when it is in possession of material, nonpublic
information relating to the Company, other than in compliance with applicable law.
2.
Applicability
2.1.
Persons Covered
This Policy applies to all directors, officers, and employees of the Company, as well as consultants and independent contractors of the Company who have
access to material, nonpublic information relating to the Company or Other Relevant Issuers (as defined in Section 2.2 below).
As a person covered by this Policy, you are responsible for ensuring the following individuals comply with the restrictions set forth in this Policy:
•
your family members, including without limitation your spouse, significant others, child, parent, sibling, who reside with you;
•
anyone else who lives in your household;
•
any family members who do not live in your household but whose securities transactions are directed by you or who are subject to your influence
or control (such as parents or children who consult with you before they trade in securities);
•
any person to whom you have disclosed material, nonpublic information; and
•
any investment fund, trust, retirement plan, partnership, corporation or other entity that you have the ability to influence or for which you may
direct investment decisions concerning securities.
Addendum 1 to this Policy is also applicable to (i) all members of the Board (the “Directors”), (ii) the Chief Executive Officer and his or her direct reports
(the “Executives”), (iii) those who report directly to the Executives (the “Leadership” or “Leader”), (iv) administrative assistants who work for Executives
or Leadership, and (v) other employees designated in writing by the General Counsel (the people falling into (i) – (v), collectively, the “Insiders”). The
General Counsel will notify you via email if you are not a Director, Executive or Leadership but are subject to Addendum 1. Addendum 1 generally
(1) prohibits covered individuals from trading in the Company’s securities during quarterly blackout and other periods and (2) requires covered individuals
to pre-clear all transactions in the Company’s securities with the General Counsel.
Additional information regarding reporting obligations and other matters related to securities transactions made by Directors, Executives and certain
members of Leadership who are subject to Section 16 reporting obligations are described by Addendum 2 to this Policy.
2.2.
Securities Covered
The prohibition on insider trading in this Policy is not limited to trading in shares of the Company’s common stock. It also includes trading in any other
securities issued by the Company (such as preferred stock, debentures, bonds and warrants) as well as derivative securities. Transactions in mutual funds,
exchange-traded funds, index funds, or other “broad basket” funds that own or hold the Company’s securities as one of many investments are, however, not
subject to this Policy.
This Policy also applies to trading in the securities of publicly traded companies with which the Company does business, such as the Company’s customers
or suppliers, and those of publicly traded companies that are involved in potential transactions or business relationships with the Company, including those
with which the Company may be negotiating major transactions, such as an acquisition, investment, or sale of assets (each such publicly traded company
referred to in this sentence, an “Other Relevant Issuer,” and, collectively, “Other Relevant Issuers”).
3.
Prohibited Activities
3.1.
No Trading on “Material, Nonpublic Information”
Subject only to the specific exceptions in this Policy, you may not trade in Company securities, directly or indirectly, including by having others trade on
your behalf, if you are aware of material, nonpublic information relating to the Company. Similarly, you may not trade in the securities of any Other
Relevant Issuer if you are aware of material, nonpublic information relating to that Other Relevant Issuer that you obtained in the course of your role with
the Company.
3.2.
No Tipping
The Company has authorized only certain individuals to release material, nonpublic information relating to the Company. Unless you are one of these
individuals, you may not communicate material, nonpublic information to others. If you are an authorized spokesperson, you must make disclosure in
compliance with the Company’s policies regarding the authorized disclosure of such information, including the Company’s Policy on Disclosure and
Speaking for the Company (Regulation Fair Disclosure (FD)). In either case, you are prohibited from recommending to anyone the purchase or sale of
securities when you are aware of material, nonpublic information relating to those securities that you learned in your role at the Company. This practice,
known as “tipping,” also may violate the securities laws and can result in civil and criminal penalties.
The existence of a personal, financial emergency does not excuse you from compliance with this Policy.
4.0 Definition of Material, Nonpublic Information
4.1 What is “Material Information”
While the term “material” is not precise, it is generally understood to apply to any information that a reasonable investor would consider in making an
investment decision. The information need not be so important that it would alter an investment decision. Rather, it is enough that an investor could
“consider” the information in making an investment decision. Both positive and negative information may be material. While it is not possible to identify
all information that would be deemed “material,” the following items are types of information that should be considered carefully to determine whether
they are material:
•
projections of future earnings or losses, or other earnings guidance;
•
information related to decisions by regulatory authorities regarding the Company’s products and/or product candidates;
•
results of clinical trials, collaborations, licenses or matters related to the status of clinical trials (e.g., enrollment), including the timing of such
announcements;
•
earnings or revenue that are inconsistent with the consensus expectations of the investment community; potential restatements of the Company’s
financial statements, changes in auditors or auditor notification that the Company may no longer rely on an auditor’s audit report;
•
pending or proposed mergers, acquisitions, tender offers, joint ventures or dispositions of significant assets; changes in management or the
Board;
•
actual or threatened litigation or governmental investigations or major developments in such matters;
•
developments regarding customers, suppliers, orders, contracts or financing sources (e.g., the acquisition or loss of a contract);
•
changes in dividend policy, declarations of stock splits, or public or private sales of additional securities;
•
potential defaults under any credit agreements or indentures of the Company, or the existence of material liquidity deficiencies; and
•
bankruptcies or receiverships.
The Securities and Exchange Commission (the “SEC”) has stated that there is no fixed quantitative threshold amount for determining materiality.
4.2 What is “Nonpublic Information”
Information is “nonpublic” if it has not been disseminated in a manner making it available to investors generally. To show that information is public, it is
necessary to point to some fact that establishes that the information has become publicly available, such as the filing of a report with the SEC, the
distribution of a press release through a widely disseminated news or wire service, or by other means that are reasonably designed to provide broad public
access.
Before a person who possesses material, nonpublic information can trade, there also must be adequate time for the market as a whole to absorb the
information that has been disclosed. For the purposes of this Policy, information will be considered public after the close of trading on the first full trading
day following the Company’s public release of the information.
For example, if the Company announces material information of which you are aware before trading begins on a Tuesday, the first time you can buy or sell
Company securities is the opening of the market on Wednesday. However, if the Company announces this material information after trading begins on that
Tuesday, the first time that you can buy or sell Company securities is the opening of the market on Thursday.
Courts judge whether a particular item is “material” or “nonpublic” with the benefit of hindsight. You should direct questions whether information is
“material” or “nonpublic” to the Company’s General Counsel.
5.0 Special and Prohibited Transactions
Certain types of transactions raise heightened legal risk and the appearance of improper or inappropriate conduct, even in the absence of any material,
nonpublic information. Insiders, consequently, may not engage in any of the following transactions:
5.1 Short Sales
Short Sales (as defined below) of the Company’s securities typically evidence an expectation on the part of the seller that the securities will decline in value
and, consequently, may signal to the market that the seller lacks confidence in the Company’s prospects. In addition, Short Sales may reduce a seller’s
incentive to seek to improve the Company’s performance. A “Short Sale against the box” is generally a short sale involving a security that the seller owns
but does not deliver to the purchaser. Short Sales and “Short Sales against the box” of the Company’s securities are prohibited by this Policy. A “Short
Sale” is a trading strategy where an investor borrows shares of a stock from a broker, sells the borrowed shares, then buys back sufficient shares to replace
the borrowed shares. The investor then returns the shares to the lender, keeping the difference, if any, between the sale and buyback price as profit, minus
any loan interest.
5.2 Publicly traded options
Given the relatively short-term nature of most publicly traded options, transactions in certain types of options may create the appearance that a director or
officer is trading based on material, nonpublic information or is focused on short-term performance at the expense of long-term objectives. Accordingly,
transactions in put options, call options, or other derivative securities, on an exchange or in any other organized market, are prohibited by this Policy.
5.3 Hedging transactions
Hedging transactions can be accomplished through a variety of mechanisms, including the use of financial instruments such as prepaid variable forward
contracts, equity swaps, collars, and exchange funds that are designed to reduce or eliminate the market price risk associated with ownership of the
reference security. Such hedging transactions may permit a holder of Company equity securities to continue to own them without the full risks and rewards
of ownership. When that occurs, the Insider may no longer have the same objectives as the Company’s other stockholders, and, therefore, Insiders are
prohibited by this Policy from engaging in any derivative transactions referencing Company equity securities.
5.4 Margin accounts and pledges
Securities held in a margin account or pledged as collateral for a loan may be sold by the broker if an individual fails to meet a margin call or by the lender
in foreclosure if an individual defaults on the loan. Because a margin or foreclosure sale that occurs when an individual is aware of material, nonpublic
information or otherwise is not permitted to trade would violate this Policy, Insiders are prohibited by this Policy from holding Company securities in a
margin account or pledging Company securities as collateral for a loan.
5.5 Standing and Limit Orders
Standing and limit orders (except standing and limit orders under approved 10b5-1 plans, as described in Addendum 1) create heightened risks for insider
trading violations similar to the use of margin accounts. There is no control over the timing of purchases or sales that result from standing instructions to a
broker, and as a result the broker could execute a trade when an Insider is in possession of material, nonpublic information. The Company therefore
discourages placing standing or limit orders on Company securities. If a person subject to this Policy determines that they must use a standing or limit
order, the order should be limited to short duration and should otherwise comply with the restrictions and procedures in this Policy and Addendum 1.
6.0 Transaction Under Company Benefit Plans
This policy does not apply to transactions under our benefit plans, except as noted below:
6.1 Stock Option Exercises
This Policy’s trading restrictions generally do not apply to the Exercise (as defined below) of a stock option. The trading restrictions do apply, however, to
any sale of the underlying stock or to a “Cashless Exercise” of the option through a broker, as this entails market sale of a portion of the underlying stock to
cover the costs of exercise. Therefore, “Cashless Exercises” which include a market sale of securities are subject to the restrictions set forth in this Policy.
The “Exercise” of a stock option means buying shares of the Company's stock at a predetermined price (the strike price) once you have the right to do so.
For example, if an employee has material nonpublic information, they may exercise options at the strike price, but they must hold and not sell the shares
until they no longer have material nonpublic information.
6.2 Vesting of Awards
This Policy’s trading restrictions do not apply to the vesting of stock options, restricted stock, or restricted stock units. Any sale of securities in connection
with such vesting is, however, subject to the restrictions set forth in this Policy.
6.3 Employee Stock Purchase Plan
This Policy’s trading restrictions do not apply to periodic purchases of Company stock under a Company employee stock purchase plan, if such plan exists,
so long as the employee’s last non-automatic election before the purchase
was a valid election. This Policy does apply, however, to an employee’s non-automatic elections under the plan (whether an election to participate in the
plan or to change the level of the employee’s contribution under the plan) and to any sales of Company stock purchased under the plan.
6.4 401(k) Plan
This Policy’s trading restrictions do not apply to purchases of Company securities in the Company’s 401(k) plan resulting from periodic contributions of
money to the plan pursuant to a valid payroll deduction election. This Policy does apply, however, to an employee’s non-automatic elections with respect to
a Company securities fund under the plan (whether an election to participate in the fund or to change the level of the employee’s level of participation in
the fund) and transfers in or out of a Company securities fund (including in connection with a plan loan).
7.0 Gifts
A security holder cannot make a gift or other transfer of Company securities during a period when that person/entity is not permitted to trade.
8.0 Post-Termination Transactions
If you are aware of material, nonpublic information when your role with the Company ends, you may not trade in Company securities until that information
has become public or is no longer material.
9.0 Unauthorized Disclosure
Maintaining the confidentiality of Company information is essential for competitive, security, and other business reasons, as well as to comply with
securities laws. You should treat all information you learn about the Company or its business plans in connection with your role as confidential and
proprietary to the Company. If you are involved in a confidential project which uses a project name in order to protect the confidentiality of the underlying
work or transaction, you should not disclose to any employee or third party who is not authorized to be aware of the project, the existence of the project or
the project name as this could lead others to believe the Company is involved in a matter that involves material nonpublic information. Inadvertent
disclosure of confidential or inside information may expose the Company and you to significant risk of investigation and litigation.
The timing and nature of Company disclosure of material information to outsiders is subject to legal rules, the breach of which could result in substantial
liability to you, the Company, and its management. Accordingly, responses to inquiries about the Company from the press, investment analysts, or others in
the financial community must be made on the Company’s behalf only through authorized individuals.
10.0 Personal Responsibility
The ultimate responsibility for adhering to this Policy and avoiding improper trading rests with you. You are responsible for confirming compliance with
this Policy of any securities transaction executed or directed by you or a person or entity listed above.
11.0 Penalties for Insider Trading and Noncompliance with this Policy
Federal and state laws impose penalties for violation of insider trading or tipping laws that may be very severe and may include both imprisonment and
large monetary and/or other civil penalties. In addition to governmental regulation in this area, those who violate insider trading or tipping laws may expose
themselves or the Company to private lawsuits. The Company reserves the right to discipline any violation of this Policy, including by termination, whether
or not the person violating the policy is found to be liable under U.S. or state law.
12.0 Questions About and Violations of this Policy
Any questions or concerns related to this policy can be directed to the Company’s General Counsel at LegalOperations@conmed.com.
If you violate this Policy or any federal or state laws governing insider trading, or know or have concerns about an actual or potential violation of this
Policy, you must report the actual or potential violation immediately to the General Counsel or to the CONMED Hotline. However, if the conduct in
question involves the General Counsel, you may raise the matter with the Company’s Chief Financial Officer, or if it involves the Chief Executive Officer
or the Chief Financial Officer you may report the matter to the Chair of the Audit Committee. You may also raise the matter through the CONMED
Hotline.
Failure to comply with this Policy may result in a violation of law or regulation and may raise serious compliance and legal concerns for CONMED, and
the individual whose action may have caused or contributed to the potential violation. Substantiated violations of this Policy may subject the violator to
disciplinary sanctions, ranging from a written warning up to, and including, employment termination.
Addendum 1
We have established additional procedures to assist in the administration of the Policy, to facilitate compliance with laws prohibiting insider
trading, and to avoid the appearance of improper trading. These additional procedures are applicable only to those individuals whom we have designated
(and family members identified in Section 2.1 of the Policy (“Family Members”) and entities they control) and are subject only to the exceptions stated at
the end of this Addendum. All capitalized terms used but not defined in this Addendum 1 have the definition ascribed to them in the Policy.
Pre-Clearance Procedures. Insiders, as well as their Family Members and entities that they control, may not engage in any transaction in
Company securities (including the gifting of Company securities) without first obtaining pre-clearance of the transaction from the Company’s General
Counsel.
A request for pre-clearance must be submitted to the General Counsel via email LegalOperations@conmed.com at least two business days in
advance of the proposed transaction. The General Counsel must submit any pre-clearance request to the Company’s Chief Financial Officer. As part of the
submission, the Insider must state that they are not in possession of material, nonpublic information concerning the Company and must respond to any
questions regarding the proposed trade requested by the General Counsel or Chief Financial Officer, as applicable.
Prior to any trade, the General Counsel, the Chief Financial Officer or his or her designee, as applicable, must have approved proposed trade via
electronic mail. Any pre-cleared trade must be executed within five business days following the approval and at a time when the Insider does not have
material, nonpublic information.
While pre-clearing trades will provide added protections for Insiders who pre-clear trades in good faith, pre-approval does not protect Insiders
from the consequences of prohibited illegal trading if the Insider is otherwise in possession of material, nonpublic information.
The General Counsel or Chief Financial Officer is under no obligation to approve a transaction submitted for pre-clearance and may determine not
to permit the transaction. If a person seeks pre-clearance, and permission to engage in the transaction is denied, then the requestor must refrain from
initiating any transaction in Company securities and should not inform any other person of the restriction, without first obtaining the General Counsel’s
written consent to disclose the restriction to another person.
Quarterly Trading Restrictions. Insiders, as well as their Family Members and entities that they control, may not trade Company securities during
a “Blackout Period” beginning two weeks prior to the end of each fiscal quarter and ending one full trading day after earnings are publicly announced for
that quarter. Accordingly, the Company’s trading window for all Insiders, as well as their Family Members and entities that they control, is always closed
during the following periods:
•
The close of business on March 15 until one full trading day after the 1 quarter earnings announcement;
•
The close of business on June 15 until one full trading day after the 2 quarter earnings announcement;
•
The close of business on September 15 until one full trading day after the 3 quarter earnings announcement; and
•
The close of business on December 15 until one full trading day after the 4 quarter earnings announcement.
As a result, if an earnings announcement is made on a Tuesday morning before the stock market opens, the first time you could trade (assuming
the trading window is not closed for any other reason, is the opening of the market on Wednesday. If earnings were released after trading began on Tuesday,
the trading window would not open until Thursday.
Event-Specific Trading Restriction Periods. From time to time, an event may occur that is material to the Company and is known by only a
limited group of Insiders or other employees. So long as the event remains
st
nd
rd
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material and nonpublic, Directors, Executives, Leaderships, and the individuals designated by the General Counsel as subject to this restriction, as well as
their Family Members and entities they control, may not trade in Company securities. In that situation, the General Counsel may, without disclosing the
reason for the restriction, notify these persons that they should not trade in Company securities. The existence of an event-specific trading restriction will
not be communicated widely within the Company, and you should not communicate the restriction or extension to any other person. Even if the General
Counsel has not designated you as a person who should not trade due to an event-specific restriction, you should not trade while aware of material,
nonpublic information.
Exceptions. The quarterly trading restrictions and event-driven trading restrictions do not apply to those transactions to which this Policy does not
apply, as described in the Policy under the headings “Transactions Under Company Benefit Plans.” Further, the requirement for pre-clearance, the
quarterly trading restrictions, and event-specific trading restrictions do not apply to transactions conducted pursuant to approved Rule 10b5-1 Trading
Plans, described below.
Written Rule 10b5-1 Plans.
Under SEC Rule 10b5-1, Insiders may enter into a written plan which may permit trading during a Blackout Period or period during which event-
specific trading restrictions have been imposed, provided, among other things, that the plan is entered into when the trading window is open (the “Plan”).
The Plan must be entered into at a time when the Insider does not possess material, nonpublic information. SEC rules require a “cooling off” period
between entering into the Plan and the transaction contemplated by the Plan, and each Plan must include a compliant cooling off period (90-120 days for
Directors or Executives and 30 days for other Insiders). The Plan mechanism may be particularly useful if you have options that may expire during a quiet
period, or, if for tax or other appropriate reasons, you do not wish to exercise options or otherwise trade in the Company’s stock before the quiet period
commences or after it ends.
All Plans must: (i) specify, or include a formula for determining, the “amount” and “price” of the securities to be traded and the “date” of the
trade; (ii) not permit the Company or the Insider to exercise subsequent influence over how, when or whether to effect the purchases or sales; and (iii)
provide that no other person may exercise influence under the Plan when aware of material, nonpublic information. The trades must then occur in
accordance with the Plan. SEC rules prohibit certain overlapping plans, subject to limited exceptions. The written plan must, among other things, be:
operated in good faith, not part of a plan or scheme to evade the prohibitions of Rule 10b5-1, and preapproved in writing (which can be via email) by the
General Counsel. Insiders should inform the General Counsel when amending or terminating any Plan. SEC rules require that plans adopted, materially
amended or terminated by Directors and Executives be publicly disclosed in the Company’s SEC filings. The Legal Department can provide you with a
sample plan upon request.
Addendum 2
SEC Reporting Obligations and Related Considerations
This Addendum 2 applies only to Director, Executive, or Leadership who the Company has identified as Section 16 Officers. There are two
primary forms that must be filed with the SEC when Directors, Executives, or Leadership trade in the Company’s securities: a Form 4, and a Form 144.
When Directors, Executives, or Leadership trade through Fidelity, the Company’s selected broker for equity compensation, Fidelity will file the Form 144,
and the Company will be able to make the necessary Form 4 filings. Directors, Executives, or Leaders who trade with other brokers are responsible for
ensuring that the required Form 144s are filed with the SEC, and for ensuring that the Legal Department receives the necessary information on a timely
basis to allow for Form 4 filings. The specific procedures for these filings are described below.
Form 4. The SEC requires that Directors, Executives, or Leadership file within two business days of a reportable transaction a Form 4: (i)
disclosing the nature of the transaction; (ii) the price of the shares transferred; and (iii) the number of shares beneficially owned by the Director, Executive,
or Leader following the transaction. The Company will make the necessary Form 4 filing, provided we receive the information necessary to make such
filing. You should be aware that we are required to disclose in our annual proxy filing any failure to meet the two-day filing deadline for Form 4s and an
explanation as to why such filing was not timely. Gifts are required to be reported on Form 4s. There may also be civil or criminal penalties for violators.
Form 144. Prior to, or simultaneously with, placing any order to sell the Company stock, a Director, Executive, or Leader is required to file a
Form 144 with the SEC. Fidelity will handle the filing of the Form 144 if Fidelity is handling the transaction; if a Director, Executive, or Leader is selling
the Company stock through a broker other than Fidelity, the Director, Executive, or Leader will have to notify the General Counsel or his or her designee so
the Company can assist with filing a Form 144. Otherwise, the Director, Executive or Leader must file the Form 144 on his or her own. The purpose of the
Form 144 is to notify the SEC that the person signing the Form does not know any material, nonpublic information in regard to the current and prospective
operations of the Company. In filling out the Form, Section 3(f) asks for the approximate date on which you expect to sell the Company stock. Since a
“shelf” filing for a Form 144 is prohibited, you should indicate, as the approximate selling date, the actual date you sign the Form 144.
Rule 144 Volume Restrictions. Rule 144(e) places volume restrictions on Directors, Executives or Leadership who plan to sell the Company
stock. This means that the number of shares that a Director, Executive or Leader intends to sell must not exceed more than 1% of the outstanding stock of
the Company or not more than the average weekly volume of trading in the stock as reported through the four calendar weeks preceding the proposed sale.
If more than one Director, Executive, or Leader sells within a three-month period, the volume restriction may apply to the aggregate number of shares sold
by all Directors, Executives or Leader in that period. The Company’s practice is to monitor the volume of trading by Directors, Executives, and Leaders
under this provision to ensure compliance.
“Short Swing” Profit Rule. Section 16 also requires that any purchase or sale (or sale and purchase) of Company securities that occur within
six (6) months of each other be “matched” such that the difference between the highest and lowest in price is considered a short-term, or short swing, profit,
that must be turned over to the Company, subject to limited exemptions. The liability for short swing profits is one of strict liability; there is no good faith
or honest mistake exception, and private attorneys police all reported transactions to ensure that public companies enforce these rules.
Post-Trade Reporting to the General Counsel.
Once any transaction in the Company’s securities by a Director, Executive, or Leader (including transactions effected pursuant to a Rule 10b5-1
Plan) is completed, the transaction details must be submitted in writing to the General Counsel within one day of the transaction. The Director, Executive,
or Leader should include the date of the transaction, quantity of shares, price and broker-dealer through which the transaction was effected.
This reporting requirement may be satisfied by sending (or having such Director’s, Executive’s, or Leader’s broker send) duplicate confirmations of trades
to the General Counsel if such information is received by General Counsel on or before the required date. This requirement is in addition to any required
notification that the Company receives from the broker who completes the trade.
EXHIBIT 21
CONMED Corporation
Subsidiaries of the Registrant
Name
State or Country of Incorporation
Aspen Laboratories, Inc.
Colorado
Biorez, Inc.
Delaware
Biorez Pty Ltd
Australia
Buffalo Filter LLC
Delaware
CONMED Andover Medical, Inc.
New York
CONMED Austria GmbH
Austria
CONMED Denmark ApS
Denmark
CONMED Deutschland GmbH
Germany
CONMED Endoscopic Technologies, Inc.
Massachusetts
CONMED Finland Oy
Finland
CONMED France SAS
France
CONMED Iberia SL
Spain
CONMED Italia SrL
Italy
CONMED Japan K. K.
Japan
CONMED Linvatec Australia PTY Ltd
Australia
CONMED Linvatec (Beijing) Medical Appliances Co., Ltd
China
CONMED Switzerland GmbH
Switzerland
CONMED U.K. Ltd.
United Kingdom
Consolidated Medical Equipment Company S. de R.L. de C.V.
Mexico
EndoDynamix, Inc.
Delaware
GWH Limited Partnership
Florida
Conmed do Brasil Comércio Importação e Exportação de Produtos Médicos Hospitalares Ltda.
Brazil
In2Bones Global, Inc.
Delaware
In2Bones SAS
France
Largo Lakes I Limited Partnership
Delaware
Linvatec Corporation
Florida
Linvatec Belgium NV
Belgium
Linvatec Canada ULC
Canada
CONMED Europe BV
Belgium
CONMED Korea Ltd.
Korea
Linvatec Nederland B.V.
Netherlands
Linvatec Polska Sp. z.o.o
Poland
Linvatec Conmed Sweden AB
Sweden
Palmerton Holdings, Inc.
New York
SurgiQuest, Inc.
Delaware
Viking Systems, Inc.
Delaware
Linvatec India Private Limited
India
EXHIBIT 23
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 18, 2025 relating to the consolidated financial statements, financial statement schedule and the effectiveness of internal control over financial
reporting, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
Fairport, New York
February 18, 2025
Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Patrick J. Beyer, 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 establishing 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 for
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 report) that has materially affected, 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 18, 2025
/s/ Patrick J. Beyer
Patrick J. Beyer
President and Chief Executive Officer
Exhibit 31.2
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
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 establishing 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 for
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 report) that has materially affected, 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 18, 2025
/s/ Todd W. Garner
Todd W. Garner
Executive Vice President, Finance 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)
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),
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, 2024 (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:
February 18, 2025
/s/ Patrick J. Beyer
Patrick J. Beyer
President and Chief Executive Officer
Date:
February 18, 2025
/s/ Todd W. Garner
Todd W. Garner
Executive Vice President, Finance and
Chief Financial Officer