Acelity L.P. Inc. - FORM 10-Q

Attached files

file	filename
EX-31.2 - EXHIBIT 31.2 - Acelity L.P. Inc.	a3122015q3cfocertification.htm
EX-31.1 - EXHIBIT 31.1 - Acelity L.P. Inc.	a3112015q3ceocertification.htm
EX-32.1 - EXHIBIT 32.1 - Acelity L.P. Inc.	a3212015q3ceocfocertificat.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2015

Commission file number 333-184233-14

ACELITY L.P. INC.

(Exact name of registrant as specified in its charter)



Guernsey		98-1022387
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

12930 West Interstate 10 San Antonio, Texas		78249
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number, including area code: (210) 524-9000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.



Yes	X	No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).



Yes	X	No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer			Accelerated filer

Non-accelerated filer	X	(Do not check if a smaller reporting company)	Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).



Yes	No	X

As of October 26, 2015, there were 341,410,891.610 Class A-1 and 717,038.800 Class A-2 partnership units outstanding, all of which were held by affiliates.

TABLE OF CONTENTS

ACELITY L.P. INC.



			Page No.

PART I.	FINANCIAL INFORMATION		4
	Item 1.	Financial Statements	4
		Condensed Consolidated Balance Sheets	4
		Condensed Consolidated Statements of Operations	5
		Condensed Consolidated Statements of Comprehensive Loss	6
		Condensed Consolidated Statements of Cash Flows	7
		Notes to Condensed Consolidated Financial Statements	8
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
	Item 4.	Controls and Procedures	37

PART II.	OTHER INFORMATION		37
	Item 1.	Legal Proceedings	37
	Item 1A.	Risk Factors	37
	Item 6.	Exhibits	38
	SIGNATURES		39

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes statements that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements.” The forward-looking statements are based on our current expectations and projections about future events. Discussions containing forward-looking statements may be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors,” and elsewhere in this report. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “predicts,” “projects,” “potential,” “continue,” “expects,” “anticipates,” “aims,” “future,” “intends,” “plans,” “believes,” “estimates,” or the negative of those terms and other variations of them or by comparable terminology.

These forward-looking statements are only predictions, not historical facts, and involve certain risks and uncertainties, as well as assumptions. Actual results, levels of activity, performance, achievements and events could differ materially from those stated, anticipated or implied by such forward-looking statements. The factors that could contribute to such differences include those discussed under the caption “Risk Factors.” You should consider each of the risk factors and uncertainties under the caption “Risk Factors” in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, among other things, in evaluating our prospects and future financial performance. The occurrence of the events described in the risk factors could harm our business, results of operations and financial condition. These forward-looking statements are made as of the date of this report. Except as required under federal securities laws and the rules and regulations of the SEC, we do not have any intention to update any forward-looking statements to reflect events or circumstances arising after the date of this report, whether as a result of new information, future events or otherwise.

TRADEMARKS, SERVICE MARKS AND COPYRIGHTS

3M^® Tegaderm^® is a licensed trademark of 3M Company; GRAFTJACKET^® is a licensed trademark of Wright Medical Technology Inc; Novadaq^®, SPY^®, and SPY ELITE^® are licensed trademarks of Novadaq Technologies, Inc.; and Prontosan^® Wound Irrigation Solution is a licensed trademark of B. Braun Medical, Inc. Unless otherwise indicated, all other trademarks appearing in this report are proprietary to KCI Licensing, Inc., LifeCell Corporation or Systagenix Wound Management IP Co B.V., their affiliates and/or licensors. The absence of a trademark or service mark or logo from this report does not constitute a waiver of trademark or other intellectual property rights of KCI Licensing, Inc., Systagenix Wound Management IP Co B.V., or LifeCell Corporation, their affiliates and/or licensors.

DEFINED TERMS

The following terms are used in this Quarterly Report on Form 10-Q unless otherwise noted or indicated by the context.


•	the terms the “Company,” “we,” “our,” and “us” refer to Acelity L.P. Inc. (“Acelity”) and its consolidated subsidiaries.


•	the term “Merger” refers to the transaction completed on November 4, 2011 pursuant to which Kinetic Concepts, Inc. was merged with Chiron Merger Sub, Inc. (“Merger Sub”), a direct subsidiary of Chiron Holdings, Inc. (“Holdings”) and an indirect subsidiary of Acelity L.P. Inc.


•	the term “KCI” means Kinetic Concepts, Inc. and its subsidiaries.


•	the term “LifeCell” means LifeCell Corporation and its subsidiaries.


•	the term “Systagenix” means “Systagenix Wound Management B.V., its subsidiaries, and its former U.S.-based affiliate, Systagenix Wound Management (US), Inc.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ACELITY L.P. INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands)



	September 30, 2015			December 31, 2014
	(unaudited)
Assets:
Current assets:
Cash and cash equivalents	$	197,010		$	183,541
Accounts receivable, net	383,438			370,483
Inventories, net	182,152			178,222
Deferred income taxes	27,699			63,025
Prepaid expenses and other	43,121			27,563
Total current assets	833,420			822,834

Net property, plant and equipment	270,077			288,048
Debt issuance costs, net	59,998			77,896
Deferred income taxes	26,705			31,692
Goodwill	3,378,298			3,378,298
Identifiable intangible assets, net	2,270,324			2,397,251
Other non-current assets	4,772			4,694
	$	6,843,594		$	7,000,713

Liabilities and Equity:
Current liabilities:
Accounts payable	$	51,120		$	51,827
Accrued expenses and other	405,631			343,484
Current installments of long-term debt	25,388			25,721
Income taxes payable	3			1,305
Deferred income taxes	44,928			113,658
Total current liabilities	527,070			535,995

Long-term debt, net of current installments and discount	4,780,663			4,815,290
Non-current tax liabilities	34,386			33,300
Deferred income taxes	798,417			792,157
Other non-current liabilities	82,951			163,258
Total liabilities	6,223,487			6,340,000
Equity:
General partner’s capital	—			—
Limited partners’ capital	638,114			670,787
Accumulated other comprehensive loss, net	(18,007		)	(10,074		)
Total equity	620,107			660,713
	$	6,843,594		$	7,000,713

See accompanying notes to condensed consolidated financial statements.

ACELITY L.P. INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(in thousands)

(unaudited)



	Three months ended September 30,						Nine months ended September 30,
	2015			2014			2015			2014
Revenue:
Rental	$	185,952		$	188,843		$	539,188		$	527,449
Sales	291,728			292,950			844,187			856,157
Total revenue	477,680			481,793			1,383,375			1,383,606

Rental expenses	76,625			83,581			232,672			254,119
Cost of sales	76,929			83,799			225,852			245,271
Gross profit	324,126			314,413			924,851			884,216

Selling, general and administrative expenses	159,956			162,269			466,713			507,646
Research and development expenses	14,271			15,879			43,340			51,602
Acquired intangible asset amortization	43,845			47,918			134,434			147,361
Wake Forest settlement	—			—			—			198,578
Operating earnings (loss)	106,054			88,347			280,364			(20,971		)

Interest income and other	68			23			282			245
Interest expense	(106,609		)	(104,475		)	(318,709		)	(308,475		)
Foreign currency gain (loss)	(9,189		)	9,599			3,412			13,687
Derivative instruments gain (loss)	(869		)	1,630			(5,136		)	(2,670		)
Loss from continuing operations before income tax expense (benefit)	(10,545		)	(4,876		)	(39,787		)	(318,184		)
Income tax benefit	(593		)	(1,641		)	(7,673		)	(114,066		)
Loss from continuing operations	(9,952		)	(3,235		)	(32,114		)	(204,118		)
Earnings from discontinued operations, net of tax	—			1,398			—			3,181
Net loss	$	(9,952	)	$	(1,837	)	$	(32,114	)	$	(200,937	)

See accompanying notes to condensed consolidated financial statements.

ACELITY L.P. INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

(unaudited)



	Three months ended September 30,						Nine months ended September 30,
	2015			2014			2015			2014

Net loss	$	(9,952	)	$	(1,837	)	$	(32,114	)	$	(200,937	)
Unrealized investment loss, net of tax benefit of $411 and $412 in 2014	—			(657		)	—			(659		)
Foreign currency translation adjustment, net of tax benefit (expense) of $475 and $(478) in 2015 and $(279) and $(782) in 2014	(5,797		)	(3,425		)	(7,933		)	(3,238		)
Total comprehensive loss	$	(15,749	)	$	(5,919	)	$	(40,047	)	$	(204,834	)

See accompanying notes to condensed consolidated financial statements.

ACELITY L.P. INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited)

	Nine months ended September 30,
	2015			2014
Cash flows from operating activities:
Net loss	$	(32,114	)	$	(200,937	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Amortization of debt issuance costs and discount	30,717			29,179
Depreciation and other amortization	197,158			234,514
Amortization of fair value step-up in inventory	—			6,680
Provision for bad debt	5,465			11,613
Equity-based compensation expense	2,366			2,966
Deferred income tax benefit	(24,586		)	(127,799		)
Unrealized gain on derivative instruments	(5,978		)	(9,310		)
Unrealized gain on foreign currency	(9,537		)	(27,559		)
Change in assets and liabilities:
Decrease (increase) in accounts receivable, net	(15,889		)	26,065
Increase in inventories, net	(15,751		)	(9,275		)
Decrease (increase) in prepaid expenses and other	(15,660		)	12,341
Increase (decrease) in accounts payable	(545		)	7,402
Increase (decrease) in accrued expenses and other	(7,772		)	161,227
Increase (decrease) in tax liabilities, net	2,136			(12,076		)
Net cash provided by operating activities	110,010			105,031

Cash flows from investing activities:
Additions to property, plant and equipment	(46,115		)	(46,760		)
Increase in inventory to be converted into equipment for short-term rental	(2,110		)	(3,289		)
Dispositions of property, plant and equipment	1,917			2,251
Businesses acquired in purchase transactions, net of cash acquired	(2,948		)	(4,613		)
Increase in identifiable intangible assets and other non-current assets	(5,501		)	(9,351		)
Net cash used by investing activities	(54,757		)	(61,762		)

Cash flows from financing activities:
Distribution to limited partners	(55		)	—
Settlement of profits interest units	(2,812		)	(1,416		)
Proceeds from revolving credit facility	30,000			—
Repayments of long-term debt and other financing obligations	(54,372		)	(19,863		)
Debt issuance costs	(6,256		)	—
Net cash used by financing activities	(33,495		)	(21,279		)
Effect of exchange rate changes on cash and cash equivalents	(8,289		)	(4,034		)
Net increase in cash and cash equivalents	13,469			17,956
Cash and cash equivalents, beginning of period	183,541			206,949
Cash and cash equivalents, end of period	$	197,010		$	224,905

See accompanying notes to condensed consolidated financial statements

Notes to Condensed Consolidated Financial Statements

NOTE 1. Summary of Significant Accounting Policies

(a) Basis of Presentation and Principles of Consolidation

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP” or “the Codification”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information necessary for a fair presentation of results of operations, financial position and cash flows in conformity with GAAP. Operating results from interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole. The condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation of our results for the interim periods presented. Certain prior period amounts have been reclassified to conform to the 2015 presentation.

On October 29, 2014, LifeCell entered into an agreement with Novadaq^® Technologies Inc. (“Novadaq”) to transfer all marketing and distribution rights to the SPY^® Elite System from LifeCell to Novadaq, effective November 30, 2014. In connection with the transfer, the parties agreed to terminate various distribution agreements entered into between 2010 and 2011. The results of the operations subject to the agreement, excluding the allocation of general corporate overhead, are presented as discontinued operations in the condensed consolidated statements of operations for all periods presented.

The condensed consolidated financial statements appearing in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

(b) Derivative Financial Instruments and Fair Value Measurements

We use derivative financial instruments to manage the economic impact of fluctuations in interest rates. We do not use financial instruments for speculative or trading purposes. Periodically, we enter into interest rate protection agreements to modify the interest characteristics of our outstanding debt. Our interest rate derivatives have not been designated as hedging instruments, and as such, we recognize the fair value of these instruments as an asset or liability with income or expense recognized in the current period.

We also periodically use derivative financial instruments to manage the economic impact of fluctuations in currency exchange rates on our intercompany balances and corresponding cash flows and to manage our transactional currency exposures when our foreign subsidiaries enter into transactions denominated in currencies other than their local currency. We enter into foreign currency exchange contracts to manage these economic risks. These contracts are not designated as hedges; and as such, we recognize the fair value of these instruments as an asset or liability with income or expense recognized in the current period. Although we use master netting agreements with our derivative counterparties, we do not offset derivative asset and liability positions in the condensed consolidated balance sheets.

All derivative instruments are recorded on the balance sheets at fair value. The fair values of our interest rate derivatives and foreign currency exchange contracts are determined based on inputs that are readily available in public markets or can be derived from information available in publicly-quoted markets, which represent level 2 inputs as defined by the Codification.

We have a concentration of credit risk with financial institutions related to our derivative instruments. As of September 30, 2015, Morgan Stanley, UBS and HSBC were the counterparties on our interest rate protection agreements consisting of interest rate swap agreements in notional amounts totaling $478.7 million each. We use master netting agreements with our derivative counterparties to reduce our risk and use multiple counterparties to reduce our concentration of credit risk.

We maintain cash and cash equivalents with several financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. These deposits bear minimal credit risk as they are maintained at financial institutions of reputable credit and generally may be redeemed upon demand.

(d) Recently Adopted Accounting Standards

In April 2014, the Financial Accounting Standard Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity”. ASU No. 2014-08 changes the requirements for reporting discontinued operations and requires additional disclosures about discontinued operations. Under the new guidance, only disposals representing a strategic shift in operations - that is, a major effect on the organization’s operations and financial results should be presented as discontinued operations. Examples include a disposal of a major geographic area, a major line of business, or a major equity method investment. Additionally, the ASU requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The Company adopted this ASU effective January 1, 2015. We do not anticipate that it will have a material effect on our results of operations, financial position or disclosures.

(e) Recently Issued Accounting Standards

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”. This ASU affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). This ASU supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition”, and most industry-specific guidance. This ASU also supersedes some cost guidance included in Subtopic 605-35, “Revenue Recognition-Construction-Type and Production-Type Contracts”. In addition, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (e.g., assets within the scope of Topic 360, “Property, Plant, and Equipment”, and intangible assets within the scope of Topic 350, “Intangibles-Goodwill and Other”) are amended to be consistent with the guidance on recognition and measurement (including the constraint on revenue) in this ASU. In July 2015, the FASB voted to defer the effective date of this ASU by one year. As a result, the amendments in ASU 2014-09 are effective for public companies for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Entities would be permitted to adopt this ASU as early as the original public entity effective date, which was annual reporting periods beginning after December 15, 2016 and interim periods therein. Early adoption prior to that date would not be permitted. The Company is evaluating ASU No. 2014-09 to determine if it will have a material effect on our results of operations, financial position or disclosures.

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements — Going Concern (Subtopic 205-40).” The new guidance addresses management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. Management’s evaluation should be based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The Company is evaluating this ASU, however we do not anticipate that the adoption of this guidance will have a material impact on our results of operations, financial position or disclosures.

In January 2015, the FASB issued ASU No. 2015-01, "Income Statement -Extraordinary and Unusual Items (Subtopic 225-20)." The objective of this ASU is to simplify the income statement presentation requirements in Subtopic 225-20 by eliminating the concept of extraordinary items. Extraordinary items are events and transactions that are distinguished by their unusual nature and by the infrequency of their occurrence. Eliminating the extraordinary classification simplifies income statement presentation by altogether removing the concept of extraordinary items from consideration. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period. Early application is permitted. The Company is evaluating this ASU, however we do not anticipate that the adoption of this guidance will have a material impact on our results of operations, financial position or disclosures.

On February 18, 2015, the FASB issued ASU 2015-02, "Consolidation (Topic 810): Amendments to the Consolidation Analysis." This ASU provides a revised consolidation model for all reporting entities to use in evaluating whether they should consolidate certain legal entities. All legal entities will be subject to reevaluation under this revised consolidation model. The revised consolidation model, among other things, (i) modifies the evaluation of whether limited partnerships and similar legal entities are variable interest entities ("VIEs") or voting interest entities, (ii) eliminates the presumption that a general partner should consolidate a limited partnership, and (iii) modifies the consolidation analysis of reporting entities that are involved with VIEs through fee arrangements and related party relationships. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period. Early application is permitted. The Company is evaluating this ASU, however we do not anticipate that the adoption of this guidance will have a material impact on our results of operations, financial position or disclosures.

In April 2015, the FASB issued ASU 2015-03, "Interest - Imputation of Interest (Subtopic 835-30)." The objective of this ASU is to simplify the presentation of debt issuance costs in the balance sheet by requiring the presentation of debt issuance costs as a deduction from the carrying amount of the related debt liability instead of a deferred charge. The standard will be effective for annual reporting periods beginning after December 15, 2015. Early adoption is permitted. As of September 30, 2015, the Company had $60.0 million of unamortized debt issuance costs recorded as a deferred charge.

In July 2015, the FASB issued ASU 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory.” The amendments in this ASU do not apply to inventory that is measured using last-in, first-out or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out or average cost. An entity should measure inventory within the scope of this ASU at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The Company is evaluating this ASU, however we do not anticipate that the adoption of this guidance will have a material impact on our results of operations, financial position or disclosures.

In September 2015, the FASB issued ASU 2015-16, “Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments.” The amendments in this ASU require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments in this ASU also require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. Additionally, the amendments in this ASU require an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2015. Early adoption is permitted. The Company is evaluating this ASU, however we do not anticipate that the adoption of this guidance will have a material impact on our results of operations, financial position or disclosures.

(f) Other Significant Accounting Policies

For further information on our significant accounting policies, see Note 1 of the notes to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

NOTE 2. Acquisitions and Divestitures

Acquisitions

There were no significant acquisitions during the nine months ended September 30, 2015.

Divestitures

SPY® Elite System

On October 29, 2014, LifeCell Corporation entered into an agreement with Novadaq^® Technologies Inc. (“Novadaq”) to transfer all marketing and distribution rights to the SPY^® Elite System from LifeCell to Novadaq, effective November 30, 2014.

The operating results of the SPY^® Elite System product portfolio included in discontinued operations are as follows (in thousands):



	Three months ended September 30,		Nine months ended September 30,
	2014		2014

Revenue	$	6,858	$	17,755
Earnings before income taxes	$	2,273	$	5,172
Income tax expense	$	875	$	1,991
Earnings from discontinued operations, net of tax	$	1,398	$	3,181

NOTE 3. Supplemental Balance Sheet Data

(a) Accounts Receivable, net

Accounts receivable consist of the following (in thousands):



	September 30, 2015			December 31, 2014
Gross trade accounts receivable:
Billed trade accounts receivable	$	402,363		$	396,329
Unbilled receivables	43,182			39,293
Less: Allowance for revenue adjustments	(66,031		)	(61,460		)
Gross trade accounts receivable	379,514			374,162
Less: Allowance for bad debt	(12,036		)	(13,087		)
Net trade accounts receivable	367,478			361,075
Other receivables	15,960			9,408
	$	383,438		$	370,483

(b) Inventories, net

Inventories consist of the following (in thousands):



	September 30, 2015			December 31, 2014
Finished goods and tissue available for distribution	$	131,819		$	127,253
Goods and tissue in-process	10,390			6,887
Raw materials, supplies, parts and unprocessed tissue	67,941			67,567
	210,150			201,707
Less: Amounts expected to be converted into equipment for short-term rental	(9,625		)	(7,515		)
Reserve for excess and obsolete inventory	(18,373		)	(15,970		)
	$	182,152		$	178,222

NOTE 4. Long-Term Debt

Long-term debt consists of the following (in thousands):



	September 30, 2015			December 31, 2014

Senior Dollar Term E-1 Credit Facility – due 2018	$	1,912,641		$	1,927,241
Senior Euro Term E-1 Credit Facility – due 2018	268,762			293,746
Senior Term E-2 Credit Facility – due 2016	312,962			315,351
10.5% Second Lien Senior Secured Notes due 2018	1,750,000			1,750,000
12.5% Senior Unsecured Notes due 2019	612,000			612,000
3.25% Convertible Senior Notes due 2015	—			101
Notional amount of debt	4,856,365			4,898,439

Senior Dollar Term E-1 Credit Facility Discount, net of accretion	(22,892		)	(24,241		)
Senior Euro Term E-1 Credit Facility Discount, net of accretion	(5,906		)	(7,376		)
Senior Term E-2 Credit Facility Discount, net of accretion	(2,284		)	(2,955		)
Second Lien Senior Secured Notes Discount, net of accretion	(16,894		)	(20,205		)
Senior Unsecured Notes Discount, net of accretion	(2,338		)	(2,651		)
Net discount on debt	(50,314		)	(57,428		)

Total debt, net of discount	4,806,051			4,841,011
Less: Current installments	(25,388		)	(25,721		)
	$	4,780,663		$	4,815,290

Senior Secured Credit Facility

Our senior secured credit facility (the “Senior Secured Credit Facility”) includes a $200 million revolving credit facility (the “Revolving Credit Facility”). Amounts available under the Revolving Credit Facility are available for borrowing and reborrowing until maturity. At September 30, 2015 and December 31, 2014, no revolving credit loans were outstanding and we had outstanding letters of credit issued by banks which are party to the Senior Secured Credit Facility of $38.3 million and $39.0 million, respectively. In addition, we had $8.8 million and $11.4 million of letters of credit issued by a bank not party to the Senior Secured Credit Facility as of September 30, 2015 and December 31, 2014, respectively. The capacity of the Revolving Credit Facility is reduced for the $38.3 million and $39.0 million of letters of credit issued by banks which are party to the Senior Secured Credit Facility as of September 30, 2015 and December 31, 2014, respectively. The resulting availability under the Revolving Credit Facility was $161.7 million and $161.0 million at September 30, 2015 and December 31, 2014, respectively. Commitment fees accrue at a rate of 0.50% on the amounts available under the Revolving Credit Facility.

Interest. On March 10, 2015, we entered into Amendment No. 6 to our Senior Secured Credit Facility (“Amendment No. 6”). In connection with Amendment No. 6, certain applicable rates were modified so that (i) Dollar Term E-1 Loans bear interest at a rate equal to, at KCI’s election, a Eurocurrency rate plus 3.50% or an adjusted base rate plus 2.50%, (ii) Euro Term E-1 Loans bear interest at a rate equal to, at KCI’s election, a Eurocurrency rate plus 3.75% or an adjusted base rate plus 2.75%, and (iii) Term E-2 Loans bear interest at a rate equal to, at KCI’s election, a Eurocurrency rate plus 3.00% or an adjusted base rate plus 2.00%. The Eurocurrency rate shall be subject to a floor of 1.00%, and the adjusted base rate shall be subject to a floor of 2.00%.

Covenants

As a result of Amendment No. 6, the financial covenants were amended to remove the interest coverage ratio in its entirety and to set the total leverage ratio for any test period to be no greater than 8.25:1.00. In addition, certain other covenants were amended, including with respect to the incurrence of incremental facilities and asset sales. As of September 30, 2015, we were in compliance with all covenants under our credit agreement and indentures.

For further information on our long-term debt, see Note 5 of the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

NOTE 5. Derivative Financial Instruments and Fair Value Measurements

We are exposed to credit loss in the event of nonperformance by counterparties to the extent of the fair values of the outstanding interest rate swap agreements, interest rate cap agreements and foreign currency exchange contracts, but we do not anticipate nonperformance by any of the counterparties. All derivative instruments are recorded on the balance sheets at fair value. We do not use financial instruments for speculative or trading purposes.

Interest Rate Protection

At September 30, 2015 and December 31, 2014, we were party to three interest rate swap agreements which are used to convert a portion of our outstanding variable rate debt to a fixed rate basis. These agreements have not been designated as hedging instruments, and as such, we recognize the fair value of these instruments as an asset or liability with income or expense recognized in the current period. The interest rate swap agreements have receive rates based on the higher of three-month USD LIBOR or 1.25% and pay rates based on fixed rates. Quarterly payments under the interest rate swap agreements are due on the last day of March, June, September and December. The aggregate notional amount decreases quarterly by amounts ranging from $1.7 million to $56.4 million until maturity.

The following table summarizes our interest rate swap agreements (dollars in thousands):



Effective Dates	Outstanding Notional Amount	Fixed Interest Rate
12/31/13-12/31/16	$478,700	2.256%
12/31/13-12/31/16	$478,700	2.249%
12/31/13-12/31/16	$478,700	2.250%

Foreign Currency Exchange Rate Mitigation

At September 30, 2015 and December 31, 2014, we had no outstanding foreign currency exchange contracts.

Fair Value Measurements

The Codification defines fair value as the exit price that would be received to sell an asset or paid to transfer a liability. The Fair Value Measurements and Disclosure topic of the Codification establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The carrying amount reported in the balance sheets for cash and cash equivalents, accounts receivable, accounts payable and long-term obligations, excluding our borrowings under our Senior Secured Credit Facility and fixed rate long-term debt, approximates fair value. The fair value of our borrowings under our Senior Secured Credit Facility and fixed rate long-term debt as determined using Level 2 inputs was $2.489 billion and $2.479 billion, respectively, at September 30, 2015. The fair value of our borrowings under our Senior Secured Credit Facility and fixed rate long-term debt was $2.501 billion and $2.584 billion, respectively, at December 31, 2014. The fair value of our long-term debt was estimated based upon open-market trades at or near period end.

All of our derivatives, as of the reporting date, use inputs considered as Level 2. The interest rate swap agreements are valued using a discounted cash flow model that takes into account the present value of the expected future cash flows under the terms of the agreements by using market information available as of the reporting date, including prevailing interest rates and related forward interest rate curves.

The following table sets forth the location and aggregate fair value amounts of all derivative instruments with credit-related contingent features (in thousands):



	Asset Derivatives					Liability Derivatives
	Balance Sheet Location	Fair Value				Balance Sheet Location	Fair Value
	Balance Sheet Location	September 30, 2015		December 31, 2014		Balance Sheet Location	September 30, 2015		December 31, 2014
Derivatives not designated as hedging instruments
Interest rate swap agreements	Prepaid expenses and other	$	—	$	—	Accrued expenses and other	$	13,076	$	13,936
Interest rate swap agreements	Other non-current assets	—		—		Other non-current liabilities	2,950		8,067
Total derivatives		$	—	$	—		$	16,026	$	22,003

The following table summarizes the amount of gain (loss) on derivatives not designated as hedging instruments (dollars in thousands):



	Three months ended September 30,					Nine months ended September 30,
	2015			2014		2015			2014
Interest rate swap agreements	$	(869	)	$	1,630	$	(5,136	)	$	(2,732	)
Foreign currency exchange contracts	—			—		—			62
	$	(869	)	$	1,630	$	(5,136	)	$	(2,670	)

Certain of our derivative instruments contain provisions that require compliance with the restrictive covenants of our Senior Secured Credit Facility. For further information regarding the restrictive covenants of credit facilities, see Note 5 of the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

If we default under our credit facilities, the lenders could require immediate repayment of the entire outstanding principal balance. If those lenders require immediate repayment, we may not be able to repay them which could result in the foreclosure of substantially all of our assets. In these circumstances, the counterparties to the derivative instruments could request immediate payment or full collateralization on derivative instruments in net liability positions. Certain of our derivative counterparties are also parties to our Senior Secured Credit Facility.

No collateral has been posted by us in the normal course of business. If the credit-related contingent features underlying these agreements were triggered on September 30, 2015, we could be required to settle or post the full amount as collateral to the respective agreement counterparties.

We did not have any measurements of financial assets or financial liabilities at fair value on a nonrecurring basis at September 30, 2015 or December 31, 2014.

NOTE 6. Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss are as follows (in thousands):



	Accumulated Foreign Currency Translation Adjustment			Accumulated Other Comprehensive Income (Loss)
Balances at December 31, 2014	$	(10,074	)	$	(10,074	)
Foreign currency translation adjustment, net of taxes of $478	(7,933		)	(7,933		)
Balances at September 30, 2015	$	(18,007	)	$	(18,007	)

During the nine months ended September 30, 2015, there were no reclassification adjustments out of accumulated other comprehensive loss to net loss.

NOTE 7. Commitments and Contingencies

Legal Proceedings

Intellectual Property Litigation

As the owner and exclusive licensee of patents, from time to time, we are a party to proceedings challenging these patents, including challenges in U.S. federal courts, foreign courts, foreign patent offices and the U.S. Patent and Trademark Office. Additionally, from time to time, we are a party to litigation we initiate against others we contend infringe these patents, which often results in counterclaims regarding the validity of such patents. At other times, we are party to litigation initiated by others who contend we infringe their patents. It is not possible to reliably predict the outcome of the proceedings described below. However, if we are unable to effectively enforce our intellectual property rights, third parties may become more aggressive in the marketing of competitive products around the world.

In September 2013, LifeNet Health ("LifeNet") filed suit against LifeCell in the U.S. District Court for the Eastern District of Virginia, Norfolk Division. LifeNet alleges that two LifeCell products, Strattice and AlloDerm Ready to Use, infringe LifeNet’s U.S. Patent No. 6,569,200 (the " '200 Patent"). In November 2014, a jury found that the ‘200 Patent was not invalid and was infringed and further awarded LifeNet a lump sum damages amount of $34.7 million. As a result of this decision, we recorded a liability of $34.7 million in the fourth quarter of 2014. We disagree with the result at this stage in the litigation and believe that LifeCell’s defenses to the claims are meritorious. LifeCell will continue to vigorously assert its defenses during the appeal stages of this litigation and intends to defend any further claims by LifeNet. LifeCell has filed an appeal in the U.S. Federal Circuit Court of Appeals in Washington D.C. on multiple grounds. In September 2015, LifeCell filed suit against LifeNet in the U.S. District Court for the District of New Jersey seeking declaratory judgment that LifeCell’s products do not infringe U.S. Patent No. 9,125,971 (the " '971 Patent") which issued to LifeNet the same day. LifeCell also filed a petition with United States Patent and Trademark Office to invalidate the ‘971 Patent. The ‘971 Patent is a continuation of the ‘200 Patent.

Products Liability Litigation

LifeCell is a defendant in approximately 354 lawsuits filed by individuals alleging personal injury and seeking monetary damages for failed hernia repair procedures using LifeCell’s AlloDerm products. These cases have been consolidated for case management purposes in Middlesex County, New Jersey. The trial court has issued a pre-trial order incorporating the bellwether practice of trying the claims of some plaintiffs to determine the likelihood of settlement or to avoid relitigating common issues in every case. Discovery was completed in four bellwether cases. In August 2015, LifeCell was successful in obtaining a summary judgment resulting in the dismissal of two of the four bellwether cases, and the dismissal of the design defect claims in the remaining two bellwether cases. The plaintiffs have appealed these decisions. Trial of the first remaining bellwether case is currently scheduled for January 2016. Although it is not possible to reliably predict the outcome of the litigation, we believe that our defenses to these claims are meritorious and we will defend against these suits vigorously. Based on our existing insurance coverage and our defenses to these cases, we do not expect them to have a material impact on our results of operations or our financial position. Because discovery of damages has been limited to the four bellwether cases, we do not know the damages allegedly suffered by the remaining plaintiffs. As such, it is impossible to predict or estimate potential losses if our defenses to these cases are unsuccessful.

LifeCell has been named as a defendant in approximately 257 lawsuits in state and U.S. federal courts alleging personal injury and seeking monetary damages for failed gynecological procedures using a human tissue product processed by LifeCell and sold by one of LifeCell’s distributors, Boston Scientific, under the name Repliform. There are approximately 253 LifeCell cases filed in two consolidated dockets in Middlesex County, Massachusetts. The cases are in the initial phase and no discovery has occurred. Two cases are pending in a multi-district U.S. federal case in West Virginia that is proceeding very slowly. LifeCell has been named, but not served, in 12 cases with multiple plaintiffs and defendants in St. Louis, Missouri State court. The St. Louis cases are aimed at the entire pelvic mesh industry and it is unknown at this time if Repliform was actually implanted in any of the plaintiffs. The remaining cases are in Delaware and Minnesota. Based on our existing insurance coverage and our defenses to these cases, we do not expect them to have a material impact on our results of operations or our financial position. As these cases are in their early stages it is not possible to predict or estimate potential losses if our defenses to these cases are unsuccessful.

Other Litigation

In 2009, KCI received a subpoena from the U.S. Department of Health and Human Services Office of Inspector General (“OIG”) seeking records regarding our billing practices under the local coverage policies of the four regional Durable Medical Equipment Medicare Administrative Contractors (“DME MACs”). KCI cooperated with the OIG's inquiry and provided substantial documentation to the OIG and the U.S. Attorneys' office in response to its request. The government's inquiry stemmed from the filing under seal of two 2008 qui tam actions against KCI by two former employees in the U.S. District Court, Central District of California, Western Division. These cases are captioned United States of America, ex rel. Steven J. Hartpence v. Kinetic Concepts, Inc. et al, and United States of America, ex rel. Geraldine Godecke v. Kinetic Concepts, Inc., et al. The complaints contend that KCI violated the federal False Claims Act by billing in a manner that was not consistent with the Local Coverage Determinations issued by the DME MACs and seek recovery of monetary damages. Following the completion of the government's review and its decision declining to intervene in such suits, the live pleadings were ordered unsealed in 2011. After reviewing the allegations, KCI filed motions seeking the dismissal of the suits on multiple grounds. In 2012, the District Court granted KCI's motions dismissing all of the claims under the False Claims Act. The cases went to appeal in the U.S. Court of Appeals for the Ninth Circuit which reversed the District Court's dismissal of the suits and remanded the cases back to the District Court for further proceedings. We believe that our defenses to the claims in the Hartpence and Goedecke cases are meritorious and that we have no liability under the False Claims Act for their allegations. However, it is not possible to predict the outcome of this litigation nor is it possible to estimate any damages that may be awarded if we are unsuccessful in the litigation.

We are a party to several additional lawsuits arising in the ordinary course of our business. Additionally, the manufacturing and marketing of medical products necessarily entails an inherent risk of product liability claims. We maintain multiple layers of product liability insurance coverage and we believe these policies and the amounts of coverage are appropriate and adequate.

Other Commitments and Contingencies

As a healthcare supplier, we are subject to extensive government regulation, including laws and regulations directed at ascertaining the appropriateness of reimbursement, preventing fraud and abuse and otherwise regulating reimbursement under various government programs. The marketing, billing, documenting and other practices are all subject to government oversight and review. To ensure compliance with Medicare and other regulations, regional carriers often conduct audits and request patient records and other documents to support claims submitted by us for payment of services rendered to customers.

We also are subject to routine pre-payment and post-payment audits of durable medical equipment (“DME”) claims submitted to Medicare Part B. These audits typically involve a complex medical review, by Medicare or its designated contractors and representatives, of documentation supporting the therapy provided by us. While Medicare requires us to obtain a comprehensive physician order prior to providing products and services, we are not required to obtain the written medical record in advance of therapy as long as the underlying medical records reported to us support the coverage criteria and medical necessity information included in such claim. Following a Medicare request for supporting documentation, we are obligated to procure and submit the underlying medical records retained by various clinical providers, medical facilities and prescribers. Obtaining these medical records in connection with a claims audit may be challenging and, in any event, all of these records are subject to further examination, interpretation and dispute by an auditing authority. Under standard Medicare procedures, we are entitled to demonstrate the sufficiency of documentation and the establishment of medical necessity, and we have the right to appeal any adverse determinations. If a determination is made that our records or the patients’ medical records are insufficient to meet medical necessity or Medicare reimbursement requirements for the claims, we could be subject to denial or overpayment demands for claims submitted for Medicare reimbursement. In the rare event that an audit results in major discrepancies of claims records which lacked proof of medical necessity, Medicare may be entitled to take additional corrective measures, including: extrapolation of the results of the audit across a wider population of claims, submitting recoupment demands for claims other than those examined in the audit, or placing the organization on a full prepayment review. These audits have increased over the last two years from being negligible to approximately 10% of our claims. While eventually receiving payment on a high percent of the claims subject to these audits, payment timeliness may range from a few months up to a year resulting in increasing Medicare accounts receivable balances.

NOTE 8. Segment Information

The Company is engaged in the rental and sale of advanced wound therapeutics and regenerative medicine products in over 75 countries worldwide through direct sales and indirect operations. We have two reportable operating segments which correspond to our two businesses: Advanced Wound Therapeutics and Regenerative Medicine. Our Advanced Wound Therapeutics business is conducted by KCI and its subsidiaries, including Systagenix, while our Regenerative Medicine business is conducted by LifeCell and its subsidiaries. In most countries where we operate, certain aspects of our two businesses are supported by the same administrative staff, systems and infrastructure and, as such, we have allocated these costs between the businesses based on allocation methods including headcount, revenue and other methods as deemed appropriate. We measure segment profit (loss) as operating earnings (loss), which is defined as income (loss) before interest and other income, interest expense, foreign currency gains and losses, derivative instruments gains and losses and income taxes. All intercompany transactions are eliminated in computing revenue and operating earnings (loss).

Information on segments and a reconciliation of consolidated totals are as follows (in thousands):



	Three months ended September 30,						Nine months ended September 30,
	2015			2014			2015			2014
Revenue:
Advanced Wound Therapeutics	$	365,819		$	372,965		$	1,057,292		$	1,051,233
Regenerative Medicine	109,332			104,611			317,030			318,791
Other operations ⁽¹⁾	2,529			4,217			9,053			13,582
Total revenue	$	477,680		$	481,793		$	1,383,375		$	1,383,606

Operating earnings (loss):
Advanced Wound Therapeutics	$	126,330		$	131,792		$	356,857		$	324,160
Regenerative Medicine	38,922			31,980			108,287			93,853
Other operations ⁽¹⁾	421			557			1,410			1,858
Non-allocated costs:
General headquarter expense	(1,179		)	(1,063		)	(4,128		)	(3,475		)
Equity-based compensation	(1,061		)	(863		)	(2,366		)	(2,966		)
Business optimization and transaction-related expenses ⁽²⁾	(13,534		)	(26,138		)	(45,262		)	(88,462		)
Acquired intangible asset amortization⁽³⁾	(43,845		)	(47,918		)	(134,434		)	(147,361		)
Wake Forest settlement	—			—			—			(198,578		)
Total non-allocated costs	(59,619		)	(75,982		)	(186,190		)	(440,842		)
Total operating earnings (loss)	$	106,054		$	88,347		$	280,364		$	(20,971	)


(1)	Represents contract manufacturing operations conducted at our manufacturing facility in Gargrave, England.


(2)	Represents expenses associated with our business optimization initiatives as well as management fees and costs associated with acquisition, disposition and financing activities.


(3)	Represents amortization of acquired intangible assets related to our Merger in November 2011, our acquisition of Systagenix in October 2013 and other technology acquisitions.

NOTE 9. Guarantor Condensed Consolidating Financial Statements

Our 10.5% Second Lien Notes and 12.5% Unsecured Notes are fully and unconditionally guaranteed, jointly and severally, by us and each of our material 100% owned subsidiaries, other than the subsidiaries that are co-issuers of the notes, foreign subsidiaries and subsidiaries whose only assets are investments in foreign subsidiaries. The non-guarantor subsidiaries do not have any payment obligations under the 10.5% Second Lien Notes or 12.5% Unsecured Notes. Subject to the terms of the10.5% Second Lien Notes and 12.5% Unsecured Notes indentures, the guarantee of a subsidiary guarantor will terminate upon:


(1)	a sale or other disposition (including by way of consolidation or merger) of the capital stock of such guarantor or the sale or disposition of all or substantially all the assets of such subsidiary guarantor (other than to the Company or a restricted subsidiary) otherwise permitted by the 10.5% Second Lien Notes or 12.5% Unsecured Notes indentures,


(2)	the designation in accordance with the 10.5% Second Lien Notes or 12.5% Unsecured Notes indenture of the guarantor as an unrestricted subsidiary or the occurrence of any event after which the guarantor is no longer a restricted subsidiary,


(3)	defeasance or discharge of the 10.5% Second Lien Notes or 12.5% Unsecured Notes, or


(4)	upon the achievement of investment grade status by the 10.5% Second Lien Notes or 12.5% Unsecured Notes; provided that such guarantee shall be reinstated upon the reversion date.

In the event of a bankruptcy, liquidation or reorganization of any non-guarantor subsidiary, such non-guarantor subsidiary will pay the holders of its debt and other liabilities, including its trade creditors, before it will be able to distribute any of its assets to us. In the future, any non-U.S. subsidiaries, immaterial subsidiaries and subsidiaries that we designate as unrestricted subsidiaries under the 10.5% Second Lien Notes and 12.5% Unsecured Notes indentures will not guarantee the 10.5% Second Lien Notes or 12.5% Unsecured Notes. As of September 30, 2015, there were no restrictions on the ability of subsidiary guarantors to transfer funds to the parent company.

As a result of the guarantee arrangements, we are presenting the following condensed consolidated balance sheets, statements of operations and comprehensive income (loss), and statements of cash flows of the issuer, the guarantor subsidiaries and the non-guarantor subsidiaries.

Condensed Consolidating Parent Company, Co-Issuers,

Guarantor and Non-Guarantor Balance Sheet

September 30, 2015

(in thousands)

(unaudited)



	Acelity L.P. Inc. Parent Company		Kinetic Concepts, Inc. and KCI USA, Inc. Borrower			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets:
Current assets:
Cash and cash equivalents	$	398	$	24,095		$	3,379	$	169,138	$	—		$	197,010
Accounts receivable, net	—		187,029			53,341		143,068		—			383,438
Inventories, net	—		86,136			103,584		105,838		(113,406		)	182,152
Deferred income taxes	—		19,319			7,434		946		—			27,699
Prepaid expenses and other	—		16,628			14,629		243,502		(231,638		)	43,121
Intercompany receivables	166		2,060,253			2,655,517		31,384		(4,747,320		)	—
Total current assets	564		2,393,460			2,837,884		693,876		(5,092,364		)	833,420
Net property, plant and equipment	—		302,230			63,003		130,263		(225,419		)	270,077
Debt issuance costs, net	—		59,998			—		—		—			59,998
Deferred income taxes	—		—			—		26,705		—			26,705
Goodwill	—		2,483,240			732,138		162,920		—			3,378,298
Identifiable intangible assets, net	—		259,638			1,735,640		275,046		—			2,270,324
Other non-current assets	—		1,231			270		94,171		(90,900		)	4,772
Intercompany loan receivables	—		745,000			433,281		—		(1,178,281		)	—
Intercompany investments	629,849		462,677			161,170		—		(1,253,696		)	—
	$	630,413	$	6,707,474		$	5,963,386	$	1,382,981	$	(7,840,660	)	$	6,843,594

Liabilities and Equity:
Current liabilities:
Accounts payable	$	—	$	17,255		$	11,946	$	21,919	$	—		$	51,120
Accrued expenses and other	—		295,281			224,659		73,979		(188,288		)	405,631
Intercompany payables	9,553		1,553,950			2,668,943		514,874		(4,747,320		)	—
Current installments of long-term debt	—		25,388			—		—		—			25,388
Income taxes payable	—		—			—		3		—			3
Deferred income taxes	—		—			44,928		—		—			44,928
Total current liabilities	9,553		1,891,874			2,950,476		610,775		(4,935,608		)	527,070
Long-term debt, net of current installments and discount	—		4,780,663			—		—		—			4,780,663
Non-current tax liabilities	—		9,646			6,306		18,434		—			34,386
Deferred income taxes	—		66,732			688,665		43,020		—			798,417
Other non-current liabilities	753		30,717			48,799		2,682		—			82,951
Intercompany loan payables	—		429,482			745,000		3,799		(1,178,281		)	—
Total liabilities	10,306		7,209,114			4,439,246		678,710		(6,113,889		)	6,223,487

Total equity	620,107		(501,640		)	1,524,140		704,271		(1,726,771		)	620,107
	$	630,413	$	6,707,474		$	5,963,386	$	1,382,981	$	(7,840,660	)	$	6,843,594

Condensed Consolidating Parent Company, Co-Issuers,

Guarantor and Non-Guarantor Balance Sheet

December 31, 2014

(in thousands)



	Acelity L.P. Inc. Parent Company		Kinetic Concepts, Inc. and KCI USA, Inc. Borrower			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets:
Current assets:
Cash and cash equivalents	$	398	$	41,027		$	1,499	$	140,617	$	—		$	183,541
Accounts receivable, net	—		179,872			67,355		123,256		—			370,483
Inventories, net	—		73,904			110,355		93,765		(99,802		)	178,222
Deferred income taxes	—		52,868			10,157		—		—			63,025
Prepaid expenses and other	—		11,106			6,851		247,606		(238,000		)	27,563
Intercompany receivables	166		1,854,033			2,432,299		48,267		(4,334,765		)	—
Total current assets	564		2,212,810			2,628,516		653,511		(4,672,567		)	822,834
Net property, plant and equipment	—		315,691			69,801		164,838		(262,282		)	288,048
Debt issuance costs, net	—		77,896			—		—		—			77,896
Deferred income taxes	—		—			—		31,692		—			31,692
Goodwill	—		2,483,240			732,138		162,920		—			3,378,298
Identifiable intangible assets, net	—		299,575			1,788,661		309,015		—			2,397,251
Other non-current assets	—		1,161			186		94,247		(90,900		)	4,694
Intercompany loan receivables	—		760,000			429,856		—		(1,189,856		)	—
Intercompany investments	667,530		360,292			223,581		—		(1,251,403		)	—
	$	668,094	$	6,510,665		$	5,872,739	$	1,416,223	$	(7,467,008	)	$	7,000,713

Liabilities and Equity:
Current liabilities:
Accounts payable	$	245	$	16,298		$	14,463	$	20,821	$	—		$	51,827
Accrued expenses and other	—		218,793			244,829		74,380		(194,518		)	343,484
Intercompany payables	6,441		1,181,383			2,634,149		512,792		(4,334,765		)	—
Current installments of long-term debt	—		25,721			—		—		—			25,721
Income taxes payable	—		—			—		1,305		—			1,305
Deferred income taxes	—		—			113,658		—		—			113,658
Total current liabilities	6,686		1,442,195			3,007,099		609,298		(4,529,283		)	535,995
Long-term debt, net of current installments and discount	—		4,815,290			—		—		—			4,815,290
Non-current tax liabilities	—		9,404			6,203		17,693		—			33,300
Deferred income taxes	—		106,440			637,777		47,940		—			792,157
Other non-current liabilities	695		113,368			48,172		1,023		—			163,258
Intercompany loan payables	—		420,294			760,000		9,562		(1,189,856		)	—
Total liabilities	7,381		6,906,991			4,459,251		685,516		(5,719,139		)	6,340,000

Total equity	660,713		(396,326		)	1,413,488		730,707		(1,747,869		)	660,713
	$	668,094	$	6,510,665		$	5,872,739	$	1,416,223	$	(7,467,008	)	$	7,000,713

Condensed Consolidating Parent Company, Co-Issuers,

Guarantor and Non-Guarantor Statement of Operations and Comprehensive Income (Loss)

(in thousands)

(unaudited)



	For the three months ended September 30, 2015
	Acelity L.P. Inc. Parent Company			Kinetic Concepts, Inc. and KCI USA, Inc. Borrower			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue:
Rental	$	—		$	164,284		$	—		$	21,668		$	—		$	185,952
Sales	—			91,638			220,649			195,760			(216,319		)	291,728
Total revenue	—			255,922			220,649			217,428			(216,319		)	477,680
Rental expenses	21			79,983			2,729			37,721			(43,829		)	76,625
Cost of sales	14			93,444			135,240			84,654			(236,423		)	76,929
Gross profit (loss)	(35		)	82,495			82,680			95,053			63,933			324,126
Selling, general and administrative expenses	1,026			77,673			38,425			43,173			(341		)	159,956
Research and development expenses	—			5,324			5,251			3,418			278			14,271
Acquired intangible asset amortization	—			12,753			19,175			11,917			—			43,845
Operating earnings (loss)	(1,061		)	(13,255		)	19,829			36,545			63,996			106,054
Non-operating intercompany transactions	—			5,504			14,472			(20,015		)	39			—
Interest income and other	—			16,914			3,063			29			(19,938		)	68
Interest expense	—			(109,592		)	(16,874		)	(81		)	19,938			(106,609		)
Foreign currency gain (loss)	—			(666		)	(1,717		)	(6,806		)	—			(9,189		)
Derivative instruments loss	—			(869		)	—			—			—			(869		)
Earnings (loss) from continuing operations before income taxes (benefit) and equity in earnings (loss) of subsidiaries	(1,061		)	(101,964		)	18,773			9,672			64,035			(10,545		)
Income tax expense (benefit)	—			6,399			(7,419		)	427			—			(593		)
Earnings (loss) from continuing operations before equity in earnings (loss) of subsidiaries	(1,061		)	(108,363		)	26,192			9,245			64,035			(9,952		)
Equity in earnings (loss) of subsidiaries	(8,891		)	33,709			9,245			—			(34,063		)	—
Earnings (loss) from continuing operations	(9,952		)	(74,654		)	35,437			9,245			29,972			(9,952		)
Earnings (loss) from discontinued operations, net of tax	—			—			—			—			—			—
Net earnings (loss)	$	(9,952	)	$	(74,654	)	$	35,437		$	9,245		$	29,972		$	(9,952	)
Total comprehensive income (loss)	$	(15,749	)	$	(80,451	)	$	29,640		$	3,448		$	47,363		$	(15,749	)

Condensed Consolidating Parent Company, Co-Issuers,

Guarantor and Non-Guarantor Statement of Operations and Comprehensive Income (Loss)

(in thousands)

(unaudited)



	For the three months ended September 30, 2014
	Acelity L.P. Inc. Parent Company			Kinetic Concepts, Inc. and KCI USA, Inc. Borrower			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue:
Rental	$	—		$	160,147		$	—		$	28,696		$	—		$	188,843
Sales	—			79,951			265,930			239,133			(292,064		)	292,950
Total revenue	—			240,098			265,930			267,829			(292,064		)	481,793
Rental expenses	—			76,656			3,680			49,544			(46,299		)	83,581
Cost of sales	28			87,277			178,262			91,044			(272,812		)	83,799
Gross profit (loss)	(28		)	76,165			83,988			127,241			27,047			314,413
Selling, general and administrative expenses	835			72,295			42,769			46,583			(213		)	162,269
Research and development expenses	—			5,771			6,130			3,978			—			15,879
Acquired intangible asset amortization	—			15,077			19,731			13,110			—			47,918
Operating earnings (loss)	(863		)	(16,978		)	15,358			63,570			27,260			88,347
Non-operating intercompany transactions	—			5,702			(895		)	(15,994		)	11,187			—
Interest income and other	—			18,955			3,062			88			(22,082		)	23
Interest expense	—			(107,529		)	(17,305		)	(1,723		)	22,082			(104,475		)
Foreign currency gain (loss)	—			27,996			(783		)	(17,614		)	—			9,599
Derivative instruments loss	—			1,630			—			—			—			1,630
Earnings (loss) from continuing operations before income taxes (benefit) and equity in earnings (loss) of subsidiaries	(863		)	(70,224		)	(563		)	28,327			38,447			(4,876		)
Income tax expense (benefit)	—			12,787			(12,164		)	(2,264		)	—			(1,641		)
Earnings (loss) from continuing operations before equity in earnings (loss) of subsidiaries	(863		)	(83,011		)	11,601			30,591			38,447			(3,235		)
Equity in earnings (loss) of subsidiaries	(974		)	44,971			30,591			—			(74,588		)	—
Earnings (loss) from continuing operations	(1,837		)	(38,040		)	42,192			30,591			(36,141		)	(3,235		)
Earnings (loss) from discontinued operations, net of tax	—			—			1,398			—			—			1,398
Net earnings (loss)	$	(1,837	)	$	(38,040	)	$	43,590		$	30,591		$	(36,141	)	$	(1,837	)
Total comprehensive income (loss)	$	(5,919	)	$	(42,122	)	$	39,508		$	26,509		$	(23,895	)	$	(5,919	)

Condensed Consolidating Parent Company, Co-Issuers,

Guarantor and Non-Guarantor Statement of Operations and Comprehensive Income (Loss)

(in thousands)

(unaudited)



	For the nine months ended September 30, 2015
	Acelity L.P. Inc. Parent Company			Kinetic Concepts, Inc. and KCI USA, Inc. Borrower			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue:
Rental	$	—		$	471,656		$	—		$	67,532		$	—		$	539,188
Sales	—			263,342			678,080			628,514			(725,749		)	844,187
Total revenue	—			734,998			678,080			696,046			(725,749		)	1,383,375
Rental expenses	57			233,063			8,869			119,946			(129,263		)	232,672
Cost of sales	67			273,659			431,430			257,652			(736,956		)	225,852
Gross profit (loss)	(124		)	228,276			237,781			318,448			140,470			924,851
Selling, general and administrative expenses	2,242			221,019			115,465			128,684			(697		)	466,713
Research and development expenses	—			16,186			15,790			11,086			278			43,340
Acquired intangible asset amortization	—			39,937			57,944			36,553			—			134,434
Operating earnings (loss)	(2,366		)	(48,866		)	48,582			142,125			140,889			280,364
Non-operating intercompany transactions	—			26,358			234,292			(260,832		)	182			—
Interest income and other	—			50,475			12,461			184			(62,838		)	282
Interest expense	—			(331,047		)	(50,390		)	(110		)	62,838			(318,709		)
Foreign currency gain (loss)	—			24,129			(2,615		)	(18,102		)	—			3,412
Derivative instruments gain	—			(5,136		)	—			—			—			(5,136		)
Earnings (loss) from continuing operations before income taxes (benefit) and equity in earnings (loss) of subsidiaries	(2,366		)	(284,087		)	242,330			(136,735		)	141,071			(39,787		)
Income tax expense (benefit)	—			(2,638		)	(8,584		)	3,549			—			(7,673		)
Earnings (loss) from continuing operations before equity in earnings (loss) of subsidiaries	(2,366		)	(281,449		)	250,914			(140,284		)	141,071			(32,114		)
Equity in earnings (loss) of subsidiaries	(29,748		)	102,386			(140,284		)	—			67,646			—
Earnings (loss) from continuing operations	(32,114		)	(179,063		)	110,630			(140,284		)	208,717			(32,114		)
Loss from discontinued operations, net of tax	—			—			—			—			—			—
Net earnings (loss)	$	(32,114	)	$	(179,063	)	$	110,630		$	(140,284	)	$	208,717		$	(32,114	)
Total comprehensive income (loss)	$	(40,047	)	$	(186,996	)	$	102,697		$	(148,217	)	$	232,516		$	(40,047	)

Condensed Consolidating Parent Company, Co-Issuers,

Guarantor and Non-Guarantor Statement of Operations and Comprehensive Income (Loss)

(in thousands)

(unaudited)



	For the nine months ended September 30, 2014
	Acelity L.P. Inc. Parent Company			Kinetic Concepts, Inc. and KCI USA, Inc. Borrower			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue:
Rental	$	—		$	440,351		$	—		$	87,098		$	—		$	527,449
Sales	—			215,289			714,000			665,333			(738,465		)	856,157
Total revenue	—			655,640			714,000			752,431			(738,465		)	1,383,606
Rental expenses	80			216,134			9,008			157,584			(128,687		)	254,119
Cost of sales	73			229,191			453,774			274,514			(712,281		)	245,271
Gross profit (loss)	(153		)	210,315			251,218			320,333			102,503			884,216
Selling, general and administrative expenses	2,813			224,598			131,151			149,470			(386		)	507,646
Research and development expenses	—			17,634			19,409			14,559			—			51,602
Acquired intangible asset amortization	—			47,239			59,621			40,501			—			147,361
Wake Forest settlement	—			198,578			—			—			—			198,578
Operating earnings (loss)	(2,966		)	(277,734		)	41,037			115,803			102,889			(20,971		)
Non-operating intercompany transactions	—			5,034			(29,421		)	(46,983		)	71,370			—
Interest income and other	—			53,456			15,953			165			(69,329		)	245
Interest expense	—			(324,379		)	(51,663		)	(1,762		)	69,329			(308,475		)
Foreign currency gain (loss)	—			31,375			(480		)	(17,208		)	—			13,687
Derivative instruments gain (loss)	—			(2,670		)	—			—			—			(2,670		)
Earnings (loss) from continuing operations before income taxes (benefit) and equity in earnings (loss) of subsidiaries	(2,966		)	(514,918		)	(24,574		)	50,015			174,259			(318,184		)
Income tax expense (benefit)	—			(177,652		)	43,205			20,381			—			(114,066		)
Earnings (loss) from continuing operations before equity in earnings (loss) of subsidiaries	(2,966		)	(337,266		)	(67,779		)	29,634			174,259			(204,118		)
Equity in earnings (loss) of subsidiaries	(197,971		)	(39,793		)	29,634			—			208,130			—
Earnings (loss) from continuing operations	(200,937		)	(377,059		)	(38,145		)	29,634			382,389			(204,118		)
Earnings (loss) from discontinued operations, net of tax	—			—			3,181			—			—			3,181
Net earnings (loss)	$	(200,937	)	$	(377,059	)	$	(34,964	)	$	29,634		$	382,389		$	(200,937	)
Total comprehensive income (loss)	$	(204,834	)	$	(380,956	)	$	(38,861	)	$	25,737		$	394,080		$	(204,834	)

Condensed Consolidating Parent Company, Co-Issuers,

Guarantor and Non-Guarantor Statement of Cash Flows

(in thousands)

(unaudited)



	For the nine months ended September 30, 2015
	Acelity L.P. Inc. Parent Company			Kinetic Concepts, Inc. and KCI USA, Inc. Borrower			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net earnings (loss)	$	(32,114	)	$	(179,063	)	$	110,630		$	(140,284	)	$	208,717		$	(32,114	)
Adjustments to reconcile net earnings (loss) to net cash provided (used) by operating activities	5,233			300,215			(137,018		)	81,591			(107,897		)	142,124
Net cash provided (used) by operating activities	(26,881		)	121,152			(26,388		)	(58,693		)	100,820			110,010
Cash flows from investing activities:
Net additions to property, plant and equipment	—			(107,919		)	(4,461		)	(18,434		)	84,506			(46,308		)
Businesses acquired in purchase transactions, net of cash acquired	—			—			—			(2,948		)	—			(2,948		)
Decrease (increase) in identifiable intangible assets and other non-current assets	—			(70		)	(6,280		)	849			—			(5,501		)
Net cash provided (used) by investing activities	—			(107,989		)	(10,741		)	(20,533		)	84,506			(54,757		)
Cash flows from financing activities:
Distribution to limited partners	(55		)	—			—			—			—			(55		)
Settlement of profits interest units	(2,812		)	—			—			—			—			(2,812		)
Proceeds from revolving credit facility	—			30,000			—			—			—			30,000
Repayments of long-term debt and other financing obligations	—			(49,391		)	(5,000		)	19			—			(54,372		)
Debt issuance costs	—			(6,256		)	—			—			—			(6,256		)
Proceeds (payments) on intercompany loans	—			24,188			(18,425		)	(5,763		)	—			—
Proceeds (payments) on intercompany investments	29,748			(28,636		)	62,434			121,780			(185,326		)	—
Net cash provided (used) by financing activities	26,881			(30,095		)	39,009			116,036			(185,326		)	(33,495		)
Effect of exchange rate changes on cash and cash equivalents	—			—			—			(8,289		)	—			(8,289		)
Net increase (decrease) in cash and cash equivalents	—			(16,932		)	1,880			28,521			—			13,469
Cash and cash equivalents, beginning of period	398			41,027			1,499			140,617			—			183,541
Cash and cash equivalents, end of period	$	398		$	24,095		$	3,379		$	169,138		$	—		$	197,010

Condensed Consolidating Parent Company, Co-Issuers,

Guarantor and Non-Guarantor Statement of Cash Flows

(in thousands)

(unaudited)



	For the nine months ended September 30, 2014
	Acelity L.P. Inc. Parent Company			Kinetic Concepts, Inc. and KCI USA, Inc. Borrower			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net earnings (loss)	$	(200,937	)	$	(377,059	)	$	(34,964	)	$	29,634		$	382,389		$	(200,937	)
Adjustments to reconcile net loss to net cash provided (used) by operating activities	4,381			214,293			123,273			129,300			(165,279		)	305,968
Net cash provided (used) by operating activities	(196,556		)	(162,766		)	88,309			158,934			217,110			105,031
Cash flows from investing activities:
Net additions to property, plant and equipment	—			(132,506		)	(3,688		)	(31,367		)	119,763			(47,798		)
Businesses acquired in purchase transactions, net of cash acquired	—			—			(4,500		)	(113		)	—			(4,613		)
Decrease (increase) in identifiable intangible assets and other non-current assets	—			(419		)	(4,896		)	(4,036		)	—			(9,351		)
Net cash provided (used) by investing activities	—			(132,925		)	(13,084		)	(35,516		)	119,763			(61,762		)
Cash flows from financing activities:
Settlement of profits interest units	(1,416		)	—			—			—			—			(1,416		)
Repayments of long-term debt and other financing obligations	—			(19,816		)	—			(47		)	—			(19,863		)
Proceeds (payments) on intercompany loans	—			243,714			(33,736		)	(209,978		)	—			—
Proceeds (payments) on intercompany investments	197,972			36,402			(32,162		)	134,661			(336,873		)	—
Net cash provided (used) by financing activities	196,556			260,300			(65,898		)	(75,364		)	(336,873		)	(21,279		)
Effect of exchange rate changes on cash and cash equivalents	—			—			—			(4,034		)	—			(4,034		)
Net increase (decrease) in cash and cash equivalents	—			(35,391		)	9,327			44,020			—			17,956
Cash and cash equivalents, beginning of period	398			87,771			118			118,662			—			206,949
Cash and cash equivalents, end of period	$	398		$	52,380		$	9,445		$	162,682		$	—		$	224,905

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the condensed consolidated financial statements and accompanying notes included in this report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed in our “Risk Factors” (Part II, Item 1A.), including those previously disseminated in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

GENERAL

We are a leading global medical technology company committed to the development and commercialization of advanced wound care and regenerative medicine solutions. We were formed by uniting the strengths of three organizations, KCI, Systagenix and LifeCell, into our two business segments: Advanced Wound Therapeutics and Regenerative Medicine. Our mission is to change the clinical practice of medicine with solutions that speed healing, reduce complications, create economic value and improve patients’ lives. We offer a broad range of products that can be used across clinical applications, care settings and clinician groups to accelerate soft tissue healing, improve clinical outcomes and reduce overall costs of care. Our product offerings are backed by an extensive body of scientific, clinical and economic outcomes, data that demonstrate the clinical efficacy and value proposition of our products. By offering a range of complementary solutions that are often used together or in sequence across multiple care settings, we are able to address patients’ needs throughout the healing process and offer healthcare providers a single source for addressing such needs.

Our AWT business is focused on the development and commercialization of advanced devices and advanced wound dressings. Our advanced devices business is primarily engaged in marketing several technology platforms, including NPWT, surgical and incision management and epidermal grafting. For patients suffering from traumatic, surgical or chronic wounds, such as diabetic foot ulcers, our NPWT devices facilitate accelerated healing that was unattainable prior to the introduction of NPWT. Our advanced wound dressings business markets wound dressing technologies for the purpose of managing chronic and acute wounds. Our advanced wound dressings are designed to maintain a moist wound environment, while managing exudate, to promote healing and to protect the wound site from infection. Our AWT business is primarily conducted by KCI and its operating subsidiaries, including Systagenix.

Our Regenerative Medicine business is primarily focused on the development and commercialization of regenerative and reconstructive acellular tissue matrices for use in general and reconstructive surgical procedures to reinforce soft tissue defects. We offer tissue matrices for a variety of reconstructive procedures, including post-mastectomy breast reconstruction and the reinforcement of abdominal wall defects. Our tissue matrices are engineered to encourage rapid tissue incorporation, reducing morbidity for patients, while providing optimal reconstructive outcomes. In addition to our acellular tissue matrices, our Regenerative Medicine business markets complementary autologous fat grafting solutions for reconstructive and aesthetic applications. Our Regenerative Medicine business is primarily conducted by LifeCell and its operating subsidiaries.

We are a global company with approximately 26% of our revenues generated outside the United States in the third quarter and first nine months of 2015, and our products are available in more than 75 countries. We have invested in direct sales and marketing channels and distributors in order to expand our presence in these markets to meet the needs of our customers and payers across clinical applications, care settings and clinician groups. A critical component of marketing our portfolio of solutions and services is our sales organization of approximately 1,800 professionals working across multiple care settings and specialties. This sales infrastructure enables us to market our products directly with trained medical professionals in specific care settings in the United States, Canada, Western Europe and key emerging markets. We also have established strong relationships globally with key constituencies, including hospitals, post-acute facilities, GPOs, payers and other key clinical and economic decision makers by offering comprehensive customer service and clinical education.

We have two reportable operating segments which correspond to our two businesses: AWT and Regenerative Medicine. We also have other revenue which consists of contract manufacturing operations performed at our manufacturing facility in Gargrave, England.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, our results of operations (dollars in thousands):



	Three months ended September 30,						Nine months ended September 30,
	2015			2014			2015			2014
Revenue:
Rental	$	185,952		$	188,843		$	539,188		$	527,449
Sales	291,728			292,950			844,187			856,157
Total revenue	477,680			481,793			1,383,375			1,383,606

Rental expenses	76,625			83,581			232,672			254,119
Cost of sales	76,929			83,799			225,852			245,271
Gross profit	324,126			314,413			924,851			884,216
Gross profit margin	67.9		%	65.3		%	66.9		%	63.9		%

Selling, general and administrative expenses	159,956			162,269			466,713			507,646
Research and development expenses	14,271			15,879			43,340			51,602
Acquired intangible asset amortization	43,845			47,918			134,434			147,361
Wake Forest settlement	—			—			—			198,578
Operating earnings (loss)	106,054			88,347			280,364			(20,971		)
Operating profit margin	22.2		%	18.3		%	20.3		%	(1.5		)%

Interest income and other	68			23			282			245
Interest expense	(106,609		)	(104,475		)	(318,709		)	(308,475		)
Foreign currency gain (loss)	(9,189		)	9,599			3,412			13,687
Derivative instruments gain (loss)	(869		)	1,630			(5,136		)	(2,670		)
Loss from continuing operations before income tax benefit	(10,545		)	(4,876		)	(39,787		)	(318,184		)
Income tax benefit	(593		)	(1,641		)	(7,673		)	(114,066		)
Effective tax rate	5.6		%	33.7		%	19.3		%	35.8		%
Loss from continuing operations	(9,952		)	(3,235		)	(32,114		)	(204,118		)
Earnings from discontinued operations, net of tax	—			1,398			—			3,181
Net loss	$	(9,952	)	$	(1,837	)	$	(32,114	)	$	(200,937	)

Revenue

Total revenue for the third quarter of 2015 decreased $4.1 million, or 0.9%, as reported on a GAAP basis, and increased 16.0 million, or 3.3%, on a constant currency basis, compared to the prior year period. Total revenue for the first nine months of 2015 decreased $0.2 million as reported on a GAAP basis, and increased $58.1 million or 4.2%, on a constant currency basis, compared to the prior year period. Excluding the impact of foreign currency exchange rate movements, the increases in total revenue compared to the prior year periods were due to higher AWT and Regenerative Medicine revenue.

Revenue by Operating Segment

The following table sets forth, for the periods indicated, segment revenue and the percentage changes in each line item between the periods (dollars in thousands):



	Three months ended September 30,
	2015		2015		2014		As Reported		Constant Currency
	(GAAP)		(Constant currency)		(GAAP)		% Change		% Change ⁽¹⁾
Advanced Wound Therapeutics revenue:
Rental	$	185,952	$	189,832	$	188,843	(1.5	)%	0.5	%
Sales	179,867		194,512		184,122		(2.3	)	5.6
Total – Advanced Wound Therapeutics	365,819		384,344		372,965		(1.9	)	3.1

Regenerative Medicine revenue:
Sales	109,332		110,757		104,611		4.5		5.9

Other revenue:
Sales	2,529		2,725		4,217		(40.0	)	(35.4	)

Total consolidated revenue:
Rental	185,952		189,832		188,843		(1.5	)	0.5
Sales	291,728		307,994		292,950		(0.4	)	5.1
Total consolidated revenue	$	477,680	$	497,826	$	481,793	(0.9	)%	3.3	%


(1)	Represents percentage change between non-GAAP constant currency revenue and GAAP revenue from the prior year. Constant currency information compares results between periods as if exchange rates had remained constant period-over-period. We calculate constant currency by calculating current-period results using prior-period foreign currency exchange rates.

The following table sets forth, for the periods indicated, segment revenue and the percentage changes in each line item between the periods (dollars in thousands):



	Nine months ended September 30,
	2015		2015		2014		As Reported		Constant Currency
	(GAAP)		(Constant currency)		(GAAP)		% Change		% Change ⁽¹⁾
Advanced Wound Therapeutics revenue:
Rental	$	539,188	$	550,706	$	527,449	2.2	%	4.4	%
Sales	518,104		559,736		523,784		(1.1	)	6.9
Total – Advanced Wound Therapeutics	1,057,292		1,110,442		1,051,233		0.6		5.6

Regenerative Medicine revenue:
Sales	317,030		321,365		318,791		(0.6	)	0.8

Other revenue:
Sales	9,053		9,882		13,582		(33.3	)	(27.2	)

Total consolidated revenue:
Rental	539,188		550,706		527,449		2.2		4.4
Sales	844,187		890,983		856,157		(1.4	)	4.1
Total consolidated revenue	$	1,383,375	$	1,441,689	$	1,383,606	—	%	4.2	%


(1)	Represents percentage change between non-GAAP constant currency revenue and GAAP revenue from the prior year. Constant currency information compares results between periods as if exchange rates had remained constant period-over-period. We calculate constant currency by calculating current-period results using prior-period foreign currency exchange rates.

The following table sets forth, for the periods indicated, the percentage relationship of each item to total revenue in the period, as well as the changes in each line item:



	Three months ended September 30,							Nine months ended September 30,
	2015		2014		Change			2015		2014		Change

Advanced Wound Therapeutics revenue	76.6	%	77.4	%	(80	)	bps	76.4	%	76.0	%	40		bps
Regenerative Medicine revenue	22.9		21.7		120		bps	22.9		23.0		(10	)	bps
Other revenue	0.5		0.9		(40	)	bps	0.7		1.0		(30	)	bps
Total consolidated revenue	100.0	%	100.0	%				100.0	%	100.0	%

Rental revenue	38.9	%	39.2	%	(30	)	bps	39.0	%	38.1	%	90		bps
Sales revenue	61.1		60.8		30		bps	61.0		61.9		(90	)	bps
Total consolidated revenue	100.0	%	100.0	%				100.0	%	100.0	%

AWT revenue for the third quarter of 2015 decreased $7.1 million, or 1.9%, as reported on a GAAP basis, and increased $11.4 million, or 3.1%, on a constant currency basis, compared to the prior year period. AWT revenue for the first nine months of 2015 increased $6.1 million, or 0.6%, as reported on a GAAP basis, and $59.2 million, or 5.6%, on a constant currency basis, compared to the prior year period. Foreign currency exchange rate movements unfavorably impacted AWT rental revenue by $3.9 million, or 2.0%, and $11.5 million, or 2.2%, in the third quarter and first nine months of 2015, respectively, compared to the prior year periods. Excluding the impact of foreign currency exchange rate movements, AWT rental revenue for the third quarter and first nine months of 2015 increased $1.0 million, or 0.5%, and $23.3 million, or 4.4%, respectively, compared to the prior year periods due primarily to increased NPWT volumes associated with increasing device utilization in the United States and growth in device volumes internationally, partially offset by lower average pricing due to increased competition, healthcare reform and

declining reimbursement. Foreign currency exchange rate movements unfavorably impacted AWT sales revenue by $14.6 million, or 7.9%, and $41.6 million, or 8.0%, in the third quarter and first nine months of 2015, respectively, compared to the prior year periods. Excluding the impact of foreign currency exchange rate movements, AWT sales revenue for the third quarter and first nine months of 2015 increased by $10.4 million, or 5.6%, and $36.0 million, or 6.9%, respectively, compared to the prior year period due primarily to increased sales volumes of AWT devices and dressings. Total global pricing and reimbursement declines for AWT devices totaled $21.7 million for the nine months ended September 30, 2015, compared to the prior year period.

Regenerative Medicine revenue for the third quarter of 2015 increased $4.7 million, or 4.5%, as reported on a GAAP basis, and $6.1 million, or 5.9%, on a constant currency basis, compared to the prior period. Regenerative Medicine revenue for the first nine months of 2015 decreased $1.8 million, or 0.6%, as reported on a GAAP basis, and increased $2.6 million or 0.8%, on a constant currency basis, compared to the prior year period. Foreign currency exchange rate movements unfavorably impacted Regenerative Medicine revenue by $1.4 million, or 1.4%, and $4.3 million, or 1.4%, in the third quarter and first nine months of 2015, respectively, compared to the prior year periods. Excluding the impact of foreign exchange rate movements, the increase in Regenerative Medicine revenue from the prior year periods was due primarily to growth in Strattice sales in our international markets and an increase in revenue related to breast reconstruction procedures, partially offset by a decline in revenue from abdominal wall reconstruction procedures.

Other revenue for the third quarter and first nine months of 2015 decreased $1.7 million and $4.5 million as reported on a GAAP basis, respectively, and decreased $1.5 million and $3.7 million on a constant currency basis, respectively, compared to the prior year periods. Other revenue consists of contract manufacturing revenue from our manufacturing plant in Gargrave, England.

Gross Profit and Gross Profit Margin

The following table presents the gross profit and gross profit margin (calculated as gross profit divided by total revenue) for the periods indicated (dollars in thousands):



	Three months ended September 30,								Nine months ended September 30,
	2015			2014			Change		2015			2014			Change

Gross profit	$	324,126		$	314,413		3.1%		$	924,851		$	884,216		4.6%
Gross profit margin	67.9		%	65.3		%	260	bps	66.9		%	63.9		%	300	bps

Gross profit margin increased by 260 basis points to 67.9% in the third quarter and 300 basis points to 66.9% in the first nine months of 2015 from 65.3% and 63.9%, respectively, in the prior year periods. The improvement in the gross profit margin during the third quarter and first nine months of 2015 compared to the prior-year periods was primarily due to the reduced impact of purchase accounting adjustments on rental expense and improved production yields, primarily in our Regenerative Medicine business.

Cost of sales for the first nine months of 2015 benefited from the absence of $6.7 million of additional cost of sales recorded in the first quarter of 2014 associated with the step up in value of inventory associated with purchase accounting. Foreign currency exchange rate movements favorably impacted cost of sales for the third quarter and first nine months of 2015 by $4.2 million, and $12.2 million, respectively, compared to the prior year periods.

Rental expense for the third quarter and first nine months of 2015 benefited from the absence of $2.7 million and $16.2 million of depreciation expense, respectively, related to the fixed asset step-up associated with purchase accounting. Foreign currency exchange rate movements also favorably impacted rental expenses for the third quarter and first nine months of 2015 by $4.6 million and $14.5 million, respectively, compared to the prior year periods, partially offset by increases in marketing and service-related expenses associated with increased rental revenue.

Selling, General and Administrative Expenses

The following table presents selling, general and administrative expenses and the percentage relationship to total revenue for the periods indicated (dollars in thousands):



	Three months ended September 30,									Nine months ended September 30,
	2015			2014			Change			2015			2014			Change

Selling, general and administrative expenses	$	159,956		$	162,269		(1.4)%			$	466,713		$	507,646		(8.1)%
As a percent of total revenue	33.5		%	33.7		%	(20	)	bps	33.7		%	36.7		%	(300	)	bps

Foreign currency exchange rate movements favorably impacted SG&A expenses during the third quarter and first nine months of 2015 by $6.6 million and $19.5 million, respectively, compared to the prior year periods. Excluding the impact of foreign currency exchange rate movements, the increase in SG&A expenses during the third quarter of 2015 was primarily due to increased incentive compensation expense as a result of improved financial performance compared to the prior year period. Excluding the impact of foreign currency exchange rate movements, the remaining decrease in SG&A expenses for the first nine months of 2015 was due primarily to lower selling-related costs and savings associated with our business optimization and integration efforts, partially offset by increased incentive compensation expense as a result of improved financial performance compared to the prior year period.

Research and Development Expenses

The following table presents research and development expenses and the percentage relationship to total revenue for the periods indicated (dollars in thousands):



	Three months ended September 30,									Nine months ended September 30,
	2015			2014			% Change			2015			2014			% Change

Research and development expenses	$	14,271		$	15,879		(10.1)%			$	43,340		$	51,602		(16.0)%
As a percent of total revenue	3.0		%	3.3		%	(30	)	bps	3.1		%	3.7		%	(60	)	bps

The decrease in R&D expenses is due primarily to salary-related expenses due to lower employee headcount. Expenses associated with product development, clinical studies and clinical research also decreased due to savings associated with our integration efforts.

Acquired Intangible Asset Amortization

We have recorded identifiable intangible assets in connection with the 2011 merger, the 2013 Systagenix acquisition and various technology acquisitions. During the third quarters of 2015 and 2014, we recorded $43.8 million and $47.9 million, respectively, of amortization expense associated with these identifiable intangible assets. During the first nine months of 2015 and 2014, we recorded $134.4 million and $147.4 million, respectively, of amortization expense associated with these identifiable intangible assets.

Wake Forest Settlement

On June 30, 2014 , KCI entered into a settlement and release agreement (the “Settlement Agreement”) with Wake Forest to fully and finally resolve the pending patent disputes between them regarding Wake Forest’s NPWT patents formerly licensed to KCI. To fully resolve all the pending disputes between KCI and Wake Forest, KCI agreed to pay Wake Forest retrospective U.S. patent royalties in the amount of $280 million, according to the following schedule: $80 million paid in July 2014, $85 million paid in June 2015, $85 million to be paid in June 2016, and $30 million to be paid in June 2017. As a result, we recorded patent settlement charges of $198.6 million in the second quarter of 2014 representing the net present value of payments under the Settlement Agreement, net of the $63.2 million previously existing accrual.

Interest Expense

Interest expense increased to $106.6 million and $318.7 million in the third quarter and first nine months of 2015, respectively, compared to $104.5 million and $308.5 million in the prior-year periods due to accretion of the Wake Forest settlement liability related to the Settlement Agreement and higher interest rates associated with Amendment No. 6 of our existing senior secured credit facilities which we entered into on March 10, 2015.

Foreign Currency Gain (Loss)

Foreign currency transactions resulted in a loss of $9.2 million and a gain of $3.4 million during the third quarter and first nine months of 2015, respectively, compared to gains of $9.6 million and $13.7 million in the prior-year periods. The revaluation of the Term E-1 EURO loan to U.S. dollars represented a foreign currency transaction loss of $0.6 million and gain of $22.4 million during the third quarter and first nine months of 2015, respectively. The revaluation of the Term E-1 EURO loan to U.S. dollars represented foreign currency transaction gains of $24.5 million and $27.6 million in the prior-year periods. Excluding the revaluation of the Term E-1 EURO loan to U.S. dollars, we recognized foreign currency exchange losses of $8.6 million and $19.0 million during the third quarter and first nine months of 2015, respectively, compared to losses of $14.9 million and $13.9 million in the prior-year periods due to significant fluctuations in the Euro exchange rate.

Derivative Instruments Loss

During the third quarter and first nine months of 2015, we recorded a derivative instruments loss of $0.9 million and $5.1 million, respectively, compared to a gain of $1.6 million and a loss of $2.7 million of in the comparable prior-year periods due primarily to fluctuations in the value of our interest rate derivative instruments.

Income Tax Benefit

The income tax benefit from continuing operations decreased by $1.0 million to $0.6 million for the three months ended September 30, 2015, compared to $1.6 million in the comparable prior year period. The income tax benefit from continuing operations decreased by $106.4 million to $7.7 million for the nine months ended September 30, 2015, compared to $114.1 million in the comparable prior year period. The decreased income tax benefit was primarily due to lower pretax losses in the first nine months of 2015.

Earnings from Discontinued Operations

No gains or losses from discontinued operations were recorded in the third quarter and first nine months of 2015. During the third quarter and first nine months of 2014, we recorded a gain from discontinued operations, net of tax, of $1.4 million and $3.2 million, respectively, related to the disposition of our SPY assets.

Net Loss

Net loss increased by $8.2 million to $10.0 million for the third quarter of 2015, compared to $1.8 million in the prior year period. The increase was primarily due to the $9.2 million foreign currency loss in the third quarter of 2015, compared to the $9.6 million gain in the prior year period. Net loss decreased by $168.8 million to $32.1 million for the first nine months of 2015, compared to $200.9 million in the prior year period. The improvement was primarily due to the $301.3 million improvement in operating earnings driven by the improved operating performance described above and the absence of a $198.6 million litigation-related charge related to the Settlement Agreement.

LIQUIDITY AND CAPITAL RESOURCES

General

Our primary uses of cash are working capital requirements, capital expenditures and debt service requirements. Additionally, from time to time, we may use capital for acquisitions and other investing and financing activities. Working capital is required principally to finance accounts receivable and inventory. Our working capital requirements vary from period-to-period depending on manufacturing volumes, the timing of shipments and the payment cycles of our customers and payers. Our capital expenditures consist primarily of manufactured rental assets, manufacturing equipment, computer hardware and software, expenditures related to leasehold improvements and expenditures related to our global corporate headquarters building.

Historically, our primary source of liquidity has been cash flow from operations. In addition, we also have a $200.0 million revolving credit facility to provide us with an additional source of liquidity. We anticipate that cash generated from operations together with amounts available under our revolving credit facility will be sufficient to meet our future working capital requirements, capital expenditures and debt service obligations as they become due for the foreseeable future. To the extent additional funds are necessary to meet our long-term liquidity needs as we continue to execute our business strategy, we anticipate that they will be obtained through the incurrence of additional indebtedness, additional equity financings or a combination of these potential sources of funds. In the event that we need access to additional cash, we may not be able to access the credit markets on commercially acceptable terms or at all. Our ability to fund future operating expenses and capital expenditures and our ability to meet future debt service obligations or refinance our indebtedness will depend on our future operating performance which will be affected by general economic, financial and other factors beyond our control, including those described under “Risk Factors.”

The following table presents our cash and cash equivalents and debt as of the date indicated (in thousands):



	September 30, 2015		December 31, 2014		Change
Cash and cash equivalents	$	197,010	$	183,541	$	13,469
Total debt ⁽¹⁾	4,806,646		4,841,975		(35,329		)


(1)	Total debt equals current and long-term debt, net of discount, and capital lease obligations.

As of September 30, 2015, our cash and cash equivalents were $197.0 million. As of September 30, 2015, no revolving credit loans were outstanding under our Revolving Credit Facility, $38.3 million of letters of credit issued by banks party to our senior secured credit facilities were outstanding (reducing the availability under the Revolving Credit Facility to $161.7 million) and $8.8 million of letters of credit issued by a bank not party to our senior secured credit facilities were outstanding. The decrease in our total debt as of September 30, 2015 as compared to December 31, 2014 was primarily due to scheduled payments on our senior secured credit facilities.

We and our Sponsors may from time to time seek to retire or purchase our outstanding debt through cash purchases, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Cash Flows

The following table summarizes the net cash provided by operating activities, investing activities and financing activities for the periods indicated (in thousands):



	Nine months ended September 30,
	2015			2014
Net cash provided by operating activities	$	110,010		$	105,031
Net cash used by investing activities	(54,757		)	(61,762		)
Net cash used by financing activities	(33,495		)	(21,279		)

Operating Activities

For the nine months ended September 30, 2015, net cash provided by operating activities was $110.0 million, compared to net cash provided by operating activities of $105.0 million for the nine months ended September 30, 2014. Net cash provided by operations for the first nine months of 2015 and 2014 was impacted by Wake Forest settlement payments of $85.0 million and $80.0 million, respectively.

Investing Activities

For the nine months ended September 30, 2015, net cash used by investing activities was $54.8 million, compared to $61.8 million for the nine months ended September 30, 2014. Net cash used by investing activities was higher during the nine months ended September 30, 2014 due to higher expenditures on patents and trademarks as well as $4.5 million spent in connection with our acquisition of Attenuate in January 2014, partially offset by the $2.9 million spent in connection with our acquisition of a Brazilian distributor in June 2015.

Financing Activities

For the nine months ended September 30, 2015, net cash used by financing activities was $33.5 million, compared to $21.3 million for the nine months ended September 30, 2014. Net cash used by financing activities increased primarily due to the $6.3 million of expenses in March 2015 related to the credit facility amendment.

Discontinued Operations

Cash flows related to discontinued operations were not material for the nine months ended September 30, 2015 and 2014, and therefore have not been separately disclosed in our condensed consolidated statements of cash flows. We do not anticipate the absence of cash flows from discontinued operations to significantly affect our liquidity and capital resources.

Capital Expenditures

During the first nine months of 2015 and 2014, we made capital expenditures of $46.1 million and $46.8 million, respectively. Capital expenditures during the first nine months of 2015 and 2014 related primarily to expanding the rental fleet and information technology projects and purchases.

Debt

Existing Senior Secured Credit Facilities

The following table sets forth the amounts owed under the Existing Senior Secured Credit Facilities, the effective interest rates on such outstanding amounts, and the amount available for additional borrowing thereunder, as of September 30, 2015 (dollars in thousands):



Senior Secured Credit Facility	Maturity Date	Effective Interest Rate			Amount Outstanding⁽¹⁾		Amount Available for Additional Borrowing
Senior Revolving Credit Facility	November 2016	—	%		$	—	$	161,695	⁽²⁾
Senior Dollar Term E-1 Credit Facility	May 2018	5.00	%	⁽³⁾	1,889,749		—
Senior Euro Term E-1 Credit Facility	May 2018	5.67	%	⁽³⁾	262,856		—
Senior Term E-2 Credit Facility	November 2016	4.69	%	⁽³⁾	310,678		—
Total					$	2,463,283	$	161,695

_____________________


(1)	Amount outstanding includes the original issue discount.


(2)	At September 30, 2015, the amount available under the Revolving Credit Facility reflected a reduction of $38.3 million of letters of credit issued by banks which are party to the Existing Senior Secured Credit Facilities. In addition, we have $8.8 million of letters of credit issued by a bank not party to the Existing Senior Secured Credit Facilities.


(3)	The effective interest rate includes the effect of the original issue discount. Excluding the original issue discount, our nominal interest rate as of September 30, 2015 was 4.50% on the Senior Dollar Term E-1 Credit Facility, 4.75% on the Senior Euro Term E-1 Credit Facility and 4.00% on the Senior Term E-2 Credit Facility.

On March 10, 2015, we entered into Amendment No. 6 to the Existing Senior Secured Credit Facilities (“Amendment No. 6”). In connection with Amendment No. 6, certain applicable rates were modified such that (i) Dollar Term E-1 Loans bear interest at a rate equal to, at KCI’s election, a Eurocurrency rate plus 3.50% or an adjusted base rate plus 2.50%, (ii) Euro Term E-1 Loans bear interest at a rate equal to, at KCI’s election, a Eurocurrency rate plus 3.75% or an adjusted base rate plus 2.75%, and (iii) Term E-2 Loans bear interest at a rate equal to, at KCI’s election, a Eurocurrency rate plus 3.00% or an adjusted base rate plus 2.00%. The Eurocurrency rate shall be subject to a floor of 1.00%, and the adjusted base rate shall be subject to a floor of 2.00%. Repayments of Dollar Term E-1 Loans, Euro Term E-1 Loans or Term E-2 Loans within 12 months of the effective date of Amendment No. 6 in connection with a repricing transaction will be subject to a 1.0% prepayment premium. As a result of Amendment No. 6, the financial covenants were amended to remove the interest coverage ratio in its entirety and to set the total leverage ratio for any test period to be no greater than 8.25:1.00. In addition, certain other covenants were amended, including with respect to the incurrence of incremental facilities and asset sales.

10.5% Second Lien Senior Secured Notes

In November 2011, we issued $1.750 billion aggregate principal amount of second lien senior secured notes due 2018 (the “10.5% Second Lien Notes”). Interest on the 10.5% Second Lien Notes accrues at the rate of 10.5% per annum and is payable semi-annually in cash on each May 1 and November 1 through the maturity date. The 10.5% Second Lien Notes were issued at a discount resulting in an effective interest rate of 10.87%.

12.5% Senior Unsecured Notes

In November 2011, we issued $750.0 million aggregate principal amount of senior unsecured notes due 2019 (the “12.5% Unsecured Notes”); $612.0 million of which are still outstanding. Interest on the 12.5% Unsecured Notes accrues at the rate of 12.50% per annum and is payable semi-annually in cash on each May 1 and November 1through the maturity date. The 12.5% Unsecured Notes were issued at a discount resulting in an effective interest rate of 12.62%.

Covenants

As of September 30, 2015, we were in compliance with all covenants under our credit agreement and indentures.

For further information on our long-term debt, see Note 5 of the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

Interest Rate Protection

At September 30, 2015 and December 31, 2014, we were party to three interest rate swap agreements to convert $1.436 billion and $1.463 billion, respectively, of our outstanding variable rate debt to a fixed rate basis. The aggregate notional amount of the interest rate swaps decreases quarterly by amounts ranging from $1.7 million to $56.4 million until maturity. Our interest rate protection agreements have not been designated as hedging instruments, and as such, we recognize the fair value of these instruments as an asset or liability with income or expense recognized in the current period.

For further information on our interest rate protection agreements, see Note 5 of the notes to the condensed consolidated financial statements.

Contractual Obligations

There have been no material changes, outside of the ordinary course of business, in our outstanding contractual obligations since December 31, 2014.

Critical Accounting Estimates

For a description of our critical accounting estimates, please see our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 under the heading Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates."

Recently Issued Accounting Standards

See note 1(e) of the notes to condensed consolidated financial statements included in this report for a discussion of recently issued accounting standards.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various market risks, including fluctuations in interest rates and variability in currency exchange rates. There have been no material changes from the risk factors disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014. For a description of our policies, procedures and internal processes governing our management of market risk and the use of financial instruments to manage our exposure to such risk, please see our Annual Report for the fiscal year ended December 31, 2014 under the heading “Quantitative and Qualitative Disclosures About Market Risk.”

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures. Our management, with the participation of the principal executive officer and our principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, our principal executive officer and principal financial officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports that we file or submit under the Exchange Act and are effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting. There have not been any changes in our internal control over financial reporting (as such term is defined by paragraph (d) of Rule 13a-15) under the Exchange Act, during the third fiscal quarter of 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Incorporated in this Item 1, by reference, are the legal proceedings described in Note 7 of the notes to condensed consolidated financial statements included in this report under the heading "Commitments and Contingencies: Legal Proceedings."

ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

ITEM 6. EXHIBITS



A list of all exhibits filed or included as part of this quarterly report on Form 10-Q is as follows:

Exhibit Number		Description
3.1		Declaration of Centaur Guernsey L.P. Inc. (filed as Exhibit 3.3 to our Registration Statement on Form S-4 filed on October 1, 2012).
3.2		Certificate of Registration of Centaur Guernsey L.P. Inc. (filed as Exhibit 3.4 to our Registration Statement on Form S-4 filed on October 1, 2012).
3.3		Third Amended and Restated Limited Partnership Agreement of Acelity L.P. Inc. (filed as Exhibit 3.3 to our Form 10-Q for the quarterly period ended September 30, 2014).
†31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated October 28, 2015.
†31.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated October 28, 2015.
†32.1		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated October 28, 2015.

		† Exhibit filed herewith.

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, in the City of San Antonio, State of Texas on October 28, 2015.



	ACELITY L.P. INC.
	(REGISTRANT)

Date: October 28, 2015	By:	/s/ Joseph F. Woody
		Joseph F. Woody
		Principal Executive Officer
		(Duly Authorized Officer)


Date: October 28, 2015	By:	/s/ Thomas W. Casey
		Thomas W. Casey
		Principal Financial Officer
		(Duly Authorized Officer)

EXHIBITS



Exhibit Number		Description
3.1		Declaration of Centaur Guernsey L.P. Inc. (filed as Exhibit 3.3 to our Registration Statement on Form S-4 filed on October 1, 2012).
3.2		Certificate of Registration of Centaur Guernsey L.P. Inc. (filed as Exhibit 3.4 to our Registration Statement on Form S-4 filed on October 1, 2012).
3.3		Third Amended and Restated Limited Partnership Agreement of Acelity L.P. Inc. (filed as Exhibit 3.3 to our Form 10-Q for the quarterly period ended September 30, 2014).
†31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated October 28, 2015.
†31.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated October 28, 2015.
†32.1		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated October 28, 2015.

		† Exhibit filed herewith.

Acelity L.P. Inc. - FORM 10-Q - October 28, 2015

Attached files

Acelity L.P. Inc. Reports