Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with Selected Financial Data (Item 6), and our Consolidated Financial Statements and related notes contained elsewhere in this report.

This section of this Form 10-K generally discusses 2020 and 2019 items and year-to-year comparisons between 2020 and 2019. Discussions of 2018 items and year-to-year comparisons between 2019 and 2018 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

Overview of CONMED Corporation

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.

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 including 2DHD and 3DHD vision technologies 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, 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:

Orthopedic surgery 43 % 49 % 52 %

A significant amount of our products are used in surgical procedures with approximately 82% 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 44% in 2020, 46% in 2019 and 48% in 2018.

COVID-19

Our business has been significantly impacted by the emergence of the COVID-19 pandemic, with the Company experiencing lower sales in 2020 compared to 2019, first in the Asia/Pacific Rim and later in the United States, Europe and elsewhere as temporary closures occurred and hospitals and surgery centers postponed many non-urgent surgical procedures to minimize the risk of infection. In compliance with various governmental orders, beginning in March we restricted access to our main facilities to only essential personnel required to be on-site while maintaining production and distribution. We expect revenues to increase in 2021 as compared to 2020. We expect the United States to rebound faster than our international markets based on the expected timing of increases in procedural volumes and general surgery rebounding faster than orthopedic surgery due to the nature of the products. However, the extent and duration of the adverse impact of COVID-19 on our business are still uncertain, rapidly changing and are subject to factors outside of our control, see "Item 1A. Risk Factors" for more information. For additional discussion regarding COVID 19, see Liquidity and Capital Resources below.

Buffalo Filter Acquisition

On February 11, 2019, we acquired Buffalo Filter 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. See Note 2 for further information on this business acquisition.

We financed the purchase price for the Buffalo Filter Acquisition using a combination of the issuance of $345.0 million of 2.625% convertible notes due 2024 issued on January 29, 2019 (the Convertible Notes”) and the incurrence of

indebtedness under our sixth amended and restated senior secured credit agreement, which closed on February 7, 2019. Refer to Financing Cash Flows and Note 7 for further details.

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 describes the significant accounting policies used in preparation of the consolidated financial statements. The most significant areas involving management judgments and estimates are described below and are considered by management to be critical to understanding the financial condition and results of operations of CONMED Corporation. Actual results may or may not differ from these estimates.

Goodwill and Intangible Assets

We have a history of growth through acquisitions. 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. Factors that contribute to the recognition of goodwill include synergies that are expected to increase net sales and profits; acquisition of a talented workforce; cost savings opportunities; the strategic benefit of expanding our presence in core and adjacent markets; and diversifying our product portfolio.Customer and distributor relationships, trademarks, tradenames, developed technology, patents and other intangible assets primarily represent allocations of purchase price to identifiable intangible assets of acquired businesses. Sales representation, marketing and promotional rights represent intangible assets created under our agreement with Musculoskeletal Transplant Foundation (“MTF”). Determining the fair value of intangible assets acquired as part of a business combination requires us to make significant estimates. These estimates include the amount and timing of projected future cash flows of each project or technology, revenue growth rates, projected cost of sales, customer attrition rates, the discount rate used to discount those cash flows to present value, the assessment of the asset’s useful life, and the consideration of legal, technical, regulatory, economic, and competitive risks. As these are significant estimates, we would obtain the assistance of a third-party valuation specialist in estimating fair values of intangible assets for significant acquisitions.

Goodwill and intangible assets deemed to have indefinite lives are not amortized, but are subject to at least annual impairment testing. It is our policy to perform our annual impairment testing in the fourth quarter. The identification and measurement of goodwill impairment involves the estimation of the fair value of our business. Estimates of fair value are based on the best information available as of the date of the assessment. We completed our goodwill impairment testing of our single reporting unit during the fourth quarter of 2020. We performed our impairment test utilizing the market capitalization approach to determine whether the fair value of a reporting unit is less than its carrying amount. Based upon our assessment, the fair value of our reporting unit continues to exceed carrying value.

For our indefinite-lived intangible assets, trademarks and tradenames, we performed our impairment testing as of the fourth quarter of 2020 utilizing the relief from royalty income based approach to determine whether the fair value is less than its carrying amount. A considerable amount of management judgment and assumptions are required in performing the impairment testing. The key assumptions used in the impairment testing were long-term revenue growth projections, royalty rates, discount rates and general industry, market and macro-economic conditions. Based upon our assessment, the fair value continues to exceed carrying value.

Intangible assets with a finite life are amortized over the estimated useful life of the asset and are evaluated each reporting period to determine whether events and circumstances warrant a revision to the remaining period of amortization. Intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. The carrying amount of an intangible asset subject to amortization is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of the asset. An impairment loss is recognized by reducing the carrying amount of the intangible asset to its current fair value.

See Note 6 for further discussion of goodwill and other intangible assets.

Pension Plan

We sponsor a defined benefit pension plan (the “pension plan”) that was frozen in 2009. It covered substantially all our United States based employees at the time it was frozen. In conjunction with the pension plan, we recorded a pension benefit obligation totaling $101.2 million as of December 31, 2020. In accounting for this pension plan, we are required to make a number of assumptions, including the expected rate of return on plan assets and discount rate. In determining the expected rate of return on plan assets, we consider the relative weighting of plan assets, the historical performance of total plan

assets and individual asset classes and economic and other indicators of future performance. The discount rate represents the interest rate used in estimating the present value of projected cash flows to settle the Company’s pension obligations. The discount rate assumption is determined by using a full yield curve approach, which involves applying the specific spot rates along the yield curve used in the determination of the benefit obligation that correlates to the relevant projected cash flows. See Note 12 for further discussion of the pension plan.

Consolidated Results of Operations

The following table presents, as a percentage of net sales, certain categories included in our consolidated statements of comprehensive income for the periods indicated:

Years Ended December 31,

Selling and administrative expense 43.3 41.9 41.4

Research and development expense 4.7 4.8 4.9

Income from operations 5.3 8.3 8.3

Other expense — 0.5 —

Income before income taxes 0.2 3.3 5.9

Provision (benefit) for income taxes (0.9) 0.3 1.1

Net Sales

The following table presents net sales by product line for the years ended December 31, 2020, 2019 and 2018:

2020 2019 As Reported Impact of Foreign Currency Constant Currency a

2019 2018 As Reported Impact of Foreign Currency Constant Currency a

(a) Refer to Non-GAAP Financial Measures below for further details.

Net sales decreased 9.7% to $862.5 million in 2020 from $955.1 million in 2019. Net sales decreased across all product lines in 2020 as a result of the COVID-19 pandemic.

•Orthopedic surgery sales decreased 19.1% in 2020 to $374.7 million from $463.3 million in 2019 primarily driven by deferral of non-urgent surgeries in hospitals and surgery centers as a result of the COVID-19 pandemic. A significant portion of this decline was driven by a reduction in capital equipment purchases as hospitals and surgery centers conserved cash and deferred capital outlays.

•General surgery sales decreased 0.8% in 2020 to $487.8 million from $491.8 million in 2019. The decrease was a result of the deferral of non-urgent surgeries in hospitals and surgery centers as a result of the COVID-19 pandemic. We believe the deferral of non-urgent procedures has had a lesser impact on our general surgery lines as a result of the nature of the products and procedures in which they are used and this belief was borne out in the second half of the year as we experienced sequential growth from the third to the fourth quarter, including continued growth in our Buffalo Filter® and AirSeal® products throughout 2020.

Cost of Sales

Cost of sales was $402.2 million in 2020 compared to $430.4 million in 2019. Gross profit margins were 53.4% in 2020 and 54.9% in 2019. The decrease in gross profit margin of 1.5 percentage points in 2020 was driven by the following:

•$6.6 million in costs related to plant underutilization due to abnormally low production as a result of decreased sales caused by the COVID-19 pandemic;

•an increase of $1.1 million in costs related to the consolidation of certain manufacturing operations related to winding down operations at certain locations and moving production lines to other facilities ($4.0 million in 2020 compared to $2.9 million in 2019);

•an increase of $1.5 million in business acquisition costs ($2.8 million in 2020 compared to $1.3 million in 2019);

•$2.2 million in costs related to product rationalization; and

•$1.1 million in restructuring costs related to a voluntary separation arrangement as a result of the COVID-19 pandemic.

Refer to Note 14 for further details.

Selling and Administrative Expense

Selling and administrative expense was $373.8 million in 2020 compared to $400.1 million in 2019. Selling and administrative expense as a percentage of net sales was 43.3% in 2020 and 41.9% in 2019.

The decrease in selling and administrative expense in 2020 was driven mainly by actions taken to reduce expenses in response to the COVID-19 pandemic. We experienced reduced travel due to safety measures put in place and reduced trade show costs as shows were cancelled during the year. We also had lower commission costs during 2020 as sales declined compared to the prior year. In addition, during 2020, we incurred $4.8 million in severance costs related to a voluntary termination program and costs associated with the restructuring of our sales force, a $2.1 million write-off of field inventory used for customer demonstration and evaluation of products resulting from the product rationalization initiative and $1.2 million in acquisition and integration costs relating to the Buffalo Filter acquisition compared to $13.1 million in acquisition and integration costs in 2019. Refer to Note 14 for further details.

Research and Development Expense

Research and development expense was $40.5 million in 2020 and $45.5 million in 2019. As a percentage of net sales, research and development expense was 4.7% in 2020 and 4.8% in 2019. The lower spend in 2020 was driven by cost cutting measures in light of the COVID-19 pandemic while still investing in key projects.

Interest Expense

Interest expense increased to $44.1 million in 2020 compared to $42.7 million in 2019. The weighted average interest rates on our borrowings were 3.65% in 2020 decreasing from 3.71% in 2019. The increase in interest expense during 2020 was primarily due to an increase in non-cash interest expense offset by a decrease in outstanding debt balances and slightly lower interest rates.

Other Expense

Other expense during the year ended December 31, 2020 related to non-service pension costs. Other expense during the year ended December 31, 2019 was mainly related to costs associated with our sixth amended and restated senior credit agreement entered into on February 7, 2019 as further described in Note 7. These costs included a $3.6 million charge related to commitment fees paid to certain of our lenders, which provided a financing commitment for the Buffalo Filter acquisition, and a loss on the early extinguishment of debt of $0.3 million. Also included in 2019 were non-service pension costs.

Provision for Income Taxes

A provision (benefit) for income taxes was recorded at an effective rate of (493.9)% and 8.3% in 2020 and 2019, respectively, as compared to the federal statutory rate of 21.0%. The lower effective tax rate in 2020 was primarily the result of federal tax items having a greater benefit due to lower book income in 2020 as compared to 2019 as well as the benefit relating to the final issuance of tax regulations regarding United States tax on foreign earnings at different rates. A reconciliation of the United States statutory income tax rate to our effective tax rate is included in Note 8.

Non-GAAP Financial Measures

Net sales on a "constant currency" basis is a non-GAAP measure. The Company analyzes net sales on a constant currency basis to better measure the comparability of results between periods. To measure percentage sales growth in constant currency, the Company removes the impact of changes in foreign currency exchange rates that affect the comparability and trend of net sales.

Because non-GAAP financial measures are not standardized, it may not be possible to compare this financial measure with other companies' non-GAAP financial measures having the same or similar names. This adjusted financial measure should not be considered in isolation or as a substitute for reported net sales growth, the most directly comparable GAAP financial measure. This non-GAAP financial measure is an additional way of viewing net sales that, when viewed with our GAAP results, provides a more complete understanding of our business. The Company strongly encourages investors and shareholders to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.

Liquidity and Capital Resources

Our liquidity needs arise primarily from capital investments, working capital requirements and payments on indebtedness under the amended and restated senior credit agreement, described below. We have historically met these liquidity requirements with funds generated from operations and borrowings under our revolving credit facility. In addition, we have historically used term borrowings, including borrowings under the sixth amended and restated senior credit agreement and borrowings under separate loan facilities, in the case of real property purchases, to finance our acquisitions. We also have the

ability to raise funds through the sale of stock or we may issue debt through a private placement or public offering.

As a result of the COVID-19 pandemic, we experienced lower sales in 2020, however as noted above we expect revenues to increase in 2021. On April 17, 2020 we amended our senior credit agreement to suspend our required leverage ratios for up to four quarters. On November 20, 2020, we entered into a third amendment under our senior credit agreement to lower the applicable margin on loans and lower the interest floor on Eurocurrency loans agreed upon in April as actual and forecasted results are expected to be better than anticipated. We have certain minimum liquidity and fixed charge coverage ratio requirements with which we were in compliance with as of December 31, 2020. Management believes that cash flow from operations, including cash and cash equivalents on hand and available borrowing capacity under our revolving credit facility, will be adequate to meet our liquidity needs for the foreseeable future. We have undertaken steps to reduce our spending and expenses in light of our expectation that our revenues will be depressed over the next several months. While we expect that we will be well positioned when surgeries begin to return to their pre-pandemic levels, we are unable to predict with certainty how long the COVID-19 pandemic will last, or how severe its economic impact will be. Even after the COVID-19 pandemic and government responses thereto have subsided, residual economic and other effects may have an impact on the demand for post-pandemic surgery levels that are difficult to predict. If the downturn is more severe and prolonged than we currently expect, we may need to take further steps to reduce our costs, or to refinance our debt.

We had total cash on hand at December 31, 2020 of $27.4 million, of which approximately $26.3 million was held by our foreign subsidiaries outside the United States with unremitted earnings. During 2020, we redeployed $15.8 million of cash from certain non-U.S. subsidiaries primarily for U.S. debt reduction which consisted primarily of earnings that were taxed in 2017 as part of the deemed repatriation toll charge implemented by Tax Reform. We may repatriate funds from certain foreign subsidiaries in the future. Refer to Note 8 for further details.

Operating Cash Flows

Our net working capital position was $226.5 million at December 31, 2020. Net cash provided by operating activities was $64.5 million in 2020 and $95.1 million in 2019 generated on net income of $9.5 million in 2020 and $28.6 million in 2019. The decrease in cash provided by operating activities in 2020 as compared to 2019 was mainly driven by lower sales and net income in 2020 resulting from the COVID-19 pandemic. Significant impacts to operating cash flows in 2020 include increases from accounts receivable as fourth quarter sales in 2020 were lower than the same period in 2019 offset by decreases in operating cash flow caused by higher inventories on lower sales compared to the same period a year ago. Use of cash in other assets declined in 2020 compared to 2019 as lower sales force activity caused by the pandemic resulted in lower field inventory requirements.

Investing Cash Flows

Net cash used in investing activities decreased to $13.6 million in 2020 compared to $387.7 million in 2019 primarily due to the $365 million payment for the Buffalo Filter acquisition in 2019 and $3.2 million in cash received from the sale of a facility during 2020. Capital expenditures were $13.0 million and $20.1 million in 2020 and 2019, respectively.

Financing Cash Flows

Financing activities in 2020 used cash of $52.1 million compared to providing cash of $300.9 million in 2019. Below is a summary of the significant financing activities:

•During 2019, we received proceeds of $345.0 million related to the issuance of 2.625% convertible notes as further described below.

•During 2019, we entered into a $265.0 million term loan in conjunction with the refinancing of our senior credit agreement. This new term loan replaced the previous term loan and resulted in payments of $13.3 million during the year ended December 31, 2020 compared to $110.7 million in net proceeds in the prior year.

•We had net repayments on our revolving line of credit of $13.0 million and $92.0 million in 2020 and 2019, respectively.

•In 2019, we paid $51.2 million to purchase hedges related to our convertible notes. Partially offsetting this, were proceeds of $30.6 million from the issuance of warrants as further described below.

•We paid $2.7 million and $6.5 million in 2020 and 2019, respectively, in contingent consideration related to prior acquisitions.

•In 2020, we paid debt issuance costs of $3.2 million in connection with the April 17, 2020 and November 20, 2020 amendments of our sixth amended and restated senior credit agreement as further described below compared to $16.2 million in 2019 related to the sixth amended and restated senior credit agreement and 2.625% convertible notes.

On February 7, 2019, we entered into a sixth amended and restated senior credit agreement consisting of: (a) a $265.0 million term loan facility and (b) a $585.0 million revolving credit facility. The revolving credit facility will terminate and the loans outstanding under the term loan facility will mature on the earlier of (i) February 7, 2024 or (ii) 91 days prior to the earliest scheduled maturity date of the 2.625% convertible notes due in 2024 described below, (if, as of such date, more than $150.0 million in aggregate principal amount of such convertible notes (or any refinancing thereof) remains outstanding). The term loan facility is payable in quarterly installments increasing over the term of the facility. Proceeds from the term loan facility and borrowings under the revolving credit facility were used to repay the then existing senior credit agreement and in part to finance the acquisition of Buffalo Filter. As noted above, on April 17, 2020, we amended our sixth amended and restated senior credit agreement to suspend our required leverage ratios for up to four quarters. On November 20, 2020, we entered into a third amendment under our senior credit agreement to lower the applicable margin on the loans and lower the interest floor on Eurocurrency loans agreed upon in April as forecasted results are expected to be better than anticipated. We have certain minimum liquidity and fixed charge coverage ratio requirements. Interest rates are adjusted so that the applicable margin for base rate loans is 2.00% per annum and for Eurocurrency rate loans is 3.00% per annum, and the applicable commitment fee rate for the revolving credit facility is 0.50%. Following the suspension period, the applicable margin will depend upon CONMED’s consolidated senior secured leverage ratio, using the pricing grid set forth in the November 2020 amendment. Interest rates were at LIBOR (subject to 0.50% floor) plus an interest rate margin of 3.00% (3.50% at December 31, 2020).

There were $241.8 million in borrowings outstanding on the term loan facility as of December 31, 2020. There were $207.0 million in borrowings outstanding under the revolving credit facility as of December 31, 2020. Our available borrowings on the revolving credit facility at December 31, 2020 were $375.5 million with approximately $2.5 million of the facility set aside for outstanding letters of credit.

The sixth amended and restated senior credit agreement is collateralized by substantially all of our personal property and assets. The sixth amended and restated senior credit agreement contains covenants and restrictions which, among other things, require the maintenance of certain financial ratios and restrict dividend payments and the incurrence of certain indebtedness and other activities, including acquisitions and dispositions. We were in full compliance with these covenants and restrictions as of December 31, 2020. We are also required, under certain circumstances, to make mandatory prepayments from net cash proceeds from any issuance of equity and asset sales.

On January 29, 2019, we issued $345.0 million in 2.625% convertible notes due in 2024 (the "Notes"). Interest is payable semi-annually in arrears on February 1 and August 1 of each year, commencing August 1, 2019. The Notes will mature on February 1, 2024, unless earlier repurchased or converted. The Notes represent subordinated unsecured obligations and are convertible under certain circumstances, as defined in the indenture, into a combination of cash and CONMED common stock. The Notes may be converted at an initial conversion rate of 11.2608 shares of our common stock per $1,000 principal amount of Notes (equivalent to an initial conversion price of approximately $88.80 per share of common stock). Holders of the Notes may convert the Notes at their option at any time on or after November 1, 2023 through the second scheduled trading day preceding the maturity date. Holders of the Notes will also have the right to convert the Notes prior to November 1, 2023, but only upon the occurrence of specified events. The conversion rate is subject to anti-dilution adjustments if certain events occur. A portion of the net proceeds from the offering of the Notes were used as part of the financing for the Buffalo Filter acquisition and $21.0 million were used to pay the cost of certain convertible notes hedge transactions as further described below.

In connection with the offering of the Notes, we entered into convertible notes hedge transactions with a number of financial institutions (each, an “option counterparty”). The convertible notes hedge transactions cover, subject to anti-dilution adjustments substantially similar to those applicable to the Notes, the number of shares of our common stock underlying the Notes. Concurrently with entering into the convertible notes hedge transactions, we also entered into separate warrant transactions with each option counterparty whereby we sold to such option counterparty warrants to purchase, subject to customary anti-dilution adjustments, the same number of shares of our common stock.

The convertible notes hedge transactions are expected generally to reduce the potential dilution upon conversion of the Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Notes, as the case may be, in the event that the market price per share of our common stock, as measured under the terms of the convertible notes hedge transactions, is greater than the strike price ($114.92) of the convertible notes hedge transactions, which initially corresponds to the conversion price of the Notes and is subject to anti-dilution adjustments substantially similar to those applicable to the conversion rate of the Notes. If, however, the market price per share of our common stock, as measured under the terms of the warrant transactions, exceeds the strike price of the warrants, there would nevertheless be dilution to the extent that such market price exceeds the strike price of the warrants, unless we elect to settle the warrants in cash.

Our Board of Directors has authorized a $200.0 million share repurchase program. Through December 31, 2020, we have repurchased a total of 6.1 million shares of common stock aggregating $162.6 million under this authorization and have $37.4 million remaining available for share repurchases. The repurchase program calls for shares to be purchased in the open market or in private transactions from time to time. We may suspend or discontinue the share repurchase program at any time. We have not purchased any shares of common stock under the share repurchase program during 2020. We have financed the repurchases and may finance additional repurchases through operating cash flow and from available borrowings under our revolving credit facility.

Management believes that cash flow from operations, including cash and cash equivalents on hand and available borrowing capacity under our sixth amended and restated senior credit agreement, will be adequate to meet our anticipated operating working capital requirements, debt service, funding of capital expenditures, dividend payments and common stock repurchases in the foreseeable future. See “Item 1A. Risk Factors - Risks Related to Our Indebtedness."

Contractual Obligations

The following table summarizes our contractual obligations for the next five years and thereafter (amounts in thousands) as of December 31, 2020. Purchase obligations represent purchase orders for goods and services placed in the ordinary course of business.

Payments Due by Period

Total Less than1 Year 1-3Years 3-5Years More than5 Years

In addition to the above contractual obligations, we are required to make periodic interest payments on our long-term debt obligations (see additional discussion under Item 7A. “Quantitative and Qualitative Disclosures About Market Risk—Interest Rate Risk” and Note 7). The above table also does not include unrecognized tax benefits of approximately $0.2 million, the timing and certainty of recognition for which is not known (See Note 8).

Stock-based Compensation

We have reserved shares of common stock for issuance to employees and directors under two shareholder-approved share-based compensation plans (the "Plans"). The Plans provide for grants of stock options, stock appreciation rights (“SARs”), dividend equivalent rights, restricted stock, restricted stock units (“RSUs”), performance share units (“PSUs”) and other equity-based and equity-related awards. The exercise price on all outstanding stock options and SARs is equal to the quoted fair market value of the stock at the date of grant. RSUs and PSUs are valued at the market value of the underlying stock on the date of grant. Stock options, SARs, RSUs and PSUs are generally non-transferable other than on death and generally become exercisable over a four to five year period from date of grant. Stock options and SARs expire ten years from date of grant. SARs are only settled in shares of the Company’s stock (See Note 9). Total pre-tax stock-based compensation expense recognized in the consolidated statements of comprehensive income was $13.1 million, $11.8 million and $10.0 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Other Matters

Through April 1, 2020, our credit facility allowed us to seek to sell products to certain customers in Iran in compliance with applicable laws and regulations and subject to certain terms and conditions, including pre-approval by us and our lenders of the identity of any distributor and prior review of each of the end-customers. We had sales to a third-party distributor in Iran during the first quarter of 2020. We limited such sales into Iran to products that qualified as “medical supplies” within the meaning of the general license, or covered by specific licenses, provided by the Iranian Transactions and Sanctions Regulations set forth in the regulations promulgated by the Office of Foreign Assets Control (“OFAC”) of the United States Department of the Treasury set forth at 31 C.F.R. § 560.530. We have implemented certain controls and processes designed to ensure that the ultimate end-users for the products are those permitted under the OFAC general license, and that the sales and transactions with the Iranian distributor otherwise comply with the requirements of the OFAC regulations. The expected revenues and net profits associated with sales to the Iranian distributor were not material to our overall results of operations.

We do not believe that our activities to date have been subject to required disclosure under Section 13(r) of the Securities Exchange Act of 1934 (the “Exchange Act”), which, among other things, requires disclosure of transactions and activities knowingly entered into with the Government of Iran that do not benefit from an OFAC license and with certain designated parties. If, however, activities are in the future discovered to be within the scope of the transactions and activities captured by Section 13(r) of the Exchange Act, we will make the required disclosures and notices.

New Accounting Pronouncements

See Note 17 for a discussion of new accounting pronouncements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the potential loss arising from adverse changes in market rates and prices such as commodity prices, foreign currency exchange rates and interest rates. In the normal course of business, we are exposed to various market risks, including changes in foreign currency exchange rates and interest rates. We manage our exposure to these and other market risks through regular operating and financing activities and as necessary through the use of derivative financial instruments.

Foreign currency risk

Approximately 44% of our total 2020 consolidated net sales were to customers outside the United States. We have sales subsidiaries in a significant number of countries in Europe as well as Australia, Canada, China, Japan and Korea. In those countries in which we have a direct presence, our sales are denominated in the local currency amounting to approximately 34% of our total net sales in 2020. The remaining 10% of sales to customers outside the United States was on an export basis and transacted in United States dollars.

Because a significant portion of our operations consist of sales activities in foreign jurisdictions, our financial results may be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the markets in which we distribute products. During 2020, foreign currency exchange rates, including the effects of the hedging program, caused sales to decrease by approximately $4.9 million.

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.

Refer to Note 16 for further discussion.

Interest rate risk

At December 31, 2020, we had approximately $448.8 million of variable rate long-term debt outstanding under our senior credit agreement. Assuming no repayments, if market interest rates for similar borrowings averaged 1.0% more in 2021 than they did in 2020, interest expense would increase, and income before income taxes would decrease by $4.5 million. Comparatively, if market interest rates for similar borrowings average 1.0% less in 2021 than they did in 2020, our interest expense would decrease, and income before income taxes would increase by $4.5 million.

Item 8. Financial Statements and Supplementary Data

Our 2020 Financial Statements are included in this Form 10-K beginning on page 43 and incorporated by reference herein.

Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosures

There were no changes in or disagreement with accountants on accounting and financial disclosure.

Item 9A. Controls and Procedures

As of the end of the period covered by this report, an evaluation was carried out by CONMED Corporation’s management, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective as of the end of the period covered by this report. In addition, no change in our internal control over financial reporting (as defined in Rule 13a-15 under the Securities Exchange Act of 1934) occurred during the fourth quarter of the year ended December 31, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting and the Report of Independent Registered Public Accounting Firm thereon are set forth in Part IV, Item 15 of the Annual Report on Form 10-K.

Item 9B. Other Information

Not applicable.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information required by this item is incorporated herein by reference to the sections captioned “Proposal One: Election of Directors”, “Directors, Executive Officers, Other Company Officers and Nominees for the Board of Directors”, “Delinquent Section 16(a) Reports", “Ethics Disclosure” and "Meetings of the Board of Directors and Committees, Leadership Structure and Risk Oversight” in CONMED Corporation’s definitive Proxy Statement or other informational filing to be filed with the Securities and Exchange Commission on or about April 9, 2021.

Item 11. Executive Compensation

The information required by this item is incorporated herein by reference to the sections captioned “Compensation Discussion and Analysis”, “Compensation Committee Report on Executive Compensation”, “Summary Compensation Table”, “Grants of Plan-Based Awards”, “Outstanding Equity Awards at Fiscal Year-End”, “Option Exercises and Stock Vested”, “Non-Qualified Deferred Compensation”, “Potential Payments on Termination or Change-in-Control”, “Director Compensation,” “Pay Ratio” and “Board of Directors and Compensation Committee Interlocks and Insider Participation; Certain Relationships and Related Transactions” in CONMED Corporation’s definitive Proxy Statement or other informational filing to be filed with the Securities and Exchange Commission on or about April 9, 2021.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item is incorporated herein by reference to the section captioned “Security Ownership of Certain Beneficial Owners and Management” in CONMED Corporation’s definitive Proxy Statement or other informational filing to be filed with the Securities and Exchange Commission on or about April 9, 2021.

Information relating to shareholder approved compensation plans under which equity securities of CONMED Corporation are authorized for issuance is set forth below:

Equity Compensation Plan Information

Equity compensation plans not approved by security holders — — —

The number of securities included in column (a) above consists of outstanding stock options, share appreciation rights (“SARs”) and performance share units, however the weighted-average exercise price in column (b) is for stock options and SARs only.

During 2018, the Company granted employment inducement awards in conjunction with the hiring of the Executive Vice President & Chief Financial Officer. This included 48,000 stock options, that would be issued upon exercise, at an exercise price of $50.61 per share. These shares are not part of a shareholder approved plan and no shares remain available for future issuance.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this item is incorporatedherein by reference to the section captioned “Directors, Executive Officers and Nominees for the Board of Directors” and “Board of Directors and Compensation Committee Interlocks and Insider Participation; Certain Relationships and Related Transactions” in CONMED Corporation’s definitive Proxy Statement or other informational filing to be filed with the Securities and Exchange Commission on or about April 9, 2021.

Item 14. Principal Accounting Fees and Services

The information required by this item is incorporatedherein by reference to the section captioned “Principal Accounting Fees and Services” in CONMED Corporation’s definitive Proxy Statement or other informational filing to be filed with the Securities and Exchange Commission on or about April 9, 2021.

PART IV

Item 15. Exhibits, Financial Statement Schedules

Index to Financial Statements

(a)(1) List of Financial Statements Page in Form 10-K

Management’s Report on Internal Control Over Financial Reporting 43

Report of Independent Registered Public Accounting Firm 44

Notes to Consolidated Financial Statements 51

(2) List of Financial Statement Schedules

(3) List of Exhibits

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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

By: /s/ Curt R. Hartman

Curt R. Hartman

(President and Chief

Executive Officer)

Date:

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature Title Date

/s/ CURT R. HARTMAN President, Chief Executive Officer and

Curt R. Hartman Chair of the Board of Directors February 22, 2021

/s/ TODD W. GARNER Executive Vice President

Todd W. Garner and Chief Financial Officer February 22, 2021

/s/ TERENCE M. BERGE Vice President-

Terence M. Berge Corporate Controller February 22, 2021

/s/ MARTHA GOLDBERG ARONSON

Martha Goldberg Aronson Lead Independent Director February 22, 2021

/s/ DAVID BRONSON

David Bronson Director February 22, 2021

/s/ BRIAN P. CONCANNON

Brian P. Concannon Director February 22, 2021

/s/ LAVERNE COUNCIL

Laverne Council Director February 22, 2021

/s/ CHARLES M. FARKAS

Charles M. Farkas Director February 22, 2021

/s/ JEROME J. LANDE

Jerome J. Lande Director February 22, 2021

/s/ BARBARA SCHWARZENTRAUB

Barbara Schwarzentraub Director February 22, 2021

/s/ MARK E. TRYNISKI

Mark E. Tryniski Director February 22, 2021

/s/ JOHN L. WORKMAN

John L. Workman Director February 22, 2021

Exhibit Index

Exhibit No. Description

21* - Subsidiaries of the Registrant.

23* - Consent of Independent Registered Public Accounting Firm.

101.SCH* - XBRL Taxonomy Extension Schema Document

101.CAL* - XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF* - XBRL Taxonomy Extension Definition Linkbase Document

101.LAB* - XBRL Taxonomy Extension Label Linkbase Document

101.PRE* - XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith

+ Management contract or compensatory plan or arrangement

MANAGEMENT’S REPORT ON INTERNAL CONTROL

OVER FINANCIAL REPORTING

The management of CONMED Corporation is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Management assessed the effectiveness of CONMED’s internal control over financial reporting as of December 31, 2020. In making its assessment, management utilized the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in “Internal Control-Integrated Framework”, released in 2013. Management has concluded that based on its assessment, CONMED’s internal control over financial reporting was effective as of December 31, 2020. The effectiveness of the Company’s internal control over financial reporting as of December 31, 2020 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

/s/ Curt R. Hartman

Curt R. Hartman

President and

Chief Executive Officer

/s/ Todd W. Garner

Todd W. Garner

Executive Vice President and

Chief Financial Officer

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of CONMED Corporation

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of CONMED Corporation and its subsidiaries(the "Company") as of December 31, 2020 and 2019, and the related consolidated statements of comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2020, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2)(collectively referred to as the “consolidated financial statements”).We also have audited the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidatedfinancial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020 based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 17 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidatedfinancial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidatedfinancial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidatedfinancial statements included performing procedures to assess the risks of material misstatement of the consolidatedfinancial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidatedfinancial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidatedfinancial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures

that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidatedfinancial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of Pension Benefit Obligation

As described in Note 12 to the consolidated financial statements, the Company’s consolidated pension benefit obligation was $101.2 million as of December 31, 2020. Management's discount rate assumption is the significant assumption in determining the projected benefit obligation of the Company’s pension plan. The discount rate assumption is determined by management using a full yield curve approach, which involves applying the specific spot rates along the yield curve used in the determination of the benefit obligation that correlates to the relevant projected cash flows.

The principal considerations for our determination that performing procedures relating to the valuation of the pension benefit obligation is a critical audit matter are (i) the significant judgment by management to determine the pension benefit obligation, (ii) significant auditor judgment, subjectivity, and effort in evaluating management’s significant assumptions related to the discount rate, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.These procedures included testing the effectiveness of controls relating to the valuation of the pension benefit obligation, including controls over management's methodology, significant assumption, and data. These procedures also included, among others, (i) testing the completeness and accuracy of underlying data used in the valuation of the pension benefit obligation and (ii) the involvement of professionals with specialized skill and knowledge to assist in (a) testing management’s process for determining the pension benefit obligation, (b) evaluating the appropriateness of the methodology used by management, and (c) evaluating the reasonableness of the discount rate.

/s/ PricewaterhouseCoopers LLP

Rochester, New York

February 22, 2021

We have served as the Company’s auditor since 1982.

CONMED CORPORATION

CONSOLIDATED BALANCE SHEETS

December 31, 2020 and 2019

(In thousands except share and per share amounts)

ASSETS

Current assets:

Accounts receivable, less allowance for doubtful

Prepaid expenses and other current assets 17,278 17,794

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Current portion of long-term debt $ 18,415 $ 13,596

Commitments and contingencies (Note 13)

Shareholders' equity:

Preferred stock, par value $.01 per share; authorized

500,000 shares, none issued or outstanding — —

Accumulated other comprehensive loss (63,681) (59,277)

Less: Treasury stock, at cost;

The accompanying notes are an integral part of the consolidated financial statements.

CONMED CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years Ended December 31, 2020, 2019 and 2018

(In thousands except per share amounts)

Per share data:

Other comprehensive income (loss), before income tax:

Foreign currency translation adjustments $ 6,963 $ 25 $ (8,369)

Other comprehensive income (loss), before income tax (8,025) (4,676) 1,731

Other comprehensive income (loss), net of income tax $ (4,404) $ (3,540) $ (710)

The accompanying notes are an integral part of the consolidated financial statements.

CONMED CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Years Ended December 31, 2020, 2019 and 2018

(In thousands)

Shares Amount

Comprehensive income (loss):

Foreign currency translation adjustments (8,369)

Pension liability, net (672)

Cash flow hedging gain, net 8,331

Total comprehensive income 40,144

Cumulative effect of change in accounting principle(1) 6,389 (5,949) 440

Convertible notes debt issuance costs (1,233) (1,233)

Comprehensive income (loss):

Foreign currency translation adjustments 25

Pension liability, net 27

Cash flow hedging loss, net (3,592)

Total comprehensive income 25,080

Comprehensive income (loss):

Foreign currencytranslation adjustments 6,963

Pension liability, net (4,929)

Cash flow hedging loss, net (6,438)

Total comprehensive income 5,113

(1)We recorded the cumulative impact of adopting ASU 2014-09, Revenue from Contracts with Customers, (and its amendments) and ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220) in 2018.

The accompanying notes are an integral part of the consolidated financial statements.

CONMED CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2020, 2019 and 2018

(In thousands)

Cash flows from operating activities:

Amortization of debt discount 9,692 8,302 —

Amortization of deferred debt issuance costs 3,723 3,454 1,042

Loss on early extinguishment of debt — 300 —

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

liabilities, net of acquired assets:

Cash flows from investing activities:

Proceeds from sale of a facility 3,227 — —

Cash flows from financing activities:

Proceeds from term loan — 265,000 —

Proceeds from convertible notes — 345,000 —

Payments on mortgage notes — (836) (1,574)

Payments related to contingent consideration (2,671) (6,466) (21,323)

Payments related to debt issuance costs (3,153) (16,210) (913)

Purchases of convertible notes hedges — (51,198) —

Proceeds from issuance of warrants — 30,567 —

Effect of exchange rate changes on cash and cash equivalents 2,666 (7) (1,040)

Net increase (decrease) in cash and cash equivalents 1,500 8,345 (15,111)

Non-cash investing and financing activities:

Contractual obligations from asset acquisition $ — $ 5,639 $ 8,360

Supplemental disclosures of cash flow information:

Cash paid during the year for:

The accompanying notes are an integral part of the consolidated financial statements.

CONMED CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands except per share amounts)

Note 1 — Operations and Significant Accounting Policies

Organization and operations

Principles of consolidation

The consolidated financial statements include the accounts of CONMED Corporation and its controlled subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and judgments which affect the reported amounts of assets, liabilities, related disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. The Company considered COVID-19 related impacts on its estimates, as appropriate, within its consolidated financial statements and there may be changes to those estimates in future periods. The Company believes that the accounting estimates are appropriate after giving consideration to the increased uncertainties surrounding the severity and duration of the COVID-19 pandemic. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may differ from those estimates.

Cash and cash equivalents

We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents.

Inventories

Inventories are valued at the lower of cost and net realizable value determined on the FIFO (first-in, first-out) cost method.

We write-off excess and obsolete inventory resulting from the inability to sell our products at prices in excess of current carrying costs. We make estimates regarding the future recoverability of the costs of our products and record a provision for excess and obsolete inventories based on historical experience and expected future trends.

Property, plant and equipment

Property, plant and equipment are stated at cost and depreciated using the straight-line method over the following estimated useful lives:

Building and improvements 12 to 40 years

Leasehold improvements Shorter of life of asset or life of lease

Machinery and equipment 2 to 15 years

Leases

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. We use the implicit rate when readily determinable. 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. 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 ten 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. Refer to Note 5 for further detail on leases.

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 non-lease 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.

Goodwill and other intangible assets

amortization. Intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. The carrying amount of an intangible asset subject to amortization is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of the asset. An impairment loss is recognized by reducing the carrying amount of the intangible asset to its current fair value.

Other long-lived assets

We review other long-lived assets consisting of property, plant and equipment and field inventory for impairment whenever events or circumstances indicate that such carrying amounts may not be recoverable. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the asset, an impairment loss is recognized by reducing the recorded value to its current fair value.

The Company maintains field inventory consisting of capital equipment for customer demonstration and evaluation purposes. Field inventory is generally not sold to customers but rather continues to be used over its useful life for demonstration, evaluation and loaner purposes. An annual wear and tear provision has been recorded on field inventory. The net book value of such equipment at December 31, 2020 and 2019 is $43.3 million and $50.3 million, respectively.

Translation of foreign currency financial statements

Assets and liabilities of foreign subsidiaries have been translated into United States dollars at the applicable rates of exchange in effect at the end of the period reported. Revenues and expenses have been translated at the applicable weighted average rates of exchange in effect during the period reported. Translation adjustments are reflected in accumulated other comprehensive loss. Transaction gains and losses are included in net income.

Foreign exchange and hedging activity

We manage our foreign currency transaction risks through the use of forward contracts to hedge forecasted cash flows associated with foreign currency transaction exposures. 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 reclassified 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 denominated 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. We record these forward contracts at fair value with resulting gains and losses included in selling and administrative expense in the consolidated statements of comprehensive income.

Income taxes

Deferred income tax assets and liabilities are based on the difference between the financial statement and tax basis of assets and liabilities and operating loss and tax credit carryforwards as measured by the enacted tax rates that are anticipated to be in effect in the respective jurisdictions when these differences reverse. The deferred income tax provision generally represents the net change in the assets and liabilities for deferred income taxes. A valuation allowance is established when it is necessary to reduce deferred income tax assets to amounts for which realization is likely. In assessing the need for a valuation allowance, we estimate future taxable income, considering the feasibility of ongoing tax planning strategies and the realizability of tax loss carryforwards following tax law ordering rules. Valuation allowances related to deferred tax assets may be impacted by changes to tax laws, changes to statutory tax rates, reversal of temporary differences and ongoing and future taxable income levels.

Deferred income taxes are not provided on the unremitted earnings of certain subsidiaries outside of the United States earned after December 31, 2017 as it is expected that these earnings are permanently reinvested. Such earnings may become taxable upon a repatriation of assets from a subsidiary or the sale or liquidation of a subsidiary. Deferred income taxes are provided when the Company no longer considers subsidiary earnings to be permanently invested, such as in situations where the Company’s subsidiaries plan to make future dividend distributions.

Revenue recognition

The Company recognizes revenue when we have satisfied a performance obligation by transferring a promised good or service (that is an asset) to a customer. An asset is transferred when the customer obtains control of that asset. The following policies apply to our major categories of revenue transactions:

•Revenue is recognized when product is shipped at which point the performance obligation is satisfied and the customer obtains control of the product.

•We place 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. In these circumstances, no revenue is recognized upon capital equipment shipment as the equipment is loaned and subject to return if certain minimum single-use purchases are not met. Revenue is recognized upon the sale and shipment of the related single-use products. The cost of the equipment is amortized over its estimated useful life which is generally five years.

•We recognize revenues in accordance with the terms of our agreement with MTF on a net basis as our role is that of an agent earning a commission or fee. MTF is responsible for the sourcing, processing and distribution of allograft tissue for sports medicine procedures while the Company represents, markets and promotes MTF’s sports medicine allograft tissues to customers. The Company is paid a fee by MTF which is calculated as a percentage of the net amounts invoiced by MTF to customers for sports medicine allograft tissues. The Company accounts for the services provided to MTF as a series of distinct performance obligations and each service is recognized over time as MTF simultaneously receives and consumes the benefit.

•Product returns are only accepted at the discretion of the Company and in accordance with our “Returned Goods Policy”. Historically, the level of product returns has not been significant. We accrue for sales returns, rebates and allowances based upon an analysis of historical customer returns and credits, rebates, discounts and current market conditions.

•Our terms of sale to customers generally do not include any obligations to perform future services. Limited warranties are provided for capital equipment sales and provisions for warranty are provided at the time of product sale based upon an analysis of historical data.

•Amounts billed to customers related to shipping and handling have been included in net sales. Shipping and handling costs included in selling and administrative expense were $14.6 million, $15.4 million and $14.0 million for 2020, 2019 and 2018, respectively.

•We sell to a diversified base of customers around the world and, therefore, believe there is no material concentration of credit risk.

•We assess the risk of loss on accounts receivable and adjust the allowance for doubtful accounts based on this risk assessment. We do so by applying historical loss rates to our accounts receivable aging schedule to estimate expected credit losses. We further adjusted expected credit losses for specifically identified and forecasted credit losses. Historically, losses on accounts receivable have not been material. Management believes that the allowance for doubtful accounts is adequate to provide for probable losses resulting from accounts receivable.

•We sell extended warranties to customers that are typically for a period of one to three years. The related revenue is recorded as a contract liability and recognized over the life of the contract on a straight-line basis, which is reflective of our obligation to stand ready to provide repair services.

Please refer to Note 10 for further detail on revenue.

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 during the period.The following table sets forth the computation of basic and diluted earnings per share at December 31, 2020, 2019 and 2018, respectively:

Effect of dilutive potential securities 883 1,170 772

Net income (per share)

The shares used in the calculation of diluted EPS exclude options and stock appreciation rights ("SARs") to purchase shares where the exercise price was greater than the average market price of common shares for the year and the effect of the inclusion would be anti-dilutive. Such shares aggregated approximately 1.4 million, 0.7 million and 0.7 million at December 31, 2020, 2019 and 2018, respectively. As more fully described in Note 7, 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 calculation of diluted EPS would include 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. During the years ended December 31, 2020 and 2019, our average share price has 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. We intend to settle in cash the principal outstanding and use the treasury stock method when calculating their potential dilutive effect, if any. We have entered into convertible notes hedge transactions to increase the effective conversion price of the Notes to $114.92. However, our convertible notes hedges are not included when calculating potential dilutive shares since their effect is always anti-dilutive.

Stock-based compensation

All share-based payments to employees, including grants of employee stock options, restricted stock units, performance share units and stock appreciation rights are recognized in the financial statements based at their fair values. Compensation expense is generally recognized using a straight-line method over the vesting period. Compensation expense for performance share units is recognized using the graded vesting method.

We issue shares under our stock based compensation plans out of treasury stock whereby treasury stock is reduced by the weighted average cost of such treasury stock. To the extent there is a difference between the cost of the treasury stock and the exercise price of shares issued under stock based compensation plans, we record gains to paid in capital; losses are recorded to paid in capital to the extent any gain was previously recorded, otherwise the loss is recorded to retained earnings.

Accumulated other comprehensive loss

Accumulated other comprehensive loss consists of the following:

Net current-period other comprehensive income (loss) 8,331 (672) (8,369) (710)

Cumulative effect of change in accounting principle(b) (716) (5,233) — (5,949)

Net current-period other comprehensive income (loss) (3,592) 27 25 (3,540)

(a) The cash flow hedging gain (loss) and pension liability accumulated other comprehensive income components are included in sales or cost of sales and as a component of net periodic pension cost, respectively. Refer to Note 16 and Note 12, respectively, for further details.

(b) We recorded the cumulative impact of adopting ASU 2018-02 in 2018, which allows for the elimination of the stranded tax effects of Tax Reform through a reclassification between accumulated other comprehensive income (loss) and retained earnings.

Note 2 – Business Acquisitions

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 business combination was funded through a combination of cash on hand and long-term borrowings as further described in Note 7.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as a result of the Buffalo Filter Acquisition.

Accounts receivable 4,587

Other current assets 146

Property, plant & equipment 4,036

Deferred income taxes 80

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

The goodwill recorded as part of the acquisition primarily represents revenue synergies, as well as operating efficiencies and cost savings. The goodwill deductible for tax purposes is $215.8 million. The weighted amortization period for intangibles acquired is 16 years. Customer relationships were valued using the multi-period excess earnings model, and are being amortized over a weighted average life of 16 years. Developed technology and trademarks and tradenames were valued using the relief from royalty method, and are being amortized over a weighted average life of 10 and 20 years, respectively. Significant judgment was applied in estimating the fair value of the customer relationships intangible asset acquired, which involved the use of significant estimates and assumptions with respect to the timing and amounts of cash flow projections, including revenue growth rates, customer attrition rates, the discount rate and projected cost of sales.

The unaudited pro forma information for the years ended December 31, 2019 and 2018, assuming the 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.

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 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 year ended December 31, 2018 were $1.3 million in cost of goods sold and $13.1 million in selling and administrative expense on the consolidated statement of comprehensive income. Such amounts are excluded from the determination of pro forma net income for the year ended December 31, 2019.

Net sales associated with Buffalo Filter of $49.6 million have been recorded in the consolidated statement of comprehensive income for the year ended December 31, 2019. It is impracticable to determine the earnings recorded in the consolidated statement of comprehensive income for the year ended December 31, 2019 as these amounts are not separately measured.

On December 4, 2019, we acquired, through a share purchase agreement, the operations of a distributor for total estimated consideration of approximately $13.9 million. The purchase price included $4.1 million of identifiable intangible assets and $0.7 million of goodwill. Pro forma results of operations for the acquisition have not been presented as they are not material to our results of operations, either individually or in aggregate, for the period ended December 31, 2019.

Note 3 — Inventories

Inventories consist of the following at December 31:

Note 4 — Property, Plant and Equipment

Property, plant and equipment consist of the following at December 31:

Internal-use software, included in gross machinery and equipment at December 31, 2020 and 2019 was $50.3 million and $49.6 million, respectively, with related accumulated depreciation of $42.9 million and $38.7 million, respectively. Internal use software depreciation expense was $4.7 million, $4.8 million and $4.7 million for the years ended December 31, 2020, 2019 and 2018, respectively. Also, during 2020, we sold a vacant facility for $3.2 million.

Note 5 – Leases

Lease costs for the year ended December 31, consist of the following:

Operating lease cost:

Right-of-use asset impairment cost — 312

Finance lease cost:

Interest on lease liabilities 33 27

Total finance lease cost 388 265

Rent expense on operating leases was approximately $8.7 million for the year ended December 31, 2018 in accordance with ASC 840. During 2018, we entered into capital lease obligations of $0.2 million, in connection with the purchase of equipment, in accordance with ASC 840.

Supplemental balance sheet information related to leases as of December 31, is as follows:

Operating leases

Other current liabilities $ 7,469 $ 7,268

Total operating lease liabilities $ 22,225 $ 24,364

Finance leases

Property, plant and equipment, gross $ 1,762 $ 1,684

Accumulated depreciation (825) (479)

Property, plant and equipment, net $ 937 $ 1,205

Current portion of long-term debt $ 197 $ 346

Total finance lease liabilities $ 587 $ 836

Weighted average remaining lease term (in years)

Operating leases 3.76 years 4.43 years

Finance leases 3.22 years 3.61 years

Weighted average discount rate

Supplemental cash flow information related to leases for the year ended December 31, was as follows:

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases $ 7,535 $ 8,459

Financing cash flows from finance leases 373 380

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

Maturities of lease liabilities as of December 31, 2020 are as follows:

Finance Lease Operating Lease

Thereafter — 726

Less imputed interest (33) (2,358)

As of December 31, 2020, we have not entered into any operating or finance leases that have not yet commenced.

Note 6 – Goodwill and Other Intangible Assets

The changes in the net carrying amount of goodwill for the years ended December 31, are as follows:

Goodwill resulting from business combinations — 217,482

Goodwill adjustment resulting from business combinations (1,009) —

Foreign currency translation 1,407 120

During 2019, the Company acquired Buffalo Filter as further described in Note 2. Goodwill resulting from the acquisition amounted to $215.8 million and acquired intangible assets including customer and distributor relationships, developed technology and trademarks and tradenames amounted to $140.0 million. Total accumulated goodwill impairment losses aggregated $107.0 million at December 31, 2020 and 2019, respectively. During 2019, the Company acquired a

distributor as further described in Note 2 resulting in identifiable intangible assets of $4.1 million and goodwill. During 2020, the Company recorded a measurement period adjustment related to the acquired distributor.

Other intangible assets consist of the following:

Intangible assets with definite lives:

Intangible assets with indefinite lives:

Amortization expense related to intangible assets which are subject to amortization totaled $34.2 million, $32.3 million and $23.2 million for the years ending December 31, 2020, 2019 and 2018, respectively, and is included as a reduction of revenue (for amortization related to our sales representation, marketing and promotional rights) and in selling and administrative expense (for all other intangible assets) in the consolidated statements of comprehensive income. Included in developed technology is $1.6 million, $6.5 million and $21.3 million of earn-out consideration that was paid during 2020, 2019 and 2018, respectively, and an additional accrual of $6.0 million that is considered probable as of December 31, 2020 associated with a prior asset acquisition. The accrual is recorded in other current and other long-term liabilities at December 31, 2020.

The estimated amortization expense related to intangible assets at December 31, 2020 and for each of the five succeeding years is as follows:

Note 7 — Long Term Debt

Long-term debt consists of the following at December 31:

On February 7, 2019, we entered into a sixth amended and restated senior credit agreement consisting of: (a) a $265.0 million term loan facility and (b) a $585.0 million revolving credit facility. The revolving credit facility will terminate and the loans outstanding under the term loan facility will mature on the earlier of (i) February 7, 2024 or (ii) 91 days prior to the earliest scheduled maturity date of the 2.625% convertible notes due in 2024 described below, (if, as of such date, more than $150.0 million in aggregate principal amount of such convertible notes (or any refinancing thereof) remains outstanding). The term loan facility is payable in quarterly installments increasing over the term of the facility. Proceeds from the term loan facility and borrowings under the revolving credit facility were used to repay the then existing senior credit agreement and in part to finance the acquisition of Buffalo Filter. On April 17, 2020. we amended our sixth amended and restated senior credit agreement to suspend our required leverage ratios for up to four quarters as a result of the potential impact from the COVID-19 pandemic. On November 20, 2020, we entered into a third amendment under our senior credit agreement to lower the applicable margin on the loans and lower the interest floor on Eurocurrency loans agreed upon in April. Interest rates are adjusted so that the applicable margin for base rate loans is 2.00% per annum and for Eurocurrency rate loans is 3.00% per annum, and the applicable commitment fee rate for the revolving credit facility is 0.50%. Following the suspension period, the applicable margin will depend upon CONMED’s consolidated senior secured leverage ratio, using the pricing grid set forth in the amendment. Interest rates were at LIBOR (subject to 0.50% floor) plus an interest rate margin of 3.00% (3.50% at December 31, 2020).

Our effective borrowing rate for nonconvertible debt at the time of issuance of the Notes was estimated to be 6.14%, which resulted in $51.6 million of the $345.0 million aggregate principal amount of Notes issued, or $39.1 million after taxes, being attributable to equity. For the years ended December 31, 2020 and 2019, we have recorded interest expense related to the amortization of debt discount on the Notes of $9.7 million and $8.3 million, respectively, at the effective interest rate of 6.14%. The debt discount on the Notes is being amortized through February 2024. For the year ended December 31, 2020 and 2019, we have recorded interest expense on the Notes of $9.1 million and $8.4 million, respectively, at the contractual coupon rate of 2.625%.

The scheduled maturities of long-term debt outstanding at December 31, 2020 are as follows:

Thereafter —

The above amounts exclude debt discount,deferred debt issuance costs and financing leases.

Note 8 — Income Taxes

The provision (benefit) for income taxes for the years ended December 31, 2020, 2019 and 2018 consists of the following:

Current tax expense (benefit):

Deferred income tax expense (benefit):

Provision (benefit) for income taxes $ (7,914) $ 2,605 $ 9,799

A reconciliation between income taxes computed at the statutory federal rate and the provision (benefit) for income taxes for the years ended December 31, 2020, 2019 and 2018 follows:

Settlement of taxing authority examinations (122.9) (7.7) (0.7)

Federal research credit (124.2) (4.0) (2.8)

Tax treaty protocols — (2.9) —

US tax on worldwide earnings at different rates (123.7) 7.9 2.9

Non deductible/non-taxable items 28.6 2.8 (1.4)

State income taxes, net of federal tax benefit (24.5) 0.3 1.6

International tax reform — — (3.6)

US tax reform — — 1.8

The 2017 Tax Cuts and Jobs Act ("Tax Reform") was enacted on December 22, 2017. The Tax Reform included a number of changes in existing tax law impacting businesses, including a one-time deemed repatriation of cumulative undistributed foreign earnings and a permanent reduction in the U.S. federal statutory rate from 35% to 21%, effective on January 1, 2018.

The SEC issued Staff Accounting Bulletin No. 118 to allow for a one-year measurement period to finalize estimated provisional amounts and the overall assessment of the impacts of Tax Reform. During 2018, the Company finalized its accounting and recorded $1.3 million of tax expense related to the revaluation of certain deferred tax items. This expense was offset in part by $0.4 million of tax benefit primarily resulting from finalization of the deemed repatriation toll charge, related foreign tax credits and adjustments to foreign withholding amounts. The final tax benefit related to Tax Reform was $31.0 million.

The Company has elected to account for Global Intangible Low Tax Income ("GILTI") using the period cost method. The net impact of GILTI including the allowable GILTI deduction is presented in the rate reconciliation as a component of “US tax on worldwide earnings at different rates” and is offset in part by the Foreign Derived Intangible Income deduction (“FDII”).

The tax effects of the significant temporary differences which comprise the deferred income tax assets and liabilities at December 31, 2020 and 2019 are as follows:

Assets:

Capitalized research and development 5,187 6,201

Interest limitation — 5,702

Less: valuation allowances (2,721) (1,732)

Liabilities:

Convertible notes debt discount 7,060 9,096

Income before income taxes consists of the following U.S. and foreign income:

As of December 31, 2020, the amount of federal net operating loss carryforward was $19.4 million and begins to expire in 2027. As of December 31, 2020, the amount of federal research credit carryforward available was $13.5 million. These credits begin to expire in 2027.

We have accrued tax liabilities related to the amount of unremitted earnings at December 31, 2017 and certain subsequent unremitted earnings as these are not considered permanently reinvested. Deferred taxes have not been accrued on unremitted earnings subsequent to December 31, 2017 that are considered permanently reinvested. The amount of such untaxed foreign earnings for the periods occurring after December 2017 totaled $22.6 million. If we were to repatriate these funds, we would be required to accrue and pay taxes on such amounts. The Company has estimated foreign withholding taxes of $1.5 million would be due if these earnings were repatriated.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27, 2020 to provide economic relief in the early wake of the COVID-19 pandemic. The CARES Act includes many measures to assist companies, including temporary changes to income and non-income-based tax laws. Income tax relief includes temporary favorable changes to net operating loss and interest expense annual deduction limitations. Additionally, on December 27, 2020, the Consolidated Appropriations Act was signed into law to enhance and expand provisions of the CARES Act and provide other taxpayer relief. These provisions did not have a material impact to our 2020 financial results.

The Company is subject to taxation in the United States and various states and foreign jurisdictions. Taxing authority examinations can involve complex issues and may require an extended period of time to resolve. Our federal income tax returns have been examined by the Internal Revenue Service (“IRS”) for calendar years ending through 2018.

We recognize tax liabilities in accordance with the provisions for accounting for uncertainty in income taxes. Such guidance prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

The following table summarizes the activity related to our unrecognized tax benefits for the years ending December 31,:

Increases (decreases) for positions taken in prior periods — — (250)

Increases for positions taken in current periods — 1,650 1,017

If the total unrecognized tax benefits of $0.2 million at December 31, 2020 were recognized, it would reduce our annual effective tax rate. The amount of interest accrued in 2018, 2019 and 2020 related to these unrecognized tax benefits was not material and is included in the provision (benefit) for income taxes in the consolidated statements of comprehensive income.

Note 9 – Shareholders’ Equity

On February 29, 2012, the Board of Directors adopted a cash dividend policy and declared an initial quarterly dividend of $0.15 per share. On October 28, 2013, the Board of Directors increased the quarterly dividend to $0.20 per share. The total dividend per share was $0.80 for each of 2020, 2019 and 2018. The fourth quarter dividend for 2020 was paid on January 5, 2021 to shareholders of record as of December 15, 2020. The total dividend payable was $5.8 million and $5.7 million at December 31, 2020 and 2019, respectively, and is included in other current liabilities in the consolidated balance sheet.

Our shareholders have authorized 500,000 shares of preferred stock, par value $.01 per share, which may be issued in one or more series by the Board of Directors without further action by the shareholders. As of December 31, 2020 and 2019, no preferred stock had been issued.

Our Board of Directors has authorized a $200.0 million share repurchase program. Through December 31, 2020, we have repurchased a total of 6.1 million shares of common stock aggregating $162.6 million under this authorization and have $37.4 million remaining available for share repurchases. The repurchase program calls for shares to be purchased in the open market or in private transactions from time to time. We may suspend or discontinue the share repurchase program at any time. During 2020, 2019, and 2018 we did not repurchase any shares.

We have reserved 7.1 million shares of common stock for issuance to employees and directors under two shareholder approved share-based compensation plans (the "Plans") of which approximately 3.8 million shares remain available for grant at December 31, 2020. The exercise price on all outstanding stock options and stock appreciation rights (“SARs”) is equal to the quoted fair market value of the stock at the date of grant. Restricted stock units (“RSUs”) and performance stock units (“PSUs”) are valued at the market value of the underlying stock on the date of grant. Stock options, SARs, RSUs and PSUs are generally non-transferable other than on death and generally become exercisable over a 4 to 5 year period from date of grant. Stock options and SARs expire 10 years from date of grant. SARs are only settled in shares of the Company’s stock. The issuance of shares pursuant to the exercise of stock options and SARs and vesting of RSUs and PSUs are from the Company’s treasury stock.

Total pre-tax stock-based compensation expense recognized in the consolidated statements of comprehensive income was $13.1 million, $11.8 million and $10.0 million for the years ended December 31, 2020, 2019 and 2018, respectively. These amounts are included in selling and administrative expense. Tax related benefits of $3.2 million, $2.8 million and $2.3 million were also recognized for the years ended December 31, 2020, 2019 and 2018, respectively. Cash received from the exercise of stock options was $13.7 million, $7.7 million and $3.5 million for the years ended December 31, 2020, 2019 and 2018, respectively, and is reflected in cash flows from financing activities in the consolidated statements of cash flows.

The Company uses the Black-Scholes option pricing model to estimate the fair value of stock options and SARs at the date of grant. Use of a valuation model requires management to make certain assumptions with respect to select model inputs. Expected volatilities are based upon historical volatility of the Company’s stock over a period equal to the expected life of each stock option and SAR grant. The risk free interest rate is based on the stock option and SAR grant date for a traded U.S. Treasury bond with a maturity date closest to the expected life. The expected annual dividend yield is based on the Company's anticipated cash dividend payouts. The expected life represents the period of time that the stock options and SARs are expected to be outstanding based on a study of historical data of option holder exercise and termination behavior. Forfeitures are recognized as incurred.

The following table illustrates the assumptions used in estimating fair value in the years ended December 31, 2020, 2019 and 2018:

Grant date fair value of stock options and SARs $ 22.62 $ 20.59 $ 14.78

Expected annual dividend yield 0.82 % 1.08 % 1.34 %

Expected life of options & SARs (years) 5.5 5.6 5.7

The following table illustrates the stock option and SAR activity for the year ended December 31, 2020:

NumberofShares(in 000’s) Weighted-AverageExercisePrice

Stock options & SARs expected to vest 2,137 $ 74.94

The weighted average remaining contractual term for SARs and stock options outstanding and exercisable at December 31, 2020 was 7.2 years and 5.8 years, respectively. The aggregate intrinsic value of SARs and stock options outstanding and exercisable at December 31, 2020 was $150.9 million and $71.7 million, respectively. The aggregate intrinsic

value of stock options and SARs exercised during the years ended December 31, 2020, 2019 and 2018 was $26.6 million, $17.0 million and $4.2 million, respectively.

The following table illustrates the RSU and PSU activity for the year ended December 31, 2020:

NumberofShares(in 000’s) Weighted-AverageGrant-DateFair Value

The weighted average fair value of awards of RSUs granted in the years ended December 31, 2020, 2019 and 2018 was $85.45, $78.64 and $61.76, respectively.

The total fair value of RSUs and PSUs vested was $6.2 million, $2.8 million and $3.0 million for the years ended December 31, 2020, 2019 and 2018, respectively.

As of December 31, 2020, there was $33.1 million of total unrecognized compensation cost related to nonvested stock options, SARs and RSUs granted under the Plans which is expected to be recognized over a weighted average period of 3.4 years.

We offer to our employees a shareholder-approved Employee Stock Purchase Plan (the “Employee Plan”), under which we reserved 1.0 million shares of common stock for issuance to our employees. The Employee Plan provides employees with the opportunity to invest from 1% to 10% of their annual salary to purchase shares of CONMED common stock at a purchase price equal to 95% of the fair market value of the common stock on the exercise date. During 2020, we issued approximately 22,165 shares of common stock under the Employee Plan. No stock-based compensation expense has been recognized in the accompanying consolidated financial statements as a result of common stock issuances under the Employee Plan.

Note 10 — Revenues

The following tables present revenue disaggregated by product line and timing of revenue recognition for the years ended December 31, 2020, 2019 and 2018:

Orthopedic Surgery General Surgery Total

Timing of Revenue Recognition

Orthopedic Surgery General Surgery Total

Timing of Revenue Recognition

Orthopedic Surgery General Surgery Total

Timing of Revenue Recognition

Revenue disaggregated by primary geographic market where the products are sold is included in Note 11.

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

Revenue recognized during years ended December 31, 2020, 2019 and 2018 from amounts included in contract liabilities at the beginning of the period were $9.3 million, $6.8 million and $5.0 million, respectively. There were no material contract assets as of December 31, 2020 and December 31, 2019.

Note 11 — Business Segments and Geographic Areas

We are accounting and reporting for our business as a single operating segment entity engaged in the development, manufacturing and sale on a global basis of surgical devices and related equipment. Our chief operating decision maker (the CEO) evaluates the various global product portfolios on a net sales basis and evaluates profitability, investment, cash flow metrics and allocates resources on a consolidated worldwide basis due to shared infrastructure and resources. 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 including 2DHD and 3DHD vision technologies and fees related to sales representation, 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, a line of cardiac monitoring products as well as electrosurgical generators and related instruments. These product lines' net sales and primary geographic market where the products are sold, are as follows for the years ended December 31, 2020, 2019 and 2018:

Orthopedic Surgery General Surgery Total

Primary Geographic Markets

Orthopedic Surgery General Surgery Total

Primary Geographic Markets

Orthopedic Surgery General Surgery Total

Primary Geographic Markets

Sales are attributed to countries based on the location of the customer. There were no significant investments in long-lived assets located outside the United States at December 31, 2020 and 2019. No single customer represented over 10% of our consolidated net sales for the years ended December 31, 2020, 2019 and 2018.

Note 12 — Employee Benefit Plans

We sponsor an employee savings plan (“401(k) plan”) covering substantially all of our United States based employees. We also sponsor a defined benefit pension plan (the “pension plan”) that was frozen in 2009. It covered substantially all our United States based employees at the time it was frozen.

Total employer contributions to the 401(k) plan were $8.9 million, $9.1 million and $8.3 million during the years ended December 31, 2020, 2019 and 2018, respectively.

We use a December 31, measurement date for our pension plan. Cumulative gains and losses in excess of 10% of the greater of the benefit obligation or the market-related value of assets are amortized on a straight-line basis over the lesser of the expected average remaining life expectancy of the plan's participants or 12 years. The limit of 12 years is adjusted to reflect the percentage change in the average remaining service period for the plan's active membership.

The following table provides a reconciliation of the projected benefit obligation, plan assets and funded status of the pension plan at December 31:

Change in benefit obligation

Projected benefit obligation at beginning of year $ 92,052 $ 80,776

Projected benefit obligation at end of year $ 101,242 $ 92,052

Change in plan assets

Fair value of plan assets at beginning of year $ 75,321 $ 66,307

Actual gain (loss) on plan assets 6,664 12,439

Fair value of plan assets at end of year $ 76,940 $ 75,321

The projected benefit obligation increased $9.2 million as of December 31, 2020 mainly due to the decrease in the discount rate from 3.33% at December 31, 2019 to 2.44% at December 31, 2020.

Amounts recognized in the consolidated balance sheets consist of the following at December 31,:

Accumulated other comprehensive loss (48,285) (41,787)

Accumulated other comprehensive loss for the years ended December 31, 2020 and 2019 consists of net actuarial losses not yet recognized in net periodic pension cost (before income taxes).

The following actuarial assumptions were used to determine our accumulated and projected benefit obligations as of December 31,:

Other changes in plan assets and benefit obligations recognized in other comprehensive income in 2020 and 2019 are as follows:

Current year actuarial loss $ (9,319) $ (2,846)

Amortization of actuarial loss 2,821 2,881

Total recognized in other comprehensive loss $ (6,498) $ 35

CNMD US Equity

CNMD · 10-K · period ended 2020-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosures

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14. Principal Accounting Fees and Services

Item 15. Exhibits, Financial Statement Schedules

CNMD US Equity☆

CNMD · 10-K · period ended 2020-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosures

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14. Principal Accounting Fees and Services

Item 15. Exhibits, Financial Statement Schedules

CNMD US Equity