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 June 30, 2016

Commission file number 333-184233-14

ACELITY L.P. INC.

(Exact name of registrant as specified in its charter)

Guernsey	98-1022387
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
12930 West Interstate 10 San Antonio, Texas	78249
(Address of principal executive offices)	(Zip Code)

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

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

Yes X No

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

Yes X No

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

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

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

Yes No X

As of August 1, 2016, there were 341,410,891.610 Class A-1 and 717,038.800 Class A-2 partnership units outstanding, all of which were held by affiliates.   

TABLE OF CONTENTS

ACELITY L.P. INC.

			Page No.
PART I.	FINANCIAL INFORMATION		4
	Item 1.	Financial Statements	4
		Condensed Consolidated Balance Sheets	4
		Condensed Consolidated Statements of Operations	5
		Condensed Consolidated Statements of Comprehensive Loss	6
		Condensed Consolidated Statements of Cash Flows	7
		Notes to Condensed Consolidated Financial Statements	8
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	32
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46
	Item 4.	Controls and Procedures	46
PART II.	OTHER INFORMATION		46
	Item 1.	Legal Proceedings	46
	Item 1A.	Risk Factors	46
	Item 6.	Exhibits	47
	SIGNATURES		48

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, 2015, among other things, in evaluating our prospects and future financial performance. The occurrence of the events described in the risk factors could harm our business, results of operations and financial condition. These forward-looking statements are made as of the date of this report. Except as required under federal securities laws and the rules and regulations of the SEC, we do not have any intention to update any forward-looking statements to reflect events or circumstances arising after the date of this report, whether as a result of new information, future events or otherwise.

TRADEMARKS, SERVICE MARKS AND COPYRIGHTS

We own a number of registered and common law trademarks and pending applications for trademark registrations in the United States and other countries, primarily through our subsidiaries (including KCI Licensing, Inc., LifeCell and Systagenix Wound Management IP Co B.V.), including: ABThera Open Abdomen Negative Pressure Therapy, AlloDerm Regenerative Tissue Matrix, AlloDerm RTU Regenerative Tissue Matrix, Strattice Reconstructive Tissue Matrix, Revolve System, Prevena Incision Management System, PROMOGRAN Matrix Wound Dressing, TIELLE Hydropolymer Adhesive Dressing, ADAPTIC Non-Adhering Dressing, V.A.C. Therapy, V.A.C. GranuFoam Dressing, CelluTome Epidermal Harvesting System, SNAP Therapy System and iOn Healing Mobile App. Unless otherwise indicated, all trademarks appearing in this Quarterly Report on Form 10-Q are proprietary to us, our affiliates and/or licensors. This Quarterly Report on Form 10-Q also contains trademarks, trade names and service marks of other companies, which to our knowledge are the property of their respective owners. For example, 3M Tegaderm is a licensed trademark of 3M Company; GRAFTJACKET is a licensed trademark of Wright Medical Technology Inc.; and Prontosan Wound Irrigation Solution is a licensed trademark of B. Braun Medical, Inc. Solely for convenience, the trademarks, tradenames and service marks referred to in this Quarterly Report on Form 10-Q may appear without the ®, ™ and SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, tradenames and service marks. We do not intend our use or display of other parties’ trademarks, trade names or service marks to imply, and such use or display should not be construed to imply, a relationship with, or endorsement or sponsorship of us by, these other parties.

DEFINED TERMS

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

• “Acelity,” the “Company,” “we,” “us” and “our” mean Acelity L.P. Inc. and its consolidated subsidiaries;

• The “2011 LBO” means the acquisition of KCI, LifeCell and their respective subsidiaries by the Sponsors and the corporate reorganization which resulted in LifeCell Corporation, formerly a 100% owned subsidiary of Kinetic Concepts, Inc., becoming a sister corporation of Kinetic Concepts, Inc., which was completed on November 4, 2011;

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

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

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

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ACELITY L.P. INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands)

	June 30, 2016			December 31, 2015
	(unaudited)
Assets:
Current assets:
Cash and cash equivalents	$	99,197		$	88,409
Accounts receivable, net	413,440			413,531
Inventories, net	197,583			181,309
Deferred income taxes	51,968			74,521
Prepaid expenses and other	40,117			34,985
Total current assets	802,305			792,755
Net property, plant and equipment	260,569			273,076
Deferred income taxes	22,333			29,909
Goodwill	3,406,475			3,405,823
Identifiable intangible assets, net	2,139,366			2,219,088
Other non-current assets	5,033			6,104
	$	6,636,081		$	6,726,755
Liabilities and Equity:
Current liabilities:
Accounts payable	$	52,718		$	57,910
Accrued expenses and other	326,302			373,440
Current installments of long-term debt	23,307			22,130
Income taxes payable	4,372			3,561
Deferred income taxes	113,595			113,595
Total current liabilities	520,294			570,636
Long-term debt, net of current installments, premium, discount and debt issuance costs	4,845,783			4,720,363
Non-current tax liabilities	34,533			34,833
Deferred income taxes	681,592			760,737
Other non-current liabilities	15,153			37,021
Total liabilities	6,097,355			6,123,590
Equity:
General partner’s capital	—			—
Limited partners’ capital	577,979			622,899
Accumulated other comprehensive loss, net	(39,253		)	(19,734		)
Total equity	538,726			603,165
	$	6,636,081		$	6,726,755

See accompanying notes to condensed consolidated financial statements.

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ACELITY L.P. INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(in thousands)

(unaudited)

	Three months ended June 30,						Six months ended June 30,
	2016			2015			2016			2015
Revenue:
Rental	$	175,422		$	180,397		$	345,521		$	353,236
Sales	296,999			281,248			578,266			552,459
Total revenue	472,421			461,645			923,787			905,695
Rental expenses	75,794			77,869			150,689			156,047
Cost of sales	78,118			75,509			156,697			148,923
Gross profit	318,509			308,267			616,401			600,725
Selling, general and administrative expenses	182,194			158,994			346,638			306,757
Research and development expenses	14,717			14,391			28,695			29,069
Acquired intangible asset amortization	41,159			44,712			83,361			90,589
Operating earnings	80,439			90,170			157,707			174,310
Interest income and other	589			67			696			214
Interest expense	(110,428		)	(107,374		)	(218,980		)	(212,100		)
Loss on extinguishment of debt	(10,107		)	—			(13,716		)	—
Foreign currency gain (loss)	8,998			(6,799		)	4,668			12,601
Derivative instruments loss	(357		)	(919		)	(1,039		)	(4,267		)
Loss before income tax benefit	(30,866		)	(24,855		)	(70,664		)	(29,242		)
Income tax benefit	(10,751		)	(7,224		)	(24,574		)	(7,080		)
Net loss	$	(20,115	)	$	(17,631	)	$	(46,090	)	$	(22,162	)

See accompanying notes to condensed consolidated financial statements.

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ACELITY L.P. INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

(unaudited)

	Three months ended June 30,						Six months ended June 30,
	2016			2015			2016			2015
Net loss	$	(20,115	)	$	(17,631	)	$	(46,090	)	$	(22,162	)
Foreign currency translation adjustment, net of tax benefit (expense) of $584 and $1,339 in 2016 and ($317) and ($952) in 2015	(12,324		)	4,935			(8,226		)	(2,136		)
Net derivative loss, net of taxes of $0	(11,293		)	—			(11,293		)	—
Total comprehensive loss	$	(43,732	)	$	(12,696	)	$	(65,609	)	$	(24,298	)

See accompanying notes to condensed consolidated financial statements.

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ACELITY L.P. INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited)
	Six months ended June 30,
	2016			2015
Cash flows from operating activities:
Net loss	$	(46,090	)	$	(22,162	)
Adjustments to reconcile net loss to net cash used by operating activities:
Amortization of debt issuance costs, premium and discount	19,352			20,311
Depreciation and other amortization	127,418			132,334
Loss on disposition of assets	1,122			1,265
Amortization of fair value step-up in inventory	164			—
Provision for bad debt	3,429			3,266
Loss on extinguishment of debt	13,716			—
Equity-based compensation expense	1,602			1,305
Deferred income tax benefit	(46,880		)	(30,224		)
Unrealized gain on derivative instruments	(5,944		)	(3,078		)
Unrealized gain on foreign currency	(7,147		)	(16,683		)
Change in assets and liabilities:
Increase in accounts receivable, net	(7,500		)	(968		)
Increase in inventories, net	(5,656		)	(10,856		)
Increase in prepaid expenses and other	(5,133		)	(4,685		)
Decrease in accounts payable	(5,543		)	(3,533		)
Decrease in accrued expenses and other	(74,994		)	(76,509		)
Increase (decrease) in tax liabilities, net	(1,495		)	6,213
Net cash used by operating activities	(39,579		)	(4,004		)
Cash flows from investing activities:
Additions to property, plant and equipment	(35,762		)	(29,574		)
Increase in inventory to be converted into equipment for short-term rental	(98		)	(4,144		)
Dispositions of property, plant and equipment	2			—
Businesses acquired in purchase transactions, net of cash acquired	—			(2,948		)
Increase in identifiable intangible assets and other non-current assets	(3,684		)	(3,646		)
Net cash used by investing activities	(39,542		)	(40,312		)
Cash flows from financing activities:
Distribution to limited partners	—			(55		)
Settlement of equity-based awards	(226		)	(1,348		)
Proceeds from revolving credit facility	25,000			30,000
Proceeds from debt issuance	595,044			—
Repayments of long-term debt and capital lease obligations	(518,570		)	(15,389		)
Debt issuance costs	(12,899		)	(6,256		)
Net cash provided by financing activities	88,349			6,952
Effect of exchange rate changes on cash and cash equivalents	1,560			(5,025		)
Net increase (decrease) in cash and cash equivalents	10,788			(42,389		)
Cash and cash equivalents, beginning of period	88,409			183,541
Cash and cash equivalents, end of period	$	99,197		$	141,152

See accompanying notes to condensed consolidated financial statements

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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 2016 presentation.

The Company has two reportable operating segments: Advanced Wound Therapeutics and Regenerative Medicine. We also have other revenue which consists of contract manufacturing operations performed at our manufacturing facility in Gargrave, England.

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, 2015.

(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. As of June 30, 2016, we have three interest rate derivatives that have not been designated as hedging instruments and three interest rate derivatives that have been designated as cash flow hedge instruments. For our interest rate derivatives that have not been designated as hedging instruments, we recognize the fair value of these instruments as an asset or liability with income or expense recognized in the current period. For our cash flow hedge instruments which begin in December 2016 and extend through December 2021, changes in the fair value are recorded in accumulated other comprehensive income until the underlying transaction affects earnings, and are then reclassified to earnings in the same account as the hedged transaction as long as the derivative is highly effective. At inception, all derivatives are expected to be highly effective. Each interest rate swap is designated as a hedge of interest payments associated with specific principal balances and terms of our debt obligations. These agreements involve the exchange of amounts based on variable interest rates, for amounts based on fixed interest rates over the life of the agreement, without an exchange of the notional amount upon which the payments are based.

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.

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(c)Concentration of Credit Risk

We have a concentration of credit risk with financial institutions related to our derivative instruments. As of June 30, 2016, Morgan Stanley, UBS and HSBC were the counterparties on our interest rate protection agreements consisting of interest rate swap agreements not designated as hedging instruments in notional amounts totaling $458.7 million each. UBS, Nomura and Goldman Sachs were counterparties on our interest rate protection agreements, which become effective in December 2016, consisting of interest rate swap agreements that have been designated as cash flow hedge instruments in notional amounts totaling $291.2 million, $291.2 million and $582.5 million, respectively. 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 January 2015, the Financial Accounting Standard Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-01, "Income Statement -Extraordinary and Unusual Items (Subtopic 225-20)." The objective of this ASU is to simplify the income statement presentation requirements in Subtopic 225-20 by eliminating the concept of extraordinary items. Extraordinary items are events and transactions that are distinguished by their unusual nature and by the infrequency of their occurrence. Eliminating the extraordinary classification simplifies income statement presentation by altogether removing the concept of extraordinary items from consideration. The Company adopted this ASU effective January 1, 2016. The adoption of this update did not have a material impact on our results of operations, financial position or disclosures.

On February 18, 2015, the FASB issued ASU 2015-02, "Consolidation (Topic 810): Amendments to the Consolidation Analysis." This update provides a revised consolidation model for all reporting entities to use in evaluating whether they should consolidate certain legal entities. All legal entities will be subject to reevaluation under this revised consolidation model. The revised consolidation model, among other things, (i) modifies the evaluation of whether limited partnerships and similar legal entities are variable interest entities ("VIEs") or voting interest entities, (ii) eliminates the presumption that a general partner should consolidate a limited partnership, and (iii) modifies the consolidation analysis of reporting entities that are involved with VIEs through fee arrangements and related party relationships. The Company adopted this ASU effective January 1, 2016. The adoption of this update did not have a material impact on our results of operations, financial position or disclosures.

In April 2015, the FASB issued ASU 2015-03, "Interest - Imputation of Interest (Subtopic 835-30)." The objective of this ASU was to simplify the presentation of debt issuance costs in the balance sheet by requiring the presentation of debt issuance costs as a deduction from the carrying amount of the related debt liability instead of a deferred charge. Prior to the issuance of ASU 2015-03, debt issuance costs were required to be presented as an asset in the balance sheet. The Company adopted this ASU effective January 1, 2016, resulting in a $54.7 million retrospective reduction of both our non-current assets and long-term debt, net of current installments, discount and debt issuance costs, as of December 31, 2015.

In September 2015, the FASB issued ASU 2015-16, “Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments.” The amendments in this ASU require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments in this ASU also require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. Additionally, the amendments in this ASU require an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The Company adopted this ASU effective January 1, 2016. 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 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

9

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, 2017, including interim periods within that reporting period. The standard may be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company has not selected a transition method and we are evaluating ASU No. 2014-09 to determine if it will have a material effect on our results of operations, financial position or disclosures.

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements — Going Concern (Subtopic 205-40).” The new guidance addresses management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. Management’s evaluation should be based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The Company is evaluating this 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.

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

In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes,” which changes how deferred taxes are classified on organizations’ balance sheets. The ASU eliminates the current requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, organizations will be required to classify all deferred tax assets and liabilities as noncurrent. The amendments apply to all organizations that present a classified balance sheet. The standard will be effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” This ASU amends existing guidance related to the recognition, measurement, presentation, and disclosure of financial instruments. The ASU eliminates the existing requirement to disclose the methods and significant assumptions used to estimate the fair value required to be disclosed for financial instruments measured at amortized cost on the balance sheet, instead requiring entities to disclose the fair value of these financial instruments using the exit price. This ASU also requires an entity that elects to measure a liability at fair value to present separately in other comprehensive income the portion of the total change in the liability’s fair value that is due to a change in credit risk specifically related to the financial instrument. Additionally, this ASU requires that financial assets and financial liabilities be presented separately by measurement category and form of financial asset on the balance sheet or in the notes to the financial statements. This standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2017. Early adoption is only permitted for separate presentation in other comprehensive income as of the beginning of the fiscal year of adoption. The standard should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. 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.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” The objective of this ASU is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and increasing disclosure requirements to include key information about leasing arrangements. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases (with the exception of short-term leases) at the commencement date. When measuring assets and liabilities arising from a lease, a lessee should include payments to be made in optional periods, and optional payments to purchase, only if the lessee is reasonably certain to exercise the option. This new guidance continues to differentiate between finance leases and operating leases; there have been no significant changes in the recognition, measurement, and presentation of expenses and cash flows. This standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2018. Early adoption is permitted. The standard must be applied using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company is evaluating this update.

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In March 2016, the FASB issued ASU 2016-06, “Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments,” which applies to all entities that are issuers of or investors in debt instruments (or hybrid financial instruments that are determined to have a debt host) with embedded call (put) options. This amendment requires an entity to assess the embedded call (put) options solely in accordance with the four-step decision sequence. Additionally, this ASU clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts, which is one of the criteria for bifurcating an embedded derivative. This standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2016. Early adoption is permitted, including in an interim period. If an entity early adopts in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The standard should be applied on a modified retrospective basis to existing debt instruments as of the beginning of the fiscal year for which the amendments are effective. 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.

In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net).” When another party is involved in providing goods or services to a customer, this ASU provides additional guidance for entities in determining whether the nature of its promise is to provide that good or service to the customer (i.e. the entity is the principal) or to arrange for the good or service to be provided to the customer by the other party (i.e., the entity is the agent). This amendment clarifies that an entity determine whether it is a principal or an agent for each specified good or service promised to a customer and determine the nature of each specified good or service. The effective date and transition for this ASU is the same as ASU 2014-09. 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.

In March 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” The amendment in this ASU affects all organizations that issue share-based payment awards to employees and is intended to simplify several aspects of the accounting for these awards, including income tax consequences, classification of awards as either equity or liabilities, classification on the statement of cash flows, and allowing an accounting policy election to account for forfeitures as they occur. This standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2016. Early adoption is permitted, however an entity must adopt all of the amendments in the same period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes the interim period. Transition guidance is dependent on the individual amendment within the update. 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.

In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing.” This standard clarifies the guidance in ASU 2014-09 for entities in identifying performance obligations, and the licensing implementation guidance. The ASU clarifies that an entity is not required to assess whether promised goods or services are performance obligations if they are immaterial to the contract. This update also allows entities to make a policy election to account for shipping and handling occurring after the customer has obtained control of a good as an activity to fulfill the promise to transfer the good rather than an additional promise. Additionally, the update includes clarification on whether an entity’s promise to grant a customer a license to intellectual property that has a significant standalone functionality or symbolic intellectual property, that does not have significant standalone functionality, include support during the license period. The effective date and transition for this ASU is the same as ASU 2014-09. 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, 2015.

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NOTE 2.Acquisitions and Divestitures

Acquisitions

Spiracur Inc.

On December 1, 2015, we closed the acquisition of the SNAP business from Spiracur Inc., expanding our offering in disposable, portable, mechanical negative pressure wound therapy ("NPWT") technology, and allowing our sales and service channels to accelerate the expansion of the SNAP Therapy System to patients and their care teams around the world who need access to NPWT devices. The aggregate purchase price of this acquisition was $42.5 million, all of which was paid in cash. The allocation of the purchase price to the tangible and identifiable intangible assets was based on their estimated fair values as of the acquisition date using the income approach. 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. Goodwill recognized was primarily attributable to potential operational synergies related to overhead cost reductions. 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 consolidated financial statements include the results of operations from this business combination from the date of the acquisition. Had the transaction occurred at the beginning of fiscal 2015, consolidated results of operations would not have differed materially from reported results.

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

	December 31, 2015			Adjustments			June 30, 2016
Goodwill	$	27,525		$	652		$	28,177
Identifiable intangible assets:
Customer relationships	5,800						5,800
Developed technology	6,400						6,400
Tradenames	2,400						2,400
Tangible assets acquired and liabilities assumed:
Inventories	1,741						1,741
Other current assets	125						125
Property, plant and equipment	250						250
Current liabilities	(713		)	(1,639		)	(2,352		)
Other non-current liabilities	(987		)	987			—
Total purchase price	$	42,541		$	—		$	42,541

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.

Divestitures

There were no divestitures during the six months ended June 30,2016.

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NOTE 3.Supplemental Balance Sheet Data

(a)Accounts Receivable, net

Accounts receivable consist of the following (in thousands):

	June 30, 2016			December 31, 2015
Gross trade accounts receivable:
Billed trade accounts receivable	$	436,388		$	429,556
Unbilled receivables	40,212			48,795
Less:  Allowance for revenue adjustments	(63,708		)	(66,868		)
Gross trade accounts receivable	412,892			411,483
Less:  Allowance for bad debt	(11,485		)	(11,372		)
Net trade accounts receivable	401,407			400,111
Other receivables	12,033			13,420
	$	413,440		$	413,531

(b)       Inventories, net

Inventories consist of the following (in thousands):

	June 30, 2016			December 31, 2015
Finished goods and tissue available for distribution	$	142,877		$	133,293
Goods and tissue in-process	13,239			9,778
Raw materials, supplies, parts and unprocessed tissue	69,037			67,433
	225,153			210,504
Less: Amounts expected to be converted into equipment for short-term rental	(9,695		)	(9,597		)
Reserve for excess and obsolete inventory	(17,875		)	(19,598		)
	$	197,583		$	181,309

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NOTE 4.     Long-Term Debt

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

	June 30, 2016			December 31, 2015
Senior Revolving Credit Facility - due 2017(1)	$	25,000		$	—
Senior Dollar Term F Credit Facility – due 2020(2)	1,702,733			1,907,774
Senior Euro Term F Credit Facility – due 2020(2)	264,647			260,946
Senior Term E-2 Credit Facility– due 2016 (3)	—			312,166
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
7.875% First Lien Senior Secured Notes due 2021	590,000			—
Notional amount of debt	4,944,380			4,842,886
Senior Dollar Term F Credit Facility Discount, net of accretion(2)	(16,686		)	(20,792		)
Senior Euro Term F Credit Facility Discount, net of accretion(2)	(4,946		)	(5,224		)
Senior Term E-2 Credit Facility Discount, net of accretion(3)	—			(1,770		)
Second Lien Senior Secured Notes Discount, net of accretion	(13,303		)	(15,729		)
Senior Unsecured Notes Discount, net of accretion	(1,995		)	(2,227		)
First Lien Senior Secured Notes Premium, net of amortization	9,934			—
Net discount on debt	(26,996		)	(45,742		)
Net debt issuance costs	(48,294		)	(54,651		)
Total debt, net of premium, discount and debt issuance costs	4,869,090			4,742,493
Less:  Current installments	(23,307		)	(22,130		)
	$	4,845,783		$	4,720,363

(1) On February 9, 2016 we entered into Amendment No. 7 and Amendment No. 8 to our senior secured credit facilities. As a result of these amendments, we have aggregate revolving loan commitments under our Revolving Credit Facility of $171.3 million maturing on November 4, 2017, with an additional $28.7 million in revolving loan commitments continuing to mature on November 4, 2016.

(2) On June 16, 2016, we entered into Amendment No. 9 to our senior secured credit facilities. As a result of the amendment we created new classes of Dollar Term F Loans and Euro Term F Loans, having the same rights and obligations as the Dollar Term E-1 Loans and Euro Term E-1 Loans as set forth in the credit agreement and loan documents, except as revised by the amendment.

(3) All amounts outstanding under the Senior Term E-2 Credit Facility were paid in full on February 9, 2016, with proceeds from the offering of the 7.875% First Lien Senior Secured Notes due 2021.

Senior Secured Credit Facilities

Our senior secured credit facilities (the “Senior Secured Credit Facilities”) include 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 June 30, 2016, $25.0 million revolving credit loans were outstanding, while at December 31, 2015, no revolving credit loans were outstanding and we had outstanding letters of credit issued by banks which are party to the Senior Secured Credit Facilities of $36.6 million and $38.2 million, respectively. The $25.0 million borrowing under the Revolving Credit Facility was repaid in July 2016 using cash from operations. In addition, we had $5.8 million and $8.5 million of letters of credit issued by a bank not party to the Senior Secured Credit Facilities as of June 30, 2016, and December 31, 2015, respectively. The capacity of the Revolving Credit Facility is reduced for the $36.6 million and $38.2 million of letters of credit issued by banks which are party to the Senior Secured Credit Facilities as of June 30, 2016, and December 31, 2015, respectively. The resulting availability under the Revolving Credit Facility was $138.4 million and $161.8 million at June 30, 2016, and December 31, 2015, respectively. Commitment fees accrue at a rate of 0.50% on the amounts available under the Revolving Credit Facility.

On February 9, 2016, we entered into Amendment No. 7 to the Senior Secured Credit Facilities ("Amendment No. 7"). Pursuant to Amendment No. 7, among other things, the maturity date of certain consenting lenders’ commitments under the Revolving Credit Facility was extended to November 4, 2017. Promptly after the effectiveness of Amendment No. 7, we permanently

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reduced, or the Permanent Reduction, a portion of the commitments under our Revolving Credit Facility of lenders that did not consent to extend the maturity date of their commitments under the Revolving Credit Facility pursuant to Amendment No. 7. On February 9, 2016, we also entered into Amendment No. 8 to the Senior Secured Credit Facilities ("Amendment No. 8"). In connection with Amendment No. 8, certain lenders agreed to provide incremental commitments under the Revolving Credit Facility in a principal amount equal to the principal amount of the commitments subject to the Permanent Reduction, and such incremental commitments also have a maturity date of November 4, 2017. After giving effect to Amendment No. 7 and Amendment No. 8, we have aggregate revolving loan commitments under our Revolving Credit Facility of $171.3 million maturing on November 4, 2017, with an additional $28.7 million in revolving loan commitments continuing to mature on November 4, 2016.

On June 16, 2016, we entered into Amendment No. 9 to our Senior Secured Credit Facility (“Amendment No. 9”). In connection with Amendment No. 9, we created new classes of Dollar Term F Loans and Euro Term F Loans, having the same rights and obligations as the Dollar Term E-1 Loans and Euro Term E-1 Loans as set forth in the Senior Secured Credit Facilities, except as revised by Amendment No. 9. Lenders exchanged $1.707 billion of Dollar Term E-1 Loans and all Euro Term E-1 Loans for equivalent amounts of Dollar F Loans and Euro Term F Loans, respectively. The Dollar Term F Loans and Euro Term F Loans mature on November 4, 2020. Applicable rates were modified so that (i) Dollar Term F Loans bear interest at a rate equal to, at KCI’s election, a Eurocurrency rate plus 4.00% or an adjusted base rate plus 3.00%, and (ii) Euro Term F Loans bear interest at a rate equal to, at KCI’s election, a Eurocurrency rate plus 4.00% or an adjusted base rate plus 3.00%. The Eurocurrency rate shall be subject to a floor of 1.00%, and the adjusted base rate shall be subject to a floor of 2.00%.

7.875% First Lien Senior Secured Notes

In 2016, Kinetic Concepts, Inc. and KCI USA, Inc., each a wholly-owned subsidiary of Acelity L.P. Inc. (together, the "Notes Issuers"), co-issued 7.875% First Lien Senior Secured notes due 2021 (the "First Lien Notes"). On February 9, 2016, the Notes Issuers, co-issued $400.0 million aggregate principal amount of First Lien Senior Secured notes and used the net proceeds to pay in full all amounts outstanding under the Senior Term E-2 Credit Facility. On June 22, 2016, the Notes Issuers co-issued an additional $190.0 million aggregate principal amount of First Lien Notes and used the net proceeds to pay in full all Dollar Term E-1 Loans that were not exchanged in connection with Amendment No. 9.

Interest. Interest on the First Lien Notes accrues at the rate of 7.875% per annum and is payable semiannually in arrears on each February 15 and August 15, beginning on August 15, 2016. Interest is computed on the basis of a 360-day year consisting of twelve 30-day months.

Collateral. The First Lien Notes are secured on a first priority basis by a perfected security interest in substantially all of the Notes Issuers' and the guarantors' tangible and intangible assets (subject to certain exceptions), including U.S. registered intellectual property and all of the capital stock of each of Acelity L.P. Inc.'s direct and indirect wholly-owned material restricted subsidiaries, including the Notes Issuers (limited, in the case of foreign subsidiaries and domestic foreign holding companies, to 65% of the voting capital stock of material foreign subsidiaries and domestic foreign holding companies). The liens securing the First Lien Notes are subject to permitted liens.

Guarantors. Our Notes Issuers' obligations under the First Lien Notes are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis, by Acelity L.P. Inc., Chiron Topco, Inc., Chiron Holdings, Inc., LifeCell Corporation and each of Acelity L.P. Inc.’s other subsidiaries to the extent such entities guarantee indebtedness under the Senior Secured Credit Facilities or the 10.5% Second Lien Senior Secured Notes due 2018 (the "Second Lien Notes") and the 12.5% Senior Unsecured Notes due 2019 (together with the Second Lien Notes, the "Existing Notes").

Maturity. The First Lien Notes will mature on February 15, 2021.

Covenants. The indenture governing the First Lien Notes contains covenants customary for similar transactions, including limitations or restrictions on our ability to:

• incur additional indebtedness and guarantee indebtedness;

• pay dividends or make other distributions in respect of, or repurchase or redeem, capital stock;

• prepay, redeem or repurchase certain debt;

• make loans and investments;

• sell or otherwise dispose of assets;

• incur liens;

• enter into transactions with affiliates;

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• enter into agreements restricting our subsidiaries’ ability to pay dividends; and

• consolidate, merge or sell all or substantially all of our assets.

Optional Redemption. At any time prior to February 15, 2018, the Notes Issuers, at their option, may redeem up to 40% of the aggregate principal amount of the First Lien Notes with the net cash proceeds of certain equity offerings, at a redemption price equal to 107.875% of the aggregate principal amount of the First Lien Notes being redeemed plus accrued and unpaid interest, if any.

At any time prior to February 15, 2018, the Notes Issuers, at their option, may redeem all or part of the First Lien Notes at a redemption price equal to 100% of the aggregate principal amount of the First Lien Notes to be redeemed, plus a make-whole premium plus accrued and unpaid interest, if any, to the date of redemption.

At any time on or after February 15, 2018, the Notes Issuers may redeem the First Lien Notes, in whole or in part, at the following redemption prices (expressed as percentages of the principal amount) if redeemed during the twelve‑month period commencing on February 15 of the year set forth below, plus, in each case, accrued and unpaid interest thereon, if any, to the date of redemption:

Year	Price
2018	103.938%
2019	101.969%
2020 and thereafter	100.000%

Change of Control. If the Notes Issuers experience certain kinds of changes of control specified in the indenture governing the First Lien Notes, the Notes Issuers will be required to offer to repurchase the First Lien Notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any.

Events of Default. The indenture governing the First Lien Notes contains events of default (subject in certain cases to customary grace and cure periods) including, but not limited to, failure to pay principal or interest, breach of covenants, payment defaults or acceleration of other indebtedness, a bankruptcy or similar proceeding being instituted by or against us, rendering of certain monetary judgments against us, and impairments of loan documentation or security.

Registration. The First Lien Notes and related guarantees have not been and will not be registered under the Securities Act of 1933, as amended, or the securities laws of any other jurisdiction.

Covenants

As of June 30, 2016, we were in compliance with the covenants under the credit agreement governing our Senior Secured Credit Facilities and indentures governing the First Lien Notes and the Existing Notes.

For further information on our long-term debt, see Note 5 of the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

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 June 30, 2016 and December 31, 2015, we were party to three interest rate swap agreements which are used to convert a portion of our outstanding variable-rate debt to a fixed-rate basis. These agreements, which began in December 2013 and extend through December 2016, have not been designated as hedging instruments, and as such, we recognize the fair value of these instruments as an asset or liability with income or expense recognized in the current period. The interest rate swap agreements have receive rates based on the higher of three-month USD LIBOR or 1.25% and pay rates based on fixed rates. Quarterly payments

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under the interest rate swap agreements are due on the last day of March, June, September and December. The aggregate notional amount decreases quarterly by $1.7 million until maturity.

The following table summarizes our interest rate swap agreements which have not been designated as hedging instruments (dollars in thousands):

Outstanding Notional Amount	Fixed Interest Rate
$458,733	2.256%
$458,733	2.249%
$458,733	2.250%

In April 2016, we entered into three additional interest rate swap agreements to convert $1.165 billion of our variable-rate debt to a fixed-rate basis, which begin in December 2016 and extend through December 2021. These agreements have been designated as cash flow hedge instruments. Quarterly payments under the interest rate swap agreements are due on the last day of March, June, September and December. The aggregate notional amount decreases quarterly by amounts ranging from $4.4 million to $84.5 million until maturity.

The following table summarizes our interest rate swap agreements which have been designated as hedging instruments (dollars in thousands):

Outstanding Notional Amount	Fixed Interest Rate
$291,225	1.663%
$291,225	1.668%
$582,450	1.666%

Foreign Currency Exchange Rate Mitigation

At June 30, 2016 and December 31, 2015, we had no outstanding foreign currency exchange contracts.

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 Facilities and fixed rate long-term debt, approximates fair value. The fair value of our borrowings under our Senior Secured Credit Facilities and fixed rate long-term debt was $1.959 billion and $2.946 billion, respectively, at June 30, 2016. The fair value of our borrowings under our Senior Secured Credit Facilities and fixed rate long-term debt was $2.400 billion and $2.257 billion, respectively, at December 31, 2015. The fair value of our long-term debt was estimated based upon open-market trades at or near year end.

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

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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
		June 30, 2016		December 31, 2015			June 30, 2016		December 31, 2015
Derivatives not designated as hedging instruments
Interest rate swap agreements	Prepaid expenses and other	$	—	$	—	Accrued expenses and other	$	6,299	$	12,243
Interest rate swap agreements	Other non-current assets	—		—		Other non-current liabilities	—		—
Derivatives designated as hedging instruments
Interest rate swap agreements	Prepaid expenses and other	—		—		Accrued expenses and other	3,557		—
Interest rate swap agreements	Other non-current assets	—		—		Other non-current liabilities	7,736		—
Total derivatives		$	—	$	—		$	17,592	$	12,243

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

	Three months ended June 30,						Six months ended June 30,
	2016			2015			2016			2015
Interest rate swap agreements	$	(357	)	$	(919	)	$	(1,039	)	$	(4,267	)
Foreign currency exchange contracts	—			—			—			—
	$	(357	)	$	(919	)	$	(1,039	)	$	(4,267	)

Certain of our derivative instruments contain provisions that require compliance with the restrictive covenants of our Senior Secured Credit Facilities. For further information regarding the restrictive covenants of credit facilities, see Note 5 of the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

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

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 June 30, 2016, 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 June 30, 2016 or December 31, 2015.

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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			Accumulated Derivative Loss			Accumulated Other Comprehensive Loss
Balances at December 31, 2015	$	(19,734	)	$	—		$	(19,734	)
Foreign currency translation adjustment, net of tax benefit of $1,339	(8,226		)	—			(8,226		)
Net derivative loss, net of taxes of $0	—			(11,293		)	(11,293		)
Balances at June 30, 2016	$	(27,960	)	$	(11,293	)	$	(39,253	)

During the six months ended June 30, 2016, there were no reclassification adjustments out of accumulated other comprehensive loss to net loss.

NOTE 7.Commitments and Contingencies

Legal Proceedings

Intellectual Property Litigation

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

In September 2013, LifeNet Health ("LifeNet") filed suit against LifeCell Corporation ("LifeCell") in the U.S. District Court for the Eastern District of Virginia, Norfolk Division. LifeNet alleged that two LifeCell products, Strattice and AlloDerm Ready to Use, infringe LifeNet’s U.S. Patent No. 6,569,200, or the ‘200 Patent. On November 18, 2014, a jury found that the ‘200 Patent was not invalid and was infringed and further awarded LifeNet a lump sum damages amount of $34.7 million. As a result of this decision, we recorded a liability of $34.7 million in the fourth quarter of 2014. We disagree with the result at this stage in the litigation and believe that LifeCell’s defenses to the claims are meritorious. LifeCell will continue to vigorously assert its defenses during the appeal stages of this litigation and intends to defend any further claims by LifeNet. LifeCell has filed an appeal in the U.S. Federal Circuit Court of Appeals in Washington D.C. on multiple grounds. The hearing before the Federal Circuit Court of Appeals was held in March 2016. In September 2015, LifeCell filed suit against LifeNet in the U.S. District Court for the District of New Jersey seeking declaratory judgment that LifeCell’s products do not infringe U.S. Patent No. 9,125,971, or the ‘971 Patent, which was issued to LifeNet the same day. In February 2016, a magistrate judge ordered the case transferred to Virginia, which LifeCell is appealing. LifeCell also filed a petition with United States Patent and Trademark Office to invalidate the ‘971 Patent. The ‘971 Patent is a continuation of the ‘200 Patent.

Products Liability Litigation

LifeCell is a defendant in approximately 341 lawsuits filed by individuals alleging personal injury and seeking monetary damages for failed hernia repair procedures using LifeCell’s AlloDerm products. These cases have been consolidated for case management purposes in Middlesex County, New Jersey. The trial court has issued a pre-trial order incorporating the bellwether practice of trying the claims of some plaintiffs to determine the likelihood of settlement or to avoid relitigating common issues in every case. Discovery was completed in four bellwether cases. In August 2015, LifeCell successfullly obtained a summary judgment resulting in the dismissal of two of the four bellwether cases, and the dismissal of the design defect claims in the remaining two bellwether cases. The plaintiffs have appealed these decisions. Trial of the first remaining bellwether case has been postponed and has not yet been rescheduled. 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 vigorously defend these cases . Based on our existing insurance coverage and

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our defenses to these cases, we do not expect them to have a material impact on our results of operations or our financial position. Because discovery of damages has been limited to the four bellwether cases, we do not know the damages allegedly suffered by the remaining plaintiffs. As such, it is impossible to predict or estimate potential losses if our defenses to these cases are unsuccessful.

LifeCell has been named as a defendant in approximately 270 lawsuits in state and U.S. federal courts alleging personal injury and seeking monetary damages for failed gynecological procedures using a human tissue product processed by LifeCell and sold by one of LifeCell’s distributors, Boston Scientific, under the name Repliform. There are approximately 266 LifeCell cases filed in two consolidated dockets in Middlesex County, Massachusetts. The cases are in the initial phase and no discovery has occurred. Two cases are pending in a multi-district U.S. federal case in West Virginia that is proceeding very slowly. LifeCell has been named, but not served, in 12 cases with multiple plaintiffs and defendants in St. Louis, Missouri State court. The St. Louis cases are aimed at the entire pelvic mesh industry and it is unknown at this time if Repliform was actually implanted in any of the plaintiffs. The two remaining cases are in Delaware and Minnesota. Based on our existing insurance coverage and our defenses to these cases, we do not expect them to have a material impact on our results of operations or our financial position. As these cases are in their early stages it is not possible to predict or estimate potential losses if our defenses to these cases are unsuccessful.

Other Litigation

In 2009, KCI received a subpoena from the U.S. Department of Health and Human Services Office of Inspector General, or OIG, seeking records regarding our billing practices under the local coverage policies of the four regional Durable Medical Equipment Medicare Administrative Contractors, or 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 allege 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. Plaintiffs seek recovery of monetary damages. Following the completion of the government’s review and its decision declining to intervene in such suits, the live pleadings were ordered unsealed in 2011. After reviewing the allegations, KCI filed motions seeking the dismissal of the suits on multiple grounds. In 2012, the District Court granted KCI’s motions dismissing all of the claims under the False Claims Act. The cases were appealed to the U.S. Court of Appeals for the Ninth Circuit which reversed the District Court’s dismissal of the suits and remanded the cases back to the District Court for further proceedings. The cases are in their initial phase and the court is considering the objections to it jurisdiction. We believe that our defenses to the claims in the Hartpence and Godecke cases are meritorious and that we have no liability under the False Claims Act for their allegations. However, it is not possible to predict the outcome of this litigation nor is it possible to estimate any damages that may be awarded if we are unsuccessful in the litigation.

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

Other Commitments and Contingencies

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

We also are subject to routine pre-payment and post-payment audits of durable medical equipment (“DME”) claims submitted to Medicare. These audits typically involve a complex medical review, by Medicare or its designated contractors and representatives, of documentation supporting the therapy provided by us. While Medicare requires us to obtain a comprehensive physician order prior to providing products and services, we are not required to obtain the written medical record in advance of therapy as long as the underlying medical records reported to us support the coverage criteria and medical necessity information included in such claim. Following a Medicare request for supporting documentation, we are obligated to procure and submit the underlying medical records retained by various clinical providers, medical facilities and prescribers. Obtaining these medical records in connection with a claims audit may be challenging and, in any event, all of these records are subject to further examination, interpretation and dispute by an auditing authority. Under standard Medicare procedures, we are entitled to demonstrate the sufficiency of documentation and the establishment of medical necessity, and we have the right to appeal any adverse determinations. If a determination is made that our records or the patients’ medical records are insufficient to meet medical necessity or Medicare reimbursement requirements for the claims, we could be subject to denial or overpayment demands for claims submitted for

20

Medicare reimbursement. In the rare event that an audit results in major discrepancies of claims records which lacked proof of medical necessity, Medicare may be entitled to take additional corrective measures, including: extrapolation of the results of the audit across a wider population of claims, submitting recoupment demands for claims other than those examined in the audit, or placing the organization on a full prepayment review. Over the twelve month period ended June 30, 2016, these audits have averaged approximately 12% of our claims. While eventually receiving payment on a high percent of the claims subject to these audits, payment timeliness may range from a few months up to a year resulting in increasing Medicare accounts receivable balances.

On June 30, 2014, KCI entered into a settlement agreement with Wake Forest  University Health Sciences to fully and finally resolve the historical patent and royalty disputes between them relating to negative pressure wound therapy. As of June 30, 2016, the accompanying consolidated balance sheet included $28.4 million under the caption “accrued expenses and other" representing the net present value of remaining payments under the settlement agreement discounted using our incremental borrowing rate as the discount rate. 

21

NOTE 8.Segment Information

The Company is engaged in the rental and sale of advanced wound therapeutics and regenerative medicine products in approximately 80 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).

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

	Three months ended June 30,						Six months ended June 30,
	2016			2015			2016			2015
Revenue:
Advanced Wound Therapeutics	$	354,968		$	354,214		$	694,010		$	691,473
Regenerative Medicine	114,905			103,529			224,779			207,698
Other operations (1)	2,548			3,902			4,998			6,524
Total revenue	$	472,421		$	461,645		$	923,787		$	905,695
Operating earnings:
Advanced Wound Therapeutics	$	107,633		$	117,642		$	207,297		$	230,527
Regenerative Medicine	42,523			35,346			81,798			69,365
Other operations (1)	465			542			1,016			989
Non-allocated costs:
General headquarter expense (2)	(1,160		)	(1,526		)	(2,728		)	(2,949		)
Equity-based compensation	(834		)	(770		)	(1,602		)	(1,305		)
Business optimization and transaction-related expenses (3)	(27,028		)	(16,352		)	(44,713		)	(31,728		)
Acquired intangible asset amortization (4)	(41,160		)	(44,712		)	(83,361		)	(90,589		)
Total non-allocated costs	(70,182		)	(63,360		)	(132,404		)	(126,571		)
Total operating earnings	$	80,439		$	90,170		$	157,707		$	174,310

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

(2) Represents general headquarter expenses not allocated to the individual segments.

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

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

22

NOTE 9.Guarantor Condensed Consolidating Financial Statements

Our First Lien Notes and Existing 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 First Lien Notes or Existing Notes. Subject to the terms of the First Lien Notes and Existing 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 First Lien Notes or Existing Notes indentures,

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

(3) defeasance or discharge of the First Lien Notes or Existing Notes, or

(4) the achievement of investment grade status by the First Lien Notes or Existing 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 First Lien Notes and Existing Notes indentures will not guarantee the First Lien Notes or Existing Notes. As of June 30, 2016, 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.

23

Condensed Consolidating Parent Company, Co-Issuers,

Guarantor and Non-Guarantor Balance Sheet

June 30, 2016

(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	$	25,029		$	1,895	$	71,875	$	—		$	99,197
Accounts receivable, net	—		206,624			59,412		147,404		—			413,440
Inventories, net	—		100,069			113,756		117,663		(133,905		)	197,583
Deferred income taxes	—		34,892			20,470		—		(3,394		)	51,968
Prepaid expenses and other	—		22,001			3,746		243,526		(229,156		)	40,117
Intercompany receivables	166		2,165,186			3,131,862		56,689		(5,353,903		)	—
Total current assets	564		2,553,801			3,331,141		637,157		(5,720,358		)	802,305
Net property, plant and equipment	—		299,623			55,431		113,096		(207,581		)	260,569
Deferred income taxes	—		—			—		22,333		—			22,333
Goodwill	—		2,511,417			732,138		162,920		—			3,406,475
Identifiable intangible assets, net	—		227,982			1,669,038		242,346		—			2,139,366
Other non-current assets	—		1,598			282		3,153		—			5,033
Intercompany loan receivables	—		730,000			443,480		—		(1,173,480		)	—
Intercompany investments	549,533		463,886			—		—		(1,013,419		)	—
	$	550,097	$	6,788,307		$	6,231,510	$	1,181,005	$	(8,114,838	)	$	6,636,081
Liabilities and Equity:
Current liabilities:
Accounts payable	$	—	$	14,957		$	13,619	$	24,142	$	—		$	52,718
Accrued expenses and other	—		188,290			255,801		67,856		(185,645		)	326,302
Intercompany payables	10,340		2,016,381			2,819,472		507,710		(5,353,903		)	—
Current installments of long-term debt	—		23,307			—		—		—			23,307
Income taxes payable	—		—			1,357		3,175		(160		)	4,372
Deferred income taxes	—		—			113,595		3,394		(3,394		)	113,595
Total current liabilities	10,340		2,242,935			3,203,844		606,277		(5,543,102		)	520,294
Long-term debt, net of current installments, premium, discount and debt issuance costs	—		4,845,783			—		—		—			4,845,783
Non-current tax liabilities	—		15,609			15,640		3,284		—			34,533
Deferred income taxes	—		37,762			605,486		38,344		—			681,592
Other non-current liabilities	1,031		8,834			2,524		2,764		—			15,153
Intercompany loan payables	—		438,670			730,000		4,810		(1,173,480		)	—
Intercompany advance	—		—			134,643		—		(134,643		)	—
Total liabilities	11,371		7,589,593			4,692,137		655,479		(6,851,225		)	6,097,355
Total equity	538,726		(801,286		)	1,539,373		525,526		(1,263,613		)	538,726
	$	550,097	$	6,788,307		$	6,231,510	$	1,181,005	$	(8,114,838	)	$	6,636,081

24

Condensed Consolidating Parent Company, Co-Issuers,

Guarantor and Non-Guarantor Balance Sheet

December 31, 2015

(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	$	12,859		$	4,919	$	70,233	$	—		$	88,409
Accounts receivable, net	—		202,377			58,080		153,074		—			413,531
Inventories, net	—		89,929			87,519		104,904		(101,043		)	181,309
Deferred income taxes	—		66,235			8,286		—		—			74,521
Prepaid expenses and other	—		15,199			7,519		244,833		(232,566		)	34,985
Intercompany receivables	166		2,098,061			2,828,639		16,279		(4,943,145		)	—
Total current assets	564		2,484,660			2,994,962		589,323		(5,276,754		)	792,755
Net property, plant and equipment	—		294,855			59,833		127,858		(209,470		)	273,076
Deferred income taxes	—		—			—		29,909		—			29,909
Goodwill	—		2,510,765			732,138		162,920		—			3,405,823
Identifiable intangible assets, net	—		250,635			1,704,521		263,932		—			2,219,088
Other non-current assets	—		1,029			282		4,793		—			6,104
Intercompany loan receivables	—		740,000			436,432		—		(1,176,432		)	—
Intercompany investments	613,540		353,768			—		—		(967,308		)	—
	$	614,104	$	6,635,712		$	5,928,168	$	1,178,735	$	(7,629,964	)	$	6,726,755
Liabilities and Equity:
Current liabilities:
Accounts payable	$	—	$	18,013		$	14,129	$	25,768	$	—		$	57,910
Accrued expenses and other	—		234,036			260,404		68,207		(189,207		)	373,440
Intercompany payables	10,115		1,730,435			2,689,502		513,093		(4,943,145		)	—
Current installments of long-term debt	—		22,130			—		—		—			22,130
Income taxes payable	—		—			—		3,561		—			3,561
Deferred income taxes	—		—			113,595		—		—			113,595
Total current liabilities	10,115		2,004,614			3,077,630		610,629		(5,132,352		)	570,636
Long-term debt, net of current installments, premium, discount and debt issuance costs	—		4,720,363			—		—		—			4,720,363
Non-current tax liabilities	—		15,046			14,965		4,822		—			34,833
Deferred income taxes	—		110,076			609,281		41,380		—			760,737
Other non-current liabilities	824		29,079			4,472		2,646		—			37,021
Intercompany loan payables	—		432,545			740,000		3,887		(1,176,432		)	—
Intercompany advance	—		—			70,045		—		(70,045		)	—
Total liabilities	10,939		7,311,723			4,516,393		663,364		(6,378,829		)	6,123,590
Total equity	603,165		(676,011		)	1,411,775		515,371		(1,251,135		)	603,165
	$	614,104	$	6,635,712		$	5,928,168	$	1,178,735	$	(7,629,964	)	$	6,726,755

25

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 June 30, 2016
	Acelity L.P. Inc. Parent Company			Kinetic Concepts, Inc. and KCI USA, Inc. Borrower			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue:
Rental	$	—		$	155,345		$	—		$	20,077		$	—		$	175,422
Sales	—			99,880			251,328			215,941			(270,150		)	296,999
Total revenue	—			255,225			251,328			236,018			(270,150		)	472,421
Rental expenses	25			81,183			866			35,427			(41,707		)	75,794
Cost of sales	16			94,791			161,862			90,578			(269,129		)	78,118
Gross profit (loss)	(41		)	79,251			88,600			110,013			40,686			318,509
Selling, general and administrative expenses	793			96,350			41,786			43,526			(261		)	182,194
Research and development expenses	—			5,469			5,194			4,054			—			14,717
Acquired intangible asset amortization	—			11,074			19,242			10,843			—			41,159
Operating earnings (loss)	(834		)	(33,642		)	22,378			51,590			40,947			80,439
Non-operating intercompany transactions	—			31,226			163,824			(195,051		)	1			—
Interest income and other	—			16,402			3,112			511			(19,436		)	589
Interest expense	—			(113,372		)	(16,430		)	(62		)	19,436			(110,428		)
Loss on extinguishment of debt	—			(10,107		)	—			—			—			(10,107		)
Foreign currency gain (loss)	—			7,159			853			986			—			8,998
Derivative instruments loss	—			(357		)	—			—			—			(357		)
Earnings (loss) before income taxes (benefit) and equity in earnings (loss) of subsidiaries	(834		)	(102,691		)	173,737			(142,026		)	40,948			(30,866		)
Income tax expense (benefit)	—			(1,171		)	(956		)	(8,624		)	—			(10,751		)
Earnings (loss) before equity in earnings (loss) of subsidiaries	(834		)	(101,520		)	174,693			(133,402		)	40,948			(20,115		)
Equity in earnings (loss) of subsidiaries	(19,281		)	35,654			(133,402		)	—			117,029			—
Net earnings (loss)	$	(20,115	)	$	(65,866	)	$	41,291		$	(133,402	)	$	157,977		$	(20,115	)
Total comprehensive income (loss)	$	(43,732	)	$	(89,483	)	$	17,674		$	(157,019	)	$	228,828		$	(43,732	)

26

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 June 30, 2015
	Acelity L.P. Inc. Parent Company			Kinetic Concepts, Inc. and KCI USA, Inc. Borrower			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue:
Rental	$	—		$	157,674		$	—		$	22,723		$	—		$	180,397
Sales	—			87,967			217,740			203,091			(227,550		)	281,248
Total revenue	—			245,641			217,740			225,814			(227,550		)	461,645
Rental expenses	15			77,207			2,673			40,860			(42,886		)	77,869
Cost of sales	10			90,719			136,937			85,024			(237,181		)	75,509
Gross profit (loss)	(25		)	77,715			78,130			99,930			52,517			308,267
Selling, general and administrative expenses	745			74,827			40,324			43,203			(105		)	158,994
Research and development expenses	—			5,245			5,643			3,503			—			14,391
Acquired intangible asset amortization	—			13,304			19,313			12,095			—			44,712
Operating earnings (loss)	(770		)	(15,661		)	12,850			41,129			52,622			90,170
Non-operating intercompany transactions	—			22,536			188,971			(211,627		)	120			—
Interest income and other	—			16,799			6,335			52			(23,119		)	67
Interest expense	—			(113,673		)	(16,798		)	(22		)	23,119			(107,374		)
Foreign currency gain (loss)	—			(10,211		)	695			2,717			—			(6,799		)
Derivative instruments loss	—			(919		)	—			—			—			(919		)
Earnings (loss) before income taxes (benefit) and equity in earnings (loss) of subsidiaries	(770		)	(101,129		)	192,053			(167,751		)	52,742			(24,855		)
Income tax expense (benefit)	—			(9,452		)	(1,306		)	3,534			—			(7,224		)
Earnings (loss) before equity in earnings (loss) of subsidiaries	(770		)	(91,677		)	193,359			(171,285		)	52,742			(17,631		)
Equity in earnings (loss) of subsidiaries	(16,861		)	19,724			(171,285		)	—			168,422			—
Net earnings (loss)	$	(17,631	)	$	(71,953	)	$	22,074		$	(171,285	)	$	221,164		$	(17,631	)
Total comprehensive income (loss)	$	(12,696	)	$	(67,018	)	$	27,009		$	(166,350	)	$	206,359		$	(12,696	)

27

Condensed Consolidating Parent Company, Co-Issuers,

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

(in thousands)

(unaudited)

	For the six months ended June 30, 2016
	Acelity L.P. Inc. Parent Company			Kinetic Concepts, Inc. and KCI USA, Inc. Borrower			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue:
Rental	$	—		$	305,765		$	—		$	39,756		$	—		$	345,521
Sales	—			190,661			497,271			467,203			(576,869		)	578,266
Total revenue	—			496,426			497,271			506,959			(576,869		)	923,787
Rental expenses	45			162,671			1,042			71,378			(84,447		)	150,689
Cost of sales	16			194,403			322,657			183,259			(543,638		)	156,697
Gross profit (loss)	(61		)	139,352			173,572			252,322			51,216			616,401
Selling, general and administrative expenses	1,541			177,324			84,160			84,259			(646		)	346,638
Research and development expenses	—			11,233			10,213			7,249			—			28,695
Acquired intangible asset amortization	—			22,658			38,606			22,097			—			83,361
Operating earnings (loss)	(1,602		)	(71,863		)	40,593			138,717			51,862			157,707
Non-operating intercompany transactions	—			29,824			170,537			(200,403		)	42			—
Interest income and other	—			32,910			10,729			582			(43,525		)	696
Interest expense	—			(229,460		)	(32,967		)	(78		)	43,525			(218,980		)
Loss on extinguishment of debt	—			(13,716		)	—			—			—			(13,716		)
Foreign currency gain (loss)	—			(5,885		)	1,590			8,963			—			4,668
Derivative instruments loss	—			(1,039		)	—			—			—			(1,039		)
Earnings (loss) before income taxes (benefit) and equity in earnings (loss) of subsidiaries	(1,602		)	(259,229		)	190,482			(52,219		)	51,904			(70,664		)
Income tax expense (benefit)	—			(35,151		)	(1,802		)	12,379			—			(24,574		)
Earnings (loss) before equity in earnings (loss) of subsidiaries	(1,602		)	(224,078		)	192,284			(64,598		)	51,904			(46,090		)
Equity in earnings (loss) of subsidiaries	(44,488		)	110,118			(64,598		)	—			(1,032		)	—
Net earnings (loss)	$	(46,090	)	$	(113,960	)	$	127,686		$	(64,598	)	$	50,872		$	(46,090	)
Total comprehensive income (loss)	$	(65,609	)	$	(133,479	)	$	108,167		$	(84,117	)	$	109,429		$	(65,609	)

28

Condensed Consolidating Parent Company, Co-Issuers,

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

(in thousands)

(unaudited)

	For the six months ended June 30, 2015
	Acelity L.P. Inc. Parent Company			Kinetic Concepts, Inc. and KCI USA, Inc. Borrower			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue:
Rental	$	—		$	307,372		$	—		$	45,864		$	—		$	353,236
Sales	—			171,704			457,431			432,754			(509,430		)	552,459
Total revenue	—			479,076			457,431			478,618			(509,430		)	905,695
Rental expenses	36			153,080			6,140			82,225			(85,434		)	156,047
Cost of sales	53			180,215			296,190			172,998			(500,533		)	148,923
Gross profit (loss)	(89		)	145,781			155,101			223,395			76,537			600,725
Selling, general and administrative expenses	1,216			143,346			77,040			85,511			(356		)	306,757
Research and development expenses	—			10,862			10,539			7,668			—			29,069
Acquired intangible asset amortization	—			27,184			38,769			24,636			—			90,589
Operating earnings (loss)	(1,305		)	(35,611		)	28,753			105,580			76,893			174,310
Non-operating intercompany transactions	—			20,854			219,820			(240,817		)	143			—
Interest income and other	—			33,561			9,398			155			(42,900		)	214
Interest expense	—			(221,455		)	(33,516		)	(29		)	42,900			(212,100		)
Foreign currency gain (loss)	—			24,795			(898		)	(11,296		)	—			12,601
Derivative instruments loss	—			(4,267		)	—			—			—			(4,267		)
Earnings (loss) before income taxes (benefit) and equity in earnings (loss) of subsidiaries	(1,305		)	(182,123		)	223,557			(146,407		)	77,036			(29,242		)
Income tax expense (benefit)	—			(9,037		)	(1,165		)	3,122			—			(7,080		)
Earnings (loss) before equity in earnings (loss) of subsidiaries	(1,305		)	(173,086		)	224,722			(149,529		)	77,036			(22,162		)
Equity in earnings (loss) of subsidiaries	(20,857		)	68,677			(149,529		)	—			101,709			—
Net earnings (loss)	$	(22,162	)	$	(104,409	)	$	75,193		$	(149,529	)	$	178,745		$	(22,162	)
Total comprehensive income (loss)	$	(24,298	)	$	(106,545	)	$	73,057		$	(151,665	)	$	185,153		$	(24,298	)

29

Condensed Consolidating Parent Company, Co-Issuers,

Guarantor and Non-Guarantor Statement of Cash Flows

(in thousands)

(unaudited)

	For the six months ended June 30, 2016
	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)	$	(46,090	)	$	(113,960	)	$	127,686		$	(64,598	)	$	50,872		$	(46,090	)
Adjustments to reconcile net earnings (loss) to net cash provided (used) by operating activities	1,829			228,754			(170,653		)	1,232			(54,651		)	6,511
Net cash provided (used) by operating activities	(44,261		)	114,794			(42,967		)	(63,366		)	(3,779		)	(39,579		)
Cash flows from investing activities:
Net additions to property, plant and equipment	—			(96,612		)	(3,415		)	(21,447		)	85,616			(35,858		)
Decrease (increase) in identifiable intangible assets and other non-current assets	—			(574		)	(4,104		)	994			—			(3,684		)
Net cash provided (used) by investing activities	—			(97,186		)	(7,519		)	(20,453		)	85,616			(39,542		)
Cash flows from financing activities:
Settlement of equity-based awards	(226		)	—			—			—			—			(226		)
Proceeds from revolving credit facility	—			25,000			—			—			—			25,000
Proceeds from debt issuance	—			595,044			—			—			—			595,044
Repayments of long-term debt and capital lease obligations	—			(518,568		)	—			(2		)	—			(518,570		)
Debt issuance costs	—			(12,899		)	—			—			—			(12,899		)
Proceeds (payments) on intercompany loans	—			16,125			(17,048		)	923			—			—
Proceeds (payments) on intercompany investments	44,487			(110,140		)	64,510			82,980			(81,837		)	—
Net cash provided (used) by financing activities	44,261			(5,438		)	47,462			83,901			(81,837		)	88,349
Effect of exchange rate changes on cash and cash equivalents	—			—			—			1,560			—			1,560
Net increase (decrease) in cash and cash equivalents	—			12,170			(3,024		)	1,642			—			10,788
Cash and cash equivalents, beginning of period	398			12,859			4,919			70,233			—			88,409
Cash and cash equivalents, end of period	$	398		$	25,029		$	1,895		$	71,875		$	—		$	99,197

30

Condensed Consolidating Parent Company, Co-Issuers,

Guarantor and Non-Guarantor Statement of Cash Flows

(in thousands)

(unaudited)

	For the six months ended June 30, 2015
	Acelity L.P. Inc. Parent Company			Kinetic Concepts, Inc. and KCI USA, Inc. Borrower			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net earnings (loss)	$	(22,162	)	$	(104,409	)	$	75,193		$	(149,529	)	$	178,745		$	(22,162	)
Adjustments to reconcile net loss to net cash provided (used) by operating activities	2,708			159,336			(126,725		)	42,979			(60,140		)	18,158
Net cash provided (used) by operating activities	(19,454		)	54,927			(51,532		)	(106,550		)	118,605			(4,004		)
Cash flows from investing activities:
Net additions to property, plant and equipment	—			(72,883		)	(4,094		)	(11,729		)	54,988			(33,718		)
Businesses acquired in purchase transactions, net of cash acquired	—			—			—			(2,948		)	—			(2,948		)
Decrease (increase) in identifiable intangible assets and other non-current assets	—			9			(3,595		)	(60		)	—			(3,646		)
Net cash provided (used) by investing activities	—			(72,874		)	(7,689		)	(14,737		)	54,988			(40,312		)
Cash flows from financing activities:
Distribution to limited partners	(55		)	—			—			—			—			(55		)
Settlement of equity-based awards	(1,348		)	—			—			—			—			(1,348		)
Proceeds from revolving credit facility	—			30,000			—			—			—			30,000
Repayments of long-term debt and capital lease obligations	—			(12,916		)	(2,500		)	27			—			(15,389		)
Debt issuance costs	—			(6,256		)	—			—			—			(6,256		)
Proceeds (payments) on intercompany loans	—			16,125			(11,399		)	(4,726		)	—			—
Proceeds (payments) on intercompany investments	20,857			5,830			71,621			75,285			(173,593		)	—
Net cash provided (used) by financing activities	19,454			32,783			57,722			70,586			(173,593		)	6,952
Effect of exchange rate changes on cash and cash equivalents	—			—			—			(5,025		)	—			(5,025		)
Net increase (decrease) in cash and cash equivalents	—			14,836			(1,499		)	(55,726		)	—			(42,389		)
Cash and cash equivalents, beginning of period	398			41,027			1,499			140,617			—			183,541
Cash and cash equivalents, end of period	$	398		$	55,863		$	—		$	84,891		$	—		$	141,152

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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, 2015.

OVERVIEW

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

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

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

We are a global company with approximately 24%, of our revenues generated outside the United States for both the second quarter and first six months of 2016, and our products are available in approximately 80 countries. We have invested in direct sales and marketing channels and distributors in order to expand our presence in these markets to meet the needs of our customers and payers across clinical applications, care settings and clinician groups. A critical component of marketing our portfolio of solutions and services is our sales organization of approximately 1,700 professionals working across multiple care settings and specialties. This sales infrastructure enables us to market our products directly with trained medical professionals in specific care settings in the United States, Canada, Western Europe and key emerging markets. We also have established strong relationships globally with key constituencies, including hospitals, post-acute facilities, group purchasing organizations, or GPOs, payers and other key clinical and economic decision makers by offering comprehensive customer service and clinical education.

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

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Strategic Transformation

Since our 2011 LBO, we have transformed our business strategically, operationally and financially. This transformation resulted from the re-alignment of our product portfolio through acquisitions and divestitures, expansion into developed and emerging markets, increased commitment to product innovation and new product launches and cost saving initiatives. Our transformation culminated in the unification of the businesses of KCI, LifeCell and Systagenix under our Acelity brand, designed to allow us to leverage our complementary product portfolio with our sales, marketing and distribution network to improve our go-to-market approach, drive increased market penetration through cross-selling opportunities and improve sales productivity across our platform.

We initiated this transformation in response to trends and challenges impacting our business and the industry in which we operate. We have managed our business in order to take advantage of the growing global market opportunities for our AWT and Regenerative Medicine products, driven by the following key growth drivers:

• Favorable Global Demographics and Aging Population. The global population aged 65 and older is expected to grow from approximately 610 million people in 2015 to approximately 1.2 billion people by 2035. There is a strong correlation between age and more severe chronic and surgical wounds and increased frequency of hernia and other abdominal wall defects, as well as breast cancer, thus increasing demand for wound care and soft tissue repair products.

• Greater Incidence of Obesity, Diabetes and Other Chronic Conditions. According to the World Health Organization, worldwide obesity has more than doubled since 1980, and in 2014, more than 1.9 billion adults, 18 years and older, were overweight, 600 million of whom were obese. The number of people with diabetes is expected to rise from 415 million in 2015 to 642 million by 2040. Obesity and diabetes can cause other chronic conditions, such as venous insufficiencies that can impair the healing process. Higher incidence of these chronic conditions and co-morbidities in turn lead to increased incidence and complexity of wounds. Obesity is also a contributing factor to the incidence of abdominal wall defects, driving demand for soft tissue repair products.

• Increasing Acceptance of Innovative Technologies and Protocols for Complex Wound Treatment. Education and awareness of the benefits of new wound care technologies and proper wound care protocols have increased as medical institutions and professionals look to reduce healthcare costs by decreasing the length of hospital stays and the risk of infection. This expanded acceptance of best practices has resulted in a shift away from traditional lower-technology wound care modalities and increasing demand for advanced wound care treatments backed by clinical and economic evidence.

• Increasing Awareness of and Demand for Biologics in Complex Soft Tissue Repair Procedures, such as Breast Reconstruction and Abdominal Wall Reconstruction. The increased incidence of breast cancer combined with rising awareness of post-mastectomy treatment options, including the significant psychological benefits of breast reconstruction, have resulted in increasing numbers of patients seeking breast reconstruction following mastectomy or lumpectomy. This is being driven by increasing surgeon awareness of the large body of published clinical data demonstrating better clinical outcomes from using biologic dermal matrices in soft tissue repair procedures.

• Shift to Advanced Treatment Protocols Outside of the United States. In emerging markets, the incidence of chronic wounds continues to be under-addressed. As the middle class continues to grow in emerging markets, we expect there will be an increased adoption of advanced wound dressings due to access to better healthcare and greater awareness of the cost-effectiveness of advanced wound therapies for chronic wounds. In addition, in certain developed markets in Europe, there is increased momentum to provide healthcare in post-acute settings. As these post-acute settings develop further, we believe there will be increased adoption of advanced devices, including NPWT, and advanced wound dressings. While biologic dermal matrices are largely used in the United States for breast reconstruction and abdominal wall reconstruction procedures, synthetic meshes are currently more widely used outside the United States. As the awareness of benefits of biologic dermal matrices in the markets outside the United States increases, we expect that there will be increased adoption of biologic dermal matrices in soft tissue repair procedures in such markets.

33

We have also managed our AWT and Regenerative Medicine businesses in light of the following challenges:

• Decreasing Price and Reimbursement Levels. We have experienced downward pressure on price and reimbursement levels for our AWT devices primarily in the United States and Europe both from public and private third-party payers, including government-funded programs such as Medicare. These decreased pricing and reimbursement levels have resulted from a variety of factors, including strategic pricing reductions in exchange for longer-term contracts and other favorable contract terms, healthcare reform, transition of certain direct markets to indirect models using distributors with greater scale, government austerity measures, Medicare’s durable medical equipment competitive bidding program and the impact of the U.S. government’s sequestration.

• Cost Containment Efforts of Payers. The consolidation of our customers into larger purchasing groups, such as GPOs and IDNs, has increased their negotiating and purchasing power. This trend, in turn, has resulted in increasing pricing pressure on us due to the consolidation of healthcare facilities, purchasing groups and U.S.-based insurance third party payers, pricing concessions and other cost containment efforts, such as competitive bidding processes.

• Increased Competition. We have faced increased competition due to increased number of entrants into our key markets.

As a result of these market pressures, our overall pricing and reimbursement levels for AWT devices have declined. For the years ended December 31, 2015, 2014 and 2013, we estimate global pricing and reimbursement declines for AWT devices totaled $38.7 million, $80.0 million and $42.6 million, respectively. A component of these declines was the impact associated with Medicare’s durable medical equipment competitive bidding program and the U.S. government’s sequestration, which together reduced Medicare reimbursement by $2.8 million, $25.0 million and $14.8 million for the years ended December 31, 2015, 2014 and 2013, respectively.

Medicare’s competitive bidding program and related price reductions in 2016 will further adversely impact our revenues in 2016 and 2017. Our total 2015 U.S. Medicare revenue was approximately 6.7%, or $124.6 million, of our global revenue.  As a result of recent price reductions and competitive bidding activities by the Centers for Medicare and Medicaid Services, or CMS, we expect our aggregate 2016 U.S. Medicare revenue to be reduced by approximately $35 million, as described below.

Of our total 2015 U.S. Medicare revenue, regions representing approximately $73.5 million are subject to estimated price reductions compared to 2015 levels of approximately 46%, with 18% reductions effective January 2016 and additional reductions of approximately 28% effective July 2016.  These reductions are based on fee schedules announced by CMS in 2015 as modified by CMS announcements in the second quarter of 2016.  In addition, our 2015 revenue from regions subject to Round Two of the competitive bidding program was approximately $43.7 million.  In March 2016, CMS announced reimbursement rates in these regions, representing average pricing reductions of approximately 13%, effective July 2016.  In April 2016, we were informed that KCI was not awarded direct supplier contracts in the Round Two regions based on a technical disqualification.  In light of the CMS decision, we have contracted with a number of suppliers in order to provide continued patient access to our products in 116 out of the 117 Round Two regions.   Finally, revenue from regions subject to Round One of the competitive bidding program was $7.4 million for the year ended December 31, 2015. These Round One regions will be subject to pricing changes resulting from the next round of the competitive bidding program, which will become effective January 2017. 

As part of our efforts to address such challenges, trends and uncertainties, we have taken the following actions since our acquisition by the Sponsors:

• Realigning our product portfolio and expanding our addressable market by acquiring the Systagenix wound dressings business, successfully executing tuck-in technology acquisitions, such as the SNAP NPWT product portfolio, and divesting our legacy lower growth, lower margin Therapeutic Support System, or TSS, business and SPY Elite System, or SPY, assets.

• Successfully commercializing new product categories such as incision management, epidermal skin grafting, fat grafting, instillation NPWT, and innovative customer service solutions, including through the launch of iOn Healing mobile application.

• Investing in our commercial infrastructure by increasing our U.S. sales organization, expanding our distributor relationships in foreign countries and re-aligning our sales organization to better address the needs of our customers.

• Expanding and deepening our global footprint through the acquisition of Systagenix which is based in the United Kingdom, as well as increasing market development and product introductions in Europe and emerging markets. Since 2011, we have increased our global presence and now market our products in approximately 80 countries.

34

• Implementing a focused franchise model designed to better align our global research and development and marketing functions with our regional sales forces so we develop and commercialize products and solutions well-tailored to the needs of our key customers and care settings across different geographies.

• Implementing efficiencies in our systems and operations, which continue to drive significant and sustained cost savings. Such cost-savings initiatives consisted of centralizing our international management and our shared service operations into regional hubs in lower cost jurisdictions, integrating acquired businesses into our existing infrastructure, eliminating redundancy within the organization, creating a strategic procurement capability and lowering our costs through the identification of strategic suppliers and negotiation with them of mutually-advantageous contracts reflecting our integrated global purchasing scale and scope.

As a result of our transformation, we have strengthened our business, increased revenue and expanded margins by developing a unified and streamlined global business with product offerings across the continuum of care. These actions enabled us to stabilize our revenues in 2013 and begin to drive AWT revenue increases in 2014 and 2015, despite the pricing pressures in our industry. For the year ended December 31, 2015, global AWT devices volume increased revenue by $105.7 million, compared to an increase of $58.2 million in 2014. In addition, our business optimization and integration efforts have mitigated a considerable portion of the earnings impact relating to pricing headwinds and stranded costs from the sale of the TSS business. Over the past three years, we have realigned our organization following the sale of TSS and the purchase of the Systagenix business, while at the same time investing in commercial infrastructure, global footprint and building our franchise model. We believe these actions have established a solid foundation to support future growth and leverage our infrastructure in an effective and cost efficient manner.

Use of Constant Currency

As exchange rates are an important factor in understanding period-to-period comparisons, we believe in certain cases the presentation of results on a constant currency basis in addition to reported results helps improve investors’ ability to understand our operating results and evaluate our performance in comparison to prior periods. Constant currency information compares results between periods as if exchange rates had remained constant period-over-period. We use results on a constant currency basis as one measure to evaluate our performance. In this quarterly report on Form 10-Q, we calculate constant currency by calculating current-year results using prior-year foreign currency exchange rates. We generally refer to such amounts calculated on a constant currency basis as excluding or adjusting for the impact of foreign currency or being on a constant currency basis. These results should be considered in addition to, not as a substitute for, results reported in accordance with GAAP. Results on a constant currency basis, as we present them, may not be comparable to similarly titled measures used by other companies and are not measures of performance presented in accordance with GAAP.

35

Results of Operations

The following table sets forth, for the periods indicated, our results of operations:

	Three months ended June 30,						Six months ended June 30,
($ in thousands)	2016			2015			2016			2015
Revenue:
Rental	$	175,422		$	180,397		$	345,521		$	353,236
Sales	296,999			281,248			578,266			552,459
Total revenue	472,421			461,645			923,787			905,695
Rental expenses	75,794			77,869			150,689			156,047
Cost of sales	78,118			75,509			156,697			148,923
Gross profit	318,509			308,267			616,401			600,725
Selling, general and administrative expenses	182,194			158,994			346,638			306,757
Research and development expenses	14,717			14,391			28,695			29,069
Acquired intangible asset amortization	41,159			44,712			83,361			90,589
Operating earnings	80,439			90,170			157,707			174,310
Interest income and other	589			67			696			214
Interest expense	(110,428		)	(107,374		)	(218,980		)	(212,100		)
Loss on extinguishment of debt	(10,107		)	—			(13,716		)	—
Foreign currency gain (loss)	8,998			(6,799		)	4,668			12,601
Derivative instruments loss	(357		)	(919		)	(1,039		)	(4,267		)
Loss before income tax benefit	(30,866		)	(24,855		)	(70,664		)	(29,242		)
Income tax benefit	(10,751		)	(7,224		)	(24,574		)	(7,080		)
Net loss	$	(20,115	)	$	(17,631	)	$	(46,090	)	$	(22,162	)

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Revenue by Operating Segment

The following table sets forth, for the periods indicated, business unit revenue:

	Three months ended June 30,
			2016				As		Constant
	2016		(constant		2015		Reported		Currency %
($ in thousands)	(GAAP)		currency)		(GAAP)		% Change		Change(1)
Advanced Wound Therapeutics revenue:
Rental	$	175,422	$	175,184	$	180,397	(2.8	)%	(2.9	)%
Sales	179,546		181,837		173,817		3.3		4.6
Total – Advanced Wound Therapeutics	354,968		357,021		354,214		0.2		0.8
Regenerative Medicine revenue:
Sales	114,905		114,932		103,529		11.0		11.0
Other revenue:
Sales	2,548		2,719		3,902		(34.7	)	(30.3	)
Total consolidated revenue:
Rental	175,422		175,184		180,397		(2.8	)	(2.9	)
Sales	296,999		299,488		281,248		5.6		6.5
Total consolidated revenue	$	472,421	$	474,672	$	461,645	2.3	%	2.8	%
	Six months ended June 30,
			2016				As		Constant
	2016		(constant		2015		Reported		Currency %
($ in thousands)	(GAAP)		currency)		(GAAP)		% Change		Change(1)
Advanced Wound Therapeutics revenue:
Rental	$	345,521	$	346,061	$	353,236	(2.2	)%	(2.0	)%
Sales	348,489		355,447		338,237		3.0		5.1
Total – Advanced Wound Therapeutics	694,010		701,508		691,473		0.4		1.5
Regenerative Medicine revenue:
Sales	224,779		225,104		207,698		8.2		8.4
Other revenue:
Sales	4,998		5,313		6,524		(23.4	)	(18.6	)
Total consolidated revenue:
Rental	345,521		346,061		353,236		(2.2	)	(2.0	)
Sales	578,266		585,864		552,459		4.7		6.0
Total consolidated revenue	$	923,787	$	931,925	$	905,695	2.0	%	2.9	%
(1) Represents percentage change between non-GAAP constant currency revenue and GAAP revenue from the prior year.

37

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 June 30,							Six months ended June 30,
	2016		2015		Change			2016		2015		Change
Advanced Wound Therapeutics revenue	75.2	%	76.8	%	(160	)	bps	75.2	%	76.3	%	(110	)	bps
Regenerative Medicine revenue	24.3	%	22.4	%	190		bps	24.3	%	22.9	%	140		bps
Other revenue	0.5	%	0.8	%	(30	)	bps	0.5	%	0.8	%	(30	)	bps
Total consolidated revenue	100.0	%	100.0	%				100.0	%	100.0	%
Rental revenue	37.1	%	39.1	%	(200	)	bps	37.4	%	39.0	%	(160	)	bps
Sales revenue	62.9	%	60.9	%	200		bps	62.6	%	61.0	%	160		bps
Total consolidated revenue	100.0	%	100.0	%				100.0	%	100.0	%

AWT revenue for the second quarter of 2016 increased $0.8 million, or 0.2%, as reported on a GAAP basis, and $2.8 million, or 0.8%, on a constant currency basis, compared to the prior year period. AWT revenue for the first six months of 2016 increased $2.5 million, or 0.4%, as reported on a GAAP basis, and $10.0 million, or 1.5%, on a constant currency basis, compared to the prior year period. The increase in AWT revenue for the second quarter and first six months of 2016 was due primarily to increased volumes in advanced wound devices and strong Prevena sales, partially offset by a decline in average pricing and decreased revenue from advanced wound dressings in international markets due primarily to timing of distributor ordering patterns. Foreign currency exchange rate movements unfavorably impacted AWT sales revenue by $2.3 million, or 1.3%, and $7.0 million, or 2.1%, for the second quarter and first six months of 2016, respectively, compared to the prior year periods. Excluding the impact of foreign currency exchange rate movements, AWT sales revenue for the second quarter and first six months of 2016 increased $8.0 million, or 4.6%, and $17.2 million, or 5.1%, respectively, compared to the prior year periods due primarily to increased volumes in advanced wound devices, including increased revenue from expansion products, partially offset by a decline in average pricing of our advanced wound devices and decreased revenue from advanced wound dressings in international markets due primarily to timing of distributor ordering patterns. Foreign currency exchange rate movements impacted AWT rental revenue favorably by $0.2 million, or 0.1%, for the second quarter and unfavorably by $0.5 million, or 0.2%, for the first six months of 2016 compared to the prior year periods. Excluding the impact of the foreign currency exchange rate movements, AWT rental revenue for the second quarter and first six months of 2016 decreased $5.2 million, or 2.9%, or $7.2 million, or 2.0%, respectively, compared to the prior year periods due to lower pricing, partially offset by increased rental volumes. Global AWT devices pricing and reimbursement declined approximately $20.3 million in the second quarter of 2016, compared to the prior year period. Of this decline, approximately $4.9 million related to Medicare’s durable medical equipment competitive bidding program and the U.S. government’s sequestration, which further reduced Medicare pricing.

Regenerative Medicine revenue for the second quarter of 2016 increased $11.4 million, or 11.0%, on both a reported GAAP basis and on a constant currency basis, compared to the prior year period. Regenerative Medicine revenue for the first six months of 2016 increased $17.1 million, or 8.2%, as reported on a GAAP basis, and $17.4 million, or 8.4%, on a constant currency basis, compared to the prior year period. The increase in our Regenerative Medicine revenue was primarily driven by volume growth associated with an increase in the number of breast reconstruction procedures using our Regenerative Medicine products, strong Revolve sales, and Strattice growth in Europe, partially offset by decreases in the number of procedures using our abdominal wall reconstruction products as some customers continue choosing lower cost synthetic alternatives for less complex procedures.

Other revenue for the second quarter of 2016 decreased $1.4 million, as reported on a GAAP basis, and $1.2 million, on a constant currency basis, compared to the prior year period. Other revenue for the first six months of 2016 decreased $1.5 million, as reported on a GAAP basis, and $1.2 million, on a constant currency basis, compared to the prior year period. Other revenue consists of contract manufacturing revenue from our manufacturing plant in Gargrave, England.

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Gross Profit and Gross Profit Margin

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

	Three months ended June 30,						Six months ended June 30,
($ in thousands)	2016			2015			2016			2015
Gross profit	$	318,509		$	308,267		$	616,401		$	600,725
Gross profit margin	67.4		%	66.8		%	66.7		%	66.3		%

Gross profit margin increased by 60 basis points to 67.4% in the second quarter of 2016 from 66.8% in the prior year period and increased by 40 basis points to 66.7% in the first six months of 2016 from 66.3% in the prior year period. The increase in the gross profit margin during the second quarter compared to the prior year period was due primarily to lower expenses related to marketing, depreciation and rental fleet maintenance, partially offset by the impact of lower pricing associated with competitive bidding and the expansion of our distributor relationships in foreign countries, which yield lower gross margins. The increase in gross profit margin during the first six months of 2016 compared to the prior year period was due primarily to lower expenses related to marketing, selling, depreciation and rental fleet maintenance, partially offset by the impact of lower pricing associated with competitive bidding and the expansion of our distributor relationships in foreign countries, which yield lower gross margins.

Cost of sales for the second quarter and first six months of 2016 increased due primarily to increased sales volumes of AWT and Regenerative Medicine products. Foreign currency exchange rate movements favorably impacted cost of sales for the second quarter and first six months of 2016 by $0.7 million and $2.1 million, respectively, compared to the prior year periods.

Rental expense for the second quarter benefited from lower expenses related to depreciation, rental fleet maintenance, and marketing of our rental products. Rental expense for the first six months of 2016 benefited from lower expenses related to marketing, selling, depreciation and rental fleet maintenance. Foreign currency exchange rate movements also favorably impacted rental expenses for the second quarter and first six months of 2016 by $0.1 million and $1.2 million, respectively, compared to the prior year periods.

Selling, General and Administrative Expenses

The following table presents selling, general and administrative expenses (“SG&A”) and the percentage relationship to total revenue for the periods indicated:

	Three months ended June 30,						Six months ended June 30,
($ in thousands)	2016			2015			2016			2015
Selling, general and administrative expenses	$	182,194		$	158,994		$	346,638		$	306,757
As a percent of total revenue	38.6		%	34.4		%	37.5		%	33.9		%

SG&A expenses increased by $23.2 million and $39.9 million in the second quarter and first six months of 2016, respectively, compared to the prior year periods. The increase in SG&A expenses for the second quarter and first six months of 2016 was due primarily to investments being made in our focused franchise model, sales force and marketing to drive sales revenue growth. Additionally, we incurred $6.9 million and $7.5 million of expenses in connection with our debt transactions during the second quarter and first six months of 2016, respectively. These increases were partially offset by foreign currency exchange rate movements which favorably impacted SG&A expenses during the second quarter and first six months of 2016 by $1.1 million and $3.7 million, respectively, compared to the prior year periods.

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Research and Development Expenses

The following table presents research and development expenses and the percentage relationship to total revenue for the periods indicated:

	Three months ended June 30,						Six months ended June 30,
($ in thousands)	2016			2015			2016			2015
Research and development expenses	$	14,717		$	14,391		$	28,695		$	29,069
As a percent of total revenue	3.1		%	3.1		%	3.1		%	3.2		%

The decrease in R&D expenses in the first six months of 2016 is due primarily to lower salary-related expenses due to lower employee headcount.

Acquired Intangible Asset Amortization

We have recorded identifiable intangible assets in connection with the 2011 LBO, the 2013 Systagenix acquisition and various technology acquisitions. During the second quarters of 2016 and 2015, we recorded $41.2 million and $44.7 million, respectively, of amortization expense associated with these identifiable intangible assets. During the first six months of 2016 and 2015, we recorded $83.4 million and $90.6 million, respectively, of amortization expense associated with these identifiable intangible assets.

Interest Expense

Interest expense increased to $110.4 million and $219.0 million in the second quarter and first six months of 2016, respectively, compared to $107.4 million and $212.1 million in the prior year periods due to higher interest rates associated with our Senior Secured Credit Facilities and the addition of our 7.875% First Lien Senior Secured Notes resulting in a higher average debt balance. These increases were partially offset by the repayment in full of our Senior Term E-2 Credit Facility and the non-extended portion of our Senior Dollar Term E-1 Credit Facility, a decrease in the Wake Forest settlement liability accretion due to scheduled payments and lower fees associated with our letters of credit.

Loss on Extinguishment of Debt

During the second quarter and first six months of 2016, we recorded $10.1 million and $13.7 million, respectively, of loss on extinguishment of debt associated with amendments to our Senior Secured Credit Facilities and Revolving Credit Facility. The loss on extinguishment of debt included the write off of net debt issuance costs and unamortized net discount of $5.8 million and $4.3 million, respectively, in the second quarter of 2016 and $7.9 million and $5.8 million, respectively, in the first six months of 2016.

Foreign Currency Gain (Loss)

Foreign currency transactions resulted in gains of $9.0 million and $4.7 million during the second quarter and first six months of 2016, respectively, compared to a loss of $6.8 million during the second quarter of 2015 and a gain of $12.6 million during the first six months of 2015. The revaluation of the Term F Euro loan to U.S. dollars represented a foreign currency transaction gain of $7.3 million during the second quarter of 2016 and a loss of $5.0 million during the first six months of 2016 compared to a loss of $9.5 million and gain of $23.0 million in the comparable prior year periods. Excluding the revaluation of the Term F Euro loan to U.S. dollars, we recognized foreign currency exchange gains of $1.7 million and $9.6 million during the second quarter and first six months of 2016, respectively, compared to a gain of $2.7 million and loss of $10.4 million in the comparable prior year periods.

.

Derivative Instruments Loss

During the second quarter and first six months of 2016, we recorded a derivative instruments loss of $0.4 million and$1.0 million, respectively, due primarily to fluctuations in the value of our interest rate derivative instruments. During the second quarter and first six months of 2015, the derivative instruments loss was $0.9 million and $4.3 million, respectively.

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Income Tax Benefit

During the second quarter and first six months of 2016, we recorded an income tax benefit of $10.8 million and $24.6 million, respectively, compared to $7.2 million and $7.1 million, respectively, in the comparable prior year periods. The income tax benefit was primarily due to higher pretax losses in the second quarter and first six months of 2016.

Net Loss

Net loss increased by $2.5 million to $20.1 million for the second quarter of 2016, compared to $17.6 million in the prior year period. This increase during the second quarter was due primarily to the loss on debt extinguishment of $10.1 million and expenses associated with our debt transactions of $6.9 million, partially offset by $9.0 million of foreign currency gains compared to foreign currency losses of $6.8 million in the prior year period. Net loss increased by $23.9 million to $46.1 million for the first six months of 2016, compared to $22.2 million in the prior year period. This increase during the first six months of 2016 was due primarily to the loss on debt extinguishment of $13.7 million, expenses associated with our debt transactions of $7.5 million and a decrease in foreign currency gains to $4.7 million compared to $12.6 million in the prior year period. Also contributing to the higher net loss in the second quarter and first six months of 2016 were the increased investments made in our focused franchise model, sales force and marketing to drive growth, partially offset by revenue growth and expense savings associated with our integration and business optimization efforts.

LIQUIDITY AND CAPITAL RESOURCES

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

Historically, our primary source of liquidity has been cash flow from operations. In addition, we also have a $200.0 million Revolving Credit Facility to provide us with an additional source of liquidity. We anticipate that cash generated from operations together with amounts available under our Revolving Credit Facility will be sufficient to meet our future working capital requirements, capital expenditures and debt service obligations as they become due for the foreseeable future. To the extent additional funds are necessary to meet our long-term liquidity needs as we continue to execute our business strategy, we anticipate that they will be obtained through the incurrence of additional indebtedness, additional equity financings or a combination of these potential sources of funds. In the event that we need access to additional cash, we may not be able to access the credit markets on commercially acceptable terms or at all. Our ability to fund future operating expenses and capital expenditures and our ability to meet future debt service obligations or refinance our indebtedness will depend on our future operating performance which will be affected by general economic, financial and other factors beyond our control, including those described under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

As of June 30, 2016, our cash and cash equivalents were $99.2 million. We are highly leveraged. As of June 30, 2016, we had approximately $4.9 billion of aggregate principal amount of indebtedness outstanding, with an additional $138.4 million of unused commitments available to be borrowed under our Revolving Credit Facility. We also can incur additional indebtedness, including secured indebtedness, if certain specified conditions are met under the credit agreement governing the Senior Secured Credit Facilities and the indentures governing the outstanding notes. Our liquidity requirements will be significant, primarily due to debt service requirements.

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

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Cash Flows

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

	Six months ended June 30,
($ in thousands)	2016			2015
Net cash used by operating activities	$	(39,579	)	$	(4,004	)
Net cash used by investing activities	(39,542		)	(40,312		)
Net cash provided by financing activities	88,349			6,952
Effect of exchange rate changes on cash and cash equivalents	1,560			(5,025		)
Net increase (decrease) in cash and cash equivalents	$	10,788		$	(42,389	)

Operating Activities

For the first six months of 2016, net cash used by operating activities was $39.6 million, compared to $4.0 million for the first six months of 2015. The increase in cash used by operations was primarily driven by lower operating earnings and higher working capital requirements, which was due primarily to revenue growth and an increase in average payment terms associated with the expansion of our distributor program in foreign markets.

Investing Activities

For the first six months of 2016, net cash used by investing activities was $39.5 million, compared to $40.3 million for the first six months of 2015. Net cash used by investing activities was lower during the first six months of 2016 due to business acquisition activities during 2015, partially offset by higher capital expenditures during 2016.

Financing Activities

For the first six months of 2016, net cash provided by financing activities was $88.3 million, compared to $7.0 million for the first six months of 2015. Net cash provided by financing activities increased primarily due to the proceeds from the issuance of 7.875% First Lien Senior Secured Notes, net of the repayment of all amounts outstanding under our Senior Term E-2 Credit Facility and the non-extended portion of our Senior Dollar Term E-1 Credit Facility.

Capital Expenditures

During the first six months of 2016 and 2015, we made capital expenditures of $35.8 million and $29.6 million, respectively. Capital expenditures during the first six months of 2016 and 2015 related primarily to expanding the rental fleet and information technology projects and purchases.

Debt

Senior Secured Credit Facilities

On November 4, 2011, Kinetic Concepts, Inc. and its subsidiary, KCI USA, Inc., as co-borrowers, or collectively, the Borrowers, Acelity L.P. Inc., Chiron Holdings, Inc. and Chiron Topco, Inc. and, with respect to certain representations and warranties, Chiron Guernsey GP Co. Limited, entered into a credit agreement, or the Senior Secured Credit Facilities, with Bank of America, N.A., as administrative and collateral agent, Morgan Stanley Senior Funding, Inc. and Credit Suisse Securities (USA) LLC, as syndication agents, Royal Bank of Canada, as documentation agent, UBS Securities LLC, as co-manager, Bank of America, N.A., Morgan Stanley Senior Funding, Inc., Credit Suisse Securities (USA) LLC and RBC Capital Markets, LLC, as joint lead arrangers and bookrunners, and the lenders party thereto from time to time. The Senior Secured Credit Facilities were amended on November 7, 2012, June 14, 2013, October 28, 2013, November 15, 2013, January 22, 2014, and March 10, 2015, to, among other things, reduce the overall pricing and amend the financial covenants of the Senior Secured Credit Facilities. The Senior Secured Credit Facilities were amended on February 9, 2016, to, among other things, extend the maturity date of certain lenders’ commitments under the Revolving Credit Facility. After giving effect to the February 2016 amendments, we continue to have $200 million of aggregate revolving loan commitments under our Revolving Credit Facility with $28.7 million of the commitments maturing on November 4, 2016, and $171.3 million maturing on November 4, 2017. The Senior Secured Credit Facilities were

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also amended on June 16, 2016 to, among other things, create new classes of Dollar Term F Loans and Euro Term F Loans, having the same rights and obligations as the Dollar Term E-1 Loans and Euro Term E-1 Loans as set forth in the Senior Secured Credit Facilities, except as revised by the amendment. Lenders exchanged $1.707 billion of Dollar Term E-1 Loans and all Euro Term E-1 Loans for equivalent amounts of Dollar F Loans and Euro Term F Loans, respectively. The remaining Dollar Term E-1 Loans were repaid with the proceeds from the issuance of First Lien Notes in June 2016. The Dollar Term F Loans and Euro Term F Loans mature on November 4, 2020.

The following table sets forth the amounts owed under the Senior Secured Credit Facilities, the effective interest rates on such outstanding amounts, and the amount available for additional borrowing thereunder, as of June 30, 2016 (dollars in thousands):

Senior Secured Credit Facilities	Maturity Date		Effective Interest Rate			Amount Outstanding (1)		Amount Available for Additional Borrowing
Senior Revolving Credit Facility	November 2016 November 2017	(2)	6.38	%		$	25,000	$	138,359	(2)(3)
Senior Dollar Term F Credit Facility	November 2020		5.26	%	(4)	1,686,047		—
Senior Euro Term F Credit Facility	November 2020		5.49	%	(4)	259,701		—
Total						$	1,970,748	$	138,359

_____________________

(1) Amount outstanding includes the original issue discount, if applicable.

(2) After giving effect to Amendment No. 7 and Amendment No. 8, we have aggregate revolving loan commitments under the Revolving Credit Facility of $171.3 million maturing on November 4, 2017, with an additional $28.7 million in revolving loan commitments continuing to mature on November 4, 2016.

(3) At June 30, 2016, the amount available under the Revolving Credit Facility reflected a reduction of $36.6 million of letters of credit issued by banks which are party to the Senior Secured Credit Facilities. In addition, we have $5.8 million of letters of credit issued by a bank not party to the Senior Secured Credit Facilities. The $25.0 million borrowing under the Revolving Credit Facility was repaid in July 2016 using cash from operations.

(4) The effective interest rate includes the effect of the original issue discount. Excluding the original issue discount, our nominal interest rate as of June 30, 2016 was 5.00% on the Senior Dollar Term F Credit Facility and 5.00% on the Senior Euro Term F Credit Facility.

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

In connection with the 2011 LBO, on November 4, 2011, Kinetic Concepts, Inc. and its subsidiary, KCI USA, Inc., or collectively, the Notes Issuers, co-issued $1.750 billion aggregate principal amount of 10.5% Second Lien Senior Secured Notes due 2018, or the Second Lien Notes, and $750.0 million aggregate principal amount of 12.5% Senior Unsecured Notes due 2019, or the Unsecured Notes.

As of June 30, 2016, we had outstanding $1,736.7 million aggregate principal amount, net of discount of $13.3 million (net of accretion), of the Second Lien Notes and $610.0 million aggregate principal amount, net of discount of $2.0 million (net of accretion), of the Unsecured Notes.

Interest on the 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 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 Second Lien Notes were issued at a discount resulting in an effective interest rate of 10.87%.

Interest on the 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 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 Unsecured Notes were issued at a discount resulting in an effective interest rate of 12.62%.

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7.875% First Lien Senior Secured Notes

On February 9, 2016, the Notes Issuers co-issued $400.0 million aggregate principal amount of 7.875% First Lien Senior Secured Notes due 2021, or the First Lien Notes. On June 22, 2016, the Notes Issuers co-issued an additional $190.0 million aggregate principal amount of First Lien Notes. Interest on the First Lien Notes accrues at the rate of 7.875% per annum and is payable semi-annually in arrears on each February 15 and August 15, beginning on August 15, 2016, to the persons who are registered holders at the close of business on February 1 and August 1 immediately preceding the applicable interest payment date. The First Lien Notes issued on February 9, 2016 were issued at par and the First Lien Notes issued on June 22, 2016 were issued at a premium to par. These First Lien Notes have an effective interest rate of 7.45%. The First Lien Notes are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis, by Acelity L.P. Inc., Chiron Topco, Inc., Chiron Holdings, Inc., LifeCell Corporation and each of Acelity L.P. Inc.’s other subsidiaries to the extent such entities guarantee indebtedness under the Senior Secured Credit Facilities or the Second Lien Notes and Unsecured Notes. The First Lien Notes and related guarantees are initially secured on a first-priority basis by security interests in all of the Notes Issuers’ and the guarantors’ assets that secure our Senior Secured Credit Facilities on a first-priority basis. The First Lien Notes and related guarantees will not be registered for resale under the Securities Act of 1993, as amended, or the Securities Act, or the securities laws of any other jurisdiction or offered to be exchanged for registered notes under the Securities Act or securities laws of any other jurisdiction. On or after February 15, 2018, the Notes Issuers may redeem some or all of the First Lien Notes at redemption prices (expressed as percentages of the principal amount) equal to 103.938% through February 14, 2019, 101.969% from February 15, 2019 through February 14, 2020, and at par thereafter, plus accrued and unpaid interest, if any, to the redemption date.

Covenants

The credit agreement governing the Senior Secured Credit Facilities and the indentures governing the First Lien Notes, Second Lien Notes and Unsecured Notes contain a number of covenants that, among other things, restrict, subject to certain exceptions, our ability to incur or guarantee additional indebtedness; create liens on assets; engage in mergers and consolidations; sell assets; pay dividends and distributions or repurchase capital stock; repay subordinated indebtedness; engage in certain transactions with affiliates; make investments, loans or advances; make certain acquisitions; and in the case of the credit agreement governing the Senior Secured Credit Facilities, change our lines of business. The credit agreement governing the Senior Secured Credit Facilities and the indentures governing the First Lien Notes, Second Lien Notes and Unsecured Notes also contain change of control provisions and certain customary covenants and events of default.

As of June 30, 2016, we were in compliance with all covenants under the credit agreement governing the Senior Secured Credit Facilities and the indentures governing the First Lien Notes, Second Lien Notes and Unsecured Notes.

For further information on our long-term debt, see Note 4 of the notes to the condensed consolidated financial statements included herein and Note 5 of the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

Interest Rate Protection

At June 30, 2016, and December 31, 2015, we were party to three interest rate swap agreements to convert $1.376 billion and $1.380 billion, respectively, of our outstanding variable-rate debt to a fixed-rate basis. The aggregate notional amount decreases quarterly by $1.7 million until maturity. As of June 30, 2016, these 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.

In April 2016, we entered into three additional interest rate swap agreements to convert $1.165 billion of our variable-rate debt to a fixed-rate basis, which begin in December 2016 and extend through December 2021. These agreements have been designated as cash flow hedge instruments. Quarterly payments under the interest rate swap agreements are due on the last day of March, June, September and December. The aggregate notional amount decreases quarterly by amounts ranging from $4.4 million to $84.5 million until maturity.

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

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Contractual Obligations

On February 9, 2016, we entered into Amendment No. 7 to the Senior Secured Credit Facilities ("Amendment No. 7"). Pursuant to Amendment No. 7, among other things, the maturity date of certain consenting lenders’ commitments under the Revolving Credit Facility was extended to November 4, 2017. Promptly after the effectiveness of Amendment No. 7, we permanently reduced, or the Permanent Reduction, a portion of the commitments under our Revolving Credit Facility of lenders that did not consent to extend the maturity date of their commitments under the Revolving Credit Facility pursuant to Amendment No. 7. On February 9, 2016, we also entered into Amendment No. 8 to the Senior Secured Credit Facilities ("Amendment No. 8"). In connection with Amendment No. 8, certain lenders agreed to provide incremental commitments under the Revolving Credit Facility in a principal amount equal to the principal amount of the commitments subject to the Permanent Reduction, and such incremental commitments also have a maturity date of November 4, 2017. After giving effect to Amendment No. 7 and Amendment No. 8, we have aggregate revolving loan commitments under our Revolving Credit Facility of $171.3 million maturing on November 4, 2017, with an additional $28.7 million in revolving loan commitments continuing to mature on November 4, 2016. On February 9, 2016, the Notes Issuers, co-issued $400.0 million aggregate principal amount of First Lien Senior Secured notes and used the net proceeds to pay in full all amounts outstanding under the Senior Term E-2 Credit Facility.

On June 16, 2016, we entered into Amendment No. 9 to our Senior Secured Credit Facility (“Amendment No. 9”). In connection with Amendment No. 9, we created new classes of Dollar Term F Loans and Euro Term F Loans, having the same rights and obligations as the Dollar Term E-1 Loans and Euro Term E-1 Loans as set forth in the Senior Secured Credit Facilities, except as revised by Amendment No. 9. Lenders exchanged $1.707 billion of Dollar Term E-1 Loans and all Euro Term E-1 Loans for equivalent amounts of Dollar F Loans and Euro Term F Loans, respectively. The Dollar Term F Loans and Euro Term F Loans mature on November 4, 2020. Applicable rates were modified so that (i) Dollar Term F Loans bear interest at a rate equal to, at KCI’s election, a Eurocurrency rate plus 4.00% or an adjusted base rate plus 3.00%, and (ii) Euro Term F Loans bear interest at a rate equal to, at KCI’s election, a Eurocurrency rate plus 4.00% or an adjusted base rate plus 3.00%. The Eurocurrency rate shall be subject to a floor of 1.00%, and the adjusted base rate shall be subject to a floor of 2.00%. On June 22, 2016, the Notes Issuers co-issued an additional $190.0 million aggregate principal amount of First Lien Notes and used the net proceeds to pay in full all Dollar Term E-1 Loans that were not exchanged in connection with Amendment No. 9.

The following table summarizes our contractual cash obligations for long-term debt and related interest as of June 30, 2016, for each of the periods indicated ($ in thousands):

	2016 (1)		2017-2018		2019-2020		Thereafter		Total
Long-term debt obligations(2)	$	13,445	$	1,810,863	$	2,530,072	$	590,000	$	4,944,380
Interest on long-term debt obligations(2)	$	204,967	$	810,922	$	345,189	$	23,231	$	1,384,309

(1) Amounts represent estimated payments due for the last six months of 2016.

(2) Amounts and timing may be different from our estimated payments due to potential voluntary prepayments, borrowings, interest rate fluctuations and foreign currency exchange rate fluctuations.

Other than Amendment No. 7, Amendment No. 8, Amendment No. 9, the issuance of First Lien Notes and the repayment of Term E-1 and Term E-2 loans with the proceeds therefrom, there have been no material changes, outside of the ordinary course of business, in our outstanding contractual obligations since December 31, 2015.

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, 2015 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.

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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, 2015. 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, 2015 under the heading “Quantitative and Qualitative Disclosures About Market Risk.”

ITEM 4.CONTROLS AND PROCEDURES

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

Changes in Internal Control over Financial Reporting. There have not been any changes in our internal control over financial reporting (as such term is defined by paragraph (f) of Rule 13a-15) under the Exchange Act, during the second fiscal quarter of 2016 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, 2015.

46

ITEM 6.EXHIBITS

A list of all exhibits filed or included as part of this quarterly report on Form 10-Q is as follows:
Exhibit Number	Description
3.1	Declaration of Centaur Guernsey L.P. Inc. (filed as Exhibit 3.3 to our Registration Statement on Form S-4 filed on October 1, 2012).
3.2	Certificate of Registration of Acelity L.P. Inc. (filed as Exhibit 3.2 to our Form 10-Q for the quarterly period ended September 30, 2014).
3.3	Third Amended and Restated Limited Partnership Agreement of Acelity L.P. Inc. (filed as Exhibit 3.3 to our Form 10-Q for the quarterly period ended September 30, 2014).
4.1	Indenture, dated as of February 9, 2016, by and among Kinetic Concepts, Inc., KCI USA, Inc., the guarantors party thereto and Wilmington Trust, N.A., as trustee and as collateral agent (filed as Exhibit 4.1 to our Form 8-K filed on February 10, 2016).
4.2	Global Notes representing 7.875% First Lien Senior Secured Notes due 2021 (filed as Exhibit 4.2 to our Form 8-K filed on June 22, 2016).
4.3	Officer’s Certificate, dated June 22, 2016 (filed as Exhibit 4.3 to our Form 8-K filed on June 22, 2016).
10.1	Amendment No. 9 to the Credit Agreement, dated as of June 16, 2016, by and among Kinetic Concepts, Inc., KCI USA, Inc., Chiron Guernsey GP Co. Limited, the guarantors party thereto, the lenders party thereto, and Bank of America, N.A., as Administrative Agent for the lenders (filed as Exhibit 10.1 to our Form 8-K filed on June 17, 2016).
†31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated August 2, 2016.
†31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated August 2, 2016.
†32.1	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated August 2, 2016.
†100	Interactive data files.
	†      Exhibit filed herewith.

47

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 August 2, 2016.

	ACELITY L.P. INC.
	(REGISTRANT)
Date: August 2, 2016	By:	/s/ Joseph F. Woody
		Joseph F. Woody
		Principal Executive Officer
		(Duly Authorized Officer)
Date: August 2, 2016	By:	/s/ Thomas W. Casey
		Thomas W. Casey
		Principal Financial Officer
		(Duly Authorized Officer)

48

EXHIBITS

Exhibit Number	Description
3.1	Declaration of Centaur Guernsey L.P. Inc. (filed as Exhibit 3.3 to our Registration Statement on Form S-4 filed on October 1, 2012).
3.2	Certificate of Registration of Acelity L.P. Inc. (filed as Exhibit 3.2 to our Form 10-Q for the quarterly period ended September 30, 2014).
3.3	Third Amended and Restated Limited Partnership Agreement of Acelity L.P. Inc. (filed as Exhibit 3.3 to our Form 10-Q for the quarterly period ended September 30, 2014).
4.1	Indenture, dated as of February 9, 2016, by and among Kinetic Concepts, Inc., KCI USA, Inc., the guarantors party thereto and Wilmington Trust, N.A., as trustee and as collateral agent (filed as Exhibit 4.1 to our Form 8-K filed on February 10, 2016).
4.2	Global Notes representing 7.875% First Lien Senior Secured Notes due 2021 (filed as Exhibit 4.2 to our Form 8-K filed on June 22, 2016).
4.3	Officer’s Certificate, dated June 22, 2016 (filed as Exhibit 4.3 to our Form 8-K filed on June 22, 2016).
10.1	Amendment No. 9 to the Credit Agreement, dated as of June 16, 2016, by and among Kinetic Concepts, Inc., KCI USA, Inc., Chiron Guernsey GP Co. Limited, the guarantors party thereto, the lenders party thereto, and Bank of America, N.A., as Administrative Agent for the lenders (filed as Exhibit 10.1 to our Form 8-K filed on June 17, 2016).
†31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated August 2, 2016.
†31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated August 2, 2016.
†32.1	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated August 2, 2016.
†100	Interactive data files.
	†      Exhibit filed herewith.

49

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.

/s/ JOSEPH F. WOODY

Joseph F. Woody

Chief Executive Officer

August 2, 2016

EX-31.2

Exhibit 31.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

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

I, Thomas W. Casey, 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.

/s/ THOMAS W. CASEY

Thomas W. Casey

Chief Financial Officer

August 2, 2016

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 June 30, 2016 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 Thomas W. Casey, as Chief Financial Officer 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.

/s/ JOSEPH F. WOODY

Joseph F. Woody

Chief Executive Officer

August 2, 2016

/s/ THOMAS W. CASEY

Thomas W. Casey

Chief Financial Officer

August 2, 2016

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Aug. 01, 2016
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
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2016
Class A-1 Partnership Units [Member]
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		341,410,891.610
Class A-2 Partnership Units [Member]
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		717,038.800

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 99,197	$ 88,409
Accounts receivable, net	413,440	413,531
Inventories, net	197,583	181,309
Deferred income taxes	51,968	74,521
Prepaid expenses and other	40,117	34,985
Total current assets	802,305	792,755
Net property, plant and equipment	260,569	273,076
Deferred income taxes	22,333	29,909
Goodwill	3,406,475	3,405,823
Identifiable intangible assets, net	2,139,366	2,219,088
Other non-current assets	5,033	6,104
Total assets	6,636,081	6,726,755
Current liabilities:
Accounts payable	52,718	57,910
Accrued expenses and other	326,302	373,440
Current installments of long-term debt	23,307	22,130
Income taxes payable	4,372	3,561
Deferred income taxes	113,595	113,595
Total current liabilities	520,294	570,636
Long-term debt, net of current installments, premium, discount and debt issuance costs	4,845,783	4,720,363
Non-current tax liabilities	34,533	34,833
Deferred income taxes	681,592	760,737
Other non-current liabilities	15,153	37,021
Total liabilities	6,097,355	6,123,590
Equity:
General partner’s capital	0	0
Limited partners’ capital	577,979	622,899
Accumulated other comprehensive loss, net	(39,253)	(19,734)
Total equity	538,726	603,165
Total liabilities and shareholders' equity	$ 6,636,081	$ 6,726,755

XML

Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Revenue:
Rental	$ 175,422	$ 180,397	$ 345,521	$ 353,236
Sales	296,999	281,248	578,266	552,459
Total revenue	472,421	461,645	923,787	905,695
Rental expenses	75,794	77,869	150,689	156,047
Cost of sales	78,118	75,509	156,697	148,923
Gross profit (loss)	318,509	308,267	616,401	600,725
Selling, general and administrative expenses	182,194	158,994	346,638	306,757
Research and development expenses	14,717	14,391	28,695	29,069
Acquired intangible asset amortization	41,159	44,712	83,361	90,589
Operating earnings (loss)	80,439	90,170	157,707	174,310
Interest income and other	589	67	696	214
Interest expense	(110,428)	(107,374)	(218,980)	(212,100)
Loss on extinguishment of debt	(10,107)	0	(13,716)	0
Foreign currency gain (loss)	8,998	(6,799)	4,668	12,601
Derivative instruments loss	(357)	(919)	(1,039)	(4,267)
Earnings (loss) before income tax expense (benefit)	(30,866)	(24,855)	(70,664)	(29,242)
Income tax benefit	(10,751)	(7,224)	(24,574)	(7,080)
Net earnings (loss)	$ (20,115)	$ (17,631)	$ (46,090)	$ (22,162)

XML

Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Net loss	$ (20,115)	$ (17,631)	$ (46,090)	$ (22,162)
Foreign currency translation adjustment, net of tax benefit (expense) of $584 and $1,339 in 2016 and ($317) and ($952) in 2015	(12,324)	4,935	(8,226)	(2,136)
Net derivative loss, net of taxes of $0	(11,293)	0	(11,293)	0
Total comprehensive income (loss)	$ (43,732)	$ (12,696)	$ (65,609)	$ (24,298)

XML

Condensed Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Foreign currency translation adjustment, net of tax benefit (expense) of $584 and $1,339 in 2016 and ($317) and ($952) in 2015	$ 584	$ (317)	$ 1,339	$ (952)

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Cash flows from operating activities:
Net loss	$ (46,090)	$ (22,162)
Adjustments to reconcile net loss to net cash used by operating activities:
Amortization of debt issuance costs, premium and discount	19,352	20,311
Depreciation and other amortization	127,418	132,334
Loss on disposition of assets	1,122	1,265
Amortization of fair value step-up in inventory	164	0
Provision for bad debt	3,429	3,266
Loss on extinguishment of debt	13,716	0
Equity-based compensation expense	1,602	1,305
Deferred income tax benefit	(46,880)	(30,224)
Unrealized gain on derivative instruments	(5,944)	(3,078)
Unrealized gain on foreign currency	(7,147)	(16,683)
Change in assets and liabilities:
Increase in accounts receivable, net	(7,500)	(968)
Increase in inventories, net	(5,656)	(10,856)
Increase in prepaid expenses and other	(5,133)	(4,685)
Decrease in accounts payable	(5,543)	(3,533)
Decrease in accrued expenses and other	(74,994)	(76,509)
Increase (decrease) in tax liabilities, net	(1,495)	6,213
Net cash provided (used) by operating activities	(39,579)	(4,004)
Cash flows from investing activities
Additions to property, plant and equipment	(35,762)	(29,574)
Increase in inventory to be converted into equipment for short-term rental	(98)	(4,144)
Dispositions of property, plant and equipment	2	0
Businesses acquired in purchase transactions, net of cash acquired	0	(2,948)
Increase in identifiable intangible assets and other non-current assets	(3,684)	(3,646)
Net cash provided (used) by investing activities	(39,542)	(40,312)
Cash flows from financing activities:
Distribution to limited partners	0	(55)
Settlement of equity-based awards	(226)	(1,348)
Proceeds from revolving credit facility	25,000	30,000
Proceeds from debt issuance	595,044	0
Repayments of long-term debt and capital lease obligations	(518,570)	(15,389)
Debt issuance costs	(12,899)	(6,256)
Net cash provided (used) by financing activities	88,349	6,952
Effect of exchange rate changes on cash and cash equivalents	1,560	(5,025)
Net increase (decrease) in cash and cash equivalents	10,788	(42,389)
Cash and cash equivalents, beginning of period	88,409	183,541
Cash and cash equivalents, end of period	$ 99,197	$ 141,152

XML

Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2016

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 2016 presentation.

The Company has two reportable operating segments: Advanced Wound Therapeutics and Regenerative Medicine. We also have other revenue which consists of contract manufacturing operations performed at our manufacturing facility in Gargrave, England.

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, 2015.

(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. As of June 30, 2016, we have three interest rate derivatives that have not been designated as hedging instruments and three interest rate derivatives that have been designated as cash flow hedge instruments. For our interest rate derivatives that have not been designated as hedging instruments, we recognize the fair value of these instruments as an asset or liability with income or expense recognized in the current period. For our cash flow hedge instruments which begin in December 2016 and extend through December 2021, changes in the fair value are recorded in accumulated other comprehensive income until the underlying transaction affects earnings, and are then reclassified to earnings in the same account as the hedged transaction as long as the derivative is highly effective. At inception, all derivatives are expected to be highly effective. Each interest rate swap is designated as a hedge of interest payments associated with specific principal balances and terms of our debt obligations. These agreements involve the exchange of amounts based on variable interest rates, for amounts based on fixed interest rates over the life of the agreement, without an exchange of the notional amount upon which the payments are based.

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 June 30, 2016, Morgan Stanley, UBS and HSBC were the counterparties on our interest rate protection agreements consisting of interest rate swap agreements not designated as hedging instruments in notional amounts totaling $458.7 million each. UBS, Nomura and Goldman Sachs were counterparties on our interest rate protection agreements, which become effective in December 2016, consisting of interest rate swap agreements that have been designated as cash flow hedge instruments in notional amounts totaling $291.2 million, $291.2 million and $582.5 million, respectively. 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 January 2015, the Financial Accounting Standard Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-01, "Income Statement -Extraordinary and Unusual Items (Subtopic 225-20)." The objective of this ASU is to simplify the income statement presentation requirements in Subtopic 225-20 by eliminating the concept of extraordinary items. Extraordinary items are events and transactions that are distinguished by their unusual nature and by the infrequency of their occurrence. Eliminating the extraordinary classification simplifies income statement presentation by altogether removing the concept of extraordinary items from consideration. The Company adopted this ASU effective January 1, 2016. The adoption of this update did not have a material impact on our results of operations, financial position or disclosures.

On February 18, 2015, the FASB issued ASU 2015-02, "Consolidation (Topic 810): Amendments to the Consolidation Analysis." This update provides a revised consolidation model for all reporting entities to use in evaluating whether they should consolidate certain legal entities. All legal entities will be subject to reevaluation under this revised consolidation model. The revised consolidation model, among other things, (i) modifies the evaluation of whether limited partnerships and similar legal entities are variable interest entities ("VIEs") or voting interest entities, (ii) eliminates the presumption that a general partner should consolidate a limited partnership, and (iii) modifies the consolidation analysis of reporting entities that are involved with VIEs through fee arrangements and related party relationships. The Company adopted this ASU effective January 1, 2016. The adoption of this update did not have a material impact on our results of operations, financial position or disclosures.

In April 2015, the FASB issued ASU 2015-03, "Interest - Imputation of Interest (Subtopic 835-30)." The objective of this ASU was to simplify the presentation of debt issuance costs in the balance sheet by requiring the presentation of debt issuance costs as a deduction from the carrying amount of the related debt liability instead of a deferred charge. Prior to the issuance of ASU 2015-03, debt issuance costs were required to be presented as an asset in the balance sheet. The Company adopted this ASU effective January 1, 2016, resulting in a $54.7 million retrospective reduction of both our non-current assets and long-term debt, net of current installments, discount and debt issuance costs, as of December 31, 2015.

In September 2015, the FASB issued ASU 2015-16, “Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments.” The amendments in this ASU require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments in this ASU also require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. Additionally, the amendments in this ASU require an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The Company adopted this ASU effective January 1, 2016. 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 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, 2017, including interim periods within that reporting period. The standard may be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company has not selected a transition method and we are evaluating ASU No. 2014-09 to determine if it will have a material effect on our results of operations, financial position or disclosures.

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements — Going Concern (Subtopic 205-40).” The new guidance addresses management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. Management’s evaluation should be based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The Company is evaluating this 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.

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

In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes,” which changes how deferred taxes are classified on organizations’ balance sheets. The ASU eliminates the current requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, organizations will be required to classify all deferred tax assets and liabilities as noncurrent. The amendments apply to all organizations that present a classified balance sheet. The standard will be effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” This ASU amends existing guidance related to the recognition, measurement, presentation, and disclosure of financial instruments. The ASU eliminates the existing requirement to disclose the methods and significant assumptions used to estimate the fair value required to be disclosed for financial instruments measured at amortized cost on the balance sheet, instead requiring entities to disclose the fair value of these financial instruments using the exit price. This ASU also requires an entity that elects to measure a liability at fair value to present separately in other comprehensive income the portion of the total change in the liability’s fair value that is due to a change in credit risk specifically related to the financial instrument. Additionally, this ASU requires that financial assets and financial liabilities be presented separately by measurement category and form of financial asset on the balance sheet or in the notes to the financial statements. This standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2017. Early adoption is only permitted for separate presentation in other comprehensive income as of the beginning of the fiscal year of adoption. The standard should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. 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.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” The objective of this ASU is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and increasing disclosure requirements to include key information about leasing arrangements. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases (with the exception of short-term leases) at the commencement date. When measuring assets and liabilities arising from a lease, a lessee should include payments to be made in optional periods, and optional payments to purchase, only if the lessee is reasonably certain to exercise the option. This new guidance continues to differentiate between finance leases and operating leases; there have been no significant changes in the recognition, measurement, and presentation of expenses and cash flows. This standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2018. Early adoption is permitted. The standard must be applied using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company is evaluating this update.

In March 2016, the FASB issued ASU 2016-06, “Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments,” which applies to all entities that are issuers of or investors in debt instruments (or hybrid financial instruments that are determined to have a debt host) with embedded call (put) options. This amendment requires an entity to assess the embedded call (put) options solely in accordance with the four-step decision sequence. Additionally, this ASU clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts, which is one of the criteria for bifurcating an embedded derivative. This standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2016. Early adoption is permitted, including in an interim period. If an entity early adopts in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The standard should be applied on a modified retrospective basis to existing debt instruments as of the beginning of the fiscal year for which the amendments are effective. 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.

In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net).” When another party is involved in providing goods or services to a customer, this ASU provides additional guidance for entities in determining whether the nature of its promise is to provide that good or service to the customer (i.e. the entity is the principal) or to arrange for the good or service to be provided to the customer by the other party (i.e., the entity is the agent). This amendment clarifies that an entity determine whether it is a principal or an agent for each specified good or service promised to a customer and determine the nature of each specified good or service. The effective date and transition for this ASU is the same as ASU 2014-09. 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.

In March 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” The amendment in this ASU affects all organizations that issue share-based payment awards to employees and is intended to simplify several aspects of the accounting for these awards, including income tax consequences, classification of awards as either equity or liabilities, classification on the statement of cash flows, and allowing an accounting policy election to account for forfeitures as they occur. This standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2016. Early adoption is permitted, however an entity must adopt all of the amendments in the same period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes the interim period. Transition guidance is dependent on the individual amendment within the update. 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.

In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing.” This standard clarifies the guidance in ASU 2014-09 for entities in identifying performance obligations, and the licensing implementation guidance. The ASU clarifies that an entity is not required to assess whether promised goods or services are performance obligations if they are immaterial to the contract. This update also allows entities to make a policy election to account for shipping and handling occurring after the customer has obtained control of a good as an activity to fulfill the promise to transfer the good rather than an additional promise. Additionally, the update includes clarification on whether an entity’s promise to grant a customer a license to intellectual property that has a significant standalone functionality or symbolic intellectual property, that does not have significant standalone functionality, include support during the license period. The effective date and transition for this ASU is the same as ASU 2014-09. 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, 2015.

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Acquisitions and Divestitures Acquisitions and Divestitures

6 Months Ended

Jun. 30, 2016

Business Combinations and Discontinued Operations [Abstract]

Acquisitions and Divestitures

Acquisitions and Divestitures

Acquisitions

Spiracur Inc.

On December 1, 2015, we closed the acquisition of the SNAP business from Spiracur Inc., expanding our offering in disposable, portable, mechanical negative pressure wound therapy ("NPWT") technology, and allowing our sales and service channels to accelerate the expansion of the SNAP Therapy System to patients and their care teams around the world who need access to NPWT devices. The aggregate purchase price of this acquisition was $42.5 million, all of which was paid in cash. The allocation of the purchase price to the tangible and identifiable intangible assets was based on their estimated fair values as of the acquisition date using the income approach. 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. Goodwill recognized was primarily attributable to potential operational synergies related to overhead cost reductions. 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 consolidated financial statements include the results of operations from this business combination from the date of the acquisition. Had the transaction occurred at the beginning of fiscal 2015, consolidated results of operations would not have differed materially from reported results.

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

	December 31, 2015			Adjustments			June 30, 2016
Goodwill	$	27,525		$	652		$	28,177
Identifiable intangible assets:
Customer relationships	5,800						5,800
Developed technology	6,400						6,400
Tradenames	2,400						2,400
Tangible assets acquired and liabilities assumed:
Inventories	1,741						1,741
Other current assets	125						125
Property, plant and equipment	250						250
Current liabilities	(713		)	(1,639		)	(2,352		)
Other non-current liabilities	(987		)	987			—
Total purchase price	$	42,541		$	—		$	42,541

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.

Divestitures

There were no divestitures during the six months ended June 30,2016.

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Supplemental Balance Sheet Data

6 Months Ended

Jun. 30, 2016

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):

	June 30, 2016			December 31, 2015
Gross trade accounts receivable:
Billed trade accounts receivable	$	436,388		$	429,556
Unbilled receivables	40,212			48,795
Less:  Allowance for revenue adjustments	(63,708		)	(66,868		)
Gross trade accounts receivable	412,892			411,483
Less:  Allowance for bad debt	(11,485		)	(11,372		)
Net trade accounts receivable	401,407			400,111
Other receivables	12,033			13,420
	$	413,440		$	413,531

(b)       Inventories, net

Inventories consist of the following (in thousands):

	June 30, 2016			December 31, 2015
Finished goods and tissue available for distribution	$	142,877		$	133,293
Goods and tissue in-process	13,239			9,778
Raw materials, supplies, parts and unprocessed tissue	69,037			67,433
	225,153			210,504
Less: Amounts expected to be converted into equipment for short-term rental	(9,695		)	(9,597		)
Reserve for excess and obsolete inventory	(17,875		)	(19,598		)
	$	197,583		$	181,309

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Long-Term Debt

6 Months Ended

Jun. 30, 2016

Debt Disclosure [Abstract]

Long-Term Debt

Long-Term Debt

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

	June 30, 2016			December 31, 2015
Senior Revolving Credit Facility - due 2017(1)	$	25,000		$	—
Senior Dollar Term F Credit Facility – due 2020(2)	1,702,733			1,907,774
Senior Euro Term F Credit Facility – due 2020(2)	264,647			260,946
Senior Term E-2 Credit Facility– due 2016 (3)	—			312,166
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
7.875% First Lien Senior Secured Notes due 2021	590,000			—
Notional amount of debt	4,944,380			4,842,886
Senior Dollar Term F Credit Facility Discount, net of accretion(2)	(16,686		)	(20,792		)
Senior Euro Term F Credit Facility Discount, net of accretion(2)	(4,946		)	(5,224		)
Senior Term E-2 Credit Facility Discount, net of accretion(3)	—			(1,770		)
Second Lien Senior Secured Notes Discount, net of accretion	(13,303		)	(15,729		)
Senior Unsecured Notes Discount, net of accretion	(1,995		)	(2,227		)
First Lien Senior Secured Notes Premium, net of amortization	9,934			—
Net discount on debt	(26,996		)	(45,742		)
Net debt issuance costs	(48,294		)	(54,651		)
Total debt, net of premium, discount and debt issuance costs	4,869,090			4,742,493
Less:  Current installments	(23,307		)	(22,130		)
	$	4,845,783		$	4,720,363

(1) On February 9, 2016 we entered into Amendment No. 7 and Amendment No. 8 to our senior secured credit facilities. As a result of these amendments, we have aggregate revolving loan commitments under our Revolving Credit Facility of $171.3 million maturing on November 4, 2017, with an additional $28.7 million in revolving loan commitments continuing to mature on November 4, 2016.

(2) On June 16, 2016, we entered into Amendment No. 9 to our senior secured credit facilities. As a result of the amendment we created new classes of Dollar Term F Loans and Euro Term F Loans, having the same rights and obligations as the Dollar Term E-1 Loans and Euro Term E-1 Loans as set forth in the credit agreement and loan documents, except as revised by the amendment.

(3) All amounts outstanding under the Senior Term E-2 Credit Facility were paid in full on February 9, 2016, with proceeds from the offering of the 7.875% First Lien Senior Secured Notes due 2021.

Senior Secured Credit Facilities

Our senior secured credit facilities (the “Senior Secured Credit Facilities”) include 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 June 30, 2016, $25.0 million revolving credit loans were outstanding, while at December 31, 2015, no revolving credit loans were outstanding and we had outstanding letters of credit issued by banks which are party to the Senior Secured Credit Facilities of $36.6 million and $38.2 million, respectively. The $25.0 million borrowing under the Revolving Credit Facility was repaid in July 2016 using cash from operations. In addition, we had $5.8 million and $8.5 million of letters of credit issued by a bank not party to the Senior Secured Credit Facilities as of June 30, 2016, and December 31, 2015, respectively. The capacity of the Revolving Credit Facility is reduced for the $36.6 million and $38.2 million of letters of credit issued by banks which are party to the Senior Secured Credit Facilities as of June 30, 2016, and December 31, 2015, respectively. The resulting availability under the Revolving Credit Facility was $138.4 million and $161.8 million at June 30, 2016, and December 31, 2015, respectively. Commitment fees accrue at a rate of 0.50% on the amounts available under the Revolving Credit Facility.

On February 9, 2016, we entered into Amendment No. 7 to the Senior Secured Credit Facilities ("Amendment No. 7"). Pursuant to Amendment No. 7, among other things, the maturity date of certain consenting lenders’ commitments under the Revolving Credit Facility was extended to November 4, 2017. Promptly after the effectiveness of Amendment No. 7, we permanently reduced, or the Permanent Reduction, a portion of the commitments under our Revolving Credit Facility of lenders that did not consent to extend the maturity date of their commitments under the Revolving Credit Facility pursuant to Amendment No. 7. On February 9, 2016, we also entered into Amendment No. 8 to the Senior Secured Credit Facilities ("Amendment No. 8"). In connection with Amendment No. 8, certain lenders agreed to provide incremental commitments under the Revolving Credit Facility in a principal amount equal to the principal amount of the commitments subject to the Permanent Reduction, and such incremental commitments also have a maturity date of November 4, 2017. After giving effect to Amendment No. 7 and Amendment No. 8, we have aggregate revolving loan commitments under our Revolving Credit Facility of $171.3 million maturing on November 4, 2017, with an additional $28.7 million in revolving loan commitments continuing to mature on November 4, 2016.

On June 16, 2016, we entered into Amendment No. 9 to our Senior Secured Credit Facility (“Amendment No. 9”). In connection with Amendment No. 9, we created new classes of Dollar Term F Loans and Euro Term F Loans, having the same rights and obligations as the Dollar Term E-1 Loans and Euro Term E-1 Loans as set forth in the Senior Secured Credit Facilities, except as revised by Amendment No. 9. Lenders exchanged $1.707 billion of Dollar Term E-1 Loans and all Euro Term E-1 Loans for equivalent amounts of Dollar F Loans and Euro Term F Loans, respectively. The Dollar Term F Loans and Euro Term F Loans mature on November 4, 2020. Applicable rates were modified so that (i) Dollar Term F Loans bear interest at a rate equal to, at KCI’s election, a Eurocurrency rate plus 4.00% or an adjusted base rate plus 3.00%, and (ii) Euro Term F Loans bear interest at a rate equal to, at KCI’s election, a Eurocurrency rate plus 4.00% or an adjusted base rate plus 3.00%. The Eurocurrency rate shall be subject to a floor of 1.00%, and the adjusted base rate shall be subject to a floor of 2.00%.

7.875% First Lien Senior Secured Notes

In 2016, Kinetic Concepts, Inc. and KCI USA, Inc., each a wholly-owned subsidiary of Acelity L.P. Inc. (together, the "Notes Issuers"), co-issued 7.875% First Lien Senior Secured notes due 2021 (the "First Lien Notes"). On February 9, 2016, the Notes Issuers, co-issued $400.0 million aggregate principal amount of First Lien Senior Secured notes and used the net proceeds to pay in full all amounts outstanding under the Senior Term E-2 Credit Facility. On June 22, 2016, the Notes Issuers co-issued an additional $190.0 million aggregate principal amount of First Lien Notes and used the net proceeds to pay in full all Dollar Term E-1 Loans that were not exchanged in connection with Amendment No. 9.

Interest. Interest on the First Lien Notes accrues at the rate of 7.875% per annum and is payable semiannually in arrears on each February 15 and August 15, beginning on August 15, 2016. Interest is computed on the basis of a 360-day year consisting of twelve 30-day months.

Collateral. The First Lien Notes are secured on a first priority basis by a perfected security interest in substantially all of the Notes Issuers' and the guarantors' tangible and intangible assets (subject to certain exceptions), including U.S. registered intellectual property and all of the capital stock of each of Acelity L.P. Inc.'s direct and indirect wholly-owned material restricted subsidiaries, including the Notes Issuers (limited, in the case of foreign subsidiaries and domestic foreign holding companies, to 65% of the voting capital stock of material foreign subsidiaries and domestic foreign holding companies). The liens securing the First Lien Notes are subject to permitted liens.

Guarantors. Our Notes Issuers' obligations under the First Lien Notes are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis, by Acelity L.P. Inc., Chiron Topco, Inc., Chiron Holdings, Inc., LifeCell Corporation and each of Acelity L.P. Inc.’s other subsidiaries to the extent such entities guarantee indebtedness under the Senior Secured Credit Facilities or the 10.5% Second Lien Senior Secured Notes due 2018 (the "Second Lien Notes") and the 12.5% Senior Unsecured Notes due 2019 (together with the Second Lien Notes, the "Existing Notes").

Maturity. The First Lien Notes will mature on February 15, 2021.

Covenants. The indenture governing the First Lien Notes contains covenants customary for similar transactions, including limitations or restrictions on our ability to:

• incur additional indebtedness and guarantee indebtedness;

• pay dividends or make other distributions in respect of, or repurchase or redeem, capital stock;

• prepay, redeem or repurchase certain debt;

• make loans and investments;

• sell or otherwise dispose of assets;

• incur liens;

• enter into transactions with affiliates;

• enter into agreements restricting our subsidiaries’ ability to pay dividends; and

• consolidate, merge or sell all or substantially all of our assets.

Optional Redemption. At any time prior to February 15, 2018, the Notes Issuers, at their option, may redeem up to 40% of the aggregate principal amount of the First Lien Notes with the net cash proceeds of certain equity offerings, at a redemption price equal to 107.875% of the aggregate principal amount of the First Lien Notes being redeemed plus accrued and unpaid interest, if any.

At any time prior to February 15, 2018, the Notes Issuers, at their option, may redeem all or part of the First Lien Notes at a redemption price equal to 100% of the aggregate principal amount of the First Lien Notes to be redeemed, plus a make-whole premium plus accrued and unpaid interest, if any, to the date of redemption.

At any time on or after February 15, 2018, the Notes Issuers may redeem the First Lien Notes, in whole or in part, at the following redemption prices (expressed as percentages of the principal amount) if redeemed during the twelve‑month period commencing on February 15 of the year set forth below, plus, in each case, accrued and unpaid interest thereon, if any, to the date of redemption:

Year	Price
2018	103.938%
2019	101.969%
2020 and thereafter	100.000%

Change of Control. If the Notes Issuers experience certain kinds of changes of control specified in the indenture governing the First Lien Notes, the Notes Issuers will be required to offer to repurchase the First Lien Notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any.

Events of Default. The indenture governing the First Lien Notes contains events of default (subject in certain cases to customary grace and cure periods) including, but not limited to, failure to pay principal or interest, breach of covenants, payment defaults or acceleration of other indebtedness, a bankruptcy or similar proceeding being instituted by or against us, rendering of certain monetary judgments against us, and impairments of loan documentation or security.

Registration. The First Lien Notes and related guarantees have not been and will not be registered under the Securities Act of 1933, as amended, or the securities laws of any other jurisdiction.

Covenants

As of June 30, 2016, we were in compliance with the covenants under the credit agreement governing our Senior Secured Credit Facilities and indentures governing the First Lien Notes and the Existing Notes.

For further information on our long-term debt, see Note 5 of the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

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Derivative Financial Instruments and Fair Value Measurements

6 Months Ended

Jun. 30, 2016

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 June 30, 2016 and December 31, 2015, we were party to three interest rate swap agreements which are used to convert a portion of our outstanding variable-rate debt to a fixed-rate basis. These agreements, which began in December 2013 and extend through December 2016, have not been designated as hedging instruments, and as such, we recognize the fair value of these instruments as an asset or liability with income or expense recognized in the current period. The interest rate swap agreements have receive rates based on the higher of three-month USD LIBOR or 1.25% and pay rates based on fixed rates. Quarterly payments under the interest rate swap agreements are due on the last day of March, June, September and December. The aggregate notional amount decreases quarterly by $1.7 million until maturity.

The following table summarizes our interest rate swap agreements which have not been designated as hedging instruments (dollars in thousands):

Outstanding Notional Amount	Fixed Interest Rate
$458,733	2.256%
$458,733	2.249%
$458,733	2.250%

In April 2016, we entered into three additional interest rate swap agreements to convert $1.165 billion of our variable-rate debt to a fixed-rate basis, which begin in December 2016 and extend through December 2021. These agreements have been designated as cash flow hedge instruments. Quarterly payments under the interest rate swap agreements are due on the last day of March, June, September and December. The aggregate notional amount decreases quarterly by amounts ranging from $4.4 million to $84.5 million until maturity.

The following table summarizes our interest rate swap agreements which have been designated as hedging instruments (dollars in thousands):

Outstanding Notional Amount	Fixed Interest Rate
$291,225	1.663%
$291,225	1.668%
$582,450	1.666%

Foreign Currency Exchange Rate Mitigation

At June 30, 2016 and December 31, 2015, we had no outstanding foreign currency exchange contracts.

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 Facilities and fixed rate long-term debt, approximates fair value. The fair value of our borrowings under our Senior Secured Credit Facilities and fixed rate long-term debt was $1.959 billion and $2.946 billion, respectively, at June 30, 2016. The fair value of our borrowings under our Senior Secured Credit Facilities and fixed rate long-term debt was $2.400 billion and $2.257 billion, respectively, at December 31, 2015. The fair value of our long-term debt was estimated based upon open-market trades at or near year end.

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

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

	Asset Derivatives					Liability Derivatives
	Balance Sheet Location	Fair Value				Balance Sheet Location	Fair Value
		June 30, 2016		December 31, 2015			June 30, 2016		December 31, 2015
Derivatives not designated as hedging instruments
Interest rate swap agreements	Prepaid expenses and other	$	—	$	—	Accrued expenses and other	$	6,299	$	12,243
Interest rate swap agreements	Other non-current assets	—		—		Other non-current liabilities	—		—
Derivatives designated as hedging instruments
Interest rate swap agreements	Prepaid expenses and other	—		—		Accrued expenses and other	3,557		—
Interest rate swap agreements	Other non-current assets	—		—		Other non-current liabilities	7,736		—
Total derivatives		$	—	$	—		$	17,592	$	12,243

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

	Three months ended June 30,						Six months ended June 30,
	2016			2015			2016			2015
Interest rate swap agreements	$	(357	)	$	(919	)	$	(1,039	)	$	(4,267	)
Foreign currency exchange contracts	—			—			—			—
	$	(357	)	$	(919	)	$	(1,039	)	$	(4,267	)

Certain of our derivative instruments contain provisions that require compliance with the restrictive covenants of our Senior Secured Credit Facilities. For further information regarding the restrictive covenants of credit facilities, see Note 5 of the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

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

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 June 30, 2016, 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 June 30, 2016 or December 31, 2015.

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Accumulated Other Comprehensive Income (Loss)

6 Months Ended

Jun. 30, 2016

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			Accumulated Derivative Loss			Accumulated Other Comprehensive Loss
Balances at December 31, 2015	$	(19,734	)	$	—		$	(19,734	)
Foreign currency translation adjustment, net of tax benefit of $1,339	(8,226		)	—			(8,226		)
Net derivative loss, net of taxes of $0	—			(11,293		)	(11,293		)
Balances at June 30, 2016	$	(27,960	)	$	(11,293	)	$	(39,253	)

During the six months ended June 30, 2016, there were no reclassification adjustments out of accumulated other comprehensive loss to net loss.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2016

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 September 2013, LifeNet Health ("LifeNet") filed suit against LifeCell Corporation ("LifeCell") in the U.S. District Court for the Eastern District of Virginia, Norfolk Division. LifeNet alleged that two LifeCell products, Strattice and AlloDerm Ready to Use, infringe LifeNet’s U.S. Patent No. 6,569,200, or the ‘200 Patent. On November 18, 2014, a jury found that the ‘200 Patent was not invalid and was infringed and further awarded LifeNet a lump sum damages amount of $34.7 million. As a result of this decision, we recorded a liability of $34.7 million in the fourth quarter of 2014. We disagree with the result at this stage in the litigation and believe that LifeCell’s defenses to the claims are meritorious. LifeCell will continue to vigorously assert its defenses during the appeal stages of this litigation and intends to defend any further claims by LifeNet. LifeCell has filed an appeal in the U.S. Federal Circuit Court of Appeals in Washington D.C. on multiple grounds. The hearing before the Federal Circuit Court of Appeals was held in March 2016. In September 2015, LifeCell filed suit against LifeNet in the U.S. District Court for the District of New Jersey seeking declaratory judgment that LifeCell’s products do not infringe U.S. Patent No. 9,125,971, or the ‘971 Patent, which was issued to LifeNet the same day. In February 2016, a magistrate judge ordered the case transferred to Virginia, which LifeCell is appealing. LifeCell also filed a petition with United States Patent and Trademark Office to invalidate the ‘971 Patent. The ‘971 Patent is a continuation of the ‘200 Patent.

Products Liability Litigation

LifeCell is a defendant in approximately 341 lawsuits filed by individuals alleging personal injury and seeking monetary damages for failed hernia repair procedures using LifeCell’s AlloDerm products. These cases have been consolidated for case management purposes in Middlesex County, New Jersey. The trial court has issued a pre-trial order incorporating the bellwether practice of trying the claims of some plaintiffs to determine the likelihood of settlement or to avoid relitigating common issues in every case. Discovery was completed in four bellwether cases. In August 2015, LifeCell successfullly obtained a summary judgment resulting in the dismissal of two of the four bellwether cases, and the dismissal of the design defect claims in the remaining two bellwether cases. The plaintiffs have appealed these decisions. Trial of the first remaining bellwether case has been postponed and has not yet been rescheduled. 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 vigorously defend these cases . Based on our existing insurance coverage and our defenses to these cases, we do not expect them to have a material impact on our results of operations or our financial position. Because discovery of damages has been limited to the four bellwether cases, we do not know the damages allegedly suffered by the remaining plaintiffs. As such, it is impossible to predict or estimate potential losses if our defenses to these cases are unsuccessful.

LifeCell has been named as a defendant in approximately 270 lawsuits in state and U.S. federal courts alleging personal injury and seeking monetary damages for failed gynecological procedures using a human tissue product processed by LifeCell and sold by one of LifeCell’s distributors, Boston Scientific, under the name Repliform. There are approximately 266 LifeCell cases filed in two consolidated dockets in Middlesex County, Massachusetts. The cases are in the initial phase and no discovery has occurred. Two cases are pending in a multi-district U.S. federal case in West Virginia that is proceeding very slowly. LifeCell has been named, but not served, in 12 cases with multiple plaintiffs and defendants in St. Louis, Missouri State court. The St. Louis cases are aimed at the entire pelvic mesh industry and it is unknown at this time if Repliform was actually implanted in any of the plaintiffs. The two remaining cases are in Delaware and Minnesota. Based on our existing insurance coverage and our defenses to these cases, we do not expect them to have a material impact on our results of operations or our financial position. As these cases are in their early stages it is not possible to predict or estimate potential losses if our defenses to these cases are unsuccessful.

Other Litigation

In 2009, KCI received a subpoena from the U.S. Department of Health and Human Services Office of Inspector General, or OIG, seeking records regarding our billing practices under the local coverage policies of the four regional Durable Medical Equipment Medicare Administrative Contractors, or 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 allege 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. Plaintiffs seek recovery of monetary damages. Following the completion of the government’s review and its decision declining to intervene in such suits, the live pleadings were ordered unsealed in 2011. After reviewing the allegations, KCI filed motions seeking the dismissal of the suits on multiple grounds. In 2012, the District Court granted KCI’s motions dismissing all of the claims under the False Claims Act. The cases were appealed to the U.S. Court of Appeals for the Ninth Circuit which reversed the District Court’s dismissal of the suits and remanded the cases back to the District Court for further proceedings. The cases are in their initial phase and the court is considering the objections to it jurisdiction. We believe that our defenses to the claims in the Hartpence and Godecke cases are meritorious and that we have no liability under the False Claims Act for their allegations. However, it is not possible to predict the outcome of this litigation nor is it possible to estimate any damages that may be awarded if we are unsuccessful in the litigation.

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

Other Commitments and Contingencies

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

We also are subject to routine pre-payment and post-payment audits of durable medical equipment (“DME”) claims submitted to Medicare. These audits typically involve a complex medical review, by Medicare or its designated contractors and representatives, of documentation supporting the therapy provided by us. While Medicare requires us to obtain a comprehensive physician order prior to providing products and services, we are not required to obtain the written medical record in advance of therapy as long as the underlying medical records reported to us support the coverage criteria and medical necessity information included in such claim. Following a Medicare request for supporting documentation, we are obligated to procure and submit the underlying medical records retained by various clinical providers, medical facilities and prescribers. Obtaining these medical records in connection with a claims audit may be challenging and, in any event, all of these records are subject to further examination, interpretation and dispute by an auditing authority. Under standard Medicare procedures, we are entitled to demonstrate the sufficiency of documentation and the establishment of medical necessity, and we have the right to appeal any adverse determinations. If a determination is made that our records or the patients’ medical records are insufficient to meet medical necessity or Medicare reimbursement requirements for the claims, we could be subject to denial or overpayment demands for claims submitted for Medicare reimbursement. In the rare event that an audit results in major discrepancies of claims records which lacked proof of medical necessity, Medicare may be entitled to take additional corrective measures, including: extrapolation of the results of the audit across a wider population of claims, submitting recoupment demands for claims other than those examined in the audit, or placing the organization on a full prepayment review. Over the twelve month period ended June 30, 2016, these audits have averaged approximately 12% of our claims. While eventually receiving payment on a high percent of the claims subject to these audits, payment timeliness may range from a few months up to a year resulting in increasing Medicare accounts receivable balances.

On June 30, 2014, KCI entered into a settlement agreement with Wake Forest  University Health Sciences to fully and finally resolve the historical patent and royalty disputes between them relating to negative pressure wound therapy. As of June 30, 2016, the accompanying consolidated balance sheet included $28.4 million under the caption “accrued expenses and other" representing the net present value of remaining payments under the settlement agreement discounted using our incremental borrowing rate as the discount rate.

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Segment Information

6 Months Ended

Jun. 30, 2016

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 approximately 80 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).

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

	Three months ended June 30,						Six months ended June 30,
	2016			2015			2016			2015
Revenue:
Advanced Wound Therapeutics	$	354,968		$	354,214		$	694,010		$	691,473
Regenerative Medicine	114,905			103,529			224,779			207,698
Other operations (1)	2,548			3,902			4,998			6,524
Total revenue	$	472,421		$	461,645		$	923,787		$	905,695
Operating earnings:
Advanced Wound Therapeutics	$	107,633		$	117,642		$	207,297		$	230,527
Regenerative Medicine	42,523			35,346			81,798			69,365
Other operations (1)	465			542			1,016			989
Non-allocated costs:
General headquarter expense (2)	(1,160		)	(1,526		)	(2,728		)	(2,949		)
Equity-based compensation	(834		)	(770		)	(1,602		)	(1,305		)
Business optimization and transaction-related expenses (3)	(27,028		)	(16,352		)	(44,713		)	(31,728		)
Acquired intangible asset amortization (4)	(41,160		)	(44,712		)	(83,361		)	(90,589		)
Total non-allocated costs	(70,182		)	(63,360		)	(132,404		)	(126,571		)
Total operating earnings	$	80,439		$	90,170		$	157,707		$	174,310

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

(2) Represents general headquarter expenses not allocated to the individual segments.

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

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

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Guarantor Condensed Consolidating Financial Statements

6 Months Ended

Jun. 30, 2016

Guarantor Condensed Consolidating Financial Statements [Abstract]

Guarantor Condensed Consolidating Financial Statements

Guarantor Condensed Consolidating Financial Statements

Our First Lien Notes and Existing 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 First Lien Notes or Existing Notes. Subject to the terms of the First Lien Notes and Existing 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 First Lien Notes or Existing Notes indentures,

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

(3) defeasance or discharge of the First Lien Notes or Existing Notes, or

(4) the achievement of investment grade status by the First Lien Notes or Existing 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 First Lien Notes and Existing Notes indentures will not guarantee the First Lien Notes or Existing Notes. As of June 30, 2016, 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

June 30, 2016

(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	$	25,029		$	1,895	$	71,875	$	—		$	99,197
Accounts receivable, net	—		206,624			59,412		147,404		—			413,440
Inventories, net	—		100,069			113,756		117,663		(133,905		)	197,583
Deferred income taxes	—		34,892			20,470		—		(3,394		)	51,968
Prepaid expenses and other	—		22,001			3,746		243,526		(229,156		)	40,117
Intercompany receivables	166		2,165,186			3,131,862		56,689		(5,353,903		)	—
Total current assets	564		2,553,801			3,331,141		637,157		(5,720,358		)	802,305
Net property, plant and equipment	—		299,623			55,431		113,096		(207,581		)	260,569
Deferred income taxes	—		—			—		22,333		—			22,333
Goodwill	—		2,511,417			732,138		162,920		—			3,406,475
Identifiable intangible assets, net	—		227,982			1,669,038		242,346		—			2,139,366
Other non-current assets	—		1,598			282		3,153		—			5,033
Intercompany loan receivables	—		730,000			443,480		—		(1,173,480		)	—
Intercompany investments	549,533		463,886			—		—		(1,013,419		)	—
	$	550,097	$	6,788,307		$	6,231,510	$	1,181,005	$	(8,114,838	)	$	6,636,081
Liabilities and Equity:
Current liabilities:
Accounts payable	$	—	$	14,957		$	13,619	$	24,142	$	—		$	52,718
Accrued expenses and other	—		188,290			255,801		67,856		(185,645		)	326,302
Intercompany payables	10,340		2,016,381			2,819,472		507,710		(5,353,903		)	—
Current installments of long-term debt	—		23,307			—		—		—			23,307
Income taxes payable	—		—			1,357		3,175		(160		)	4,372
Deferred income taxes	—		—			113,595		3,394		(3,394		)	113,595
Total current liabilities	10,340		2,242,935			3,203,844		606,277		(5,543,102		)	520,294
Long-term debt, net of current installments, premium, discount and debt issuance costs	—		4,845,783			—		—		—			4,845,783
Non-current tax liabilities	—		15,609			15,640		3,284		—			34,533
Deferred income taxes	—		37,762			605,486		38,344		—			681,592
Other non-current liabilities	1,031		8,834			2,524		2,764		—			15,153
Intercompany loan payables	—		438,670			730,000		4,810		(1,173,480		)	—
Intercompany advance	—		—			134,643		—		(134,643		)	—
Total liabilities	11,371		7,589,593			4,692,137		655,479		(6,851,225		)	6,097,355
Total equity	538,726		(801,286		)	1,539,373		525,526		(1,263,613		)	538,726
	$	550,097	$	6,788,307		$	6,231,510	$	1,181,005	$	(8,114,838	)	$	6,636,081

Condensed Consolidating Parent Company, Co-Issuers,

Guarantor and Non-Guarantor Balance Sheet

December 31, 2015

(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	$	12,859		$	4,919	$	70,233	$	—		$	88,409
Accounts receivable, net	—		202,377			58,080		153,074		—			413,531
Inventories, net	—		89,929			87,519		104,904		(101,043		)	181,309
Deferred income taxes	—		66,235			8,286		—		—			74,521
Prepaid expenses and other	—		15,199			7,519		244,833		(232,566		)	34,985
Intercompany receivables	166		2,098,061			2,828,639		16,279		(4,943,145		)	—
Total current assets	564		2,484,660			2,994,962		589,323		(5,276,754		)	792,755
Net property, plant and equipment	—		294,855			59,833		127,858		(209,470		)	273,076
Deferred income taxes	—		—			—		29,909		—			29,909
Goodwill	—		2,510,765			732,138		162,920		—			3,405,823
Identifiable intangible assets, net	—		250,635			1,704,521		263,932		—			2,219,088
Other non-current assets	—		1,029			282		4,793		—			6,104
Intercompany loan receivables	—		740,000			436,432		—		(1,176,432		)	—
Intercompany investments	613,540		353,768			—		—		(967,308		)	—
	$	614,104	$	6,635,712		$	5,928,168	$	1,178,735	$	(7,629,964	)	$	6,726,755
Liabilities and Equity:
Current liabilities:
Accounts payable	$	—	$	18,013		$	14,129	$	25,768	$	—		$	57,910
Accrued expenses and other	—		234,036			260,404		68,207		(189,207		)	373,440
Intercompany payables	10,115		1,730,435			2,689,502		513,093		(4,943,145		)	—
Current installments of long-term debt	—		22,130			—		—		—			22,130
Income taxes payable	—		—			—		3,561		—			3,561
Deferred income taxes	—		—			113,595		—		—			113,595
Total current liabilities	10,115		2,004,614			3,077,630		610,629		(5,132,352		)	570,636
Long-term debt, net of current installments, premium, discount and debt issuance costs	—		4,720,363			—		—		—			4,720,363
Non-current tax liabilities	—		15,046			14,965		4,822		—			34,833
Deferred income taxes	—		110,076			609,281		41,380		—			760,737
Other non-current liabilities	824		29,079			4,472		2,646		—			37,021
Intercompany loan payables	—		432,545			740,000		3,887		(1,176,432		)	—
Intercompany advance	—		—			70,045		—		(70,045		)	—
Total liabilities	10,939		7,311,723			4,516,393		663,364		(6,378,829		)	6,123,590
Total equity	603,165		(676,011		)	1,411,775		515,371		(1,251,135		)	603,165
	$	614,104	$	6,635,712		$	5,928,168	$	1,178,735	$	(7,629,964	)	$	6,726,755

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 June 30, 2016
	Acelity L.P. Inc. Parent Company			Kinetic Concepts, Inc. and KCI USA, Inc. Borrower			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue:
Rental	$	—		$	155,345		$	—		$	20,077		$	—		$	175,422
Sales	—			99,880			251,328			215,941			(270,150		)	296,999
Total revenue	—			255,225			251,328			236,018			(270,150		)	472,421
Rental expenses	25			81,183			866			35,427			(41,707		)	75,794
Cost of sales	16			94,791			161,862			90,578			(269,129		)	78,118
Gross profit (loss)	(41		)	79,251			88,600			110,013			40,686			318,509
Selling, general and administrative expenses	793			96,350			41,786			43,526			(261		)	182,194
Research and development expenses	—			5,469			5,194			4,054			—			14,717
Acquired intangible asset amortization	—			11,074			19,242			10,843			—			41,159
Operating earnings (loss)	(834		)	(33,642		)	22,378			51,590			40,947			80,439
Non-operating intercompany transactions	—			31,226			163,824			(195,051		)	1			—
Interest income and other	—			16,402			3,112			511			(19,436		)	589
Interest expense	—			(113,372		)	(16,430		)	(62		)	19,436			(110,428		)
Loss on extinguishment of debt	—			(10,107		)	—			—			—			(10,107		)
Foreign currency gain (loss)	—			7,159			853			986			—			8,998
Derivative instruments loss	—			(357		)	—			—			—			(357		)
Earnings (loss) before income taxes (benefit) and equity in earnings (loss) of subsidiaries	(834		)	(102,691		)	173,737			(142,026		)	40,948			(30,866		)
Income tax expense (benefit)	—			(1,171		)	(956		)	(8,624		)	—			(10,751		)
Earnings (loss) before equity in earnings (loss) of subsidiaries	(834		)	(101,520		)	174,693			(133,402		)	40,948			(20,115		)
Equity in earnings (loss) of subsidiaries	(19,281		)	35,654			(133,402		)	—			117,029			—
Net earnings (loss)	$	(20,115	)	$	(65,866	)	$	41,291		$	(133,402	)	$	157,977		$	(20,115	)
Total comprehensive income (loss)	$	(43,732	)	$	(89,483	)	$	17,674		$	(157,019	)	$	228,828		$	(43,732	)

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 June 30, 2015
	Acelity L.P. Inc. Parent Company			Kinetic Concepts, Inc. and KCI USA, Inc. Borrower			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue:
Rental	$	—		$	157,674		$	—		$	22,723		$	—		$	180,397
Sales	—			87,967			217,740			203,091			(227,550		)	281,248
Total revenue	—			245,641			217,740			225,814			(227,550		)	461,645
Rental expenses	15			77,207			2,673			40,860			(42,886		)	77,869
Cost of sales	10			90,719			136,937			85,024			(237,181		)	75,509
Gross profit (loss)	(25		)	77,715			78,130			99,930			52,517			308,267
Selling, general and administrative expenses	745			74,827			40,324			43,203			(105		)	158,994
Research and development expenses	—			5,245			5,643			3,503			—			14,391
Acquired intangible asset amortization	—			13,304			19,313			12,095			—			44,712
Operating earnings (loss)	(770		)	(15,661		)	12,850			41,129			52,622			90,170
Non-operating intercompany transactions	—			22,536			188,971			(211,627		)	120			—
Interest income and other	—			16,799			6,335			52			(23,119		)	67
Interest expense	—			(113,673		)	(16,798		)	(22		)	23,119			(107,374		)
Foreign currency gain (loss)	—			(10,211		)	695			2,717			—			(6,799		)
Derivative instruments loss	—			(919		)	—			—			—			(919		)
Earnings (loss) before income taxes (benefit) and equity in earnings (loss) of subsidiaries	(770		)	(101,129		)	192,053			(167,751		)	52,742			(24,855		)
Income tax expense (benefit)	—			(9,452		)	(1,306		)	3,534			—			(7,224		)
Earnings (loss) before equity in earnings (loss) of subsidiaries	(770		)	(91,677		)	193,359			(171,285		)	52,742			(17,631		)
Equity in earnings (loss) of subsidiaries	(16,861		)	19,724			(171,285		)	—			168,422			—
Net earnings (loss)	$	(17,631	)	$	(71,953	)	$	22,074		$	(171,285	)	$	221,164		$	(17,631	)
Total comprehensive income (loss)	$	(12,696	)	$	(67,018	)	$	27,009		$	(166,350	)	$	206,359		$	(12,696	)

Condensed Consolidating Parent Company, Co-Issuers,

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

(in thousands)

(unaudited)

	For the six months ended June 30, 2016
	Acelity L.P. Inc. Parent Company			Kinetic Concepts, Inc. and KCI USA, Inc. Borrower			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue:
Rental	$	—		$	305,765		$	—		$	39,756		$	—		$	345,521
Sales	—			190,661			497,271			467,203			(576,869		)	578,266
Total revenue	—			496,426			497,271			506,959			(576,869		)	923,787
Rental expenses	45			162,671			1,042			71,378			(84,447		)	150,689
Cost of sales	16			194,403			322,657			183,259			(543,638		)	156,697
Gross profit (loss)	(61		)	139,352			173,572			252,322			51,216			616,401
Selling, general and administrative expenses	1,541			177,324			84,160			84,259			(646		)	346,638
Research and development expenses	—			11,233			10,213			7,249			—			28,695
Acquired intangible asset amortization	—			22,658			38,606			22,097			—			83,361
Operating earnings (loss)	(1,602		)	(71,863		)	40,593			138,717			51,862			157,707
Non-operating intercompany transactions	—			29,824			170,537			(200,403		)	42			—
Interest income and other	—			32,910			10,729			582			(43,525		)	696
Interest expense	—			(229,460		)	(32,967		)	(78		)	43,525			(218,980		)
Loss on extinguishment of debt	—			(13,716		)	—			—			—			(13,716		)
Foreign currency gain (loss)	—			(5,885		)	1,590			8,963			—			4,668
Derivative instruments loss	—			(1,039		)	—			—			—			(1,039		)
Earnings (loss) before income taxes (benefit) and equity in earnings (loss) of subsidiaries	(1,602		)	(259,229		)	190,482			(52,219		)	51,904			(70,664		)
Income tax expense (benefit)	—			(35,151		)	(1,802		)	12,379			—			(24,574		)
Earnings (loss) before equity in earnings (loss) of subsidiaries	(1,602		)	(224,078		)	192,284			(64,598		)	51,904			(46,090		)
Equity in earnings (loss) of subsidiaries	(44,488		)	110,118			(64,598		)	—			(1,032		)	—
Net earnings (loss)	$	(46,090	)	$	(113,960	)	$	127,686		$	(64,598	)	$	50,872		$	(46,090	)
Total comprehensive income (loss)	$	(65,609	)	$	(133,479	)	$	108,167		$	(84,117	)	$	109,429		$	(65,609	)

Condensed Consolidating Parent Company, Co-Issuers,

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

(in thousands)

(unaudited)

	For the six months ended June 30, 2015
	Acelity L.P. Inc. Parent Company			Kinetic Concepts, Inc. and KCI USA, Inc. Borrower			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue:
Rental	$	—		$	307,372		$	—		$	45,864		$	—		$	353,236
Sales	—			171,704			457,431			432,754			(509,430		)	552,459
Total revenue	—			479,076			457,431			478,618			(509,430		)	905,695
Rental expenses	36			153,080			6,140			82,225			(85,434		)	156,047
Cost of sales	53			180,215			296,190			172,998			(500,533		)	148,923
Gross profit (loss)	(89		)	145,781			155,101			223,395			76,537			600,725
Selling, general and administrative expenses	1,216			143,346			77,040			85,511			(356		)	306,757
Research and development expenses	—			10,862			10,539			7,668			—			29,069
Acquired intangible asset amortization	—			27,184			38,769			24,636			—			90,589
Operating earnings (loss)	(1,305		)	(35,611		)	28,753			105,580			76,893			174,310
Non-operating intercompany transactions	—			20,854			219,820			(240,817		)	143			—
Interest income and other	—			33,561			9,398			155			(42,900		)	214
Interest expense	—			(221,455		)	(33,516		)	(29		)	42,900			(212,100		)
Foreign currency gain (loss)	—			24,795			(898		)	(11,296		)	—			12,601
Derivative instruments loss	—			(4,267		)	—			—			—			(4,267		)
Earnings (loss) before income taxes (benefit) and equity in earnings (loss) of subsidiaries	(1,305		)	(182,123		)	223,557			(146,407		)	77,036			(29,242		)
Income tax expense (benefit)	—			(9,037		)	(1,165		)	3,122			—			(7,080		)
Earnings (loss) before equity in earnings (loss) of subsidiaries	(1,305		)	(173,086		)	224,722			(149,529		)	77,036			(22,162		)
Equity in earnings (loss) of subsidiaries	(20,857		)	68,677			(149,529		)	—			101,709			—
Net earnings (loss)	$	(22,162	)	$	(104,409	)	$	75,193		$	(149,529	)	$	178,745		$	(22,162	)
Total comprehensive income (loss)	$	(24,298	)	$	(106,545	)	$	73,057		$	(151,665	)	$	185,153		$	(24,298	)

Condensed Consolidating Parent Company, Co-Issuers,

Guarantor and Non-Guarantor Statement of Cash Flows

(in thousands)

(unaudited)

	For the six months ended June 30, 2016
	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)	$	(46,090	)	$	(113,960	)	$	127,686		$	(64,598	)	$	50,872		$	(46,090	)
Adjustments to reconcile net earnings (loss) to net cash provided (used) by operating activities	1,829			228,754			(170,653		)	1,232			(54,651		)	6,511
Net cash provided (used) by operating activities	(44,261		)	114,794			(42,967		)	(63,366		)	(3,779		)	(39,579		)
Cash flows from investing activities:
Net additions to property, plant and equipment	—			(96,612		)	(3,415		)	(21,447		)	85,616			(35,858		)
Decrease (increase) in identifiable intangible assets and other non-current assets	—			(574		)	(4,104		)	994			—			(3,684		)
Net cash provided (used) by investing activities	—			(97,186		)	(7,519		)	(20,453		)	85,616			(39,542		)
Cash flows from financing activities:
Settlement of equity-based awards	(226		)	—			—			—			—			(226		)
Proceeds from revolving credit facility	—			25,000			—			—			—			25,000
Proceeds from debt issuance	—			595,044			—			—			—			595,044
Repayments of long-term debt and capital lease obligations	—			(518,568		)	—			(2		)	—			(518,570		)
Debt issuance costs	—			(12,899		)	—			—			—			(12,899		)
Proceeds (payments) on intercompany loans	—			16,125			(17,048		)	923			—			—
Proceeds (payments) on intercompany investments	44,487			(110,140		)	64,510			82,980			(81,837		)	—
Net cash provided (used) by financing activities	44,261			(5,438		)	47,462			83,901			(81,837		)	88,349
Effect of exchange rate changes on cash and cash equivalents	—			—			—			1,560			—			1,560
Net increase (decrease) in cash and cash equivalents	—			12,170			(3,024		)	1,642			—			10,788
Cash and cash equivalents, beginning of period	398			12,859			4,919			70,233			—			88,409
Cash and cash equivalents, end of period	$	398		$	25,029		$	1,895		$	71,875		$	—		$	99,197

Condensed Consolidating Parent Company, Co-Issuers,

Guarantor and Non-Guarantor Statement of Cash Flows

(in thousands)

(unaudited)

	For the six months ended June 30, 2015
	Acelity L.P. Inc. Parent Company			Kinetic Concepts, Inc. and KCI USA, Inc. Borrower			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net earnings (loss)	$	(22,162	)	$	(104,409	)	$	75,193		$	(149,529	)	$	178,745		$	(22,162	)
Adjustments to reconcile net loss to net cash provided (used) by operating activities	2,708			159,336			(126,725		)	42,979			(60,140		)	18,158
Net cash provided (used) by operating activities	(19,454		)	54,927			(51,532		)	(106,550		)	118,605			(4,004		)
Cash flows from investing activities:
Net additions to property, plant and equipment	—			(72,883		)	(4,094		)	(11,729		)	54,988			(33,718		)
Businesses acquired in purchase transactions, net of cash acquired	—			—			—			(2,948		)	—			(2,948		)
Decrease (increase) in identifiable intangible assets and other non-current assets	—			9			(3,595		)	(60		)	—			(3,646		)
Net cash provided (used) by investing activities	—			(72,874		)	(7,689		)	(14,737		)	54,988			(40,312		)
Cash flows from financing activities:
Distribution to limited partners	(55		)	—			—			—			—			(55		)
Settlement of equity-based awards	(1,348		)	—			—			—			—			(1,348		)
Proceeds from revolving credit facility	—			30,000			—			—			—			30,000
Repayments of long-term debt and capital lease obligations	—			(12,916		)	(2,500		)	27			—			(15,389		)
Debt issuance costs	—			(6,256		)	—			—			—			(6,256		)
Proceeds (payments) on intercompany loans	—			16,125			(11,399		)	(4,726		)	—			—
Proceeds (payments) on intercompany investments	20,857			5,830			71,621			75,285			(173,593		)	—
Net cash provided (used) by financing activities	19,454			32,783			57,722			70,586			(173,593		)	6,952
Effect of exchange rate changes on cash and cash equivalents	—			—			—			(5,025		)	—			(5,025		)
Net increase (decrease) in cash and cash equivalents	—			14,836			(1,499		)	(55,726		)	—			(42,389		)
Cash and cash equivalents, beginning of period	398			41,027			1,499			140,617			—			183,541
Cash and cash equivalents, end of period	$	398		$	55,863		$	—		$	84,891		$	—		$	141,152

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2016

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 2016 presentation.

The Company has two reportable operating segments: Advanced Wound Therapeutics and Regenerative Medicine. We also have other revenue which consists of contract manufacturing operations performed at our manufacturing facility in Gargrave, England.

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, 2015.

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. As of June 30, 2016, we have three interest rate derivatives that have not been designated as hedging instruments and three interest rate derivatives that have been designated as cash flow hedge instruments. For our interest rate derivatives that have not been designated as hedging instruments, we recognize the fair value of these instruments as an asset or liability with income or expense recognized in the current period. For our cash flow hedge instruments which begin in December 2016 and extend through December 2021, changes in the fair value are recorded in accumulated other comprehensive income until the underlying transaction affects earnings, and are then reclassified to earnings in the same account as the hedged transaction as long as the derivative is highly effective. At inception, all derivatives are expected to be highly effective. Each interest rate swap is designated as a hedge of interest payments associated with specific principal balances and terms of our debt obligations. These agreements involve the exchange of amounts based on variable interest rates, for amounts based on fixed interest rates over the life of the agreement, without an exchange of the notional amount upon which the payments are based.

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 June 30, 2016, Morgan Stanley, UBS and HSBC were the counterparties on our interest rate protection agreements consisting of interest rate swap agreements not designated as hedging instruments in notional amounts totaling $458.7 million each. UBS, Nomura and Goldman Sachs were counterparties on our interest rate protection agreements, which become effective in December 2016, consisting of interest rate swap agreements that have been designated as cash flow hedge instruments in notional amounts totaling $291.2 million, $291.2 million and $582.5 million, respectively. 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 January 2015, the Financial Accounting Standard Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-01, "Income Statement -Extraordinary and Unusual Items (Subtopic 225-20)." The objective of this ASU is to simplify the income statement presentation requirements in Subtopic 225-20 by eliminating the concept of extraordinary items. Extraordinary items are events and transactions that are distinguished by their unusual nature and by the infrequency of their occurrence. Eliminating the extraordinary classification simplifies income statement presentation by altogether removing the concept of extraordinary items from consideration. The Company adopted this ASU effective January 1, 2016. The adoption of this update did not have a material impact on our results of operations, financial position or disclosures.

On February 18, 2015, the FASB issued ASU 2015-02, "Consolidation (Topic 810): Amendments to the Consolidation Analysis." This update provides a revised consolidation model for all reporting entities to use in evaluating whether they should consolidate certain legal entities. All legal entities will be subject to reevaluation under this revised consolidation model. The revised consolidation model, among other things, (i) modifies the evaluation of whether limited partnerships and similar legal entities are variable interest entities ("VIEs") or voting interest entities, (ii) eliminates the presumption that a general partner should consolidate a limited partnership, and (iii) modifies the consolidation analysis of reporting entities that are involved with VIEs through fee arrangements and related party relationships. The Company adopted this ASU effective January 1, 2016. The adoption of this update did not have a material impact on our results of operations, financial position or disclosures.

In April 2015, the FASB issued ASU 2015-03, "Interest - Imputation of Interest (Subtopic 835-30)." The objective of this ASU was to simplify the presentation of debt issuance costs in the balance sheet by requiring the presentation of debt issuance costs as a deduction from the carrying amount of the related debt liability instead of a deferred charge. Prior to the issuance of ASU 2015-03, debt issuance costs were required to be presented as an asset in the balance sheet. The Company adopted this ASU effective January 1, 2016, resulting in a $54.7 million retrospective reduction of both our non-current assets and long-term debt, net of current installments, discount and debt issuance costs, as of December 31, 2015.

In September 2015, the FASB issued ASU 2015-16, “Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments.” The amendments in this ASU require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments in this ASU also require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. Additionally, the amendments in this ASU require an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The Company adopted this ASU effective January 1, 2016. The adoption of this update did not have a material impact on our results of operations, financial position or disclosures.

Recently Issued Accounting Standards

Recently Issued Accounting Standards

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” This ASU affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). This ASU supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition”, and most industry-specific guidance. This ASU also supersedes some cost guidance included in Subtopic 605-35, “Revenue Recognition-Construction-Type and Production-Type Contracts”. In addition, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (e.g., assets within the scope of Topic 360, “Property, Plant, and Equipment”, and intangible assets within the scope of Topic 350, “Intangibles-Goodwill and Other”) are amended to be consistent with the guidance on recognition and measurement (including the constraint on revenue) in this ASU. For a public entity, the amendments in this ASU are effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The standard may be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company has not selected a transition method and we are evaluating ASU No. 2014-09 to determine if it will have a material effect on our results of operations, financial position or disclosures.

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements — Going Concern (Subtopic 205-40).” The new guidance addresses management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. Management’s evaluation should be based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The Company is evaluating this 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.

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

In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes,” which changes how deferred taxes are classified on organizations’ balance sheets. The ASU eliminates the current requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, organizations will be required to classify all deferred tax assets and liabilities as noncurrent. The amendments apply to all organizations that present a classified balance sheet. The standard will be effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” This ASU amends existing guidance related to the recognition, measurement, presentation, and disclosure of financial instruments. The ASU eliminates the existing requirement to disclose the methods and significant assumptions used to estimate the fair value required to be disclosed for financial instruments measured at amortized cost on the balance sheet, instead requiring entities to disclose the fair value of these financial instruments using the exit price. This ASU also requires an entity that elects to measure a liability at fair value to present separately in other comprehensive income the portion of the total change in the liability’s fair value that is due to a change in credit risk specifically related to the financial instrument. Additionally, this ASU requires that financial assets and financial liabilities be presented separately by measurement category and form of financial asset on the balance sheet or in the notes to the financial statements. This standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2017. Early adoption is only permitted for separate presentation in other comprehensive income as of the beginning of the fiscal year of adoption. The standard should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. 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.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” The objective of this ASU is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and increasing disclosure requirements to include key information about leasing arrangements. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases (with the exception of short-term leases) at the commencement date. When measuring assets and liabilities arising from a lease, a lessee should include payments to be made in optional periods, and optional payments to purchase, only if the lessee is reasonably certain to exercise the option. This new guidance continues to differentiate between finance leases and operating leases; there have been no significant changes in the recognition, measurement, and presentation of expenses and cash flows. This standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2018. Early adoption is permitted. The standard must be applied using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company is evaluating this update.

In March 2016, the FASB issued ASU 2016-06, “Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments,” which applies to all entities that are issuers of or investors in debt instruments (or hybrid financial instruments that are determined to have a debt host) with embedded call (put) options. This amendment requires an entity to assess the embedded call (put) options solely in accordance with the four-step decision sequence. Additionally, this ASU clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts, which is one of the criteria for bifurcating an embedded derivative. This standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2016. Early adoption is permitted, including in an interim period. If an entity early adopts in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The standard should be applied on a modified retrospective basis to existing debt instruments as of the beginning of the fiscal year for which the amendments are effective. 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.

In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net).” When another party is involved in providing goods or services to a customer, this ASU provides additional guidance for entities in determining whether the nature of its promise is to provide that good or service to the customer (i.e. the entity is the principal) or to arrange for the good or service to be provided to the customer by the other party (i.e., the entity is the agent). This amendment clarifies that an entity determine whether it is a principal or an agent for each specified good or service promised to a customer and determine the nature of each specified good or service. The effective date and transition for this ASU is the same as ASU 2014-09. 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.

In March 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” The amendment in this ASU affects all organizations that issue share-based payment awards to employees and is intended to simplify several aspects of the accounting for these awards, including income tax consequences, classification of awards as either equity or liabilities, classification on the statement of cash flows, and allowing an accounting policy election to account for forfeitures as they occur. This standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2016. Early adoption is permitted, however an entity must adopt all of the amendments in the same period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes the interim period. Transition guidance is dependent on the individual amendment within the update. 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.

In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing.” This standard clarifies the guidance in ASU 2014-09 for entities in identifying performance obligations, and the licensing implementation guidance. The ASU clarifies that an entity is not required to assess whether promised goods or services are performance obligations if they are immaterial to the contract. This update also allows entities to make a policy election to account for shipping and handling occurring after the customer has obtained control of a good as an activity to fulfill the promise to transfer the good rather than an additional promise. Additionally, the update includes clarification on whether an entity’s promise to grant a customer a license to intellectual property that has a significant standalone functionality or symbolic intellectual property, that does not have significant standalone functionality, include support during the license period. The effective date and transition for this ASU is the same as ASU 2014-09. 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, 2015.

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Acquisitions and Divestitures (Tables)

6 Months Ended

Jun. 30, 2016

Business Combinations and Discontinued Operations [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, 2015			Adjustments			June 30, 2016
Goodwill	$	27,525		$	652		$	28,177
Identifiable intangible assets:
Customer relationships	5,800						5,800
Developed technology	6,400						6,400
Tradenames	2,400						2,400
Tangible assets acquired and liabilities assumed:
Inventories	1,741						1,741
Other current assets	125						125
Property, plant and equipment	250						250
Current liabilities	(713		)	(1,639		)	(2,352		)
Other non-current liabilities	(987		)	987			—
Total purchase price	$	42,541		$	—		$	42,541

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Supplemental Balance Sheet Data (Tables)

6 Months Ended

Jun. 30, 2016

Balance Sheet Related Disclosures [Abstract]

Schedule of Accounts Receivable, Net

Accounts receivable consist of the following (in thousands):

	June 30, 2016			December 31, 2015
Gross trade accounts receivable:
Billed trade accounts receivable	$	436,388		$	429,556
Unbilled receivables	40,212			48,795
Less:  Allowance for revenue adjustments	(63,708		)	(66,868		)
Gross trade accounts receivable	412,892			411,483
Less:  Allowance for bad debt	(11,485		)	(11,372		)
Net trade accounts receivable	401,407			400,111
Other receivables	12,033			13,420
	$	413,440		$	413,531

Schedule of Inventories, Net

Inventories consist of the following (in thousands):

	June 30, 2016			December 31, 2015
Finished goods and tissue available for distribution	$	142,877		$	133,293
Goods and tissue in-process	13,239			9,778
Raw materials, supplies, parts and unprocessed tissue	69,037			67,433
	225,153			210,504
Less: Amounts expected to be converted into equipment for short-term rental	(9,695		)	(9,597		)
Reserve for excess and obsolete inventory	(17,875		)	(19,598		)
	$	197,583		$	181,309

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Long-Term Debt (Tables)

6 Months Ended

Jun. 30, 2016

Debt Disclosure [Abstract]

Schedule of Long-term Debt Instruments

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

	June 30, 2016			December 31, 2015
Senior Revolving Credit Facility - due 2017(1)	$	25,000		$	—
Senior Dollar Term F Credit Facility – due 2020(2)	1,702,733			1,907,774
Senior Euro Term F Credit Facility – due 2020(2)	264,647			260,946
Senior Term E-2 Credit Facility– due 2016 (3)	—			312,166
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
7.875% First Lien Senior Secured Notes due 2021	590,000			—
Notional amount of debt	4,944,380			4,842,886
Senior Dollar Term F Credit Facility Discount, net of accretion(2)	(16,686		)	(20,792		)
Senior Euro Term F Credit Facility Discount, net of accretion(2)	(4,946		)	(5,224		)
Senior Term E-2 Credit Facility Discount, net of accretion(3)	—			(1,770		)
Second Lien Senior Secured Notes Discount, net of accretion	(13,303		)	(15,729		)
Senior Unsecured Notes Discount, net of accretion	(1,995		)	(2,227		)
First Lien Senior Secured Notes Premium, net of amortization	9,934			—
Net discount on debt	(26,996		)	(45,742		)
Net debt issuance costs	(48,294		)	(54,651		)
Total debt, net of premium, discount and debt issuance costs	4,869,090			4,742,493
Less:  Current installments	(23,307		)	(22,130		)
	$	4,845,783		$	4,720,363

(1) On February 9, 2016 we entered into Amendment No. 7 and Amendment No. 8 to our senior secured credit facilities. As a result of these amendments, we have aggregate revolving loan commitments under our Revolving Credit Facility of $171.3 million maturing on November 4, 2017, with an additional $28.7 million in revolving loan commitments continuing to mature on November 4, 2016.

(2) On June 16, 2016, we entered into Amendment No. 9 to our senior secured credit facilities. As a result of the amendment we created new classes of Dollar Term F Loans and Euro Term F Loans, having the same rights and obligations as the Dollar Term E-1 Loans and Euro Term E-1 Loans as set forth in the credit agreement and loan documents, except as revised by the amendment.

(3) All amounts outstanding under the Senior Term E-2 Credit Facility were paid in full on February 9, 2016, with proceeds from the offering of the 7.875% First Lien Senior Secured Notes due 2021.

Schedule of Redemption Prices for First Lien Notes

At any time on or after February 15, 2018, the Notes Issuers may redeem the First Lien Notes, in whole or in part, at the following redemption prices (expressed as percentages of the principal amount) if redeemed during the twelve‑month period commencing on February 15 of the year set forth below, plus, in each case, accrued and unpaid interest thereon, if any, to the date of redemption:

Year	Price
2018	103.938%
2019	101.969%
2020 and thereafter	100.000%

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Derivative Financial Instruments and Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2016

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
		June 30, 2016		December 31, 2015			June 30, 2016		December 31, 2015
Derivatives not designated as hedging instruments
Interest rate swap agreements	Prepaid expenses and other	$	—	$	—	Accrued expenses and other	$	6,299	$	12,243
Interest rate swap agreements	Other non-current assets	—		—		Other non-current liabilities	—		—
Derivatives designated as hedging instruments
Interest rate swap agreements	Prepaid expenses and other	—		—		Accrued expenses and other	3,557		—
Interest rate swap agreements	Other non-current assets	—		—		Other non-current liabilities	7,736		—
Total derivatives		$	—	$	—		$	17,592	$	12,243

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 June 30,						Six months ended June 30,
	2016			2015			2016			2015
Interest rate swap agreements	$	(357	)	$	(919	)	$	(1,039	)	$	(4,267	)
Foreign currency exchange contracts	—			—			—			—
	$	(357	)	$	(919	)	$	(1,039	)	$	(4,267	)

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 which have not been designated as hedging instruments (dollars in thousands):

Outstanding Notional Amount	Fixed Interest Rate
$458,733	2.256%
$458,733	2.249%
$458,733	2.250%

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 which have been designated as hedging instruments (dollars in thousands):

Outstanding Notional Amount	Fixed Interest Rate
$291,225	1.663%
$291,225	1.668%
$582,450	1.666%

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Accumulated Other Comprehensive Income (Loss) (Tables)

6 Months Ended

Jun. 30, 2016

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

Schedule of Accumulated Other Comprehensive Income (Loss)

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

	Accumulated Foreign Currency Translation Adjustment			Accumulated Derivative Loss			Accumulated Other Comprehensive Loss
Balances at December 31, 2015	$	(19,734	)	$	—		$	(19,734	)
Foreign currency translation adjustment, net of tax benefit of $1,339	(8,226		)	—			(8,226		)
Net derivative loss, net of taxes of $0	—			(11,293		)	(11,293		)
Balances at June 30, 2016	$	(27,960	)	$	(11,293	)	$	(39,253	)

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2016

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 June 30,						Six months ended June 30,
	2016			2015			2016			2015
Revenue:
Advanced Wound Therapeutics	$	354,968		$	354,214		$	694,010		$	691,473
Regenerative Medicine	114,905			103,529			224,779			207,698
Other operations (1)	2,548			3,902			4,998			6,524
Total revenue	$	472,421		$	461,645		$	923,787		$	905,695
Operating earnings:
Advanced Wound Therapeutics	$	107,633		$	117,642		$	207,297		$	230,527
Regenerative Medicine	42,523			35,346			81,798			69,365
Other operations (1)	465			542			1,016			989
Non-allocated costs:
General headquarter expense (2)	(1,160		)	(1,526		)	(2,728		)	(2,949		)
Equity-based compensation	(834		)	(770		)	(1,602		)	(1,305		)
Business optimization and transaction-related expenses (3)	(27,028		)	(16,352		)	(44,713		)	(31,728		)
Acquired intangible asset amortization (4)	(41,160		)	(44,712		)	(83,361		)	(90,589		)
Total non-allocated costs	(70,182		)	(63,360		)	(132,404		)	(126,571		)
Total operating earnings	$	80,439		$	90,170		$	157,707		$	174,310

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

(2) Represents general headquarter expenses not allocated to the individual segments.

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

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

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Guarantor Condensed Consolidating Financial Statements (Tables)

6 Months Ended

Jun. 30, 2016

Guarantor Condensed Consolidating Financial Statements [Abstract]

Guarantor and Non-Guarantor Balance Sheet

Condensed Consolidating Parent Company, Co-Issuers,

Guarantor and Non-Guarantor Balance Sheet

June 30, 2016

(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	$	25,029		$	1,895	$	71,875	$	—		$	99,197
Accounts receivable, net	—		206,624			59,412		147,404		—			413,440
Inventories, net	—		100,069			113,756		117,663		(133,905		)	197,583
Deferred income taxes	—		34,892			20,470		—		(3,394		)	51,968
Prepaid expenses and other	—		22,001			3,746		243,526		(229,156		)	40,117
Intercompany receivables	166		2,165,186			3,131,862		56,689		(5,353,903		)	—
Total current assets	564		2,553,801			3,331,141		637,157		(5,720,358		)	802,305
Net property, plant and equipment	—		299,623			55,431		113,096		(207,581		)	260,569
Deferred income taxes	—		—			—		22,333		—			22,333
Goodwill	—		2,511,417			732,138		162,920		—			3,406,475
Identifiable intangible assets, net	—		227,982			1,669,038		242,346		—			2,139,366
Other non-current assets	—		1,598			282		3,153		—			5,033
Intercompany loan receivables	—		730,000			443,480		—		(1,173,480		)	—
Intercompany investments	549,533		463,886			—		—		(1,013,419		)	—
	$	550,097	$	6,788,307		$	6,231,510	$	1,181,005	$	(8,114,838	)	$	6,636,081
Liabilities and Equity:
Current liabilities:
Accounts payable	$	—	$	14,957		$	13,619	$	24,142	$	—		$	52,718
Accrued expenses and other	—		188,290			255,801		67,856		(185,645		)	326,302
Intercompany payables	10,340		2,016,381			2,819,472		507,710		(5,353,903		)	—
Current installments of long-term debt	—		23,307			—		—		—			23,307
Income taxes payable	—		—			1,357		3,175		(160		)	4,372
Deferred income taxes	—		—			113,595		3,394		(3,394		)	113,595
Total current liabilities	10,340		2,242,935			3,203,844		606,277		(5,543,102		)	520,294
Long-term debt, net of current installments, premium, discount and debt issuance costs	—		4,845,783			—		—		—			4,845,783
Non-current tax liabilities	—		15,609			15,640		3,284		—			34,533
Deferred income taxes	—		37,762			605,486		38,344		—			681,592
Other non-current liabilities	1,031		8,834			2,524		2,764		—			15,153
Intercompany loan payables	—		438,670			730,000		4,810		(1,173,480		)	—
Intercompany advance	—		—			134,643		—		(134,643		)	—
Total liabilities	11,371		7,589,593			4,692,137		655,479		(6,851,225		)	6,097,355
Total equity	538,726		(801,286		)	1,539,373		525,526		(1,263,613		)	538,726
	$	550,097	$	6,788,307		$	6,231,510	$	1,181,005	$	(8,114,838	)	$	6,636,081

Condensed Consolidating Parent Company, Co-Issuers,

Guarantor and Non-Guarantor Balance Sheet

December 31, 2015

(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	$	12,859		$	4,919	$	70,233	$	—		$	88,409
Accounts receivable, net	—		202,377			58,080		153,074		—			413,531
Inventories, net	—		89,929			87,519		104,904		(101,043		)	181,309
Deferred income taxes	—		66,235			8,286		—		—			74,521
Prepaid expenses and other	—		15,199			7,519		244,833		(232,566		)	34,985
Intercompany receivables	166		2,098,061			2,828,639		16,279		(4,943,145		)	—
Total current assets	564		2,484,660			2,994,962		589,323		(5,276,754		)	792,755
Net property, plant and equipment	—		294,855			59,833		127,858		(209,470		)	273,076
Deferred income taxes	—		—			—		29,909		—			29,909
Goodwill	—		2,510,765			732,138		162,920		—			3,405,823
Identifiable intangible assets, net	—		250,635			1,704,521		263,932		—			2,219,088
Other non-current assets	—		1,029			282		4,793		—			6,104
Intercompany loan receivables	—		740,000			436,432		—		(1,176,432		)	—
Intercompany investments	613,540		353,768			—		—		(967,308		)	—
	$	614,104	$	6,635,712		$	5,928,168	$	1,178,735	$	(7,629,964	)	$	6,726,755
Liabilities and Equity:
Current liabilities:
Accounts payable	$	—	$	18,013		$	14,129	$	25,768	$	—		$	57,910
Accrued expenses and other	—		234,036			260,404		68,207		(189,207		)	373,440
Intercompany payables	10,115		1,730,435			2,689,502		513,093		(4,943,145		)	—
Current installments of long-term debt	—		22,130			—		—		—			22,130
Income taxes payable	—		—			—		3,561		—			3,561
Deferred income taxes	—		—			113,595		—		—			113,595
Total current liabilities	10,115		2,004,614			3,077,630		610,629		(5,132,352		)	570,636
Long-term debt, net of current installments, premium, discount and debt issuance costs	—		4,720,363			—		—		—			4,720,363
Non-current tax liabilities	—		15,046			14,965		4,822		—			34,833
Deferred income taxes	—		110,076			609,281		41,380		—			760,737
Other non-current liabilities	824		29,079			4,472		2,646		—			37,021
Intercompany loan payables	—		432,545			740,000		3,887		(1,176,432		)	—
Intercompany advance	—		—			70,045		—		(70,045		)	—
Total liabilities	10,939		7,311,723			4,516,393		663,364		(6,378,829		)	6,123,590
Total equity	603,165		(676,011		)	1,411,775		515,371		(1,251,135		)	603,165
	$	614,104	$	6,635,712		$	5,928,168	$	1,178,735	$	(7,629,964	)	$	6,726,755

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 June 30, 2016
	Acelity L.P. Inc. Parent Company			Kinetic Concepts, Inc. and KCI USA, Inc. Borrower			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue:
Rental	$	—		$	155,345		$	—		$	20,077		$	—		$	175,422
Sales	—			99,880			251,328			215,941			(270,150		)	296,999
Total revenue	—			255,225			251,328			236,018			(270,150		)	472,421
Rental expenses	25			81,183			866			35,427			(41,707		)	75,794
Cost of sales	16			94,791			161,862			90,578			(269,129		)	78,118
Gross profit (loss)	(41		)	79,251			88,600			110,013			40,686			318,509
Selling, general and administrative expenses	793			96,350			41,786			43,526			(261		)	182,194
Research and development expenses	—			5,469			5,194			4,054			—			14,717
Acquired intangible asset amortization	—			11,074			19,242			10,843			—			41,159
Operating earnings (loss)	(834		)	(33,642		)	22,378			51,590			40,947			80,439
Non-operating intercompany transactions	—			31,226			163,824			(195,051		)	1			—
Interest income and other	—			16,402			3,112			511			(19,436		)	589
Interest expense	—			(113,372		)	(16,430		)	(62		)	19,436			(110,428		)
Loss on extinguishment of debt	—			(10,107		)	—			—			—			(10,107		)
Foreign currency gain (loss)	—			7,159			853			986			—			8,998
Derivative instruments loss	—			(357		)	—			—			—			(357		)
Earnings (loss) before income taxes (benefit) and equity in earnings (loss) of subsidiaries	(834		)	(102,691		)	173,737			(142,026		)	40,948			(30,866		)
Income tax expense (benefit)	—			(1,171		)	(956		)	(8,624		)	—			(10,751		)
Earnings (loss) before equity in earnings (loss) of subsidiaries	(834		)	(101,520		)	174,693			(133,402		)	40,948			(20,115		)
Equity in earnings (loss) of subsidiaries	(19,281		)	35,654			(133,402		)	—			117,029			—
Net earnings (loss)	$	(20,115	)	$	(65,866	)	$	41,291		$	(133,402	)	$	157,977		$	(20,115	)
Total comprehensive income (loss)	$	(43,732	)	$	(89,483	)	$	17,674		$	(157,019	)	$	228,828		$	(43,732	)

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 June 30, 2015
	Acelity L.P. Inc. Parent Company			Kinetic Concepts, Inc. and KCI USA, Inc. Borrower			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue:
Rental	$	—		$	157,674		$	—		$	22,723		$	—		$	180,397
Sales	—			87,967			217,740			203,091			(227,550		)	281,248
Total revenue	—			245,641			217,740			225,814			(227,550		)	461,645
Rental expenses	15			77,207			2,673			40,860			(42,886		)	77,869
Cost of sales	10			90,719			136,937			85,024			(237,181		)	75,509
Gross profit (loss)	(25		)	77,715			78,130			99,930			52,517			308,267
Selling, general and administrative expenses	745			74,827			40,324			43,203			(105		)	158,994
Research and development expenses	—			5,245			5,643			3,503			—			14,391
Acquired intangible asset amortization	—			13,304			19,313			12,095			—			44,712
Operating earnings (loss)	(770		)	(15,661		)	12,850			41,129			52,622			90,170
Non-operating intercompany transactions	—			22,536			188,971			(211,627		)	120			—
Interest income and other	—			16,799			6,335			52			(23,119		)	67
Interest expense	—			(113,673		)	(16,798		)	(22		)	23,119			(107,374		)
Foreign currency gain (loss)	—			(10,211		)	695			2,717			—			(6,799		)
Derivative instruments loss	—			(919		)	—			—			—			(919		)
Earnings (loss) before income taxes (benefit) and equity in earnings (loss) of subsidiaries	(770		)	(101,129		)	192,053			(167,751		)	52,742			(24,855		)
Income tax expense (benefit)	—			(9,452		)	(1,306		)	3,534			—			(7,224		)
Earnings (loss) before equity in earnings (loss) of subsidiaries	(770		)	(91,677		)	193,359			(171,285		)	52,742			(17,631		)
Equity in earnings (loss) of subsidiaries	(16,861		)	19,724			(171,285		)	—			168,422			—
Net earnings (loss)	$	(17,631	)	$	(71,953	)	$	22,074		$	(171,285	)	$	221,164		$	(17,631	)
Total comprehensive income (loss)	$	(12,696	)	$	(67,018	)	$	27,009		$	(166,350	)	$	206,359		$	(12,696	)

Condensed Consolidating Parent Company, Co-Issuers,

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

(in thousands)

(unaudited)

	For the six months ended June 30, 2016
	Acelity L.P. Inc. Parent Company			Kinetic Concepts, Inc. and KCI USA, Inc. Borrower			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue:
Rental	$	—		$	305,765		$	—		$	39,756		$	—		$	345,521
Sales	—			190,661			497,271			467,203			(576,869		)	578,266
Total revenue	—			496,426			497,271			506,959			(576,869		)	923,787
Rental expenses	45			162,671			1,042			71,378			(84,447		)	150,689
Cost of sales	16			194,403			322,657			183,259			(543,638		)	156,697
Gross profit (loss)	(61		)	139,352			173,572			252,322			51,216			616,401
Selling, general and administrative expenses	1,541			177,324			84,160			84,259			(646		)	346,638
Research and development expenses	—			11,233			10,213			7,249			—			28,695
Acquired intangible asset amortization	—			22,658			38,606			22,097			—			83,361
Operating earnings (loss)	(1,602		)	(71,863		)	40,593			138,717			51,862			157,707
Non-operating intercompany transactions	—			29,824			170,537			(200,403		)	42			—
Interest income and other	—			32,910			10,729			582			(43,525		)	696
Interest expense	—			(229,460		)	(32,967		)	(78		)	43,525			(218,980		)
Loss on extinguishment of debt	—			(13,716		)	—			—			—			(13,716		)
Foreign currency gain (loss)	—			(5,885		)	1,590			8,963			—			4,668
Derivative instruments loss	—			(1,039		)	—			—			—			(1,039		)
Earnings (loss) before income taxes (benefit) and equity in earnings (loss) of subsidiaries	(1,602		)	(259,229		)	190,482			(52,219		)	51,904			(70,664		)
Income tax expense (benefit)	—			(35,151		)	(1,802		)	12,379			—			(24,574		)
Earnings (loss) before equity in earnings (loss) of subsidiaries	(1,602		)	(224,078		)	192,284			(64,598		)	51,904			(46,090		)
Equity in earnings (loss) of subsidiaries	(44,488		)	110,118			(64,598		)	—			(1,032		)	—
Net earnings (loss)	$	(46,090	)	$	(113,960	)	$	127,686		$	(64,598	)	$	50,872		$	(46,090	)
Total comprehensive income (loss)	$	(65,609	)	$	(133,479	)	$	108,167		$	(84,117	)	$	109,429		$	(65,609	)

Condensed Consolidating Parent Company, Co-Issuers,

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

(in thousands)

(unaudited)

	For the six months ended June 30, 2015
	Acelity L.P. Inc. Parent Company			Kinetic Concepts, Inc. and KCI USA, Inc. Borrower			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenue:
Rental	$	—		$	307,372		$	—		$	45,864		$	—		$	353,236
Sales	—			171,704			457,431			432,754			(509,430		)	552,459
Total revenue	—			479,076			457,431			478,618			(509,430		)	905,695
Rental expenses	36			153,080			6,140			82,225			(85,434		)	156,047
Cost of sales	53			180,215			296,190			172,998			(500,533		)	148,923
Gross profit (loss)	(89		)	145,781			155,101			223,395			76,537			600,725
Selling, general and administrative expenses	1,216			143,346			77,040			85,511			(356		)	306,757
Research and development expenses	—			10,862			10,539			7,668			—			29,069
Acquired intangible asset amortization	—			27,184			38,769			24,636			—			90,589
Operating earnings (loss)	(1,305		)	(35,611		)	28,753			105,580			76,893			174,310
Non-operating intercompany transactions	—			20,854			219,820			(240,817		)	143			—
Interest income and other	—			33,561			9,398			155			(42,900		)	214
Interest expense	—			(221,455		)	(33,516		)	(29		)	42,900			(212,100		)
Foreign currency gain (loss)	—			24,795			(898		)	(11,296		)	—			12,601
Derivative instruments loss	—			(4,267		)	—			—			—			(4,267		)
Earnings (loss) before income taxes (benefit) and equity in earnings (loss) of subsidiaries	(1,305		)	(182,123		)	223,557			(146,407		)	77,036			(29,242		)
Income tax expense (benefit)	—			(9,037		)	(1,165		)	3,122			—			(7,080		)
Earnings (loss) before equity in earnings (loss) of subsidiaries	(1,305		)	(173,086		)	224,722			(149,529		)	77,036			(22,162		)
Equity in earnings (loss) of subsidiaries	(20,857		)	68,677			(149,529		)	—			101,709			—
Net earnings (loss)	$	(22,162	)	$	(104,409	)	$	75,193		$	(149,529	)	$	178,745		$	(22,162	)
Total comprehensive income (loss)	$	(24,298	)	$	(106,545	)	$	73,057		$	(151,665	)	$	185,153		$	(24,298	)

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 six months ended June 30, 2016
	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)	$	(46,090	)	$	(113,960	)	$	127,686		$	(64,598	)	$	50,872		$	(46,090	)
Adjustments to reconcile net earnings (loss) to net cash provided (used) by operating activities	1,829			228,754			(170,653		)	1,232			(54,651		)	6,511
Net cash provided (used) by operating activities	(44,261		)	114,794			(42,967		)	(63,366		)	(3,779		)	(39,579		)
Cash flows from investing activities:
Net additions to property, plant and equipment	—			(96,612		)	(3,415		)	(21,447		)	85,616			(35,858		)
Decrease (increase) in identifiable intangible assets and other non-current assets	—			(574		)	(4,104		)	994			—			(3,684		)
Net cash provided (used) by investing activities	—			(97,186		)	(7,519		)	(20,453		)	85,616			(39,542		)
Cash flows from financing activities:
Settlement of equity-based awards	(226		)	—			—			—			—			(226		)
Proceeds from revolving credit facility	—			25,000			—			—			—			25,000
Proceeds from debt issuance	—			595,044			—			—			—			595,044
Repayments of long-term debt and capital lease obligations	—			(518,568		)	—			(2		)	—			(518,570		)
Debt issuance costs	—			(12,899		)	—			—			—			(12,899		)
Proceeds (payments) on intercompany loans	—			16,125			(17,048		)	923			—			—
Proceeds (payments) on intercompany investments	44,487			(110,140		)	64,510			82,980			(81,837		)	—
Net cash provided (used) by financing activities	44,261			(5,438		)	47,462			83,901			(81,837		)	88,349
Effect of exchange rate changes on cash and cash equivalents	—			—			—			1,560			—			1,560
Net increase (decrease) in cash and cash equivalents	—			12,170			(3,024		)	1,642			—			10,788
Cash and cash equivalents, beginning of period	398			12,859			4,919			70,233			—			88,409
Cash and cash equivalents, end of period	$	398		$	25,029		$	1,895		$	71,875		$	—		$	99,197

Condensed Consolidating Parent Company, Co-Issuers,

Guarantor and Non-Guarantor Statement of Cash Flows

(in thousands)

(unaudited)

	For the six months ended June 30, 2015
	Acelity L.P. Inc. Parent Company			Kinetic Concepts, Inc. and KCI USA, Inc. Borrower			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net earnings (loss)	$	(22,162	)	$	(104,409	)	$	75,193		$	(149,529	)	$	178,745		$	(22,162	)
Adjustments to reconcile net loss to net cash provided (used) by operating activities	2,708			159,336			(126,725		)	42,979			(60,140		)	18,158
Net cash provided (used) by operating activities	(19,454		)	54,927			(51,532		)	(106,550		)	118,605			(4,004		)
Cash flows from investing activities:
Net additions to property, plant and equipment	—			(72,883		)	(4,094		)	(11,729		)	54,988			(33,718		)
Businesses acquired in purchase transactions, net of cash acquired	—			—			—			(2,948		)	—			(2,948		)
Decrease (increase) in identifiable intangible assets and other non-current assets	—			9			(3,595		)	(60		)	—			(3,646		)
Net cash provided (used) by investing activities	—			(72,874		)	(7,689		)	(14,737		)	54,988			(40,312		)
Cash flows from financing activities:
Distribution to limited partners	(55		)	—			—			—			—			(55		)
Settlement of equity-based awards	(1,348		)	—			—			—			—			(1,348		)
Proceeds from revolving credit facility	—			30,000			—			—			—			30,000
Repayments of long-term debt and capital lease obligations	—			(12,916		)	(2,500		)	27			—			(15,389		)
Debt issuance costs	—			(6,256		)	—			—			—			(6,256		)
Proceeds (payments) on intercompany loans	—			16,125			(11,399		)	(4,726		)	—			—
Proceeds (payments) on intercompany investments	20,857			5,830			71,621			75,285			(173,593		)	—
Net cash provided (used) by financing activities	19,454			32,783			57,722			70,586			(173,593		)	6,952
Effect of exchange rate changes on cash and cash equivalents	—			—			—			(5,025		)	—			(5,025		)
Net increase (decrease) in cash and cash equivalents	—			14,836			(1,499		)	(55,726		)	—			(42,389		)
Cash and cash equivalents, beginning of period	398			41,027			1,499			140,617			—			183,541
Cash and cash equivalents, end of period	$	398		$	55,863		$	—		$	84,891		$	—		$	141,152

XML

Summary of Significant Accounting Policies (Details) $ in Thousands	Jun. 30, 2016 USD ($) segment	Apr. 06, 2016 USD ($)	Dec. 31, 2015 USD ($)
Basis of Presentation and Principles of Consolidation [Abstract]
Number of reportable operating segments | segment	2
Recently Adopted Accounting Standards [Abstract]
Debt Issuance Costs, Net	$ 48,294		$ 54,651
Not Designated as Hedging Instrument [Member] | Credit Concentration Risk [Member] | Interest Rate Swap [Member]
Concentration of Credit Risk [Abstract]
Derivative, Notional Amount	458,733
Designated as Hedging Instrument [Member] | Interest Rate Swap [Member]
Concentration of Credit Risk [Abstract]
Derivative, Notional Amount		$ 1,165,000
Interest Rate Swap - 1.666%, begins December 31, 2016 [Member] | Designated as Hedging Instrument [Member] | Interest Rate Swap [Member]
Concentration of Credit Risk [Abstract]
Derivative, Notional Amount	582,450
Interest Rate Swap - 1.666%, begins December 31, 2016 [Member] | Designated as Hedging Instrument [Member] | Credit Concentration Risk [Member] | Interest Rate Swap [Member]
Concentration of Credit Risk [Abstract]
Derivative, Notional Amount	582,450
Interest Rate Swap - 1.663%, begins December 31, 2016 [Member] | Designated as Hedging Instrument [Member] | Interest Rate Swap [Member]
Concentration of Credit Risk [Abstract]
Derivative, Notional Amount	291,225
Interest Rate Swap - 1.663%, begins December 31, 2016 [Member] | Designated as Hedging Instrument [Member] | Credit Concentration Risk [Member] | Interest Rate Swap [Member]
Concentration of Credit Risk [Abstract]
Derivative, Notional Amount	291,225
Interest Rate Swap - 1.668%, begins December 31, 2016 [Member] | Designated as Hedging Instrument [Member] | Interest Rate Swap [Member]
Concentration of Credit Risk [Abstract]
Derivative, Notional Amount	291,225
Interest Rate Swap - 1.668%, begins December 31, 2016 [Member] | Designated as Hedging Instrument [Member] | Credit Concentration Risk [Member] | Interest Rate Swap [Member]
Concentration of Credit Risk [Abstract]
Derivative, Notional Amount	$ 291,225

XML

Acquisitions and Divestitures Acquisitions (Details) - USD ($) $ in Thousands		6 Months Ended
	Dec. 01, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Business Acquisition [Line Items]
Goodwill		$ 3,406,475		$ 3,405,823
Businesses acquired in purchase transactions, net of cash acquired		0	$ 2,948
SNap Business [Member]
Business Acquisition [Line Items]
Goodwill		28,177		27,525
Goodwill, Purchase Accounting Adjustments		652
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Inventory		1,741		1,741
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Assets, Receivables		125		125
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Property, Plant, and Equipment		250		250
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Liabilities, Accounts Payable		(2,352)		(713)
Assumed Current Liability Purchase Accounting Adjustment		(1,639)
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Noncurrent Liabilities, Other		0		(987)
Assumed Non-current Liability Purchase Accounting Adjustment		987
Businesses acquired in purchase transactions, net of cash acquired	$ 42,541	42,541
Customer Relationships [Member] | SNap Business [Member]
Business Acquisition [Line Items]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles		5,800		5,800
Developed Technology [Member] | SNap Business [Member]
Business Acquisition [Line Items]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles		6,400		6,400
Tradenames [Member] | SNap Business [Member]
Business Acquisition [Line Items]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles		$ 2,400		$ 2,400

XML

Supplemental Balance Sheet Data - Accounts Receivable, Net (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Accounts, Notes, Loans and Financing Receivable [Line Items]
Billed trade accounts receivable	$ 436,388	$ 429,556
Unbilled receivables	40,212	48,795
Less: Allowance for revenue adjustments	(63,708)	(66,868)
Gross trade accounts receivable	412,892	411,483
Less: Allowance for bad debt	(11,485)	(11,372)
Net trade accounts receivable	401,407	400,111
Other receivables	12,033	13,420
Accounts receivable, net	$ 413,440	$ 413,531

XML

Supplemental Balance Sheet Data - Inventories, Net (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Inventory [Line Items]
Finished goods and tissue available for distribution	$ 142,877	$ 133,293
Goods and tissue in-process	13,239	9,778
Raw materials, supplies, parts and unprocessed tissue	69,037	67,433
Inventories, gross	225,153	210,504
Less: Amounts expected to be converted into equipment for short-term rental	(9,695)	(9,597)
Reserve for excess and obsolete inventory	(17,875)	(19,598)
Inventories, net	$ 197,583	$ 181,309

XML

Long-Term Debt (Details) - USD ($)				6 Months Ended
		Jul. 28, 2016	Jun. 16, 2016	Jun. 30, 2016	Jun. 22, 2016	Feb. 09, 2016	Dec. 31, 2015
Debt Instrument [Line Items]
Long-term debt, gross				$ 4,944,380,000			$ 4,842,886,000
Less: Premium (discount), net of (amortization) accretion				(26,996,000)			(45,742,000)
Less: Debt issuance costs, net of amortization				(48,294,000)			(54,651,000)
Long-term Debt				4,869,090,000			4,742,493,000
Less: Current installments				(23,307,000)			(22,130,000)
Long-term debt, net of current installments, premium, discount and debt issuance costs				4,845,783,000			4,720,363,000
Senior Dollar Term E-1 Credit Facility Due 2018 [Member] [Member]
Interest [Abstract]
Debt Exchanged			$ 1,707,000,000
Revolving Credit Facility [Member] | Senior Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Long-term debt, gross	[1]			25,000,000			0
Interest [Abstract]
Credit facility, maximum borrowing capacity				200,000,000.000
Line of Credit Facility, Amount Outstanding				25,000,000			0
Letters of credit, amount outstanding				36,600,000			38,200,000
Credit facility, remaining borrowing capacity				$ 138,400,000			161,800,000
Credit facility, unused capacity, commitment fee percentage				0.50%
Term Credit Facilities [Member] | Senior Dollar Term F Credit Facility Due 2020 [Member]
Debt Instrument [Line Items]
Long-term debt, gross	[2]			$ 1,702,733,000			1,907,774,000
Less: Premium (discount), net of (amortization) accretion	[2]			(16,686,000)			(20,792,000)
Term Credit Facilities [Member] | Senior Euro Term F Credit Facility Due 2020 [Member]
Debt Instrument [Line Items]
Long-term debt, gross	[2]			264,647,000			260,946,000
Less: Premium (discount), net of (amortization) accretion	[2]			(4,946,000)			(5,224,000)
Term Credit Facilities [Member] | Senior Term E-2 Credit Facility Due 2016 [Member] [Member]
Debt Instrument [Line Items]
Long-term debt, gross	[3]			0			312,166,000
Less: Premium (discount), net of (amortization) accretion	[3]			0			(1,770,000)
Senior Secured Notes [Member] | 10.5% Second Lien Senior Secured Notes due 2018 [Member]
Debt Instrument [Line Items]
Long-term debt, gross				1,750,000,000			1,750,000,000
Less: Premium (discount), net of (amortization) accretion				(13,303,000)			(15,729,000)
Senior Secured Notes [Member] | 7.875 First Lien Senior Secured Notes due 2021 [Member]
Debt Instrument [Line Items]
Long-term debt, gross				590,000,000			0
Less: Premium (discount), net of (amortization) accretion				$ 9,934,000			0
7.875% First Lien Senior Secured Notes [Abstract]
Debt Instrument, Face Amount					$ 190,000,000	$ 400,000,000.0
Debt Instrument, Interest Rate, Stated Percentage				7.875%
Redemption price of notes as percentage of principal plus accrued interest in event of change of control				101.00%
Debt Instrument, Collateral, Maximum Percentage of Voting Stock of Certain Subsidiaries				65.00%
Senior Secured Notes [Member] | 7.875 First Lien Senior Secured Notes due 2021 [Member] | Debt Instrument, Redemption, Period One [Member]
7.875% First Lien Senior Secured Notes [Abstract]
Debt Instrument, Subject to Early Redemption, Percentage of Aggregate Principal				40.00%
Debt Instrument, Redemption Price, Percentage				107.875%
Debt Instrument, Optional Redemption Percentage with Make Whole Premium				100.00%
Debt Instrument, Redemption Price, Percentage				103.938%
Senior Secured Notes [Member] | 7.875 First Lien Senior Secured Notes due 2021 [Member] | Debt Instrument, Redemption, Period Two [Member]
7.875% First Lien Senior Secured Notes [Abstract]
Debt Instrument, Redemption Price, Percentage				101.969%
Senior Secured Notes [Member] | 7.875 First Lien Senior Secured Notes due 2021 [Member] | Debt Instrument, Redemption, Period Three [Member]
7.875% First Lien Senior Secured Notes [Abstract]
Debt Instrument, Redemption Price, Percentage				100.00%
Senior Unsecured Notes [Member] | 12.5% Senior Unsecured Notes due 2019 [Member]
Debt Instrument [Line Items]
Long-term debt, gross				$ 612,000,000			612,000,000
Less: Premium (discount), net of (amortization) accretion				(1,995,000)			(2,227,000)
Banks Which Are Not Party To Senior Secured Credit Facility [Member] | Senior Revolving Credit Facility [Member]
Interest [Abstract]
Letters of credit, amount outstanding				5,800,000			$ 8,500,000
Maturing on November 4, 2017 [Member] | Revolving Credit Facility [Member] | Senior Revolving Credit Facility [Member]
Interest [Abstract]
Credit facility, maximum borrowing capacity				171,300,000
Maturing on November 4, 2016 [Member] | Revolving Credit Facility [Member] | Senior Revolving Credit Facility [Member]
Interest [Abstract]
Credit facility, maximum borrowing capacity				$ 28,700,000
Eurocurrency Rate [Member] | Senior Dollar Term F Credit Facility Due 2020 [Member]
Interest [Abstract]
Debt Instrument, Basis Spread on Variable Rate			4.00%
Eurocurrency Rate [Member] | Senior Euro Term F Credit Facility Due 2020 [Member]
Interest [Abstract]
Debt Instrument, Basis Spread on Variable Rate			4.00%
Base Rate [Member] | Senior Dollar Term F Credit Facility Due 2020 [Member]
Interest [Abstract]
Debt Instrument, Basis Spread on Variable Rate			3.00%
Base Rate [Member] | Senior Euro Term F Credit Facility Due 2020 [Member]
Interest [Abstract]
Debt Instrument, Basis Spread on Variable Rate			3.00%
Minimum [Member] | Eurocurrency Rate [Member]
Interest [Abstract]
Debt Instrument, Basis Spread on Variable Rate			1.00%
Minimum [Member] | Base Rate [Member]
Interest [Abstract]
Debt Instrument, Basis Spread on Variable Rate			2.00%
Subsequent Event [Member] | Revolving Credit Facility [Member] | Senior Revolving Credit Facility [Member]
Interest [Abstract]
Repayments of Lines of Credit		$ 25,000,000

[1] On February 9, 2016 we entered into Amendment No. 7 and Amendment No. 8 to our senior secured credit facilities. As a result of these amendments, we have aggregate revolving loan commitments under our Revolving Credit Facility of $171.3 million maturing on November 4, 2017, with an additional $28.7 million in revolving loan commitments continuing to mature on November 4, 2016.

[2] On June 16, 2016, we entered into Amendment No. 9 to our senior secured credit facilities. As a result of the amendment we created new classes of Dollar Term F Loans and Euro Term F Loans, having the same rights and obligations as the Dollar Term E-1 Loans and Euro Term E-1 Loans as set forth in the credit agreement and loan documents, except as revised by the amendment.

[3] All amounts outstanding under the Senior Term E-2 Credit Facility were paid in full on February 9, 2016, with proceeds from the offering of the 7.875% First Lien Senior Secured Notes due 2021.

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Derivative Financial Instruments and Fair Value Measurements - Derivative Financial Instruments (Details)	Jun. 30, 2016 USD ($) agreement	Apr. 06, 2016 USD ($) agreement	Dec. 31, 2015 USD ($)
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, minimum	1.25%
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] | Foreign Currency Exchange Contracts [Member]
Foreign Currency Exchange Risk Mitigation [Abstract]
Foreign Currency Derivative Instruments Not Designated as Hedging Instruments, Notional Amount	0		$ 0
Designated as Hedging Instrument [Member] | Interest Rate Swap [Member]
Derivative [Line Items]
Derivative, Notional Amount		$ 1,165,000,000
Interest Rate Protection [Abstract]
Number of interest rate agreements held | agreement		3
Designated as Hedging Instrument [Member] | Interest Rate Swap [Member] | Minimum [Member]
Interest Rate Protection [Abstract]
Notional amount decreases by quarter		$ 4,400,000
Designated as Hedging Instrument [Member] | Interest Rate Swap [Member] | Maximum [Member]
Interest Rate Protection [Abstract]
Notional amount decreases by quarter		$ 84,500,000
Senior Secured Credit Facility [Member]
Derivative [Line Items]
Long-term Debt, Fair Value	1,959,000,000		2,400,000,000
Fixed Rate Long-Term Debt [Member]
Derivative [Line Items]
Long-term Debt, Fair Value	2,946,000,000		$ 2,257,000,000
Interest Rate Swap - 2.256%, begins December 31, 2013 [Member] | Not Designated as Hedging Instrument [Member] | Interest Rate Swap [Member]
Derivative [Line Items]
Derivative, Notional Amount	$ 458,733,000
Interest Rate Protection [Abstract]
Fixed Interest Rate	2.256%
Interest Rate Swap - 2.249%, begins December 31, 2013 [Member] | Not Designated as Hedging Instrument [Member] | Interest Rate Swap [Member]
Derivative [Line Items]
Derivative, Notional Amount	$ 458,733,000
Interest Rate Protection [Abstract]
Fixed Interest Rate	2.249%
Interest Rate Swap - 2.250%, begins December 31, 2013 [Member] | Not Designated as Hedging Instrument [Member] | Interest Rate Swap [Member]
Derivative [Line Items]
Derivative, Notional Amount	$ 458,733,000
Interest Rate Protection [Abstract]
Fixed Interest Rate	2.25%
Interest Rate Swap - 1.663%, begins December 31, 2016 [Member] | Designated as Hedging Instrument [Member] | Interest Rate Swap [Member]
Derivative [Line Items]
Derivative, Notional Amount	$ 291,225,000
Interest Rate Protection [Abstract]
Fixed Interest Rate	1.663%
Interest Rate Swap - 1.668%, begins December 31, 2016 [Member] | Designated as Hedging Instrument [Member] | Interest Rate Swap [Member]
Derivative [Line Items]
Derivative, Notional Amount	$ 291,225,000
Interest Rate Protection [Abstract]
Fixed Interest Rate	1.6682%
Interest Rate Swap - 1.666%, begins December 31, 2016 [Member] | Designated as Hedging Instrument [Member] | Interest Rate Swap [Member]
Derivative [Line Items]
Derivative, Notional Amount	$ 582,450,000
Interest Rate Protection [Abstract]
Fixed Interest Rate	1.666%

XML

Derivative Financial Instruments and Fair Value Measurements - Fair Value and Balance Sheet Locations (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Derivatives, Fair Value [Line Items]
Derivative asset, fair value	$ 0	$ 0
Derivative liability, fair value	17,592	12,243
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 assets [Member]
Derivatives, Fair Value [Line Items]
Derivative asset, fair value	0	0
Not Designated as Hedging Instrument [Member] | Interest Rate Swap [Member] | Accrued expenses and other [Member]
Derivatives, Fair Value [Line Items]
Derivative liability, fair value	6,299	12,243
Not Designated as Hedging Instrument [Member] | Interest Rate Swap [Member] | Other non-current liabilities [Member]
Derivatives, Fair Value [Line Items]
Derivative liability, fair value	0	0
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
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
Designated as Hedging Instrument [Member] | Interest Rate Swap [Member] | Accrued expenses and other [Member]
Derivatives, Fair Value [Line Items]
Derivative liability, fair value	3,557	0
Designated as Hedging Instrument [Member] | Interest Rate Swap [Member] | Other non-current liabilities [Member]
Derivatives, Fair Value [Line Items]
Derivative liability, fair value	$ 7,736	$ 0

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Derivative Financial Instruments and Fair Value Measurements - Gain (Loss) on Derivatives (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Derivative Instruments, Gain (Loss) [Line Items]
Derivative instruments gain (loss)	$ (357)	$ (919)	$ (1,039)	$ (4,267)
Not Designated as Hedging Instrument [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative instruments gain (loss)	(357)	(919)	(1,039)	(4,267)
Not Designated as Hedging Instrument [Member] | Interest Rate Swap [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative instruments gain (loss)	(357)	(919)	(1,039)	(4,267)
Not Designated as Hedging Instrument [Member] | Foreign Currency Exchange Contracts [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative instruments gain (loss)	$ 0	$ 0	$ 0	$ 0

XML

Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Other Comprehenisve Income Loss, Net of Tax [Line Items]
Accumulated other comprehensive income (loss), net	$ (39,253)		$ (39,253)		$ (19,734)
Foreign currency translation adjustment, net of tax benefit of $1,339	(12,324)	$ 4,935	(8,226)	$ (2,136)
Net derivative loss, net of taxes of $0	(11,293)	$ 0	(11,293)	$ 0
Accumulated Translation Adjustment [Member]
Other Comprehenisve Income Loss, Net of Tax [Line Items]
Accumulated other comprehensive income (loss), net	(27,960)		(27,960)		(19,734)
Foreign currency translation adjustment, net of tax benefit of $1,339			(8,226)
Net derivative loss, net of taxes of $0			0
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI on Derivatives, before Tax			0
Accumulated Net Gain (Loss) from Cash Flow Hedges Attributable to Parent [Member]
Other Comprehenisve Income Loss, Net of Tax [Line Items]
Accumulated other comprehensive income (loss), net	(11,293)		(11,293)		0
Foreign currency translation adjustment, net of tax benefit of $1,339			0
Net derivative loss, net of taxes of $0			(11,293)
Accumulated Other Comprehensive Income (Loss) [Member]
Other Comprehenisve Income Loss, Net of Tax [Line Items]
Accumulated other comprehensive income (loss), net	$ (39,253)		(39,253)		$ (19,734)
Foreign currency translation adjustment, net of tax benefit of $1,339			(8,226)
Net derivative loss, net of taxes of $0			$ (11,293)

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Commitments and Contingencies (Details) $ in Thousands	12 Months Ended
	Jun. 30, 2016 USD ($) suit	Dec. 31, 2014 USD ($)	Dec. 31, 2015 USD ($)
Loss Contingencies [Line Items]
Other non-current liabilities | $	$ 15,153		$ 37,021
Medicare audits as % of Claims	12.00%
LifeNet [Member]
Loss Contingencies [Line Items]
Litigation Settlement, Expense | $		$ 34,700
Other non-current liabilities | $		$ 34,700
Wake Forest Settlement [Member]
Loss Contingencies [Line Items]
Accrued Liabilities and Other Liabilities | $	$ 28,400
Alloderm [Member] | LifeCell Corporation [Member] | Damages from Product Defects [Member]
Loss Contingencies [Line Items]
Number of pending lawsuits	341
Repliform [Member] | LifeCell Corporation [Member] | Damages from Product Defects [Member]
Loss Contingencies [Line Items]
Number of pending lawsuits	270
Cases Filed in Consolidated Docket [Member] | Repliform [Member] | LifeCell Corporation [Member] | Damages from Product Defects [Member]
Loss Contingencies [Line Items]
Number of pending lawsuits	266
Cases filed in multi-district court in West Virginia [Member] | Repliform [Member] | LifeCell Corporation [Member] | Damages from Product Defects [Member]
Loss Contingencies [Line Items]
Number of pending lawsuits	2
Cases filed in St. Louis, Missouri Court [Member] | Repliform [Member] | LifeCell Corporation [Member] | Damages from Product Defects [Member]
Loss Contingencies [Line Items]
Number of pending lawsuits	12
Cases filed in Delaware and Minnesota [Member] | Repliform [Member] | LifeCell Corporation [Member] | Damages from Product Defects [Member]
Loss Contingencies [Line Items]
Number of pending lawsuits	2

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Segment Information (Details) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2016 USD ($) segment Countries	Jun. 30, 2015 USD ($)	Jun. 30, 2016 USD ($) segment Countries	Jun. 30, 2015 USD ($)
Segment Reporting Information [Line Items]
Approximate number of countries in which the entity has operations | Countries		80		80
Number of reportable operating segments | segment		2		2
Number of Global Business Units | segment		2		2
Total revenue		$ 472,421	$ 461,645	$ 923,787	$ 905,695
Operating earnings (loss)		80,439	90,170	157,707	174,310
Non-allocated costs:
General headquarter expense	[1]	(1,160)	(1,526)	(2,728)	(2,949)
Equity-based compensation		(834)	(770)	(1,602)	(1,305)
Business optimization and transaction-related expenses	[2]	(27,028)	(16,352)	(44,713)	(31,728)
Acquired intangible asset amortization	[3]	(41,160)	(44,712)	(83,361)	(90,589)
Total non-allocated costs		(70,182)	(63,360)	(132,404)	(126,571)
Advanced Wound Therapeutics [Member]
Segment Reporting Information [Line Items]
Total revenue		354,968	354,214	694,010	691,473
Operating earnings (loss)		107,633	117,642	207,297	230,527
Regenerative Medicine [Member]
Segment Reporting Information [Line Items]
Total revenue		114,905	103,529	224,779	207,698
Operating earnings (loss)		42,523	35,346	81,798	69,365
Other Segments [Member]
Segment Reporting Information [Line Items]
Total revenue	[4]	2,548	3,902	4,998	6,524
Operating earnings (loss)	[4]	$ 465	$ 542	$ 1,016	$ 989

[1] Represents general headquarter expenses not allocated to the individual segments.

[2] Represents restructuring-related expenses associated with our business optimization initiatives as well as management fees and costs associated with acquisition, disposition and financing activities.

[3] Represents amortization of acquired intangible assets related to our 2011 LBO, our acquisition of Systagenix in October 2013 and other technology acquisitions.

[4] Represents contract manufacturing operations conducted at our manufacturing facility in Gargrave, England.

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Guarantor Condensed Consolidating Financial Statements - Condensed Consolidated Balance Sheet (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015	Jun. 30, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 99,197	$ 88,409	$ 141,152	$ 183,541
Accounts receivable, net	413,440	413,531
Inventories, net	197,583	181,309
Deferred income taxes	51,968	74,521
Prepaid expenses and other	40,117	34,985
Intercompany receivables	0	0
Total current assets	802,305	792,755
Net property, plant and equipment	260,569	273,076
Deferred income taxes	22,333	29,909
Goodwill	3,406,475	3,405,823
Identifiable intangible assets, net	2,139,366	2,219,088
Other non-current assets	5,033	6,104
Intercompany loan receivables	0	0
Intercompany investments	0	0
Total assets	6,636,081	6,726,755
Current liabilities:
Accounts payable	52,718	57,910
Accrued expenses and other	326,302	373,440
Intercompany payables	0	0
Current installments of long-term debt	23,307	22,130
Income taxes payable	4,372	3,561
Deferred income taxes	113,595	113,595
Total current liabilities	520,294	570,636
Long-term debt, net of current installments, premium, discount and debt issuance costs	4,845,783	4,720,363
Non-current tax liabilities	34,533	34,833
Deferred income taxes	681,592	760,737
Other non-current liabilities	15,153	37,021
Intercompany loan payables	0	0
intercompany advance	0	0
Total liabilities	6,097,355	6,123,590
Equity:
Total equity	538,726	603,165
Total liabilities and shareholders' equity	6,636,081	6,726,755
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
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	549,533	613,540
Total assets	550,097	614,104
Current liabilities:
Accounts payable	0	0
Accrued expenses and other	0	0
Intercompany payables	10,340	10,115
Current installments of long-term debt	0	0
Income taxes payable	0	0
Deferred income taxes	0	0
Total current liabilities	10,340	10,115
Long-term debt, net of current installments, premium, discount and debt issuance costs	0	0
Non-current tax liabilities	0	0
Deferred income taxes	0	0
Other non-current liabilities	1,031	824
Intercompany loan payables	0	0
intercompany advance	0	0
Total liabilities	11,371	10,939
Equity:
Total equity	538,726	603,165
Total liabilities and shareholders' equity	550,097	614,104
Kinetic Concepts, Inc. and KCI USA, Inc. Borrower [Member]
Current assets:
Cash and cash equivalents	25,029	12,859	55,863	41,027
Accounts receivable, net	206,624	202,377
Inventories, net	100,069	89,929
Deferred income taxes	34,892	66,235
Prepaid expenses and other	22,001	15,199
Intercompany receivables	2,165,186	2,098,061
Total current assets	2,553,801	2,484,660
Net property, plant and equipment	299,623	294,855
Deferred income taxes	0	0
Goodwill	2,511,417	2,510,765
Identifiable intangible assets, net	227,982	250,635
Other non-current assets	1,598	1,029
Intercompany loan receivables	730,000	740,000
Intercompany investments	463,886	353,768
Total assets	6,788,307	6,635,712
Current liabilities:
Accounts payable	14,957	18,013
Accrued expenses and other	188,290	234,036
Intercompany payables	2,016,381	1,730,435
Current installments of long-term debt	23,307	22,130
Income taxes payable	0	0
Deferred income taxes	0	0
Total current liabilities	2,242,935	2,004,614
Long-term debt, net of current installments, premium, discount and debt issuance costs	4,845,783	4,720,363
Non-current tax liabilities	15,609	15,046
Deferred income taxes	37,762	110,076
Other non-current liabilities	8,834	29,079
Intercompany loan payables	438,670	432,545
intercompany advance	0	0
Total liabilities	7,589,593	7,311,723
Equity:
Total equity	(801,286)	(676,011)
Total liabilities and shareholders' equity	6,788,307	6,635,712
Guarantor Subsidiaries [Member]
Current assets:
Cash and cash equivalents	1,895	4,919	0	1,499
Accounts receivable, net	59,412	58,080
Inventories, net	113,756	87,519
Deferred income taxes	20,470	8,286
Prepaid expenses and other	3,746	7,519
Intercompany receivables	3,131,862	2,828,639
Total current assets	3,331,141	2,994,962
Net property, plant and equipment	55,431	59,833
Deferred income taxes	0	0
Goodwill	732,138	732,138
Identifiable intangible assets, net	1,669,038	1,704,521
Other non-current assets	282	282
Intercompany loan receivables	443,480	436,432
Intercompany investments	0	0
Total assets	6,231,510	5,928,168
Current liabilities:
Accounts payable	13,619	14,129
Accrued expenses and other	255,801	260,404
Intercompany payables	2,819,472	2,689,502
Current installments of long-term debt	0	0
Income taxes payable	1,357	0
Deferred income taxes	113,595	113,595
Total current liabilities	3,203,844	3,077,630
Long-term debt, net of current installments, premium, discount and debt issuance costs	0	0
Non-current tax liabilities	15,640	14,965
Deferred income taxes	605,486	609,281
Other non-current liabilities	2,524	4,472
Intercompany loan payables	730,000	740,000
intercompany advance	134,643	70,045
Total liabilities	4,692,137	4,516,393
Equity:
Total equity	1,539,373	1,411,775
Total liabilities and shareholders' equity	6,231,510	5,928,168
Non-Guarantor Subsidiaries [Member]
Current assets:
Cash and cash equivalents	71,875	70,233	84,891	140,617
Accounts receivable, net	147,404	153,074
Inventories, net	117,663	104,904
Deferred income taxes	0	0
Prepaid expenses and other	243,526	244,833
Intercompany receivables	56,689	16,279
Total current assets	637,157	589,323
Net property, plant and equipment	113,096	127,858
Deferred income taxes	22,333	29,909
Goodwill	162,920	162,920
Identifiable intangible assets, net	242,346	263,932
Other non-current assets	3,153	4,793
Intercompany loan receivables	0	0
Intercompany investments	0	0
Total assets	1,181,005	1,178,735
Current liabilities:
Accounts payable	24,142	25,768
Accrued expenses and other	67,856	68,207
Intercompany payables	507,710	513,093
Current installments of long-term debt	0	0
Income taxes payable	3,175	3,561
Deferred income taxes	3,394	0
Total current liabilities	606,277	610,629
Long-term debt, net of current installments, premium, discount and debt issuance costs	0	0
Non-current tax liabilities	3,284	4,822
Deferred income taxes	38,344	41,380
Other non-current liabilities	2,764	2,646
Intercompany loan payables	4,810	3,887
intercompany advance	0	0
Total liabilities	655,479	663,364
Equity:
Total equity	525,526	515,371
Total liabilities and shareholders' equity	1,181,005	1,178,735
Consolidation, Eliminations [Member]
Current assets:
Cash and cash equivalents	0	0	$ 0	$ 0
Accounts receivable, net	0	0
Inventories, net	(133,905)	(101,043)
Deferred income taxes	(3,394)	0
Prepaid expenses and other	(229,156)	(232,566)
Intercompany receivables	(5,353,903)	(4,943,145)
Total current assets	(5,720,358)	(5,276,754)
Net property, plant and equipment	(207,581)	(209,470)
Deferred income taxes	0	0
Goodwill	0	0
Identifiable intangible assets, net	0	0
Other non-current assets	0	0
Intercompany loan receivables	(1,173,480)	(1,176,432)
Intercompany investments	(1,013,419)	(967,308)
Total assets	(8,114,838)	(7,629,964)
Current liabilities:
Accounts payable	0	0
Accrued expenses and other	(185,645)	(189,207)
Intercompany payables	(5,353,903)	(4,943,145)
Current installments of long-term debt	0	0
Income taxes payable	(160)	0
Deferred income taxes	(3,394)	0
Total current liabilities	(5,543,102)	(5,132,352)
Long-term debt, net of current installments, premium, discount and debt issuance costs	0	0
Non-current tax liabilities	0	0
Deferred income taxes	0	0
Other non-current liabilities	0	0
Intercompany loan payables	(1,173,480)	(1,176,432)
intercompany advance	(134,643)	(70,045)
Total liabilities	(6,851,225)	(6,378,829)
Equity:
Total equity	(1,263,613)	(1,251,135)
Total liabilities and shareholders' equity	$ (8,114,838)	$ (7,629,964)

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Guarantor Condensed Consolidating Financial Statements - Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Condensed Income Statements, Captions [Line Items]
Rental	$ 175,422	$ 180,397	$ 345,521	$ 353,236
Sales	296,999	281,248	578,266	552,459
Total revenue	472,421	461,645	923,787	905,695
Rental expenses	75,794	77,869	150,689	156,047
Cost of sales	78,118	75,509	156,697	148,923
Gross profit (loss)	318,509	308,267	616,401	600,725
Selling, general and administrative expenses	182,194	158,994	346,638	306,757
Research and development expenses	14,717	14,391	28,695	29,069
Acquired intangible asset amortization	41,159	44,712	83,361	90,589
Operating earnings (loss)	80,439	90,170	157,707	174,310
Non-operating intercompany transactions	0	0	0	0
Interest income and other	589	67	696	214
Interest expense	(110,428)	(107,374)	(218,980)	(212,100)
Loss on extinguishment of debt	(10,107)	0	(13,716)	0
Foreign currency gain (loss)	8,998	(6,799)	4,668	12,601
Derivative instruments loss	(357)	(919)	(1,039)	(4,267)
Earnings (loss) before income taxes (benefit) and equity in earnings (loss) of subsidiaries	(30,866)	(24,855)	(70,664)	(29,242)
Income tax expense (benefit)	(10,751)	(7,224)	(24,574)	(7,080)
Earnings (loss) before equity in earnings (loss) of subsidiaries	(20,115)	(17,631)	(46,090)	(22,162)
Equity in earnings (loss) of subsidiaries	0	0	0	0
Net earnings (loss)	(20,115)	(17,631)	(46,090)	(22,162)
Total comprehensive income (loss)	(43,732)	(12,696)	(65,609)	(24,298)
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	25	15	45	36
Cost of sales	16	10	16	53
Gross profit (loss)	(41)	(25)	(61)	(89)
Selling, general and administrative expenses	793	745	1,541	1,216
Research and development expenses	0	0	0	0
Acquired intangible asset amortization	0	0	0	0
Operating earnings (loss)	(834)	(770)	(1,602)	(1,305)
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 loss	0	0	0	0
Earnings (loss) before income taxes (benefit) and equity in earnings (loss) of subsidiaries	(834)	(770)	(1,602)	(1,305)
Income tax expense (benefit)	0	0	0	0
Earnings (loss) before equity in earnings (loss) of subsidiaries	(834)	(770)	(1,602)	(1,305)
Equity in earnings (loss) of subsidiaries	(19,281)	(16,861)	(44,488)	(20,857)
Net earnings (loss)	(20,115)	(17,631)	(46,090)	(22,162)
Total comprehensive income (loss)	(43,732)	(12,696)	(65,609)	(24,298)
Kinetic Concepts, Inc. and KCI USA, Inc. Borrower [Member]
Condensed Income Statements, Captions [Line Items]
Rental	155,345	157,674	305,765	307,372
Sales	99,880	87,967	190,661	171,704
Total revenue	255,225	245,641	496,426	479,076
Rental expenses	81,183	77,207	162,671	153,080
Cost of sales	94,791	90,719	194,403	180,215
Gross profit (loss)	79,251	77,715	139,352	145,781
Selling, general and administrative expenses	96,350	74,827	177,324	143,346
Research and development expenses	5,469	5,245	11,233	10,862
Acquired intangible asset amortization	11,074	13,304	22,658	27,184
Operating earnings (loss)	(33,642)	(15,661)	(71,863)	(35,611)
Non-operating intercompany transactions	31,226	22,536	29,824	20,854
Interest income and other	16,402	16,799	32,910	33,561
Interest expense	(113,372)	(113,673)	(229,460)	(221,455)
Loss on extinguishment of debt	(10,107)		(13,716)
Foreign currency gain (loss)	7,159	(10,211)	(5,885)	24,795
Derivative instruments loss	(357)	(919)	(1,039)	(4,267)
Earnings (loss) before income taxes (benefit) and equity in earnings (loss) of subsidiaries	(102,691)	(101,129)	(259,229)	(182,123)
Income tax expense (benefit)	(1,171)	(9,452)	(35,151)	(9,037)
Earnings (loss) before equity in earnings (loss) of subsidiaries	(101,520)	(91,677)	(224,078)	(173,086)
Equity in earnings (loss) of subsidiaries	35,654	19,724	110,118	68,677
Net earnings (loss)	(65,866)	(71,953)	(113,960)	(104,409)
Total comprehensive income (loss)	(89,483)	(67,018)	(133,479)	(106,545)
Guarantor Subsidiaries [Member]
Condensed Income Statements, Captions [Line Items]
Rental	0	0	0	0
Sales	251,328	217,740	497,271	457,431
Total revenue	251,328	217,740	497,271	457,431
Rental expenses	866	2,673	1,042	6,140
Cost of sales	161,862	136,937	322,657	296,190
Gross profit (loss)	88,600	78,130	173,572	155,101
Selling, general and administrative expenses	41,786	40,324	84,160	77,040
Research and development expenses	5,194	5,643	10,213	10,539
Acquired intangible asset amortization	19,242	19,313	38,606	38,769
Operating earnings (loss)	22,378	12,850	40,593	28,753
Non-operating intercompany transactions	163,824	188,971	170,537	219,820
Interest income and other	3,112	6,335	10,729	9,398
Interest expense	(16,430)	(16,798)	(32,967)	(33,516)
Loss on extinguishment of debt	0		0
Foreign currency gain (loss)	853	695	1,590	(898)
Derivative instruments loss	0	0	0	0
Earnings (loss) before income taxes (benefit) and equity in earnings (loss) of subsidiaries	173,737	192,053	190,482	223,557
Income tax expense (benefit)	(956)	(1,306)	(1,802)	(1,165)
Earnings (loss) before equity in earnings (loss) of subsidiaries	174,693	193,359	192,284	224,722
Equity in earnings (loss) of subsidiaries	(133,402)	(171,285)	(64,598)	(149,529)
Net earnings (loss)	41,291	22,074	127,686	75,193
Total comprehensive income (loss)	17,674	27,009	108,167	73,057
Non-Guarantor Subsidiaries [Member]
Condensed Income Statements, Captions [Line Items]
Rental	20,077	22,723	39,756	45,864
Sales	215,941	203,091	467,203	432,754
Total revenue	236,018	225,814	506,959	478,618
Rental expenses	35,427	40,860	71,378	82,225
Cost of sales	90,578	85,024	183,259	172,998
Gross profit (loss)	110,013	99,930	252,322	223,395
Selling, general and administrative expenses	43,526	43,203	84,259	85,511
Research and development expenses	4,054	3,503	7,249	7,668
Acquired intangible asset amortization	10,843	12,095	22,097	24,636
Operating earnings (loss)	51,590	41,129	138,717	105,580
Non-operating intercompany transactions	(195,051)	(211,627)	(200,403)	(240,817)
Interest income and other	511	52	582	155
Interest expense	(62)	(22)	(78)	(29)
Loss on extinguishment of debt	0		0
Foreign currency gain (loss)	986	2,717	8,963	(11,296)
Derivative instruments loss	0	0	0	0
Earnings (loss) before income taxes (benefit) and equity in earnings (loss) of subsidiaries	(142,026)	(167,751)	(52,219)	(146,407)
Income tax expense (benefit)	(8,624)	3,534	12,379	3,122
Earnings (loss) before equity in earnings (loss) of subsidiaries	(133,402)	(171,285)	(64,598)	(149,529)
Equity in earnings (loss) of subsidiaries	0	0	0	0
Net earnings (loss)	(133,402)	(171,285)	(64,598)	(149,529)
Total comprehensive income (loss)	(157,019)	(166,350)	(84,117)	(151,665)
Consolidation, Eliminations [Member]
Condensed Income Statements, Captions [Line Items]
Rental	0	0	0	0
Sales	(270,150)	(227,550)	(576,869)	(509,430)
Total revenue	(270,150)	(227,550)	(576,869)	(509,430)
Rental expenses	(41,707)	(42,886)	(84,447)	(85,434)
Cost of sales	(269,129)	(237,181)	(543,638)	(500,533)
Gross profit (loss)	40,686	52,517	51,216	76,537
Selling, general and administrative expenses	(261)	(105)	(646)	(356)
Research and development expenses	0	0	0	0
Acquired intangible asset amortization	0	0	0	0
Operating earnings (loss)	40,947	52,622	51,862	76,893
Non-operating intercompany transactions	1	120	42	143
Interest income and other	(19,436)	(23,119)	(43,525)	(42,900)
Interest expense	19,436	23,119	43,525	42,900
Loss on extinguishment of debt	0		0
Foreign currency gain (loss)	0	0	0	0
Derivative instruments loss	0	0	0	0
Earnings (loss) before income taxes (benefit) and equity in earnings (loss) of subsidiaries	40,948	52,742	51,904	77,036
Income tax expense (benefit)	0	0	0	0
Earnings (loss) before equity in earnings (loss) of subsidiaries	40,948	52,742	51,904	77,036
Equity in earnings (loss) of subsidiaries	117,029	168,422	(1,032)	101,709
Net earnings (loss)	157,977	221,164	50,872	178,745
Total comprehensive income (loss)	$ 228,828	$ 206,359	$ 109,429	$ 185,153

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Guarantor Condensed Consolidating Financial Statements - Condensed Consolidated Cash Flow (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Cash flows from operating activities:
Net earnings (loss)	$ (20,115)	$ (17,631)	$ (46,090)	$ (22,162)
Adjustments to reconcile net earnings (loss) to net cash provided (used) by operating activities			6,511	18,158
Net cash provided (used) by operating activities			(39,579)	(4,004)
Cash flows from investing activities
Net additions to property, plant and equipment			(35,858)	(33,718)
Businesses acquired in purchase transactions, net of cash acquired			0	(2,948)
Decrease (increase) in identifiable intangible assets and other non-current assets			(3,684)	(3,646)
Net cash provided (used) by investing activities			(39,542)	(40,312)
Cash flows from financing activities:
Distribution to limited partners			0	(55)
Settlement of equity-based awards			(226)	(1,348)
Proceeds from revolving credit facility			25,000	30,000
Proceeds from debt issuance			595,044	0
Repayments of long-term debt and capital lease obligations			(518,570)	(15,389)
Debt issuance costs			(12,899)	(6,256)
Proceeds (payments) on intercompany loans			0	0
Proceeds (payments) on intercompany investments			0	0
Net cash provided (used) by financing activities			88,349	6,952
Effect of exchange rate changes on cash and cash equivalents			1,560	(5,025)
Net increase (decrease) in cash and cash equivalents			10,788	(42,389)
Cash and cash equivalents, beginning of period			88,409	183,541
Cash and cash equivalents, end of period	99,197	141,152	99,197	141,152
Parent Company [Member]
Cash flows from operating activities:
Net earnings (loss)	(20,115)	(17,631)	(46,090)	(22,162)
Adjustments to reconcile net earnings (loss) to net cash provided (used) by operating activities			1,829	2,708
Net cash provided (used) by operating activities			(44,261)	(19,454)
Cash flows from investing activities
Net additions to property, plant and equipment			0	0
Businesses acquired in purchase transactions, 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				(55)
Settlement of equity-based awards			(226)	(1,348)
Proceeds from revolving credit facility			0	0
Proceeds from debt issuance			0
Repayments of long-term debt and capital lease obligations			0	0
Debt issuance costs			0	0
Proceeds (payments) on intercompany loans			0	0
Proceeds (payments) on intercompany investments			44,487	20,857
Net cash provided (used) by financing activities			44,261	19,454
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	398	398
Kinetic Concepts, Inc. and KCI USA, Inc. Borrower [Member]
Cash flows from operating activities:
Net earnings (loss)	(65,866)	(71,953)	(113,960)	(104,409)
Adjustments to reconcile net earnings (loss) to net cash provided (used) by operating activities			228,754	159,336
Net cash provided (used) by operating activities			114,794	54,927
Cash flows from investing activities
Net additions to property, plant and equipment			(96,612)	(72,883)
Businesses acquired in purchase transactions, net of cash acquired				0
Decrease (increase) in identifiable intangible assets and other non-current assets			(574)	9
Net cash provided (used) by investing activities			(97,186)	(72,874)
Cash flows from financing activities:
Distribution to limited partners				0
Settlement of equity-based awards			0	0
Proceeds from revolving credit facility			25,000	30,000
Proceeds from debt issuance			595,044
Repayments of long-term debt and capital lease obligations			(518,568)	(12,916)
Debt issuance costs			(12,899)	(6,256)
Proceeds (payments) on intercompany loans			16,125	16,125
Proceeds (payments) on intercompany investments			(110,140)	5,830
Net cash provided (used) by financing activities			(5,438)	32,783
Effect of exchange rate changes on cash and cash equivalents			0	0
Net increase (decrease) in cash and cash equivalents			12,170	14,836
Cash and cash equivalents, beginning of period			12,859	41,027
Cash and cash equivalents, end of period	25,029	55,863	25,029	55,863
Guarantor Subsidiaries [Member]
Cash flows from operating activities:
Net earnings (loss)	41,291	22,074	127,686	75,193
Adjustments to reconcile net earnings (loss) to net cash provided (used) by operating activities			(170,653)	(126,725)
Net cash provided (used) by operating activities			(42,967)	(51,532)
Cash flows from investing activities
Net additions to property, plant and equipment			(3,415)	(4,094)
Businesses acquired in purchase transactions, net of cash acquired				0
Decrease (increase) in identifiable intangible assets and other non-current assets			(4,104)	(3,595)
Net cash provided (used) by investing activities			(7,519)	(7,689)
Cash flows from financing activities:
Distribution to limited partners				0
Settlement of equity-based awards			0	0
Proceeds from revolving credit facility			0	0
Proceeds from debt issuance			0
Repayments of long-term debt and capital lease obligations			0	(2,500)
Debt issuance costs			0	0
Proceeds (payments) on intercompany loans			(17,048)	(11,399)
Proceeds (payments) on intercompany investments			64,510	71,621
Net cash provided (used) by financing activities			47,462	57,722
Effect of exchange rate changes on cash and cash equivalents			0	0
Net increase (decrease) in cash and cash equivalents			(3,024)	(1,499)
Cash and cash equivalents, beginning of period			4,919	1,499
Cash and cash equivalents, end of period	1,895	0	1,895	0
Non-Guarantor Subsidiaries [Member]
Cash flows from operating activities:
Net earnings (loss)	(133,402)	(171,285)	(64,598)	(149,529)
Adjustments to reconcile net earnings (loss) to net cash provided (used) by operating activities			1,232	42,979
Net cash provided (used) by operating activities			(63,366)	(106,550)
Cash flows from investing activities
Net additions to property, plant and equipment			(21,447)	(11,729)
Businesses acquired in purchase transactions, net of cash acquired				(2,948)
Decrease (increase) in identifiable intangible assets and other non-current assets			994	(60)
Net cash provided (used) by investing activities			(20,453)	(14,737)
Cash flows from financing activities:
Distribution to limited partners				0
Settlement of equity-based awards			0	0
Proceeds from revolving credit facility			0	0
Proceeds from debt issuance			0
Repayments of long-term debt and capital lease obligations			(2)	27
Debt issuance costs			0	0
Proceeds (payments) on intercompany loans			923	(4,726)
Proceeds (payments) on intercompany investments			82,980	75,285
Net cash provided (used) by financing activities			83,901	70,586
Effect of exchange rate changes on cash and cash equivalents			1,560	(5,025)
Net increase (decrease) in cash and cash equivalents			1,642	(55,726)
Cash and cash equivalents, beginning of period			70,233	140,617
Cash and cash equivalents, end of period	71,875	84,891	71,875	84,891
Consolidation, Eliminations [Member]
Cash flows from operating activities:
Net earnings (loss)	157,977	221,164	50,872	178,745
Adjustments to reconcile net earnings (loss) to net cash provided (used) by operating activities			(54,651)	(60,140)
Net cash provided (used) by operating activities			(3,779)	118,605
Cash flows from investing activities
Net additions to property, plant and equipment			85,616	54,988
Businesses acquired in purchase transactions, 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			85,616	54,988
Cash flows from financing activities:
Distribution to limited partners				0
Settlement of equity-based awards			0	0
Proceeds from revolving credit facility			0	0
Proceeds from debt issuance			0
Repayments of long-term debt and capital lease obligations			0	0
Debt issuance costs			0	0
Proceeds (payments) on intercompany loans			0	0
Proceeds (payments) on intercompany investments			(81,837)	(173,593)
Net cash provided (used) by financing activities			(81,837)	(173,593)
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	$ 0	$ 0