Good day, ladies and gentlemen, and welcome to fourth quarter 2008 CONMED earnings conference call. My name is Francine and I’ll be your coordinator for today. At this time, all participants are in listen-only mode. We’ll be facilitating a question-and-answer session towards the end of today’s 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 conference, Mr. Joseph Corasanti, President and Chief Executive Officer of CONMED. Please proceed, sir.

Thank you, Francine. Good morning everyone, welcome to CONMED Corporation's fourth quarter 2008 earnings conference call. With me today is Rob Shallish, our Chief Finance Officer. After formal remarks, the call will be opened 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 represents 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. You will also hear Rob and me refer certain non-GAAP measurements during this discussion. While these figures are not a substitute for GAAP measurement, 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 of the normal on-going 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 our results. As we explained in the company’s press release in early January, CONMED’s fourth quarter financial performance was affected by economic volatility, specifically the exceptionally rapid changes in foreign currency exchange rates and cash conservation measures of hospital customers have led to reduced sales of the company’s capital equipment products. Before discussing how the company was impacted by these economic developments, let me run through…

Thanks very much, Joe, and good morning everyone. Before taking in a deeper dive into the numbers, I thought it would be useful to spend a few more moments on how the overall global economy affected our business in the fourth quarter. While Joe has already discussed at length our performance relative to surgical procedure rates and capital spending by hospitals, I would like to focus on three other matters that impacted or will impact our business, both positively and adversely. These matters are the market value of the company’s convertible bonds, interest rates and foreign currency translation rates. Each of these areas saw a dramatic change in the fourth quarter. First, with respect to our convertible bonds, as many of you know, the market for such bonds has seen significant change in the last few months. In the summer of 2008, our bonds were trading fairly closely to their par value. In October, however, their market value declined by 20%. The company took advantage of this decline in market value and repurchased $25 million of the face value of the bonds at a discount, with the result that CONMED recognized an overall gain of $4.4 million. Second, we have seen a dramatic decline in interest rates during the fourth quarter. The company’s floating rate financings consist of two components. The first is a term loan of approximately $58 million, and the second is the off balance sheet securitization program with a discount on the sale of receivables tied to a floating interest rate with approximately $42 million outstanding. Thus, CONMED has approximately $100 million tied to floating interest rates. Interest on these facilities averages to LIBOR+ 125 basis points. With LIBOR at all time lows, we anticipate lower interest expense in 2009 as a result of the economic volatility.…

(Operator instructions) Our first question comes from the line of Matt Miksic of Piper Jaffray. Please proceed. Matt Miksic – Piper Jaffray: Hi, good morning. Do you hear me okay?

Yes, fine Matt.

Yes, good morning. Matt Miksic – Piper Jaffray: So, thanks for taking the questions. On FX, just some clarifications. You'd mentioned in the past that you are looking at hedging facilities to help offset some of the bottom line impact of currency fluctuations. Does Q4 reflect that, or are we going to see some of the benefit of those efforts in Q1 or anytime in 2009?

The hedging activities that we have been involved with through last year and the fourth quarter deal with hedging the transactions associated with out inter-company balances. So, we bill our foreign subsidiaries in a local currency such as the Euro, and they pay as back in Euros and we translate that to the US dollar. If there are changes in FX rates during that interim period between billing the customer – billing our subsidiary and receiving the cash, we take those adjustments to the P&L – or have to take those adjustments to the P&L immediately. So in order to avoid losses and I guess gains as well on those kinds of transactions, we've been hedging that portion of our FX situation since September of '08. With regard to our revenue, the flow of sales into the company, in 2008, we have not done any of that hedging, nor have at this point at least entered into any hedging transactions for '09. Matt Miksic – Piper Jaffray: Okay. And clarification on the breakout you gave of some of your exposure to foreign currencies, I missed it, did you mention the British pound?

Yes, the pound is – of our total exposure to foreign currencies, that would be 15% of our exposure. So it’s 15% – 30% of our sales are exposed to foreign currency. Matt Miksic – Piper Jaffray: Got it, so 4.5% of total or whatever.

Yes. Matt Miksic – Piper Jaffray: Got it. So FX – the other thing I guess I would ask is, I know this is the first time you've given Q1 guidance, but you came in a little bit below our number, below consensus, and I’m trying to – it’s probably not a fair question, but if you had to put your finger on something that we were missing, and I know currency was part of it or I think it was for the first quarter, was there anything else factoring into your thinking about Q1 guidance?

Well, just currency, we continue to be a little bit concerned about capital purchases by hospitals. We think that for the entire year, there should be not too much of an effect on capital purchases, but I think it is still very early to make conclusions about the first quarter, so we have tried to be conservative in our estimates. Matt Miksic – Piper Jaffray: Okay, so maybe some of the behavior in Q4 is splashing over here into Q1. Another last thing here on currency is it looks like rates have gotten a little bit worse since early January; not a ton, maybe 50 to 100 basis points at least by my calculations. But it looks like you have maintained the same dollar guidance numbers in revenue and earnings. Are you taking a risk here or are you assuming that there is some easing or at least things don't get any worse in terms of FX?

Well, it’s difficult for us to pick a number with regard to currency right now. So, we decided that we would continue to use the fourth quarter rates as a guide to our estimates for 2009. I think the Euro is about the same as it was on average last quarter. The pound is probably down a little bit, I agree. So overall, I’m not exactly sure where we might come out compared to the overall average at this point (inaudible) in the fourth quarter average. Matt Miksic – Piper Jaffray: Okay. So, if we follow your constant currency growth number guidance, as we think about our own currency projections, in such that they are, then that would be a reasonable guide.

Yes, I would agree with that. Matt Miksic – Piper Jaffray: Okay. This other thing you have discussed here about procedures, and Joe mentioned some of them may be temporarily postponed, I’m wondering if you have a sense, and everyone’s procedure seems to be different, every one exposure to different kinds of procedures, but of the kinds that drive your business, how long do you think these things are postponable as they are, and how confident are you that the deferral does not push these out into 2010?

When we talk about procedures being delayed or postponed, we are just talking about the concept that could happen, we actually did not see that in Q4, and I think we mentioned that. But going forward, if there were delay, it would only really occur in this sport medicine area for us, those procedures certainly have an element of being elective. But it’s still an injury that makes it very difficult for people to get around, walking, moving their arms, et cetera, for ACL repairs or rotator cuff repair. So with those types of elective procedure, yes, we acknowledge they could be delayed for economic reasons. But, at some point, the patient needs to have that treated. So whether it is a couple of months or half-a-year, it’s anyone’s guess. But I do not think it goes out beyond half-a-year. Matt Miksic – Piper Jaffray: Okay, that is really helpful. I think I understand in talking to you last quarter and around the end of the year this idea that a big chunk of your sports medicine business is driven by something that I would characterize as kind of soft tissue trauma or joint trauma that is maybe different than, I don't know, other sorts of sports medicine procedures. Can you – I know it is probably hard for you to put your finger on an exact number, but do you think – I mean, is it greater than 50%, is it greater than three quarters of the procedures that really drive your sports medicine business? Would you characterize them as, these rotator cuff and ACL ruptures and repairs, how big and how important is that?

That is the lion's share of our business. That is the sweet spot of our sports medicine businesses, the ACL repair and the rotator cuff repair. A meniscus tear is also a large part. Matt Miksic – Piper Jaffray: Okay, so over 50%. Do you think it’s over 75%?

Certainly over 50%, but I do not have kind of any hard data on that.

Yes, Matt, it is hard to tell exactly. But almost all – I would say almost all of our products are used in arthroscopic procedure as a result of some kind of trauma that occurred to the patient. So it’s a soft tissue injury that was a result of an acute event, usually not a chronic situation. So it’s usually some sports activity whether it’s skiing or soccer or it could be anything, tripping on the stairs and falling down the stairs, it’s not usually as a result of a chronic situation. Matt Miksic – Piper Jaffray: Okay, that is helpful. And then, last thing here on non-hospitals, just their behavior around postponing purchases, can you characterize – generally people have talked about cash conservation and being more cautious, putting things on hold. But is there – I guess, new hospital constructions a factor for this, is it just a policy decision that you are seeing at some hospitals that just say, we are putting a freeze on new capital purchases, anything you could do to characterize the drivers of those decisions to sort of pause the purchasing would be helpful?

Some hospitals have actually enacted a policy saying we are going to freeze capital purchases. I do not have a number on how many of those hospitals have said that. Then there are other hospitals that have just simply delayed the actual issuing of the purchase order. They still have been willing to conduct an evaluation of video or powered instruments. They give us the results of the evaluation, but have held up their purchase order. Those are two examples of what is happening with capital. I will say that with our generators in electrosurgery, we really have not seen anything in the way of holding up purchase orders or delaying purchases in that area. And I guess that does not surprise us because that really is a replacement market for electrosurgical generators, and the numbers bear that out in Q4. Matt Miksic – Piper Jaffray: Okay, so are you saying that – and I don’t want to put words in your mouth, but are you saying that all or most of the impact on the capital side was around video and not generators?

Video powered and powered instruments and not generators. Matt Miksic – Piper Jaffray: Got it, all right. And then, finally, last question here just taking your hospitals to the other geographies – your behavior of hospitals in overseas, in Europe in particular, are you seeing any of what we’re seeing here in the US splashing over there? Do you expect to – and maybe regionally, how do you think that might affect that group of countries?

Well, from the standpoint of single use products, Matt, I think that the answer is the same. I don’t think that single-use product sales would be diminished because I think the procedures are going to be done. With regard to capital, I think the same situation could occur outside United States as we may see here in the US with – it’s just a slowdown in capital spending, perhaps more of the kneejerk reaction to the current economic situation. But if there is any slowdown, it would return to a fairly normal rate fairly quickly, because the products that we sell are used routinely every single day that you suffer wear and tear and damage. And there is just a normal replacement cycle that has to be followed if they’re going to have surgeries. So, surgical video is the same way, powered instrument is the same way, and electrosurgical generator is the same way. Matt Miksic – Piper Jaffray: Is that slowdown in your guidance today, or is that something that should you see that, you need to rethink '09?

We have considered the slowdown, so to speak, in the forecast. It is our best forecast at this point. Matt Miksic – Piper Jaffray: Okay. Well, thank you so much for taking the questions.

Thanks, Matt.

Our next question comes from the line of Raj Denhoy of Thomas Weisel Partners. Please proceed. Raj Denhoy – Thomas Weisel Partners: Thanks and good morning.

Hi, Raj. Raj Denhoy – Thomas Weisel Partners: I wonder if I could ask a little bit just on the outlook for procedure volumes. And if I’m not mistaken, you have not baked in any slowdown in procedure volumes in your guidance, is that correct?

That would be correct. We’re assuming the procedure volumes are – let me put it this way, in the fourth quarter, it would seem to us the procedures were growing based upon our sales of, say, the electrosurgical devices at 11% or 12%. So, in our forecast for 2009, we are not assuming 11% or 12% growth in procedure rates. So I guess to some extent, we may have backed off the fourth quarter number, but we would expect that single-use products would be better than the 4% to 5% growth rate that we forecast overall. The offset being capital products which are – Raj Denhoy – Thomas Weisel Partners: Right, I guess, I’m just getting a sense – I mean, obviously, you’re one of many companies that hasn’t seen a slowdown yet in procedure volumes. But I think a number of other companies are being somewhat prudent in expecting there to be one, but it doesn’t sound like your taking that same position.

Well, I guess, we have to look at the kinds of procedures that our products are used in. Getting back to Joe’s previous conversation, we may possibly see some – it is possible there could be some reduced procedure volume with respect to sports medicine. But a lot of these injuries, sports medicine injuries, occur to high school athletes. Kids are playing soccer, kids playing football, volleyball, whatever. And as a parent, I’m not going to delay an ACL repair. I’m going to get the ACL done. If I’m a 50-year-old skier and out having fun and popped the ACL, is it possible that I’ll hold off for a period of time? Maybe, maybe not, I don’t know. So, I guess, if we expect any slowdown at all, it would be very, very minor with respect to the sports medicine products. Raj Denhoy – Thomas Weisel Partners: What about areas like patient care where it’s dependent on just overall patient volume going into hospitals? Isn't there a chance that that business could be somewhat of a risk in 2009?

Well, it is possible. But we don’t expect – of our traditional patient care products, we’re only expecting normal growth at the market rate which is between 2% and 3%. We are expecting that patient care would have some benefit during 2009 as a result of a new product introduction. So, we think that that would offset any slowdown in the Patient Care products. But, people are still going to be going to the hospital. They’re still going to need ECGs. They’re still going to need IV therapy. I think the assumption that there’s going to be a dramatic reduction in these basic kinds of procedures is very conservative. Raj Denhoy – Thomas Weisel Partners: Okay, and then just on the capital side, we’re a month into the first quarter of the year, a little more than a month. Have you seen any thawing in the frozen capital budgets in the part of hospitals, any change so far this year?

I would say that – and we don’t want to get into forecasting on a monthly basis because that just leads to our discussion on a monthly basis. It just gets into how did we do this week, how did we do yesterday. But I would say that in January, we did not see any change from the fourth quarter trends. Raj Denhoy – Thomas Weisel Partners: Okay. Lastly, on your cash flow expectations for 2009, given the slower topline and maybe provide us, I might have missed it, but what are your expectations for cash flow this year?

We’re expecting operating cash generated from operations to be in the neighborhood of the same number that we’ve been running in the last couple of years, so somewhere in the $60 million range. From a capital expenditure standpoint, we’re expecting that capital expenditures will be in the $20 million to $25 million range for 2009. Raj Denhoy – Thomas Weisel Partners: Okay, fair enough. Thank you very much.

Our next question comes from the line of James Sidoti of Sidoti & Company. Please proceed. James Sidoti – Sidoti & Company: Good morning, Rob. Good morning, Joe.

Good morning, Jim. James Sidoti – Sidoti & Company: I don’t want to beat the currency to death, but I just want to make sure my numbers are right. You’re saying it’s about $10 million effect in the topline, about $6 million to the operating income line, and probably about $0.13 or so to the EPS line. Does that sound about right?

Well, that would be about right yes. James Sidoti – Sidoti & Company: So, without currency, I mean even with the slowing economy, you would have come in pretty close to where you'd originally guided for the fourth quarter?

Yes, I would agree with that. James Sidoti – Sidoti & Company: All right, then on the R&D line, you’re down about $1 million from the third quarter. Is that just you’ve completed some products, so you’ve got some expenses rolling off. And do you think that those – your sold [ph] new products in 2009 and that will get back up to where it has been for most of 2008?

Well, Jim, the rate of spending is not necessarily stable because – well, we obviously have our own R&D engineers and scientists, but we do use outside development houses from time to time so the rate of spending can go up and down on a quarterly basis. Overall, we are planning the same kind of spending in 2009 that we had in 2008, but roughly in 4.5% of sales range. James Sidoti – Sidoti & Company: Okay. All right, and then can you just give us an update on ECOM, how many boxes were placed in the quarter, and what do you think the number would be for 2009?

Sure, Jim. The reception that we are getting from ECOM is very, very good. As you know, we launched it to the entire Patient Care sales force of 32 people beginning on January 5, so they’ve had it for a month. We also have six specialists selling it. Soon, that number will be up to ten. Where we are right now is we have some 32 boxes in the field. We are expecting probably anywhere from 50 to 60 boxes to be in the field by April 1, to the end of the quarter. The number of evaluations continue to increase. We’ve got 17 completed now, 18 are in the works and not yet completed, so actually 35 evaluations. And we've got 60 schedules that haven’t even started yet. So, we’re seeing it ramp up significantly. And we think that we will probably get to a rate of getting about 50 boxes placed per month starting sometime after April or May. So, although not hitting our original schedule in terms of box placements, we think it’s been delayed slightly as a result of taking a little longer with evaluations, and then after that a little longer getting a PO. We are extremely encouraged. We think this is going to be a great product for us. James Sidoti – Sidoti & Company: And what type of surgeries are they being used in so far?

That’s actually been a surprise for us, a very pleasant surprise for us. We originally anticipated that these would first be used in cardiac surgeries, and then after, there’s been a significant adoption that it would spread out to being used in triple-care [ph] patients, high-risk patients, spine patients, and elderly patients. What we’ve seen is that it’s immediately being used in the high-risk patient population, which is the population of patients that are receiving an A-line, to be monitored via an A-line during surgery. So, we’re immediately getting both the cardiac cases and the high-risk cases. So, spine procedures, aortic aneurysm cases, lengthy procedures involving total hip replacements and knee replacements in elderly patients, all of those types of cases involving an A-line. James Sidoti – Sidoti & Company: And is there a major learning curve to get doctors used to using this as opposed to the (inaudible) or does it go pretty quick?

No. It actually is – it goes very quickly. It’s a very easy setup. We place the – the anesthesiologist places the trach tube plus – the connection at the end of our trach tube into the monitoring box, calibrates the box by typing in the patient’s height and weight and that’s it. The system is fully functional once that procedure’s happened or taken place, so it’s very easy to use and very easy to set up. James Sidoti – Sidoti & Company: All right. And then, my last question, Joe, you mentioned that you thought that by 2010, you’d get a little boost EBIT by about $10 million. Can you just give us some sense how much of that is cost saving due to the facility consolidations? And how much of that is a little bit of acceleration in topline growth due to ECOM and some of the other products that you plan on launching in 2009?

Yes. The four initiatives right now are the manufacturing consolidation, which we’ve estimated to have an impact of $3 million to $5 million on our bottom line in 2010, and then, the rest of it is the acceleration of ECOM, tissue ceiling, and basically bringing the endoscopic technology division to profitability in 2010 as a result of the four products that they launched at the end of '08. James Sidoti – Sidoti & Company: Okay. All right, thank you very much.

(Operator instructions) Our next question comes from the line of Dalton Chandler of Needham & Company. Please proceed. Dalton Chandler – Needham & Company: Good morning. I guess we’ve gone over the assumptions about elective procedures or procedures in general quite a bit, but do you make any specific assumptions about hospital budgets and developing your CapEx sales forecast?

Well, Dalton, I think we’ve assumed, on an overall basis for 2009, that our capital, the sale of our capital products would be pretty much on a par with the 2008 sales overall. There may be some dislocation relative to how that roles out on a quarterly basis, but on an overall basis, we’re assuming that the capital products would be, in dollar terms, about the same as 2008. Dalton Chandler – Needham & Company: Okay.

But no growth in other words. Dalton Chandler – Needham & Company: And just on the tissue ceiling product, I think you said you’re planning to introduce that at AAOS. Is that right? Or when do you expect to actually be selling it?

No. Tissue ceiling, we’re expecting a limited market release in June or July. Dalton Chandler – Needham & Company: Okay.

And then, probably a full launch sometime after that. Dalton Chandler – Needham & Company: Okay, great. And then, if I did the math right here, it looks like you had a spike in CapEx in the fourth quarter. Was that related to the facility consolidation?

That was, to some extent, facility consolidation, yes. That was basically a number of things. We had to get the – we’re leasing the building, so that’s not ours, but there’s IT infrastructure. There’s the internal machinery in that facility, the racking for finished goods. So, yes, that was one component of it, as well as we’re working toward the completion of the Oracle project, so we had costs associated with that. So, it’s basically just increased spending across the board. Dalton Chandler – Needham & Company: Okay. All right, thanks a lot.

You have no further questions. I would now like to turn the call over to Mr. Joe Corasanti for closing remarks.

Well, I want to thank everyone for joining us today on our year-end and fourth quarter conference call. We look forward to discussing our further progress with you on our next conference call. Thank you very much. Have a good day.

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Have a good day.