10-Q

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, 2014

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

Centaur Guernsey L.P. Inc.

(Former name, former address and former fiscal year, if changed since last report)

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 November 4, 2014, there were 341,410,891.610 Class A-1 and 728,041.800 Class A-2 partnership units outstanding.   

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	29
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
	Item 4.	Controls and Procedures	38
PART II.	OTHER INFORMATION		38
	Item 1.	Legal Proceedings	38
	Item 1A.	Risk Factors	38
	Item 6.	Exhibits	39
	SIGNATURES		40

2

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, 2013, 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 Securities and Exchange Commission, 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., formerly known as Centaur Guernsey 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.

• 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 U.S.-based affiliate, Systagenix Wound Management (US), Inc.

3

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ACELITY L.P. INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands)

	September 30, 2014			December 31, 2013
	(unaudited)
Assets:
Current assets:
Cash and cash equivalents	$	224,905		$	206,949
Accounts receivable, net	371,381			407,578
Inventories, net	184,590			181,567
Deferred income taxes	28,218			23,621
Prepaid expenses and other	39,604			53,161
Total current assets	848,698			872,876
Net property, plant and equipment	293,366			333,725
Debt issuance costs, net	83,926			102,054
Deferred income taxes	30,353			31,459
Goodwill	3,378,931			3,378,661
Identifiable intangible assets, net	2,429,166			2,549,201
Other non-current assets	4,950			4,669
	$	7,069,390		$	7,272,645
Liabilities and Equity:
Current liabilities:
Accounts payable	57,575			50,316
Accrued expenses and other	410,725			328,975
Current installments of long-term debt	25,847			26,311
Income taxes payable	4,900			3,368
Deferred income taxes	28,512			2,199
Total current liabilities	527,559			411,169
Long-term debt, net of current installments and discount	4,830,009			4,865,503
Non-current tax liabilities	33,757			53,682
Deferred income taxes	859,078			1,003,784
Other non-current liabilities	124,542			40,432
Total liabilities	6,374,945			6,374,570
Equity:
General partner’s capital	—			—
Limited partners’ capital	700,485			900,218
Accumulated other comprehensive loss, net	(6,040		)	(2,143		)
Total equity	694,445			898,075
	$	7,069,390		$	7,272,645

See accompanying notes to condensed consolidated financial statements.

4

ACELITY L.P. INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(in thousands)

(unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2014			2013			2014			2013
Revenue:
Rental	$	190,465		$	191,041		$	532,258		$	569,449
Sales	298,186			249,520			869,103			719,675
Total revenue	488,651			440,561			1,401,361			1,289,124
Rental expenses	84,744			85,746			257,574			273,479
Cost of sales	86,314			66,151			251,923			181,707
Gross profit	317,593			288,664			891,864			833,938
Selling, general and administrative expenses	163,176			152,053			510,122			518,478
Research and development expenses	15,879			17,961			51,602			56,140
Acquired intangible asset amortization	47,918			45,116			147,361			139,123
Wake Forest settlement	—			—			198,578			—
Impairment of goodwill and intangible assets	—			443,400			—			443,400
Operating earnings (loss)	90,620			(369,866		)	(15,799		)	(323,203		)
Interest income and other	23			217			245			1,279
Interest expense	(104,475		)	(101,398		)	(308,475		)	(315,144		)
Loss on extinguishment of debt	—			(200		)	—			(2,364		)
Foreign currency gain (loss)	9,599			(8,738		)	13,687			(11,935		)
Derivative instruments gain (loss)	1,630			(6,840		)	(2,670		)	3,200
Loss from continuing operations before income tax benefit	(2,603		)	(486,825		)	(313,012		)	(648,167		)
Income tax benefit	(766		)	(88,519		)	(112,075		)	(144,543		)
Loss from continuing operations	(1,837		)	(398,306		)	(200,937		)	(503,624		)
Loss from discontinued operations, net of tax	—			(255		)	—			(2,299		)
Net loss	$	(1,837	)	$	(398,561	)	$	(200,937	)	$	(505,923	)

See accompanying notes to condensed consolidated financial statements.

5

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,
	2014			2013			2014			2013
Net loss	$	(1,837	)	$	(398,561	)	$	(200,937	)	$	(505,923	)
Unrealized investment gain (loss), net of tax benefit (expense) of $411 and $412 in 2014 and $(338) and $(1,413) in 2013	(657		)	541			(659		)	2,257
Foreign currency translation adjustment, net of tax benefit (expense) of $(279) and $(782) in 2014 and $(300) and $259 in 2013	(3,425		)	(5,131		)	(3,238		)	(9,266		)
Total comprehensive loss	$	(5,919	)	$	(403,151	)	$	(204,834	)	$	(512,932	)

See accompanying notes to condensed consolidated financial statements.

6

ACELITY L.P. INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited)
	Nine months ended September 30,
	2014			2013
Cash flows from operating activities:
Net loss	$	(200,937	)	$	(505,923	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Amortization of debt issuance costs and discount	29,179			26,356
Depreciation and other amortization	234,514			252,026
Loss on disposition of assets	—			3,189
Amortization of fair value step-up in inventory	6,680			—
Fixed asset and inventory impairment	—			30,259
Impairment of goodwill and intangible assets	—			443,400
Write-off of other intangible assets	—			16,885
Provision for bad debt	11,613			5,051
Loss on extinguishment of debt	—			2,164
Equity-based compensation expense	2,966			2,046
Deferred income tax benefit	(127,799		)	(165,456		)
Unrealized gain on derivative instruments	(9,310		)	(5,729		)
Unrealized loss (gain) on revaluation of cross currency debt	(27,559		)	8,174
Change in assets and liabilities:
Decrease (increase) in accounts receivable, net	26,065			(23,046		)
Increase in inventories, net	(9,275		)	(10,498		)
Decrease (increase) in prepaid expenses and other	12,341			(17,137		)
Increase in accounts payable	7,402			3,273
Increase in accrued expenses and other	161,227			68,440
Increase (decrease) in tax liabilities, net	(12,076		)	2,021
Net cash provided by operating activities	105,031			135,495
Cash flows from investing activities:
Additions to property, plant and equipment	(46,760		)	(59,868		)
Increase in inventory to be converted into equipment for short-term rental	(3,289		)	(8,881		)
Dispositions of property, plant and equipment	2,251			1,052
Businesses acquired in purchase transaction, net of cash acquired	(4,613		)	—
Increase in identifiable intangible assets and other non-current assets	(9,351		)	(4,273		)
Net cash used by investing activities	(61,762		)	(71,970		)
Cash flows from financing activities:
Settlement of profits interest units	(1,416		)	—
Distribution to limited partners	—			(1,572		)
Repayments of long-term debt and capital lease obligations	(19,863		)	(60,429		)
Payment of debt issuance costs	—			(21,604		)
Net cash used by financing activities	(21,279		)	(83,605		)
Effect of exchange rate changes on cash and cash equivalents	(4,034		)	(151		)
Net increase (decrease) in cash and cash equivalents	17,956			(20,231		)
Cash and cash equivalents, beginning of period	206,949			383,150
Cash and cash equivalents, end of period	$	224,905		$	362,919

See accompanying notes to condensed consolidated financial statements

7

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 2014 presentation.

On November 8, 2012, KCI closed on the divestiture of its Therapeutic Support Systems ("TSS") business to Getinge AB. Under the terms of the sale agreement, we agreed to provide transition services to Getinge AB after the close of the transaction. Additionally, the results of the operations subject to the agreement, excluding the allocation of general corporate overhead, are presented as discontinued operations in the consolidated statements of operations for all periods presented. Discontinued operations amounts related to TSS also exclude incremental expenses related to our transition services agreement with Getinge AB and the service fee payable by Getinge AB under the transition services agreement.

The Company has two reportable operating segments: Advanced Wound Therapeutics and Regenerative Medicine. We have two primary geographic regions: the Americas, which is comprised principally of the United States and includes Canada, Puerto Rico and Latin America; and EMEA/APAC, which is comprised of Europe, the Middle East, Africa and the Asia Pacific region.

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, 2013.

(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.

8

(c)Concentration of Credit Risk

We have a concentration of credit risk with financial institutions related to our derivative instruments. As of September 30, 2014, Morgan Stanley, UBS and HSBC were the counterparties on our interest rate protection agreements consisting of interest rate swap agreements in notional amounts totaling $504.4 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 July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-11 “Income Taxes – Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carry forward, a Similar Tax Loss, or a Tax Credit Carry forwards Exists” which provides that entities should present the unrecognized tax benefit as a reduction of the deferred tax asset for a net operating loss (“NOL”) or similar tax loss or tax credit carryforward rather than as a liability when the uncertain tax position would reduce the NOL or other carryforward under the tax law. The ASU is effective for annual and interim period for fiscal years beginning on or after December 15, 2013. The Company adopted this ASU effective January 1, 2014. The adoption of this update did not have a material impact on our results of operations, financial position or disclosures.

(e)   Recently Issued Accounting Standards

In April 2014, the Financial Accounting Standards 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 amendments in the ASU are effective in the first quarter of 2015 for public organizations with calendar year ends. The Company is evaluating this update, however we do not anticipate that it will have a material effect on our results of operations, financial position or disclosures.

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. For a public entity, the amendments in this ASU are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. The Company is evaluating this update 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 update, 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.

9

(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, 2013.

NOTE 2.Business Acquisition

On July 30, 2013, KCI announced that it had signed a definitive share purchase agreement to acquire Systagenix, an established provider of advanced wound care products. The transaction closed on October 28, 2013. The adjusted purchase price paid, net of cash and cash equivalents, was $478.7 million. The acquisition was accounted for as a business combination using the acquisition method and the purchase price was funded using $350.0 million of incremental borrowings under our existing senior secured credit facility along with cash on hand. The preliminary allocation of the purchase price to the Systagenix tangible and identifiable intangible assets was based on their estimated fair values as of the acquisition date. The excess of the purchase price over the identifiable intangible and net tangible assets was allocated to goodwill, which is not deductible for tax purposes. The purchase price allocation is preliminary, pending the final determination of the fair value of certain assumed assets and liabilities. As these issues are identified, modified or resolved, resulting increases or decreases to the preliminary value of assets and liabilities are offset by a change to goodwill. Adjustments to these estimates will be included in the final allocation of the purchase price.

The following table represents the preliminary allocation of the purchase price (in thousands):

	December 31, 2013			Adjustment			September 30, 2014
Goodwill	$	171,086		$	270		$	171,356
Identifiable intangible assets
Customer relationships	103,301						103,301
Developed technology	91,700						91,700
Tradenames	56,800						56,800
In-process research and development	1,766						1,766
Tangible assets acquired and liabilities assumed:
Accounts receivable	50,807						50,807
Inventories	27,450						27,450
Other current assets	1,902						1,902
Property, plant and equipment	44,016						44,016
Other non-current assets	139						139
Current liabilities	(34,752		)	(270		)	(35,022		)
Other non-current liabilities	(79		)				(79		)
Net deferred tax liability	(35,388		)				(35,388		)
Total purchase price	$	478,748		$	—		$	478,748

Purchase accounting rules require that as certain pre-acquisition issues are identified, modified or resolved, resulting increases or decreases to the preliminary value of assets and liabilities are offset by a change in goodwill. Modifications to goodwill reflected in the “Adjustments” column above were primarily the result of assumed liabilities.

10

The following table reflects the unaudited pro forma condensed consolidated results of operations, as though the acquisition had occurred on January 1, 2012 (in thousands):

	Three months ended September 30,			Nine months ended September 30,
	2013			2013
Pro forma revenue	$	494,869		$	1,446,634
Pro forma net loss	$	(394,675	)	$	(503,990	)

The unaudited pro forma condensed consolidated results of operations presented above are for illustrative purposes only and are not necessarily indicative of what actually would have occurred had the acquisition been in effect for the period presented, nor are they indicative of future operating results. 

In January 2014, LifeCell entered into an asset purchase agreement with TauTona Injector, LLC to purchase certain assets, including patents, know-how, and inventory. Under the terms of the asset purchase agreement, LifeCell made an initial cash payment of $3.0 million at the closing of the transaction. The asset purchase agreement also calls for additional payments by LifeCell of up to $31.5 million upon the achievement of certain milestones. During the first nine months of 2014, LifeCell paid $1.5 million under the asset purchase agreement related to milestone achievement. As of September 30, 2014, the accompanying condensed consolidated balance sheet included $6.9 million under the caption "accrued expenses and other" and $8.8 million under the caption "other non-current liabilities" related to future anticipated milestone payments.

NOTE 3.Supplemental Balance Sheet Data

(a)Accounts Receivable, net

Accounts receivable consist of the following (in thousands):

	September 30, 2014			December 31, 2013
Gross trade accounts receivable:
Billed trade accounts receivable	$	397,743		$	418,804
Unbilled receivables	36,077			50,841
Less:  Allowance for revenue adjustments	(58,839		)	(67,631		)
Gross trade accounts receivable	374,981			402,014
Less:  Allowance for bad debt	(13,433		)	(8,483		)
Net trade accounts receivable	361,548			393,531
Other receivables	9,833			14,047
	$	371,381		$	407,578

11

(b)   Inventories, net

Inventories consist of the following (in thousands):

	September 30, 2014			December 31, 2013
Finished goods and tissue available for distribution	$	129,375		$	110,937
Goods and tissue in-process	10,176			12,994
Raw materials, supplies, parts and unprocessed tissue	67,541			71,876
	207,092			195,807
Less: Amounts expected to be converted into equipment for short-term rental	(7,241		)	(3,952		)
Reserve for excess and obsolete inventory	(15,261		)	(10,288		)
	$	184,590		$	181,567

NOTE 4.     Long-Term Debt

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

	September 30, 2014			December 31, 2013
Senior Dollar Term E-1 Credit Facility (1) – due 2018	$	1,932,108		$	1,946,708
Senior Euro Term E-1 Credit Facility (1) – due 2018	307,004			337,820
Senior Term E-2 Credit Facility (1) – due 2016	316,147			318,537
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			101
Notional amount of debt	4,917,360			4,965,166
Senior Dollar Term E-1 Credit Facility Discount, net of accretion	(25,938		)	(30,926		)
Senior Euro Term E-1 Credit Facility Discount, net of accretion	(8,224		)	(10,693		)
Senior Term E-2 Credit Facility Discount, net of accretion	(3,342		)	(4,486		)
Second Lien Senior Secured Notes Discount, net of accretion	(21,251		)	(24,222		)
Senior Unsecured Notes Discount, net of accretion	(2,749		)	(3,025		)
Net discount on debt	(61,504		)	(73,352		)
Total debt, net of discount	4,855,856			4,891,814
Less:  Current installments	(25,847		)	(26,311		)
	$	4,830,009		$	4,865,503

_____________________________

(1) On January 22, 2014, we entered into Amendment No. 5 to our senior secured credit facility. As a result of the amendment we created new classes of Dollar Term E-1 Loans, Euro Term E-1 Loans and Term E-2 Loans, having the same rights and obligations as the Dollar Term D-1 Loans, Euro Term D-1 Loans and Term D-2 Loans as set forth in the governing credit agreement and loan documents, except as revised by Amendment No. 5.

12

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, 2014 and December 31, 2013, 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 $22.0 million and $21.2 million, respectively. In addition, we had $11.8 million and $12.6 million of letters of credit issued by a bank not party to the Senior Secured Credit Facility as of September 30, 2014 and December 31, 2013, respectively. The capacity of the Revolving Credit Facility is reduced for the $22.0 million and $21.2 million of letters of credit issued by banks which are party to the Senior Secured Credit Facility as of September 30, 2014 and December 31, 2013, respectively. The resulting availability under the Revolving Credit Facility was $178.0 million and $178.8 million at September 30, 2014 and December 31, 2013, respectively. Commitment fees accrue at a rate of 0.50% on the amounts available under the Revolving Credit Facility.

On January 22, 2014, we entered into Amendment No. 5 to our Senior Secured Credit Facility ("Amendment No. 5"). As a result of the amendment we created new classes of Dollar Term E-1 Loans, Euro Term E-1 Loans and Term E-2 Loans, having the same rights and obligations as the Dollar Term D-1 Loans, Euro Term D-1 Loans and Term D-2 Loans as set forth in the governing credit agreement and loan documents, except as revised by Amendment No. 5. In connection with Amendment No. 5, Dollar Term D-1 Loans, Euro Term D-1 Loans and Term D-2 Loans were refinanced with Dollar Term E-1 Loans, Euro Term E-1 Loans and Term E-2 Loans, respectively.

Interest. Amounts outstanding under the Dollar Term E-1 Loans, the Term E-2 Loans and the Revolving Credit Facility (other than swing-line loans and unreimbursed drawings on letters of credit) bear interest, at our option, at a rate equal to either the base rate or the eurocurrency rate, in each case plus an applicable margin. Amounts outstanding under the Euro Term E-1 Loans bear interest at the eurocurrency rate, and swing-line loans and unreimbursed drawings on letters of credit bear interest at the base rate. As a result of Amendment No. 5, the new applicable margins are (i) for eurocurrency rate loans that are Dollar Term E-1 Loans, 3.00%, (ii) for base rate loans that are Dollar Term E-1 Loans, 2.00%, (iii) for eurocurrency rate loans that are Euro Term E-1 Loans, 3.25%, (iv) for base rate loans that are Euro Term E-1 Loans, 2.25%, (v) for eurocurrency rate loans that are Term E-2 Loans, 2.50%, and (vi) for base rate loans that are Term E-2 Loans, 1.50%. The Term E loans will have a eurocurrency rate floor of 1.00% and a base rate floor of 2.00%.

10.5% Second Lien Senior Secured Notes and 12.5% Senior Unsecured Notes

As required upon the closing of our 10.5% Second Lien Senior Secured Notes due 2018 (“10.5% Second Lien Notes”) and the 12.5% Senior Unsecured Notes due 2019 (“12.5% Unsecured Notes”), we entered into registration rights agreements with respect to these notes. Pursuant to the terms of the registration rights agreements, we filed a registration statement (the “Registration Statement”) with respect to a registered exchange offer to exchange such notes for new notes with terms substantially identical in all material respects with the notes (except for the provisions relating to the transfer restrictions and payment of additional interest). On February 13, 2013, our Registration Statement was declared effective by the Securities and Exchange Commission (“SEC”), and our exchange offer was completed on March 15, 2013.

Because our Registration Statement was not declared effective by the SEC under the Securities Act and the exchange offer was not consummated within 365 days following the issuance of the notes (“Exchange Date”), and because we did not file a shelf registration statement covering resales of the notes within 30 days after the Exchange Date (each a “Notes Registration Default”), additional interest accrued on the aggregate principal amount of the notes from and including the date on which any such Notes Registration Default occurred to but excluding the date on which the Notes Registration Defaults were cured through the completion of the exchange offer. Under the terms of the registration rights agreements entered into with respect to these notes, additional interest was accrued at a rate of 0.25% and 0.50% from November 4, 2012 to February 4, 2013 and February 5, 2013 to March 15, 2013, respectively.

Covenants

As of September 30, 2014, we were in compliance with all covenants under our Senior Secured Credit Facility, 10.5% Second Lien Notes, 12.5% Unsecured Notes, and 3.25% Convertible Senior Notes due 2015 (“the Convertible Notes”).

For further information on our long-term debt, see Note 6 of the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

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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, 2014 and December 31, 2013, we had three interest rate swap agreements to convert a portion of our outstanding variable rate debt to a fixed rate basis. These agreements that became effective in December 2013, 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 quarterly interest payments, receive rates based on the higher of three-month USD LIBOR or 1.25% and pay rates based on fixed rates, 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	$504,367	2.256%
12/31/13-12/31/16	$504,367	2.249%
12/31/13-12/31/16	$504,367	2.250%

Previously held interest rate cap agreements expired on December 31, 2013.

Foreign Currency Exchange Rate Mitigation

At September 30, 2014, we had no outstanding foreign currency exchange contracts. At December 31, 2013, we had foreign currency exchange contracts to sell or purchase $14.3 million of various currencies.

Fair Value Measurements

The Codification definesfair 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, including the 10.5% Second Lien Secured Notes, the 12.5% Unsecured Notes and the Convertible Notes approximates fair value. The fair value of our borrowings under our Senior Secured Credit Facility and fixed rate long-term debt was $2.5 billion and $2.6 billion, respectively, at September 30, 2014. The fair value of our borrowings under our Senior Secured Credit Facility and fixed rate long-term debt was $2.6 billion and $2.7 billion, respectively, at December 31, 2013. The fair value of our long-term debt was estimated based upon open-market trades at or near year end which represent Level 2 inputs.

The fair values of all of our derivatives, as of the reporting date, are computed using Level 2 inputs. The interest rate swap agreements are valued using a discounted cash flow model that takes into account the present value of the 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 foreign currency exchange contracts are valued using a discounted cash flow model that takes into account the present value of the future cash flows under the terms of the agreements by using market information available as of the reporting date, including prevailing foreign currency exchange rates and related foreign currency exchange rate curves.

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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
		September 30, 2014		December 31, 2013			September 30, 2014		December 31, 2013
Derivatives not designated as hedging instruments
Interest rate swap agreements	Prepaid expenses and other	$	—	$	—	Accrued expenses and other	$	13,938	$	345
Interest rate swap agreements	Other non-current assets	—		—		Other non-current liabilities	9,426		31,906
Foreign currency exchange contracts	Prepaid expenses and other	—		146		Accrued expenses and other	—		569
Total derivatives		$	—	$	146		$	23,364	$	32,820

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,
	2014		2013			2014			2013
Interest rate swap agreements	$	1,630	$	(5,195	)	$	(2,732	)	$	4,057
Interest rate cap agreements	—		(4		)	—			(9		)
Foreign currency exchange contracts	—		(1,641		)	62			(848		)
	$	1,630	$	(6,840	)	$	(2,670	)	$	3,200

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 6 of the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

If we default under our credit facilities, the lenders could require immediate repayment of the entire principal. 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, 2014, 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, 2014 or December 31, 2013.

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NOTE 6. Accumulated Other Comprehensive Loss

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

	Accumulated Foreign Currency Translation Adjustment			Investment Gain			Accumulated Other Comprehensive Income (Loss)
Balances at December 31, 2013	$	(4,384	)	$	2,241		$	(2,143	)
Unrealized investment loss, net of tax benefit of $412	—			(659		)	(659		)
Foreign currency translation adjustment, net of tax expense of $782	(3,238		)	—			(3,238		)
Balances at September 30, 2014	$	(7,622	)	$	1,582		$	(6,040	)

During the nine months ended September 30, 2014, 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 August 2013, Vital Needs International, L.P. ("Vital Needs") filed a Demand for Arbitration with the American Arbitration Association seeking to recover $100 million in damages against KCI entities based on a number of claims related to certain intellectual property rights sold by Vital Needs to KCI pursuant to a 2006 acquisition agreement. Vital Needs alleges, among other things, breach of the contract for failure to pay royalties on sales of KCI products. We do not believe any royalties are owed to Vital Needs for sales of KCI products, and we believe our defenses to Vital Needs' claims are meritorious. We intend to vigorously defend the arbitration, which is in the discovery phase. The arbitration is currently set for January 2015. It is not possible to predict the outcome of this arbitration, nor is it possible to estimate any damages that may be awarded if we are unsuccessful in the arbitration.

In September 2013, LifeNet Health ("LifeNet") filed suit against LifeCell Corporation in the United States 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"). LifeNet alleges that LifeCell has been aware of the ‘200 Patent and its infringement since 2009 and acted willfully in continuing to infringe the ‘200 Patent thereafter. LifeNet seeks monetary damages including treble damages for willful infringement, together with costs and prejudgment and post judgment interest as well as a finding that the case is exceptional and an award of costs and reasonable attorneys fees. We believe that our defenses to the LifeNet claims are meritorious, that LifeCell's products do not infringe the '200 Patent, and that the patent is invalid. The case has proceeded rapidly in the Eastern District of Virginia. The trial began in Norfolk on November 3, 2014. 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.

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On June 30, 2014, KCI entered into a settlement and release agreement (the “Settlement Agreement”) with Wake Forest  University Health Sciences to fully and finally resolve the pending patent disputes between them relating to negative pressure wound therapy. As of September 30, 2014, the accompanying condensed consolidated balance sheet included $81.5 million under the caption "accrued expenses and other" and $102.8 million under the caption "other non-current liabilities" representing the net present value of payments under the Settlement Agreement discounted using our incremental borrowing rate as the discount rate.  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.

Products Liability Litigation

LifeCell Corporation is a defendant in approximately 335 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. Following limited discovery, the parties have each selected four bellwether cases from which one case to be tried will be selected. Discovery is proceeding on each of the bellwether cases. Trial of the first bellwether case is currently scheduled for September 2015. 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. These consolidated cases are being treated as a single occurrence and therefore do not require the exhaustion of a separate self-insured retention to trigger coverage. 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 fact discovery is proceeding in these cases, the plaintiffs have yet to set forth their alleged damages. As such, it is impossible to predict or estimate potential losses if our defenses to these cases are unsuccessful.

LifeCell Corporation has been named as a defendant in approximately 175 lawsuits in state and federal courts in Massachusetts, Delaware, Minnesota, New York and Texas (federal court cases have been transferred to West Virginia multidistrict litigation docket) 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 170 LifeCell cases filed in a consolidated docket in Middlesex County, Massachusetts. The cases are in the initial phase and no discovery has occurred. We intend to defend 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. 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 Court granted KCI's motions dismissing all of the claims under the False Claims Act. The cases are on appeal in the U.S. Court of Appeals for the Ninth Circuit and oral argument was in July 2014. The appellate panel that heard the argument recently asked for briefing on whether the case should be heard en banc before the U.S. Court of Appeals for the Ninth Circuit. Both parties denied that there was need for en banc consideration. We await the opinion of the court. 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.

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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 medical claims submitted to Medicare. These audits typically involve a review, by Medicare or its designated contractors and representatives, of documentation supporting the medical necessity of 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, and do not as a matter of practice require, or subsequently obtain, the underlying medical records supporting the 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 medical facilities and physicians. Obtaining these medical records in connection with a claims audit may be difficult or impossible and, in any event, all of these records are subject to further examination 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 subject to a pre-payment or post-payment audit, we could be subject to denial, recoupment or refund demands for claims submitted for Medicare reimbursement. In the event that an audit results in discrepancies in the records provided, Medicare may be entitled to extrapolate the results of the audit to make recoupment demands based on a wider population of claims than those examined in the audit.

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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 ("AWT") and Regenerative Medicine. Our AWT 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).

On November 8, 2012, Getinge AB purchased certain assets and assumed certain liabilities comprising KCI's TSS business. The historical results of operations of the TSS business, excluding the allocation of general corporate overhead, are reported as discontinued operations in the consolidated statements of operations. Discontinued operations amounts related to TSS also exclude incremental expenses related to our transition services agreement with Getinge AB and the service fee payable by Getinge AB under the transition services agreement.

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

	Three months ended September 30,						Nine months ended September 30,
	2014			2013			2014			2013
Revenue:
Advanced Wound Therapeutics	$	377,181		$	320,879		$	1,064,815		$	944,526
Regenerative Medicine	111,470			119,682			336,546			344,598
Total revenue	$	488,651		$	440,561		$	1,401,361		$	1,289,124
Operating earnings (loss):
Advanced Wound Therapeutics	$	131,286		$	126,854		$	322,543		$	327,172
Regenerative Medicine	34,253			30,093			99,025			91,159
Non-allocated costs:
General headquarter expense (1)	(2,257		)	(6,335		)	(7,464		)	(59,447		)
Equity-based compensation	(863		)	(850		)	(2,966		)	(2,046		)
Merger and restructuring-related expenses (2)	(23,881		)	(31,112		)	(80,998		)	(97,518		)
Acquired intangible asset amortization (3)	(47,918		)	(45,116		)	(147,361		)	(139,123		)
Wake Forest settlement	—			—			(198,578		)	—
Impairment of goodwill and intangible assets (4)	—			(443,400		)	—			(443,400		)
Total non-allocated costs	(74,919		)	(526,813		)	(437,367		)	(741,534		)
Total operating earnings (loss)	$	90,620		$	(369,866	)	$	(15,799	)	$	(323,203	)

_____________________

(1) The third quarter and nine months ended September 30, 2013 includes write-offs of $3.5 million and $16.9 million, respectively, of other intangible assets due primarily to the discontinuation of certain projects. The nine months ended September 30, 2013 also includes a $30.3 million fixed asset impairment charge.

(2) Represents restructuring-related expenses as well as expenses related to the Merger, including management fees.

(3) 2014 includes amortization of acquired intangible assets related to our acquisition of Systagenix in October 2013 and our Merger in November 2011. 2013 includes amortization of acquired intangible assets related to our Merger in November 2011.

(4) During the third quarter of 2013, we recorded a $272.2 million impairment of goodwill and a $171.2 million impairment of indefinite-lived intangible assets related to our Regenerative Medicine reporting unit. These amounts have been excluded from Regenerative Medicine operating earnings as management excludes these charges from operating earnings when making operating decisions about the business.

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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 indentures 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, 2014, 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.

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Condensed Consolidating Parent Company, Co-Issuers,

Guarantor and Non-Guarantor Balance Sheet

September 30, 2014

(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	$	52,380		$	9,445	$	162,682	$	—		$	224,905
Accounts receivable, net	—		176,575			68,807		125,999		—			371,381
Inventories, net	—		84,637			102,912		102,779		(105,738		)	184,590
Deferred income taxes	—		503			28,218		—		(503		)	28,218
Prepaid expenses and other	—		17,067			5,851		269,706		(253,020		)	39,604
Intercompany receivables	166		1,862,339			2,387,963		122,512		(4,372,980		)	—
Total current assets	564		2,193,501			2,603,196		783,678		(4,732,241		)	848,698
Net property, plant and equipment	—		329,753			72,274		170,434		(279,095		)	293,366
Debt issuance costs, net	—		83,926			—		—		—			83,926
Deferred income taxes	—		—			—		30,353		—			30,353
Goodwill	—		2,483,240			732,771		162,920		—			3,378,931
Identifiable intangible assets, net	—		314,331			1,792,989		321,846		—			2,429,166
Other non-current assets	—		1,204			186		94,460		(90,900		)	4,950
Intercompany loan receivables	—		765,000			423,424		—		(1,188,424		)	—
Intercompany investments	700,033		393,091			404,273		—		(1,497,397		)	—
	$	700,597	$	6,564,046		$	6,029,113	$	1,563,691	$	(7,788,057	)	$	7,069,390
Liabilities and Equity:
Current liabilities:
Accounts payable	$	—	$	20,028		$	14,670	$	22,877	$	—		$	57,575
Accrued expenses and other	—		285,492			245,327		75,308		(195,402		)	410,725
Intercompany payables	5,526		1,065,538			2,676,774		625,142		(4,372,980		)	—
Current installments of long-term debt	—		25,847			—		—		—			25,847
Income taxes payable	—		—			—		5,849		(949		)	4,900
Deferred income taxes	—		—			13,692		15,323		(503		)	28,512
Total current liabilities	5,526		1,396,905			2,950,463		744,499		(4,569,834		)	527,559
Long-term debt, net of current installments and discount	—		4,830,009			—		—		—			4,830,009
Non-current tax liabilities	—		10,790			4,847		18,120		—			33,757
Deferred income taxes	—		73,003			730,816		55,259		—			859,078
Other non-current liabilities	626		113,416			9,424		1,076		—			124,542
Intercompany loan payables	—		417,432			765,000		5,992		(1,188,424		)	—
Total liabilities	6,152		6,841,555			4,460,550		824,946		(5,758,258		)	6,374,945
Total equity	694,445		(277,509		)	1,568,563		738,745		(2,029,799		)	694,445
	$	700,597	$	6,564,046		$	6,029,113	$	1,563,691	$	(7,788,057	)	$	7,069,390

21

Condensed Consolidating Parent Company, Co-Issuers,

Guarantor and Non-Guarantor Balance Sheet

December 31, 2013

(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	$	87,771	$	118	$	118,662	$	—		$	206,949
Accounts receivable, net	—		184,723		71,457		151,398		—			407,578
Inventories, net	—		54,809		101,779		101,751		(76,772		)	181,567
Deferred income taxes	—		14,991		6,610		2,020		—			23,621
Prepaid expenses and other	—		35,832		5,434		321,427		(309,532		)	53,161
Intercompany receivables	166		1,687,528		2,326,181		21,241		(4,035,116		)	—
Total current assets	564		2,065,654		2,511,579		716,499		(4,421,420		)	872,876
Net property, plant and equipment	—		311,122		80,963		223,987		(282,347		)	333,725
Debt issuance costs, net	—		102,054		—		—		—			102,054
Deferred income taxes	—		—		—		31,459		—			31,459
Goodwill	—		2,483,240		732,771		162,650		—			3,378,661
Identifiable intangible assets, net	—		361,640		1,829,452		358,109		—			2,549,201
Other non-current assets	—		715		192		94,662		(90,900		)	4,669
Intercompany loan receivables	—		990,972		404,688		—		(1,395,660		)	—
Intercompany investments	901,902		432,884		372,093		—		(1,706,879		)	—
	$	902,466	$	6,748,281	$	5,931,738	$	1,587,366	$	(7,897,206	)	$	7,272,645
Liabilities and Equity:
Current liabilities:
Accounts payable	$	—	$	15,266	$	14,929	$	20,121	$	—		$	50,316
Accrued expenses and other	—		185,790		246,977		77,843		(181,635		)	328,975
Intercompany payables	4,110		852,892		2,559,407		618,707		(4,035,116		)	—
Current installments of long-term debt	—		26,311		—		—		—			26,311
Income taxes payable	—		—		3,368		—		—			3,368
Deferred income taxes	—		—		—		2,199		—			2,199
Total current liabilities	4,110		1,080,259		2,824,681		718,870		(4,216,751		)	411,169
Long-term debt, net of current installments and discount	—		4,865,503		—		—		—			4,865,503
Non-current tax liabilities	—		28,850		4,284		20,548		—			53,682
Deferred income taxes	—		231,713		718,930		53,141		—			1,003,784
Other non-current liabilities	281		38,667		334		1,150		—			40,432
Intercompany loan payables	—		399,690		780,000		215,970		(1,395,660		)	—
Total liabilities	4,391		6,644,682		4,328,229		1,009,679		(5,612,411		)	6,374,570
Total equity	898,075		103,599		1,603,509		577,687		(2,284,795		)	898,075
	$	902,466	$	6,748,281	$	5,931,738	$	1,587,366	$	(7,897,206	)	$	7,272,645

22

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		$	1,622		$	28,696		$	—		$	190,465
Sales	—			79,951			271,166			239,133			(292,064		)	298,186
Total revenue	—			240,098			272,788			267,829			(292,064		)	488,651
Rental expenses	—			76,656			4,843			49,544			(46,299		)	84,744
Cost of sales	28			87,277			180,777			91,044			(272,812		)	86,314
Gross profit (loss)	(28		)	76,165			87,168			127,241			27,047			317,593
Selling, general and administrative expenses	835			72,295			43,676			46,583			(213		)	163,176
Research and development expenses	—			5,771			6,130			3,978			—			15,879
Acquired intangible asset amortization	—			15,077			19,731			13,110			—			47,918
Wake Forest settlement	—			—			—			—			—			—
Operating earnings (loss)	(863		)	(16,978		)	17,631			63,570			27,260			90,620
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 gain	—			1,630			—			—			—			1,630
Earnings (loss) from continuing operations before income taxes (benefit) and equity in earnings (loss) of subsidiaries	(863		)	(70,224		)	1,710			28,327			38,447			(2,603		)
Income tax expense (benefit)	—			12,787			(11,289		)	(2,264		)	—			(766		)
Earnings (loss) from continuing operations before equity in earnings (loss) of subsidiaries	(863		)	(83,011		)	12,999			30,591			38,447			(1,837		)
Equity in earnings (loss) of subsidiaries	(974		)	44,971			30,591			—			(74,588		)	—
Earnings (loss) from continuing operations	(1,837		)	(38,040		)	43,590			30,591			(36,141		)	(1,837		)
Earnings (loss) from discontinued operations, net of tax	—			—			—			—			—			—
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	)

23

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, 2013
	Acelity L.P. Inc. Parent Company			Kinetic Concepts, Inc. and KCI USA, Inc. Borrower			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue:
Rental	$	—		$	155,893		$	1,513		$	33,635		$	—		$	191,041
Sales	—			77,659			224,426			159,142			(211,707		)	249,520
Total revenue	—			233,552			225,939			192,777			(211,707		)	440,561
Rental expenses	—			62,928			4,010			53,891			(35,083		)	85,746
Cost of sales	30			123,481			142,946			57,512			(257,818		)	66,151
Gross profit (loss)	(30		)	47,143			78,983			81,374			81,194			288,664
Selling, general and administrative expenses	820			66,834			44,169			40,261			(31		)	152,053
Research and development expenses	—			8,010			6,742			3,209			—			17,961
Acquired intangible asset amortization	—			19,625			17,907			7,584			—			45,116
Impairment of goodwill and intangible assets	—			—			443,400			—			—			443,400
Operating earnings (loss)	(850		)	(47,326		)	(433,235		)	30,320			81,225			(369,866		)
Non-operating intercompany transactions	—			(8,076		)	49,735			(60,212		)	18,553			—
Interest income and other	—			17,852			3,062			97			(20,794		)	217
Interest expense	—			(104,402		)	(17,756		)	(34		)	20,794			(101,398		)
Loss on extinguishment of debt	—			(200		)	—			—			—			(200		)
Foreign currency gain (loss)	—			(14,433		)	(38		)	5,733			—			(8,738		)
Derivative instruments loss	—			(6,840		)	—			—			—			(6,840		)
Earnings (loss) from continuing operations before income taxes (benefit) and equity in earnings (loss) of subsidiaries	(850		)	(163,425		)	(398,232		)	(24,096		)	99,778			(486,825		)
Income tax benefit	—			(51,104		)	(34,535		)	(2,880		)	—			(88,519		)
Earnings (loss) from continuing operations before equity in earnings (loss) of subsidiaries	(850		)	(112,321		)	(363,697		)	(21,216		)	99,778			(398,306		)
Equity in earnings (loss) of subsidiaries	(397,711		)	48,780			(20,950		)	—			369,881			—
Earnings (loss) from continuing operations	(398,561		)	(63,541		)	(384,647		)	(21,216		)	469,659			(398,306		)
Earnings (loss) from discontinued operations, net of tax	—			(331		)	(1		)	266			(189		)	(255		)
Net earnings (loss)	$	(398,561	)	$	(63,872	)	$	(384,648	)	$	(20,950	)	$	469,470		$	(398,561	)
Total comprehensive income (loss)	$	(403,151	)	$	(68,462	)	$	(389,238	)	$	(25,540	)	$	483,240		$	(403,151	)

24

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		$	4,809		$	87,098		$	—		$	532,258
Sales	—			215,289			726,946			665,333			(738,465		)	869,103
Total revenue	—			655,640			731,755			752,431			(738,465		)	1,401,361
Rental expenses	80			216,134			12,463			157,584			(128,687		)	257,574
Cost of sales	73			229,191			460,426			274,514			(712,281		)	251,923
Gross profit (loss)	(153		)	210,315			258,866			320,333			102,503			891,864
Selling, general and administrative expenses	2,813			224,598			133,627			149,470			(386		)	510,122
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		)	46,209			115,803			102,889			(15,799		)
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 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		)	(19,402		)	50,015			174,259			(313,012		)
Income tax expense (benefit)	—			(177,652		)	45,196			20,381			—			(112,075		)
Earnings (loss) from continuing operations before equity in earnings (loss) of subsidiaries	(2,966		)	(337,266		)	(64,598		)	29,634			174,259			(200,937		)
Equity in earnings (loss) of subsidiaries	(197,971		)	(39,793		)	29,634			—			208,130			—
Earnings (loss) from continuing operations	(200,937		)	(377,059		)	(34,964		)	29,634			382,389			(200,937		)
Earnings (loss) from discontinued operations, net of tax	—			—			—			—			—			—
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	)

25

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, 2013
	Acelity L.P. Inc. Parent Company			Kinetic Concepts, Inc. and KCI USA, Inc. Borrower			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue:
Rental	$	—		$	461,605		$	4,766		$	103,078		$	—		$	569,449
Sales	—			221,296			640,681			481,490			(623,792		)	719,675
Total revenue	—			682,901			645,447			584,568			(623,792		)	1,289,124
Rental expenses	13			186,426			12,180			167,226			(92,366		)	273,479
Cost of sales	84			221,212			396,855			177,420			(613,864		)	181,707
Gross profit (loss)	(97		)	275,263			236,412			239,922			82,438			833,938
Selling, general and administrative expenses	1,949			269,490			136,734			110,515			(210		)	518,478
Research and development expenses	—			23,366			23,263			9,511			—			56,140
Acquired intangible asset amortization	—			61,276			54,274			23,573			—			139,123
Impairment of goodwill and intangible assets	—			—			443,400			—			—			443,400
Operating earnings (loss)	(2,046		)	(78,869		)	(421,259		)	96,323			82,648			(323,203		)
Non-operating intercompany transactions	—			52,176			108,489			(112,565		)	(48,100		)	—
Interest income and other	—			54,046			9,188			166			(62,121		)	1,279
Interest expense	—			(324,163		)	(52,974		)	(128		)	62,121			(315,144		)
Loss on extinguishment of debt	—			(2,364		)	—			—			—			(2,364		)
Foreign currency loss	—			(8,953		)	(251		)	(2,731		)	—			(11,935		)
Derivative instruments gain	—			3,200			—			—			—			3,200
Earnings (loss) from continuing operations before income taxes (benefit) and equity in earnings (loss) of subsidiaries	(2,046		)	(304,927		)	(356,807		)	(18,935		)	34,548			(648,167		)
Income tax benefit	—			(97,201		)	(38,718		)	(8,624		)	—			(144,543		)
Earnings (loss) from continuing operations before equity in earnings (loss) of subsidiaries	(2,046		)	(207,726		)	(318,089		)	(10,311		)	34,548			(503,624		)
Equity in earnings (loss) of subsidiaries	(503,877		)	104,040			(10,136		)	—			409,973			—
Earnings (loss) from continuing operations	(505,923		)	(103,686		)	(328,225		)	(10,311		)	444,521			(503,624		)
Earnings (loss) from discontinued operations, net of tax	—			(2,725		)	(3		)	175			254			(2,299		)
Net earnings (loss)	$	(505,923	)	$	(106,411	)	$	(328,228	)	$	(10,136	)	$	444,775		$	(505,923	)
Total comprehensive income (loss)	$	(512,932	)	$	(113,420	)	$	(335,237	)	$	(17,145	)	$	465,802		$	(512,932	)

26

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 earnings (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 transaction, 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 capital lease 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

27

Condensed Consolidating Parent Company, Co-Issuers,

Guarantor and Non-Guarantor Statement of Cash Flows

(in thousands)

(unaudited)

	For the nine months ended September 30, 2013
	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)	$	(505,923	)	$	(106,411	)	$	(328,228	)	$	(10,136	)	$	444,775		$	(505,923	)
Adjustments to reconcile net loss to net cash provided (used) by operating activities	3,619			249,757			397,283			35,915			(45,156		)	641,418
Net cash provided (used) by operating activities	(502,304		)	143,346			69,055			25,779			399,619			135,495
Cash flows from investing activities:
Net additions to property, plant and equipment	—			(145,714		)	(14,556		)	(98,591		)	191,164			(67,697		)
Decrease (increase) in identifiable intangible assets and other non-current assets	—			(70		)	(4,474		)	271			—			(4,273		)
Net cash provided (used) by investing activities	—			(145,784		)	(19,030		)	(98,320		)	191,164			(71,970		)
Cash flows from financing activities:
Distribution to limited partners	(1,572		)	—			—			—			—			(1,572		)
Repayments of long-term debt and capital lease obligations	—			(60,446		)	—			17			—			(60,429		)
Payment of debt issuance costs	—			(21,604		)	—			—			—			(21,604		)
Proceeds (payments) on intercompany loans	—			51,298			(53,452		)	2,154			—			—
Proceeds (payments) on intercompany investments	503,876			(104,808		)	3,427			188,288			(590,783		)	—
Net cash provided (used) by financing activities	502,304			(135,560		)	(50,025		)	190,459			(590,783		)	(83,605		)
Effect of exchange rate changes on cash and cash equivalents	—			—			—			(151		)	—			(151		)
Net increase (decrease) in cash and cash equivalents	—			(137,998		)	—			117,767			—			(20,231		)
Cash and cash equivalents, beginning of period	398			276,788			—			105,964			—			383,150
Cash and cash equivalents, end of period	$	398		$	138,790		$	—		$	223,731		$	—		$	362,919

NOTE 10.Subsequent Event

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. In connection with the transfer, the parties agreed to terminate various distribution agreements entered into between 2010 and 2011. The U.S. agreement for the core fields of plastic, general, and gastrointestinal surgeries was set to expire in November 2015. The termination agreement provides for a one-time payment of $4.5 million to LifeCell on November 30, 2014 and the repurchase of existing inventory. LifeCell has agreed to provide limited transition services to Novadaq through year end. In connection with the transfer, the parties have also resolved all legal disputes between them.

28

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION 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, 2013.

GENERAL

We are a leading global medical technology company devoted to the development and commercialization of innovative products and therapies designed to improve outcomes while helping to reduce the overall cost of patient care. Our primary businesses serve the advanced wound therapeutics and regenerative medicine markets and we are engaged in the rental and sale of our products throughout the United States and in over 75 countries worldwide through direct sales and indirect operations. We are owned by investment funds advised by Apax Partners and controlled affiliates of Canada Pension Plan Investment Board and the Public Sector Pension Investment Board and certain other co-investors.

Our advanced wound therapeutics ("AWT") business is focused on the development and commercialization of AWT devices and dressings. Our AWT business is primarily engaged in commercializing several technology platforms, including negative pressure wound therapy (“NPWT”), advanced dressings, negative pressure surgical management (“NPSM”) and epidermal harvesting. Our AWT dressings are used for the management of chronic and acute wounds. Our AWT business is primarily conducted by KCI and its operating subsidiaries, including Systagenix. Key brands in our AWT business include the V.A.C. NPWT line of products, Prevena, ABThera, CelluTome, Promogran, Tielle, and Adaptic.

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 repair soft tissue defects. Key brands within our product portfolio include our human tissue based AlloDerm and porcine tissue based Strattice in various configurations designed to meet the needs of patients and caregivers. In addition to our acellular tissue matrices, our Regenerative Medicine business markets autologous fat grafting solutions, such as Revolve, which complement our tissue matrix business.

Our customers include acute care hospitals, ambulatory surgical centers, and long-term care facilities, with whom we contract directly or through group purchasing organizations (“GPOs”). We bill these facilities directly for the rental and sale of our products. In the U.S. home care setting, we provide products and therapies to patients in the home and bill third-party payers, such as Medicare and private insurance, directly. Outside of the U.S., most of our revenue is generated in the acute care setting. Our sales and marketing organizations are focused on the training and education of care-givers on the proper application of our products and therapies, particularly with general, plastic and orthopedic surgeons, as well as wound ostomy care nurses. We also drive adoption of our products with the support of extensive clinical efficacy data, as well as the economic value proposition of our products to reduce the overall cost of care.

RECENT DEVELOPMENTS

In September 2014 we announced the general partner of Centaur Guernsey L.P. Inc. approved changing the name of the company from Centaur Guernsey L.P. Inc. to Acelity L.P. Inc. The name change became effective on September 1, 2014. The KCI, LifeCell and Systagenix subsidiaries will continue to exist as legal entities and will each operate as Acelity companies.

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RESULTS OF OPERATIONS

We have two reportable operating segments which correspond to our two businesses: Advanced Wound Therapeutics ("AWT") and Regenerative Medicine. Our AWT business is conducted by KCI and its subsidiaries, including Systagenix, while our Regenerative Medicine business is conducted by LifeCell and its subsidiaries. We have two primary geographic regions: the Americas, which is comprised principally of the United States and includes Canada, Puerto Rico and Latin America; and EMEA/APAC, which is comprised of Europe, the Middle East, Africa and the Asia Pacific region.

Historically, we have experienced a seasonal slowing of unit demand for our NPWT devices and related dressings beginning in the fourth quarter and continuing into the first quarter, which we believe has been caused by year-end clinical treatment patterns, such as the postponement of elective surgeries and increased discharges of individuals from the acute care setting around the winter holidays. We typically experience a slowing of demand for our AWT dressings in the fourth quarter. Although we do not know if our historical experience will prove to be indicative of future periods, similar slow-downs may occur in subsequent periods.

Revenue for each of our geographic regions in which we operate is disclosed for each of our businesses. Certain prior period amounts have been reclassified to conform to the 2014 presentation.

Revenue by Operating Segment

The following table sets forth, for the periods indicated, business unit revenue as well as the percentage change in each line item, comparing the third quarter and first nine months of 2014 to the third quarter and first nine months of 2013 (dollars in thousands):

	Three months ended September 30,						Nine months ended September 30,
	2014		2013		% Change		2014		2013		% Change
Advanced Wound Therapeutics revenue:
Rental	$	188,843	$	189,528	(0.4	)%	$	527,449	$	564,683	(6.6	)%
Sales	188,338		131,351		43.4		537,366		379,843		41.5
Total – Advanced Wound Therapeutics	377,181		320,879		17.5		1,064,815		944,526		12.7
Regenerative Medicine revenue:
Rental	1,622		1,513		7.2		4,809		4,766		0.9
Sales	109,848		118,169		(7.0	)	331,737		339,832		(2.4	)
Total – Regenerative Medicine	111,470		119,682		(6.9	)	336,546		344,598		(2.3	)
Total consolidated revenue:
Rental	190,465		191,041		(0.3	)	532,258		569,449		(6.5	)
Sales	298,186		249,520		19.5		869,103		719,675		20.8
Total consolidated revenue	$	488,651	$	440,561	10.9	%	$	1,401,361	$	1,289,124	8.7	%

The increase in total revenue compared to the prior-year periods was due to higher AWT sales revenue, partially offset by lower AWT rental revenue. Foreign currency exchange rate movements did not have a significant impact on worldwide revenue compared to the prior years.

The increase in worldwide AWT revenue from the comparable prior-year periods was attributable primarily to revenues from Systagenix, which was acquired in the fourth quarter of 2013, and increased revenue from expansion products and certain markets outside the U.S., partially offset by lower rental revenue in established markets. The lower rental revenue in established markets resulted from lower average pricing due to increased competition, healthcare reform and declining reimbursement, partially offset by higher volumes. Foreign currency exchange rate movements did not have a significant impact on worldwide AWT revenue during the third quarter and first nine months of 2014 compared to the prior year periods.

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Revenue by Geography

The following table sets forth, for the periods indicated, rental and sales revenue by geography as well as the percentage change in each line item, comparing the third quarter and first nine months of 2014 to the third quarter and first nine months of 2013 (dollars in thousands):

	Three months ended September 30,						Nine months ended September 30,
	2014		2013		% Change		2014		2013		% Change
Americas revenue:
Rental	$	165,528	$	161,992	2.2	%	$	457,536	$	480,606	(4.8	)%
Sales	208,346		198,458		5.0		598,012		571,985		4.6
Total – Americas	373,874		360,450		3.7		1,055,548		1,052,591		0.3
EMEA/APAC revenue:
Rental	24,937		29,049		(14.2	)	74,722		88,843		(15.9	)
Sales	89,840		51,062		75.9		271,091		147,690		83.6
Total – EMEA/APAC	114,777		80,111		43.3		345,813		236,533		46.2
Total consolidated revenue:
Rental	190,465		191,041		(0.3	)	532,258		569,449		(6.5	)
Sales	298,186		249,520		19.5		869,103		719,675		20.8
Total consolidated revenue	$	488,651	$	440,561	10.9	%	$	1,401,361	$	1,289,124	8.7	%

Revenue Relationship

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,
	2014		2013		Change			2014		2013		Change
Advanced Wound Therapeutics revenue	77.2	%	72.8	%	440		bps	76.0	%	73.3	%	270		bps
Regenerative Medicine revenue	22.8		27.2		(440	)	bps	24.0		26.7		(270	)	bps
Total consolidated revenue	100.0	%	100.0	%				100.0	%	100.0	%
Americas revenue	76.5	%	81.8	%	(530	)	bps	75.3	%	81.7	%	(640	)	bps
EMEA/APAC revenue	23.5		18.2		530		bps	24.7		18.3		640		bps
Total consolidated revenue	100.0	%	100.0	%				100.0	%	100.0	%
Rental revenue	39.0	%	43.4	%	(440	)	bps	38.0	%	44.2	%	(620	)	bps
Sales revenue	61.0		56.6		440		bps	62.0		55.8		620		bps
Total consolidated revenue	100.0	%	100.0	%				100.0	%	100.0	%

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Rental Expenses

The following table presents rental expenses for the periods indicated as well as the percentage change in each line item, comparing the third quarter and first nine months of 2014 to the third quarter and first nine months of 2013 (dollars in thousands):

	Three months ended September 30,						Nine months ended September 30,
	2014		2013		% Change		2014		2013		% Change
Rental expenses	$	84,744	$	85,746	(1.2	)%	$	257,574	$	273,479	(5.8	)%

Rental, or field, expenses are comprised of both fixed and variable costs including facilities, field service, sales force compensation and royalties associated with our rental products. Rental expenses during the third quarter and first nine months of 2014 decreased from the prior-year periods due primarily to a decrease in depreciation related to the fixed asset step up associated with purchase accounting, partially offset by an increase in operational expenses related to the sales force.

Cost of Sales

The following table presents cost of sales as well as the percentage change in each line item, comparing the third quarter and first nine months of 2014 to the third quarter and first nine months of 2013 (dollars in thousands):

	Three months ended September 30,						Nine months ended September 30,
	2014		2013		% Change		2014		2013		% Change
Cost of sales	$	86,314	$	66,151	30.5	%	$	251,923	$	181,707	38.6	%

Cost of sales includes manufacturing costs, product costs and royalties associated with our “for sale” products. The increase in cost of sales from the prior-year periods was due primarily to increased sales volumes from Systagenix, which was acquired in the fourth quarter of 2013. The increase is also due to $6.7 million of additional cost of sales recorded in the first quarter of 2014 associated with the Systagenix acquisition purchase accounting adjustments related to the step up in value of inventory.

Gross Profit Margin

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

	Three months ended September 30,							Nine months ended September 30,
	2014		2013		Change			2014		2013		Change
Gross profit margin	65.0	%	65.5	%	(50	)	bps	63.6	%	64.7	%	(110	)	bps

The gross profit margin decrease during the third quarter of 2014 compared to the prior-year period was due primarily to a decline in average global pricing due to increased competition, healthcare reform, declining reimbursement and higher operational expenses related to the sales force. This decrease was partially offset by a decrease in depreciation expense related to the fixed asset step up associated with purchase accounting adjustments. The gross profit margin decrease during the first nine months of 2014 compared to the prior-year period was due primarily to a decline in average global pricing due to increased competition, healthcare reform, declining reimbursement, higher operational expenses related to the sales force and higher cost of sales related to the inventory step up associated with purchase accounting. This decrease was partially offset by a decrease in depreciation expense related to the fixed asset step up associated with purchase accounting adjustments.

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Selling, General and Administrative Expenses

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

	Three months ended September 30,						Nine months ended September 30,
	2014		2013		% Change		2014		2013		% Change
Selling, general and administrative expenses	$	163,176	$	152,053	7.3	%	$	510,122	$	518,478	(1.6	)%

Selling, general and administrative (“SG&A”) expenses generally include administrative labor, incentive and sales compensation costs, insurance costs, professional fees, depreciation, bad debt expense and information systems costs, but exclude rental sales force compensation costs. The increase in SG&A during the third quarter of 2014 compared to the prior-year period was due primarily to increased costs from Systagenix, which was acquired in the fourth quarter of 2013. The decrease in SG&A expenses during the first nine months of 2014 compared to the prior-year period is due primarily to a fixed asset impairment charge of $30.3 million and write-offs of $3.5 million and $16.9 million of other intangible assets due to the discontinuation of certain projects in 2013, partially offset by increased costs from Systagenix.

Research and Development Expenses

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

	Three months ended September 30,									Nine months ended September 30,
	2014			2013			Change			2014			2013			Change
Research and development expenses	$	15,879		$	17,961		(11.6)%			$	51,602		$	56,140		(8.1)%
As a percent of total revenue	3.2		%	4.1		%	(90	)	bps	3.7		%	4.4		%	(70	)	bps

Research and development expenses relate to our investments in clinical studies and the development of new and enhanced products and therapies. Our research and development efforts include the development of new and synergistic technologies across the continuum of wound care, including tissue regeneration, preservation and repair, as well as new applications of negative pressure technology. Our research and development program is also leveraging our core understanding of biological tissues in order to develop biosurgery products in our Regenerative Medicine business.

Acquired Intangible Asset Amortization

In connection with the 2011 merger and the 2013 Systagenix acquisition, we recorded $2.89 billion and $253.6 million, respectively, of identifiable intangible assets during the fourth quarters of 2011 and 2013, respectively. During the third quarters of 2014 and 2013, we recorded $47.9 million and $45.1 million, respectively, of amortization expense associated with these acquired intangible assets. During the first nine months of 2014 and 2013, we recorded $147.4 million and $139.1 million, respectively, of amortization expense associated with these acquired 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 to be 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.

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Impairment of Goodwill and Intangible Assets

During the third quarter of 2013, we recorded a $272.2 million impairment of goodwill and a $171.2 million impairment of indefinite-lived intangible assets related to our Regenerative Medicine reporting unit.

Interest Expense

Interest expense decreased to $104.5 million and $308.5 million in the third quarter and first nine months of 2014, respectively, compared to $101.4 million and $315.1 million in the comparable prior-year periods due to lower interest rates.

Foreign Currency Gain (Loss)

Foreign currency transaction gains were $9.6 million and $13.7 million during the third quarter and first nine months of 2014, respectively compared to losses of $8.7 million and $11.9 million in the prior-year periods. The revaluation of the Term E-1 EURO loan to U.S. dollars represented a foreign currency transaction gain of $24.5 million and $27.6 million during the third quarter and first nine months of 2014, respectively. The revaluation of the Term E-1 EURO loan to U.S. dollars represented $12.5 million and $8.2 million of the foreign currency transaction losses recorded during the third quarter and first nine months of 2013, respectively.

Derivative Instruments Gain (Loss)

During the third quarter and first nine months of 2014, we recorded a derivative instruments gain of $1.6 million and a loss of $2.7 million, respectively, compared to a loss of $6.8 million and a gain of $3.2 million in the comparable prior-year periods due primarily to fluctuations in the value of our interest rate derivative instruments.

Loss from Discontinued Operations

No gains or losses from discontinued operations were recorded in the third quarter and first nine months of 2014. During the third quarter and first nine months of 2013, we recorded a loss from discontinued operations, net of tax, of $0.3 million and $2.3 million.

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LIQUIDITY AND CAPITAL RESOURCES

General

We require capital principally for 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.

We may from time to time seek to retire or purchase our outstanding debt through cash purchases, 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.

Sources of Capital

Based upon the current level of operations, we believe our existing capital resources, as well as cash flows from operating activities and availability under our Revolving Credit Facility will be adequate to meet our anticipated cash requirements for at least the next twelve months. Cash flows related to discontinued operations were not material for the first nine months of 2013 and therefore have not been separately disclosed in the 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. During the first nine months of 2014 and 2013, our primary source of capital was cash from operations. The following table summarizes the net cash provided and used by operating activities, investing activities and financing activities (in thousands):

	Nine months ended September 30,
	2014			2013
Net cash provided by operating activities	$	105,031		$	135,495
Net cash used by investing activities	(61,762		)	(71,970		)
Net cash used by financing activities	(21,279		)	(83,605		)
Effect of exchange rates changes on cash and cash equivalents	(4,034		)	(151		)
Net increase (decrease) in cash and cash equivalents	$	17,956		$	(20,231	)

As of September 30, 2014 and December 31, 2013, our principal sources of liquidity consisted of $224.9 million and $206.9 million, respectively, of cash and cash equivalents. We also had availability of $178.0 million and $178.8 million under our Revolving Credit Facility as of September 30, 2014 and December 31, 2013, respectively.

Capital Expenditures

During the first nine months of 2014 and 2013, we made capital expenditures of $46.8 million and $59.9 million, respectively. Capital expenditures during the first nine months of 2014 and 2013 related primarily to expanding the rental fleet and information technology projects and purchases.

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Senior Secured Credit Facility

The following table sets forth the amounts owed under the Senior Secured Credit Facility, the effective interest rates on such outstanding amounts, and the amount available for additional borrowing thereunder, as of September 30, 2014 (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	—	%		$	—	$	178,029	(2)
Senior Dollar Term E-1 Credit Facility	May 2018	4.41	%	(3)	1,906,170		—
Senior Euro Term E-1 Credit Facility	May 2018	5.08	%	(3)	298,780		—
Senior Term E-2 Credit Facility	November 2016	4.03	%	(3)	312,805		—
Total					$	2,517,755	$	178,029

_____________________

(1) Amount outstanding includes the original issue discount.

(2) At September 30, 2014, the amount available under the Revolving Credit Facility reflected a reduction of $22.0 million of letters of credit issued by banks which are party to the Senior Secured Credit Facility. In addition, we have $11.8 million of letters of credit issued by a bank not party to the Senior Secured Credit Facility.

(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, 2014 was 4.00% on the Senior Dollar Term E-1 Credit Facility, 4.25% on the Senior Euro Term E-1 Credit Facility and 3.50% on the Senior Term E-2 Credit Facility.

On January 22, 2014, we entered into Amendment No. 5 to our Senior Secured Credit Facility ("Amendment No. 5"). As a result of the amendment we created new classes of Dollar Term E-1 Loans, Euro Term E-1 Loans and Term E-2 Loans, having the same rights and obligations as the Dollar Term D-1 Loans, Euro Term D-1 Loans and Term D-2 Loans as set forth in the Credit Agreement and Loan Documents, except as revised by the amendment. In connection with Amendment No. 5, Dollar Term D-1 Loans, Euro Term D-1 Loans and Term D-2 Loans were refinanced with Dollar Term E-1 Loans, Euro Term E-1 Loans and Term E-2 Loans, respectively. Dollar Term E-1 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%. Euro Term E-1 Loans bear interest at a rate equal to, at KCI’s election, a Eurocurrency rate plus 3.25% or an adjusted base rate plus 2.25%.  Term E-2 Loans bear interest at a rate equal to, at KCI’s election, a Eurocurrency rate plus 2.50% or an adjusted base rate plus 1.50%.  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%. We paid and expensed fees of $1.8 million as a result of this amendment.

10.5% Second Lien Senior Secured Notes

In November 2011, we issued $1.75 billion aggregate principal amount of 10.5% Second Lien Notes due 2018. Interest on the 10.5% Second Lien Notes accrues at the rate of 10.50% per annum and is payable semi-annually in cash on each May 1 and November 1, beginning on May 1, 2012, to the persons who are registered holders at the close of business on April 15 and October 15 immediately preceding the applicable interest payment date. The 10.5% Second Lien Notes were issued at a discount resulting in an effective interest rate of 10.87%. Under the terms of the registration rights agreements entered into with respect to these notes, additional interest was accrued at a rate of 0.25% and 0.50% from November 4, 2012 to February 4, 2013 and February 5, 2013 to March 15, 2013, respectively, due to delays in the effectiveness of our registration statement.

12.5% Senior Unsecured Notes

In November 2011, we issued $750.0 million aggregate principal amount of senior 12.5% Unsecured Notes due 2019; $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 1, beginning on May 1, 2012, to the persons who are registered holders at the close of business on April 15 and October 15 immediately preceding the applicable interest payment date. The 12.5% Unsecured Notes were issued at a discount resulting in an effective interest rate of 12.62%. Under the terms of the registration rights agreements entered into with respect to these notes, additional interest was accrued at a rate of 0.25% and 0.50% from November 4, 2012 to February 4, 2013 and February 5, 2013 to March 15, 2013, respectively, due to delays in the effectiveness of our registration statement.

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Convertible Senior Notes

In 2008, we issued $690.0 million aggregate principal amount of 3.25% convertible senior notes due 2015 (the "Convertible Notes").  The Convertible Notes are governed by the terms of an indenture dated as of April 21, 2008 (the “Convertible Notes Indenture”). As a result of the Merger, the holders of the Convertible Notes have the right to require us to repurchase some or all of their Convertible Notes as provided in the Convertible Notes Indenture. The repurchase price is the principal amount of the Convertible Notes plus accrued interest. As of September 30, 2014, $101,000 aggregate principal amount of the notes remained outstanding.

Covenants

As of September 30, 2014, we were in compliance with all covenants under our Senior Secured Credit Facility, 10.5% Second Lien Notes, 12.5% Unsecured Notes, and the Convertible Notes.

For further information on our long-term debt, see Note 6 of the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

Interest Rate Protection

At September 30, 2014 and December 31, 2013, we had three interest rate swap agreements to convert $1.5 billion of our outstanding variable rate debt to a fixed rate basis. These agreements became effective on December 31, 2013. 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.

Previously held interest rate cap agreements expired on December 31, 2013.

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

Contractual Obligations

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. The Settlement Agreement resolves all disputes between KCI and Wake Forest, and their respective affiliates, related to Wake Forest’s NPWT patents that were the subject of a 1993 license agreement between KCI and Wake Forest, and detailed in our previous disclosures. 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 $280.0 million. In July 2014, KCI made the first payment to Wake Forest in the amount of $80.0 million. The remaining scheduled payments are as follows (in thousands):

	2014		2015-2016		2017-2018		Thereafter		Total
Settlement Agreement obligations	$	—	$	170,000	$	30,000	$	—	$	200,000

Other than the Settlement Agreement, there have been no material changes, outside of the ordinary course of business, in our outstanding contractual obligations since December 31, 2013.

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OTHER MATTERS

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, 2013 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, 2013. 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, 2013 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 Chief 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 Chief 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 Chief 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 2014 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, 2013.

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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 in relation to Chiron 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 Acelity L.P. Inc.
†3.3	Third Amended and Restated Limited Partnership Agreement of Acelity L.P. Inc.
†31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated November 6, 2014.
†31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated November 6, 2014.
†32.1	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated November 6, 2014.
	†      Exhibit filed herewith.

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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 November 6, 2014.

	ACELITY L.P. INC.
	(REGISTRANT)
Date: November 6, 2014	By:	/s/ Joseph F. Woody
		Joseph F. Woody
		Principal Executive Officer
		(Duly Authorized Officer)
Date: November 6, 2014	By:	/s/ Brian Busenlehner
		Brian Busenlehner
		Principal Financial Officer
		(Duly Authorized Officer)

40

EXHIBITS

Exhibit Number	Description
3.1	Declaration in relation to Chiron 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 Acelity L.P. Inc.
†3.3	Third Amended and Restated Limited Partnership Agreement of Acelity L.P. Inc.
†31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated November 6, 2014.
†31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated November 6, 2014.
†32.1	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated November 6, 2014.
	†      Exhibit filed herewith.

41

EX-3.2

CERTIFICATE OF REGISTRATION

No. 1545

I Hereby Certify that

Centaur Guernsey L.P. Inc.

(which has elected to have a legal personality)

which changed its name to

Acelity L.P. Inc.

(which has elected to have a legal personality)

whose registered office is

Third Floor, Royal Bank Place, 1 Glategny Esplanade, St Peter Port, GUERNSEY, GY1 2HJ

Was registered in the Register of Limited Partnerships of the Island of Guernsey on the26^th October 2011, having complied with the requirements for registration imposed by the Limited Partnerships (Guernsey) Law, 1995.

Greffe, Guernsey this 1^st day of September 2014

Her Majesty’s Deputy Greffier

EX-3.3

DATED     1 SEPTEMBER 2014

CHIRON GUERNSEY GP CO. LIMITED

and

CHIRON GUERNSEY HOLDINGS L.P. INC.
acting by its general partner CHIRON HOLDINGS GP, INC.

and

DENISE FALLAIZE

THIRD AMENDED AND RESTATED

LIMITED PARTNERSHIP AGREEMENT

relating to

ACELITY L.P. INC.

1

THIS AGREEMENT is made on 1 September 2014

BETWEEN:

(1) CHIRON GUERNSEY GP CO. LIMITED,a Guernsey limited company, whose registered office is at Third Floor, Royal Bank House, 1 Glategny Esplanade, St Peter Port, Guernsey, GY1 2HJ ("General Partner");

(2) CHIRON GUERNSEY HOLDING L.P. INC.,a Guernsey limited partnership whose registered office is at Third Floor, Royal Bank House, 1 Glategny Esplanade, St Peter Port, Guernsey, GY1 2HJ, acting by its general partner, Chiron Holdings GP, Inc.,a corporation incorporated in the State of Delaware, whose registered address is at 1209 Orange Street, Wilmington, Delaware, 19801, USA, ("LimitedPartner"); and

(3) DENISE FALLAIZE, an individual resident in Guernsey (the "Managing Limited Partner").

INTRODUCTION:

(A) By a limited partnership agreement dated 26 October 2011 (the "Initial LPA"), the parties agreed to establish a limited partnership under the name Chiron Guernsey L.P. Inc. (the "Partnership") to be registered as a limited partnership in Guernsey under the Limited Partnerships (Guernsey) Law, 1995, as amended (the "Law").

(B) The Partnership was registered as a limited partnership on 26 October 2011 with registered number 1545 under the name Chiron Guernsey L.P. Inc.

(C) The Initial LPA was amended and restated on 4 November 2011 in order to increase the contribution of the Limited Partner (the "First Amended and Restated LPA").

(D) The First Amended and Restated LPA was amended and restated on 16 November 2011 in order to change the name of the Partnership to "Centaur Guernsey L.P. Inc." (the "Second Amended and Restated LPA").

(E) The parties now wish to amend and restate the Second Amended and Restated LPA in order to change the name of the Partnership to "Acelity L.P. Inc."

(F) The General Partner is to be solely responsible for the conduct and management of the business of the Partnership save as set out in this Agreement.

IT IS AGREED:

1.NATURE

The Partnership is a limited partnership registered in Guernsey pursuant to the Law.

2

2.NAME

The business of the Partnership shall be carried on under the name and style of Acelity L.P. Inc.

3.PRINCIPAL PLACE OF BUSINESS

The registered office and principal place of business of the Partnership shall be at Third Floor, Royal Bank Place, 1 Glategny Esplanade, St Peter Port, Guernsey GY1 2HJ.

4.PURPOSE OF THE PARTNERSHIP

4.1 The purpose of the Partnership is to carry on the business of making, holding and divesting of investments from time to time, to engage in such other activities as the General Partner deems necessary, advisable, convenient or incidental to the foregoing and to engage in any other lawful acts or activities consistent with the foregoing for which limited partnerships may be formed under the Law. The business of the Partnership shall be carried on with a view to producing profits for distribution in accordance with this Agreement. The General Partner shall receive no fee, payment, emolument, or other similar or analogous thing for acting as the General Partner of the Partnership. The General Partner may, on behalf of the Partnership, execute, deliver and perform all contracts and other undertakings and engage in all activities and transactions as may in the opinion of the General Partner be necessary or advisable in order to carry out the foregoing purposes and objectives.

4.2 Subject to the provisions of the Law, it is intended that the Partnership shall continue to be a limited partnership registered under the Law.

4.3 The General Partner undertakes to notify forthwith any change which may occur in the particulars to be furnished under the Law to H.M. Greffier in a statement specifying the date and nature of that change and to comply with any other requirements of the Law.

5.PARTNERSHIP ASSETS

5.1 If, and to the extent that section 20 of the Law applies to the Partnership, the General Partner, the Limited Partner and the Managing Limited Partner declare that the trust (or as the case may be the deemed trust) on which the General Partner holds any property of the Partnership which is:

5.1.1 transferred to, vested in or held on behalf of the General Partner; or

5.1.2 transferred to or vested in the name of the Partnership,

is a trust (or deemed trust) in favour of the Partnership itself (and not the Partners).

6.LIABILITIES OF THE PARTNERS

6.1 The liability of the Limited Partner and of the Managing Limited Partner shall be limited to the amount of their respective capital contributions referred to in clause 9.2 and each of them shall have

3

no personal liability whatsoever for the debts, contracts or any obligation and liabilities of the Partnership or for any of its losses.

6.2 The General Partner will be liable for such of the Partnership’s debts, liabilities and obligations as exceed the liability of the Limited Partners under clause 6.1.

6.3 If at any time the liabilities of the Partnership cannot be satisfied out of the Partnership’s cash funds and the General Partner is obliged by law or otherwise required to satisfy such liabilities, the General Partner will be liable to contribute an amount which when added to the Partnership’s cash funds will be sufficient to meet such liabilities provided that any such contribution shall subsequently be repayable to the General Partner out of the first cash funds thereafter available to the Partnership.

7.POWERS OF THE GENERAL PARTNER

The General Partner shall, and the Limited Partner and Managing Limited Partner authorise the General Partner to, do all things and discharge all duties or requirements of or imposed on a general partner by the Law (whether or not on behalf of the Partnership) and in particular so as to ensure, so far as the General Partner is able, that the liability of the Limited Partner is and remains limited as provided in the Law.

8.DURATION OF THE PARTNERSHIP

8.1 The General Partner, the Limited Partner and the Managing Limited Partner shall be partners in the Partnership as from the date of the Initial LPA.

8.2 Unless terminated at the election of the General Partner, the Limited Partner and the Managing Limited Partner, the term of the Partnership shall continue until a date to be determined between the General Partner and the Limited Partner.

8.3 The withdrawal, expulsion, death or insolvency of a partner in the Partnership (including an assignment (in whole or part) of its interest in the Partnership) or any other changes to the membership of the Partnership shall not determine the Partnership as regards the other such partners, subject to its registration pursuant to clause 4.2 and subject also to there being at all times a continuing general partner in accordance with the Law.

8.4 The Partnership shall continue in existence notwithstanding any change in its composition.

9.CAPITAL CONTRIBUTIONS

9.1 The General Partner shall not be required to make a capital contribution to the Partnership.

9.2 The Limited Partner, following the execution of the First Amended and Restated LPA, made a capital contribution to the Partnership of US$1,714,808,674.06 (one billion seven hundred fourteen million eight hundred eight thousand six hundred seventy four dollars and six cents). The Managing Limited Partner, following the execution of the Initial LPA, made a capital contribution to the Partnership of US$100 (one hundred dollars).

4

9.3 Save as regards any Additional Limited Partner as referred to in clause 12, no partner in the Partnership is required to make any additional capital contribution to the Partnership.

9.4 To the extent that any income, gains or other distributable amounts arise in the Partnership, unless otherwise agreed by the parties to this Agreement and, as the case may be, any Additional Limited Partners (whether by amendment of this Agreement pursuant to clause 12.2 or otherwise), such amounts shall be allocated and, after payment of and provision for any expenses or liabilities of the Partnership, distributed between the General Partner, the Limited Partner, the Managing Limited Partner and any Additional Limited Partners in proportion to their respective capital contributions at such time.

10.TRANSFER OF INTERESTS

Subject to complying with the relevant provisions of the Law, any partner may transfer its interest in the Partnership at any time only with the consent of the General Partner.

11.MANAGEMENT

11.1 The Limited Partner shall take no part in the management or control of the business and affairs of the Partnership and shall have no right or authority to act for or to bind the Partnership or to take part or in any way to interfere in the conduct or management of the Partnership otherwise than as provided in the Law or this Agreement. The Limited Partner and the Managing Limited Partner shall at all reasonable times, have access to and the right to inspect the books and accounts of the Partnership.

11.2 The Managing Limited Partner shall have the right, but shall not be obliged to, manage, operate and administer jointly with the General Partner the business and affairs of the Partnership, but in the event of any disagreement between the Managing Limited Partner and the General Partner the views of the General Partner shall prevail and provided that the Managing Limited Partner shall have no power to bind the Partnership towards third parties.  The General Partner agrees to provide the Managing Limited Partner, upon request, with such information as will enable the Managing Limited Partner to exercise its rights under this clause.

11.3 There shall at all times be at least one Managing Limited Partner and if at any time there is no Managing Limited Partner, the Partners shall nominate a replacement managing limited partner by unanimous resolution and the General Partner shall admit such person as a new Managing Limited Partner. 

12.ADDITIONAL PARTNERS

12.1 The General Partner may admit additional limited partners ("Additional Limited Partners").

12.2 In order to effect or facilitate the admission of Additional Limited Partners pursuant to clause 12.1 or for any other reason, this Agreement may be amended or restated with the agreement of the General Partner, the Limited Partner, the Managing Limited Partner and such Additional Limited Partners admitted at the time of amendment or restatement.

5

12.3 Upon the admission of Additional Limited Partners pursuant to clause 12.1, the Partnership shall continue as a limited partnership under the Law.

13.INDEMNITY

The Partnership irrevocably agrees to the General Partner indemnifying itself out of the assets of the Partnership so as to discharge any liability incurred by it in respect of the Partnership.

14.COUNTERPARTS

This Agreement may be entered into in any number of counterparts and by the parties to it on separate counterparts, each of which when so executed shall be an original but all the counterparts shall together constitute one and the same instrument.

15.AMENDMENTS

This Agreement may only be amended with the consent of the General Partner, the Limited Partner and the Managing Limited Partner.

16.GOVERNING LAW

This Agreement and the rights of the parties hereunder shall be governed by, and construed in accordance with, the laws of the Island of Guernsey. The parties hereby agree to submit to the non-exclusive jurisdiction of the courts of the Island of Guernsey for the purposes of this Agreement.

6

IN WITNESS whereof this Agreement has been executed on the date first above written.

EXECUTED by	)
CHIRON GUERNSEY GP CO. LIMITED	)
acting by: John T. Bibb	)
	/s/ John T. Bibb
	Director

EXECUTED by	)
CHIRON GUERNSEY HOLDINGS L.P. INC.	)
acting by its general partner	)
CHIRON HOLDINGS GP, INC.	)
acting by: William J. Gumina	)
	/s/ William J. Gumina
	President

DENISE FALLAIZE	)
	/s/ Denise Fallaize

EX-31.1

Exhibit 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

(PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002)

I, Joseph F. Woody, certify that:

1.   I have reviewed this Quarterly Report on Form 10-Q of Acelity L.P. Inc.

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

   (a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

   (b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

   (c)   Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

   (d)   Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.   The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

   (a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

   (b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:       November 6, 2014

 /s/ Joseph F. Woody

Joseph F. Woody

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

(PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002)

I, Brian Busenlehner, certify that:

1.   I have reviewed this Quarterly Report on Form 10-Q of Acelity L.P. Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

   (a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

   (b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

   (c)   Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

   (d)   Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.   The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

   (a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

   (b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:   November 6, 2014

 /s/ Brian Busenlehner

Brian Busenlehner

Interim Chief Financial Officer and Vice President, Corporate Controller

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND

CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES‑OXLEY ACT OF 2002

     In connection with the Quarterly Report of Acelity L.P. Inc. (the "Company") on Form 10-Q for the quarter ended September 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Joseph F. Woody, as Chief Executive Officer of the Company and Brian Busenlehner, as Interim Chief Financial Officer and Vice President, Corporate Controller of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002, to the best of their knowledge, respectively, that (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 6, 2014

 /s/ Joseph F. Woody

Joseph F. Woody

Chief Executive Officer

 /s/ Brian Busenlehner

Brian Busenlehner

Interim Chief Financial Officer and Vice President, Corporate Controller

XML

Subsequent Event (Details) (Novadaq [Member], USD $) In Thousands, unless otherwise specified	0 Months Ended
	Nov. 30, 2014
Novadaq [Member]
Subsequent Event [Line Items]
Proceeds from Sale of Intangible Assets	$ 4,500

XML

Accumulated Other Comprehensive Income (Loss) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Accumulated other comprehensive income (loss), net	$ (6,040)		$ (6,040)		$ (2,143)
Unrealized investment loss, net of tax benefit of $412	(657)	541	(659)	2,257
Foreign currency translation adjustment, net of tax expense of $782	(3,425)	(5,131)	(3,238)	(9,266)
Accumulated Translation Adjustment [Member]
Other Comprehensive Income (Loss), Reclassification Adjustment on Derivatives Included in Net Income, before Tax			0
Accumulated other comprehensive income (loss), net	(7,622)		(7,622)		(4,384)
Unrealized investment loss, net of tax benefit of $412			0
Accumulated Net Unrealized Investment Gain (Loss) [Member]
Accumulated other comprehensive income (loss), net	1,582		1,582		2,241
Foreign currency translation adjustment, net of tax expense of $782			0
Accumulated Other Comprehensive Income (Loss) [Member]
Accumulated other comprehensive income (loss), net	(6,040)		(6,040)		(2,143)
Unrealized investment loss, net of tax benefit of $412			(659)
Foreign currency translation adjustment, net of tax expense of $782			$ (3,238)

XML

Summary of Significant Accounting Policies (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014 segment
Basis of Presentation and Principles of Consolidation [Abstract]
Number of Reportable Operating Segments	2
Number of primary geographic regions	2
Interest Rate Swap [Member] | Concentration of Credit Risk [Member]
Basis of Presentation and Principles of Consolidation [Abstract]
Derivative, Notional Amount	$ 504,400

XML

Guarantor Condensed Consolidating Financial Statements - Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013		Sep. 30, 2014		Sep. 30, 2013
Condensed Income Statements, Captions [Line Items]
Rental	$ 190,465		$ 191,041		$ 532,258		$ 569,449
Sales	298,186		249,520		869,103		719,675
Total revenue	488,651		440,561		1,401,361		1,289,124
Rental expenses	84,744		85,746		257,574		273,479
Cost of sales	86,314		66,151		251,923		181,707
Gross profit (loss)	317,593		288,664		891,864		833,938
Selling, general and administrative expenses	163,176		152,053		510,122		518,478
Research and development expenses	15,879		17,961		51,602		56,140
Acquired intangible asset amortization	47,918	[1]	45,116	[1]	147,361	[1]	139,123	[1]
Impairment of goodwill and intangible assets	0	[2]	443,400	[2]	0	[2]	443,400	[2]
Wake Forest settlement	0		0		198,578		0
Operating earnings (loss)	90,620		(369,866)		(15,799)		(323,203)
Non-operating intercompany transactions	0		0		0		0
Interest income and other	23		217		245		1,279
Interest expense	(104,475)		(101,398)		(308,475)		(315,144)
Loss on extinguishment of debt	0		(200)		0		(2,364)
Foreign currency gain (loss)	9,599		(8,738)		13,687		(11,935)
Derivative instruments gain (loss)	1,630		(6,840)		(2,670)		3,200
Earnings (loss) from continuing operations before income taxes (benefit) and equity in earnings (loss) of subsidiaries	(2,603)		(486,825)		(313,012)		(648,167)
Income tax expense (benefit)	(766)		(88,519)		(112,075)		(144,543)
Earnings (loss) from continuing operations before equity in earnings (loss) of subsidiaries	(1,837)		(398,306)		(200,937)		(503,624)
Equity in earnings (loss) of subsidiaries	0		0		0		0
Earnings (loss) from continuing operations	(1,837)		(398,306)		(200,937)		(503,624)
Earnings (loss) from discontinued operations, net of tax	0		(255)		0		(2,299)
Net earnings (loss)	(1,837)		(398,561)		(200,937)		(505,923)
Total comprehensive income (loss)	(5,919)		(403,151)		(204,834)		(512,932)
Parent Company [Member]
Condensed Income Statements, Captions [Line Items]
Rental	0		0		0		0
Sales	0		0		0		0
Total revenue	0		0		0		0
Rental expenses	0		0		80		13
Cost of sales	28		30		73		84
Gross profit (loss)	(28)		(30)		(153)		(97)
Selling, general and administrative expenses	835		820		2,813		1,949
Research and development expenses	0		0		0		0
Acquired intangible asset amortization	0		0		0		0
Impairment of goodwill and intangible assets			0				0
Wake Forest settlement	0				0
Operating earnings (loss)	(863)		(850)		(2,966)		(2,046)
Non-operating intercompany transactions	0		0		0		0
Interest income and other	0		0		0		0
Interest expense	0		0		0		0
Loss on extinguishment of debt			0				0
Foreign currency gain (loss)	0		0		0		0
Derivative instruments gain (loss)	0		0		0		0
Earnings (loss) from continuing operations before income taxes (benefit) and equity in earnings (loss) of subsidiaries	(863)		(850)		(2,966)		(2,046)
Income tax expense (benefit)	0		0		0		0
Earnings (loss) from continuing operations before equity in earnings (loss) of subsidiaries	(863)		(850)		(2,966)		(2,046)
Equity in earnings (loss) of subsidiaries	(974)		(397,711)		(197,971)		(503,877)
Earnings (loss) from continuing operations	(1,837)		(398,561)		(200,937)		(505,923)
Earnings (loss) from discontinued operations, net of tax	0		0		0		0
Net earnings (loss)	(1,837)		(398,561)		(200,937)		(505,923)
Total comprehensive income (loss)	(5,919)		(403,151)		(204,834)		(512,932)
Kinetic Concepts, Inc. and KCI USA, Inc. Borrower [Member]
Condensed Income Statements, Captions [Line Items]
Rental	160,147		155,893		440,351		461,605
Sales	79,951		77,659		215,289		221,296
Total revenue	240,098		233,552		655,640		682,901
Rental expenses	76,656		62,928		216,134		186,426
Cost of sales	87,277		123,481		229,191		221,212
Gross profit (loss)	76,165		47,143		210,315		275,263
Selling, general and administrative expenses	72,295		66,834		224,598		269,490
Research and development expenses	5,771		8,010		17,634		23,366
Acquired intangible asset amortization	15,077		19,625		47,239		61,276
Impairment of goodwill and intangible assets			0				0
Wake Forest settlement	0				198,578
Operating earnings (loss)	(16,978)		(47,326)		(277,734)		(78,869)
Non-operating intercompany transactions	5,702		(8,076)		5,034		52,176
Interest income and other	18,955		17,852		53,456		54,046
Interest expense	(107,529)		(104,402)		(324,379)		(324,163)
Loss on extinguishment of debt			(200)				(2,364)
Foreign currency gain (loss)	27,996		(14,433)		31,375		(8,953)
Derivative instruments gain (loss)	1,630		(6,840)		(2,670)		3,200
Earnings (loss) from continuing operations before income taxes (benefit) and equity in earnings (loss) of subsidiaries	(70,224)		(163,425)		(514,918)		(304,927)
Income tax expense (benefit)	12,787		(51,104)		(177,652)		(97,201)
Earnings (loss) from continuing operations before equity in earnings (loss) of subsidiaries	(83,011)		(112,321)		(337,266)		(207,726)
Equity in earnings (loss) of subsidiaries	44,971		48,780		(39,793)		104,040
Earnings (loss) from continuing operations	(38,040)		(63,541)		(377,059)		(103,686)
Earnings (loss) from discontinued operations, net of tax	0		(331)		0		(2,725)
Net earnings (loss)	(38,040)		(63,872)		(377,059)		(106,411)
Total comprehensive income (loss)	(42,122)		(68,462)		(380,956)		(113,420)
Guarantor Subsidiaries [Member]
Condensed Income Statements, Captions [Line Items]
Rental	1,622		1,513		4,809		4,766
Sales	271,166		224,426		726,946		640,681
Total revenue	272,788		225,939		731,755		645,447
Rental expenses	4,843		4,010		12,463		12,180
Cost of sales	180,777		142,946		460,426		396,855
Gross profit (loss)	87,168		78,983		258,866		236,412
Selling, general and administrative expenses	43,676		44,169		133,627		136,734
Research and development expenses	6,130		6,742		19,409		23,263
Acquired intangible asset amortization	19,731		17,907		59,621		54,274
Impairment of goodwill and intangible assets			443,400				443,400
Wake Forest settlement	0				0
Operating earnings (loss)	17,631		(433,235)		46,209		(421,259)
Non-operating intercompany transactions	(895)		49,735		(29,421)		108,489
Interest income and other	3,062		3,062		15,953		9,188
Interest expense	(17,305)		(17,756)		(51,663)		(52,974)
Loss on extinguishment of debt			0				0
Foreign currency gain (loss)	(783)		(38)		(480)		(251)
Derivative instruments gain (loss)	0		0		0		0
Earnings (loss) from continuing operations before income taxes (benefit) and equity in earnings (loss) of subsidiaries	1,710		(398,232)		(19,402)		(356,807)
Income tax expense (benefit)	(11,289)		(34,535)		45,196		(38,718)
Earnings (loss) from continuing operations before equity in earnings (loss) of subsidiaries	12,999		(363,697)		(64,598)		(318,089)
Equity in earnings (loss) of subsidiaries	30,591		(20,950)		29,634		(10,136)
Earnings (loss) from continuing operations	43,590		(384,647)		(34,964)		(328,225)
Earnings (loss) from discontinued operations, net of tax	0		(1)		0		(3)
Net earnings (loss)	43,590		(384,648)		(34,964)		(328,228)
Total comprehensive income (loss)	39,508		(389,238)		(38,861)		(335,237)
Non-Guarantor Subsidiaries [Member]
Condensed Income Statements, Captions [Line Items]
Rental	28,696		33,635		87,098		103,078
Sales	239,133		159,142		665,333		481,490
Total revenue	267,829		192,777		752,431		584,568
Rental expenses	49,544		53,891		157,584		167,226
Cost of sales	91,044		57,512		274,514		177,420
Gross profit (loss)	127,241		81,374		320,333		239,922
Selling, general and administrative expenses	46,583		40,261		149,470		110,515
Research and development expenses	3,978		3,209		14,559		9,511
Acquired intangible asset amortization	13,110		7,584		40,501		23,573
Impairment of goodwill and intangible assets			0				0
Wake Forest settlement	0				0
Operating earnings (loss)	63,570		30,320		115,803		96,323
Non-operating intercompany transactions	(15,994)		(60,212)		(46,983)		(112,565)
Interest income and other	88		97		165		166
Interest expense	(1,723)		(34)		(1,762)		(128)
Loss on extinguishment of debt			0				0
Foreign currency gain (loss)	(17,614)		5,733		(17,208)		(2,731)
Derivative instruments gain (loss)	0		0		0		0
Earnings (loss) from continuing operations before income taxes (benefit) and equity in earnings (loss) of subsidiaries	28,327		(24,096)		50,015		(18,935)
Income tax expense (benefit)	(2,264)		(2,880)		20,381		(8,624)
Earnings (loss) from continuing operations before equity in earnings (loss) of subsidiaries	30,591		(21,216)		29,634		(10,311)
Equity in earnings (loss) of subsidiaries	0		0		0		0
Earnings (loss) from continuing operations	30,591		(21,216)		29,634		(10,311)
Earnings (loss) from discontinued operations, net of tax	0		266		0		175
Net earnings (loss)	30,591		(20,950)		29,634		(10,136)
Total comprehensive income (loss)	26,509		(25,540)		25,737		(17,145)
Eliminations [Member]
Condensed Income Statements, Captions [Line Items]
Rental	0		0		0		0
Sales	(292,064)		(211,707)		(738,465)		(623,792)
Total revenue	(292,064)		(211,707)		(738,465)		(623,792)
Rental expenses	(46,299)		(35,083)		(128,687)		(92,366)
Cost of sales	(272,812)		(257,818)		(712,281)		(613,864)
Gross profit (loss)	27,047		81,194		102,503		82,438
Selling, general and administrative expenses	(213)		(31)		(386)		(210)
Research and development expenses	0		0		0		0
Acquired intangible asset amortization	0		0		0		0
Impairment of goodwill and intangible assets			0				0
Wake Forest settlement	0				0
Operating earnings (loss)	27,260		81,225		102,889		82,648
Non-operating intercompany transactions	11,187		18,553		71,370		(48,100)
Interest income and other	(22,082)		(20,794)		(69,329)		(62,121)
Interest expense	22,082		20,794		69,329		62,121
Loss on extinguishment of debt			0				0
Foreign currency gain (loss)	0		0		0		0
Derivative instruments gain (loss)	0		0		0		0
Earnings (loss) from continuing operations before income taxes (benefit) and equity in earnings (loss) of subsidiaries	38,447		99,778		174,259		34,548
Income tax expense (benefit)	0		0		0		0
Earnings (loss) from continuing operations before equity in earnings (loss) of subsidiaries	38,447		99,778		174,259		34,548
Equity in earnings (loss) of subsidiaries	(74,588)		369,881		208,130		409,973
Earnings (loss) from continuing operations	(36,141)		469,659		382,389		444,521
Earnings (loss) from discontinued operations, net of tax	0		(189)		0		254
Net earnings (loss)	(36,141)		469,470		382,389		444,775
Total comprehensive income (loss)	$ (23,895)		$ 483,240		$ 394,080		$ 465,802

[1] 2014 includes amortization of acquired intangible assets related to our acquisition of Systagenix in October 2013 and our Merger in November 2011. 2013 includes amortization of acquired intangible assets related to our Merger in November 2011.

[2] During the third quarter of 2013, we recorded a $272.2 million impairment of goodwill and a $171.2 million impairment of indefinite-lived intangible assets related to our Regenerative Medicine reporting unit. These amounts have been excluded from Regenerative Medicine operating earnings as management excludes these charges from operating earnings when making operating decisions about the business.

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Supplemental Balance Sheet Data

9 Months Ended

Sep. 30, 2014

Balance Sheet Related Disclosures [Abstract]

Supplemental Balance Sheet Data

Supplemental Balance Sheet Data

(a)Accounts Receivable, net

Accounts receivable consist of the following (in thousands):

	September 30, 2014			December 31, 2013
Gross trade accounts receivable:
Billed trade accounts receivable	$	397,743		$	418,804
Unbilled receivables	36,077			50,841
Less:  Allowance for revenue adjustments	(58,839		)	(67,631		)
Gross trade accounts receivable	374,981			402,014
Less:  Allowance for bad debt	(13,433		)	(8,483		)
Net trade accounts receivable	361,548			393,531
Other receivables	9,833			14,047
	$	371,381		$	407,578

(b)   Inventories, net

Inventories consist of the following (in thousands):

	September 30, 2014			December 31, 2013
Finished goods and tissue available for distribution	$	129,375		$	110,937
Goods and tissue in-process	10,176			12,994
Raw materials, supplies, parts and unprocessed tissue	67,541			71,876
	207,092			195,807
Less: Amounts expected to be converted into equipment for short-term rental	(7,241		)	(3,952		)
Reserve for excess and obsolete inventory	(15,261		)	(10,288		)
	$	184,590		$	181,567

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Long-Term Debt (Details) (USD $)	1 Months Ended	3 Months Ended			9 Months Ended																	3 Months Ended
	Mar. 15, 2013	Feb. 04, 2013	Sep. 30, 2014	Dec. 31, 2013	Sep. 30, 2014 Revolving Credit Facility [Member] Senior Revolving Credit Facility - due 2016 [Member]	Dec. 31, 2013 Revolving Credit Facility [Member] Senior Revolving Credit Facility - due 2016 [Member]	Nov. 30, 2011 Revolving Credit Facility [Member] Senior Revolving Credit Facility - due 2016 [Member]	Sep. 30, 2014 Term Credit Facilities [Member] Senior Dollar Term E-1 Credit Facility Due 2018 [Member]	Dec. 31, 2013 Term Credit Facilities [Member] Senior Dollar Term D-1 Credit Facility Due 2018 [Member]	Sep. 30, 2014 Term Credit Facilities [Member] Senior Euro Term E-1 Credit Facility Due 2018 [Member]	Dec. 31, 2013 Term Credit Facilities [Member] Senior Euro Term D-1 Credit Facility Due 2018 [Member]	Sep. 30, 2014 Term Credit Facilities [Member] Senior Term E-2 Credit Facility Due 2016 [Member] [Member]	Dec. 31, 2013 Term Credit Facilities [Member] Senior Term D-2 Credit Facility Due 2016 [Member]	Sep. 30, 2014 Convertible Senior Notes [Member] 3.25% Convertible Senior Notes due 2015 [Member]	Dec. 31, 2013 Convertible Senior Notes [Member] 3.25% Convertible Senior Notes due 2015 [Member]	Sep. 30, 2014 Senior Secured Notes [Member] 10.5% Second Lien Senior Secured Notes due 2018 [Member]	Dec. 31, 2013 Senior Secured Notes [Member] 10.5% Second Lien Senior Secured Notes due 2018 [Member]	Sep. 30, 2014 Senior Unsecured Notes [Member] 12.5% Senior Unsecured Notes due 2019 [Member]	Dec. 31, 2013 Senior Unsecured Notes [Member] 12.5% Senior Unsecured Notes due 2019 [Member]	Sep. 30, 2014 Banks Which Are Not Party To Senior Secured Credit Facility [Member] Senior Revolving Credit Facility - due 2016 [Member]	Dec. 31, 2013 Banks Which Are Not Party To Senior Secured Credit Facility [Member] Senior Revolving Credit Facility - due 2016 [Member]	Sep. 30, 2014 Eurocurrency Rate [Member] Senior Dollar Term E-1 Credit Facility Due 2018 [Member]	Sep. 30, 2014 Eurocurrency Rate [Member] Senior Euro Term E-1 Credit Facility Due 2018 [Member]	Sep. 30, 2014 Eurocurrency Rate [Member] Senior Term E-2 Credit Facility Due 2016 [Member] [Member]	Sep. 30, 2014 Eurocurrency Rate [Member] Dollar Term E-1 Facility, Euro Term E-1 Facility and Dollar Term E-2 Facility [Member] Minimum [Member]	Sep. 30, 2014 Base Rate [Member] Senior Dollar Term E-1 Credit Facility Due 2018 [Member]	Sep. 30, 2014 Base Rate [Member] Senior Euro Term E-1 Credit Facility Due 2018 [Member]	Sep. 30, 2014 Base Rate [Member] Senior Term E-2 Credit Facility Due 2016 [Member] [Member]	Sep. 30, 2014 Base Rate [Member] Dollar Term E-1 Facility, Euro Term E-1 Facility and Dollar Term E-2 Facility [Member] Minimum [Member]
Debt Instrument [Line Items]
Long-term debt, gross			$ 4,917,360,000	$ 4,965,166,000				$ 1,932,108,000	$ 1,946,708,000	$ 307,004,000	$ 337,820,000	$ 316,147,000	$ 318,537,000	$ 101,000	$ 101,000	$ 1,750,000,000	$ 1,750,000,000	$ 612,000,000	$ 612,000,000
Less: Discount, net of accretion			(61,504,000)	(73,352,000)				(25,938,000)	(30,926,000)	(8,224,000)	(10,693,000)	(3,342,000)	(4,486,000)			(21,251,000)	(24,222,000)	(2,749,000)	(3,025,000)
Long-term Debt			4,855,856,000	4,891,814,000
Less: Current installments			(25,847,000)	(26,311,000)
Long-term debt, net of current installments and discount			4,830,009,000	4,865,503,000
Senior Secured Credit Facilities [Abstract]
Credit facility, maximum borrowing capacity							200,000,000
Line of Credit Facility, Amount Outstanding					0	0
Letters of credit, amount outstanding					22,000,000	21,200,000														11,800,000	12,600,000
Credit facility, remaining borrowing capacity					$ 178,000,000	$ 178,800,000
Credit facility, unused capacity, commitment fee percentage					0.50%
Debt Instrument, Basis Spread on Variable Rate																						3.00%	3.25%	2.50%	1.00%	2.00%	2.25%	1.50%	2.00%
10.5% Second Lien Senior Secured Notes and 12.5% Senior Unsecured Notes [Abstract]
Interest rate on senior long-term debt														3.25%		10.50%		12.50%
Debt Instument, Registration Rights Agreement, Additional Interest Accrual Rate	0.50%	0.25%

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Supplemental Balance Sheet Data - Inventories, Net (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Inventory [Line Items]
Finished goods and tissue available for distribution	$ 129,375	$ 110,937
Goods and tissue in-process	10,176	12,994
Raw materials, supplies, parts and unprocessed tissue	67,541	71,876
Inventories, gross	207,092	195,807
Less: Amounts expected to be converted into equipment for short-term rental	(7,241)	(3,952)
Reserve for excess and obsolete inventory	(15,261)	(10,288)
Inventories, net	$ 184,590	$ 181,567

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Derivative Financial Instruments and Fair Value Measurements - Derivative Financial Instruments (Details) (USD $)	Sep. 30, 2014	Dec. 31, 2013
Interest Rate Protection [Abstract]
Collateral posted	$ 0
Not Designated as Hedging Instrument [Member] | Interest Rate Swap [Member]
Interest Rate Protection [Abstract]
Number of interest rate agreements held	3	3
Derivative, quarterly interest payments, receive rates, maximum	1.25%
Not Designated as Hedging Instrument [Member] | Interest Rate Swap [Member] | Interest Rate Swap - 2.256%, effective December 31, 2013 [Member]
Derivative [Line Items]
Derivative, Notional Amount	504,367,000
Interest Rate Protection [Abstract]
Fixed Interest Rate	2.256%
Not Designated as Hedging Instrument [Member] | Interest Rate Swap [Member] | Interest Rate Swap - 2.249%, effective December 31, 2013 [Member]
Derivative [Line Items]
Derivative, Notional Amount	504,367,000
Interest Rate Protection [Abstract]
Fixed Interest Rate	2.249%
Not Designated as Hedging Instrument [Member] | Interest Rate Swap [Member] | Interest Rate Swap - 2.250%, effective December 31, 2013 [Member]
Derivative [Line Items]
Derivative, Notional Amount	504,367,000
Interest Rate Protection [Abstract]
Fixed Interest Rate	2.25%
Not Designated as Hedging Instrument [Member] | Interest Rate Swap [Member] | Minimum [Member]
Interest Rate Protection [Abstract]
Notional amount decreases by quarter	1,700,000
Not Designated as Hedging Instrument [Member] | Interest Rate Swap [Member] | Maximum [Member]
Interest Rate Protection [Abstract]
Notional amount decreases by quarter	56,400,000
Not Designated as Hedging Instrument [Member] | Foreign Currency Exchange Contracts [Member]
Derivative [Line Items]
Derivative, Notional Amount	0	14,300,000
Senior Secured Credit Facility [Member]
Derivative [Line Items]
Long-term Debt, Fair Value	2,500,000,000	2,600,000,000
Fixed Rate Long-Term Debt [Member]
Derivative [Line Items]
Long-term Debt, Fair Value	$ 2,600,000,000	$ 2,700,000,000

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Derivative Financial Instruments and Fair Value Measurements - Fair Value and Balance Sheet Locations (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Derivatives, Fair Value [Line Items]
Derivative asset, fair value	$ 0	$ 146
Derivative liability, fair value	23,364	32,820
Not Designated as Hedging Instrument [Member] | Interest Rate Swap [Member] | Other non-current assets [Member]
Derivatives, Fair Value [Line Items]
Derivative asset, fair value	0	0
Not Designated as Hedging Instrument [Member] | Interest Rate Swap [Member] | Prepaid expenses and other [Member]
Derivatives, Fair Value [Line Items]
Derivative asset, fair value	0	0
Not Designated as Hedging Instrument [Member] | Interest Rate Swap [Member] | Other non-current liabilities [Member]
Derivatives, Fair Value [Line Items]
Derivative liability, fair value	9,426	31,906
Not Designated as Hedging Instrument [Member] | Interest Rate Swap [Member] | Accrued expenses and other [Member]
Derivatives, Fair Value [Line Items]
Derivative liability, fair value	13,938	345
Not Designated as Hedging Instrument [Member] | Foreign Currency Exchange Contracts [Member] | Prepaid expenses and other [Member]
Derivatives, Fair Value [Line Items]
Derivative asset, fair value	0	146
Not Designated as Hedging Instrument [Member] | Foreign Currency Exchange Contracts [Member] | Accrued expenses and other [Member]
Derivatives, Fair Value [Line Items]
Derivative liability, fair value	$ 0	$ 569

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Business Acquisition Business Acquisition

9 Months Ended

Sep. 30, 2014

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

Business Acquisition

On July 30, 2013, KCI announced that it had signed a definitive share purchase agreement to acquire Systagenix, an established provider of advanced wound care products. The transaction closed on October 28, 2013. The adjusted purchase price paid, net of cash and cash equivalents, was $478.7 million. The acquisition was accounted for as a business combination using the acquisition method and the purchase price was funded using $350.0 million of incremental borrowings under our existing senior secured credit facility along with cash on hand. The preliminary allocation of the purchase price to the Systagenix tangible and identifiable intangible assets was based on their estimated fair values as of the acquisition date. The excess of the purchase price over the identifiable intangible and net tangible assets was allocated to goodwill, which is not deductible for tax purposes. The purchase price allocation is preliminary, pending the final determination of the fair value of certain assumed assets and liabilities. As these issues are identified, modified or resolved, resulting increases or decreases to the preliminary value of assets and liabilities are offset by a change to goodwill. Adjustments to these estimates will be included in the final allocation of the purchase price.

The following table represents the preliminary allocation of the purchase price (in thousands):

	December 31, 2013			Adjustment			September 30, 2014
Goodwill	$	171,086		$	270		$	171,356
Identifiable intangible assets
Customer relationships	103,301						103,301
Developed technology	91,700						91,700
Tradenames	56,800						56,800
In-process research and development	1,766						1,766
Tangible assets acquired and liabilities assumed:
Accounts receivable	50,807						50,807
Inventories	27,450						27,450
Other current assets	1,902						1,902
Property, plant and equipment	44,016						44,016
Other non-current assets	139						139
Current liabilities	(34,752		)	(270		)	(35,022		)
Other non-current liabilities	(79		)				(79		)
Net deferred tax liability	(35,388		)				(35,388		)
Total purchase price	$	478,748		$	—		$	478,748

Purchase accounting rules require that as certain pre-acquisition issues are identified, modified or resolved, resulting increases or decreases to the preliminary value of assets and liabilities are offset by a change in goodwill. Modifications to goodwill reflected in the “Adjustments” column above were primarily the result of assumed liabilities.

The following table reflects the unaudited pro forma condensed consolidated results of operations, as though the acquisition had occurred on January 1, 2012 (in thousands):

	Three months ended September 30,			Nine months ended September 30,
	2013			2013
Pro forma revenue	$	494,869		$	1,446,634
Pro forma net loss	$	(394,675	)	$	(503,990	)

The unaudited pro forma condensed consolidated results of operations presented above are for illustrative purposes only and are not necessarily indicative of what actually would have occurred had the acquisition been in effect for the period presented, nor are they indicative of future operating results. 

In January 2014, LifeCell entered into an asset purchase agreement with TauTona Injector, LLC to purchase certain assets, including patents, know-how, and inventory. Under the terms of the asset purchase agreement, LifeCell made an initial cash payment of $3.0 million at the closing of the transaction. The asset purchase agreement also calls for additional payments by LifeCell of up to $31.5 million upon the achievement of certain milestones. During the first nine months of 2014, LifeCell paid $1.5 million under the asset purchase agreement related to milestone achievement. As of September 30, 2014, the accompanying condensed consolidated balance sheet included $6.9 million under the caption "accrued expenses and other" and $8.8 million under the caption "other non-current liabilities" related to future anticipated milestone payments.

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Derivative Financial Instruments and Fair Value Measurements - Gain (Loss) on Derivatives (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Derivative Instruments, Gain (Loss) [Line Items]
Derivative instruments gain (loss)	$ 1,630	$ (6,840)	$ (2,670)	$ 3,200
Not Designated as Hedging Instrument [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative instruments gain (loss)	1,630	(6,840)	(2,670)	3,200
Not Designated as Hedging Instrument [Member] | Interest Rate Swap [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative instruments gain (loss)	1,630	(5,195)	(2,732)	4,057
Not Designated as Hedging Instrument [Member] | Interest Rate Cap [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative instruments gain (loss)	0	(4)	0	(9)
Not Designated as Hedging Instrument [Member] | Foreign Currency Exchange Contracts [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative instruments gain (loss)	$ 0	$ (1,641)	$ 62	$ (848)

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 224,905	$ 206,949
Accounts receivable, net	371,381	407,578
Inventories, net	184,590	181,567
Deferred income taxes	28,218	23,621
Prepaid expenses and other	39,604	53,161
Total current assets	848,698	872,876
Net property, plant and equipment	293,366	333,725
Debt issuance costs, net	83,926	102,054
Deferred income taxes	30,353	31,459
Goodwill	3,378,931	3,378,661
Identifiable intangible assets, net	2,429,166	2,549,201
Other non-current assets	4,950	4,669
Total assets	7,069,390	7,272,645
Current liabilities:
Accounts payable	57,575	50,316
Accrued expenses and other	410,725	328,975
Current installments of long-term debt	25,847	26,311
Income taxes payable	4,900	3,368
Deferred income taxes	28,512	2,199
Total current liabilities	527,559	411,169
Long-term debt, net of current installments and discount	4,830,009	4,865,503
Non-current tax liabilities	33,757	53,682
Deferred income taxes	859,078	1,003,784
Other non-current liabilities	124,542	40,432
Total liabilities	6,374,945	6,374,570
Equity:
General partner’s capital	0	0
Limited partners’ capital	700,485	900,218
Accumulated other comprehensive loss, net	(6,040)	(2,143)
Total equity	694,445	898,075
Total liabilities and shareholders' equity	$ 7,069,390	$ 7,272,645

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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013
Cash flows from operating activities:
Net loss	$ (200,937)		$ (505,923)
Adjustments to reconcile net loss to net cash provided by operating activities:
Amortization of debt issuance costs and discount	29,179		26,356
Depreciation and other amortization	234,514		252,026
Loss on disposition of assets	0		3,189
Amortization of fair value step-up in inventory	6,680		0
Fixed asset and inventory impairment	0		30,259
Impairment of goodwill and intangible assets	0	[1]	443,400	[1]
Write-off of other intangible assets	0		16,885
Provision for bad debt	11,613		5,051
Loss on extinguishment of debt	0		2,164
Equity-based compensation expense	2,966		2,046
Deferred income tax benefit	(127,799)		(165,456)
Unrealized gain on derivative instruments	(9,310)		(5,729)
Unrealized loss (gain) on revaluation of cross currency debt	(27,559)		8,174
Change in assets and liabilities:
Decrease (increase) in accounts receivable, net	26,065		(23,046)
Increase in inventories, net	(9,275)		(10,498)
Decrease (increase) in prepaid expenses and other	12,341		(17,137)
Increase in accounts payable	7,402		3,273
Increase in accrued expenses and other	161,227		68,440
Increase (decrease) in tax liabilities, net	(12,076)		2,021
Net cash provided (used) by operating activities	105,031		135,495
Cash flows from investing activities
Additions to property, plant and equipment	(46,760)		(59,868)
Increase in inventory to be converted into equipment for short-term rental	(3,289)		(8,881)
Dispositions of property, plant and equipment	2,251		1,052
Businesses acquired in purchase transaction, net of cash acquired	(4,613)		0
Increase in identifiable intangible assets and other non-current assets	(9,351)		(4,273)
Net cash provided (used) by investing activities	(61,762)		(71,970)
Cash flows from financing activities:
Settlement of profits interest units	(1,416)		0
Distribution to limited partners	0		(1,572)
Repayments of long-term debt and capital lease obligations	(19,863)		(60,429)
Payment of debt issuance costs	0		(21,604)
Net cash provided (used) by financing activities	(21,279)		(83,605)
Effect of exchange rate changes on cash and cash equivalents	(4,034)		(151)
Net increase (decrease) in cash and cash equivalents	17,956		(20,231)
Cash and cash equivalents, beginning of period	206,949		383,150
Cash and cash equivalents, end of period	$ 224,905		$ 362,919

[1] During the third quarter of 2013, we recorded a $272.2 million impairment of goodwill and a $171.2 million impairment of indefinite-lived intangible assets related to our Regenerative Medicine reporting unit. These amounts have been excluded from Regenerative Medicine operating earnings as management excludes these charges from operating earnings when making operating decisions about the business.

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Segment Information (Details) (USD $)	3 Months Ended				9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013		Sep. 30, 2014 segment		Sep. 30, 2013
Segment Reporting Information [Line Items]
Number of Reportable Operating Segments					2
Number of global business units					2
Total revenue	$ 488,651,000		$ 440,561,000		$ 1,401,361,000		$ 1,289,124,000
Operating earnings (loss)	90,620,000		(369,866,000)		(15,799,000)		(323,203,000)
Non-allocated costs:
General headquarter expense	(2,257,000)	[1]	(6,335,000)	[1]	(7,464,000)	[1]	(59,447,000)	[1]
Equity-based compensation	(863,000)		(850,000)		(2,966,000)		(2,046,000)
Merger and restructuring-related expenses	(23,881,000)	[2]	(31,112,000)	[2]	(80,998,000)	[2]	(97,518,000)	[2]
Acquired intangible asset amortization	(47,918,000)	[3]	(45,116,000)	[3]	(147,361,000)	[3]	(139,123,000)	[3]
Wake Forest settlement	0		0		(198,578,000)		0
Impairment of goodwill and intangible assets	0	[4]	(443,400,000)	[4]	0	[4]	(443,400,000)	[4]
Total non-allocated costs	(74,919,000)		(526,813,000)		(437,367,000)		(741,534,000)
Write-off of other intangible assets			3,500,000		0		16,885,000
Asset Impairment Charges					0		30,259,000
Goodwill, Impairment Loss			272,200,000
Impairment of Intangible Assets, Indefinite-lived (Excluding Goodwill)			171,200,000
Advanced Wound Therapeutics [Member]
Segment Reporting Information [Line Items]
Total revenue	377,181,000		320,879,000		1,064,815,000		944,526,000
Operating earnings (loss)	131,286,000		126,854,000		322,543,000		327,172,000
Regenerative Medicine [Member]
Segment Reporting Information [Line Items]
Total revenue	111,470,000		119,682,000		336,546,000		344,598,000
Operating earnings (loss)	$ 34,253,000		$ 30,093,000		$ 99,025,000		$ 91,159,000
Minimum [Member]
Segment Reporting Information [Line Items]
Minimum number of countries in which the entity has operations	75				75

[1] The third quarter and nine months ended September 30, 2013 includes write-offs of $3.5 million and $16.9 million, respectively, of other intangible assets due primarily to the discontinuation of certain projects. The nine months ended September 30, 2013 also includes a $30.3 million fixed asset impairment charge.

[2] Represents restructuring-related expenses as well as expenses related to the Merger, including management fees.

[3] 2014 includes amortization of acquired intangible assets related to our acquisition of Systagenix in October 2013 and our Merger in November 2011. 2013 includes amortization of acquired intangible assets related to our Merger in November 2011.

[4] During the third quarter of 2013, we recorded a $272.2 million impairment of goodwill and a $171.2 million impairment of indefinite-lived intangible assets related to our Regenerative Medicine reporting unit. These amounts have been excluded from Regenerative Medicine operating earnings as management excludes these charges from operating earnings when making operating decisions about the business.

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Accumulated Other Comprehensive Income (Loss) (Tables)

9 Months Ended

Sep. 30, 2014

Schedule of Accumulated Other Comprehensive Income (Loss)

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

	Accumulated Foreign Currency Translation Adjustment			Investment Gain			Accumulated Other Comprehensive Income (Loss)
Balances at December 31, 2013	$	(4,384	)	$	2,241		$	(2,143	)
Unrealized investment loss, net of tax benefit of $412	—			(659		)	(659		)
Foreign currency translation adjustment, net of tax expense of $782	(3,238		)	—			(3,238		)
Balances at September 30, 2014	$	(7,622	)	$	1,582		$	(6,040	)

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Guarantor Condensed Consolidating Financial Statements - Condensed Consolidated Balance Sheet (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013	Sep. 30, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents	$ 224,905	$ 206,949	$ 362,919	$ 383,150
Accounts receivable, net	371,381	407,578
Inventories, net	184,590	181,567
Deferred income taxes	28,218	23,621
Prepaid expenses and other	39,604	53,161
Intercompany receivables	0	0
Total current assets	848,698	872,876
Net property, plant and equipment	293,366	333,725
Debt issuance costs, net	83,926	102,054
Deferred income taxes	30,353	31,459
Goodwill	3,378,931	3,378,661
Identifiable intangible assets, net	2,429,166	2,549,201
Other non-current assets	4,950	4,669
Intercompany loan receivables	0	0
Intercompany investments	0	0
Total assets	7,069,390	7,272,645
Current liabilities:
Accounts payable	57,575	50,316
Accrued expenses and other	410,725	328,975
Intercompany payables	0	0
Current installments of long-term debt	25,847	26,311
Income taxes payable	4,900	3,368
Deferred income taxes	28,512	2,199
Total current liabilities	527,559	411,169
Long-term debt, net of current installments and discount	4,830,009	4,865,503
Non-current tax liabilities	33,757	53,682
Deferred income taxes	859,078	1,003,784
Other non-current liabilities	124,542	40,432
Intercompany loan payables	0	0
Total liabilities	6,374,945	6,374,570
Equity:
Total equity	694,445	898,075
Total liabilities and shareholders' equity	7,069,390	7,272,645
Parent Company [Member]
Current assets:
Cash and cash equivalents	398	398	398	398
Accounts receivable, net	0	0
Inventories, net	0	0
Deferred income taxes	0	0
Prepaid expenses and other	0	0
Intercompany receivables	166	166
Total current assets	564	564
Net property, plant and equipment	0	0
Debt issuance costs, net	0	0
Deferred income taxes	0	0
Goodwill	0	0
Identifiable intangible assets, net	0	0
Other non-current assets	0	0
Intercompany loan receivables	0	0
Intercompany investments	700,033	901,902
Total assets	700,597	902,466
Current liabilities:
Accounts payable	0	0
Accrued expenses and other	0	0
Intercompany payables	5,526	4,110
Current installments of long-term debt	0	0
Income taxes payable	0	0
Deferred income taxes	0	0
Total current liabilities	5,526	4,110
Long-term debt, net of current installments and discount	0	0
Non-current tax liabilities	0	0
Deferred income taxes	0	0
Other non-current liabilities	626	281
Intercompany loan payables	0	0
Total liabilities	6,152	4,391
Equity:
Total equity	694,445	898,075
Total liabilities and shareholders' equity	700,597	902,466
Kinetic Concepts, Inc. and KCI USA, Inc. Borrower [Member]
Current assets:
Cash and cash equivalents	52,380	87,771	138,790	276,788
Accounts receivable, net	176,575	184,723
Inventories, net	84,637	54,809
Deferred income taxes	503	14,991
Prepaid expenses and other	17,067	35,832
Intercompany receivables	1,862,339	1,687,528
Total current assets	2,193,501	2,065,654
Net property, plant and equipment	329,753	311,122
Debt issuance costs, net	83,926	102,054
Deferred income taxes	0	0
Goodwill	2,483,240	2,483,240
Identifiable intangible assets, net	314,331	361,640
Other non-current assets	1,204	715
Intercompany loan receivables	765,000	990,972
Intercompany investments	393,091	432,884
Total assets	6,564,046	6,748,281
Current liabilities:
Accounts payable	20,028	15,266
Accrued expenses and other	285,492	185,790
Intercompany payables	1,065,538	852,892
Current installments of long-term debt	25,847	26,311
Income taxes payable	0	0
Deferred income taxes	0	0
Total current liabilities	1,396,905	1,080,259
Long-term debt, net of current installments and discount	4,830,009	4,865,503
Non-current tax liabilities	10,790	28,850
Deferred income taxes	73,003	231,713
Other non-current liabilities	113,416	38,667
Intercompany loan payables	417,432	399,690
Total liabilities	6,841,555	6,644,682
Equity:
Total equity	(277,509)	103,599
Total liabilities and shareholders' equity	6,564,046	6,748,281
Guarantor Subsidiaries [Member]
Current assets:
Cash and cash equivalents	9,445	118	0	0
Accounts receivable, net	68,807	71,457
Inventories, net	102,912	101,779
Deferred income taxes	28,218	6,610
Prepaid expenses and other	5,851	5,434
Intercompany receivables	2,387,963	2,326,181
Total current assets	2,603,196	2,511,579
Net property, plant and equipment	72,274	80,963
Debt issuance costs, net	0	0
Deferred income taxes	0	0
Goodwill	732,771	732,771
Identifiable intangible assets, net	1,792,989	1,829,452
Other non-current assets	186	192
Intercompany loan receivables	423,424	404,688
Intercompany investments	404,273	372,093
Total assets	6,029,113	5,931,738
Current liabilities:
Accounts payable	14,670	14,929
Accrued expenses and other	245,327	246,977
Intercompany payables	2,676,774	2,559,407
Current installments of long-term debt	0	0
Income taxes payable	0	3,368
Deferred income taxes	13,692	0
Total current liabilities	2,950,463	2,824,681
Long-term debt, net of current installments and discount	0	0
Non-current tax liabilities	4,847	4,284
Deferred income taxes	730,816	718,930
Other non-current liabilities	9,424	334
Intercompany loan payables	765,000	780,000
Total liabilities	4,460,550	4,328,229
Equity:
Total equity	1,568,563	1,603,509
Total liabilities and shareholders' equity	6,029,113	5,931,738
Non-Guarantor Subsidiaries [Member]
Current assets:
Cash and cash equivalents	162,682	118,662	223,731	105,964
Accounts receivable, net	125,999	151,398
Inventories, net	102,779	101,751
Deferred income taxes	0	2,020
Prepaid expenses and other	269,706	321,427
Intercompany receivables	122,512	21,241
Total current assets	783,678	716,499
Net property, plant and equipment	170,434	223,987
Debt issuance costs, net	0	0
Deferred income taxes	30,353	31,459
Goodwill	162,920	162,650
Identifiable intangible assets, net	321,846	358,109
Other non-current assets	94,460	94,662
Intercompany loan receivables	0	0
Intercompany investments	0	0
Total assets	1,563,691	1,587,366
Current liabilities:
Accounts payable	22,877	20,121
Accrued expenses and other	75,308	77,843
Intercompany payables	625,142	618,707
Current installments of long-term debt	0	0
Income taxes payable	5,849	0
Deferred income taxes	15,323	2,199
Total current liabilities	744,499	718,870
Long-term debt, net of current installments and discount	0	0
Non-current tax liabilities	18,120	20,548
Deferred income taxes	55,259	53,141
Other non-current liabilities	1,076	1,150
Intercompany loan payables	5,992	215,970
Total liabilities	824,946	1,009,679
Equity:
Total equity	738,745	577,687
Total liabilities and shareholders' equity	1,563,691	1,587,366
Eliminations [Member]
Current assets:
Cash and cash equivalents	0	0	0	0
Accounts receivable, net	0	0
Inventories, net	(105,738)	(76,772)
Deferred income taxes	(503)	0
Prepaid expenses and other	(253,020)	(309,532)
Intercompany receivables	(4,372,980)	(4,035,116)
Total current assets	(4,732,241)	(4,421,420)
Net property, plant and equipment	(279,095)	(282,347)
Debt issuance costs, net	0	0
Deferred income taxes	0	0
Goodwill	0	0
Identifiable intangible assets, net	0	0
Other non-current assets	(90,900)	(90,900)
Intercompany loan receivables	(1,188,424)	(1,395,660)
Intercompany investments	(1,497,397)	(1,706,879)
Total assets	(7,788,057)	(7,897,206)
Current liabilities:
Accounts payable	0	0
Accrued expenses and other	(195,402)	(181,635)
Intercompany payables	(4,372,980)	(4,035,116)
Current installments of long-term debt	0	0
Income taxes payable	(949)	0
Deferred income taxes	(503)	0
Total current liabilities	(4,569,834)	(4,216,751)
Long-term debt, net of current installments and discount	0	0
Non-current tax liabilities	0	0
Deferred income taxes	0	0
Other non-current liabilities	0	0
Intercompany loan payables	(1,188,424)	(1,395,660)
Total liabilities	(5,758,258)	(5,612,411)
Equity:
Total equity	(2,029,799)	(2,284,795)
Total liabilities and shareholders' equity	$ (7,788,057)	$ (7,897,206)

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Guarantor Condensed Consolidating Financial Statements (Tables)

9 Months Ended

Sep. 30, 2014

Guarantor Condensed Consolidating Financial Statements [Abstract]

Guarantor and Non-Guarantor Balance Sheet

Condensed Consolidating Parent Company, Co-Issuers,

Guarantor and Non-Guarantor Balance Sheet

September 30, 2014

(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	$	52,380		$	9,445	$	162,682	$	—		$	224,905
Accounts receivable, net	—		176,575			68,807		125,999		—			371,381
Inventories, net	—		84,637			102,912		102,779		(105,738		)	184,590
Deferred income taxes	—		503			28,218		—		(503		)	28,218
Prepaid expenses and other	—		17,067			5,851		269,706		(253,020		)	39,604
Intercompany receivables	166		1,862,339			2,387,963		122,512		(4,372,980		)	—
Total current assets	564		2,193,501			2,603,196		783,678		(4,732,241		)	848,698
Net property, plant and equipment	—		329,753			72,274		170,434		(279,095		)	293,366
Debt issuance costs, net	—		83,926			—		—		—			83,926
Deferred income taxes	—		—			—		30,353		—			30,353
Goodwill	—		2,483,240			732,771		162,920		—			3,378,931
Identifiable intangible assets, net	—		314,331			1,792,989		321,846		—			2,429,166
Other non-current assets	—		1,204			186		94,460		(90,900		)	4,950
Intercompany loan receivables	—		765,000			423,424		—		(1,188,424		)	—
Intercompany investments	700,033		393,091			404,273		—		(1,497,397		)	—
	$	700,597	$	6,564,046		$	6,029,113	$	1,563,691	$	(7,788,057	)	$	7,069,390
Liabilities and Equity:
Current liabilities:
Accounts payable	$	—	$	20,028		$	14,670	$	22,877	$	—		$	57,575
Accrued expenses and other	—		285,492			245,327		75,308		(195,402		)	410,725
Intercompany payables	5,526		1,065,538			2,676,774		625,142		(4,372,980		)	—
Current installments of long-term debt	—		25,847			—		—		—			25,847
Income taxes payable	—		—			—		5,849		(949		)	4,900
Deferred income taxes	—		—			13,692		15,323		(503		)	28,512
Total current liabilities	5,526		1,396,905			2,950,463		744,499		(4,569,834		)	527,559
Long-term debt, net of current installments and discount	—		4,830,009			—		—		—			4,830,009
Non-current tax liabilities	—		10,790			4,847		18,120		—			33,757
Deferred income taxes	—		73,003			730,816		55,259		—			859,078
Other non-current liabilities	626		113,416			9,424		1,076		—			124,542
Intercompany loan payables	—		417,432			765,000		5,992		(1,188,424		)	—
Total liabilities	6,152		6,841,555			4,460,550		824,946		(5,758,258		)	6,374,945
Total equity	694,445		(277,509		)	1,568,563		738,745		(2,029,799		)	694,445
	$	700,597	$	6,564,046		$	6,029,113	$	1,563,691	$	(7,788,057	)	$	7,069,390

Condensed Consolidating Parent Company, Co-Issuers,

Guarantor and Non-Guarantor Balance Sheet

December 31, 2013

(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	$	87,771	$	118	$	118,662	$	—		$	206,949
Accounts receivable, net	—		184,723		71,457		151,398		—			407,578
Inventories, net	—		54,809		101,779		101,751		(76,772		)	181,567
Deferred income taxes	—		14,991		6,610		2,020		—			23,621
Prepaid expenses and other	—		35,832		5,434		321,427		(309,532		)	53,161
Intercompany receivables	166		1,687,528		2,326,181		21,241		(4,035,116		)	—
Total current assets	564		2,065,654		2,511,579		716,499		(4,421,420		)	872,876
Net property, plant and equipment	—		311,122		80,963		223,987		(282,347		)	333,725
Debt issuance costs, net	—		102,054		—		—		—			102,054
Deferred income taxes	—		—		—		31,459		—			31,459
Goodwill	—		2,483,240		732,771		162,650		—			3,378,661
Identifiable intangible assets, net	—		361,640		1,829,452		358,109		—			2,549,201
Other non-current assets	—		715		192		94,662		(90,900		)	4,669
Intercompany loan receivables	—		990,972		404,688		—		(1,395,660		)	—
Intercompany investments	901,902		432,884		372,093		—		(1,706,879		)	—
	$	902,466	$	6,748,281	$	5,931,738	$	1,587,366	$	(7,897,206	)	$	7,272,645
Liabilities and Equity:
Current liabilities:
Accounts payable	$	—	$	15,266	$	14,929	$	20,121	$	—		$	50,316
Accrued expenses and other	—		185,790		246,977		77,843		(181,635		)	328,975
Intercompany payables	4,110		852,892		2,559,407		618,707		(4,035,116		)	—
Current installments of long-term debt	—		26,311		—		—		—			26,311
Income taxes payable	—		—		3,368		—		—			3,368
Deferred income taxes	—		—		—		2,199		—			2,199
Total current liabilities	4,110		1,080,259		2,824,681		718,870		(4,216,751		)	411,169
Long-term debt, net of current installments and discount	—		4,865,503		—		—		—			4,865,503
Non-current tax liabilities	—		28,850		4,284		20,548		—			53,682
Deferred income taxes	—		231,713		718,930		53,141		—			1,003,784
Other non-current liabilities	281		38,667		334		1,150		—			40,432
Intercompany loan payables	—		399,690		780,000		215,970		(1,395,660		)	—
Total liabilities	4,391		6,644,682		4,328,229		1,009,679		(5,612,411		)	6,374,570
Total equity	898,075		103,599		1,603,509		577,687		(2,284,795		)	898,075
	$	902,466	$	6,748,281	$	5,931,738	$	1,587,366	$	(7,897,206	)	$	7,272,645

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

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		$	1,622		$	28,696		$	—		$	190,465
Sales	—			79,951			271,166			239,133			(292,064		)	298,186
Total revenue	—			240,098			272,788			267,829			(292,064		)	488,651
Rental expenses	—			76,656			4,843			49,544			(46,299		)	84,744
Cost of sales	28			87,277			180,777			91,044			(272,812		)	86,314
Gross profit (loss)	(28		)	76,165			87,168			127,241			27,047			317,593
Selling, general and administrative expenses	835			72,295			43,676			46,583			(213		)	163,176
Research and development expenses	—			5,771			6,130			3,978			—			15,879
Acquired intangible asset amortization	—			15,077			19,731			13,110			—			47,918
Wake Forest settlement	—			—			—			—			—			—
Operating earnings (loss)	(863		)	(16,978		)	17,631			63,570			27,260			90,620
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 gain	—			1,630			—			—			—			1,630
Earnings (loss) from continuing operations before income taxes (benefit) and equity in earnings (loss) of subsidiaries	(863		)	(70,224		)	1,710			28,327			38,447			(2,603		)
Income tax expense (benefit)	—			12,787			(11,289		)	(2,264		)	—			(766		)
Earnings (loss) from continuing operations before equity in earnings (loss) of subsidiaries	(863		)	(83,011		)	12,999			30,591			38,447			(1,837		)
Equity in earnings (loss) of subsidiaries	(974		)	44,971			30,591			—			(74,588		)	—
Earnings (loss) from continuing operations	(1,837		)	(38,040		)	43,590			30,591			(36,141		)	(1,837		)
Earnings (loss) from discontinued operations, net of tax	—			—			—			—			—			—
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 three months ended September 30, 2013
	Acelity L.P. Inc. Parent Company			Kinetic Concepts, Inc. and KCI USA, Inc. Borrower			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue:
Rental	$	—		$	155,893		$	1,513		$	33,635		$	—		$	191,041
Sales	—			77,659			224,426			159,142			(211,707		)	249,520
Total revenue	—			233,552			225,939			192,777			(211,707		)	440,561
Rental expenses	—			62,928			4,010			53,891			(35,083		)	85,746
Cost of sales	30			123,481			142,946			57,512			(257,818		)	66,151
Gross profit (loss)	(30		)	47,143			78,983			81,374			81,194			288,664
Selling, general and administrative expenses	820			66,834			44,169			40,261			(31		)	152,053
Research and development expenses	—			8,010			6,742			3,209			—			17,961
Acquired intangible asset amortization	—			19,625			17,907			7,584			—			45,116
Impairment of goodwill and intangible assets	—			—			443,400			—			—			443,400
Operating earnings (loss)	(850		)	(47,326		)	(433,235		)	30,320			81,225			(369,866		)
Non-operating intercompany transactions	—			(8,076		)	49,735			(60,212		)	18,553			—
Interest income and other	—			17,852			3,062			97			(20,794		)	217
Interest expense	—			(104,402		)	(17,756		)	(34		)	20,794			(101,398		)
Loss on extinguishment of debt	—			(200		)	—			—			—			(200		)
Foreign currency gain (loss)	—			(14,433		)	(38		)	5,733			—			(8,738		)
Derivative instruments loss	—			(6,840		)	—			—			—			(6,840		)
Earnings (loss) from continuing operations before income taxes (benefit) and equity in earnings (loss) of subsidiaries	(850		)	(163,425		)	(398,232		)	(24,096		)	99,778			(486,825		)
Income tax benefit	—			(51,104		)	(34,535		)	(2,880		)	—			(88,519		)
Earnings (loss) from continuing operations before equity in earnings (loss) of subsidiaries	(850		)	(112,321		)	(363,697		)	(21,216		)	99,778			(398,306		)
Equity in earnings (loss) of subsidiaries	(397,711		)	48,780			(20,950		)	—			369,881			—
Earnings (loss) from continuing operations	(398,561		)	(63,541		)	(384,647		)	(21,216		)	469,659			(398,306		)
Earnings (loss) from discontinued operations, net of tax	—			(331		)	(1		)	266			(189		)	(255		)
Net earnings (loss)	$	(398,561	)	$	(63,872	)	$	(384,648	)	$	(20,950	)	$	469,470		$	(398,561	)
Total comprehensive income (loss)	$	(403,151	)	$	(68,462	)	$	(389,238	)	$	(25,540	)	$	483,240		$	(403,151	)

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		$	4,809		$	87,098		$	—		$	532,258
Sales	—			215,289			726,946			665,333			(738,465		)	869,103
Total revenue	—			655,640			731,755			752,431			(738,465		)	1,401,361
Rental expenses	80			216,134			12,463			157,584			(128,687		)	257,574
Cost of sales	73			229,191			460,426			274,514			(712,281		)	251,923
Gross profit (loss)	(153		)	210,315			258,866			320,333			102,503			891,864
Selling, general and administrative expenses	2,813			224,598			133,627			149,470			(386		)	510,122
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		)	46,209			115,803			102,889			(15,799		)
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 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		)	(19,402		)	50,015			174,259			(313,012		)
Income tax expense (benefit)	—			(177,652		)	45,196			20,381			—			(112,075		)
Earnings (loss) from continuing operations before equity in earnings (loss) of subsidiaries	(2,966		)	(337,266		)	(64,598		)	29,634			174,259			(200,937		)
Equity in earnings (loss) of subsidiaries	(197,971		)	(39,793		)	29,634			—			208,130			—
Earnings (loss) from continuing operations	(200,937		)	(377,059		)	(34,964		)	29,634			382,389			(200,937		)
Earnings (loss) from discontinued operations, net of tax	—			—			—			—			—			—
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 Operations and Comprehensive Income (Loss)

(in thousands)

(unaudited)

	For the nine months ended September 30, 2013
	Acelity L.P. Inc. Parent Company			Kinetic Concepts, Inc. and KCI USA, Inc. Borrower			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue:
Rental	$	—		$	461,605		$	4,766		$	103,078		$	—		$	569,449
Sales	—			221,296			640,681			481,490			(623,792		)	719,675
Total revenue	—			682,901			645,447			584,568			(623,792		)	1,289,124
Rental expenses	13			186,426			12,180			167,226			(92,366		)	273,479
Cost of sales	84			221,212			396,855			177,420			(613,864		)	181,707
Gross profit (loss)	(97		)	275,263			236,412			239,922			82,438			833,938
Selling, general and administrative expenses	1,949			269,490			136,734			110,515			(210		)	518,478
Research and development expenses	—			23,366			23,263			9,511			—			56,140
Acquired intangible asset amortization	—			61,276			54,274			23,573			—			139,123
Impairment of goodwill and intangible assets	—			—			443,400			—			—			443,400
Operating earnings (loss)	(2,046		)	(78,869		)	(421,259		)	96,323			82,648			(323,203		)
Non-operating intercompany transactions	—			52,176			108,489			(112,565		)	(48,100		)	—
Interest income and other	—			54,046			9,188			166			(62,121		)	1,279
Interest expense	—			(324,163		)	(52,974		)	(128		)	62,121			(315,144		)
Loss on extinguishment of debt	—			(2,364		)	—			—			—			(2,364		)
Foreign currency loss	—			(8,953		)	(251		)	(2,731		)	—			(11,935		)
Derivative instruments gain	—			3,200			—			—			—			3,200
Earnings (loss) from continuing operations before income taxes (benefit) and equity in earnings (loss) of subsidiaries	(2,046		)	(304,927		)	(356,807		)	(18,935		)	34,548			(648,167		)
Income tax benefit	—			(97,201		)	(38,718		)	(8,624		)	—			(144,543		)
Earnings (loss) from continuing operations before equity in earnings (loss) of subsidiaries	(2,046		)	(207,726		)	(318,089		)	(10,311		)	34,548			(503,624		)
Equity in earnings (loss) of subsidiaries	(503,877		)	104,040			(10,136		)	—			409,973			—
Earnings (loss) from continuing operations	(505,923		)	(103,686		)	(328,225		)	(10,311		)	444,521			(503,624		)
Earnings (loss) from discontinued operations, net of tax	—			(2,725		)	(3		)	175			254			(2,299		)
Net earnings (loss)	$	(505,923	)	$	(106,411	)	$	(328,228	)	$	(10,136	)	$	444,775		$	(505,923	)
Total comprehensive income (loss)	$	(512,932	)	$	(113,420	)	$	(335,237	)	$	(17,145	)	$	465,802		$	(512,932	)

Guarantor and Non-Guarantor Statement of Cash Flows

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 earnings (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 transaction, 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 capital lease 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

Condensed Consolidating Parent Company, Co-Issuers,

Guarantor and Non-Guarantor Statement of Cash Flows

(in thousands)

(unaudited)

	For the nine months ended September 30, 2013
	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)	$	(505,923	)	$	(106,411	)	$	(328,228	)	$	(10,136	)	$	444,775		$	(505,923	)
Adjustments to reconcile net loss to net cash provided (used) by operating activities	3,619			249,757			397,283			35,915			(45,156		)	641,418
Net cash provided (used) by operating activities	(502,304		)	143,346			69,055			25,779			399,619			135,495
Cash flows from investing activities:
Net additions to property, plant and equipment	—			(145,714		)	(14,556		)	(98,591		)	191,164			(67,697		)
Decrease (increase) in identifiable intangible assets and other non-current assets	—			(70		)	(4,474		)	271			—			(4,273		)
Net cash provided (used) by investing activities	—			(145,784		)	(19,030		)	(98,320		)	191,164			(71,970		)
Cash flows from financing activities:
Distribution to limited partners	(1,572		)	—			—			—			—			(1,572		)
Repayments of long-term debt and capital lease obligations	—			(60,446		)	—			17			—			(60,429		)
Payment of debt issuance costs	—			(21,604		)	—			—			—			(21,604		)
Proceeds (payments) on intercompany loans	—			51,298			(53,452		)	2,154			—			—
Proceeds (payments) on intercompany investments	503,876			(104,808		)	3,427			188,288			(590,783		)	—
Net cash provided (used) by financing activities	502,304			(135,560		)	(50,025		)	190,459			(590,783		)	(83,605		)
Effect of exchange rate changes on cash and cash equivalents	—			—			—			(151		)	—			(151		)
Net increase (decrease) in cash and cash equivalents	—			(137,998		)	—			117,767			—			(20,231		)
Cash and cash equivalents, beginning of period	398			276,788			—			105,964			—			383,150
Cash and cash equivalents, end of period	$	398		$	138,790		$	—		$	223,731		$	—		$	362,919

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2014

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

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 2014 presentation.

On November 8, 2012, KCI closed on the divestiture of its Therapeutic Support Systems ("TSS") business to Getinge AB. Under the terms of the sale agreement, we agreed to provide transition services to Getinge AB after the close of the transaction. Additionally, the results of the operations subject to the agreement, excluding the allocation of general corporate overhead, are presented as discontinued operations in the consolidated statements of operations for all periods presented. Discontinued operations amounts related to TSS also exclude incremental expenses related to our transition services agreement with Getinge AB and the service fee payable by Getinge AB under the transition services agreement.

The Company has two reportable operating segments: Advanced Wound Therapeutics and Regenerative Medicine. We have two primary geographic regions: the Americas, which is comprised principally of the United States and includes Canada, Puerto Rico and Latin America; and EMEA/APAC, which is comprised of Europe, the Middle East, Africa and the Asia Pacific region.

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, 2013.

(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.

(c)Concentration of Credit Risk

We have a concentration of credit risk with financial institutions related to our derivative instruments. As of September 30, 2014, Morgan Stanley, UBS and HSBC were the counterparties on our interest rate protection agreements consisting of interest rate swap agreements in notional amounts totaling $504.4 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 July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-11 “Income Taxes – Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carry forward, a Similar Tax Loss, or a Tax Credit Carry forwards Exists” which provides that entities should present the unrecognized tax benefit as a reduction of the deferred tax asset for a net operating loss (“NOL”) or similar tax loss or tax credit carryforward rather than as a liability when the uncertain tax position would reduce the NOL or other carryforward under the tax law. The ASU is effective for annual and interim period for fiscal years beginning on or after December 15, 2013. The Company adopted this ASU effective January 1, 2014. The adoption of this update did not have a material impact on our results of operations, financial position or disclosures.

(e)   Recently Issued Accounting Standards

In April 2014, the Financial Accounting Standards 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 amendments in the ASU are effective in the first quarter of 2015 for public organizations with calendar year ends. The Company is evaluating this update, however we do not anticipate that it will have a material effect on our results of operations, financial position or disclosures.

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. For a public entity, the amendments in this ASU are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. The Company is evaluating this update 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 update, 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, 2013.

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Condensed Consolidated Statements of Operations (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013		Sep. 30, 2014		Sep. 30, 2013
Revenue:
Rental	$ 190,465		$ 191,041		$ 532,258		$ 569,449
Sales	298,186		249,520		869,103		719,675
Total revenue	488,651		440,561		1,401,361		1,289,124
Rental expenses	84,744		85,746		257,574		273,479
Cost of sales	86,314		66,151		251,923		181,707
Gross profit (loss)	317,593		288,664		891,864		833,938
Selling, general and administrative expenses	163,176		152,053		510,122		518,478
Research and development expenses	15,879		17,961		51,602		56,140
Acquired intangible asset amortization	47,918	[1]	45,116	[1]	147,361	[1]	139,123	[1]
Wake Forest settlement	0		0		198,578		0
Impairment of goodwill and intangible assets	0	[2]	443,400	[2]	0	[2]	443,400	[2]
Operating earnings (loss)	90,620		(369,866)		(15,799)		(323,203)
Interest income and other	23		217		245		1,279
Interest expense	(104,475)		(101,398)		(308,475)		(315,144)
Loss on extinguishment of debt	0		(200)		0		(2,364)
Foreign currency gain (loss)	9,599		(8,738)		13,687		(11,935)
Derivative instruments gain (loss)	1,630		(6,840)		(2,670)		3,200
Earnings (loss) from continuing operations before income taxes (benefit) and equity in earnings (loss) of subsidiaries	(2,603)		(486,825)		(313,012)		(648,167)
Income tax benefit	(766)		(88,519)		(112,075)		(144,543)
Earnings (loss) from continuing operations	(1,837)		(398,306)		(200,937)		(503,624)
Loss from discontinued operations, net of tax	0		(255)		0		(2,299)
Net earnings (loss)	$ (1,837)		$ (398,561)		$ (200,937)		$ (505,923)

[1] 2014 includes amortization of acquired intangible assets related to our acquisition of Systagenix in October 2013 and our Merger in November 2011. 2013 includes amortization of acquired intangible assets related to our Merger in November 2011.

[2] During the third quarter of 2013, we recorded a $272.2 million impairment of goodwill and a $171.2 million impairment of indefinite-lived intangible assets related to our Regenerative Medicine reporting unit. These amounts have been excluded from Regenerative Medicine operating earnings as management excludes these charges from operating earnings when making operating decisions about the business.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2014

Accounting Policies [Abstract]

Basis of Presentation and Principles of Consolidation

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 2014 presentation.

On November 8, 2012, KCI closed on the divestiture of its Therapeutic Support Systems ("TSS") business to Getinge AB. Under the terms of the sale agreement, we agreed to provide transition services to Getinge AB after the close of the transaction. Additionally, the results of the operations subject to the agreement, excluding the allocation of general corporate overhead, are presented as discontinued operations in the consolidated statements of operations for all periods presented. Discontinued operations amounts related to TSS also exclude incremental expenses related to our transition services agreement with Getinge AB and the service fee payable by Getinge AB under the transition services agreement.

The Company has two reportable operating segments: Advanced Wound Therapeutics and Regenerative Medicine. We have two primary geographic regions: the Americas, which is comprised principally of the United States and includes Canada, Puerto Rico and Latin America; and EMEA/APAC, which is comprised of Europe, the Middle East, Africa and the Asia Pacific region.

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, 2013.

Derivative Financial Instruments and Fair Value Measurements

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.

Concentration of Credit Risk

Concentration of Credit Risk

We have a concentration of credit risk with financial institutions related to our derivative instruments. As of September 30, 2014, Morgan Stanley, UBS and HSBC were the counterparties on our interest rate protection agreements consisting of interest rate swap agreements in notional amounts totaling $504.4 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.

Recently Adopted Accounting Standards

Recently Adopted Accounting Standards

In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-11 “Income Taxes – Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carry forward, a Similar Tax Loss, or a Tax Credit Carry forwards Exists” which provides that entities should present the unrecognized tax benefit as a reduction of the deferred tax asset for a net operating loss (“NOL”) or similar tax loss or tax credit carryforward rather than as a liability when the uncertain tax position would reduce the NOL or other carryforward under the tax law. The ASU is effective for annual and interim period for fiscal years beginning on or after December 15, 2013. The Company adopted this ASU effective January 1, 2014. The adoption of this update did not have a material impact on our results of operations, financial position or disclosures.

Recently Issued Accounting Standards

(e)   Recently Issued Accounting Standards

In April 2014, the Financial Accounting Standards 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 amendments in the ASU are effective in the first quarter of 2015 for public organizations with calendar year ends. The Company is evaluating this update, however we do not anticipate that it will have a material effect on our results of operations, financial position or disclosures.

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. For a public entity, the amendments in this ASU are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. The Company is evaluating this update 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 update, 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.

Other Significant Accounting Policies

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, 2013.

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Document And Entity Information	9 Months Ended
	Sep. 30, 2014	Nov. 04, 2014 Class A-1 Partnership Units [Member]	Nov. 04, 2014 Class A-2 Partnership Units [Member]
Document Information [Line Items]
Entity Registrant Name	ACELITY L.P. INC.
Entity Central Index Key	0001557939
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		341,410,891.610	728,041.800
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q3
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2014

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Business Acquisition (Tables)

9 Months Ended

Sep. 30, 2014

Business Combinations [Abstract]

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

The following table represents the preliminary allocation of the purchase price (in thousands):

	December 31, 2013			Adjustment			September 30, 2014
Goodwill	$	171,086		$	270		$	171,356
Identifiable intangible assets
Customer relationships	103,301						103,301
Developed technology	91,700						91,700
Tradenames	56,800						56,800
In-process research and development	1,766						1,766
Tangible assets acquired and liabilities assumed:
Accounts receivable	50,807						50,807
Inventories	27,450						27,450
Other current assets	1,902						1,902
Property, plant and equipment	44,016						44,016
Other non-current assets	139						139
Current liabilities	(34,752		)	(270		)	(35,022		)
Other non-current liabilities	(79		)				(79		)
Net deferred tax liability	(35,388		)				(35,388		)
Total purchase price	$	478,748		$	—		$	478,748

Business Acquisition, Pro Forma Information [Table Text Block]

The following table reflects the unaudited pro forma condensed consolidated results of operations, as though the acquisition had occurred on January 1, 2012 (in thousands):

	Three months ended September 30,			Nine months ended September 30,
	2013			2013
Pro forma revenue	$	494,869		$	1,446,634
Pro forma net loss	$	(394,675	)	$	(503,990	)

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Condensed Consolidated Statements of Comprehensive Income (Loss) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Net loss	$ (1,837)	$ (398,561)	$ (200,937)	$ (505,923)
Unrealized investment gain (loss), net of tax benefit (expense) of $411 and $412 in 2014 and $(338) and $(1,413) in 2013	(657)	541	(659)	2,257
Foreign currency translation adjustment, net of tax benefit (expense) of $(279) and $(782) in 2014 and $(300) and $259 in 2013	(3,425)	(5,131)	(3,238)	(9,266)
Total comprehensive income (loss)	$ (5,919)	$ (403,151)	$ (204,834)	$ (512,932)

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Accumulated Other Comprehensive Income (Loss)

9 Months Ended

Sep. 30, 2014

Other Comprehensive Income (Loss), Net of Tax [Abstract]

Comprehensive Income (Loss) Note

Accumulated Other Comprehensive Loss

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

	Accumulated Foreign Currency Translation Adjustment			Investment Gain			Accumulated Other Comprehensive Income (Loss)
Balances at December 31, 2013	$	(4,384	)	$	2,241		$	(2,143	)
Unrealized investment loss, net of tax benefit of $412	—			(659		)	(659		)
Foreign currency translation adjustment, net of tax expense of $782	(3,238		)	—			(3,238		)
Balances at September 30, 2014	$	(7,622	)	$	1,582		$	(6,040	)

During the nine months ended September 30, 2014, there were no reclassification adjustments out of accumulated other comprehensive loss to net loss.

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Derivative Financial Instruments and Fair Value Measurements

9 Months Ended

Sep. 30, 2014

Derivative Financial Instruments and Fair Value Measurements Disclosure [Abstract]

Derivative Financial Instruments and Fair Value Measurements

 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, 2014 and December 31, 2013, we had three interest rate swap agreements to convert a portion of our outstanding variable rate debt to a fixed rate basis. These agreements that became effective in December 2013, 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 quarterly interest payments, receive rates based on the higher of three-month USD LIBOR or 1.25% and pay rates based on fixed rates, 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	$504,367	2.256%
12/31/13-12/31/16	$504,367	2.249%
12/31/13-12/31/16	$504,367	2.250%

Previously held interest rate cap agreements expired on December 31, 2013.

Foreign Currency Exchange Rate Mitigation

At September 30, 2014, we had no outstanding foreign currency exchange contracts. At December 31, 2013, we had foreign currency exchange contracts to sell or purchase $14.3 million of various currencies.

Fair Value Measurements

The Codification definesfair 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, including the 10.5% Second Lien Secured Notes, the 12.5% Unsecured Notes and the Convertible Notes approximates fair value. The fair value of our borrowings under our Senior Secured Credit Facility and fixed rate long-term debt was $2.5 billion and $2.6 billion, respectively, at September 30, 2014. The fair value of our borrowings under our Senior Secured Credit Facility and fixed rate long-term debt was $2.6 billion and $2.7 billion, respectively, at December 31, 2013. The fair value of our long-term debt was estimated based upon open-market trades at or near year end which represent Level 2 inputs.

The fair values of all of our derivatives, as of the reporting date, are computed using Level 2 inputs. The interest rate swap agreements are valued using a discounted cash flow model that takes into account the present value of the 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 foreign currency exchange contracts are valued using a discounted cash flow model that takes into account the present value of the future cash flows under the terms of the agreements by using market information available as of the reporting date, including prevailing foreign currency exchange rates and related foreign currency exchange 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
		September 30, 2014		December 31, 2013			September 30, 2014		December 31, 2013
Derivatives not designated as hedging instruments
Interest rate swap agreements	Prepaid expenses and other	$	—	$	—	Accrued expenses and other	$	13,938	$	345
Interest rate swap agreements	Other non-current assets	—		—		Other non-current liabilities	9,426		31,906
Foreign currency exchange contracts	Prepaid expenses and other	—		146		Accrued expenses and other	—		569
Total derivatives		$	—	$	146		$	23,364	$	32,820

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,
	2014		2013			2014			2013
Interest rate swap agreements	$	1,630	$	(5,195	)	$	(2,732	)	$	4,057
Interest rate cap agreements	—		(4		)	—			(9		)
Foreign currency exchange contracts	—		(1,641		)	62			(848		)
	$	1,630	$	(6,840	)	$	(2,670	)	$	3,200

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 6 of the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

If we default under our credit facilities, the lenders could require immediate repayment of the entire principal. 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, 2014, 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, 2014 or December 31, 2013.

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Segment Information (Tables)

9 Months Ended

Sep. 30, 2014

Segment Reporting [Abstract]

Reconciliation of Revenue and Operating Earnings (Loss) from Segments to Consolidated

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

	Three months ended September 30,						Nine months ended September 30,
	2014			2013			2014			2013
Revenue:
Advanced Wound Therapeutics	$	377,181		$	320,879		$	1,064,815		$	944,526
Regenerative Medicine	111,470			119,682			336,546			344,598
Total revenue	$	488,651		$	440,561		$	1,401,361		$	1,289,124
Operating earnings (loss):
Advanced Wound Therapeutics	$	131,286		$	126,854		$	322,543		$	327,172
Regenerative Medicine	34,253			30,093			99,025			91,159
Non-allocated costs:
General headquarter expense (1)	(2,257		)	(6,335		)	(7,464		)	(59,447		)
Equity-based compensation	(863		)	(850		)	(2,966		)	(2,046		)
Merger and restructuring-related expenses (2)	(23,881		)	(31,112		)	(80,998		)	(97,518		)
Acquired intangible asset amortization (3)	(47,918		)	(45,116		)	(147,361		)	(139,123		)
Wake Forest settlement	—			—			(198,578		)	—
Impairment of goodwill and intangible assets (4)	—			(443,400		)	—			(443,400		)
Total non-allocated costs	(74,919		)	(526,813		)	(437,367		)	(741,534		)
Total operating earnings (loss)	$	90,620		$	(369,866	)	$	(15,799	)	$	(323,203	)

_____________________

(1) The third quarter and nine months ended September 30, 2013 includes write-offs of $3.5 million and $16.9 million, respectively, of other intangible assets due primarily to the discontinuation of certain projects. The nine months ended September 30, 2013 also includes a $30.3 million fixed asset impairment charge.

(2) Represents restructuring-related expenses as well as expenses related to the Merger, including management fees.

(3) 2014 includes amortization of acquired intangible assets related to our acquisition of Systagenix in October 2013 and our Merger in November 2011. 2013 includes amortization of acquired intangible assets related to our Merger in November 2011.

(4) During the third quarter of 2013, we recorded a $272.2 million impairment of goodwill and a $171.2 million impairment of indefinite-lived intangible assets related to our Regenerative Medicine reporting unit. These amounts have been excluded from Regenerative Medicine operating earnings as management excludes these charges from operating earnings when making operating decisions about the business.

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Supplemental Balance Sheet Data (Tables)

9 Months Ended

Sep. 30, 2014

Balance Sheet Related Disclosures [Abstract]

Schedule of Accounts Receivable, Net

Accounts receivable consist of the following (in thousands):

	September 30, 2014			December 31, 2013
Gross trade accounts receivable:
Billed trade accounts receivable	$	397,743		$	418,804
Unbilled receivables	36,077			50,841
Less:  Allowance for revenue adjustments	(58,839		)	(67,631		)
Gross trade accounts receivable	374,981			402,014
Less:  Allowance for bad debt	(13,433		)	(8,483		)
Net trade accounts receivable	361,548			393,531
Other receivables	9,833			14,047
	$	371,381		$	407,578

Schedule of Inventories, Net

Inventories consist of the following (in thousands):

	September 30, 2014			December 31, 2013
Finished goods and tissue available for distribution	$	129,375		$	110,937
Goods and tissue in-process	10,176			12,994
Raw materials, supplies, parts and unprocessed tissue	67,541			71,876
	207,092			195,807
Less: Amounts expected to be converted into equipment for short-term rental	(7,241		)	(3,952		)
Reserve for excess and obsolete inventory	(15,261		)	(10,288		)
	$	184,590		$	181,567

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Guarantor Condensed Consolidating Financial Statements

9 Months Ended

Sep. 30, 2014

Guarantor Condensed Consolidating Financial Statements [Abstract]

Guarantor Condensed Consolidating Financial Statements

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 indentures 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, 2014, 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, 2014

(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	$	52,380		$	9,445	$	162,682	$	—		$	224,905
Accounts receivable, net	—		176,575			68,807		125,999		—			371,381
Inventories, net	—		84,637			102,912		102,779		(105,738		)	184,590
Deferred income taxes	—		503			28,218		—		(503		)	28,218
Prepaid expenses and other	—		17,067			5,851		269,706		(253,020		)	39,604
Intercompany receivables	166		1,862,339			2,387,963		122,512		(4,372,980		)	—
Total current assets	564		2,193,501			2,603,196		783,678		(4,732,241		)	848,698
Net property, plant and equipment	—		329,753			72,274		170,434		(279,095		)	293,366
Debt issuance costs, net	—		83,926			—		—		—			83,926
Deferred income taxes	—		—			—		30,353		—			30,353
Goodwill	—		2,483,240			732,771		162,920		—			3,378,931
Identifiable intangible assets, net	—		314,331			1,792,989		321,846		—			2,429,166
Other non-current assets	—		1,204			186		94,460		(90,900		)	4,950
Intercompany loan receivables	—		765,000			423,424		—		(1,188,424		)	—
Intercompany investments	700,033		393,091			404,273		—		(1,497,397		)	—
	$	700,597	$	6,564,046		$	6,029,113	$	1,563,691	$	(7,788,057	)	$	7,069,390
Liabilities and Equity:
Current liabilities:
Accounts payable	$	—	$	20,028		$	14,670	$	22,877	$	—		$	57,575
Accrued expenses and other	—		285,492			245,327		75,308		(195,402		)	410,725
Intercompany payables	5,526		1,065,538			2,676,774		625,142		(4,372,980		)	—
Current installments of long-term debt	—		25,847			—		—		—			25,847
Income taxes payable	—		—			—		5,849		(949		)	4,900
Deferred income taxes	—		—			13,692		15,323		(503		)	28,512
Total current liabilities	5,526		1,396,905			2,950,463		744,499		(4,569,834		)	527,559
Long-term debt, net of current installments and discount	—		4,830,009			—		—		—			4,830,009
Non-current tax liabilities	—		10,790			4,847		18,120		—			33,757
Deferred income taxes	—		73,003			730,816		55,259		—			859,078
Other non-current liabilities	626		113,416			9,424		1,076		—			124,542
Intercompany loan payables	—		417,432			765,000		5,992		(1,188,424		)	—
Total liabilities	6,152		6,841,555			4,460,550		824,946		(5,758,258		)	6,374,945
Total equity	694,445		(277,509		)	1,568,563		738,745		(2,029,799		)	694,445
	$	700,597	$	6,564,046		$	6,029,113	$	1,563,691	$	(7,788,057	)	$	7,069,390

Condensed Consolidating Parent Company, Co-Issuers,

Guarantor and Non-Guarantor Balance Sheet

December 31, 2013

(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	$	87,771	$	118	$	118,662	$	—		$	206,949
Accounts receivable, net	—		184,723		71,457		151,398		—			407,578
Inventories, net	—		54,809		101,779		101,751		(76,772		)	181,567
Deferred income taxes	—		14,991		6,610		2,020		—			23,621
Prepaid expenses and other	—		35,832		5,434		321,427		(309,532		)	53,161
Intercompany receivables	166		1,687,528		2,326,181		21,241		(4,035,116		)	—
Total current assets	564		2,065,654		2,511,579		716,499		(4,421,420		)	872,876
Net property, plant and equipment	—		311,122		80,963		223,987		(282,347		)	333,725
Debt issuance costs, net	—		102,054		—		—		—			102,054
Deferred income taxes	—		—		—		31,459		—			31,459
Goodwill	—		2,483,240		732,771		162,650		—			3,378,661
Identifiable intangible assets, net	—		361,640		1,829,452		358,109		—			2,549,201
Other non-current assets	—		715		192		94,662		(90,900		)	4,669
Intercompany loan receivables	—		990,972		404,688		—		(1,395,660		)	—
Intercompany investments	901,902		432,884		372,093		—		(1,706,879		)	—
	$	902,466	$	6,748,281	$	5,931,738	$	1,587,366	$	(7,897,206	)	$	7,272,645
Liabilities and Equity:
Current liabilities:
Accounts payable	$	—	$	15,266	$	14,929	$	20,121	$	—		$	50,316
Accrued expenses and other	—		185,790		246,977		77,843		(181,635		)	328,975
Intercompany payables	4,110		852,892		2,559,407		618,707		(4,035,116		)	—
Current installments of long-term debt	—		26,311		—		—		—			26,311
Income taxes payable	—		—		3,368		—		—			3,368
Deferred income taxes	—		—		—		2,199		—			2,199
Total current liabilities	4,110		1,080,259		2,824,681		718,870		(4,216,751		)	411,169
Long-term debt, net of current installments and discount	—		4,865,503		—		—		—			4,865,503
Non-current tax liabilities	—		28,850		4,284		20,548		—			53,682
Deferred income taxes	—		231,713		718,930		53,141		—			1,003,784
Other non-current liabilities	281		38,667		334		1,150		—			40,432
Intercompany loan payables	—		399,690		780,000		215,970		(1,395,660		)	—
Total liabilities	4,391		6,644,682		4,328,229		1,009,679		(5,612,411		)	6,374,570
Total equity	898,075		103,599		1,603,509		577,687		(2,284,795		)	898,075
	$	902,466	$	6,748,281	$	5,931,738	$	1,587,366	$	(7,897,206	)	$	7,272,645

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		$	1,622		$	28,696		$	—		$	190,465
Sales	—			79,951			271,166			239,133			(292,064		)	298,186
Total revenue	—			240,098			272,788			267,829			(292,064		)	488,651
Rental expenses	—			76,656			4,843			49,544			(46,299		)	84,744
Cost of sales	28			87,277			180,777			91,044			(272,812		)	86,314
Gross profit (loss)	(28		)	76,165			87,168			127,241			27,047			317,593
Selling, general and administrative expenses	835			72,295			43,676			46,583			(213		)	163,176
Research and development expenses	—			5,771			6,130			3,978			—			15,879
Acquired intangible asset amortization	—			15,077			19,731			13,110			—			47,918
Wake Forest settlement	—			—			—			—			—			—
Operating earnings (loss)	(863		)	(16,978		)	17,631			63,570			27,260			90,620
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 gain	—			1,630			—			—			—			1,630
Earnings (loss) from continuing operations before income taxes (benefit) and equity in earnings (loss) of subsidiaries	(863		)	(70,224		)	1,710			28,327			38,447			(2,603		)
Income tax expense (benefit)	—			12,787			(11,289		)	(2,264		)	—			(766		)
Earnings (loss) from continuing operations before equity in earnings (loss) of subsidiaries	(863		)	(83,011		)	12,999			30,591			38,447			(1,837		)
Equity in earnings (loss) of subsidiaries	(974		)	44,971			30,591			—			(74,588		)	—
Earnings (loss) from continuing operations	(1,837		)	(38,040		)	43,590			30,591			(36,141		)	(1,837		)
Earnings (loss) from discontinued operations, net of tax	—			—			—			—			—			—
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 three months ended September 30, 2013
	Acelity L.P. Inc. Parent Company			Kinetic Concepts, Inc. and KCI USA, Inc. Borrower			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue:
Rental	$	—		$	155,893		$	1,513		$	33,635		$	—		$	191,041
Sales	—			77,659			224,426			159,142			(211,707		)	249,520
Total revenue	—			233,552			225,939			192,777			(211,707		)	440,561
Rental expenses	—			62,928			4,010			53,891			(35,083		)	85,746
Cost of sales	30			123,481			142,946			57,512			(257,818		)	66,151
Gross profit (loss)	(30		)	47,143			78,983			81,374			81,194			288,664
Selling, general and administrative expenses	820			66,834			44,169			40,261			(31		)	152,053
Research and development expenses	—			8,010			6,742			3,209			—			17,961
Acquired intangible asset amortization	—			19,625			17,907			7,584			—			45,116
Impairment of goodwill and intangible assets	—			—			443,400			—			—			443,400
Operating earnings (loss)	(850		)	(47,326		)	(433,235		)	30,320			81,225			(369,866		)
Non-operating intercompany transactions	—			(8,076		)	49,735			(60,212		)	18,553			—
Interest income and other	—			17,852			3,062			97			(20,794		)	217
Interest expense	—			(104,402		)	(17,756		)	(34		)	20,794			(101,398		)
Loss on extinguishment of debt	—			(200		)	—			—			—			(200		)
Foreign currency gain (loss)	—			(14,433		)	(38		)	5,733			—			(8,738		)
Derivative instruments loss	—			(6,840		)	—			—			—			(6,840		)
Earnings (loss) from continuing operations before income taxes (benefit) and equity in earnings (loss) of subsidiaries	(850		)	(163,425		)	(398,232		)	(24,096		)	99,778			(486,825		)
Income tax benefit	—			(51,104		)	(34,535		)	(2,880		)	—			(88,519		)
Earnings (loss) from continuing operations before equity in earnings (loss) of subsidiaries	(850		)	(112,321		)	(363,697		)	(21,216		)	99,778			(398,306		)
Equity in earnings (loss) of subsidiaries	(397,711		)	48,780			(20,950		)	—			369,881			—
Earnings (loss) from continuing operations	(398,561		)	(63,541		)	(384,647		)	(21,216		)	469,659			(398,306		)
Earnings (loss) from discontinued operations, net of tax	—			(331		)	(1		)	266			(189		)	(255		)
Net earnings (loss)	$	(398,561	)	$	(63,872	)	$	(384,648	)	$	(20,950	)	$	469,470		$	(398,561	)
Total comprehensive income (loss)	$	(403,151	)	$	(68,462	)	$	(389,238	)	$	(25,540	)	$	483,240		$	(403,151	)

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		$	4,809		$	87,098		$	—		$	532,258
Sales	—			215,289			726,946			665,333			(738,465		)	869,103
Total revenue	—			655,640			731,755			752,431			(738,465		)	1,401,361
Rental expenses	80			216,134			12,463			157,584			(128,687		)	257,574
Cost of sales	73			229,191			460,426			274,514			(712,281		)	251,923
Gross profit (loss)	(153		)	210,315			258,866			320,333			102,503			891,864
Selling, general and administrative expenses	2,813			224,598			133,627			149,470			(386		)	510,122
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		)	46,209			115,803			102,889			(15,799		)
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 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		)	(19,402		)	50,015			174,259			(313,012		)
Income tax expense (benefit)	—			(177,652		)	45,196			20,381			—			(112,075		)
Earnings (loss) from continuing operations before equity in earnings (loss) of subsidiaries	(2,966		)	(337,266		)	(64,598		)	29,634			174,259			(200,937		)
Equity in earnings (loss) of subsidiaries	(197,971		)	(39,793		)	29,634			—			208,130			—
Earnings (loss) from continuing operations	(200,937		)	(377,059		)	(34,964		)	29,634			382,389			(200,937		)
Earnings (loss) from discontinued operations, net of tax	—			—			—			—			—			—
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 Operations and Comprehensive Income (Loss)

(in thousands)

(unaudited)

	For the nine months ended September 30, 2013
	Acelity L.P. Inc. Parent Company			Kinetic Concepts, Inc. and KCI USA, Inc. Borrower			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue:
Rental	$	—		$	461,605		$	4,766		$	103,078		$	—		$	569,449
Sales	—			221,296			640,681			481,490			(623,792		)	719,675
Total revenue	—			682,901			645,447			584,568			(623,792		)	1,289,124
Rental expenses	13			186,426			12,180			167,226			(92,366		)	273,479
Cost of sales	84			221,212			396,855			177,420			(613,864		)	181,707
Gross profit (loss)	(97		)	275,263			236,412			239,922			82,438			833,938
Selling, general and administrative expenses	1,949			269,490			136,734			110,515			(210		)	518,478
Research and development expenses	—			23,366			23,263			9,511			—			56,140
Acquired intangible asset amortization	—			61,276			54,274			23,573			—			139,123
Impairment of goodwill and intangible assets	—			—			443,400			—			—			443,400
Operating earnings (loss)	(2,046		)	(78,869		)	(421,259		)	96,323			82,648			(323,203		)
Non-operating intercompany transactions	—			52,176			108,489			(112,565		)	(48,100		)	—
Interest income and other	—			54,046			9,188			166			(62,121		)	1,279
Interest expense	—			(324,163		)	(52,974		)	(128		)	62,121			(315,144		)
Loss on extinguishment of debt	—			(2,364		)	—			—			—			(2,364		)
Foreign currency loss	—			(8,953		)	(251		)	(2,731		)	—			(11,935		)
Derivative instruments gain	—			3,200			—			—			—			3,200
Earnings (loss) from continuing operations before income taxes (benefit) and equity in earnings (loss) of subsidiaries	(2,046		)	(304,927		)	(356,807		)	(18,935		)	34,548			(648,167		)
Income tax benefit	—			(97,201		)	(38,718		)	(8,624		)	—			(144,543		)
Earnings (loss) from continuing operations before equity in earnings (loss) of subsidiaries	(2,046		)	(207,726		)	(318,089		)	(10,311		)	34,548			(503,624		)
Equity in earnings (loss) of subsidiaries	(503,877		)	104,040			(10,136		)	—			409,973			—
Earnings (loss) from continuing operations	(505,923		)	(103,686		)	(328,225		)	(10,311		)	444,521			(503,624		)
Earnings (loss) from discontinued operations, net of tax	—			(2,725		)	(3		)	175			254			(2,299		)
Net earnings (loss)	$	(505,923	)	$	(106,411	)	$	(328,228	)	$	(10,136	)	$	444,775		$	(505,923	)
Total comprehensive income (loss)	$	(512,932	)	$	(113,420	)	$	(335,237	)	$	(17,145	)	$	465,802		$	(512,932	)

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 earnings (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 transaction, 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 capital lease 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

Condensed Consolidating Parent Company, Co-Issuers,

Guarantor and Non-Guarantor Statement of Cash Flows

(in thousands)

(unaudited)

	For the nine months ended September 30, 2013
	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)	$	(505,923	)	$	(106,411	)	$	(328,228	)	$	(10,136	)	$	444,775		$	(505,923	)
Adjustments to reconcile net loss to net cash provided (used) by operating activities	3,619			249,757			397,283			35,915			(45,156		)	641,418
Net cash provided (used) by operating activities	(502,304		)	143,346			69,055			25,779			399,619			135,495
Cash flows from investing activities:
Net additions to property, plant and equipment	—			(145,714		)	(14,556		)	(98,591		)	191,164			(67,697		)
Decrease (increase) in identifiable intangible assets and other non-current assets	—			(70		)	(4,474		)	271			—			(4,273		)
Net cash provided (used) by investing activities	—			(145,784		)	(19,030		)	(98,320		)	191,164			(71,970		)
Cash flows from financing activities:
Distribution to limited partners	(1,572		)	—			—			—			—			(1,572		)
Repayments of long-term debt and capital lease obligations	—			(60,446		)	—			17			—			(60,429		)
Payment of debt issuance costs	—			(21,604		)	—			—			—			(21,604		)
Proceeds (payments) on intercompany loans	—			51,298			(53,452		)	2,154			—			—
Proceeds (payments) on intercompany investments	503,876			(104,808		)	3,427			188,288			(590,783		)	—
Net cash provided (used) by financing activities	502,304			(135,560		)	(50,025		)	190,459			(590,783		)	(83,605		)
Effect of exchange rate changes on cash and cash equivalents	—			—			—			(151		)	—			(151		)
Net increase (decrease) in cash and cash equivalents	—			(137,998		)	—			117,767			—			(20,231		)
Cash and cash equivalents, beginning of period	398			276,788			—			105,964			—			383,150
Cash and cash equivalents, end of period	$	398		$	138,790		$	—		$	223,731		$	—		$	362,919

XML

Commitments and Contingencies

9 Months Ended

Sep. 30, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

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 August 2013, Vital Needs International, L.P. ("Vital Needs") filed a Demand for Arbitration with the American Arbitration Association seeking to recover $100 million in damages against KCI entities based on a number of claims related to certain intellectual property rights sold by Vital Needs to KCI pursuant to a 2006 acquisition agreement. Vital Needs alleges, among other things, breach of the contract for failure to pay royalties on sales of KCI products. We do not believe any royalties are owed to Vital Needs for sales of KCI products, and we believe our defenses to Vital Needs' claims are meritorious. We intend to vigorously defend the arbitration, which is in the discovery phase. The arbitration is currently set for January 2015. It is not possible to predict the outcome of this arbitration, nor is it possible to estimate any damages that may be awarded if we are unsuccessful in the arbitration.

In September 2013, LifeNet Health ("LifeNet") filed suit against LifeCell Corporation in the United States 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"). LifeNet alleges that LifeCell has been aware of the ‘200 Patent and its infringement since 2009 and acted willfully in continuing to infringe the ‘200 Patent thereafter. LifeNet seeks monetary damages including treble damages for willful infringement, together with costs and prejudgment and post judgment interest as well as a finding that the case is exceptional and an award of costs and reasonable attorneys fees. We believe that our defenses to the LifeNet claims are meritorious, that LifeCell's products do not infringe the '200 Patent, and that the patent is invalid. The case has proceeded rapidly in the Eastern District of Virginia. The trial began in Norfolk on November 3, 2014. 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.

On June 30, 2014, KCI entered into a settlement and release agreement (the “Settlement Agreement”) with Wake Forest  University Health Sciences to fully and finally resolve the pending patent disputes between them relating to negative pressure wound therapy. As of September 30, 2014, the accompanying condensed consolidated balance sheet included $81.5 million under the caption "accrued expenses and other" and $102.8 million under the caption "other non-current liabilities" representing the net present value of payments under the Settlement Agreement discounted using our incremental borrowing rate as the discount rate.  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.

Products Liability Litigation

LifeCell Corporation is a defendant in approximately 335 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. Following limited discovery, the parties have each selected four bellwether cases from which one case to be tried will be selected. Discovery is proceeding on each of the bellwether cases. Trial of the first bellwether case is currently scheduled for September 2015. 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. These consolidated cases are being treated as a single occurrence and therefore do not require the exhaustion of a separate self-insured retention to trigger coverage. 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 fact discovery is proceeding in these cases, the plaintiffs have yet to set forth their alleged damages. As such, it is impossible to predict or estimate potential losses if our defenses to these cases are unsuccessful.

LifeCell Corporation has been named as a defendant in approximately 175 lawsuits in state and federal courts in Massachusetts, Delaware, Minnesota, New York and Texas (federal court cases have been transferred to West Virginia multidistrict litigation docket) 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 170 LifeCell cases filed in a consolidated docket in Middlesex County, Massachusetts. The cases are in the initial phase and no discovery has occurred. We intend to defend 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. 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 Court granted KCI's motions dismissing all of the claims under the False Claims Act. The cases are on appeal in the U.S. Court of Appeals for the Ninth Circuit and oral argument was in July 2014. The appellate panel that heard the argument recently asked for briefing on whether the case should be heard en banc before the U.S. Court of Appeals for the Ninth Circuit. Both parties denied that there was need for en banc consideration. We await the opinion of the court. 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 medical claims submitted to Medicare. These audits typically involve a review, by Medicare or its designated contractors and representatives, of documentation supporting the medical necessity of 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, and do not as a matter of practice require, or subsequently obtain, the underlying medical records supporting the 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 medical facilities and physicians. Obtaining these medical records in connection with a claims audit may be difficult or impossible and, in any event, all of these records are subject to further examination 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 subject to a pre-payment or post-payment audit, we could be subject to denial, recoupment or refund demands for claims submitted for Medicare reimbursement. In the event that an audit results in discrepancies in the records provided, Medicare may be entitled to extrapolate the results of the audit to make recoupment demands based on a wider population of claims than those examined in the audit.

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Segment Information

9 Months Ended

Sep. 30, 2014

Segment Reporting [Abstract]

Segment Reporting Disclosure

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 ("AWT") and Regenerative Medicine. Our AWT 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).

On November 8, 2012, Getinge AB purchased certain assets and assumed certain liabilities comprising KCI's TSS business. The historical results of operations of the TSS business, excluding the allocation of general corporate overhead, are reported as discontinued operations in the consolidated statements of operations. Discontinued operations amounts related to TSS also exclude incremental expenses related to our transition services agreement with Getinge AB and the service fee payable by Getinge AB under the transition services agreement.

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

	Three months ended September 30,						Nine months ended September 30,
	2014			2013			2014			2013
Revenue:
Advanced Wound Therapeutics	$	377,181		$	320,879		$	1,064,815		$	944,526
Regenerative Medicine	111,470			119,682			336,546			344,598
Total revenue	$	488,651		$	440,561		$	1,401,361		$	1,289,124
Operating earnings (loss):
Advanced Wound Therapeutics	$	131,286		$	126,854		$	322,543		$	327,172
Regenerative Medicine	34,253			30,093			99,025			91,159
Non-allocated costs:
General headquarter expense (1)	(2,257		)	(6,335		)	(7,464		)	(59,447		)
Equity-based compensation	(863		)	(850		)	(2,966		)	(2,046		)
Merger and restructuring-related expenses (2)	(23,881		)	(31,112		)	(80,998		)	(97,518		)
Acquired intangible asset amortization (3)	(47,918		)	(45,116		)	(147,361		)	(139,123		)
Wake Forest settlement	—			—			(198,578		)	—
Impairment of goodwill and intangible assets (4)	—			(443,400		)	—			(443,400		)
Total non-allocated costs	(74,919		)	(526,813		)	(437,367		)	(741,534		)
Total operating earnings (loss)	$	90,620		$	(369,866	)	$	(15,799	)	$	(323,203	)

_____________________

(1) The third quarter and nine months ended September 30, 2013 includes write-offs of $3.5 million and $16.9 million, respectively, of other intangible assets due primarily to the discontinuation of certain projects. The nine months ended September 30, 2013 also includes a $30.3 million fixed asset impairment charge.

(2) Represents restructuring-related expenses as well as expenses related to the Merger, including management fees.

(3) 2014 includes amortization of acquired intangible assets related to our acquisition of Systagenix in October 2013 and our Merger in November 2011. 2013 includes amortization of acquired intangible assets related to our Merger in November 2011.

(4) During the third quarter of 2013, we recorded a $272.2 million impairment of goodwill and a $171.2 million impairment of indefinite-lived intangible assets related to our Regenerative Medicine reporting unit. These amounts have been excluded from Regenerative Medicine operating earnings as management excludes these charges from operating earnings when making operating decisions about the business.

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Subsequent Event (Notes)

9 Months Ended

Sep. 30, 2014

Subsequent Event [Abstract]

Subsequent Events [Text Block]

Subsequent Event

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. In connection with the transfer, the parties agreed to terminate various distribution agreements entered into between 2010 and 2011. The U.S. agreement for the core fields of plastic, general, and gastrointestinal surgeries was set to expire in November 2015. The termination agreement provides for a one-time payment of $4.5 million to LifeCell on November 30, 2014 and the repurchase of existing inventory. LifeCell has agreed to provide limited transition services to Novadaq through year end. In connection with the transfer, the parties have also resolved all legal disputes between them.

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Commitments and Contingencies (Details) (USD $)	3 Months Ended		9 Months Ended			3 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013	Jun. 30, 2014 Wake Forest Settlement [Member]	Sep. 30, 2014 Wake Forest Settlement [Member]	Dec. 31, 2013 Wake Forest Settlement [Member]	Sep. 30, 2014 Alloderm [Member] LifeCell Corporation [Member] Damages from Product Defects [Member] suit	Sep. 30, 2014 Repliform [Member] LifeCell Corporation [Member] Damages from Product Defects [Member] suit	Sep. 30, 2014 Cases Filed in Consolidated Docket [Member] Repliform [Member] LifeCell Corporation [Member] Damages from Product Defects [Member] suit
Loss Contingencies [Line Items]
Accrued expenses and other	$ 410,725,000		$ 410,725,000		$ 328,975,000		$ 81,533,000	$ 63,176,000
Other non-current liabilities	124,542,000		124,542,000		40,432,000		102,833,000
Wake Forest settlement	0	0	198,578,000	0		198,578,000
Demand for Arbitration, Requested Damages			$ 100,000,000
Number of pending lawsuits									335	175	170

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Derivative Financial Instruments and Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2014

Derivative [Line Items]

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value

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
		September 30, 2014		December 31, 2013			September 30, 2014		December 31, 2013
Derivatives not designated as hedging instruments
Interest rate swap agreements	Prepaid expenses and other	$	—	$	—	Accrued expenses and other	$	13,938	$	345
Interest rate swap agreements	Other non-current assets	—		—		Other non-current liabilities	9,426		31,906
Foreign currency exchange contracts	Prepaid expenses and other	—		146		Accrued expenses and other	—		569
Total derivatives		$	—	$	146		$	23,364	$	32,820

Not Designated as Hedging Instrument [Member]

Derivative [Line Items]

Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance

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,
	2014		2013			2014			2013
Interest rate swap agreements	$	1,630	$	(5,195	)	$	(2,732	)	$	4,057
Interest rate cap agreements	—		(4		)	—			(9		)
Foreign currency exchange contracts	—		(1,641		)	62			(848		)
	$	1,630	$	(6,840	)	$	(2,670	)	$	3,200

Not Designated as Hedging Instrument [Member] | Interest Rate Swap [Member]

Derivative [Line Items]

Schedule of Notional Amounts of Outstanding Derivative Positions

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	$504,367	2.256%
12/31/13-12/31/16	$504,367	2.249%
12/31/13-12/31/16	$504,367	2.250%

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Business Acquisition (Details) (USD $)	9 Months Ended			9 Months Ended	3 Months Ended			9 Months Ended									3 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013	Sep. 30, 2014 Attenuate [Member]	Sep. 30, 2014 Systagenix [Member]	Dec. 31, 2013 Systagenix [Member]	Sep. 30, 2013 Systagenix [Member]	Sep. 30, 2013 Systagenix [Member]	Sep. 30, 2014 Systagenix [Member] Customer Relationships [Member]	Dec. 31, 2013 Systagenix [Member] Customer Relationships [Member]	Sep. 30, 2014 Systagenix [Member] Developed Technology Rights [Member]	Dec. 31, 2013 Systagenix [Member] Developed Technology Rights [Member]	Sep. 30, 2014 Systagenix [Member] Trade Names [Member]	Dec. 31, 2013 Systagenix [Member] Trade Names [Member]	Sep. 30, 2014 Systagenix [Member] In Process Research and Development [Member]	Dec. 31, 2013 Systagenix [Member] In Process Research and Development [Member]	Dec. 31, 2013 Systagenix [Member] Senior Dollar Term D-1 Credit Facility Due 2018 [Member]	Sep. 30, 2014 Maximum [Member] Attenuate [Member]
Business Acquisition [Line Items]
Business Acquisition, Cost of Acquired Entity, Purchase Price	$ 4,613,000	$ 0		$ 3,000,000	$ 478,748,000	$ 478,748,000
Business Acquisition, Incremental Borrowing																	350,000,000
Goodwill	3,378,931,000		3,378,661,000		171,356,000	171,086,000
Goodwill, Purchase Accounting Adjustments					270,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles									103,301,000	103,301,000	91,700,000	91,700,000	56,800,000	56,800,000	1,766,000	1,766,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Assets, Receivables					50,807,000	50,807,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Inventory					27,450,000	27,450,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Assets, Other					1,902,000	1,902,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Property, Plant, and Equipment					44,016,000	44,016,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Other Noncurrent Assets					139,000	139,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Liabilities, Accounts Payable					(35,022,000)	(34,752,000)
Assumed Liability Purchase Accounting Adjustment					(270,000)
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Noncurrent Liabilities, Other					(79,000)	(79,000)
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Deferred Tax Liability, Net					(35,388,000)	(35,388,000)
Business Acquisition, Pro Forma Revenue							494,869,000	1,446,634,000
Business Acquisition, Pro Forma Net Income (Loss)							(394,675,000)	(503,990,000)
Additional Future Milestone Payments																		31,500,000
Milestone Achievement Payment				1,500,000
Accrued expenses and other	410,725,000		328,975,000	6,900,000
Other non-current liabilities	$ 124,542,000		$ 40,432,000	$ 8,800,000

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Condensed Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Unrealized investment gain (loss), net of tax benefit (expense) of $411 and $412 in 2014 and $(338) and $(1,413) in 2013	$ 411	$ (338)	$ 412	$ (1,413)
Foreign currency translation adjustment, net of tax benefit (expense) of $(279) and $(782) in 2014 and $(300) and $259 in 2013	$ (279)	$ (300)	$ (782)	$ 259

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Long-Term Debt

9 Months Ended

Sep. 30, 2014

Debt Disclosure [Abstract]

Long-Term Debt

Long-Term Debt

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

	September 30, 2014			December 31, 2013
Senior Dollar Term E-1 Credit Facility (1) – due 2018	$	1,932,108		$	1,946,708
Senior Euro Term E-1 Credit Facility (1) – due 2018	307,004			337,820
Senior Term E-2 Credit Facility (1) – due 2016	316,147			318,537
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			101
Notional amount of debt	4,917,360			4,965,166
Senior Dollar Term E-1 Credit Facility Discount, net of accretion	(25,938		)	(30,926		)
Senior Euro Term E-1 Credit Facility Discount, net of accretion	(8,224		)	(10,693		)
Senior Term E-2 Credit Facility Discount, net of accretion	(3,342		)	(4,486		)
Second Lien Senior Secured Notes Discount, net of accretion	(21,251		)	(24,222		)
Senior Unsecured Notes Discount, net of accretion	(2,749		)	(3,025		)
Net discount on debt	(61,504		)	(73,352		)
Total debt, net of discount	4,855,856			4,891,814
Less:  Current installments	(25,847		)	(26,311		)
	$	4,830,009		$	4,865,503

_____________________________

(1) On January 22, 2014, we entered into Amendment No. 5 to our senior secured credit facility. As a result of the amendment we created new classes of Dollar Term E-1 Loans, Euro Term E-1 Loans and Term E-2 Loans, having the same rights and obligations as the Dollar Term D-1 Loans, Euro Term D-1 Loans and Term D-2 Loans as set forth in the governing credit agreement and loan documents, except as revised by Amendment No. 5.

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, 2014 and December 31, 2013, 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 $22.0 million and $21.2 million, respectively. In addition, we had $11.8 million and $12.6 million of letters of credit issued by a bank not party to the Senior Secured Credit Facility as of September 30, 2014 and December 31, 2013, respectively. The capacity of the Revolving Credit Facility is reduced for the $22.0 million and $21.2 million of letters of credit issued by banks which are party to the Senior Secured Credit Facility as of September 30, 2014 and December 31, 2013, respectively. The resulting availability under the Revolving Credit Facility was $178.0 million and $178.8 million at September 30, 2014 and December 31, 2013, respectively. Commitment fees accrue at a rate of 0.50% on the amounts available under the Revolving Credit Facility.

On January 22, 2014, we entered into Amendment No. 5 to our Senior Secured Credit Facility ("Amendment No. 5"). As a result of the amendment we created new classes of Dollar Term E-1 Loans, Euro Term E-1 Loans and Term E-2 Loans, having the same rights and obligations as the Dollar Term D-1 Loans, Euro Term D-1 Loans and Term D-2 Loans as set forth in the governing credit agreement and loan documents, except as revised by Amendment No. 5. In connection with Amendment No. 5, Dollar Term D-1 Loans, Euro Term D-1 Loans and Term D-2 Loans were refinanced with Dollar Term E-1 Loans, Euro Term E-1 Loans and Term E-2 Loans, respectively.

Interest. Amounts outstanding under the Dollar Term E-1 Loans, the Term E-2 Loans and the Revolving Credit Facility (other than swing-line loans and unreimbursed drawings on letters of credit) bear interest, at our option, at a rate equal to either the base rate or the eurocurrency rate, in each case plus an applicable margin. Amounts outstanding under the Euro Term E-1 Loans bear interest at the eurocurrency rate, and swing-line loans and unreimbursed drawings on letters of credit bear interest at the base rate. As a result of Amendment No. 5, the new applicable margins are (i) for eurocurrency rate loans that are Dollar Term E-1 Loans, 3.00%, (ii) for base rate loans that are Dollar Term E-1 Loans, 2.00%, (iii) for eurocurrency rate loans that are Euro Term E-1 Loans, 3.25%, (iv) for base rate loans that are Euro Term E-1 Loans, 2.25%, (v) for eurocurrency rate loans that are Term E-2 Loans, 2.50%, and (vi) for base rate loans that are Term E-2 Loans, 1.50%. The Term E loans will have a eurocurrency rate floor of 1.00% and a base rate floor of 2.00%.

10.5% Second Lien Senior Secured Notes and 12.5% Senior Unsecured Notes

As required upon the closing of our 10.5% Second Lien Senior Secured Notes due 2018 (“10.5% Second Lien Notes”) and the 12.5% Senior Unsecured Notes due 2019 (“12.5% Unsecured Notes”), we entered into registration rights agreements with respect to these notes. Pursuant to the terms of the registration rights agreements, we filed a registration statement (the “Registration Statement”) with respect to a registered exchange offer to exchange such notes for new notes with terms substantially identical in all material respects with the notes (except for the provisions relating to the transfer restrictions and payment of additional interest). On February 13, 2013, our Registration Statement was declared effective by the Securities and Exchange Commission (“SEC”), and our exchange offer was completed on March 15, 2013.

Because our Registration Statement was not declared effective by the SEC under the Securities Act and the exchange offer was not consummated within 365 days following the issuance of the notes (“Exchange Date”), and because we did not file a shelf registration statement covering resales of the notes within 30 days after the Exchange Date (each a “Notes Registration Default”), additional interest accrued on the aggregate principal amount of the notes from and including the date on which any such Notes Registration Default occurred to but excluding the date on which the Notes Registration Defaults were cured through the completion of the exchange offer. Under the terms of the registration rights agreements entered into with respect to these notes, additional interest was accrued at a rate of 0.25% and 0.50% from November 4, 2012 to February 4, 2013 and February 5, 2013 to March 15, 2013, respectively.

Covenants

As of September 30, 2014, we were in compliance with all covenants under our Senior Secured Credit Facility, 10.5% Second Lien Notes, 12.5% Unsecured Notes, and 3.25% Convertible Senior Notes due 2015 (“the Convertible Notes”).

For further information on our long-term debt, see Note 6 of the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

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Supplemental Balance Sheet Data - Accounts Receivable, Net (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Billed trade accounts receivable	$ 397,743	$ 418,804
Unbilled receivables	36,077	50,841
Less: Allowance for revenue adjustments	(58,839)	(67,631)
Gross trade accounts receivable	374,981	402,014
Less: Allowance for bad debt	(13,433)	(8,483)
Net trade accounts receivable	361,548	393,531
Other receivables	9,833	14,047
Accounts receivable, net	$ 371,381	$ 407,578

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Guarantor Condensed Consolidating Financial Statements - Condensed Consolidated Cash Flow (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Cash flows from operating activities:
Net earnings (loss)	$ (200,937)	$ (505,923)
Adjustments to reconcile net earnings (loss) to net cash provided (used) by operating activities	305,968	641,418
Net cash provided (used) by operating activities	105,031	135,495
Cash flows from investing activities
Net additions to property, plant and equipment	(47,798)	(67,697)
Businesses acquired in purchase transaction, net of cash acquired	(4,613)	0
Decrease (increase) in identifiable intangible assets and other non-current assets	(9,351)	(4,273)
Net cash provided (used) by investing activities	(61,762)	(71,970)
Cash flows from financing activities:
Distribution to limited partners	0	(1,572)
Settlement of profits interest units	(1,416)	0
Repayments of long-term debt and capital lease obligations	(19,863)	(60,429)
Payment of debt issuance costs	0	(21,604)
Proceeds (payments) on intercompany loans	0	0
Proceeds (payments) on intercompany investments	0	0
Net cash provided (used) by financing activities	(21,279)	(83,605)
Effect of exchange rate changes on cash and cash equivalents	(4,034)	(151)
Net increase (decrease) in cash and cash equivalents	17,956	(20,231)
Cash and cash equivalents, beginning of period	206,949	383,150
Cash and cash equivalents, end of period	224,905	362,919
Parent Company [Member]
Cash flows from operating activities:
Net earnings (loss)	(200,937)	(505,923)
Adjustments to reconcile net earnings (loss) to net cash provided (used) by operating activities	4,381	3,619
Net cash provided (used) by operating activities	(196,556)	(502,304)
Cash flows from investing activities
Net additions to property, plant and equipment	0	0
Businesses acquired in purchase transaction, net of cash acquired	0
Decrease (increase) in identifiable intangible assets and other non-current assets	0	0
Net cash provided (used) by investing activities	0	0
Cash flows from financing activities:
Distribution to limited partners		(1,572)
Settlement of profits interest units	(1,416)
Repayments of long-term debt and capital lease obligations	0	0
Payment of debt issuance costs		0
Proceeds (payments) on intercompany loans	0	0
Proceeds (payments) on intercompany investments	197,972	503,876
Net cash provided (used) by financing activities	196,556	502,304
Effect of exchange rate changes on cash and cash equivalents	0	0
Net increase (decrease) in cash and cash equivalents	0	0
Cash and cash equivalents, beginning of period	398	398
Cash and cash equivalents, end of period	398	398
Kinetic Concepts, Inc. and KCI USA, Inc. Borrower [Member]
Cash flows from operating activities:
Net earnings (loss)	(377,059)	(106,411)
Adjustments to reconcile net earnings (loss) to net cash provided (used) by operating activities	214,293	249,757
Net cash provided (used) by operating activities	(162,766)	143,346
Cash flows from investing activities
Net additions to property, plant and equipment	(132,506)	(145,714)
Businesses acquired in purchase transaction, net of cash acquired	0
Decrease (increase) in identifiable intangible assets and other non-current assets	(419)	(70)
Net cash provided (used) by investing activities	(132,925)	(145,784)
Cash flows from financing activities:
Distribution to limited partners		0
Settlement of profits interest units	0
Repayments of long-term debt and capital lease obligations	(19,816)	(60,446)
Payment of debt issuance costs		(21,604)
Proceeds (payments) on intercompany loans	243,714	51,298
Proceeds (payments) on intercompany investments	36,402	(104,808)
Net cash provided (used) by financing activities	260,300	(135,560)
Effect of exchange rate changes on cash and cash equivalents	0	0
Net increase (decrease) in cash and cash equivalents	(35,391)	(137,998)
Cash and cash equivalents, beginning of period	87,771	276,788
Cash and cash equivalents, end of period	52,380	138,790
Guarantor Subsidiaries [Member]
Cash flows from operating activities:
Net earnings (loss)	(34,964)	(328,228)
Adjustments to reconcile net earnings (loss) to net cash provided (used) by operating activities	123,273	397,283
Net cash provided (used) by operating activities	88,309	69,055
Cash flows from investing activities
Net additions to property, plant and equipment	(3,688)	(14,556)
Businesses acquired in purchase transaction, net of cash acquired	(4,500)
Decrease (increase) in identifiable intangible assets and other non-current assets	(4,896)	(4,474)
Net cash provided (used) by investing activities	(13,084)	(19,030)
Cash flows from financing activities:
Distribution to limited partners		0
Settlement of profits interest units	0
Repayments of long-term debt and capital lease obligations	0	0
Payment of debt issuance costs		0
Proceeds (payments) on intercompany loans	(33,736)	(53,452)
Proceeds (payments) on intercompany investments	(32,162)	3,427
Net cash provided (used) by financing activities	(65,898)	(50,025)
Effect of exchange rate changes on cash and cash equivalents	0	0
Net increase (decrease) in cash and cash equivalents	9,327	0
Cash and cash equivalents, beginning of period	118	0
Cash and cash equivalents, end of period	9,445	0
Non-Guarantor Subsidiaries [Member]
Cash flows from operating activities:
Net earnings (loss)	29,634	(10,136)
Adjustments to reconcile net earnings (loss) to net cash provided (used) by operating activities	129,300	35,915
Net cash provided (used) by operating activities	158,934	25,779
Cash flows from investing activities
Net additions to property, plant and equipment	(31,367)	(98,591)
Businesses acquired in purchase transaction, net of cash acquired	(113)
Decrease (increase) in identifiable intangible assets and other non-current assets	(4,036)	271
Net cash provided (used) by investing activities	(35,516)	(98,320)
Cash flows from financing activities:
Distribution to limited partners		0
Settlement of profits interest units	0
Repayments of long-term debt and capital lease obligations	(47)	17
Payment of debt issuance costs		0
Proceeds (payments) on intercompany loans	(209,978)	2,154
Proceeds (payments) on intercompany investments	134,661	188,288
Net cash provided (used) by financing activities	(75,364)	190,459
Effect of exchange rate changes on cash and cash equivalents	(4,034)	(151)
Net increase (decrease) in cash and cash equivalents	44,020	117,767
Cash and cash equivalents, beginning of period	118,662	105,964
Cash and cash equivalents, end of period	162,682	223,731
Eliminations [Member]
Cash flows from operating activities:
Net earnings (loss)	382,389	444,775
Adjustments to reconcile net earnings (loss) to net cash provided (used) by operating activities	(165,279)	(45,156)
Net cash provided (used) by operating activities	217,110	399,619
Cash flows from investing activities
Net additions to property, plant and equipment	119,763	191,164
Businesses acquired in purchase transaction, net of cash acquired	0
Decrease (increase) in identifiable intangible assets and other non-current assets	0	0
Net cash provided (used) by investing activities	119,763	191,164
Cash flows from financing activities:
Distribution to limited partners		0
Settlement of profits interest units	0
Repayments of long-term debt and capital lease obligations	0	0
Payment of debt issuance costs		0
Proceeds (payments) on intercompany loans	0	0
Proceeds (payments) on intercompany investments	(336,873)	(590,783)
Net cash provided (used) by financing activities	(336,873)	(590,783)
Effect of exchange rate changes on cash and cash equivalents	0	0
Net increase (decrease) in cash and cash equivalents	0	0
Cash and cash equivalents, beginning of period	0	0
Cash and cash equivalents, end of period	$ 0	$ 0

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Long-Term Debt (Tables)

9 Months Ended

Sep. 30, 2014

Debt Disclosure [Abstract]

Schedule of Long-term Debt Instruments

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

	September 30, 2014			December 31, 2013
Senior Dollar Term E-1 Credit Facility (1) – due 2018	$	1,932,108		$	1,946,708
Senior Euro Term E-1 Credit Facility (1) – due 2018	307,004			337,820
Senior Term E-2 Credit Facility (1) – due 2016	316,147			318,537
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			101
Notional amount of debt	4,917,360			4,965,166
Senior Dollar Term E-1 Credit Facility Discount, net of accretion	(25,938		)	(30,926		)
Senior Euro Term E-1 Credit Facility Discount, net of accretion	(8,224		)	(10,693		)
Senior Term E-2 Credit Facility Discount, net of accretion	(3,342		)	(4,486		)
Second Lien Senior Secured Notes Discount, net of accretion	(21,251		)	(24,222		)
Senior Unsecured Notes Discount, net of accretion	(2,749		)	(3,025		)
Net discount on debt	(61,504		)	(73,352		)
Total debt, net of discount	4,855,856			4,891,814
Less:  Current installments	(25,847		)	(26,311		)
	$	4,830,009		$	4,865,503

_____________________________

(1) On January 22, 2014, we entered into Amendment No. 5 to our senior secured credit facility. As a result of the amendment we created new classes of Dollar Term E-1 Loans, Euro Term E-1 Loans and Term E-2 Loans, having the same rights and obligations as the Dollar Term D-1 Loans, Euro Term D-1 Loans and Term D-2 Loans as set forth in the governing credit agreement and loan documents, except as revised by Amendment No. 5.