CONMED CORPORATION Forward-Looking Statements
In this Report on Form 10-Q, we make forward-looking statements about our financial condition, results of operations and business. Forward-looking statements are statements made by us concerning events that may or may not occur in the future. These statements may be made directly in this document or may be "incorporated by reference" from other documents. Such statements may be identified by the use of words such as "anticipates", "expects", "estimates", "intends" and "believes" and variations thereof and other terms of similar meaning.
Forward-Looking Statements are not Guarantees of Future Performance
Forward-looking statements involve known and unknown risks, uncertainties and other factors, including those that may cause our actual results, performance or achievements or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include those identified under "Risk Factors" in our Annual Report on Form 10-K for the year-endedDecember 31, 2020 and the following, among others: •general economic and business conditions; •compliance with and changes in regulatory requirements; •COVID-19 global pandemic poses significant risks to our business, financial condition and results of operations, which may be heightened if the pandemic, and various government responses to it, continue for an extended period of time; •environmental compliance risks, including lack of availability of sterilization with Ethylene Oxide ("EtO") or other compliance costs associated with the use of EtO; •the possibility thatUnited States or foreign regulatory and/or administrative agencies may initiate enforcement actions against us or our distributors; •competition; •changes in customer preferences; •changes in technology; •the introduction and acceptance of new products; •the availability and cost of materials; •the risk of an information security breach, including a cybersecurity breach; •cyclical customer purchasing patterns due to budgetary and other constraints; •the quality of our management and business abilities and the judgment of our personnel, as well as our ability to attract, motivate and retain employees at all levels of the Company; •the availability, terms and deployment of capital; •future levels of indebtedness and capital spending; •changes in foreign exchange and interest rates; •the ability to evaluate, finance and integrate acquired businesses, products and companies; •changes in business strategy; •the risk of a lack of allograft tissues due to reduced donations of such tissues or due to tissues not meeting the appropriate high standards for screening and/or processing of such tissues; •the ability to defend and enforce intellectual property, including the risks related to theft or compromise of intellectual property in connection with our international operations; •the risk of patent, product and other litigation, as well as the cost associated with such litigation; and •trade protection measures, tariffs and other border taxes, and import or export licensing requirements. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" below and "Risk Factors" and "Business" in our Annual Report on Form 10-K for the year-endedDecember 31, 2020 for a further discussion of these factors. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We do not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events. 22 -------------------------------------------------------------------------------- Table of Contents Overview
Our product lines consist of orthopedic surgery and general surgery. Orthopedic
surgery consists of sports medicine instrumentation and small bone, large bone
and specialty powered surgical instruments as well as, imaging systems for use
in minimally invasive surgery procedures and service fees related to the
promotion and marketing of sports medicine allograft tissue. General surgery
consists of a complete line of endo-mechanical instrumentation for minimally
invasive laparoscopic and gastrointestinal procedures, smoke evacuation devices,
a line of cardiac monitoring products as well as electrosurgical generators and
related instruments. These product lines as a percentage of consolidated net
sales are as follows:
Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Orthopedic surgery 42 % 43 % 44 % 43 %
General surgery 58 % 57 % 56 % 57 %
Consolidated net sales 100 % 100 % 100 % 100 %
A significant amount of our products are used in surgical procedures with
approximately 81% of our revenues derived from the sale of single-use products.
Our capital equipment offerings also facilitate the ongoing sale of related
single-use products and accessories, thus providing us with a recurring revenue
stream. We manufacture substantially all of our products in facilities located
in the United States and Mexico . We market our products both domestically and
internationally directly to customers and through distributors. International
sales approximated 45% and 44% of our consolidated net sales during the nine
months ended September 30, 2021 and 2020, respectively.
Business Environment
Our business was, and to a lesser extent continues today to be, significantly impacted by the emergence of the COVID-19 pandemic, first in theAsia Pacific geography and later inthe United States ,Europe and elsewhere as temporary closures occurred and hospitals and surgery centers postponed many non-urgent surgical procedures in order to minimize the risk of infection. In compliance with various governmental orders, beginning inMarch 2020 we restricted access to our main facilities to only essential personnel required to be onsite while maintaining production and distribution. Although such restrictions continued to be in place as ofSeptember 30, 2021 , we are developing plans in certain of our facilities to ease such restrictions as the number of COVID-19 cases decline and vaccination rates increase. During the first nine months of 2021, revenues increased compared to the first nine months of 2020. We have seen and believe we will continue to experience market variability that could influence sales, suppliers, patients and customers. We also have seen and continue to expect general surgery to rebound faster than orthopedic surgery due to the nature of the products. However, there remains uncertainty related to the COVID-19 pandemic, including the duration and severity of future impacts to the business. See additional discussion in Liquidity and Capital Resources below.
Critical Accounting Policies
Preparation of our financial statements requires us to make estimates and assumptions which affect the reported amounts of assets, liabilities, revenues and expenses. Note 1 to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year-endedDecember 31, 2020 describes the significant accounting policies used in preparation of the Consolidated Financial Statements. On an ongoing basis, we evaluate the critical accounting policies used to prepare our consolidated financial statements, including, but not limited to, those related to goodwill and intangible assets and our pension benefit obligation. 23
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