Good afternoon, everyone and welcome to the CONMED Corporation's Second Quarter 2015 Earnings Call. My name is Irene and I will be your operator today. At this time, all participants are in listen-only mode. Later we will conduct a question-and-answer session. As a reminder, this call is being recorded for replay purposes. Before we begin, let me remind you that during this call, management will be making comments and statements regarding its financial outlook which represent forward-looking statements that involve risks and uncertainties as those trends are defined under the federal securities laws. The company's actual results may differ materially from its current expectations. Please refer to the risk factors and other cautionary factors in today's press release as well as the company's SEC filings for more details on factors that may cause actual results to differ materially. You will also hear management refer to certain non-GAAP adjusted measures during this discussion. While these figures are not substitute for GAAP measurements, management will use the figures to aid in monitoring the company's ongoing financial performance from quarter-to-quarter and year-to-year on regular basis, and for benchmarking against other medical technology companies. Adjusted net income and adjusted earnings per share measure the income of the company excluding credits or charges that are considered by company to be special or outside of its normal ongoing operations. These adjusted items are specified in the reconciliation in the press release issued this afternoon. With this required announcement completed, I will turn the call over to Curt Hartman, CONMED President and Chief Executive Officer for opening remarks. Mr. Hartman? Curt R. Hartman - President, Chief Executive Officer & Director: Thank you, Irene. Good afternoon, everyone and thank you for joining us for CONMED's second quarter 2015 earnings call. With me on today's call is Luke Pomilio,…

Sure. Your first question comes from the line of Kristen Stewart with Deutsche Bank.

Hey, everybody. How are you doing? Curt R. Hartman - President, Chief Executive Officer & Director: Kristen, are you there?

Yeah. Can you hear me okay? Curt R. Hartman - President, Chief Executive Officer & Director: A little bit remote, but go ahead.

Okay. Sorry, I'll talk up. I was just wondering if you could just maybe give us a couple of words on what gives you confidence just on the second half ramp and confidence in achieving the forecast that you've outlined today, just given where you finished from a growth rate perspective for the first half? Curt R. Hartman - President, Chief Executive Officer & Director: Great question, and not unexpected. And I think if you look first and foremost at the 1% to 3% constant currency growth and where we are through the first half of the year, to get to that range, it implies that we'll grow somewhere between 2% and 6% if you just do real simple math. When you look at the activities that we've undertaken in the first half, a very heavy focus on the U.S. effort, that work I believe is behind us and we exited the second quarter with a lot of momentum, really across the board. We don't publicly report exactly the way our business operates for orthopedics, but they had a great quarter. The advanced surgical business really went through the depth of its transitions in the second quarter. We had new sales hire training, we had product training, so all those activities are behind us. Again, they exited with a lot of momentum and we feel good that those two business' lion's share of our U.S. revenue are on track with the plans that we had laid out at the beginning of the year. Jump to the other side, go to the international business, Pat has been doing a global tour. Pat, in the second quarter, has made a lot of leadership additions to his team. We have a new manager over our Latin American and Canadian business with a lot of emphasis on Latin America. We have a new leader for our Eastern Europe, Middle East, Africa as well as our general surgery business in France, Benelux, and Spain. And the list kind of goes on there in terms of the transitions Pat's trying to make to affect better penetration in the markets that we serve. And so I look at the combination of those things. I look at some of the prevailing underlying trends at some of our key product lines. I look at those things. I look at the markets and take great confidence that we'll get to the outlook that we've provided. Still there?

Your next question comes from the line of Richard Newitter with Leerink Partners.

Hi. Thanks for taking the questions. Can you hear me okay? Curt R. Hartman - President, Chief Executive Officer & Director: We can, Rich. Thank you.

Okay. Great. Curt, I have a couple. Maybe we can just start. So obviously a back-half acceleration on top both for the top-line and the EPS line, which is consistent with what you've been saying, but now that we're halfway through the year, can you maybe help tease out – the actual way we should be modeling 3Q versus 4Q, you know, how back half loaded is this? Should it be a very, very steep modeling kind of into the fourth quarter, or is it more evenly split? Can you help us think through the constant currency growth, the gross margin factors and then also EPS with respect to those items? Luke A. Pomilio - Chief Financial Officer & Executive VP-Finance: Hey, Rich it's Luke. Let me take that one. So I think, historically, our fourth quarter has always been our strongest quarter. And that being said, our fourth quarter will be strong in 2015, but I think as far as sales growth goes, I suspect that we're entering or leaving the second quarter fairly strong and we expect to see growth starting in the third quarter. From a profitability standpoint, certainly, currency has been an issue but the other item holding us back from a gross margin standpoint is the hangover of 2014 production variances. We're going to – those are behind us now, starting in the third quarter, we'll get back to a more normalized level of gross profit. So when I think of gross profit for the third and fourth quarter, I think overall we're going to be looking at the kind of levels that we saw on the second half of last year. From an EPS standpoint, overall the fourth quarter will be stronger, so I suspect that we'll finish stronger in the fourth quarter than in the third, but we expect a strong performance, overall sales margin as well as EPS in the third quarter.

Okay. That's helpful, Luke. And then just on the – I think you called out $0.05 of items that seemed pretty one time-ish in nature around marketing and R&D. Should we kind of think of the EPS number normalized for those items as roughly $0.05 higher, and that obviously those won't repeat or there won't be items like that to repeat in the back half? Curt R. Hartman - President, Chief Executive Officer & Director: Yeah. Let me just go back in the commentary. There were three items. One was a little heavier push on R&D, and we had talked or have talked publicly that the R&D as a percentage of sales needs to probably move up into the 4%. We got there a little quicker, as evidenced by this quarter. I think it was 4.1%. And I think that's a reflection of the new business leaders, the ownership of the product pipelines, the renewed emphasis on marketing. That was $0.02 above what we saw in the first quarter. And well, I don't think it'll continue necessarily at that trend. It's going to continue to edge upward, probably a little bit ahead of what we had assumed, but I'm comfortable with that, given everything else that's going on. The second item was marketing spend was $0.03 above where we were in the first quarter as we incurred some – I will call those more one-time items. ISAKOS is a very large international orthopedic show, because of our presence, high percentage of our international business being orthopedic, we made a larger investment in that show this year than we actually did in the academy and that occurred in the second quarter. So we won't see that one again for two more years. And then the last one was $0.01 attributable to the revamped equity program that we'd talked about, that we started a year across the company with a revamped focus on equity as a component of people's earnings potential. And that settled in at $0.01 and that will repeat every quarter, but again we think that's very manageable within the P&L. So I think of the three, the R&D one is the one that probably creeps a little bit higher over time. We got to it a little sooner than I was expecting, but we're pushing on the right things here. We're pushing on getting products out the door, the right products. So, comfortable with that coming on board a little quicker.

Yeah. And Curt, if I can just get one on the M&A side, you made the comment several times that a lot of the U.S. investment restructuring heavy lifting is now behind you. You've made some moves, some hires with Peter, that would seem to suggest that you're gearing up for some M&A going forward. Can we possibly expect that as soon as the second half? What kind of opportunities should we be looking for? Curt R. Hartman - President, Chief Executive Officer & Director: It's a great question and we've said, I think, almost now a year to the day, that M&A would be part of our strategy. And with Pete coming on board, it has really accelerated our efforts. Luke and I were kind of holding down that role while we were doing other things here. So we were the bottlenecks in the company. Pete is full time on this. He's connected to all of our business leaders and we have a very active list at this point in time. He has hit the ground running doing exactly what we hoped he would do. You know as well as I do you can't time M&A and you know you're going to look at a lot of items before you find one that fits what you're looking for, but I would tell you we have a very active roster of M&A targets. In addition, you're going to see in the financial statements, we did a few small acquisitions in the second quarter that are somewhat immaterial in terms of the amount of spend, but they are nice tuck-in product lines that we believe will add to our offering. Both of these fit within our orthopedics business. They're both very small. They have to be put through our distribution channel, validated through our R&D categories, but they're nice product line additions to the portfolio. So we've already got a few small ones under our belt. Not material at this point in time but things that we think will help on the portfolio, both pull-through and in terms of our reps getting something new to talk about with our customers.

Thank you.

Your next question comes from the line of Matt O'Brien with Piper Jaffray. J. P. McKim - Piper Jaffray & Co (Broker): Hey. Good afternoon, everyone. This is actually J. P. McKim in for Matt. I just had a couple questions. I think this was your first quarter with the combined energy and Endo sales force. So I'm just trying to get an update there on maybe any positive highlights from, kind of, they're selling from a larger bag of tools to sell from, and see how that's going so far? Curt R. Hartman - President, Chief Executive Officer & Director: Yeah. We're very excited with that transition. We announced plans in early 2015. We lined everything up to go into the new structure, or kind of dissolve everything and go to the new structure starting April 1st. In addition with that, we had some pretty substantial recruiting to do to fill some open territories. And all that work is behind us and we still came out of the quarter with pretty positive growth. So I put that broadly in the category of a large win for advanced surgical and the leadership team there. Bill Peters came into the company assuming that responsibility and role. He's done a great job driving it. We've got a new head of marketing there, Maria Rivlin, who's got great clinical experience. She's been with CONMED for, I believe, three years, and stepped up into this leadership role and is really connecting with key opinion leaders. And we've got a great team of sales managers that, you know, several of them are new to the organization. Some of them have been with the organization and it's a nice blend, and they're really getting out and getting after it. And when you look at two quarters…

Your next question comes from the line of Mike Matson with Needham & Company. Michael S. Matson - Needham & Co. LLC: Hi. Thanks for taking my question. Curt, I guess I just want to start out by asking you how the second quarter results turned out relative to what you were expecting at the time you reported the first quarter results? Curt R. Hartman - President, Chief Executive Officer & Director: Mike, it's a great question and there's a lot of IR training that says don't talk about your results relative to your internal plan, but I will tell you. Through the first six months, the company is exactly where we thought it would be when we laid out 2015 and because of that I'm very encouraged about our second half. Michael S. Matson - Needham & Co. LLC: Okay. Thanks. And then just you did have an $0.08 shortfall at least relative to consensus this quarter. I understand you don't give quarterly guidance, but you maintained your EPS guidance. So should we be looking toward the lower end of the guidance range now, I mean it's a $0.10 range, so... Curt R. Hartman - President, Chief Executive Officer & Director: Boy, we maintained our guidance because we have confidence that we can deliver within our guidance. And I guess the only example I can point you to is the revision we made to guidance last year. We delivered to the higher end of the midpoint of that. I don't want to point anybody to either end of the guidance. It's our current range. I suspect at the end of the third quarter we'll tighten the range knowing that we have three quarters of the year under our belt. You know, a question came up earlier about how to…

Your next question comes from the line of Matthew Mishan with KeyBanc. Curt R. Hartman - President, Chief Executive Officer & Director: Hi, Matt.

Great. Thanks, Curt. Thanks, Luke. Thanks for taking the questions. I think I've heard that you had a lot of people asking about the R&D bump, but it looks like SG&A also bumped quarter-over-quarter. Is this a good level to be modeling going forward? Have you hit the point where your organization as far as your sales heads and the alignment are where you want them to be, and we can look at this level going forward as being a good level? Luke A. Pomilio - Chief Financial Officer & Executive VP-Finance: Yeah. Matt, as we talked about last quarter, I mentioned I though first quarter would be low, second quarter would probably be a little higher as we put in some of the structure, putting in place. I think where we are now is a pretty good level, and the only caveat I'll give is, as we see the top-line grow, the expectation is especially in a big quarter is that we should get some leverage, but I think where we are now is a good place to model. Curt R. Hartman - President, Chief Executive Officer & Director: I think really, Matt, just kind of talking about it at a people level. The sales and marketing structures have transitioned and, yeah there's a few openings here and there but nothing that's going to be model changing in my view. The biggest leadership opening right now is the leader of our U.S. Orthopedics business. But again, you factor all that in, I think the levels that Luke has talked about going back to the first quarter were probably close to where we need to be. Again though, I'm still pretty focused on some of the individual line items spending and then we're asking our businesses to do the same thing. So we're going to hold people accountable.

Okay. And then versus my model on – surgical visualization was the biggest delta. And I think you mentioned that your sales force is ready to get out and get after it, but I think pervious commentary was that you were being very careful and cautious with the launch. Are you ready to go out and go full bore with the new visualization product now? Curt R. Hartman - President, Chief Executive Officer & Director: Yeah. And that really happened in the first quarter. In the second quarter, to me, the anomaly here is as we hit the OEM deal, canceled which had an adverse impact, and then outside the U.S. we did not have favorable performance in our visualization line. We had a double-digit growth quarter in the U.S. in visualization. So I feel good about what's going on in the U.S. market. I feel good about the IM8000 as a product. And we had two factors; one, execution on our end and one, a strategic decision to end an OEM relationship that impacted the visualization number.

Were there any changes to the sales force in visualization or has that been pretty much left untouched? Curt R. Hartman - President, Chief Executive Officer & Director: No. The U.S. Orthopedics business sells visualization into Arthroscopy in the U.S. market. That has always been the case and that continues today.

Okay. Thank you very much for the questions. Curt R. Hartman - President, Chief Executive Officer & Director: Thanks, Matt.

Your next question comes from the line of Jeffrey Cohen with Ladenburg Thalmann. Jeffrey S. Cohen - Ladenburg Thalmann & Co., Inc. (Broker): Hi, Curt, Luke. Thanks for taking the questions. So I hate to keep beating on the visualization, but Luke, if you can review your previous commentary about second half and perhaps also, Curt, if you can talk about 2D versus 3D for the year and how that looks? Luke A. Pomilio - Chief Financial Officer & Executive VP-Finance: Hey, Jeff. As far as second half, I think the only second half comments I made relative to visualization was the amount of the OEM which we're going to have as initial headwind. I did talk about the growth that we had both domestically and internationally for visualization over the last couple quarters. Which areas do you want me to focus on? Jeffrey S. Cohen - Ladenburg Thalmann & Co., Inc. (Broker): You're speaking about $1.3 million for the first half and $1.8 million for the second half? Luke A. Pomilio - Chief Financial Officer & Executive VP-Finance: Yeah. So in the current quarter that's the discontinuation of the OEM business, that was $1.3 million in the current quarter. In the second half of 2014, we sold a total of $1.8 million of that OEM product, which will have to have an additional headwind. Jeffrey S. Cohen - Ladenburg Thalmann & Co., Inc. (Broker): Got it. Okay. And I know Curt doesn't want to comment on any pipeline, but if you could kind of give us a macro-look, Curt, as far as how some of the new products that we saw at the Academy maybe doing in the marketplace? If you could kind of give us a little bit of color as far as the reception from accounts, you…

Your next question comes from the line of Mark Landy with Northland Capital Markets. Curt R. Hartman - President, Chief Executive Officer & Director: Hi, Mark.

Afternoon, guys. Thanks for taking my questions. Luke, I guess just first for you, if we're looking at R&D in terms of absolute dollars, should we think of the spend being roughly to $7 million to $7.5 million in third quarter versus the prior $6.5 million, is that a fair way of looking at it? Luke A. Pomilio - Chief Financial Officer & Executive VP-Finance: Yeah. You know, I think $6.5 million is low. $7.5 million is plausible, but it's high. But I think that range of $7 million to $7.5 million is probably a good way to look at it. And candidly the way I'd look at it is from a dollar perspective going forward.

Yeah. That's what I'm trying to get to because you can only turn on and turn off so much R&D during a quarter, right? Luke A. Pomilio - Chief Financial Officer & Executive VP-Finance: Correct.

So I'd say $7.5 million also high, so kind of between $7 million and $7.2 million is about fair? Luke A. Pomilio - Chief Financial Officer & Executive VP-Finance: Yes. It's $7 million to $7.5 million, but probably at the lower end of that range.

So I guess just to get a little bit deeper into the weeds with where Mike was going, with respect to the guidance on EPS, I think – if we look at the midpoints of the revenue range or thereabouts, where do you think you need to be on an operating margin side to get to – to the EPS range that you're putting out there? Kind of closer to about 12.5% to 13%? Is that fair? Luke A. Pomilio - Chief Financial Officer & Executive VP-Finance: Well, you know, I don't think we're going to go through the sort of the exercise. We've laid out our revenue range and the EPS range and people can look at their models and decide all that have lined up. I think from my perspective, we've talked a lot about the sales numbers, and I think we have some wind at our back at the moment, really some good trends that we're looking at, which for a guy who's been around for a long time. It's really encouraging to see. I think from a profitability standpoint, gross profit drives a lot of bottom line, and I think we've talked a lot about the impact of variances and how in the second half of the year, we're not going to have that headwind. So I guess from my perspective, when you look at the sales anticipated for the second half of the year and look at the absence of margins, we're going to have a strong second half any way you look at it.

Yes, the delta... Curt R. Hartman - President, Chief Executive Officer & Director: Mark, I would -

Sorry. Curt R. Hartman - President, Chief Executive Officer & Director: I would just point to – in the two quarters, we've tried to call out what those unfavorable manufacturing variances are, and that those are going to go away, and that in effect provides a nice bit of wind at our back as we enter the second half. So you have to factor that in. And I understand the math and you look at the delta, and it's probably different than the way EPS has fallen out quarter-over-quarter at this company on a historical basis. But I'm trying to encourage people to not use the historical to model the new because it is a different company on a lot of different levels, and therefore, you're probably going to see us evolve to a little more back half loaded, and it's going to start this year.

Right. But I just want to go back to, I mean, Luke, you had mentioned that there was 150 basis points of gross profit headwind, right? So I mean, even if you look at something being optimistic with the pickup in revenue and the benefit you get to manufacturing from that and other things that run through cost of goods, let's assume you can pick up maybe 200 basis points of margin. You get to – and the math is just as we discussed, you went through the SG&A with other folks, you just spoke about the R&D, tax. You've spoken about operating income obviously before tax, but it's – to get to the range, you're shooting for somewhere between a 12.5% to 13% operating income margin, and I'm just asking if that's feasible and real? Luke A. Pomilio - Chief Financial Officer & Executive VP-Finance: I think that...

That's the math on the number that you've thrown out with a 33% tax rate. Luke A. Pomilio - Chief Financial Officer & Executive VP-Finance: Yeah. I think that – I think the numbers you're talking about are in the ballpark. I think they're realistic and I guess – one thing I'll say is we – from a tax perspective we are looking at 33% overall, however we typically benefit from the R&D tax credit in the fourth quarter, so I said it's an additional benefit.

But that's not going to alter – so you are saying that there is a potential for a lower tax rate given the R&D credit if it gets written in, because it obviously not yet approved, correct?. Luke A. Pomilio - Chief Financial Officer & Executive VP-Finance: Correct...

So you included that in your guidance or not? Luke A. Pomilio - Chief Financial Officer & Executive VP-Finance: That's included. In the first quarter our effective rate was 34.7%. We're down to 33%, and if – right now, we're forecasting a renewal to the R&D tax credit and that would bring us in overall at 33% for the year.

Okay, guys. Thanks for the questions.

Your next question comes from the line of Jim Sidoti with Sidoti & Company. James P. Sidoti - Sidoti & Co. LLC: Good afternoon. Can you hear me? Curt R. Hartman - President, Chief Executive Officer & Director: We can, yeah, Jim. James P. Sidoti - Sidoti & Co. LLC: Great. Just wanted to – just one more follow-up on the Visualization business. It sounded like it was pretty strong in the U.S., not as strong overseas. Do you think that's related to the product or to the way that you're selling it? Curt R. Hartman - President, Chief Executive Officer & Director: I would tell you it's more related to the way we're selling it. We do a good job with video in select markets, and if you dive into those markets, out then and I'm talking about outside the US, it's really a byproduct of how they're organized and the emphasis that they've put on visualization. And in those markets we're doing a good job with the product and we will continue to do a good job with the product there because of the teams and the historical approach, and what we're trying to do is effect that change a little bit more. They can't carry international visualization in a few markets. We've got to have broader coverage. And that's the change that we're working through and pushing hard on. Again, I think the IM8000 is a very good product and will serve us well at this stage in our visualization journey. Now, the flip side of this is the visualization market demands, ongoing innovation and we have to be right after it back in the R&D shop putting more into this market if we really want to regain our former luster. The Linvatec brand and visualization has…

There are no further questions in queue and now I would like to turn the call over to Mr. Hartman for any closing remarks. Curt R. Hartman - President, Chief Executive Officer & Director: Okay, Irene. Thank you. In conclusion I'm pleased with the quarter, the hard work and commitment demonstrated by our employees and the substantial progress we have made across CONMED during the first half of 2015 to transform our business. We're excited about CONMED's future and believe that we have the right team and strategy in place to drive profitable growth. And I thank everybody for their time today and being on the call with us. And we look forward to speaking with you on our next earnings call, which will be held on October 21, 2015. Thanks, everybody.

Ladies and gentlemen, this concludes today's presentation and you may now disconnect. Have a great day.