Company Quick10K Filing
Quick10K
Conmed
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$81.70 28 $2,310
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-06-18 Officers, Regulation FD, Exhibits
8-K 2019-05-22 Shareholder Vote, Other Events
8-K 2019-04-24 Earnings, Exhibits
8-K 2019-02-26 Other Events
8-K 2019-02-11 M&A, Off-BS Arrangement, Other Events, Exhibits
8-K 2019-02-07 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-01-24 Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2019-01-24 Other Events, Exhibits
8-K 2019-01-24 Other Events, Exhibits
8-K 2019-01-23 Other Events, Exhibits
8-K 2019-01-23 Other Events, Exhibits
8-K 2019-01-22 Earnings, Exhibits
8-K 2019-01-02 Enter Agreement, Exhibits
8-K 2018-12-13 Enter Agreement, Regulation FD, Exhibits
8-K 2018-11-01 Earnings, Exhibits
8-K 2018-09-08 Other Events
8-K 2018-08-14 Other Events
8-K 2018-08-01 Earnings, Exhibits
8-K 2018-05-23 Officers, Shareholder Vote, Other Events
8-K 2018-02-28 Other Events
8-K 2018-01-31 Earnings, Exhibits
8-K 2018-01-02 Officers, Exhibits
AMZN Amazon 935,370
QURE Uniqure 2,170
LXRX Lexicon Pharmaceuticals 731
RNWK Realnetworks 85
CTRV Contravir Pharmaceuticals 3
NJMC New Jersey Mining 0
XSNX Xsunx 0
PEPL Panhandle Eastern Pipe Line 0
RIVEX Rivex Technology 0
VIGC Velt International Group 0
CNMD 2019-03-31
Part I Financial Information
Item 1.
Note 1 - Operations
Note 2 - Interim Financial Information
Note 3 - Business Acquisition
Note 4 - Revenues
Note 5 - Comprehensive Income
Note 6 - Fair Value of Financial Instruments
Note 7 - Inventories
Note 8 - Earnings per Share
Note 9 - Leases
Note 10 - Goodwill and Other Intangible Assets
Note 11 - Guarantees
Note 12 - Pension Plan
Note 13 - Acquisition, Restructuring and Other Expense
Note 14 - Business Segments
Note 15 - Legal Proceedings
Note 16 - New Accounting Pronouncements
Note 17 - Long-Term Debt
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II Other Information
Item 1. Legal Proceedings
Item 6. Exhibits
EX-10.1 cnmd33119ex101.htm
EX-31.1 cnmd33119ex311.htm
EX-31.2 cnmd33119ex312.htm
EX-32.1 cnmd33119ex321.htm

Conmed Earnings 2019-03-31

CNMD 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
0124700000123690001325000false--12-31Q120192019-03-310000816956falseLarge Accelerated Filerfalse0.200.200.010.01100000000100000000312991943129919405010500017900000505000340001620001730000.010.0150000050000000316742230777350311000105080001826000We recorded the cumulative impact of adopting ASU 2014-09, Revenue from Contracts with Customers, in 2018. See Note 16 for further discussion regarding the adoption of these accounting standards. 0000816956 2019-01-01 2019-03-31 0000816956 2019-04-24 0000816956 2018-01-01 2018-03-31 0000816956 us-gaap:RetainedEarningsMember 2019-01-01 2019-03-31 0000816956 2018-12-31 0000816956 2019-03-31 0000816956 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-01-01 2019-03-31 0000816956 us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-03-31 0000816956 us-gaap:CommonStockMember 2018-12-31 0000816956 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-31 0000816956 us-gaap:TreasuryStockMember 2019-03-31 0000816956 us-gaap:CommonStockMember 2019-03-31 0000816956 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-03-31 0000816956 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0000816956 us-gaap:TreasuryStockMember 2019-01-01 2019-03-31 0000816956 us-gaap:AdditionalPaidInCapitalMember 2019-03-31 0000816956 us-gaap:TreasuryStockMember 2018-12-31 0000816956 us-gaap:RetainedEarningsMember 2019-03-31 0000816956 us-gaap:RetainedEarningsMember 2018-12-31 0000816956 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-01-01 2018-03-31 0000816956 us-gaap:CommonStockMember 2017-12-31 0000816956 us-gaap:AdditionalPaidInCapitalMember 2017-12-31 0000816956 2017-12-31 0000816956 us-gaap:RetainedEarningsMember 2018-03-31 0000816956 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-12-31 0000816956 us-gaap:RetainedEarningsMember 2018-01-01 2018-03-31 0000816956 us-gaap:AccountingStandardsUpdate201409Member us-gaap:RetainedEarningsMember 2018-03-31 0000816956 us-gaap:AdditionalPaidInCapitalMember 2018-03-31 0000816956 us-gaap:TreasuryStockMember 2018-01-01 2018-03-31 0000816956 us-gaap:AccountingStandardsUpdate201409Member 2018-03-31 0000816956 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-03-31 0000816956 us-gaap:CommonStockMember 2018-03-31 0000816956 us-gaap:AdditionalPaidInCapitalMember 2018-01-01 2018-03-31 0000816956 us-gaap:TreasuryStockMember 2018-03-31 0000816956 us-gaap:RetainedEarningsMember 2017-12-31 0000816956 2018-03-31 0000816956 us-gaap:TreasuryStockMember 2017-12-31 0000816956 us-gaap:CostOfSalesMember us-gaap:ProFormaMember 2018-01-01 2018-03-31 0000816956 cnmd:BuffaloFilterLLCMember 2019-01-01 2019-03-31 0000816956 2019-02-11 2019-02-11 0000816956 2019-02-11 0000816956 cnmd:BuffaloFilterLLCMember us-gaap:TechnologyBasedIntangibleAssetsMember 2019-02-11 2019-02-11 0000816956 cnmd:BuffaloFilterLLCMember us-gaap:TrademarksAndTradeNamesMember 2019-02-11 2019-02-11 0000816956 cnmd:BuffaloFilterLLCMember 2019-02-11 2019-02-11 0000816956 cnmd:BuffaloFilterLLCMember cnmd:CustomerandDistributorRelationshipsMember 2019-02-11 2019-02-11 0000816956 us-gaap:SellingGeneralAndAdministrativeExpensesMember us-gaap:AcquisitionRelatedCostsMember us-gaap:ProFormaMember 2018-01-01 2018-03-31 0000816956 us-gaap:TechnologyBasedIntangibleAssetsMember 2019-02-11 0000816956 us-gaap:TrademarksAndTradeNamesMember 2019-02-11 0000816956 cnmd:CustomerandDistributorRelationshipsMember 2019-02-11 0000816956 cnmd:BuffaloFilterLLCMember 2019-02-11 0000816956 cnmd:OrthopedicSurgeryMember 2018-01-01 2018-03-31 0000816956 us-gaap:EMEAMember 2018-01-01 2018-03-31 0000816956 cnmd:GeneralSurgeryMember us-gaap:TransferredOverTimeMember 2019-01-01 2019-03-31 0000816956 cnmd:GeneralSurgeryMember srt:AsiaPacificMember 2019-01-01 2019-03-31 0000816956 cnmd:OrthopedicSurgeryMember cnmd:AmericasexcludingtheUnitedStatesMember 2019-01-01 2019-03-31 0000816956 cnmd:GeneralSurgeryMember cnmd:AmericasexcludingtheUnitedStatesMember 2018-01-01 2018-03-31 0000816956 us-gaap:TransferredAtPointInTimeMember 2018-01-01 2018-03-31 0000816956 cnmd:GeneralSurgeryMember us-gaap:TransferredAtPointInTimeMember 2018-01-01 2018-03-31 0000816956 cnmd:AmericasexcludingtheUnitedStatesMember 2018-01-01 2018-03-31 0000816956 cnmd:GeneralSurgeryMember 2018-01-01 2018-03-31 0000816956 cnmd:OrthopedicSurgeryMember us-gaap:TransferredOverTimeMember 2019-01-01 2019-03-31 0000816956 cnmd:OrthopedicSurgeryMember us-gaap:TransferredAtPointInTimeMember 2018-01-01 2018-03-31 0000816956 cnmd:GeneralSurgeryMember us-gaap:TransferredOverTimeMember 2018-01-01 2018-03-31 0000816956 cnmd:OrthopedicSurgeryMember srt:AsiaPacificMember 2018-01-01 2018-03-31 0000816956 srt:AsiaPacificMember 2019-01-01 2019-03-31 0000816956 cnmd:GeneralSurgeryMember us-gaap:EMEAMember 2018-01-01 2018-03-31 0000816956 cnmd:GeneralSurgeryMember 2019-01-01 2019-03-31 0000816956 cnmd:OrthopedicSurgeryMember 2019-01-01 2019-03-31 0000816956 us-gaap:EMEAMember 2019-01-01 2019-03-31 0000816956 us-gaap:TransferredAtPointInTimeMember 2019-01-01 2019-03-31 0000816956 cnmd:OrthopedicSurgeryMember srt:AsiaPacificMember 2019-01-01 2019-03-31 0000816956 cnmd:GeneralSurgeryMember cnmd:AmericasexcludingtheUnitedStatesMember 2019-01-01 2019-03-31 0000816956 cnmd:GeneralSurgeryMember us-gaap:EMEAMember 2019-01-01 2019-03-31 0000816956 cnmd:GeneralSurgeryMember country:US 2019-01-01 2019-03-31 0000816956 srt:AsiaPacificMember 2018-01-01 2018-03-31 0000816956 us-gaap:TransferredOverTimeMember 2018-01-01 2018-03-31 0000816956 cnmd:AmericasexcludingtheUnitedStatesMember 2019-01-01 2019-03-31 0000816956 cnmd:OrthopedicSurgeryMember country:US 2018-01-01 2018-03-31 0000816956 us-gaap:TransferredOverTimeMember 2019-01-01 2019-03-31 0000816956 cnmd:OrthopedicSurgeryMember us-gaap:TransferredOverTimeMember 2018-01-01 2018-03-31 0000816956 country:US 2019-01-01 2019-03-31 0000816956 cnmd:GeneralSurgeryMember country:US 2018-01-01 2018-03-31 0000816956 cnmd:OrthopedicSurgeryMember country:US 2019-01-01 2019-03-31 0000816956 country:US 2018-01-01 2018-03-31 0000816956 cnmd:OrthopedicSurgeryMember us-gaap:EMEAMember 2019-01-01 2019-03-31 0000816956 cnmd:OrthopedicSurgeryMember us-gaap:TransferredAtPointInTimeMember 2019-01-01 2019-03-31 0000816956 cnmd:GeneralSurgeryMember us-gaap:TransferredAtPointInTimeMember 2019-01-01 2019-03-31 0000816956 cnmd:OrthopedicSurgeryMember us-gaap:EMEAMember 2018-01-01 2018-03-31 0000816956 cnmd:OrthopedicSurgeryMember cnmd:AmericasexcludingtheUnitedStatesMember 2018-01-01 2018-03-31 0000816956 cnmd:GeneralSurgeryMember srt:AsiaPacificMember 2018-01-01 2018-03-31 0000816956 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2017-12-31 0000816956 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2018-01-01 2018-03-31 0000816956 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-01-01 2018-03-31 0000816956 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2018-03-31 0000816956 us-gaap:AccumulatedTranslationAdjustmentMember 2018-01-01 2018-03-31 0000816956 us-gaap:AccumulatedTranslationAdjustmentMember 2017-12-31 0000816956 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2017-12-31 0000816956 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-03-31 0000816956 us-gaap:AccumulatedTranslationAdjustmentMember 2018-03-31 0000816956 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2019-01-01 2019-03-31 0000816956 us-gaap:AccumulatedTranslationAdjustmentMember 2019-01-01 2019-03-31 0000816956 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-01-01 2019-03-31 0000816956 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-03-31 0000816956 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2018-12-31 0000816956 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-12-31 0000816956 us-gaap:AccumulatedTranslationAdjustmentMember 2018-12-31 0000816956 us-gaap:AccumulatedTranslationAdjustmentMember 2019-03-31 0000816956 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2019-03-31 0000816956 us-gaap:ForeignExchangeForwardMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-03-31 0000816956 us-gaap:OtherNoncurrentAssetsMember us-gaap:ForeignExchangeForwardMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-03-31 0000816956 us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember us-gaap:ForeignExchangeForwardMember us-gaap:NondesignatedMember 2019-03-31 0000816956 us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember us-gaap:ForeignExchangeForwardMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-03-31 0000816956 us-gaap:ForeignExchangeForwardMember us-gaap:CashFlowHedgingMember us-gaap:CostOfSalesMember 2019-01-01 2019-03-31 0000816956 us-gaap:ForeignExchangeForwardMember us-gaap:CashFlowHedgingMember 2019-01-01 2019-03-31 0000816956 us-gaap:ForeignExchangeForwardMember us-gaap:CashFlowHedgingMember us-gaap:CostOfSalesMember 2018-01-01 2018-03-31 0000816956 us-gaap:ForeignExchangeForwardMember 2019-01-01 2019-03-31 0000816956 us-gaap:ForeignExchangeForwardMember us-gaap:CashFlowHedgingMember 2018-01-01 2018-03-31 0000816956 us-gaap:ForeignExchangeForwardMember us-gaap:CashFlowHedgingMember cnmd:RevenuesMember 2019-01-01 2019-03-31 0000816956 us-gaap:ForeignExchangeForwardMember 2018-01-01 2018-03-31 0000816956 us-gaap:ForeignExchangeForwardMember us-gaap:CashFlowHedgingMember cnmd:RevenuesMember 2018-01-01 2018-03-31 0000816956 us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember us-gaap:ForeignExchangeForwardMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-12-31 0000816956 us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember us-gaap:ForeignExchangeForwardMember us-gaap:NondesignatedMember 2018-12-31 0000816956 us-gaap:ForeignExchangeForwardMember us-gaap:CashFlowHedgingMember 2019-03-31 0000816956 us-gaap:ForeignExchangeForwardMember us-gaap:NondesignatedMember 2019-03-31 0000816956 us-gaap:ForeignExchangeForwardMember us-gaap:NondesignatedMember 2018-12-31 0000816956 us-gaap:ForeignExchangeForwardMember us-gaap:CashFlowHedgingMember 2018-12-31 0000816956 srt:MaximumMember 2019-01-01 2019-03-31 0000816956 srt:MaximumMember 2019-03-31 0000816956 srt:MinimumMember 2019-01-01 2019-03-31 0000816956 us-gaap:TechnologyBasedIntangibleAssetsMember 2019-03-31 0000816956 cnmd:PatentsAndOtherIntangibleAssetsMember 2019-03-31 0000816956 cnmd:CustomerandDistributorRelationshipsMember 2018-12-31 0000816956 us-gaap:TechnologyBasedIntangibleAssetsMember 2018-12-31 0000816956 cnmd:SalesrepresentationmarketingandpromotionalrightsMember 2018-12-31 0000816956 cnmd:CustomerandDistributorRelationshipsMember 2019-03-31 0000816956 srt:WeightedAverageMember 2019-01-01 2019-03-31 0000816956 us-gaap:TrademarksAndTradeNamesMember 2018-12-31 0000816956 srt:WeightedAverageMember cnmd:SalesrepresentationmarketingandpromotionalrightsMember 2019-01-01 2019-03-31 0000816956 cnmd:SalesrepresentationmarketingandpromotionalrightsMember 2019-03-31 0000816956 srt:WeightedAverageMember cnmd:PatentsAndOtherIntangibleAssetsMember 2019-01-01 2019-03-31 0000816956 srt:WeightedAverageMember cnmd:CustomerandDistributorRelationshipsMember 2019-01-01 2019-03-31 0000816956 us-gaap:TrademarksAndTradeNamesMember 2019-03-31 0000816956 cnmd:PatentsAndOtherIntangibleAssetsMember 2018-12-31 0000816956 srt:WeightedAverageMember us-gaap:TechnologyBasedIntangibleAssetsMember 2019-01-01 2019-03-31 0000816956 cnmd:ReductionofRevenueMember 2019-03-31 0000816956 cnmd:ExpenseMember 2019-03-31 0000816956 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2018-01-01 2018-03-31 0000816956 us-gaap:DebtMember 2019-01-01 2019-03-31 0000816956 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2019-01-01 2019-03-31 0000816956 us-gaap:DebtMember 2018-01-01 2018-03-31 0000816956 us-gaap:CostOfSalesMember 2018-01-01 2018-03-31 0000816956 us-gaap:CostOfSalesMember 2019-01-01 2019-03-31 0000816956 us-gaap:CostOfSalesMember us-gaap:FairValueAdjustmentToInventoryMember 2019-01-01 2019-03-31 0000816956 cnmd:EndoDynamixInc.Member us-gaap:PendingLitigationMember 2017-01-18 2017-01-18 0000816956 2019-01-01 0000816956 us-gaap:ConvertibleNotesPayableMember 2019-01-29 0000816956 us-gaap:CallOptionMember 2019-01-29 2019-01-29 0000816956 cnmd:A2.625PercentConvertibleNotesDue2024Member us-gaap:ConvertibleNotesPayableMember 2019-01-29 2019-01-29 0000816956 cnmd:A2.625PercentConvertibleNotesDue2024Member us-gaap:ConvertibleNotesPayableMember 2019-01-29 0000816956 cnmd:AmendedAndRestatedSeniorCreditAgreementMember us-gaap:LongTermDebtMember us-gaap:LondonInterbankOfferedRateLIBORMember 2019-01-01 2019-03-31 0000816956 cnmd:AmendedAndRestatedSeniorCreditAgreementMember us-gaap:LongTermDebtMember us-gaap:EurodollarMember 2019-01-01 2019-03-31 0000816956 us-gaap:LineOfCreditMember 2019-03-31 0000816956 us-gaap:LoansPayableMember 2019-03-31 0000816956 cnmd:LargoFloridaMortgageMember us-gaap:MortgagesMember 2019-03-31 0000816956 cnmd:A2.625PercentConvertibleNotesDue2024Member us-gaap:ConvertibleNotesPayableMember 2019-01-01 2019-03-31 0000816956 cnmd:AmendedAndRestatedSeniorCreditAgreementMember us-gaap:LongTermDebtMember us-gaap:FederalFundsEffectiveSwapRateMember 2019-01-01 2019-03-31 0000816956 us-gaap:LetterOfCreditMember 2019-03-31 0000816956 cnmd:AmendedAndRestatedSeniorCreditAgreementMember us-gaap:LoansPayableMember 2019-02-07 0000816956 cnmd:AmendedAndRestatedSeniorCreditAgreementMember us-gaap:LineOfCreditMember 2019-02-07 0000816956 cnmd:AmendedAndRestatedSeniorCreditAgreementMember us-gaap:LongTermDebtMember 2019-03-31 0000816956 us-gaap:LineOfCreditMember 2018-12-31 0000816956 us-gaap:MortgagesMember 2018-12-31 0000816956 us-gaap:ConvertibleNotesPayableMember 2019-03-31 0000816956 us-gaap:ConvertibleNotesPayableMember 2018-12-31 0000816956 us-gaap:MortgagesMember 2019-03-31 0000816956 us-gaap:LoansPayableMember 2018-12-31 xbrli:shares iso4217:USD xbrli:pure iso4217:USD xbrli:shares
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
Commission File Number
March 31, 2019
0-16093

CONMED CORPORATION
(Exact name of the registrant as specified in its charter)


New York
(State or other jurisdiction of
incorporation or organization)
16-0977505
(I.R.S. Employer
Identification No.)
525 French Road, Utica, New York
(Address of principal executive offices)
13502
(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 ý   No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).  

Yes ý   No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 (Check one).

Large accelerated filer ý    Accelerated filer o    Non-accelerated filer o

Smaller reporting company o    Emerging growth company o

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. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes o No ý

The number of shares outstanding of registrant's common stock, as of April 24, 2019 is 28,231,270 shares.



CONMED CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2019

PART I FINANCIAL INFORMATION
Item Number
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PART II OTHER INFORMATION
 
 
 
 
 
 
 
 
 
 
 
 



Table of Contents

PART I FINANCIAL INFORMATION
Item 1.
CONMED CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited, in thousands except per share amounts)
 
 
Three Months Ended
 
March 31,
 
2019
 
2018
Net sales
$
218,378

 
$
202,064

 
 
 
 
Cost of sales
96,940

 
92,507

 
 
 
 
Gross profit
121,438

 
109,557

 
 
 
 
Selling and administrative expense
99,226

 
84,568

 
 
 
 
Research and development expense
10,575

 
7,711

 
 
 
 
  Operating expenses
109,801

 
92,279

 
 
 
 
Income from operations
11,637

 
17,278

 
 
 
 
Other expense
4,225

 

 
 
 
 
Interest expense
9,369

 
4,818

 
 
 
 
Income (loss) before income taxes
(1,957
)
 
12,460

 
 
 
 
Provision (benefit) for income taxes
(2,978
)
 
1,803

 
 
 
 
Net income
$
1,021

 
$
10,657

 
 
 
 
Comprehensive income
$
1,096

 
$
13,402

 
 
 
 
 
 
 
 
Per share data:
 
 
 

 
 
 
 
Net income
 
 
 

Basic
$
0.04

 
$
0.38

Diluted
0.04

 
0.37

 
 
 
 
Weighted average common shares
 
 
 

Basic
28,173

 
28,008

Diluted
29,034

 
28,573


 See notes to consolidated condensed financial statements.

1

Table of Contents

CONMED CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited, in thousands except share and per share amounts)
 
 
March 31,
2019
 
December 31,
2018
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
23,407

 
$
17,511

Accounts receivable, net
172,195

 
181,550

Inventories
171,087

 
154,599

Prepaid expenses and other current assets
24,020

 
20,691

Total current assets
390,709

 
374,351

Property, plant and equipment, net
116,976

 
113,245

Goodwill
615,152

 
400,440

Other intangible assets, net
547,025

 
413,193

Other assets
90,975

 
67,909

Total assets
$
1,760,837

 
$
1,369,138

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 

Current liabilities:
 
 
 

Current portion of long-term debt
$
14,385

 
$
18,336

Accounts payable
54,491

 
53,498

Accrued compensation and benefits
29,998

 
42,924

Other current liabilities
52,397

 
46,186

Total current liabilities
151,271

 
160,944

 
 
 
 
Long-term debt
803,555

 
438,564

Deferred income taxes
76,604

 
81,061

Other long-term liabilities
36,350

 
26,299

Total liabilities
1,067,780

 
706,868

 
 
 
 
Commitments and contingencies


 


 
 
 
 
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; 31,299,194 shares
 

 
 

issued in 2019 and 2018, respectively
313

 
313

Paid-in capital
374,555

 
341,738

Retained earnings
460,229

 
464,851

Accumulated other comprehensive loss
(55,662
)
 
(55,737
)
Less: 3,077,735 and 3,167,422 shares of common stock
 

 
 

in treasury, at cost in 2019 and 2018, respectively
(86,378
)
 
(88,895
)
Total shareholders’ equity
693,057

 
662,270

Total liabilities and shareholders’ equity
$
1,760,837

 
$
1,369,138


 See notes to consolidated condensed financial statements.

2

Table of Contents

CONMED CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited, in thousands except share and per share amounts)

 
Common Stock
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Treasury
Stock
Shareholders’
Equity
 
Shares
Amount
Balance at December 31, 2018
31,299

$
313

$
341,738

$
464,851

$
(55,737
)
$
(88,895
)
$
662,270

Common stock issued under employee plans
 

 

(769
)
 
 

2,517

1,748

Stock-based compensation
 

 

2,703

 

 

 

2,703

Dividends on common stock ($0.20 per share)
 
 
 
(5,643
)
 
 
(5,643
)
Convertible note discount (net of income tax expense of $12,470)
 
 
39,145

 
 
 
39,145

Convertible note hedge, (net of income tax benefit of $12,369)
 
 
(38,829
)
 
 
 
(38,829
)
Issuance of warrants
 
 
30,567

 
 
 
30,567

Comprehensive income (loss):
 
 
 
 
 
 


Foreign currency translation adjustments
 
 
 
 
(578
)
 
 
Pension liability (net of income tax expense of $173)
 
 
 
 
547

 
 
Cash flow hedging gain (net of income tax expense of $34)
 
 
 
 
106

 
 
Net income
 
 
 
1,021

 
 
 
Total comprehensive income
 
 
 
 
 
 
1,096

Balance at March 31, 2019
31,299

$
313

$
374,555

$
460,229

$
(55,662
)
$
(86,378
)
$
693,057


 
Common Stock
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Treasury
Stock
Shareholders’
Equity
 
Shares
Amount
Balance at December 31, 2017
31,299

$
313

$
333,795

$
440,085

$
(49,078
)
$
(93,683
)
$
631,432

Common stock issued under employee plans
 

 

(1,344
)
 
 

2,001

657

Stock-based compensation
 

 

2,303

 

 

 

2,303

Dividends on common stock ($0.20 per share)
 
 
 
(5,606
)
 
 
(5,606
)
Comprehensive income:
 
 
 
 
 
 


Foreign currency translation adjustments
 
 
 
 
649

 
 
Pension liability (net of income tax expense of $162)
 
 
 
 
510

 
 
Cash flow hedging gain (net of income tax expense of $505)
 
 
 
 
1,586

 
 
Net income
 
 
 
10,657

 
 
 
Total comprehensive income
 
 
 
 
 
 
13,402

Cumulative effect of change in accounting principle(1)
 
 
 
440

 
 
440

Balance at March 31, 2018
31,299

$
313

$
334,754

$
445,576

$
(46,333
)
$
(91,682
)
$
642,628


(1)We recorded the cumulative impact of adopting ASU 2014-09, Revenue from Contracts with Customers, (and its amendments) as of January 1, 2018.

See notes to consolidated condensed financial statements.


3

Table of Contents

CONMED CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
 
Three Months Ended
 
March 31,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income
$
1,021

 
$
10,657

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

Depreciation
4,442

 
4,502

Amortization of debt discount
1,510

 

Amortization
12,905

 
10,749

Stock-based compensation
2,703

 
2,303

Deferred income taxes
(4,699
)
 
(736
)
Loss on early extinguishment of debt
300

 

Increase (decrease) in cash flows from changes in assets and liabilities:
 

 
 

Accounts receivable
13,733

 
10,145

Inventories
(11,971
)
 
(4,615
)
Accounts payable
(1,776
)
 
8,006

Accrued compensation and benefits
(13,695
)
 
(7,052
)
Other assets
(10,047
)
 
(9,758
)
Other liabilities
1,654

 
821

 
(4,941
)
 
14,365

Net cash provided by (used in) operating activities
(3,920
)
 
25,022

 
 
 
 
Cash flows from investing activities:
 
 
 

Purchases of property, plant and equipment
(4,022
)
 
(3,783
)
Payments related to business acquisition, net of cash acquired
(364,928
)
 

Net cash used in investing activities
(368,950
)
 
(3,783
)
 
 
 
 
Cash flows from financing activities:
 
 
 

Payments on term loan
(144,375
)
 
(3,281
)
Proceeds from term loan
265,000

 

Payments on revolving line of credit
(342,000
)
 
(49,000
)
Proceeds from revolving line of credit
299,000

 
24,000

Proceeds from convertible notes
345,000

 

Payments related to contingent consideration
(2,859
)
 

Payments related to debt issuance costs
(16,210
)
 

Dividends paid on common stock
(5,626
)
 
(5,592
)
Purchases of convertible hedges
(51,198
)
 

Proceeds from issuance of warrants
30,567

 

Other, net
1,655

 
577

Net cash provided by (used in) financing activities
378,954

 
(33,296
)
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
(188
)
 
566

 
 
 
 
Net increase (decrease) in cash and cash equivalents
5,896

 
(11,491
)
 
 
 
 
Cash and cash equivalents at beginning of period
17,511

 
32,622

 
 
 
 
Cash and cash equivalents at end of period
$
23,407

 
$
21,131

 
 
 
 
Non-cash investing and financing activities:
 
 
 
Contractual obligations from asset acquisition
$
5,500

 
$
10,000

   Dividends payable
$
5,643

 
$
5,606


See notes to consolidated condensed financial statements.

4

Table of Contents

CONMED CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited, in thousands except per share amounts)

Note 1 – Operations

CONMED Corporation (“CONMED”, the “Company”, “we” or “us”) is a medical technology company that provides surgical devices and equipment for minimally invasive procedures.  The Company’s products are used by surgeons and physicians in a variety of specialties including orthopedics, general surgery, gynecology, neurosurgery, thoracic surgery and gastroenterology.

Note 2 - Interim Financial Information

The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for annual financial statements. The information herein reflects all normal recurring material adjustments, which are, in the opinion of management, necessary for the fair statements of the results for the periods presented. The consolidated condensed financial statements herein consist of all wholly-owned domestic and foreign subsidiaries with all significant intercompany transactions eliminated. Results for the period ended March 31, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.

The consolidated condensed financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes for the year ended December 31, 2018 included in our Annual Report on Form 10-K.

Note 3 - Business Acquisition

On February 11, 2019 we acquired Buffalo Filter, LLC and all of the issued and outstanding common stock of Palmerton Holdings, Inc. from Filtration Group FGC LLC (the "Buffalo Filter Acquisition") for approximately $365 million in cash. Buffalo Filter develops, manufactures and markets smoke evacuation technologies that are complementary to our general surgery offering. The acquisition was funded through a combination of cash on hand and long-term borrowings as further described below.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as a result of the Buffalo Filter Acquisition. The assessment of fair value is based on preliminary valuations and estimates that were available to management at the time the consolidated condensed financial statements were prepared. Accordingly, the allocation of purchase price is preliminary and therefore subject to adjustment during the measurement adjustment period.
Cash
$
119

Other current assets
9,315

Current assets
9,434

Property, plant & equipment
4,036

Deferred income taxes
80

Goodwill
214,793

Customer relationships
125,000

Developed technology
9,000

Trademarks & tradenames
7,000

Other non-current assets
166

Total assets acquired
$
369,509

 
 
Current liabilities assumed
4,462

Total liabilities assumed
4,462

Net assets acquired
$
365,047




5

Table of Contents

The goodwill recorded as part of the acquisition primarily represents revenue synergies, as well as operating efficiencies and cost savings. Goodwill deductible for tax purposes is $214.8 million. The weighted amortization period for intangibles acquired is 16 years. Customer relationships, developed technology and trademarks and tradenames are being amortized over a weighted average life of 16, 10 and 20 years, respectively.

The unaudited pro forma information for the quarters ended March 31, 2019 and 2018, assuming Buffalo Filter Acquisition occurred as of January 1, 2018 are presented below. This information has been prepared for comparative purposes only and does not purport to be indicative of the results of operations which actually would have resulted had the Buffalo Filter acquisition occurred on the dates indicated, or which may result in the future.

 
Three Months Ended March 31,
 
2019
 
2018
Net sales
$
223,397

 
$
211,273

Net income (loss)
8,745

 
(3,210
)

 
These pro forma results include certain adjustments, primarily due to increases in amortization expense due to fair value adjustments of intangible assets, increases in interest expense due to additional borrowings incurred to finance the acquisition and amortization of debt issuance costs incurred to finance the transaction, and acquisition related costs including transaction costs such as legal, accounting, valuation and other professional services as well as integration costs such as severance and retention.

Acquisition related costs included in the determination of pro forma net income for the three months ended March 31, 2018 included $0.7 million in cost of goods sold and $7.2 million included in selling and administrative expenses on the consolidated condensed statement of comprehensive income. Such amounts are excluded from the determination of pro forma net income for the three months ended March 31, 2019.

Net sales associated with Buffalo Filter of $6.1 million have been recorded in the consolidated condensed statement of comprehensive income for the three months ended March 31, 2019. It is impracticable to determine the earnings recorded in the consolidated condensed statement of comprehensive income for the three months ended March 31, 2019 as these amounts are not separately measured.

Note 4 - Revenues
    
The following tables present revenue disaggregated by primary geographic market where the products are sold, by product line and timing of revenue recognition:
 
Three Months Ended
 
Three Months Ended
 
March 31, 2019
 
March 31, 2018
 
Orthopedic Surgery
 
General Surgery
 
Total
 
Orthopedic Surgery
 
General Surgery
 
Total
Primary Geographic Markets
 
 
 
 
 
 
 
 
 
 
 
United States
$
45,256

 
$
71,770

 
$
117,026

 
$
43,152

 
$
63,099

 
$
106,251

Americas (excluding the United States)
15,042

 
7,462

 
22,504

 
16,771

 
7,679

 
24,450

Europe, Middle East & Africa
30,402

 
15,930

 
46,332

 
28,302

 
12,984

 
41,286

Asia Pacific
22,737

 
9,779

 
32,516

 
20,637

 
9,440

 
30,077

Total sales from contracts with customers
$
113,437

 
$
104,941

 
$
218,378

 
$
108,862

 
$
93,202

 
$
202,064

 
 
 
 
 
 
 
 
 
 
 
 
Timing of Revenue Recognition
 
 
 
 
 
 
 
 
 
 
 
Goods transferred at a point in time
$
104,739

 
$
104,425

 
$
209,164

 
$
100,791

 
$
92,881

 
$
193,672

Services transferred over time
8,698

 
516

 
9,214

 
8,071

 
321

 
8,392

Total sales from contracts with customers
$
113,437

 
$
104,941

 
$
218,378

 
$
108,862

 
$
93,202

 
$
202,064


 
 
 
 
 
 
 
 
 
 
 
 


6

Table of Contents

Contract liability balances related to the sale of extended warranties to customers are as follows:
 
March 31, 2019
 
December 31, 2018
 
 
 
 
Contract liability
$
12,027

 
$
11,043



Revenue recognized during the three months ended March 31, 2019 and March 31, 2018 from amounts included in contract liabilities at the beginning of the period were $2.3 million and $1.8 million, respectively. There were no material contract assets as of March 31, 2019 and December 31, 2018.

Note 5 – Comprehensive Income

Comprehensive income consists of the following:
 
 
Three Months Ended March 31,
 
2019
 
2018
Net income
$
1,021

 
$
10,657

 
 
 
 
Other comprehensive income (loss):
 
 
 
Pension liability, net of income tax (income tax expense of $173 and $162 for the three months ended March 31, 2019 and 2018, respectively)
547

 
510

Cash flow hedging gain, net of income tax (income tax expense of $34 and $505 for the three months ended March 31, 2019 and 2018, respectively)
106

 
1,586

Foreign currency translation adjustment
(578
)
 
649

 
 
 
 
Comprehensive income
$
1,096

 
$
13,402



Accumulated other comprehensive loss consists of the following:
 
Cash Flow
Hedging
Gain (Loss)
 
Pension
Liability
 
Cumulative
Translation
Adjustments
 
Accumulated
Other
Comprehensive
Income (Loss)
Balance, December 31, 2018
$
4,085

 
$
(31,718
)
 
$
(28,104
)
 
$
(55,737
)
 
 
 
 
 
 
 
 
Other comprehensive income (loss) before reclassifications, net of tax
1,318

 


 
(578
)
 
740

Amounts reclassified from accumulated other comprehensive income (loss) before taxa
(1,598
)
 
720

 

 
(878
)
Income tax
386

 
(173
)
 

 
213

 
 
 
 
 
 
 
 
Net current-period other comprehensive income (loss)
106

 
547

 
(578
)
 
75

 
 
 
 
 
 
 
 
Balance, March 31, 2019
$
4,191

 
$
(31,171
)
 
$
(28,682
)
 
$
(55,662
)


7

Table of Contents

 
Cash Flow
Hedging
Gain (Loss)
 
Pension
Liability
 
Cumulative
Translation
Adjustments
 
Accumulated
Other
Comprehensive
Income (Loss)
Balance, December 31, 2017
$
(3,530
)
 
$
(25,813
)
 
$
(19,735
)
 
$
(49,078
)
 
 
 
 
 
 
 
 
Other comprehensive income (loss) before reclassifications, net of tax
629

 

 
649

 
1,278

Amounts reclassified from accumulated other comprehensive income (loss) before taxa
1,262

 
672

 

 
1,934

Income tax
(305
)
 
(162
)
 

 
(467
)
 
 
 
 
 
 
 
 
Net current-period other comprehensive income (loss)
1,586

 
510

 
649

 
2,745

 
 
 
 
 
 
 
 
Balance, March 31, 2018
$
(1,944
)
 
$
(25,303
)
 
$
(19,086
)
 
$
(46,333
)

(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 6 and Note 12, respectively, for further details.

Note 6 – Fair Value of Financial Instruments
 
 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
 
March 31, 2019
 
December 31, 2018
Forward exchange contracts
Cash flow hedge
 
$
155,730

 
$
155,313

Forward exchange contracts
Non-designated
 
42,977

 
39,631



The remaining time to maturity as of March 31, 2019 is within two years for designated foreign exchange contracts and approximately one month for non-designated forward exchange contracts.


8

Table of Contents

Statement of comprehensive income 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) and net earnings on our consolidated condensed statement of comprehensive income and our consolidated condensed balance sheet:
 
 
Amount of Gain (Loss) Recognized in AOCI
 
Statement of Consolidated Condensed of Comprehensive Income
 
Amount of Gain (Loss) Reclassified from AOCI
 
 
Three Months Ended March 31,
 
 
 
Three Months Ended March 31,
Three Months Ended March 31,
 
 
 
 
 
 
 
 
Total Amount of Line Item Presented
 
 
 
 
Derivative Instrument
 
2019
 
2018
 
Location of amount reclassified
 
2019
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
 
$
1,738

 
$
829

 
Net Sales
 
$
218,378

$
202,064

 
$
1,497

 
$
(1,413
)
 
 
 
 
 

 
Cost of Sales
 
96,940

92,507

 
101

 
151

Pre-tax gain (loss)
 
$
1,738

 
$
829

 
 
 
 
 
 
$
1,598

 
$
(1,262
)
Tax expense (benefit)
 
420

 
200

 
 
 
 
 
 
386

 
(305
)
Net gain (loss)
 
$
1,318

 
$
629

 
 
 
 
 
 
$
1,212

 
$
(957
)


At March 31, 2019, $4.0 million of net unrealized gains on forward contracts accounted for as cash flow hedges, and included in accumulated other comprehensive loss, are expected to be recognized in earnings in the next twelve months.

Derivatives not designated as cash flow hedges

Net gains and losses from derivative instruments not accounted for as hedges offset by gains and losses on our intercompany receivables on our condensed consolidated statements of earnings were:

 
 
 
 
Three Months Ended March 31,
Derivative Instrument
 
Location on Consolidated Condensed Statement of Comprehensive Income
 
2019
 
2018
 
 
 
 
 
 
 
Net gain (loss) on currency hedge contracts
 
Selling and administrative expense
 
$
(181
)
 
$
(69
)
Net gain (loss) on currency transaction exposures
 
Selling and administrative expense
 
$
(229
)
 
$
(127
)



9

Table of Contents

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 March 31, 2019 and December 31, 2018:
March 31, 2019
Location on Condensed Balance Sheet
Asset Fair Value
 
Liabilities Fair Value
 
Net
Fair
Value
Derivatives designated as hedged instruments:
 
 
 
 
 
 
Foreign exchange contracts
Prepaids and other current assets
$
5,291

 
$
(65
)
 
$
5,226

Foreign exchange contracts
Other long-term assets
428

 
(128
)
 
300

 
 
$
5,719

 
$
(193
)
 
$
5,526

 
 
 
 
 
 
 
Derivatives not designated as hedging instruments:
 
 

 
 

 
 

Foreign exchange contracts
Prepaids and other current assets
14

 
(102
)
 
(88
)
 
 
 
 
 
 


Total derivatives
 
$
5,733

 
$
(295
)
 
$
5,438

December 31, 2018
Location on Condensed Balance Sheet
Asset Fair Value
 
Liabilities Fair Value
 
Net
Fair
Value
Derivatives designated as hedged instruments:
 
 
 
 
 
 
Foreign exchange contracts
Prepaids and other current assets
$
5,817

 
$
(431
)
 
$
5,386

 
 
 
 
 
 
 
Derivatives not designated as hedging instruments:
 
 

 
 

 
 
Foreign exchange contracts
Prepaids and other current assets
19

 
(217
)
 
(198
)
 
 
 
 
 
 
 
Total derivatives
 
$
5,836

 
$
(648
)
 
$
5,188



Our forward foreign exchange contracts are subject to a master netting agreement and qualify for netting in the consolidated condensed 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.
 
Valuation Techniques. Assets and liabilities carried at fair value and measured on a recurring basis as of March 31, 2019 consist of forward foreign exchange contracts. 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.  

10

Table of Contents

    
The carrying amounts reported in our consolidated condensed balance sheets for cash and cash equivalents, accounts receivable, accounts payable and long-term debt approximate fair value.  

Note 7 - Inventories

Inventories consist of the following:
 
March 31,
2019
 
December 31,
2018
Raw materials
$
49,366

 
$
45,898

Work-in-process
18,476

 
15,000

Finished goods
103,245

 
93,701

Total
$
171,087

 
$
154,599


 
Note 8 – Earnings Per Share

Basic earnings per share (“basic EPS”) is computed by dividing net income by the weighted average number of common shares outstanding for the reporting period. Diluted earnings per share (“diluted EPS”) gives effect to all dilutive potential shares outstanding resulting from employee stock options, restricted stock units, performance share units and stock appreciation rights ("SARs") during the period.

The following table sets forth the computation of basic and diluted earnings per share for the three months ended March 31, 2019 and 2018:


Three Months Ended March 31,
 
2019
 
2018
Net income
$
1,021

 
$
10,657


 
 


Basic – weighted average shares outstanding
28,173

 
28,008


 
 
 
Effect of dilutive potential securities
861

 
565


 
 
 
Diluted – weighted average shares outstanding
29,034

 
28,573


 
 
 
Net income (per share)
 

 
 

Basic
$
0.04

 
$
0.38

Diluted
0.04

 
0.37


 
The shares used in the calculation of diluted EPS exclude options and SARs to purchase shares where the exercise price was greater than the average market price of common shares for the period and the effect of the inclusion would be anti-dilutive. Such shares aggregated approximately 0.3 million and 0.4 million for the three months ended March 31, 2019 and 2018. As more fully described in Note 17, our 2.625% convertible notes due in 2024 (the “Notes”) are convertible under certain circumstances, as defined in the indenture, into a combination of cash and CONMED common stock.  As a result of convertible note hedge transactions, potential dilution upon conversion of the Notes occurs when the market price per share of our common stock, as measured under the terms of the convertible note hedge transactions, is greater than the strike price of the convertible note hedge transactions ($114.92).  As of March 31, 2019, our share price has not exceeded the strike price of the convertible note hedge transactions.  Therefore, under the net share settlement method, there were no potential shares issuable under the Notes to be used in the calculation of diluted EPS. 




11

Table of Contents

Note 9 – Leases

The Company adopted ASU No. 2016-02, Leases (Topic 842) on January 1, 2019 and applied the modified retrospective approach to adoption whereby the standard is applied only to the current period. 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. 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. We use the implicit rate when readily determinable. 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 twelve 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.

Lease costs consists of the following:

 
Three Months Ended,
 
March 31, 2019
Operating lease cost
$
1,996

Finance lease cost:
 
     Depreciation
53

     Interest on lease liabilities
7

Total finance lease cost
60

Total lease cost
$
2,056


        

12

Table of Contents

Supplemental balance sheet information related to leases is as follows:

 
March 31, 2019
Operating leases
 
Other assets (net of lease impairment of $1,325)
$
16,277

 
 
Other current liabilities
$
6,810

Other long-term liabilities
11,133

Total operating lease liabilities
$
17,943

 
 
Finance leases
 
Property, plant and equipment, gross
$
1,131

Accumulated depreciation
(302
)
Property, plant and equipment, net
$
829

 
 
Current portion of long-term debt
$
299

Long-term debt
244

Total finance lease liabilities
$
543

 
 
 
 
Weighted average remaining lease term (in years)
 
Operating leases
3.80 years

Finance leases
3.83 years

 
 
Weighted average discount rate
 
Operating leases
4.41
%
Finance leases
4.90
%


Supplemental cash flow information related to leases was as follows:

 
Three Months Ended
 
March 31, 2019
 
 
Cash paid for amounts included in the measurement of lease liabilities:
 
Operating cash flows from operating leases
$
2,123

Financing cash flows from finance leases
93

 
 
Right-of-use assets obtained in exchange for lease obligations:
 
Operating leases
444

Finance leases




13

Table of Contents

Maturities of lease liabilities as of March 31, 2019 are as follows:

 
Finance Lease
 
Operating Lease
 
 
 
 
Remaining, 2019
$
260

 
$
6,026

2020
219

 
4,921

2021
21

 
3,063

2022
76

 
2,419

2023

 
1,549

2024

 
718

Thereafter

 
770

Total lease payments
576

 
19,466

 
 
 
 
Less imputed interest
(33
)
 
(1,523
)
 
 
 
 
Total lease liabilities
$
543

 
$
17,943


    
As of March 31, 2019, we have no additional operating or finance leases that have not yet commenced. Maturities of lease liabilities under ASC 840 are consistent with the above disclosure.

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 nonlease 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.


Note 10 – Goodwill and Other Intangible Assets

The changes in the net carrying amount of goodwill for the three months ended March 31, 2019 are as follows:
Balance as of December 31, 2018
$
400,440

 
 
Goodwill resulting from business acquisition
214,793

 
 
Foreign currency translation
(81
)
 
 
Balance as of March 31, 2019
$
615,152


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.  During the three months ended March 31, 2019, the Company acquired Buffalo Filter as further described in Note 3. Goodwill resulting from the acquisition amounted to $214.8 million and acquired intangible assets including customer and distributor relationships, developed technology and trademarks and tradenames amounted to $141.0 million.


14

Table of Contents

Other intangible assets consist of the following:
 
March 31, 2019
 
December 31, 2018
 
Weighted Average Amortization Period (Years)
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Gross
Carrying
Amount
 
Accumulated
Amortization
Amortized intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Customer and distributor relationships
24
$
339,529

 
$
(101,057
)
 
$
214,577

 
$
(97,131
)
 
 
 
 
 
 
 
 
 
Sales representation, marketing and promotional rights
25
149,376

 
(43,500
)
 
149,376

 
(42,000
)