Good day, everyone, and welcome to the Integra LifeSciences First Quarter Financial Reporting Conference Call. As a reminder, today's call is being recorded. At this time, I'd like to turn the call over to Ms. Angela Steinway, Head of Investor Relations. Please go ahead.

Good morning, and thank you for joining us for the Integra LifeSciences First Quarter 2013 Earnings Results Conference Call. Joining me today are Peter Arduini, President and Chief Executive Officer; and Jack Henneman, Chief Financial Officer. Earlier this morning, we issued a press release announcing our financial results for the first quarter of 2013 and revising our full year guidance. Certain statements made during this call are forward-looking, and actual results might differ materially from those projected in any forward-looking statements. Additional information concerning factors that could cause actual results to differ is contained in our periodic reports filed with the SEC. The forward-looking statements are made only as of the date hereof, and the company undertakes no obligation to update or revise the forward-looking statements. Certain non-GAAP financial measures are disclosed in this presentation. A reconciliation of these non-GAAP financial measures is available on the Investors section of our website at integralife.com. As we aim to keep our prepared remarks short, we will reference the financial results in the press release and will not restate the individual numbers. As a result, you may want to keep a copy of the release handy during the call. I will now turn the call over to Pete.

Thank you, Angela. As we indicated in our April 10th press release and Form 8-K, the voluntary recall we announced 3 weeks ago overtook our momentum for what otherwise would've been an on-target quarter for revenues and earnings. The recall is well defined and bounded. Today we are producing and releasing products from Añasco, but it will be several months before we reach adequate supply levels. That said, the recall's impact on both the first quarter's results and on our expectations for the balance of the year was significant. For the first quarter, recalled product returns reduced revenues by $2.9 million, which falls within the range of $2 million to $4 million that we estimated on April 10. We also estimate that recall-related shortages reduced revenues during the quarter by an additional $6 million to $7 million. The product shortage primarily affected sales of DuraGen and select products in our Private Label business. If not for the effect the recall, we would have met expectations on the top line. Further, the recall and related supply issues have a disproportionate impact on our profitability. The regenerative medicine products are our highest gross margin products, so an expected reduction in sales of those products translates rather directly to the bottom line. In addition, we are incurring significant incremental expense mostly recorded in cost of goods sales -- cost of goods, to respond to the warning letter in Añasco. We will discuss these and other unplanned variances in our manufacturing operations a bit later in the call. Because of the recall, our biggest challenge and highest priority today is to build enough product to meet the requirements of our customers. We are executing a plan to increase capacity in both of our regenerative medicine facilities and have reprioritized production in favor of the…

Thank you, Pete. The recall and related product shortages have the effect of reducing the revenue of our most profitable products, disproportionately affecting the bottom line. In particular, our gross margin was and will be lower as a result of the unfavorable product mix, higher cost required to remediate our quality systems and other unplanned expenses affecting COGS, including higher reserves for excess and obsolete inventory. Further, our selling cost on the margin will increase because we are revising our commission plans to motivate our sales force while we are managing the supply of affected products. Now I will walk through the P&L results and our revised expectations for the full year in a little more detail. In the first quarter, GAAP gross margin declined 3 points to 59% versus the prior year period, primarily as a result of $3 million of revenue reversals from returned products, $1 million of scrap expense due to the recall, unfavorable product mix driven by supply shortages of high-margin products and a $2 million increase over the prior year in excess and obsolete inventory write-offs. Finally, the results of the quarter reflect the medical device excise tax, which had a slightly negative impact on both our GAAP and adjusted gross margins as compared to a year ago. We calculate adjusted gross margin by backing out the adjustments to cost of goods sold, detailed in Column A of the adjustments table in our press release. During the first quarter, our adjusted gross margin of 62.3% was down 3 points from a comparable measure in the first quarter of 2012. In 2013, we now expect reported gross margin to be between 60% and 61%, and adjusted gross margins to be between 63% and 64%. We expect to finish the year with adjusted gross margins in the…

Thanks Jack. Our #1 priority now is returning our inventory of regenerative medicine products to normal levels so that we can meet the needs of our customers and the expectations of our investors. To do that, we're focusing on the quality systems and operations at both the Plainsboro and Añasco facilities, with the twin goals of recovering supply and having successfully inspections when FDA returns to those facilities later this year. Joseph Vinhais, head of Global Quality; and John Mooradian, head of our worldwide operations, have each been here just over 6 months, and their organizations are hard at work. But the effort goes far beyond them. We have strengthened the teams reporting to them and have shared our plans with the FDA in detail. We met with the FDA's Office of Compliance at the Center for Devices and Radiological Health in March to present our plans for the entire company, and with the San Juan district office in early April to discuss our plans for immediate remediation of their findings in Añasco and the scope and boundaries of the recall. In addition, we've used and are continuing to use the pre-inspection audits by some third-party x-FDA consultants to benchmark our progress and help identify areas for further work. We believe we have the right team and the right plans in place. While our near-term focus is on addressing the quality and supply issues, we remain committed to our longer-term margin improvement and growth acceleration targets. We continue to make progress towards optimizing the company through our ERP implementation and our plans to streamline our manufacturing and distribution footprint. We are anticipating our new product launches and international product registrations to be on track for 2013, which will lay the groundwork for accelerating growth in 2014 and the years to…

[Operator Instructions] We will take our first question from Matt Miksic of Piper Jaffray.

So first question, just on -- and I apologize if you went through it. But just to be clear, I guess one of the questions coming out of the recall announcement was when you think you're going to be able to sort of get back up the supply into your channel, into you customers for the products coming out of Puerto Rico. And is it your 4-month to 6-month delay comment that we should to sort of measure that? Is it sort of some time in, what, the end of Q3 that we should expect that?

Yes, Matt, I think my 4-month to 6-month comment is really about the total year, so including Q1. But when you think about supply, realistically, Q2 is obviously the biggest impact as we're really rebuilding back our inventory supply. And as we've mentioned, when we did our pre-announcement discussions. I mean, we take down 3 to 4 months of supply. We were tight on inventory to begin with. It takes 3 to 4 months to regain that. And so we have impact in Q2 and also in early Q3. How well we ramp up our third shift yields to where we need to maintain that. We'll either shorten or lengthen that window. But at this point in time, we've been able to manage through customers by substituting different product codes, managing through that. We clearly have some shortages particularly to specific customers. We've obviously tried to do what we can do to manage and take care of our top customers in that mix. But we're very tight on supply here, and we'll be through to Q2 into early Q3.

This is Jack. The one thing I would reinforce is the point we made in the prepared remarks. We have -- we planned our production as, we said we would do on April 10, to reprioritize it in favor of our strategically most significant product and our highest-margin products so that the economic -- we'll work our way through the lion's share of the economic impact sooner than we're completely out of back order on all our products. We will have lingering back orders into the second half, but we're hoping that we will diminish the impact of them through rethinking the order in which we produce products.

That's great. Very helpful. And the one follow-up, I guess I would have is just around the guidance for the full year, particularly in Neurosurgery. Just to be crystal clear, I mean, is the entirety of that change around DuraGen? And I assume it's just primarily DuraGen into that line item. Or is there some any other sort of procedural test that you're making to what you're expecting out of that business in the year?

Yes, Matt. As it relates to Neurosurgery, it's really all attributed to the effects on DuraGen and then our time to really ramp up in the second half of the overall year. Jack, I don't know if you want to add any particular comments.

No, I think that, that pretty much captures it. The planning question for us is whether the amount of attention that the reps will devote to maintaining the DuraGen business -- they'll have to do a lot of moving stuff around, substituting SKUs, that kind of thing -- whether that all take away from their selling efforts in other lines. But right now, as we assess it, the impact is fundamentally around DuraGen.

And we'll take our next question from David Lewis of Morgan Stanley.

This is actually Jon Demchick in for David. I had a quick question. I guess concerning EPS in the quarter, and it was probably about $0.30 lighter than, I guess, the initial expectation and obviously the lion's share, if not all of that is related to the recalls. But as I kind of run through about $10 million through the income statement, even at very high margins, I still come to probably short of $0.25 of that. And, I guess, I was curious how much of the delta there is just increased costs that were associated with the recall and if those are going to also carry forward over the next few quarters.

Yes, certainly, a good chunk of it is costs whether associated with the recall or associated with remediation in Añasco or things we're doing to improve production. We're also spending more money on selling expense as a proportion of revenue than we would expect to do because we've got to motivate our sales force through this. They can't afford to take a big hit to their own personal income because we can't deliver product. So we made some adjustments to their commissioning that will have an impact. And there are also a couple of other things going on in the supply chain that are less significant. We've had higher E&O than we forecast because of changes in the rate which we're selling certain product lines and probably the acquisition of more inventory in certain areas that we needed, transitions and the Extremities distribution system, a whole series of different thing that had somewhat greater impact on the E&O. But those are the main considerations.

And also I had a quick follow-up on, I guess just ERP and broader restructuring. There appears to have been a step-up in some of the expected spending this year for the ERP implementation. And I was just wondering if the costs are going higher because of anything unexpected or if you may be accelerating the timeline. I'm just trying to kind of gauge the process of if the recall has changed any plans and even the future plans with the company and this broader restructuring.

So the ERP system had a successful pilot in Q1, so it's up and running, really darn close to glitch free at a good chunk of our Instruments business right now. We are, to some degree rethinking the order in which we do certain of the implementations going forward and the mix of cost and capital and a whole series of other things around that to frankly make it as cost effective as we can over the long term. And that will have some impact on the timing of various expenses and so forth. As far as the other restructuring goes, our plans are very much intact. However, our focus is, as Pete said, and he can elaborate, is on frankly getting supply of our collagen products and so forth back to where it needs to be. So the ops team is very much devoted to that over the next, call it, next quarter.

Yes, I think it's important for everyone to understand. I mean, our plans we laid out in November, the focus on the optimization plans. We've made a lot of great progress, continuing to make a lot of great progress. And expect to hear from us later this year about more of those items as we're ready to roll those out. But I feel good about that progress, and we've been able to separate individuals working on those items from many of the other areas associated with the recall. That being said, as Jack commented, in the short-term here in the next 90 days, we've got obviously a big focus on customers and our field organizations take care of our key customers, which is extremely important, our focus on supply and our focus on our broader quality components to make sure, candidly, that we get everything done we need to get done on our 3 warning letter sites. As we expect, as I commented, the FDA's going to be coming back in this year, and we want to be ready and be able to kind of move forward. So that's our short-term focus. But again, I think with the bandwidth we have in the organization, it doesn't really affect our long-term strategy plans that we've laid out.

And we'll take our next question from Bob Hopkins of Bank of America.

I have 2 questions. The first one is focused on the reduction in guidance for the year from an EPS perspective. It's roughly $0.60, $0.65 from the original guidance. Could you put that into as many buckets as you can and relative to how much of this is related to all the different factors that you laid out at the beginning of the call?

Sure. So revenue reduction is a big part of it. If you really look at the midpoint of our new range, it's around a $30 million reduction from the original number for the year on that order and very high-margin product. So start with that, and that accounts to the vast majority of the earnings reduction. Then if you look at on top of that, essentially incremental expense to contend with that from a -- the selling expense perspective, that is selling expenses isn't rising per se, but it's not declining in proportion to the revenue decline because we have pay our reps. And then if you add to that some incremental expense for remediation efforts, QA, to get everything we need to get, that basically gets you there. There are some small additional costs in COGS, which we detailed principally, somewhat higher E&O charges, which amounts to a couple of million dollars in the total. But that impact the vast majority of it.

Okay. And then the other thing I think a lot of people on the call are going to be trying to figure out is what all this means for 2014. And I know you're not nearly ready to give 2014 guidance. But 2 questions in that regard. One is, how much of what's going on this year creeps into 2014 in terms of incremental remediation spend or whatever? And just what's the right base level of earnings that we should be thinking about in 2013 to grow from? Obviously, it's not the 2 55. A lot of this is one-time, I'm thinking the midpoint. And I assume it's not as simple as just taking the old range or taking the new range and adding back $0.52 and growing from that. So if you could give us any help there, that would be very much appreciated.

Sure. So I'd say you're correct. We're not ready to give 2014 guidance. And ordinarily, we wouldn't give it until next February, beginning in the year in effect. In any case, I would point you to 2 or 3 things that we're thinking about ourselves, for those of you developing a view of 2014. First is we do expect a pretty strong and pretty profitable Q4 this year. But as we said in -- as we've said in the prepared remarks, we view part of that as reflecting the potential for our, call it, snapback purchases. Inventory on hospital shelves will be pretty thin by the post Labor Day period, when we're really in a position to restock, and that should have an impact in the back half. I wouldn't assume that, that momentum will fully sustain itself into 2014. So if I were going to think about it, I would essentially use a good -- I think that 2013 results are not a bad place to start, reflecting fourth quarter momentum to some degree, but not totally, and then building some growth off of that into 2014.

You mean the new guidance of 2 55 as a midpoint is not a good -- that's a good place to start?

No. I'm speaking primarily in terms of revenue. I would say from an expenses point of view, we're a long way from being able to give you any guidance on that. But it's a good -- your clarification is a good one. I think I'm only right now prepared to talk about the top line and our thinking about that.

I think, Bob -- it's Pete. I mean, as Jack was commenting on, we clearly see strength picking up in the second half of the year because of this recovery in 2013 with the supply. We don't see that as the steady run rate that's just going to fold into next year. We don't have a definitive opinion on that at this point. But I think the fact is our long-term guidance of 5% to 7% is in tact. And at this point, I think what Jack is pointing to is that we're probably on the lower end of what that guidance is at this point in time. And again, from my standpoint, I think it's just prudent where we are, we have to get through a couple of FDA audits. We have high confidence that we can ramp up our third shifts and take care of that supply. But at this point in time, I think that's how we're kind of looking at how second half of '13 and how that may parlay into 2014. If things align and we're successful and we can ramp over the higher level, obviously we could move up higher in our overall revenue range.

That's great. I was -- really just one quick comment maybe from you guys would be helpful on the degree to which you think some of these remediation expenses or other expenses will continue to beyond this year.

So our great hope is that our outsized remediation -- I call it extraordinary remediation expenses, whether or not reflected in special charges, that we'll get beyond that this year. I mean, it's obviously our great hope. However, we are out of the business of handicapping the timeline here beyond the near term and what we can tell you because it has become -- yes, we've been sadly wrong enough on some of this stuff in the last couple of quarters, and we don't want to go there. But this is our great hope is that we'll get these warning letters lifted this year. I will say we do have higher QA costs embedded in our processes, in our plants, that will continue, compared to say the levels of a couple of years ago. So we have a permanent higher investment in QA that I do not expect to go away versus, say, a couple of years ago.

And we'll take our next question from Glenn Novarro of RBC Capital Markets.

Pete, I wonder if you can just take a moment and go through the competitive landscape for your regenerative products. The reason I'm asking it is it just sounds like to me once you get the supply back, your customers are going to immediately buy. And I'm just wondering in the interim, are there any competitors or competitive products that the customer can move to? So that's question #1.

Yes, sure, Glenn. So keep in mind -- I mean, the recall, as you guys have all seen, touched a lot of different products, but it really only had probably a more profound effect on the DuraGen product family specifically. It touched some of our Private Label partner products, but in many cases, because of supply that was maintained that wasn't a part of the recall, from a competitive standpoint they should be fine. So I'll focus on the DuraGen product. And again, I also want to make a point that a product like our skin product and things like that really won't involve in this at all, so there's no impact. So around DuraGen, it's the guys that you know -- I mean, from J&J Codman, Medtronics. Stryker played in that role and some individual -- independent players that support other folks. We gained and have been growing our share quite successfully. As I mentioned, our momentum in the first quarter and really coming out of Q4, we were on track for a strong quarter if it wasn't for the recall. A lot of that was driven by our ability to gain share and grow within our DuraGen franchise. And the reason being is the combination of the breadth of product line, its appliability, which we even in recent years been able to differentiate versus other products that are out there. Now that being said, surgeons have the ability not to use a dural onlay and actually suture. They could use products from any of the 3 or 4 folks that I had mentioned. But we believe from a standpoint of being able to take care of our primary surgeons, our thought leaders and our biggest institutions that we'll be able to manage through some of that supply. But we aren't going to be able to meet the run rate that we're at really here through Q2. And in the meantime, we'll probably lose. We'll have some accounts switch over to some of those folks, and we have plans in place already to take a look at how we can incentivize customers to come back and stay with us. Our focus -- and it's really why we've been taking care of our sales team with compensation is everybody goes through tough times like this, and we want our sales team to engage with our customers side-by-side. As you know we have a lot more than this DuraGen products. We have the NeuroCritical Care and many other the products used within the whole cranial access area. So we have our reps out. They're taking care of customers. And as we increase our supply, our hope is that this one critical product as part of this extended offering we have, customers will come back to us because of the levels of service that we provide them.

Okay. But just to clarify. Within the guidance maybe there is some assumption that you lose a little bit of market share. There is within guidance assumption that maybe you have to discount a little bit to get market share back. Is that fair?

I think that's a fair assumption, Glenn.

Okay. One more question. This is -- I had a question on Extremities. Is this a type of product that is contract based? In other words are there any contracts coming up that may impact your ability to bid successfully because of the DuraGen issues?

There is some level of contract-based, but it's probably more pronounced outside the United States relative to tenders. In the United States, we think that most of any other type of bids or GPO agreements that we go into that we won't have any specific issues.

Okay. And then just lastly, on the Extremities line, so a good number. Is there any way you can break out the growth of between shoulders, foot, ankle, hand, wrist?

All of the areas were up. Shoulders is very small and would not at this point, until we get the reverse out and so forth, we're not going to have a meaningful impact on shoulder. But the Extremities group was not affected by the recall. The skin was not on the recall.

It's a pretty a successful mix across the board, Glenn, of lower and upper and regenerative. And as Jack said, there isn't a surge of shoulder in there that drew revenues a lot higher. It was a lot of our core business doing well. I think our sales teams are quite comfortable now with our product lines. We've been able to actually keep our sales levels in our territories filled, have done a lot of additional training actually in Q4 that we think is starting to actually benefit us as well. So I think good execution is helping there. And we're on track to our plans here for our reverse shoulder with our whole offering. And we're hoping that later in the second half of the year, we'll be on track to be able to roll out that whole complete offering, which again as we mentioned, will help us to bring in some larger distributors and such as that is a distributed product force.

And we'll take our next question from start Amit Bhalla of Citi.

This is actually Adam in for Amit today. So the first question is on the o-U.S. guidance, so I believe that came down from of up mid to high-single digits. Can you talk a little bit about what's happening there? I mean, is this related more to the new product rollout strategy that were supposed to be seeing in the second half? Or what else is going on there?

Yes, Adam. The main component of that, if you think about our o-U.S. business, really over half of our business outside the United States is still within our Neurosurgery franchise. And within Neurosurgery, DuraGen is a large component. So the biggest change item that affected the whole point, as a commented in the opening remarks, was the DuraGen recall and then obviously the time to actually replenish and build that up. It has a little bit more of a sharper challenge outside the United States than it does in the U.S. to the previous comment -- I meant to Glenn's question, where there's tenders and such that the timing of tenders and how we build that up has a little bit deeper effect. But primarily, I'll side with the recall itself, which we're still of the midst of obviously executing outside the United States.

Okay. And then maybe can you provide any update on where you stand with the FDA on your outstanding warning letters? And I believe the last time we talked, you had mentioned submitting your first 30-day response letter back to the FDA, and that was supposed to be happening soon. Can you talk about that?

So just to kind of recap, myself with our quality leader and some others, actually we're out at CDRH, as I'd commented in the opening -- our prepared comments, and laid out our broader plan across the company. Part of that was to make sure that they understand how seriously we take the plan, the investments we're making, and really, our overall approach. And I'd characterize that as a meeting that was on track to our expectations of what we wanted to accomplish. We've talked to all of our districts that we have ongoing inspections or plans with -- I mean, for example, Parsippany, New Jersey, we do a monthly updates and we're in tight -- in regular contact with them as well as other locations. We were actually just in Añasco, and that was a part of what we had communicated to get clarity around the recall, as well as to make sure that we've got the right approach on what we're doing for the remediation of the warning letter. Yes, we've been updating the districts and such on a regular basis. Even with the recall itself, we've made very good progress already throughout the United States and the world, getting product back, working with customers, and so we've been able to communicate that back to the agency so that they understand how well we're moving along. I think the other aspect are there's obviously always inspections going on. We have a large footprint, as we've commented on before. One of our desired states is to obviously reduce some of that, increase the size of our facilities. Recently we just actually had an audit out in our Salt Lake City facility, which hadn't been audited since 2010. That audit just completed and had no 43 observations. And so that's one of sites as well that we've been putting a lot of work into, as well as other locations. So those are how we are currently with the agency. I think Jack commented before, our focus around the 3 warning letter sites is really our biggest focus. we believe that the agency will be coming back into audit, in particular, Plainsboro, as well as Añasco, probably before Labor Day. We're thinking about things, and so all our efforts have been focused around making sure that we're ready for whenever they come in. Obviously, they could come in tomorrow if they wanted to. But our belief is that some time in the next few months, we'll be seeing follow-up inspections.

And we will take our next question from Chris Pasquale of JPMorgan. Christopher T. Pasquale - JP Morgan Chase & Co, Research Division: To start, can you quantify the decline in the Private Label ortho business this quarter so we can better gauge how the base business performed there?

Go take a shot at it, Jack.

Yes, let me just see how we want to look at it. The total Private Label business, which is for everybody to get on the same page and in the U.S. Spine -- U.S. Spine & Other segment that the report, was in fact, down a little bit, call it low single digits. The reduction in that segment is about -- in the guidance for that segment and the year going forward -- is about half in the proprietary products and about half of the Private Label side. So that's how we're thinking about it for the year going forward. The Private Label business has lots of different customers, some of which are specifically orthopedics and some of which do other things. And we're not going to get into business of breaking out the impact partly because they're each and different situations. We are very focused on giving them the support they need through this. And I don't want to direct a lot of thinking around where that's going to go, but for our purpose and also because for us, it's the confidential business arrangement. So that's all we're going to say on that point. Christopher T. Pasquale - JP Morgan Chase & Co, Research Division: And the change in outlook to the proprietary piece of that business, that was all recall-related or were there other factors?

There were other factors. The Spine Hardware component, we have brought down to some degree our expectations for the year around price mostly, and that factored into the guidance adjustment there. There are recall-related impact as well on that, but it should be worth saying that our Spine Hardware business, which is embedded in that segment, was down less in Q1 than sort of the other famously reported numbers that have come out more recently. But we just -- we want to be more conservative until we see some secular improvement in that market. Christopher T. Pasquale - JP Morgan Chase & Co, Research Division: Okay. And then one on R&D spending and how you're approaching that. So you're guiding now to the low end of your prior range, but that's against a lower overall top line. So that would suggest that you're pushing off some investment that you had previously planned to do. So was there anything specific that fell out of the budget and how are you balancing the desire to maintain near-term margins as best you can while still investing for future growth?

That's an excellent question. It's more than R&D, actually, and it's a worthy subject. So if you look at the P&L, our expenses are higher than they were a year ago, in no small part, because we planned for significantly higher revenues than we're now going to have, and therefore, one of the exercises we're going through is a re-examination of expenditures that we can defer without significant consequences for any of our key priorities. So we're -- so look at R&D. We're continuing to focus on the DFU trial, which is very important to us. We're continuing to focus on getting out the shoulder set where it needs to be. But at the same time, there are longer-term programs in our budget that we can defer a little bit. And that same general thinking again flowed through other parts of the P&L. We're not going to cut our expenses to the level to fully in effect recover from the recall by any means because that would be hurting our future for what is a short-term and specific issue. But at the same time, it's only wise for us to take a careful look at how we're spending our money and be as careful as we can be. So that exercise had been going on and will continue to go on certainly over the next couple of quarters.

And we'll take our next question from Robert Goldman, CL King. Robert M. Goldman - CL King & Associates, Inc., Research Division: Just a couple of some quick financial things. Jack, I might've missed it in your prepared remarks, but did you or could you give us a projection for free cash flow in 2013?

We did not give a projection for free cash flow or our operating cash flow. We did say CapEx would be $55 million to $65 million. Obviously, cash flow is not going to perform as well as we had hoped because it's highly correlated to earnings, and our earnings are going to be down. So we have not given that number for 2013. Robert M. Goldman - CL King & Associates, Inc., Research Division: And you're not able to give it?

We're not inclined to give it. There's obviously a wide range in that number because however it plays out, the difference between our -- we've got a bunch of delta in our CapEx and we have a bunch of delta in our earnings, and we're not walking through all of that. So we want to see how this goes, and you'll see our cash flow numbers as the year progresses. Robert M. Goldman - CL King & Associates, Inc., Research Division: And then I did see that in the quarter, your intangible amortization expenses became less negative. I'm just curious why that happened. Did you write down some businesses or why?

We reached the end of the useful life on some intangibles that came along from acquisitions years ago and they rolled off. And we haven't actually -- we actually haven't, as you know, done new acquisitions. We haven't done an acquisition since September of 2011 apart from the small Orthopedics deal we did -- the very small Orthopedics deal we did in Q1. So we had -- that's basically what's going on. And that happens in our business as time goes by. I think it was up when we're doing acquisition and we pick up new assets to amortize. Robert M. Goldman - CL King & Associates, Inc., Research Division: So on that number, should we just sort of use the first quarter number and run that through for the year every quarter?

I said something in the prepared remarks about how to deal with that. We have -- we estimate about $4.5 million a quarter, well, $4.5 million a quarter in intangible asset amortization, about $1.5 million of which is in COGS and, obviously, $3 million of which is in operating expense.

And we'll take our next question from Steven Lichtman of Oppenheimer & Co. Steven M. Lichtman - Oppenheimer & Co. Inc., Research Division: So just 2 P&L questions. One, just to build on Bob's question relative to 2014. You'll certainly be -- you'll be building off on the top line off of the base on '13. But as we think about, say, first half '14 versus first half '13, the P&L is obviously going to look a heck of a lot different when we look at gross margin and SG&A relative to the top line impact you're having here as well as some of the incentives on the sales force, right? So the drop-through is going to look a lot different as we look at the bottom line in the first half of '14 versus the first of '13. Is that not fair?

Yes, that's fair. Steven M. Lichtman - Oppenheimer & Co. Inc., Research Division: Okay, so we're not building...

I'm sorry, I think your basic view, which was helpful, is -- I think people should look for growth off of essentially the -- on the top line we should be looking for growth off of the number we report in 2013. I think assuming that we'll have a full snapback is too aggressive. Steven M. Lichtman - Oppenheimer & Co. Inc., Research Division: Right. But I think relative to the bottom line, I just want to make -- clarify in terms of the base for '13. You were talking about the top line because the bottom line is a different animal given some of the pressures on the gross margin and SG&A that you're particularly feeling here in the first half. Is that correct?

We agree. Steven M. Lichtman - Oppenheimer & Co. Inc., Research Division: Okay. And then just relative to this year, there's obviously a little bid wider range on the bottom line. Is it just -- obviously, the top line hits the bottom line particularly hard with you guys because of the low share count. Is it just the variability on the top line that is the variable from bottom end of the EPS guidance versus the top end? Or is there anything else we should be thinking about what drives you to the lower end versus the upper end on the EPS side particularly this year?

It's pretty much the delta on the top line, which is in our estimation overwhelmingly our highest-margin products. So that increases the leverage, if you will, on the bottom line.

And we'll take our next question from Spencer Nam of Janney Capital.

Just a couple of quick questions. First one is on the EPS guidance. If I remember correctly, your previous guidance I think had a $0.20 margin between the low end and the top end. Now you have $0.30 after 1 quarter. I was just curious kind of how -- what kind of scenario would lead to the EPS coming in at the low end of the range versus the high end of the range?

Well, if we had lower -- if revenues were toward the lower end, if the revenue miss where higher-margin products and if expenses were greater than anticipated for whatever reason, that certainly will drive an earnings result towards the lower end.

Yes, I mean, Spencer, it's heavily tied to what Steve's prior question was about revenue. It's the volatility we've got. Obviously, we've got the FDA coming back for inspections. We've got ramp-up of third shifts to actually be able to meet that capacity. And so that -- and obviously tied to the fact that it's our highest-margin products that's why the wider range.

Okay. So basically it's pretty much tied to the revenue outcome, that's how I should think about it overall?

That overwhelms everything else.

Correct.

Okay, got it. And then just a quick follow-up. In terms of this backlog, if you will, order, shortage of supplies, is there a potential risk of competitors coming in and taking share away from you guys through this process?

Look, the truthful answer is yes. I mean, I think are we going to lose some accounts? Yes. But we believe in this franchise that we do have some differentiation. We have some very long-time thoughtful users that like the feel and the utility of the product, so we have the confidence that we can bring that back. But the fact is, if we gap some customers, are there some that we're going to lose? Yes. And we factored some of that into our thinking.

[Operator Instructions] And we'll go next to Amit Hazan from SunTrust.

I just want to go back to Añasco for a moment. And I want to ask about the chronology of events, which I think is a little bit concerning given that the remediation began in 2011, and then kind of fast forward, we had the third-party validation in February. And you guys stated fairly clearly that you've completed substantially all of the corrective and preventive actions in the warning letter on the 4Q earnings call, and then we had the April recall over 1 month later. And so I'm kind of trying to understand who takes the responsibility for this on the ground and what changes have happened in management on the ground in Añasco that can give us some confidence that it's results -- there's kind of visibility that this is substantially resolved at this point?

Yes. So look, let's kind of frame it up. When you get the warning letter, you have the 483. There's obviously the focus in the work on getting the actual observations closed out and cleaned up. And that's been obviously your first priority item that one goes after, and we've been focused on that. The second area, though, is once you have a warning letter, as you well know, it basically means anything you've got on any product in that facility is open for obviously discussion with the agency. And so a big part of the supplemental remediation and focus is going back through all of our products to make sure that we're airtight, as well as, since this is a sister plant to Plainsboro, that 2 those are well connected on approach and process, which we've been focused on. So that's at a larger level of the saying how we think about the stages of those items. The other aspect is we have a new plant manager and a new head of quality within the facility, really less than probably about 7 months in the role. We brought in some top talent, both as employees but also as some consulting help that's literally helping us get ready. Our head of quality, Joseph and John, working tightly together, literally have control around where they're daily getting updates, interacting with the team, where they're reporting out multiple times a week, giving direction, making sure that we have the right coordination. So when I talk about this focus over the next 120 days around making sure we get these items closed out, having the right people in the right roles, that's exactly what we're doing. And so from the certification -- the certification was successful. It allows us to manufacture products going forward, saying that's coming off the line in Añasco is a high-quality product and it's following all of our procedures and capabilities. We reviewed that with the FDA in Puerto Rico, and obviously, we're continuing to manufacture because of that. That's different than the observations that came up and the items that we found in the recall, where we found some deviations even a couple of years ago and how we reacted to those. So I think we're making good progress. And again, not acting like just because you get the observations fixed, you're done. We're taking a very comprehensive look everywhere because we view that's the new world order and how the FDA expects us to think about when you're under a warning letter.

If I may help a little bit with the specific time and question you asked. Yes, we've been working on that plant a long time, and it is immeasurably tighter than it was, say, a year ago, that's point 1. Point 2, yes it remains the case, that the products coming out of that plant are coming out, as Pete said, according to fully validated processes. What we found, though, between, say the, February call and the announcement of the recall was in the preparation of our detailed response to the FDA around the warning letter, we went back and, as Pete said, we looked at everything. And we found that in our judgment, a couple of the CAPAs -- corrective and preventative actions -- that we had historically, one quite a while ago, the other more recently in December, we felt that in retrospect, they hadn't been closed out tightly enough in effect. And that given, in a situation like this, all decisions are subject to post-hoc assessment by the FDA and a subsequent inspection, we decided to approach -- we decided to approach this question with, I'd say, a great deal of professionalism and care. The consequences turned out to be financially quite significant, and we obviously regret that. But we're doing the right thing from a timing -- or from a remediation perspective and a response perspective. The timing is uncomfortable, but it's essentially a lagging indicator.

So maybe given those comments and your comments on what's coming up before Labor Day with the additional inspections, how should we think about where you are in kind of what you're probably doing in your Plainsboro facility and similar process and the risk that might be there whether, it's the endotoxin issue or otherwise, of you having product issues in that facility as well as finding some issue that you want to take a very safe stance on before the inspection?

Well, we've been taking a very conservative approach in Plainsboro all along since the warning letter. So the key is that we are reconciling anything that's come up in Puerto Rico and making sure we're reconciled with New Jersey. That's part of what the leadership team does as we make sure that we implement our plans. I mean, I would tell you that we've been again updating New Jersey FDA office in Parsippany on a monthly basis. Substantially all of our items that we really committed to are well underway and completed. But again, what we embarked on as well with Plainsboro is looking at every product we make, how we think about the products, how we think about all of the aspects associated with making those, because again, we know and expect when the FDA comes back in that they're going to look broad and wide. And I feel quite good about the progress that we've made. The leadership team that we have there is very good, the capabilities of that team. And they're getting ready for if the agency comes in tomorrow or if it's 6 months from now. But as we expect, we think that it's probably going to be here sometime in summer time to late spring here.

And we'll take our next question from Michael Rich of Raymond James.

Michael in for Jayson. Just kind of in the same vein, I was wondering if you could give us an update on the new Plainsboro facility. Maybe when do you expect to begin transitioning meaningful volumes from either Añasco or the current Plainsboro plant to the north?

Yes, on our new facility, we've made a lot of good progress on the core of it. The facility is going to be a state-of-the-art, capable facility to do really everything we need. And ultimately, again just to remind everyone, it's right across the street from what we call our 105 facility. Between the 3 locations then we'll be shifting and managing the balance of our production. And part of that is -- why do we need the added capacity? Obviously, we think we have more expanded capabilities, things such as tightening of DFU and all that growth. So that's the back drop of it. Relative to bringing it up in capacity, at this point in time, we see that being a 2014 event, primarily tied to the fact that the processes and procedures that we will utilize to make the products are the exact same ones we'll make in 105. And so obviously, getting a thumbs up from the FDA on that is an important aspect of it. So in some ways, those 2 are correlated. We would expect, when we're going to turn on that facility, that the FDA will want to have to do a pre-inspection as they normally to do on a new site, particularly when there's PMA products. And so that's the correlation of how those 2 tie together. And at this point, I would say, we will start bringing that up in 2014. But we haven't slowed down getting the site ready and all those things that we need to be able to manufacture and get that ready for full capacity.

And we have no further questions at this time. I'd like to turn the conference back over to the management team for additional or closing remarks.

All right. Thank you all for dialing in, and we look forward to speaking to you again next quarter.

And this concludes today's presentation. Thank you for joining, and have a nice day.