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form8k-93904_cnmd.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15 (d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): July 24, 2008

CONMED CORPORATION

(Exact name of registrant as specified in its charter)

New York	0-16093	16-0977505
(State or other jurisdiction of	(Commission	(I.R.S. Employer
incorporation or organization)	File Number)	Identification No.)

525 French Road

Utica, New York 13502

(Address of principal executive offices, including zip code)

(315) 797-8375

(Registrant's telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions (See General Instruction A.2 below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 2

Financial Information

Item 2.02

Results of Operations and Financial Condition.

On July 24, 2008, CONMED Corporation issued a press release announcing financial results for the second quarter of 2008. A copy of this press release is attached hereto as Exhibit 99.1.

The information in this Current Report on Form 8-K that is furnished under “Item 2.02. Results of Operations and Financial Condition” and Exhibit 99.1 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Act of 1934, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

Section 9

Financial Statements and Exhibits

Item 9.01

Financial Statements and Exhibits.

(c)

Exhibits

The following exhibit is included herewith:

	Exhibit No.	Description of Exhibit

	99.1	Press Release dated July 24, 2008, issued by CONMED Corporation.

Signature

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)


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

Date: July 24, 2008

EXHIBIT INDEX

Exhibit
Number	Exhibit Description

99.1	Press Release, dated July 24, 2008, issued by CONMED Corporation.

ex99-1.htm Logo

	NEWS RELEASE

	CONTACT:
	CONMED Corporation
	Robert Shallish
	Chief Financial Officer
	315-624-3206

	FD
	Investors: Brian Ritchie/Theresa Kelleher
	212-850-5600

FOR RELEASE: 7:00 AM (Eastern) July 24, 2008

CONMED Corporation Announces Second Quarter 2008 Financial Results

EPS Equals $0.43 - Exceeds Expectations

Record Quarterly Sales of $192.8 Million – 13.9% Growth

Increasing 2008 Sales and EPS Guidance

Conference Call to be Held at 10:00 a.m. ET Today

Utica, New York, July 24, 2008 ----- CONMED Corporation (Nasdaq: CNMD) today announced that it had better than expected second quarter 2008 sales growth of 13.9% over the second quarter of 2007. These sales drove a 34% expansion of earnings per share when compared to GAAP EPS in the second quarter 2007 and 23% when compared to non-GAAP adjusted EPS. As discussed below under “Use of Non-GAAP Financial Measures,” the Company presents various non-GAAP financial measures in this release. Investors should consider non-GAAP measures in addition to, and not a substitute for, or superior to, financial performance measures prepared in accordance with GAAP. Please refer to the attached reconciliation between GAAP and non-GAAP financial measures.

“CONMED’s focus on execution of our plan to expand our profitability at a rate faster than the top-line growth was the driving force behind our successful second quarter. The sales growth this quarter was a result of stronger worldwide sales across our product portfolio with particular strength internationally. Given the strong financial performance for the first half of 2008 and our confidence in the remainder of the year, we have increased our guidance for the full year 2008,” commented Mr. Joseph J. Corasanti, President and Chief Executive Officer.

Year-Over-Year Quarterly Highlights

GAAP EPS grew to $0.43

34% increase vs. 2Q 2007 GAAP EPS of $0.32

23% increase vs. 2Q 2007 non-GAAP EPS of $0.35

Quarterly Sales Increase to $192.8 million – a new quarterly record

13.9% increase vs. 2Q 2007 reported revenues

10.9% increase in constant currency

CONMED News Release Continued

Page 2 of 10

July 24, 2008

Year-Over-Year Six Months’ Highlights

GAAP EPS grew 9% to $0.81 compared to $0.74 (2007 first half includes a non-recurring litigation gain)

Non-GAAP EPS grew 28% to $0.83 compared to $0.65

Six-month sales increase to $383.5 million

12.7% increase vs. 1st Half 2007 reported revenues

9.4% increase in constant currency

Sales within the United States for the quarter ended June 2008 increased to $104.3 million, a growth of 5.5% compared to the same quarter in 2007. Sales outside the United States were $88.5 million in the second quarter of 2008, growing 25.7% overall and 18.4% on a constant currency basis compared to the second quarter of 2007. International sales in the June 2008 quarter were 45.9% of the Company’s total sales compared to 41.6% of sales in the second quarter last year. Foreign currency exchange rates were favorable to the Company in the second quarter 2008 compared to exchange rates in effect during the second quarter of 2007. As a result, sales were higher by $5.1 million than would have been the case had currency rates remained constant.

In January 2008, the Company completed the purchase of the Italian distributor of CONMED’s products for a purchase price of approximately $21.6 million. In connection with the acquisition, in the first quarter of 2008, the Company recorded a $1.0 million fair value adjustment to inventory acquired as a result of the acquisition; the inventory was subsequently sold in the first quarter of 2008.

CONMED’s cash flow for the first half of 2008 was strong with cash from operations totaling $35.1 million compared to $25.8 million in the first half of 2007. This cash was used to purchase the Italian distributor, fund capital expenditures and increase the Company’s cash balance by $6 million since the end of 2007.

Over the past twelve months the Company has embarked on a number of initiatives to improve manufacturing efficiency, including the use of lean manufacturing techniques. This efficiency program, together with the beneficial effects of foreign currency exchange rates and the effects of the purchase of the Italian distributor, has improved the Company’s gross margin percentage to 52.3% of sales from 50.7% of sales in the second quarter of 2007. Further, the Company has developed an operational restructuring plan to be carried out over the next 18 months including the following:

Construction and operation of a 170,000 square foot manufacturing facility in Chihuahua, Mexico

Closure of two of the Company’s manufacturing facilities in the Utica, New York area with the related operational transfer to either our headquarters location in Utica or to the new facility in Chihuahua.

Centralization of certain of the Company’s distribution activities in a new North American distribution center to be located in Atlanta, Georgia.

During the execution of this plan, the Company expects it may incur certain charges including severance costs associated with the release of approximately 100-150 positions, and the cost of restructuring and relocation activities.

CONMED News Release Continued

Page 3 of 10

July 24, 2008

Following is a summary of the Company’s sales by product line for the three months ended June 30, 2008:

	Three Months Ended June 30,
								Constant
								Currency
	2007		2008		Growth			Growth
	(in millions)

Arthroscopy	$	64.9	$	76.6		18.0	%		14.2	%

Powered Surgical Instruments		36.0		39.9		10.8	%		5.9	%

Electrosurgery		22.1		25.8		16.7	%		15.3	%

Endoscopic Technologies		13.4		13.4		-	%		-1.3	%

Endosurgery		15.5		17.3		11.6	%		9.6	%

Patient Care		17.4		19.8		13.8	%		13.5	%

	$	169.3	$	192.8		13.9	%		10.9	%

The Company’s sports medicine Arthroscopy line grew 18.0% over second quarter 2007 on strong sales of single-use surgical devices and placements of integrated operating room systems. Powered Surgical Instruments increased its sales 10.8% as a result of strong growth in international markets. Electrosurgery sales growth was led by improved sales of electrosurgical power units. Endosurgery and Patient Care double digit growth was fueled by higher sales in both domestic and international markets. Endoscopic Technologies experienced flat sales growth when compared to the second quarter of 2007, but demonstrated sequential revenue improvement from the first quarter of 2008.

Following is a summary of the Company’s sales by product line for the six months ended June 30, 2008:

	Six Months Ended June 30,
								Constant
								Currency
	2007		2008		Growth			Growth
	(in millions)

Arthroscopy	$	127.1	$	152.3		19.8	%		15.4	%

Powered Surgical Instruments		73.6		80.1		8.8	%		3.6	%

Electrosurgery		46.1		52.5		13.9	%		12.4	%

Endoscopic Technologies		26.6		25.9		-2.6	%		-4.1	%

Endosurgery		29.1		32.5		11.7	%		9.6	%

Patient Care		37.8		40.2		6.3	%		5.9	%

	$	340.3	$	383.5		12.7	%		9.4	%

CONMED News Release Continued

Page 4 of 10

July 24, 2008

Use of Non-GAAP Financial Measures

Management has disclosed financial measurements in this press announcement that present financial information that is not in accordance with Generally Accepted Accounting Principles (GAAP). These measurements are not a substitute for GAAP measurements, although Company management uses these measurements as aids in monitoring the Company’s on-going financial performance from quarter-to-quarter and year-to-year on a regular basis, and for benchmarking against other medical technology companies. Non-GAAP net income and non-GAAP earnings per share measure the income of the Company excluding unusual credits or charges that are considered by management to be outside of the normal on-going operations of the Company. Management uses and presents non-GAAP net income and non-GAAP earnings per share because management believes that in order to properly understand the Company’s short and long-term financial trends, the impact of unusual items should be eliminated from on-going operating activities. These adjustments for unusual items are derived from facts and circumstances that vary in frequency and impact on the Company’s results of operations. Management uses non-GAAP net income and non-GAAP earnings per share to forecast and evaluate the operational performance of the Company as well as to compare results of current periods to prior periods on a consistent basis.

Non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. Investors should consider non-GAAP measures in addition to, and not a substitute for, or superior to, financial performance measures prepared in accordance with GAAP.

Please refer to the attached reconciliation between GAAP and non-GAAP financial measures.

Outlook

Mr. Corasanti noted, “As was the case in the first quarter of this year, the Company has outperformed our original financial expectations for the second quarter. Further, our outlook for the remainder of 2008 continues to be positive. For the third quarter of 2008, we anticipate revenues in the range of $175-$180 million and non-GAAP diluted earnings per share (excluding unusual charges) of $0.32 - $0.36. For the full year of 2008, we are again increasing our earnings guidance based on the better than expected results of the first six months of 2008. Accordingly, we foresee full year 2008 sales of $755-$760 million and non-GAAP diluted earnings per share approximating $1.56 - $1.64, excluding unusual items.”

At this time, the Company is unable to provide GAAP diluted earnings per share guidance for the third quarter of 2008 and for the full year of 2008 because it is unable to estimate unusual credits or charges that may be recorded in the third or fourth quarter of 2008.

Conference Call

The Company will webcast its second quarter 2008 conference call live over the Internet on Thursday, July 24, 2008 at 10:00 a.m. Eastern Time. This broadcast can be accessed from CONMED's web site at www.conmed.com. Replays of the call will be made available through July 31, 2008.

CONMED Profile

CONMED is a medical technology company with an emphasis on surgical devices and equipment for minimally invasive procedures and monitoring. The Company’s products serve the clinical areas of arthroscopy, powered surgical instruments, electrosurgery, cardiac monitoring disposables, endosurgery and endoscopic technologies. They are used by surgeons and physicians in a variety of specialties including orthopedics, general surgery, gynecology, neurosurgery, and gastroenterology. Headquartered in Utica, New York, the Company’s 3,200 employees distribute its products worldwide from several manufacturing locations.

CONMED News Release Continued

Page 5 of 10

July 24, 2008

Forward Looking Information

This press release contains forward-looking statements based on certain assumptions and contingencies that involve risks and uncertainties. The forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and relate to the Company’s performance on a going-forward basis. The forward-looking statements in this press release involve risks and uncertainties which could cause actual results, performance or trends, to differ materially from those expressed in the forward-looking statements herein or in previous disclosures. The Company believes that all forward-looking statements made by it have a reasonable basis, but there can be no assurance that management’s expectations, beliefs or projections as expressed in the forward-looking statements will actually occur or prove to be correct. In addition to general industry and economic conditions, factors that could cause actual results to differ materially from those discussed in the forward-looking statements in this press release include, but are not limited to: (i) the failure of any one or more of the assumptions stated above, to prove to be correct; (ii) the risks relating to forward-looking statements discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007; (iii) cyclical purchasing patterns from customers, end-users and dealers; (iv) timely release of new products, and acceptance of such new products by the market; (v) the introduction of new products by competitors and other competitive responses; (vi) the possibility that any new acquisition or other transaction may require the Company to reconsider its financial assumptions and goals/targets; and/or (vii) the Company’s ability to devise and execute strategies to respond to market conditions.

CONMED News Release Continued

Page 6 of 10

July 24, 2008

CONMED CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(in thousands except per share amounts)

(unaudited)

	Three months ended				Six months ended
	June 30,				June 30,
	2007		2008		2007			2008

Net sales	$	169,258	$	192,755	$	340,272		$	383,528

Cost of sales		83,398		91,865		169,187			183,863
Cost of sales, acquisition- Note A		-		-		-			1,011

Gross profit		85,860		100,890		171,085			198,654

Selling and administrative		58,207		69,549		118,012			138,195
Research and development		7,453		8,689		15,047			16,767
Other expense (income) – Note B		1,312		-		(4,102	)		-
		66,972		78,238		128,957			154,962

Income from operations		18,888		22,652		42,128			43,692

Interest expense		4,329		2,439		8,845			5,613

Income before income taxes		14,559		20,213		33,283			38,079

Provision for income taxes		5,214		7,758		12,016			14,614

Net income	$	9,345	$	12,455	$	21,267		$	23,465

Per share data:

Net Income
Basic	$	.33	$	.43	$	.76		$	.82
Diluted		.32		.43		.74			.81

Weighted average common shares
Basic		28,180		28,662		27,988			28,643
Diluted		28,831		29,063		28,608			29,035

Note A – Included in cost of sales in the six months ended June 30, 2008 is a $1.0 million fair value adjustment as a result of purchase accounting for inventory which was subsequently sold.

Note B – Included in other expense (income) in the three months ended June 30, 2007 are $1.2 million in facility closure costs and $0.1 million in costs related to the termination of a product offering. Included in other expense (income) in the six months ended June 30, 2007 are $1.8 million in facility closure costs, $0.2 million in costs related to the termination of a product offering and a $6.1 million gain on a legal settlement.

CONMED News Release Continued

Page 7 of 10

July 24, 2008

CONMED CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS

(in thousands)

(unaudited)

ASSETS

	December 31,			June 30,
	2007			2008
Current assets:
Cash and cash equivalents	$	11,695		$	17,850
Accounts receivable, net		80,642			106,317
Inventories		164,969			161,057
Deferred income taxes		11,697			11,664
Other current assets		10,019			9,971
Total current assets		279,022			306,859

Property, plant and equipment, net		123,679			134,805
Goodwill		289,508			289,767
Other intangible assets, net		191,807			198,021
Other assets		9,935			8,595
Total assets	$	893,951		$	938,047

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Current portion of long-term debt	$	3,349		$	3,830
Other current liabilities		73,935			72,255
Total current liabilities		77,284			76,085

Long-term debt		219,485			224,791
Deferred income taxes		71,188			84,512
Other long-term liabilities		20,992			18,623
Total liabilities		388,949			404,011

Shareholders' equity:
Capital accounts		220,657			223,664
Retained earnings		284,850			307,997
Accumulated other comprehensive income (loss)		(505	)		2,375
Total equity		505,002			534,036

Total liabilities and shareholders' equity	$	893,951		$	938,047

CONMED News Release Continued

Page 8 of 10

July 24, 2008

CONMED CORPORATION

CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS

(in thousands)

(unaudited)

	Six months ended
	June 30,
	2007			2008
Cash flows from operating activities:
Net income	$	21,267		$	23,465
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization		15,400			15,529
Stock-based compensation expense		1,885			2,094
Deferred income taxes		10,470			12,360
Sale of accounts receivable		2,000			(3,000	)
Increase (decrease) in cash flows from changes in assets and liabilities:
Accounts receivable		(3,924	)		(4,768	)
Inventories		(15,150	)		3,028
Accounts payable		(2,579	)		(5,299	)
Income taxes receivable (payable)		(1,809	)		670
Accrued compensation and benefits		(2,388	)		(843	)
Accrued interest		59			(132	)
Other assets		619			(1,081	)
Other liabilities		( 52	)		(6,937	)
Net cash provided by operating activities		25,798			35,086

Cash flow from investing activities:
Purchases of property, plant, and equipment		(9,556	)		(15,212	)
Payments related to business acquisitions		(1,278	)		(21,838	)
Net cash used in investing activities		(10,834	)		(37,050	)

Cash flow from financing activities:
Payments on debt		(26,797	)		(1,213	)
Proceeds of debt		-			7,000
Net proceeds from common stock issued under employee plans		10,604			595
Other, net		(236	)		-
Net cash provided by (used in) financing activities		(16,429	)		6,382

Effect of exchange rate change
on cash and cash equivalents		1,513			1,737

Net increase in cash and cash equivalents		48			6,155

Cash and cash equivalents at beginning of period		3,831			11,695

Cash and cash equivalents at end of period	$	3,879		$	17,850

CONMED News Release Continued

Page 9 of 10

July 24, 2008

CONMED CORPORATION

RECONCILIATION OF REPORTED NET INCOME TO NET INCOME

BEFORE UNUSUAL ITEMS

(In thousands except per share amounts)

(unaudited)

	Three months ended
	June 30,
	2007			2008

Reported net income	$	9,345		$	12,455

Termination of product offering		58			-

Facility closure costs		1,254			-

Total other expense		1,312			-

Unusual expense before income taxes		1,312			-

Provision (benefit) for income taxes on unusual expense		(472	)		-

Net income before unusual items	$	10,185		$	12,455


Per share data:

Reported net income
Basic	$	0.33		$	0.43
Diluted		0.32			0.43

Net income before unusual items
Basic	$	0.36		$	0.43
Diluted		0.35			0.43

Management has provided the above reconciliation of net income before unusual items as an additional measure that investors can use to compare operating performance between reporting periods. Management believes this reconciliation provides a useful presentation of operating performance as discussed in the section “Use of Non-GAAP Financial Measures” above.

CONMED News Release Continued

Page 10 of 10

July 24, 2008

CONMED CORPORATION

RECONCILIATION OF REPORTED NET INCOME TO NET INCOME

BEFORE UNUSUAL ITEMS

(In thousands except per share amounts)

(unaudited)

	Six months ended
	June 30,
	2007			2008

Reported net income	$	21,267		$	23,465

Fair value inventory adjustment from purchase accounting
included in cost of sales		-			1,011

Termination of product offering		148			-

Facility closure costs		1,822			-

Gain on legal settlement		(6,072	)		-

Total other expense (income)		(4,102	)		-

Unusual expense (income) before income taxes		(4,102	)		1,011

Provision (benefit) for income taxes on unusual expense		1,477			(364	)

Net income before unusual items.	$	18,642		$	24,112


Per share data:

Reported net income
Basic	$	0.76		$	0.82
Diluted		0.74			0.81

Net income before unusual items
Basic	$	0.67		$	0.84
Diluted		0.65			0.83