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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
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedCommission File Number
June 30, 2021001-39218
CONMED CORPORATION
(Exact name of the registrant as specified in its charter)
Delaware16-0977505
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
11311 Concept BlvdLargo,Florida33773
(Address of principal executive offices)(Zip Code)
(727) 392-6464
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $0.01 par valueCNMDNYSE
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes    No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  

Yes    No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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     Accelerated filer     Non-accelerated filer

Smaller reporting company     Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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

The number of shares outstanding of registrant's common stock, as of July 26, 2021 is 29,162,891 shares.



CONMED CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2021
PART I FINANCIAL INFORMATION
Item NumberPage
   
 
   
 
   
 
   
 
   
 
   
   
   
   
   
PART II OTHER INFORMATION
   
   
   


Table of Contents
PART I FINANCIAL INFORMATION
Item 1.
CONMED CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited, in thousands except per share amounts)
 
 Three Months EndedSix Months Ended
 June 30,June 30,
 2021202020212020
Net sales$255,161 $157,785 $487,837 $371,796 
Cost of sales113,737 85,856 217,964 180,707 
Gross profit141,424 71,929 269,873 191,089 
Selling and administrative expense104,399 84,475 202,739 180,343 
Research and development expense11,318 8,700 21,344 18,820 
  Operating expenses115,717 93,175 224,083 199,163 
Income (loss) from operations25,707 (21,246)45,790 (8,074)
Interest expense9,420 11,401 19,772 20,993 
Other expense 89  178 
Income (loss) before income taxes16,287 (32,736)26,018 (29,245)
Provision (benefit) for income taxes2,997 (5,336)2,868 (7,772)
Net income (loss)$13,290 $(27,400)$23,150 $(21,473)
Comprehensive income (loss)$17,743 $(24,713)$28,486 $(25,834)
Per share data: 
Net income (loss) 
Basic$0.46 $(0.96)$0.80 $(0.75)
Diluted0.41 (0.96)0.72 (0.75)
Weighted average common shares 
Basic29,125 28,542 29,052 28,506 
Diluted32,464 28,542 31,964 28,506 
 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)
 
June 30,
2021
December 31,
2020
ASSETS 
Current assets: 
Cash and cash equivalents$46,388 $27,356 
Accounts receivable, net168,966 177,152 
Inventories211,323 194,868 
Prepaid expenses and other current assets16,503 17,278 
Total current assets443,180 416,654 
Property, plant and equipment, net107,722 111,407 
Goodwill618,280 618,440 
Other intangible assets, net486,623 501,537 
Other assets106,169 103,635 
Total assets$1,761,974 $1,751,673 
LIABILITIES AND SHAREHOLDERS' EQUITY 
Current liabilities: 
Current portion of long-term debt$21,868 $18,415 
Accounts payable55,665 53,310 
Accrued compensation and benefits49,192 50,171 
Other current liabilities71,733 68,305 
Total current liabilities198,458 190,201 
Long-term debt707,808 735,221 
Deferred income taxes57,622 57,875 
Other long-term liabilities53,587 59,338 
Total liabilities1,017,475 1,042,635 
Commitments and contingencies
Shareholders' equity: 
Preferred stock, par value $0.01 per share;
 
authorized 500,000 shares; none outstanding
  
Common stock, par value $0.01 per share;
100,000,000 shares authorized; 31,299,194 shares
issued in 2021 and 2020, respectively
313 313 
Paid-in capital393,663 382,628 
Retained earnings468,924 457,417 
Accumulated other comprehensive loss(58,345)(63,681)
Less: 2,139,851 and 2,410,045 shares of common stock
in treasury, at cost in 2021 and 2020, respectively
(60,056)(67,639)
Total shareholders’ equity744,499 709,038 
Total liabilities and shareholders’ equity$1,761,974 $1,751,673 
 See notes to consolidated condensed financial statements.
2

Table of Contents

CONMED CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited, in thousands except per share amounts)
 Common StockPaid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Treasury
Stock
Shareholders’
Equity
 SharesAmount
Balance at December 31, 202031,299 $313 $382,628 $457,417 $(63,681)$(67,639)$709,038 
Common stock issued under employee plans  2,944  5,271 8,215 
Stock-based compensation  3,387    3,387 
Dividends on common stock ($0.20 per share)
(5,813)(5,813)
Comprehensive income (loss):
Cash flow hedging gain, net3,926 
Pension liability, net631 
Foreign currency translation adjustments(3,674)
Net income9,860 
Total comprehensive income10,743 
Balance at March 31, 202131,299 $313 $388,959 $461,464 $(62,798)$(62,368)$725,570 
Common stock issued under employee plans414 2,312 2,726 
Stock-based compensation4,290 4,290 
Dividends on common stock ($0.20 per share)
(5,830)(5,830)
Comprehensive income (loss):
Cash flow hedging gain, net1,221 
Pension liability, net631 
Foreign currency translation adjustments2,601 
Net income13,290 
Total comprehensive income17,743 
Balance at June 30, 202131,299 $313 $393,663 $468,924 $(58,345)$(60,056)$744,499 

 Common StockPaid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Treasury
Stock
Shareholders’
Equity
 SharesAmount
Balance at December 31, 201931,299 $313 $379,324 $470,844 $(59,277)$(80,737)$710,467 
Common stock issued under employee plans  (7,736) 2,696 (5,040)
Stock-based compensation  3,032    3,032 
Dividends on common stock ($0.20 per share)
(5,703)(5,703)
Comprehensive income (loss):
Cash flow hedging gain, net2,405 
Pension liability, net535 
Foreign currency translation adjustments(9,988)
Net income5,927 
Total comprehensive loss(1,121)
Balance at March 31, 202031,299 $313 $374,620 $471,068 $(66,325)$(78,041)$701,635 
Common stock issued under employee plans  (1,150) 1,283 133 
Stock-based compensation  3,555    3,555 
Dividends on common stock ($0.20 per share)
(5,712)(5,712)
Comprehensive income (loss):
Cash flow hedging loss, net(2,429)
Pension liability, net535 
Foreign currency translation adjustments4,581 
Net loss(27,400)
Total comprehensive loss(24,713)
Balance at June 30, 202031,299 $313 $377,025 $437,956 $(63,638)$(76,758)$674,898 
See notes to consolidated condensed financial statements.

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CONMED CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
 Six Months Ended
 June 30,
 20212020
Cash flows from operating activities: 
Net income (loss)$23,150 $(21,473)
Adjustments to reconcile net income (loss) to net cash provided by operating activities: 
Depreciation8,741 9,234 
Amortization of debt discount5,031 4,810 
Amortization of deferred debt issuance costs2,116 1,686 
Amortization27,316 27,392 
Stock-based compensation7,676 6,587 
Deferred income taxes(1,781)(9,490)
Increase (decrease) in cash flows from changes in assets and liabilities:  
Accounts receivable7,780 43,732 
Inventories(16,693)(13,029)
Accounts payable2,547 (15,703)
Accrued compensation and benefits(769)(16,646)
Other assets(12,289)(3,634)
Other liabilities3,798 (4,206)
Net cash provided by operating activities56,623 9,260 
Cash flows from investing activities: 
Purchases of property, plant and equipment(6,103)(6,577)
Payments related to business and asset acquisitions, net of cash acquired (3,852)
Net cash used in investing activities(6,103)(10,429)
Cash flows from financing activities: 
Payments on term loan(8,281)(6,625)
Payments on revolving line of credit(161,000)(70,000)
Proceeds from revolving line of credit139,000 108,000 
Payments related to contingent consideration (2,071)
Payments related to debt issuance costs (2,057)
Dividends paid on common stock(11,588)(11,387)
Other, net10,902 (5,090)
Net cash provided by (used in) financing activities(30,967)10,770 
Effect of exchange rate changes on cash and cash equivalents(521)(474)
Net increase in cash and cash equivalents19,032 9,127 
Cash and cash equivalents at beginning of period27,356 25,856 
Cash and cash equivalents at end of period$46,388 $34,983 
Non-cash investing and financing activities:
   Dividends payable$5,830 $5,712 
See notes to consolidated condensed financial statements.
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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 other healthcare professionals in a variety of specialties including orthopedics, general surgery, gynecology, 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 to fairly present 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 June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

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, 2020 included in our Annual Report on Form 10-K.

Use of Estimates

Preparation of the consolidated condensed financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated condensed financial statements and the reported amounts of revenue and expenses during the reporting period.

Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. We are not aware of any specific event or circumstance that would require an update to our estimates or judgments or a revision of the carrying value of our assets or liabilities as of July 29, 2021, the date of issuance of this Quarterly Report on Form 10-Q. These estimates may change, as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.

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Note 3 - 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 EndedThree Months Ended
June 30, 2021June 30, 2020
 Orthopedic SurgeryGeneral SurgeryTotalOrthopedic SurgeryGeneral SurgeryTotal
Primary Geographic Markets
United States$40,777 $102,813 $143,590 $21,387 $66,038 $87,425 
Europe, Middle East & Africa27,120 20,143 47,263 13,715 16,146 29,861 
Asia Pacific26,284 16,136 42,420 19,799 10,481 30,280 
Americas (excluding the United States)13,712 8,176 21,888 5,582 4,637 10,219 
Total sales from contracts with customers$107,893 $147,268 $255,161 $60,483 $97,302 $157,785 
Timing of Revenue Recognition
Goods transferred at a point in time$97,649 $146,105 $243,754 $53,670 $96,422 $150,092 
Services transferred over time10,244 1,163 11,407 6,813 880 7,693 
Total sales from contracts with customers$107,893 $147,268 $255,161 $60,483 $97,302 $157,785 

Six Months EndedSix Months Ended
June 30, 2021June 30, 2020
Orthopedic SurgeryGeneral SurgeryTotalOrthopedic SurgeryGeneral SurgeryTotal
Primary Geographic Markets
United States$77,907 $189,625 $267,532 $58,426 $147,847 $206,273 
Europe, Middle East & Africa53,172 38,688 91,860 39,622 32,761 72,383 
Asia Pacific52,886 28,798 81,684 40,333 18,805 59,138 
Americas (excluding the United States)31,093 15,668 46,761 21,385 12,617 34,002 
Total sales from contracts with customers$215,058 $272,779 $487,837 $159,766 $212,030 $371,796 
Timing of Revenue Recognition
Goods transferred at a point in time$195,339 $270,499 $465,838 $144,222 $210,324 $354,546 
Services transferred over time19,719 2,280 21,999 15,544 1,706 17,250 
Total sales from contracts with customers$215,058 $272,779 $487,837 $159,766 $212,030 $371,796 

Contract liability balances related to the sale of extended warranties to customers are as follows:

June 30, 2021December 31, 2020
Contract liability$15,076 $13,666 
    
Revenue recognized during the six months ended June 30, 2021 and June 30, 2020 from amounts included in contract liabilities at the beginning of the period were $6.1 million and $5.5 million, respectively. There were no material contract assets as of June 30, 2021 and December 31, 2020.

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Note 4 – Comprehensive Income (Loss)

Comprehensive income (loss) consists of the following:
 
Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
Net income (loss)$13,290 $(27,400)$23,150 $(21,473)
Other comprehensive income (loss):
Cash flow hedging gain (loss), net of income tax (income tax expense (benefit) of $388 and $(774) for the three months ended June 30, 2021 and 2020, respectively, and $1,639 and $(8) for the six months ended June 30, 2021 and 2020, respectively)
1,221 (2,429)5,147 (24)
Pension liability, net of income tax (income tax expense of $201 and $170 for the three months ended June 30, 2021 and 2020, respectively, and $402 and $340 for the six months ended June 30, 2021 and 2020, respectively)
631 535 1,262 1,070 
Foreign currency translation adjustment2,601 4,581 (1,073)(5,407)
Comprehensive income (loss)$17,743 $(24,713)$28,486 $(25,834)

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, 2020$(5,945)$(36,620)$(21,116)$(63,681)
Other comprehensive income (loss) before reclassifications, net of tax2,723  (1,073)1,650 
Amounts reclassified from accumulated other comprehensive income (loss) before taxa
3,196 1,664  4,860 
Income tax (772)(402) (1,174)
Net current-period other comprehensive income (loss)5,147 1,262 (1,073)5,336 
Balance, June 30, 2021$(798)$(35,358)$(22,189)$(58,345)
Cash Flow
Hedging
Gain (Loss)
Pension
Liability
Cumulative
Translation
Adjustments
Accumulated
Other
Comprehensive
Income (Loss)
Balance, December 31, 2019$493 $(31,691)$(28,079)$(59,277)
Other comprehensive income (loss) before reclassifications, net of tax770  (5,407)(4,637)
Amounts reclassified from accumulated other comprehensive income (loss) before taxa
(1,048)1,410  362 
Income tax 254 (340) (86)
Net current-period other comprehensive income (loss)(24)1,070 (5,407)(4,361)
Balance, June 30, 2020$469 $(30,621)$(33,486)$(63,638)
(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 5 and Note 11, respectively, for further details.

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Note 5 – 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 on intercompany receivables designated in foreign currencies.  These forward contracts settle each month at month-end, at which time we enter into new forward contracts.  We have not designated these forward contracts as hedges and have not applied hedge accounting to them.  

The following table presents the notional contract amounts for forward contracts outstanding:

As of
FASB ASC Topic 815 DesignationJune 30, 2021December 31, 2020
Forward exchange contractsCash flow hedge$172,705 $154,504 
Forward exchange contractsNon-designated39,270 42,380 

The remaining time to maturity as of June 30, 2021 is within two years for hedge designated foreign exchange contracts and approximately one month for non-hedge designated forward exchange contracts.

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Statement of comprehensive income (loss) presentation

Derivatives designated as cash flow hedges

Foreign exchange contracts designated as cash flow hedges had the following effects on accumulated other comprehensive income (loss) and net earnings on our consolidated condensed statements of comprehensive income (loss) and our consolidated condensed balance sheets:

Amount of Gain (Loss) Recognized in AOCIConsolidated Condensed Statements of Comprehensive Income (Loss)Amount of Gain (Loss) Reclassified from AOCI
Three Months Ended June 30,
Total Amount of Line Item Presented
Derivative Instrument20212020Location of amount reclassified2021202020212020
Foreign exchange contracts$(3)$(3,279)Net Sales$255,161 $157,785 $(2,022)$342 
 Cost of Sales113,737 85,856 410 (418)
Pre-tax loss$(3)$(3,279)$(1,612)$(76)
Tax benefit(1)(792)(389)(18)
Net loss$(2)$(2,487)$(1,223)$(58)

Amount of Gain (Loss) Recognized in AOCIConsolidated Condensed Statements of Comprehensive Income (Loss)Amount of Gain (Loss) Reclassified from AOCI
Six Months Ended June 30,
Total Amount of Line Item Presented
Derivative Instrument20212020Location of amount reclassified2021202020212020
Foreign exchange contracts$3,590 $1,015 Net Sales$487,837 $371,796 $(3,871)$1,543 
Cost of Sales217,964 180,707 675 (495)
Pre-tax gain (loss)$3,590 $1,015 $(3,196)$1,048 
Tax expense (benefit)867 245 (772)254 
Net gain (loss)$2,723 $770 $(2,424)$794 


At June 30, 2021, $1.2 million of net unrealized losses 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.

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Derivatives not designated as cash flow hedges

Net losses from derivative instruments not accounted for as hedges and gains and losses on our intercompany receivables on our consolidated condensed statements of comprehensive income (loss) were:

Three Months Ended June 30,Six Months Ended June 30,
Derivative InstrumentLocation on Consolidated Condensed Statements of Comprehensive Income (Loss)2021202020212020
  
Net loss on currency forward contractsSelling and administrative expense$(809)$(302)$(350)$(547)
Net gain (loss) on currency transaction exposuresSelling and administrative expense$243 $22 $(879)$(169)

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 June 30, 2021 and December 31, 2020:

June 30, 2021Location on Consolidated Condensed Balance SheetAsset Fair ValueLiabilities Fair ValueNet
Fair
Value
Derivatives designated as hedged instruments:   
Foreign exchange contractsOther current liabilities$1,885 $(3,411)$(1,526)
Foreign exchange contractsOther long-term assets745 (271)474 
$2,630 $(3,682)$(1,052)
Derivatives not designated as hedging instruments:   
Foreign exchange contractsOther current liabilities40 (71)(31)
Total derivatives$2,670 $(3,753)$(1,083)

December 31, 2020Location on Consolidated Condensed Balance SheetAsset Fair ValueLiabilities Fair ValueNet
Fair
Value
Derivatives designated as hedged instruments:  
Foreign exchange contracts Other current liabilities$1,500 $(8,826)$(7,326)
Foreign exchange contractsOther long-term liabilities23 (535)(512)
$1,523 $(9,361)$(7,838)
Derivatives not designated as hedging instruments:  
Foreign exchange contractsOther current liabilities25 (150)(125)
Total derivatives$1,548 $(9,511)$(7,963)

Our forward foreign exchange contracts are subject to a master netting agreement and qualify for netting in the consolidated condensed balance sheets.
 
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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 June 30, 2021 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.  
    
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 6 - Inventories

Inventories consist of the following:

June 30,
2021
December 31,
2020
Raw materials$72,090 $71,807 
Work-in-process17,828 15,864 
Finished goods121,405 107,197 
Total$211,323 $194,868 
 
Note 7 – Earnings (Loss) Per Share

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

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The following table sets forth the computation of basic and diluted earnings per share for the three and six months ended June 30, 2021 and 2020:

Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
Net income (loss)$13,290 $(27,400)$23,150 $(21,473)
Basic – weighted average shares outstanding29,125 28,542 29,052 28,506 
Effect of dilutive potential securities3,339  2,912  
Diluted – weighted average shares outstanding32,464 28,542 31,964 28,506 
Net income (loss) (per share)    
Basic$0.46 $(0.96)$0.80 $(0.75)
Diluted0.41 (0.96)0.72 (0.75)
 
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 0.7 million and 0.5 million for the three and six months ended June 30, 2021, respectively. As the Company was in a net loss position for the three and six months ended June 30, 2020, there were no anti-dilutive shares. 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. 

The following is intended to describe the impact of the Notes and related hedge transactions on the calculation of diluted EPS. Additional shares to be issued pursuant to the terms of the Notes and related hedge transactions, if any, would occur at maturity.

The calculation of diluted EPS includes potential diluted shares upon conversion of the Notes when the average market price per share of our common stock for the period is greater than the conversion price of the Notes of $88.80. We intend to settle in cash the principal outstanding and use the treasury stock method when calculating their potential dilutive effect, if any.

During the three and six months ended June 30, 2021, our average share price exceeded the conversion price of the Notes and we included in our diluted share count 1.4 million and 1.2 million shares, respectively, assumed to be issued if the Notes were converted. During the three and six months ended June 30, 2020, our average share price had not exceeded the conversion price of the Notes; therefore, under the net share settlement method, there were no potential shares issuable under the Notes to be used in the calculation of diluted EPS.