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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 2003 Commission File Number 0-16093
CONMED CORPORATION
(Exact name of the registrant as specified in its charter)
New York 16-0977505
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
525 French Road, Utica, New York 13502
(Address of principal executive offices) (Zip Code)
(315) 797-8375
(Registrant's telephone number, including area code)
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 |X| No |_|
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 126-2).
Yes |X| No |_|
The number of shares outstanding of registrant's common stock, as of April
28, 2003 is 28,943,210 shares.
CONMED CORPORATION
TABLE OF CONTENTS
FORM 10-Q
PART I FINANCIAL INFORMATION
Item Number Page
Item 1. Financial Statements
- Consolidated Condensed Statements
of Income 1
- Consolidated Condensed Balance Sheets 2
- Consolidated Condensed Statements
of Cash Flows 3
- Notes to Consolidated Condensed
Financial Statements 4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 16
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 21
Item 4. Controls and Procedures 21
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 21
Signatures 22
Certifications 23
PART I FINANCIAL INFORMATION
Item 1.
CONMED CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in thousands except per share amounts)
(unaudited)
Three Months Ended
March 31,
---------------------
2002 2003
-------- ---------
Net sales ............................................ $113,205 $ 118,034
Cost of sales ........................................ 54,104 56,378
-------- ---------
Gross profit ......................................... 59,101 61,656
Selling and administrative ........................... 34,468 37,145
Research and development ............................. 3,824 3,703
Other expense (income) ............................... -- (7,492)
-------- ---------
38,292 33,356
Income from operations ............................... 20,809 28,300
Interest expense ..................................... 6,628 5,538
-------- ---------
Income before income taxes ........................... 14,181 22,762
Provision for income taxes ........................... 5,105 8,194
-------- ---------
Net income ........................................... $ 9,076 $ 14,568
======== =========
Per share data:
Net income
Basic ........................................... $ .36 $ .50
Diluted ......................................... .35 .50
Weighted average common shares
Basic ........................................... 25,397 28,876
Diluted ......................................... 25,969 29,037
See notes to consolidated condensed financial statements.
1
CONMED CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands except share amounts)
(unaudited)
December 31, March 31,
2002 2003
------------ ---------
ASSETS
Current assets:
Cash and cash equivalents .......................... $ 5,626 $ 6,250
Accounts receivable, net ........................... 58,093 60,257
Inventories ........................................ 120,443 125,721
Deferred income taxes .............................. 6,304 6,321
Prepaid expenses and other current assets .......... 3,200 3,645
--------- ---------
Total current assets ............................. 193,666 202,194
--------- ---------
Property, plant and equipment, net ................... 95,608 96,326
Goodwill, net ........................................ 262,394 304,530
Other intangible assets, net ......................... 180,271 180,209
Other assets ......................................... 10,201 9,977
--------- ---------
Total assets ..................................... $ 742,140 $ 793,236
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt .................. $ 2,631 $ 2,387
Accounts payable ................................... 22,074 21,851
Accrued compensation ............................... 10,463 9,484
Income taxes payable ............................... 5,885 8,260
Accrued interest ................................... 3,794 1,058
Other current liabilities .......................... 13,127 15,032
--------- ---------
Total current liabilities ........................ 57,974 58,072
--------- ---------
Long-term debt ....................................... 254,756 282,949
Deferred income taxes ................................ 28,446 32,872
Other long-term liabilities .......................... 14,025 14,347
--------- ---------
Total liabilities ................................ 355,201 388,240
--------- ---------
Shareholders' equity:
Preferred stock, par value $.01 per share;
authorized 500,000 shares; none outstanding ..... -- --
Common stock, par value $.01 per share;
100,000,000 shares authorized; 28,808,105 and
28,915,707 shares issued and outstanding in
2002 and 2003, respectively .................... 288 290
Paid-in capital .................................... 231,832 233,613
Retained earnings .................................. 162,391 176,959
Accumulated other comprehensive loss ............... (7,153) (5,447)
Less 37,500 shares of common stock in treasury,
at cost .......................................... (419) (419)
--------- ---------
Total shareholders' equity ....................... 386,939 404,996
--------- ---------
Total liabilities and shareholders equity ..... $ 742,140 $ 793,236
========= =========
See notes to consolidated condensed financial statements.
2
CONMED CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
March 31,
------------------------
2002 2003
-------- --------
Cash flows from operating activities:
Net income .......................................... $ 9,076 $ 14,568
-------- --------
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation ................................. 2,206 2,374
Amortization ................................. 3,197 3,168
Deferred income taxes ........................ 2,758 4,409
Increase (decrease) in cash flows
from changes in assets and liabilities:
Accounts receivable .............. 289 1,270
Inventories ...................... (3,605) (3,107)
Accounts payable ................. 6,503 (1,580)
Income taxes payable ............. (167) 2,375
Accrued compensation ............. (2,607) (1,943)
Accrued interest ................. (3,381) (2,736)
Other assets/liabilities, net .... (1,918) 1,680
-------- --------
3,275 5,910
-------- --------
Net cash provided by operating activities .... 12,351 20,478
-------- --------
Cash flows from investing activities:
Payments related to business acquisitions,
net of cash acquired ......................... -- (48,177)
Purchases of property, plant, and equipment ...... (3,208) (1,710)
-------- --------
Net cash used by investing activities ........ (3,208) (49,887)
-------- --------
Cash flows from financing activities:
Net proceeds from exercise of stock options ......... 1,985 808
Payments on debt .................................... (9,938) (3,051)
Proceeds of debt .................................... -- 31,000
-------- --------
Net cash used by financing activities ........ (7,953) 28,757
-------- --------
Effect of exchange rate changes
on cash and cash equivalents ...................... 42 1,276
-------- --------
Net increase in cash and cash equivalents ............. 1,232 624
Cash and cash equivalents at beginning of period ...... 1,402 5,626
-------- --------
Cash and cash equivalents at end of period ............ $ 2,634 $ 6,250
======== ========
See notes to consolidated condensed financial statements.
3
CONMED CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(in thousands except share amounts)
Note 1 - Operations and Significant Accounting Policies
Organization and Operations
The consolidated condensed financial statements include the accounts of CONMED
Corporation and its subsidiaries ("CONMED", the "Company", "we" or "us"). All
intercompany accounts and transactions have been eliminated. CONMED Corporation
is a medical technology company specializing in instruments, implants and video
equipment for arthroscopic sports medicine and powered surgical instruments,
such as drills and saws, for orthopedic, ENT, neuro-surgery and other surgical
specialties. We are a leading developer, manufacturer and supplier of RF
electrosurgery systems used routinely to cut and cauterize tissue in nearly all
types of surgical procedures worldwide, endoscopy products such as trocars, clip
appliers, scissors and surgical staplers, and a full line of ECG electrodes for
heart monitoring and other patient care products. We also offer integrated
operating room systems and intensive care unit service managers. Our products
are used in a variety of clinical settings, such as operating rooms, surgery
centers, physicians' offices and critical care areas of hospitals. Our business
is organized, managed and internally reported as a single segment, since our
product offerings have similar economic, operating and other related
characteristics.
Stock-based Compensation
We account for our stock-based compensation plans under the provisions of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees". No compensation expense has been recognized in the accompanying
financial statements relative to our stock option plans. Pro forma information
regarding net income and earnings per share is required by Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123") and has been determined as if we had accounted for
our employee stock options under the fair value method of that statement. The
weighted average fair value of options granted in the three months ended March
31, 2002 and 2003 was $8.66 and $6.56, respectively. The fair value of these
options was estimated at the date of grant using a Black-Scholes options pricing
model with the following weighted-average assumptions for options granted in the
three months ended March 31, 2002 and 2003, respectively: Risk-free interest
rates of 2.70% and 2.87%; volatility factors of the expected market price of the
Company's common stock of 41.10% and 43.23%; a weighted-average expected life of
the option of five years; and that no dividends would be paid on common stock.
For purposes of the pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:
4
Three months ended
March 31,
2002 2003
------- --------
Net income -- as reported ........................ $ 9,076 $ 14,568
------- --------
Pro forma stock-based employee
compensation expense, net of related
income tax effect .............................. (474) (524)
------- --------
Net income -- pro forma .......................... $ 8,602 $ 14,044
======= ========
EPS - as reported:
Basic......................................... $ .36 $ .50
Diluted....................................... $ .35 $ .50
EPS - pro forma:
Basic ........................................ $ .34 $ .49
Diluted....................................... $ .33 $ .48
Note 2 - Interim financial information
The statements for the three months ended March 31, 2002 and 2003 are unaudited;
in our opinion such unaudited statements include all adjustments (which comprise
only normal recurring accruals) necessary for a fair presentation of the results
for such periods. The results of operations for the three months ended March 31,
2003 are not necessarily indicative of the results of operations to be expected
for any other quarter nor for the year ending December 31, 2003. The
consolidated condensed financial statements and notes thereto should be read in
conjunction with the financial statements and notes for the year ended December
31, 2002 included in our Annual Report to the Securities and Exchange Commission
on Form 10-K.
Note 3 - Other comprehensive income (loss)
Comprehensive income (loss) consists of the following:
Three months ended
March 31,
2002 2003
------- --------
Net income ............................................ $ 9,076 $ 14,568
------- --------
Other comprehensive income:
Foreign currency
translation adjustment ............................ 36 1,313
Cash flow hedging
(net of income taxes) ............................. 480 393
------- --------
Comprehensive income ................................ $ 9,592 $ 16,274
======= ========
5
Accumulated other comprehensive income (loss) consists of the following:
Accumulated
Minimum Cumulative Cash Other
Pension Translation Flow Comprehensive
Liability Adjustments Hedges Income (loss)
--------- ----------- ------ -------------
Balance, December 31, 2002 .......... $(5,086) $(1,159) $(908) $(7,153)
Foreign currency translation
adjustments .................. -- 1,313 -- 1,313
Cash flow hedging (net of
income taxes) ................ -- -- 393 393
------- ------- ----- -------
Balance, March 31, 2003 ............. $(5,086) $ 154 $(515) $(5,447)
======= ======= ===== =======
Note 4 - Inventories
The components of inventory are as follows:
December 31, March 31,
2002 2003
------------ ---------
Raw materials .............................. $ 44,701 $ 43,041
Work-in-process ............................ 12,869 14,357
Finished goods ............................. 62,873 68,323
-------- --------
Total ................................ $120,443 $125,721
======== ========
Note 5 - Earnings per share
Basic earnings per share (EPS) is computed based on the weighted average number
of common shares outstanding for the period. Diluted EPS gives effect to all
dilutive potential shares outstanding (i.e., options and warrants) during the
period. The following is a reconciliation of the weighted average shares used in
the calculation of basic and diluted EPS (in thousands):
Three months ended
March 31,
2002 2003
------ ------
Shares used in the calculation
of Basic EPS(weighted average
shares outstanding) ...................................... 25,397 28,876
Effect of dilutive potential
securities ............................................... 572 161
------ ------
Shares used in the calculation
of Diluted EPS ........................................... 25,969 29,037
====== ======
The shares used in the calculation of diluted EPS exclude warrants and options
to purchase shares where the exercise price was greater than the average market
price of common shares for the period. Such shares aggregated 351 and 2,395 for
the three months ended March 31, 2002 and 2003, respectively.
6
Note 6 - Business acquisitions
On January 13, 2003, we entered into an agreement to acquire the common stock of
Bionx Implants, Inc. (the "Bionx acquisition") in a cash transaction valuing
Bionx at $4.35 per share. We completed the acquisition on March 10, 2003, paying
$47.0 million in cash which we financed through borrowings under our revolving
credit facility. The results of Bionx's operations have been included in the
financial statements since that date. Bionx develops and manufactures
self-reinforced resorbable polymer implants including screws, pins and meniscal
implants for use in a variety of orthopedic applications, including sports
medicine and fracture fixation. In 2002, Bionx recorded revenues of
approximately $18.0 million. The acquired product lines are expected to
complement CONMED's existing orthopedic product lines.
The following table summarizes the estimated fair values of the assets acquired
and liabilities assumed at the date of acquisition. The cost of the Bionx
acquisition may require adjustment based upon information which is not currently
available, principally related to the valuation of inventory. We are also in the
process of obtaining a third-party valuation of Bionx; thus the allocation of
purchase price, including goodwill, purchased research and development,
intangible assets not subject to amortization, intangible assets subject to
amortization and related amortization periods have not yet been finalized and
are therefore subject to adjustment in future periods. Goodwill associated with
the Bionx acquisition is not expected to be deductible for income tax purposes.
Cash...................................................................$ 517
Other current assets................................................... 7,083
Property, plant and equipment.......................................... 1,382
Other intangible assets................................................ 1,217
Goodwill............................................................... 40,458
--------
Total assets acquired.................................................. 50,657
--------
Current liabilities.................................................... (3,120)
Long-term liabilities.................................................. (521)
--------
Total liabilities assumed.............................................. (3,641)
--------
Net assets acquired....................................................$ 47,016
========
During the quarter ended March 31, 2003, we paid additional purchase
consideration related to the December 31, 2002 acquisition of CORE Dynamics,
Inc. (the "CORE acquisition") of approximately $1.7 million which resulted in an
increase to goodwill and which had been contingent on the satisfactory execution
of the plan to transition manufacturing and distribution from CORE's
Jacksonville, Florida facility to our facilities in Utica, New York.
During the quarter ended March 31, 2003, we incurred approximately $1.7 million
in acquisition expenses related primarily to the CORE and Bionx acquisitions of
which $1.3 million has been recorded in other expense (income) and $.4 million
has been recorded to cost of sales. The $1.3 million recorded to other expense
(income) consists of various acquisition integration costs to wind down CORE
operations in Jacksonville, Florida and Bionx operations in Blue Bell,
Pennsylvania. The $.4 million recorded to cost of sales consists of the step-up
to fair value related to the sale of a portion of the inventory acquired as a
result of the CORE and Bionx acquisitions as well as certain training and
transition-related costs related to the transfer of CORE's manufacturing
operations.
7
Note 7 - Other expense (income)
Other expense (income) consists of the following:
Gain on settlement of a contractual dispute,
net of legal costs...................................................($9,000)
Acquisition-related costs............................................... 1,342
Loss on early extinguishments of debt................................... 166
-------
Other expense (income), net.............................................($7,492)
=======
On March 10, 2003, we entered into an agreement with Bristol-Myers Squibb
Company ("BMS") and Zimmer, Inc., ("Zimmer") to settle a contractual dispute
related to the 1997 sale by BMS and its then subsidiary, Zimmer, of Linvatec
Corporation to CONMED Corporation. As a result of the agreement, BMS paid us
$9.5 million in cash, which has been recorded as a gain on settlement of a
contractual dispute net of $.5 million in legal costs.
During the quarter ended March 31, 2003, we incurred approximately $1.7 million
in costs related primarily to the CORE acquisition and the Bionx acquisition of
which $1.3 million has been recorded in other expense (income) as discussed in
Note 6 to the consolidated condensed financial statements.
During the quarter ended March 31, 2003 we purchased $2.6 million of our 9%
senior subordinated notes and recorded expense of $.2 million in premium and
unamortized deferred financing costs to other expense (income) related to this
purchase.
Note 8 - Goodwill and other intangible assets
The changes in the net carrying amount of goodwill for the three months ended
March 31, 2003 are as follows:
Balance as of January 1, 2003 .................................... $262,394
Goodwill acquired ................................................ 42,136
--------
Balance as of March 31, 2003 ..................................... $304,530
========
Other intangible assets consist of the following:
December 31, 2002 March 31, 2003
----------------- --------------
Gross Gross
Carrying Accumulated Carrying Accumulated
Amortized intangible assets: Amount Amortization Amount Amortization
------ ------------ ------ ------------
Customer relationships ................. $ 96,712 $ (12,725) $ 96,712 $(13,362)
Patents and other intangible assets .... 23,674 (13,534) 24,705 (13,990)
Unamortized intangible assets:
Trademarks and tradenames .............. 86,144 -- 86,144 --
--------- --------- --------- --------
$ 206,530 $ (26,259) $ 207,561 $(27,352)
========= ========= ========= ========
Other intangible assets primarily represent allocations of purchase price to
identifiable intangible assets of acquired businesses. The weighted average
amortization period for intangible assets which are amortized is 22 years.
8
Customer relationships are being amortized over 38 years. Patents and other
intangible assets are being amortized over a weighted average life of 9 years.
The trademarks and tradenames intangible asset has been determined to have an
indefinite life and therefore is not amortized.
Amortization expense related to intangible assets which are subject to
amortization totaled $1,352 in the three months ended March 31, 2003 and $1,789
in the three months ended March 31, 2002.
The estimated amortization expense for the year ending December 31, 2003 and for
each of the five succeeding years is as follows:
2003 $5,456
2004 4,821
2005 4,018
2006 3,608
2007 3,385
2008 3,176
Note 9 - Guarantees
We provide service and warranty policies on certain of our products at the time
of sale. 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.
The changes in the carrying amount of service and product warranties for the
three months ended March 31, 2003 are as follows:
Balance as of January 1, 2003 ...................................... $ 3,213
Provision for warranties ........................................... 1,211
Claims made ........................................................ (1,100)
-------
Balance as of March 31, 2003 $ 3,324
=======
Note 10 - Guarantor financial statements
Our senior credit agreement and Senior Subordinated Notes (the "Notes") are
guaranteed (the "Subsidiary Guarantees") by each of our subsidiaries (the
"Subsidiary Guarantors") except CONMED Receivables Corporation (the
"Non-Guarantor Subsidiary"). The Subsidiary Guarantees provide that each
Subsidiary Guarantor will fully and unconditionally guarantee our obligations
under our senior credit agreement and the Notes on a joint and several basis.
Each Subsidiary Guarantor and Non-Guarantor Subsidiary is wholly-owned by CONMED
Corporation. The following supplemental financial information sets forth on a
condensed consolidating basis, condensed consolidating balance sheets,
statements of income and statements of cash flows for the Parent Company only,
Subsidiary Guarantors and Non-Guarantor Subsidiary and for the Company as of
December 31, 2002 and March 31, 2003 and for the three months ended March 31,
2002 and 2003.
9
CONMED CORPORATION
CONSOLIDATING CONDENSED BALANCE SHEET
December 31, 2002
(in thousands)
Parent Non-
Company Subsidiary Guarantor Company
Only Guarantors Subsidiary Eliminations Total
--------- ---------- ---------- ------------ ---------
ASSETS
Current assets:
Cash and cash equivalents .................. $ 3,824 $ 1,516 $ 286 $ -- $ 5,626
Accounts receivable, net ................... 746 13,397 43,950 -- 58,093
Inventories ................................ 25,829 94,614 -- -- 120,443
Deferred income taxes ...................... 6,210 -- 94 -- 6,304
Prepaid expenses and other current assets .. 823 2,377 -- -- 3,200
--------- --------- ------- --------- ---------
Total current assets ................. 37,432 111,904 44,330 -- 193,666
--------- --------- ------- --------- ---------
Property, plant and equipment, net .............. 47,327 48,281 -- -- 95,608
Goodwill, net ................................... 96,393 166,001 -- -- 262,394
Other intangible assets, net .................... 3,565 176,706 -- -- 180,271
Other assets .................................... 498,111 2,406 -- (490,316) 10,201
--------- --------- ------- --------- ---------
Total assets ............................... $ 682,828 $ 505,298 $44,330 $(490,316) $ 742,140
========= ========= ======= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt .......... $ 1,284 $ 1,347 $ -- $ -- $ 2,631
Accounts payable ........................... 4,907 17,167 -- -- 22,074
Accrued compensation ....................... 4,052 6,411 -- -- 10,463
Income taxes payable ....................... 5,885 -- -- -- 5,885
Accrued interest ........................... 3,733 36 25 -- 3,794
Other current liabilities .................. 5,781 7,346 -- -- 13,127
--------- --------- ------- --------- ---------
Total current liabilities .............. 25,642 32,307 25 -- 57,974
--------- --------- ------- --------- ---------
Long-term debt .................................. 234,468 20,288 -- 254,756
Deferred income taxes ........................... 28,446 -- -- 28,446
Other long-term liabilities ..................... 7,333 269,259 41,932 (304,499) 14,025
--------- --------- ------- --------- ---------
Total liabilities .......................... 295,889 321,854 41,957 (304,499) 355,201
--------- --------- ------- --------- ---------
Shareholders' equity:
Preferred stock ............................ -- -- -- -- --
Common stock ............................... 288 -- -- -- 288
Paid-in capital ............................ 231,832 -- 2,000 (2,000) 231,832
Retained earnings .......................... 162,391 184,603 373 (184,976) 162,391
Accumulated other comprehensive loss ....... (7,153) (1,159) -- 1,159 (7,153)
Less common stock in treasury, at cost ..... (419) -- -- -- (419)
--------- --------- ------- --------- ---------
Total shareholders' equity ............. 386,939 183,444 2,373 (185,817) 386,939
--------- --------- ------- --------- ---------
Total liabilities and shareholders' equity .... $ 682,828 $ 505,298 $44,330 $(490,316) $ 742,140
========= ========= ======= ========= =========
10
CONMED CORPORATION
CONSOLIDATING CONDENSED BALANCE SHEET
March 31, 2003
(in thousands)(unaudited)
Parent Non-
Company Subsidiary Guarantor Company
Only Guarantors Subsidiary Eliminations Total
--------- ---------- ---------- ------------ ---------
ASSETS
Current assets:
Cash and cash equivalents .................. $ 4,174 $ 1,791 $ 285 $ -- $ 6,250
Accounts receivable, net ................... -- 16,607 43,650 -- 60,257
Inventories ................................ 27,073 98,648 -- -- 125,721
Deferred income taxes ...................... 6,227 -- 94 -- 6,321
Prepaid expenses and other
current assets ......................... 914 2,731 -- -- 3,645
--------- --------- ------- --------- ---------
Total current assets ................. 38,388 119,777 44,029 -- 202,194
--------- --------- ------- --------- ---------
Property, plant and equipment, net .............. 47,375 48,951 -- -- 96,326
Goodwill, net ................................... 98,095 206,435 -- -- 304,530
Other intangible assets, net .................... 3,533 176,676 -- -- 180,209
Other assets .................................... 543,274 2,431 -- (535,728) 9,977
--------- --------- ------- --------- ---------
Total assets ............................... $ 730,665 $ 554,270 $44,029 $(535,728) $ 793,236
========= ========= ======= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt .......... $ 1,034 $ 1,353 $ -- $ -- $ 2,387
Accounts payable ........................... 4,478 17,373 -- -- 21,851
Accrued compensation ....................... 3,264 6,220 -- -- 9,484
Income taxes payable ....................... 8,260 -- -- -- 8,260
Accrued interest ........................... 797 236 25 -- 1,058
Other current liabilities .................. 4,848 10,184 -- -- 15,032
--------- --------- ------- --------- ---------
Total current liabilities .............. 22,681 35,366 25 -- 58,072
--------- --------- ------- --------- ---------
Long-term debt .................................. 262,574 20,375 -- 282,949
Deferred income taxes ........................... 32,872 -- -- 32,872
Other long-term liabilities ..................... 7,542 307,533 41,613 (342,341) 14,347
--------- --------- ------- --------- ---------
Total liabilities .......................... 325,669 363,274 41,638 (342,341) 388,240
--------- --------- ------- --------- ---------
Shareholders' equity:
Preferred stock ............................ -- -- -- -- --
Common stock ............................... 290 -- -- -- 290
Paid-in capital ............................ 233,613 -- 2,000 (2,000) 233,613
Retained earnings .......................... 176,959 190,842 391 (191,233) 176,959
Accumulated other comprehensive
income (loss) .......................... (5,447) 154 -- (154) (5,447)
Less common stock in
treasury, at cost ...................... (419) -- -- -- (419)
--------- --------- ------- --------- ---------
Total shareholders' equity ............. 404,996 190,996 2,391 (193,387) 404,996
--------- --------- ------- --------- ---------
Total liabilities and
shareholders' equity ................. $ 730,665 $ 554,270 $44,029 $(535,728) $ 793,236
========= ========= ======= ========= =========
11
CONMED CORPORATION
CONSOLIDATING CONDENSED STATEMENT OF INCOME
Three Months Ended March 31, 2002
(in thousands)
(unaudited)
Parent Non-
Company Subsidiary Guarantor Company
Only Guarantors Subsidiary Eliminations Total
--------- ---------- ---------- ------------ ---------
Net sales ....................................... $ 26,299 $ 86,906 $ -- $ -- $ 113,205
Cost of sales ................................... 14,003 40,101 -- -- 54,104
--------- --------- ------- --------- ---------
Gross profit .................................... 12,296 46,805 -- -- 59,101
Selling and administrative ...................... 7,447 27,355 (334) -- 34,468
Research and development ........................ 429 3,395 -- -- 3,824
--------- --------- ------- --------- ---------
7,876 30,750 (334) -- 38,292
--------- --------- ------- --------- ---------
Income from operations .......................... 4,420 16,055 334 -- 20,809
Interest expense ................................ -- 6,308 320 -- 6,628
--------- --------- ------- --------- ---------
Income before income taxes ...................... 4,420 9,747 14 -- 14,181
Provision for income taxes ...................... 1,591 3,509 5 -- 5,105
--------- --------- ------- --------- ---------
Income before equity in
earnings of unconsolidated
subsidiaries ............................... 2,829 6,238 9 -- 9,076
Equity in earnings of
unconsolidated subsidiaries ................ 6,247 -- -- (6,247) --
--------- --------- ------- --------- ---------
Net income ...................................... $ 9,076 $ 6,238 $ 9 $ (6,247) $ 9,076
========= ========= ======= ========= =========
12
CONMED CORPORATION
CONSOLIDATING CONDENSED STATEMENT OF INCOME
Three Months Ended March 31, 2003
(in thousands)
(unaudited)
Parent Non-
Company Subsidiary Guarantor Company
Only Guarantors Subsidiary Eliminations Total
--------- ---------- ---------- ------------ ---------
Net sales ....................................... $ 29,135 $ 88,899 $ -- $ -- $ 118,034
Cost of sales ................................... 16,058 40,320 -- -- 56,378
--------- --------- ------- --------- ---------
Gross profit .................................... 13,077 48,579 -- -- 61,656
Selling and administrative ...................... 7,933 29,455 (243) -- 37,145
Research and development ........................ 481 3,222 -- -- 3,703
Other expense (income) .......................... (8,324) 832 -- -- (7,492)
--------- --------- ------- --------- ---------
90 33,509 (243) -- 33,356
--------- --------- ------- --------- ---------
Income from operations .......................... 12,987 15,070 243 -- 28,300
Interest expense ................................ -- 5,322 216 -- 5,538
--------- --------- ------- --------- ---------
Income before income taxes ...................... 12,987 9,748 27 -- 22,762
Provision for income taxes ...................... 4,676 3,509 9 -- 8,194
--------- --------- ------- --------- ---------
Income before equity in
earnings of unconsolidated
subsidiaries ............................... 8,311 6,239 18 -- 14,568
Equity in earnings of
unconsolidated subsidiaries ................ 6,257 -- -- (6,257) --
--------- --------- ------- --------- ---------
Net income ...................................... $ 14,568 $ 6,239 $ 18 $ (6,257) $ 14,568
========= ========= ======= ========= =========
13
CONMED CORPORATION
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
Three Months Ended March 31, 2002
(in thousands)
(unaudited)
Parent Non-
Company Subsidiary Guarantor Company
Only Guarantors Subsidiary Eliminations Total
--------- ---------- ---------- ------------ ---------
Net cash flows from operating
activities ................................. $ 2,761 $ 6,090 $ 3,500 $ -- $ 12,351
--------- --------- ------- --------- ---------
Cash flows from investing activities:
Distributions from subsidiaries ............ 6,752 -- -- (6,752) --
Purchases of property, plant and
equipment .............................. (1,560) (1,648) -- -- (3,208)
--------- --------- ------- --------- ---------
Net cash provided (used)
by investing activities ............ 5,192 (1,648) -- (6,752) (3,208)
--------- --------- ------- --------- ---------
Cash flows from financing:
Distributions to parent .................... -- (4,114) -- 4,114 --
Repayment on note payable to parent ........ -- -- (2,638) 2,638 --
Net proceeds from exercise of
stock options ............................ 1,985 -- -- -- 1,985
Payments on debt ........................... (9,938) -- -- -- (9,938)
--------- --------- ------- --------- ---------
Net cash provided (used) by
financing activities .............. (7,953) (4,114) (2,638) 6,752 (7,953)
--------- --------- ------- --------- ---------
Effect of exchange rate changes on cash
and cash equivalents ....................... -- 42 -- -- 42
--------- --------- ------- --------- ---------
Net increase (decrease) in cash and
cash equivalents ........................... -- 370 862 -- 1,232
Cash and cash equivalents at
beginning of period ........................ -- 1,181 221 -- 1,402
--------- --------- ------- --------- ---------
Cash and cash equivalents at
end of period .............................. $ -- $ 1,551 $ 1,083 $ -- $ 2,634
========= ========= ======= ========= =========
14
CONMED CORPORATION
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
Three Months Ended March 31, 2003
(in thousands)
(unaudited)
Parent Non-
Company Subsidiary Guarantor Company
Only Guarantors Subsidiary Eliminations Total
--------- ---------- ---------- ------------ ---------
Net cash provided by operating activities ....... $ 11,059 $ 9,101 $ 318 $ -- $ 20,478
--------- --------- ------- --------- ---------
Cash flows from investing activities:
Distributions to subsidiaries .............. (36,881) -- -- 36,881 --
Payments related to business
acquisitions, net of cash acquired ....... (1,678) (46,499) -- -- (48,177)
Purchases of property, plant and
equipment .............................. (907) (803) -- -- (1,710)
--------- --------- ------- --------- ---------
Net cash provided (used)
by investing activities ............ (39,466) (47,302) -- 36,881 (49,887)
--------- --------- ------- --------- ---------
Cash flows from financing:
Net distributions to parent ................ -- 37,200 -- (37,200) --
Borrowings on note payable to parent ....... -- -- (319) 319 --
Net proceeds from exercise
of stock options ....................... 808 -- -- -- 808
Payments on debt ........................... (3,051) -- -- -- (3,051)
Proceeds of debt ........................... 31,000 -- -- -- 31,000
--------- --------- ------- --------- ---------
Net cash provided (used) by
financing activities .............. 28,757 37,200 (319) (36,881) (28,757)
--------- --------- ------- --------- ---------
Effect of exchange rate changes on cash
and cash equivalents ....................... -- 1,276 -- -- 1,276
--------- --------- ------- --------- ---------
Net increase (decrease) in cash
and cash equivalents .......................... 350 275 (1) -- 624
Cash and cash equivalents
at beginning of period ........................ 3,824 1,516 286 -- 5,626
--------- --------- ------- --------- ---------
Cash and cash equivalents
at end of period .............................. $ 4,174 $ 1,791 $ 285 $ -- $ 6,250
========= ========= ======= ========= =========
15
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Forward-Looking Statements Made in this Form 10-Q
In this Form 10-Q, we make forward-looking statements about our financial
condition, results of operations and business. Forward-looking statements are
statements made by us concerning events that may or may not occur in the future.
These statements may be made directly in this document or may be "incorporated
by reference" from other documents. You can find many of these statements by
looking for words like "believes," "expects," "anticipates," "estimates" or
similar expressions.
Forward-Looking Statements are not Guarantees of Future Performance
Forward-looking statements involve known and unknown risks, uncertainties and
other factors, including those that 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 those identified under "Risk
Factors" in our Annual Report on Form 10-K for the year-ended December 31, 2002
and the following, among others:
o general economic and business conditions;
o cyclical customer purchasing patterns due to budgetary and other
constraints;
o changes in customer preferences;
o competition;
o changes in technology;
o our ability to manufacture product consistently and in a timely manner,
especially those products involving delicate or complex manufacturing
processes;
o the introduction and acceptance of new products, including our PowerPro(R)
battery-powered instrument product line;
o the success of our distribution arrangement with DePuy Orthopaedics;
o the integration of any acquisition;
o changes in business strategy;
o the possibility that United States or foreign regulatory and/or
administrative agencies might initiate enforcement actions against us or
our distributors;
o our indebtedness;
o quality of our management and business abilities and the judgment of our
personnel;
o the risk of litigation, especially patent litigation as well as the cost
associated with patent and other litigation;
o changes in regulatory requirements; and
o the availability, terms and deployment of capital.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" below and "Business" in our Annual Report on Form 10-K for the
year-ended December 31, 2002 for a further discussion of these factors. You are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. We do not undertake any obligation to publicly
release any revisions to
16
these forward-looking statements to reflect events or circumstances after the
date of this Form 10-Q or to reflect the occurrence of unanticipated events.
Critical Accounting Estimates
Preparation of our financial statements requires us to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses. Note 1 to the consolidated financial statements in our Annual
Report on Form 10K for the year-ended December 31, 2002 describes the
significant accounting policies used in preparation of the consolidated
financial statements. The most significant areas involving management judgments
and estimates are described in Management's Discussion and Analysis in our
Annual Report on Form 10-K for the year-ended December 31, 2002 and are
considered by management to be critical to understanding the financial condition
and results of operations of CONMED Corporation. There have been no significant
changes in our critical accounting estimates during the first quarter of 2003.
Results of Operations
Three months ended March 31, 2003 compared to three months ended March 31, 2002
The following table presents, as a percentage of net sales, certain categories
included in our unaudited consolidated statements of income for the periods
indicated:
Three Months Ended
March 31,
2002 2003
----- -----
(unaudited)
Net sales ................................................. 100.0% 100.0%
Cost of sales ............................................. 47.8 47.8
----- -----
Gross profit ........................................ 52.2 52.2
Selling and administrative .............................. 30.4 31.5
Research and development .................................. 3.4 3.1
Other expense (income) .................................... -- (6.4)
----- -----
Income from operations .............................. 18.4 24.0
Interest expense ......................................... 5.9 4.8
----- -----
Income before income taxes .......................... 12.5 19.2
Provision for income taxes ................................ 4.5 6.9
----- -----
Net Income ..................... .................... 8.0% 12.3%
===== =====
Sales for the quarter ended March 31, 2003 were $118.0 million, an increase of
4.2% compared to sales of $113.2 million in the same quarter a year ago.
Adjusted for constant foreign currency exchange rates, sales growth in the first
quarter of 2003 would have been approximately 2.0% as compared to the same
period a year ago.
o Sales in our orthopedic businesses increased 4.3% to $72.7 million
from $69.7 million in the comparable quarter last year.
o Arthroscopy sales, which represented approximately 57.4% of total
first quarter 2003 orthopedic revenues, grew 1.0% to $41.7 million
from $41.3 million in the same period a year ago as sales of imaging
systems improved while sales of procedure specific and fluid
management products were slightly less than the same period a year
ago.
o Powered surgical instrument sales, which represented approximately
42.6% of orthopedic revenues, increased 9.2% to $31.0 million from
$28.4 million in the
17
same quarter last year on the strength of our PowerPro(R) battery
powered instrument product line.
o Patient care sales for the three months ended March 31, 2003 were
$17.3 million, flat when compared to the same period a year ago as
increases in sales of our automatic defibrillator pad and certain
other products were offset by decreases in the suction instrument
product lines.
o Electrosurgery sales for the three months ended March 31, 2003 were
$16.8 million, flat when compared to the first quarter of last year,
as declines in sales of electrosurgical generators offset gains in
sales of disposables when compared with the same period a year ago.
o Sales of endoscopy products increased 13.8% to $10.7 million in the
three months ended March 31, 2003 from $9.4 million in the same period
a year ago as a result of the CORE acquisition.
Cost of sales increased to $56.4 million in the first quarter 2003 as compared
to $54.1 million in the same quarter a year ago, primarily as a result of the
increased sales volumes described above while gross margin percentage remained
at 52.2% in the first quarter of 2003, the same as in the first quarter of 2002.
Included in cost of sales during the quarter ended March 31, 2003 were
approximately $.4 million in acquisition-related costs.
Selling and administrative expense increased to $37.1 million in the first
quarter of 2003 as compared to $34.5 million in the first quarter of 2002. As a
percentage of sales, selling and administrative expense totaled 31.5% in the
first quarter of 2003 compared to 30.4% in the first quarter of 2002. The
increase in selling and administrative expense as a percentage of sales is due
principally to increased marketing costs associated with recently launched
product lines including the integrated operating room systems product lines,
PowerPro(R), and new electrosurgical generators.
Research and development expense decreased to $3.7 million in the first quarter
of 2003 as compared to $3.8 million in the first quarter of 2002. As a
percentage of sales, research and development expense also decreased to 3.1% in
the current quarter compared to 3.4% in the same quarter a year ago but remains
within the range of our historical percentages.
As discussed in Note 7 to the consolidated condensed financial statements, other
income is comprised of a net gain on settlement of a contractual dispute of $9.0
million offset by acquisition-related costs of $1.3 million and the loss of $.2
million on the early extinguishment of debt. There was no other income in the
comparable quarter in 2002.
Interest expense in the first quarter of 2003 was $5.5 million compared to $6.6
million in the first quarter of 2002. The decrease in interest expense is
primarily a result of lower total borrowings outstanding during the current
quarter as compared to the same period a year ago, as borrowings have declined
to $285.3 million at March 31, 2003 as compared to $326.0 million at March 31,
2002. Additionally, the weighted average interest rates on our borrowings has
declined to 5.91% at March 31, 2003 as compared to 6.25% at March 31, 2002.
Provision for income taxes has been recorded at an effective rate of 36% for the
first quarter 2003 and 2002. A reconciliation of the United States statutory
income tax rate to our effective tax rate is included in Note 7 to the Company's
financial statements for the year ended December 31, 2002 included in our Annual
Report to the Securities and Exchange Commission on Form 10-K.
18
Liquidity and Capital Resources
Cash generated from our operations and borrowings under our revolving credit
facility have traditionally provided the working capital for our operations,
debt service under our credit facility and the funding of our capital
expenditures. In addition, we have used term borrowings, including:
o borrowings under our senior credit agreement;
o Senior Subordinated Notes issued to refinance borrowings under our
senior credit agreement, in the case of the acquisition of Linvatec
Corporation in 1997;
o borrowings under separate loan facilities, in the case of real
property acquisitions, to finance our acquisitions.
The senior credit agreement consists of a $100 million term loan and a $100
million revolving credit facility of which $99.5 million and $36.0 million,
respectively, was outstanding at March 31, 2003. The weighted average interest
rates at March 31, 2003 on the term loan and revolving credit facility were
4.09% and 5.75%, respectively.
The Senior Subordinated Notes (the "Notes") are in aggregate principal amount
outstanding at March 31, 2003, of $127.4 million, have a maturity date of March
15, 2008 and bear interest at 9.0% per annum which is payable semi-annually. The
Notes are redeemable for cash at anytime on or after March 15, 2003, at our
option, in whole or in part, at the redemption prices set forth therein, plus
accrued and unpaid interest to the date of redemption. During the quarter ended
March 31, 2003, we purchased $2.6 million of our Notes at 104.5% and recorded
expense of $.2 million in premium and unamortized deferred financing costs as
discussed in Note 7 to the consolidated condensed financial statements. On March
12, 2003, we served notice to the trustee for the Notes that we would redeem
$15.0 million par value of the Notes, on May 1, 2003, at the redemption price of
104.5%, for a total redemption price of $15.7 million, plus accrued and unpaid
interest. We redeemed those Notes on May 1, 2003 through borrowings under our
revolving credit facility. The premium paid on the Notes will be recorded as a
charge to operating income in the second quarter of 2003. Although the
outstanding Notes do not mature until 2008, we continue to review alternatives
for redeeming the remaining outstanding Notes, including the addition of a term
loan tranche under the senior credit agreement to redeem all outstanding Notes
at the applicable redemption price.
We used term loans to purchase the property in Largo, Florida utilized by our
Linvatec subsidiary. The term loans consist of a Class A note bearing interest
at 7.50%, a Class C note bearing interest at 8.25% and a seller-financed note
bearing interest at 6.50%. The principal balances outstanding on the Class A
note, Class C note and seller-financed note aggregate $10.7 million, $7.1
million and $3.9 million, respectively, at March 31, 2003.
We have a five-year accounts receivable sales agreement pursuant to which we and
certain of our subsidiaries sell on an ongoing basis certain accounts receivable
to CONMED Receivables Corporation, a wholly-owned special-purpose subsidiary of
CONMED Corporation. CRC may in turn sell up to an aggregate $50.0 million
undivided percentage ownership interest in such receivables to a commercial
paper conduit (the "conduit purchaser"). As of December 31, 2002 and March 31,
2003, the undivided percentage ownership interest in receivables sold by CRC to
the conduit purchaser aggregated $37.0 million, which has been accounted for as
a sale and reflected in the balance sheet as a reduction in accounts receivable.
Our net working capital position was $144.1 million at March 31, 2003 as
compared to $135.7 million at December 31, 2002. Net cash provided by operations
increased to $20.5
19
million in the three months ended March 31, 2003 compared to $12.4 million for
the same period a year ago, principally as a result of the $9.0 million gain on
the settlement of a contractual dispute discussed in Note 7 to the consolidated
financial statements.
Net cash provided by operations in the first quarter of 2003 was positively
impacted by depreciation, amortization and increases in income taxes payable and
deferred income taxes and negatively impacted primarily by increases in
inventory and decreases in accounts payable, accrued compensation and accrued
interest. The increase in inventory is a result of the Bionx acquisition
discussed in Note 6 to the consolidated condensed financial statements. The
increases in income taxes payable and deferred income taxes and decreases in
accounts payable, accrued compensation and accrued interest are primarily
related to the timing of the payment of these liabilities.
Capital expenditures in the three months ended March 31, 2003 were $1.7 million
compared to $3.2 million in the same period a year ago. These capital
expenditures represent the ongoing capital investment requirements of our
business and are expected to continue at the rate of approximately $12.0 to
$14.0 million annually. Net cash used by investing activities in the three
months ended March 31, 2003 also included $48.2 million in payments related to
business acquisitions, net of cash acquired, of which $46.5 million related to
the Bionx acquisition and the remainder related to the CORE acquisition as
discussed in Note 6 to the consolidated condensed financial statements.
Financing activities in the three months ended March 31, 2003 consisted of
payments on our debt of $3.1 million and borrowings on our revolving credit
facility of $31.0 million in order to finance the Bionx acquisition. Proceeds
from the exercise of stock options in the three months ended March 31, 2003
totaled $.8 million.
Management believes that cash generated from operations, our current cash
resources and funds available under our new senior credit agreement will provide
sufficient liquidity to ensure continued working capital for operations, debt
service and funding of capital expenditures in the foreseeable future.
Contractual Obligations
There were no capital lease obligations or unconditional purchase obligations as
of March 31, 2003. The following table summarizes our contractual obligations
related to operating leases and long-term debt as of March 31, 2003:
(Amounts in thousands)
2003 2004 2005 2006 2007 Thereafter
------ ------ ------ ------ -------- ----------
Long-term debt ....... $2,072 $2,554 $2,741 $2,943 $133,914 $141,112
Operating lease
obligations ........ 1,783 1,589 1,310 1,238 1,259 3,173
------ ------ ------ ------ -------- --------
Total contractual
cash obligations ... $3,855 $4,143 $4,051 $4,182 $135,174 $144,284
====== ====== ====== ====== ======== ========
New Accounting Pronouncements
In January 2003, FIN No. 46, "Consolidation of Variable Interest Entities" was
issued. The interpretation provides guidance on consolidating variable interest
entities and applies immediately to variable interests created after January 31,
2003. The guidelines of the interpretation will become applicable for us in our
third quarter 2003 financial statements for variable interest entities created
before February 1, 2003. The interpretation requires variable interest entities
to be consolidated if the equity investment at risk is not sufficient to permit
an entity to finance its activities
20
without support from other parties or the equity investors lack certain
specified characteristics. We are reviewing FIN No. 46 to determine its impact,
if any, on future reporting periods, and do not currently anticipate any
material accounting or disclosure requirement under the provisions of the
interpretation.
In April 2003, FAS No. 149 "Amendment of Statement 133 on Derivative Instruments
and Hedging Activities" was issued. FAS No. 149 amends and clarifies financial
accounting and reporting for derivative instruments embedded in other contracts
and for hedging activities under FAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". FAS No. 149 will be applicable for us in
our third quarter 2003. We are reviewing FAS No. 149 to determine its impact, if
any, on future reporting periods, and do not currently anticipate any material
accounting or disclosure requirement under the provisions of the statement.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There has been no significant change in our exposures to market risk during the
three months ended March 31, 2003. For a detailed discussion of market risk, see
our Annual Report on Form 10K for the year-ended December 31, 2002, Part II,
Item 7A, Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures
Within the 90-day period prior to the filing of this report, an evaluation was
carried out under the supervision and with the participation of management,
including our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-14(c) under the Securities Exchange Act of
1934). Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the design and operation of these disclosure
controls and procedures were effective. No significant changes were made in our
internal controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
List of Exhibits
None
Reports on Form 8-K
On April 29, 2003, the Company filed a Report on Form 8-K furnishing as Exhibit
99.1 under Item 7, an April 24, 2003 press release announcing first quarter
results.
On May 1, 2003, the Company filed a Report on Form 8-K under Item 5, a
supplement to the discussion under Liquidity and Capital Resources included in
our Form 10-K for the year-ended December 31, 2002.
21
SIGNATURES
Pursuant to the requirements 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
(Registrant)
Date: May 12, 2003
/s/ Robert D. Shallish, Jr.
----------------------------------------
Robert D. Shallish, Jr.
Vice President - Finance
(Principal Financial Officer)
22
CERTIFICATION
I, Eugene R. Corasanti, certify that:
1. I have reviewed this quarterly report on Form 10-Q of CONMED Corporation;
2. Based on my knowledge, this quarterly 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 quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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
quarterly 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-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures 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 quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
May 9, 2003
/s/ Eugene R. Corasanti
----------------------------------------
Eugene R. Corasanti
Chairman of the Board and
Chief Executive Officer
23
CERTIFICATION
I, Robert D. Shallish, certify that:
1. I have reviewed this quarterly report on Form 10-Q of CONMED Corporation;
2. Based on my knowledge, this quarterly 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 quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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
quarterly 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-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures 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 quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
May 9, 2003
/s/ Robert D. Shallish Jr.
----------------------------------------
Robert D. Shallish, Jr.
Vice President - Finance and
Chief Financial Officer
24