CNMD

CONMED Corporation (CNMD)

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CONMED Corp. (CNMD)

Q1 2009 Earnings Call

April 23, 2009 10:00 AM ET

Executives

Joseph J. Corasanti - President and Chief Executive Officer

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

Analysts

Dalton Chandler - Needham & Company

Raj Denhoy - Thomas Weisel Partners

Brad Even - Heartland

Matt Miksic - Piper Jaffray

Presentation

Operator

Good day ladies and gentlemen, and welcome to the First Quarter 2009 CONMED Earnings Conference Call. My name is Shantley (ph) and I will be your facilitator for today's call.

At this time, all lines are muted. We will have a question-and-answer session towards the end of this conference. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today's call, Mr. Joseph Corasanti, President and CEO of CONMED. Please proceed, sir.

Joseph J. Corasanti

Thank you, Shantley (ph). Good morning everyone. Welcome to CONMED Corporation's first quarter 2009 earnings conference call. With me today is Rob Shallish, our Chief Financial Officer.

After formal remarks, the call will be open for questions.

Before we begin, let me remind you that during this call we will be making comments and statements regarding our financial outlook which represent forward-looking statements that involve risks and uncertainties as those terms are defined under Federal Securities Laws.

Our actual results may differ materially from our current expectations. Please refer to the risk factors and other cautionary factors in today's press release as well as our SEC filings for more details on factors that may cause actual results to differ materially. As you will also hear Rob and me refer to certain non-GAAP measurements during this discussion.

While these figures are not a substitute for GAAP measurements, company management uses them to aid us in monitoring the company's ongoing financial performance from quarter-to-quarter and year-to-year on a regular basis and for benchmarking against other medical technology companies.

Non-GAAP net income and non-GAAP earnings per share measure the income of the company excluding credits or charges that are considered by management to be unusual or outside the normal ongoing operations of the company. These unusual items are specified in the reconciliation in the press release issued this morning.

With these required announcements completed, I can now turn to my comments. As you all know, the last six months has been an extraordinary and difficult period in the world's economy. As it relates to healthcare, we have seen that hospital managers in many cases have taken actions to preserve their cash resources by delaying the regular replacement of medical equipment.

Also in the last three months, while the company's single-use product sales were relatively stable in constant currency compared to the first quarter of 2008, we recognize that we did not experienced the 8.4% constant currency growth that we've reported in the fourth quarter of 2008. This leads us to believe that there has been a slight effect on the growth rate from delay of the surgical procedures.

These delays in procedure volume and capital equipment purchases were more pronounced than we had anticipated when we last spoke to you over two months ago. Consequently, CONMED's first quarter 2009 sales and earnings came in below our expectations.

Although the overall economic instability has presented our business with short-term challenges, we have steadfast in our belief that the company is well positioned for future enhanced growth.

The economic slowdown will reverse in due course. The positive demographics for healthcare have not changed and in time, the pent-up need for capital equipment replacement and for surgeries will once again trade enhanced demand for the medical devices of our company as well as for other medical technology providers.

Specific to COMNED, our confidence is rooted in the fact that the capital equipment we sell is used daily in surgical suites around the world in very common surgical procedures. For example, our surgical video systems are the capital equipment portion of our Endoscopic line.

They are used routinely in both arthroscopic and general surgery and have been the standard of care for over 15 years. Mainly in base of surgery in the abdominal area as well as the joints is enabled by surgical video systems like ours. They provide the surgeon with the visual images necessary to perform the minimal access surgery.

Without these video systems, surgery would be performed the old fashion way with large incisions that lead to lengthier patient recovery times. Surgical video systems are found in most every hospital operating room because minimal access surgery is pervasive these days.

These systems are computer controlled and require routine maintenance. Just like the laptops and computers we use... we all use today these systems need to be replaced on relatively regular basis.

The same is true for the powered surgical instrument hand pieces, the capital component of the powered surgical instrument line as well as the Electrosurgical generators, the capital component of the Electrosurgery line.

Powered instrument hand pieces have many moving parts and are sterilized after each surgery in auto claves having high temperatures and humidity. We recommend routine maintenance and many customers due take advantage of our service. Even so after a few years of use the hand pieces need to be replaced.

Electrosurgical generators have found in every operating room in the world and are used in 90% of all surgical procedures. As with the video systems, these units also must be replaced after a few years of use.

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