Good day, ladies and gentlemen. And welcome to the Q1, 2014 CONMED Earnings Conference Call. My name is Jasmine and I will be your operator for today. At this time all participants are in listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today Mr. Bob Yedid of ICR. Please proceed.

Hi good morning everyone. This is Bob Yedid with ICR, Investor Relations. Before we begin, let me remind you that during this call CONMED’s management will be making comments and statements regarding their financial outlook which represents forward-looking statements that involve risks and uncertainties as those terms are defined under Federal Securities Law. The Company’s actual results may differ materially from our current expectations. Please refer to 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 management refer to certain non-GAAP adjusted measurements during this discussion. While these figures are not a substitute for GAAP measurements, the Company’s management uses these figures to aid 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 medtech companies. Adjusted net income and adjusted earnings per share measure the income of the Company, excluding credits or charges that are considered by management to be special or outside of the normal ongoing operations of the Company. These adjusting items are specified in the reconciliation in the press release issued this morning. With these required announcements completed, I will turn the call over to Joe Corasanti, CONMED’s Chief Executive Officer and President for his remarks. Joe?

Good morning. Thank you very much Bob. During the first quarter, CONMED’s strong operating performance allowed us to grow our adjusted earnings per share to $0.49, up approximately 9% over the prior year. And at the top-end of the guidance, we provided to investors in February, despite a lower capital spending environment. Sales for the first quarter of 2014 were $181.9 million, a 2% decrease on a constant currency basis versus the first quarter of 2013. Sales in our single-use products, the best indicator of medical procedures were consistent with the prior year period in constant currency despite the impact of severe winter weather in several regions of the U.S. and continued softness in U.S. healthcare utilization. As a reminder, CONMED sales are split almost evenly between the international and U.S. markets. CONMED benefited from its position as a global company as our international business units generated solid growth single-use product sales offset by lower sales in the U. S. due to weather and utilization trends. Capital products which account for approximately 20% of our sales were lower as we continue to experience a choppy capital spending environment globally. Specifically, we experienced lower sales of capital product, capital equipment in our visualization and general surgery lines. We expect that the new products that we are introducing in 2014 will help to improve the sales trend in this area through the balance of the year. Indeed, we believe much of the decline in our visualization business is due to forestalled orders as customers wait for the release of our next-generation platform. I had mentioned the growth in the adjusted earnings per share explained in part by achieving an adjusted EBITDA margin of 18.3% in the first quarter, up over 120 basis points versus the prior year period. We also generated strong…

Good morning and thanks Joe. Hello to everyone. As Joe mentioned, adjusted diluted earnings per share grew 8.9% to $0.49 in the first quarter, the top of our forecasted range compared to $0.45 in the first quarter of 2013. Diluted earnings per share on a GAAP basis came in at $0.31 for the first quarter and were affected by several special items, including a non-cash item related to a recent change in New York State tax regulations, which as a single item impacted our GAAP earnings by $0.08 per share. Total sales for the first quarter came in at $181.9 million, a year-over-year decrease of 2.7%, primarily due to lower capital product sales and at worse FX rates in this first quarter of the year. On a constant currency basis, this was comprised of an 8.9% decline in capital products and a 0.1% decrease, almost flat in single-use devices compared to the first quarter of last year. The decrease in capital products was largely due to lower sales of our surgical visualization systems and within our general surgery product lines, lower sales of electric surgery generators. Now, I will turn to a review of our three categories of product line sales disclosures; orthopedic surgery, general surgery and surgical visualization. We drove an overall improvement in orthopedics this quarter and on a constant currency basis sales were up 1.9%. As a remainder the orthopedic surgery product group consists of two broad medical device offerings including the sports medicine line and the powered instrument line. Within the sports medicine line we offer single-use procedure specific devices used to repair soft tissue defects in joints. Secondly, arthroscopic enabling devices such as resection tissue removal devices and thirdly, revenues from educating and promoting allograft tissue forms. These three sub categories are referred to as…

Thank you, sir. (Operator Instructions) And your first question comes from line of Mike Matson with Needham & Company. Please proceed. Mike S. Matson – Needham & Co. LLC: Thanks I guess, I just wanted to get a little more clarity into the new product launch timing. So I guess just starting with the camera, the IM8000 and then the LED light source, those were not out in the first quarter, correct. And then those are going to come out in the second quarter and that will be fully available early on in the quarter or late in quarter?

Well, Mike, good morning first of all. The camera is a Q3 launch at this time. So it’s slightly delayed. We did show at the academy as we said in our prepared remarks and it was very well received. We think we’ll do very well with it. Right now Q3 is the launch for the IM8000. The new ablation system, that we’re calling the edge. We expect that European launch in May and a U.S. launch in probably July, so Q3 for that. The Y-Knot is out and doing very well. In fact, it is exceeding our forecast at this point. So the Y-Knot RC for rotator cuff, we are very pleased with that. The Shaver console, that’s launched. It’s doing well. And that’s important because that helps to drive our Shaver Blade business. That’s a key core product line in arthroscopy for us. I think for those who remember some of our earlier conference calls, we may have mentioned in the past that that was a difficult line for us in 2013. So we are expecting improvement in the Shaver Blade line as a result of the couple of things, and one of the primary thing is this new console which is, user friendly so that has is better electronic and digital display better, so we can do well with that. The Hall 50 has launched, so that’s the lithium-ion batteries and Hall 50 powered instrument for large bone handpieces. And we’ve mentioned in the past our new trocar line that will be sold by the end of surgery sales force and that one looks like it will be a Q3 launch for us. And that should help us significantly in the U.S and outside the United States, probably more so outside the United States. Mike S. Matson – Needham & Co. LLC: All right. That’s really helpful. And then the Hall 50 was that out for the bulk of the first quarter or did it come out late in the quarter?

Came out in the March timeframe, so it didn’t have too much of an impact and a good performance that we had with powered instruments. As a whole target very well I think this past quarter lithium batteries helped a lot I think and then we just have some success with a number of hospital transaction in that line. Mike S. Matson – Needham & Co. LLC: And then with camera now coming out in the third quarter, are we going to see a similar type of double-digit decline in that business the visualization business in the second quarter and is that factored in your updated guidance.

So, I would have to say that so the facts really are unchanged with regard to video for us right we have customers knowing that a new platform is coming out, and for the second quarter they will be waiting. So I would expect continued difficulty with the capital video sales. Mike S. Matson – Needham & Co. LLC: Okay. And then regard, just with regard to the edge system, I just wondering what the ramp of the sales there would look like because, I guess the ultra has been pretty slow but it seems like with edge given that you’re a fairly large player in the sport medicine area that, I would hope it would see a faster ramp and what we’re seeing with ultra is but I mean do you think that’s a fair – a fair assessment?

You’re right on point with that I think exactly with ultra, just to remind everyone that’s our vessel sealing device that was launched by the Electrosurgery sales force, that sales force is smaller, 55 sales reps and we’re going up against this to extremely large entrenched players who really created that market. Now with ablation that’s much of a completely different product that serves a completely different market, and we have extremely large U.S. and O-U.S. direct sales force that will be selling the edge product and so they will be leveraging their surgeon relationships and our surgeon education programs, and we’ve had early report already that, in Europe for example, there is we think there is very high demand for an alternative product to service this particular market. Mike S. Matson – Needham & Co. LLC: And then just one more question on that product coming in sort of a little later than some of the other companies, I mean the product does look pretty good, but what’s your pricing strategy and then just the margins on that product are they higher or lower than you’re other products in the arthroscopy area.

Well, with pricing we’re taking a different approach or strategy than we had with ultras, as we recall ultras we have premium price that right out of the gate. And theory there was we wanted the price to reflect that the products had extremely, had superior performance in every way and that the performance would be well recognized by users and we want to press price through like that. Now with the ablation product, this is a superior performing product, as well. And we’ve talked about this and showed it at the academy and described how it ablates faster than competitive product. And we have a lot of safety features on the device and we think it’s very, very user friendly in terms of the console as well as the ablation ones that will be coming out. And our strategy, however, will be to competitively price this. And I’m not saying we’ll be discounting it, but it will be competitively priced immediately. And we think that we’ll have a faster uptick as a consequence, of really those two items. Mike S. Matson – Needham & Co. LLC: All right that’s all I have for now. Thank you.

Sure.

And your next question comes from the line of Jeffrey Cohen with Ladenburg Thalmann. Please proceed. Jeffrey S. Cohen – Ladenburg Thalmann & Co., Inc.: Good morning. Thanks for taking my questions and thank you for the commentary.

Good morning, Jeff. Jeffrey S. Cohen – Ladenburg Thalmann & Co., Inc.: Could you talk a little bit about the status of the MTF arrangement with PRP? Did you say that there were no PRP device for sale and why? And who you are losing that share to?

Well, Jeff the issue is with a contract supplier for MTF. So we purchased the kits from MTF. MTF had a contract manufacturer, putting the kits together. That contract manufacturer has had difficulties from a production standpoint and also so happens to the contract supplier is a very large company. And this particular business is rather small frankly to them, so it’s not a high priority. And so we’ve been without product for while since about December. We knew we are going to be without product in the first quarter. And had factored all of that into our forecasts, including the entire year’s forecast under the assumption that we would not have inventory to provide to our customers. So we have notified our customers that we are currently not able to provide the kits. We have looked in alternative sources, none of which look too appealing. The contract manufacturer may be able to supply kits, but we are of the opinion that at least the present that may not be in our best interest to continue to sell this product, just because so much time has passed supplying the kits that our customers most probably have turned over to other competitive devices. There are a number of competitors that offer a PRP devices, many as a matter of fact, over 10. So I don’t know where all the business would have gone, but it’s not with us anyway. And at present as I said, we’re considering what our options are for this particular line. Last year we had sales of approximately $3.5 million of this product and right now our assumption is that all of that is will not continue into 2014. Jeffrey S. Cohen – Ladenburg Thalmann & Co., Inc.: Okay. And what percent of the MTF arrangement was that, approximately 10%?

Approximately 10%, yes. Jeffrey S. Cohen – Ladenburg Thalmann & Co., Inc.: With regard to some of the commentary you had before in single-use for the quarter, you guys being been down 5%, Europe being up 5%. So, you generally attributed that to two factors, one would be severe weather and the other would be low utilization levels perhaps a pull forward from Q4. Is there anything else there?

That, well Cascade would be on there too, but besides Cascade it would be the weather and utilization patterns, yes. Jeffrey S. Cohen – Ladenburg Thalmann & Co., Inc.:

Well, Jeff as any company would respond, we have no comment on that. Jeffrey S. Cohen – Ladenburg Thalmann & Co., Inc.: Okay. Thank you.

And your next question comes from the line of Mark Landy with Summer Street Research. Please proceed. Mark Landy – Summer Street Research Partners: Good morning, guys. Can you hear me, okay.

Yes, fine, Mark. I think you are little low. Mark Landy – Summer Street Research Partners: Okay. I’ll speak up. So before getting to some of the general question, in terms of selling days was an extra day in the quarter or day less in the quarter.

Well. I know some companies – boy, I’m getting some feedback, I know some companies (indiscernible) up there. I think that it was the difference maybe in Europe there, Good Friday, last year and it did not occur in March this year. So, we maybe short a little bit with respect to Europe, but in general I think the days are about the same. Mark Landy – Summer Street Research Partners: Is there was any extra days or less days kind of highlight the weather issues. So it seems like the selling day is pretty much the same there.

Pretty much the same. We may have had a little advantage because Good Friday wasn’t in the first quarter of this year. Mark Landy – Summer Street Research Partners:

We’ve looked at this and certainly, we need improvement. I don’t think it’s that much of a stress and so for example, so for the second quarter, I think it was about a 1.2% or 3% growth. And then, if you look at the third quarter, we probably would need 3% in that quarter, which seems to be you might be able to comment, if that’s on the high side however the third quarter in 2013 was very, very weak. So, we would think that’s an easy comp. The other thing that we would give us comfort that we could hit that 3% growth in Q3, but that, that the new products are really coming in Q3 So I think we’ll get a good benefit from the edge and the video and the trocars et cetera. Some of these new products should help us to get there in Q3. And it really it was a very, very weak comp. And then for Q4, as I look at it, I see that really Q2 and Q3 come out the way I’ve just described. Well, for Q4, I think a 2% growth quarter there, I guess is there, and 2% is what we did last year. So it’s a repeat, if you can look at it that way. And admittedly that would be the low end of the range, but we’d be in the range. So that’s the way we’re looking at it. And we will admit to everyone on this call that we’re banking quite a bit on the new products, but our feedback so far from customers that have seen these new products is that they are going to do very well. They are very strong new products. Mark Landy – Summer Street Research Partners: Okay. I guess the other question, just relating to this pricing, a piece of that, I know it’s kind of international and Europe strengthening the U.S. They’ve been declining; maybe hurt more by the capital equipment than other geographies. How should one factor in the geographic movements along with pricing to get to those growth rates relative to procedure volumes?

Well, let’s talk about what occurred in the first quarter here. So a single-use sales outside the United States grew 5%, which is very strong actually, led by critically the procedure-specific products, shoulder products overall grew 10%. So, outside the United States, very good growth in the first quarter. The U.S. had a decline of 5% in single-use sales. So as I said, we think that’s attributable to the weather and utilization, which should catch up as we go through the rest of the year. So as we look at single-use products, good growth outside the United States. The U.S. should pick up its growth rates as we go through the rest of the year to provide a favorable trend on single-use products. And then with the capital products, we should be getting into a point where we have easier accounts, as Joe mentioned. So even though some of the – like the visualization systems won’t be out until the third quarter, I think that that visualization product line should show some benefit to us as we go through the rest of the year. And I’ll also point out that capital products are still only 20% of our business, so that we can really make some progress, I think, with our single-use devices. Mark Landy – Summer Street Research Partners: So now, I think, just asking a question maybe in another way. You’ve really got to seek growth in the U.S., stocks pick-up and close that differential between the growth O-U.S. versus the growth in U.S. to try and close that pricing differential should help, right?

We certainly believe that the U.S. will improve the performance over the course of the year. Mark Landy – Summer Street Research Partners: Okay. Any commentary on discussions with the FDA and Altrus? And I don’t know if you’ve provided any color since the last call?

There really is no update there. It just stays quo. We continue to sell Altrus and we have responded to the warning letter and we have no other – there’s been no other communications of significance with the FDA and this issue. I can’t remember if I’ve mentioned this method, but I think I did. In the last conference call, we filed a new 510(k) for Altrus. Yes we did, we mentioned that on our last conference call. So that’s a 90 day process. So we’re probably halfway through that waiting period I guess on the new 510(k) for Altrus. So there is really nothing more to report on that.

And your next question comes from the line of Matt Miksic with Piper Jaffary. Please proceed. Matt S. Miksic – Piper Jaffray & Co: Hey Joe, hey Rob. Thanks for taking my questions. Just I guess having covered the quarter of your – in the dynamics of the results. I wanted to ask if you could – without commenting on the press comment speculation about strategic actions or anything like that. I love to get your sense as to how you have looked at the business over the years. And maybe what about the businesses do you think benefit as the combined business in terms of leverage or absorption or manufacturing synergies, distribution synergies to the extent of R&D. And so to the extent you’ve looked at either investing further and some of these areas are pruning the portfolio. What that analysis has led you to? And then have a couple of just quick follow-ups?

Sure, Matt. We regularly look at the portfolio and analyze if there any pruning would be beneficial to shareholders and to, I guess our metrics in general. The obvious one that comes up from time-to-time and we’ve talked about this for many years, you know that patient care business it’s been declining. And so, it’s certainly excess of that Board incurred on our top line growth profile. As we’ve got our numbers internally and we look at that business unfortunately, we think that if we divested that business it would be fairly, highly dilutive to earnings. And so we’ve concluded that might not be in the best interest of all of our shareholders to do that. And probably would not have a favorable impact I think on the stock price of the company because of the dilution that would result from our divestiture transaction. So yes, we do look at that and we’ve looked at some of the other businesses as well. On the flipside of the coin, we are interested in acquisitions and so we would like to invest in some of these businesses by holding in acquired product lines and businesses and gain market share that way. And so we’re actively out looking for acquisitions. Matt S. Miksic – Piper Jaffray & Co: Okay. And so few comments on patient care would indicate that to us is from a kind of distance looking at this business that I would suggest maybe it’s a high margin business it’s gone all that big even though it’s kind of diluted the growth, if you will. Is that the right way to look at it?

No, it’s actually not a high margin business in terms of the gross profit margins is the lowest gross profit margin business that we operate. But there are very few below the line costs that are associated with that business. And so it is profitable for us at the operating margin level. Matt S. Miksic – Piper Jaffray & Co: Okay, so maybe about – is it above the average operating margins, I’m just trying to get a sense of how just not to zeroing in on that as the solution, but as an example.

Matt, it is probably not useful to get into that levels, of… Matt S. Miksic – Piper Jaffray & Co: All right, okay let me back off that then. It is helpful to sort of understand how the pieces come together.

Well, Matt, I just want to make a comment on that. We’ve done an awful lot of integrating over the last five or six years here. And so we are running the company as one unit, one company. We manufacture multiple kinds of product lines in each of our three major factories. We’ve got one R&D group. We have one quality group. We have one HR group. Even though we talk about these distinct product lines, because I think it’s helpful to investors to know how individual products are doing from a sales perspective. From an operating perspective, we look at the company as one big unit, and it’s often times difficult to get into details on profitability and individual product groups. Matt S. Miksic – Piper Jaffray & Co: Sure, and I can understand that generally, it’s not something a lot of teams there, management teams are going to do is get down to that level, but that is helpful to understand. The other I guess looking at divisions in the business lines, a lot of good things happening in sports medicine and encouraging to see the sort of sequential improvements there. Looking at things like, endoscopic surgery or some of the general surgery markets that you are in, I guess I would ask if you are, if investment is the way, which you’re thinking about those if that impact one of the areas you are looking to invest. What is it, take to get to? Is it scale that you like to achieve the areas? Is it more differentiated products? What would be the strategy for kicking those businesses to another place?

Yes, the strategy for that for the general surgery business, is actually pretty interesting because it’s variable with electrosurgery for example, our investment has been made in Altrus and we are waiting to get a return on investment. We’re painfully even describing the process there and unfortunately hasn’t ramped up as fast as we would have like. There are other investments being made in Advanced Energy formally called Electrosurgery and that’s on the Argon Beam product area, the smoke evacuation area and so a combination of internal investments, R&D and new products as well as acquisitions would help us in that area. With the endomechanical line the laparoscopic products and we are really anticipating that the new trocar line is going to return that business to a steady 5% to 6% grow. So if you take a look at our numbers and go back just three to four years, and then say there is a period of six years that we had that type of growth in EndoSurgery. We think we can get back there with this new trocar line, some of the other new products that we are developing. So that for us, is again a combination of investments in R&D. We think we’ll be getting a payback pretty soon as soon as that product line launches, as well as some small targeted technology type acquisitions that will fill gaps in that product line. So stapling is one area, Chinese manufacturing is another area. There are several investments that can be made in Endosurgery. With the GI line up, purely a scale issue. We have a sales force that desperately needs new products and a larger base of business, I think, would be efficient. So we’re actively looking in that area in the GI space for scale. So, and that leaves us with where we started, I guess, which is Patient Care and that business is generating cash. It’s profitable, but I’m not sure that investment is wanted in that area. So I think that rounds also with discussion of all of our general surgery businesses and the different pathways we’re looking at to improve that general surgery business. Matt S. Miksic – Piper Jaffray & Co: That is helpful. Thank you, Joe. Thank you, Rob.

And your next question comes from the line of Jim Sidoti with Sidoti & Company. Please proceed. James Sidoti – Sidoti & Company LLC: Good morning. Can you hear me?

Yes, Jim. How are you? James Sidoti – Sidoti & Company LLC: Great, great. I understand your reluctance to comment on the – you don’t want to go backin April, but I just wanted to ask, maybe you can make some comments on some of the other transactions in this space. I’m sure you’ve been following a few, acquiring through care and now Zimmer announced this morning they’re well there. Are there any opportunities as a result of this consolidation for you to maybe add to your sales force and capitalize on some of these disruptions in the near-term?

We already asked with the Smith & Nephew ArthroCare announcement. Yes, we think there’s opportunities for acquiring some of the top performing sales reps as an example. With any large acquisition, which is what that amounts to, I would suspect that would be some disruption for a period of time. The timing actually bodes very well for us as we’re launching the edge ablation system. So really I think we’re very fortunate that the timing is working out this way. With the Zimmer, as we say, was just announced, Zimmer and Biomet was just announced today and so I don’t – with the timing of that announcement and the timing of our call I haven’t given it that much thought, but I’m sure there will something that are beneficial. Well, maybe beneficial and maybe negative to come out of that. We’ll also think about it. James Sidoti – Sidoti & Company LLC: All right. Thank you.

And your next question comes from the line of Mike Matson as a follow-up with Needham & Company. Please proceed. Mike S. Matson – Needham & Co. LLC: Thanks. Just a couple more quick questions. Are the margins on the visualization products lower? So in other words, is that part of the reason that your margins were stronger with the big decline there this quarter. And then, I guess conversely assuming that new products do take off in the second half of the year, is that going to then put some pressure on your margins?

Well, the margins on our visualization systems are – gross margins are lower than the overall corporate average. And I guess, there is probably some impact to the overall margin this quarter, but I guess, I’ll remind you that the sales of surgical visualization products in the first quarter were I don’t know about 6%, 7% of our sales, so not a huge number with respect to the total. So I really think that the benefit in the margins has resulted from all of the work we’ve done over the last couple of years with regard to efficiencies and our manufacturing processes. Mike S. Matson – Needham & Co. LLC: Okay. And then, I guess, I just wanted to push back a little on the R&D target of 3.5%, because I know, I mean it’s kind of at the low end of what I see among orthopedics companies and especially among, even among the larger companies, which have a lot more scales and revenues that they can leverage R&D across. So, just with the smaller companies it seems like the numbers are considerably higher than 3.5%. So, I guess, why do you feel like that is the right number and why shouldn’t at the 5% to 6% even higher than that.

Well. We would – I mean, we agree with you on a number of valid points that the entire orthopedics companies that we were a pure play orthopedic company I would expect our R&D spending to be 5% or 6%. Content managers general surgery business which is 40% of our sales. And accordingly, our R&D spending is less, because we are spending less in the general surgery businesses in our, especially if you look at the patient care business is very low R&D you can spend. Mostly, expanding engineering for those legacy type of products. So, I think that’s really the answer. That’s the reason why a company like CONMED and other companies that manage both playing on orthopedics business and maybe a general surgery business will have different metrics and the R&D metric is one that would be different as well. Mike S. Matson – Needham & Co. LLC: All right. Thanks a lot, that’s all I have.

And that concludes today’s question-and-answer session. I would like to hand the call over for any closing remarks.

Well. I thank everyone for attending today’s earnings call. We are very pleased with our operating results, in terms of earnings growth and margin improvement. We look forward to seeing the new products continue to ramp up. And we look forward to our next earnings conference call to update you on our improvements on the top line that we are expecting. Thank you very much for your participation.

Ladies and gentlemen that concludes today’s conference. Thank you for your participation. You may now disconnect. You all have a great day.