Good day, everyone. Welcome to today's Integra LifeSciences Fourth Quarter Financial Reporting 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 ma'am.

Thank you, Alan. Good morning and thank you for joining the Integra LifeSciences fourth quarter 2014 earnings results conference call. Joining me today are Peter Arduini, President and Chief Executive Officer; and Glenn Coleman, Chief Financial Officer. Earlier this morning we issued a press release, announcing our fourth quarter 2014 financial results and 2015 guidance. We also posted a presentation on our website, which we will reference during the call today. You can find this presentation at integralife.com under investors, events and presentations in the file named fourth quarter earnings call presentation. If you would open that up to Slide 2, please reference our safe harbor statement covering the forward-looking statements we will make on the call today. As well, please reference the reconciliations of non-GAAP measures at the end of the presentation beginning on Slide 11. As a reminder, both the results and forward-looking guidance we are discussing today include the performance of this spine business. We will provide revenue guidance in both the historic five-segments format, as well as in the news three segments, one of which is the new global spine business. Right now, I would like to turn the call over to Pete.

Thank you, Angela, and good morning everyone. We are pleased with our strong results in the fourth quarter. Referencing Slide 3, sales in the fourth quarter increased 14% as reported or 16% excluding the effective currency. Our sales result this quarter reflects strength in several key areas across the business. We were particularly pleased with the strong organic revenue performance which increased 6%. The acceleration organic growth in this quarter was driven by our world-wide neurosurgery business which was up 12% excluding DuraSeal. Skin and wound sales were up more than 20% and our international sales accelerated to 50% growth on an organic basis. Below the topline, our adjusted EBITDA margin increased to slightly above 23% which reflects an improvement of nearly 400 basis points over the prior fourth quarter and demonstrates the achievability of our long term target of 23% to 24%. Free cash flow conversion for the year reached 38% with free cash flow of $37 million for 2014. We believe the strong financial results including faster topline growth are directly attributable to better execution of our plan to simplify and focus our organization. While we do not expect to sustain these metrics on a quarterly basis near term, we are on the right path to achieve our financial targets sooner than 2018 including organic growth of 5% to 7% and adjusted EBITDA margin of 23% to 24% and free cash flow conversion north of 80%. Before Glenn goes through the detailed financials, I'd like to take a few minutes to look back on 2014 and a few of the accomplishments that reflect the progress we've made. If you would please turn to Slide 4. In November we announced a transformation of our organization. We realigned from five businesses into three global segments focused on specialty surgical solutions…

Thanks, Pete and good morning everyone. Overall, I would characterize the top and bottom line performance in the fourth quarter as strong despite the impact of unfavorable foreign currency translation. Our fourth quarter organic revenue growth is 6%, coupled with adjusted EBITDA margin of 23.1%, reflect the kind of growth and profitability we expect from the business longer term. Our operating cash flow resulted $21 million during the fourth quarter, where as the $79 million for the year which was up the high end of our guidance range. Adjusted earnings per share increased 14% to $0.94. We are well-positioned to achieve our long term targets starting with the plan for 2015 that shows further organic growth acceleration and margin improvement over the full year of 2014. Let me now turn to our segment revenue performance in the fourth quarter shown on Slide 5. Starting with U.S. Neurosurgery, sales hit on all cylinders in the segment was 45% in the fourth quarter largely driven by DuraSeal which had its best quarter at the year. Organic sales grew 11% and were driven by strength in our new critical care monitor as we passed the second anniversary of its launch, and DuraGen sales increased 10% reflecting the volume run rates above pre-recall levels. Our U.S. instruments business was down about 1% in the fourth quarter compared to the prior year. Sales in the alternate site channel declined which offset modest increases in sales of acute care and lighting. The MicroFrance integration is on track to our plan and contributed incremental revenue during the last two months of the quarter. These differentiated products increased the strength of specialty instrument solutions for laparoscopic and ENT procedures offered through our existing sales channels. Our U.S. extremities business had another very strong quarter with sales up nearly…

Thanks Glenn. We have a number of priorities that we're focused on in 2015 and they're summarized on Slide 10. Our top priority is executing on our 2015 targets which includes delivering organic revenue growth of at least 4% to 5%, driving margin improvement and hitting adjusting earnings per share growth of 10% or more excluding currency. Second completing this spinoff of SeaSpine and integrating our two divisional global structure are critical priorities in 2015. We are optimistic about the value this spinoff will create and our teams are working hard to complete the separation and we believe that were on track with the timeline that we communicated back in November. We've narrowed down our list of candidates for the CEO position and are confident that the process will resolve in hiring a strong leader to achieve the goals we've outlined for SeaSpine. SeaSpine will have the ability to utilize the -- what Integra sees is operating profit today for investments that will enhance its R&D pipeline, sale structure and surgeon training. And with these investments as well as a strong starting cash balance of $30 million to $40 million, SeaSpine will be set up for success as an independent public company. For Integra the spin will enable the organization to focus on scaling two businesses, specialty surgical solutions and our orthopedic and tissue technologies. We will be able to direct our management focus and investment dollars to accelerate growth and development of our two divisions, which we believe the result will be in Integra with a faster topline growth profile, as well as higher operating margins. Moving on, our third initiative for 2015 centers on organic growth. We expect our R&D efforts to begin to support a stronger cadence of impact for new product introductions. In 2015 we expect…

[Operator Instructions] We'll take our first question form David Lewis with Morgan Stanley.

Good morning, this is actually Jon Demchick, in for David. Organic growth sales in the quarter is probably the strongest we've seen in a couple of years, and adjusting out SeaSpine probably somewhere between 6% at 7%, if I'm doing my math right. As we think about the strength in 4Q and heading into 2015, are there any reasons why we would expect this performance to slow into 2015, as guidance implies? Given some of the recent launches and filings.

I would say Jon, I think as we communicated within our guidance, we do believe that Q4 was a higher bench point level. I think the important message is, we believe we’re going to be in a range here of the 5% to 7% in organic growth. And it does make - show a signal that our product pipeline is beginning to start to bear more fruit. From a standpoint of the new skin products that we have out to much of the growth that we had within our neuro business, I would say for fourth quarter when you think of the higher level neuro had a tremendous quarter, we had the conversion of our new communal monitors which isn't something that will last for perpetuity, there is a replacement install base. So that drives up a little bit higher organic growth rate in Q4 and really from a DuraGen standpoint, we are now back to where we are in a leadership share position we've taken back all of our share that we lost before, and so that will start decelerating if you will or running at a steady level. But that steady level we’re quite excited about because we're still on that 4% to 5% overall growth range across the board. I think the other aspect and you saw in the numbers it was international. We've had a lot of work going on in China, lot of work in Japan and in Western Europe and in those markets in particular our neuro platform as well as extremities also continue to accelerate and we believe that we will continue on here really in the next few quarters.

And Jon, I would add to Pete's comments, is once we do spin the Spine business, we are expecting accretion to our revenue growth, we've always said about our point of growth. So the numbers you see here in our guidance, you could expect an additional point of growth, once we actually spinoff SeaSpine.

Understood. And then, as we think about international, it looks like obviously impacted by FX this year, but it looks like you're probably seeing more of a meaningful step up in the international sales, kind of heading into 2015. Can you kind of discuss a little bit of the progress made here, and if we think that this is going to be the inflection year in the international?

So I would say it starts with last year, we made some major changes in bringing some top talent into the team from leadership in Latin America to leadership in Asia. We made a commitment in 2014 to actually build out some country leadership capabilities and so leadership in Japan for the first time, we build out a direct sales force in for a portion of our sales within Japan. And we made some major investments within China and we've lapped some of the challenges we've had in that country with registration ownership. We went through some rough spots up and down candidly on getting registrations completed and we believe that we have that behind us. We've got really nice structure in place there and then in Western Europe, I would say between the team, the focus that we've had, we have expanded some of our sales force particularly in skin and wound and also we’re expanding in our instruments world. We just have better traction across the board, more products that we have been working on for couple of years that were filed are now actually getting approved. So, we believe that 2015 should be a solid year and a good year for international show to show that, we are on track for that 30% of our overall sales coming from international.

Thank you very much.

And next we'll go to Bob Hopkins with Bank of America.

Hello, good morning. Thanks for taking the question. I appreciate the incremental color on SeaSpine and the profitability level there. Doing some quick math, in your 2015 guidance, it looks like contribution from SeaSpine is about in the $0.30 area. Am I in the ballpark, there?

Bob, we are not quoting any EPS numbers at this point. We gave the trailing 12 month revenue number previously at about $140 million with the business. We've given the EBITDA numbers as well relative to low to mid teens. So, that can give you a level of the EBITDA dollars but we are still working through the stranded cost. So we are looking at how we can broadly reduce our G&A structure relative to the spinoff and that includes capitalizing some of the ERP system moves that we have made, leveraging that platform, as well as looking at the transition service agreements we are going to have in place with SeaSpine, which we'll have to reduce some of the corporate costs in the short term. So we have more work to do relative to reducing some of those stranded costs. But we at least want to give you an idea about the EBITDA dollars that business generates today and that's why we made those comments.

Yes, I know. The genesis of my question is that, in all likelihood, SeaSpine is going to end up being valued on revenues like most small spine companies, and so what I'm really trying to get at is -- what is the implied earnings power of Integra ex-SeaSpine in your 2015 guidance?

I understand, but at this point we’re not going to give any specific EPS numbers relative to the SeaSpine dilution.

Okay. And just real quickly, on the currency side, could you give us a sense as to the impact of currency on Q4 and then impact from a gross margin perspective, and then the impact of currency on the gross margin for 2015 as well?

Sure. So, relative to Q4 the impact of currency on our topline was a little over $3 million. I would say relative to EPS we had probably - had about $0.03 to $0.04 impact negatively on our bottom line. Gross margin is difficult to say because we are procuring materials six to nine months ago that are actually coming through now at higher euro rates. So, it's difficult to say but clearly if I just look at the instruments part of our business which is where we procure most of our materials outside the U.S. and Euros, its probably leased to 50 basis points impact on our Q4 gross margins. As you look at 2015, the impact of topline with FX right now based on current rates is about $25 million. And we have called out about $0.10 to $0.15 for the EPS impact.

And most of that flowing through gross margin?

Yes.

Okay. Thank you very much.

And next we'll go to Larry Biegelsen with Wells Fargo.

Good morning. Thanks for taking the question. I just wanted to circle back to an earlier question on Q4, first. Last quarter you talked about adding new distributors outside the US, and some other items that sounded one-time in nature. Can you quantify how much you benefited outside the US this quarter from one-time items? Obviously, the international result was very strong, this quarter. And then I had a follow-up.

I would say Larry, the view for Q4 on one timers was quite small. As far as any type of stocking distributors or things of that nature, the majority of what we took place we take a look at Western Europe and things of that nature. We had very strong sale through our direct channels particularly in narrow. We had some nice tenders that we knew were a little bit late in Q3 that picked up in Q4 as we had communicated in the last call. And then really and I would say Asia and Latin America, we just had some good strong close. I think our consumer devices, our DuraGen products as well, DuraSeal continue to do well. We just had good run rate execution and lot of it is tied to - we put broader capabilities in place. I will give you an example in China, our plan all long has been to move from one or two large mother distributors into a more flatter structure, which we've done. We've got our own management leadership team in place. Our office structure to actually manage through that and the result is that actually selling resources we’re up 30%, 40% of people actually selling our products. So, we’re staring to see the benefit of that come to the P&L.

That is helpful. So with Zimmer, Biomet and Wright and Tornier, there's potential for disruptions across both lower and upper extremities. Can you discuss what those disruptions mean for Integra, and have you seen any disruption from the announced deals, yet? And just lastly, based on some of the FTC actions or requests around Wright, Tornier, looks like the combined company may have to sell one of their total ankles. I heard your comments about the 2-piece ankle, but would you be interested in acquiring one of their ankles if it became available? Thanks a lot.

So Larry, I would first start up saying, we are not really seeing really any changes so to speak or disruptions in the marketplace yet. I would expect as we start saying the announced aggregations here in 2015, no matter how good of execution plans, all these companies have, there will be some changes. Will that open up some distributor opportunities? Will that open up some IDN opportunities? My gut says most likely there will be some opportunities that will come our way. Relative to products that come out, we always keep our ear to the ground if you will for interesting products that could fill out our product portfolio. They could be from the mega deal that is taking place to some of the orthopedic deals that are taking place. But I wouldn't say we have a specific product anywhere that we are definitely focused on. I would just comment that when it comes to some of the larger joints within the extremities were, do it be a shoulder or would be an ankle, the more that you have a different variety in your portfolio, what it does is in some cases is disfocus you and adds additional labs, additional training, additional tools. So it's not to say that we wouldn't be interested but in our spirit of staying very focused, keeping our sales channel focused, being able to really have impactful spend in labs and training, our strategy for bigger joints is to stay on a common platform where it makes sense. But we will be looking at different opportunities that come up and evaluate them to see if it makes sense for the company when they happen.

Thanks for taking the question guys.

[Operator Instructions] We will next go to Bruce Jackson with Lake Street Capital Markets.

Good morning. Thanks for taking my question. About the diabetic foot ulcer data, I think that you were planning on having that published someplace. Do you have any indication as to when that might be published? My follow-up question is -- you had some internal targets as to the performance of the product. Did you hit those targets, and were those targets set more on an Apligraf, Dermagraft level, or maybe a little bit higher?

Let me answer the first not clarified, but to clarify your second question, are you talking about the outcomes of the study on your second part of your question?

Yes.

Okay. So, the first part of your question relative to the DFU data and publications, yes, we have submitted into some major journals. We believe that we're going to hear back as far as the acceptance of the journals probably in Q2, latter part of Q2. Then from there, it could be 60 to 90 days after that so it actually gets published out within the journals. And so believe in the second quarter we will be able to communicate which journal it's going be in and when you're going to see the information. Relative to the study itself, and I spoke on previous calls that we achieved our primary and secondary end points. The study was focused on like many of the other studies that were done in the marketplace on the standard of care which is based on closure rates, quality of the close, time disclosure versus the standard of care, which is the moist wound dressings. So that's been the focus. We obviously had some other secondary end points that I'm not going to go through now that we believe are going to be relatively important in an economics discussion or a discussion on how you think about the treatment regimen. And again, we feel very good about our data. We feel very good about the power of the study, the quality of the study and again we had just submitted our PMA supplement which gets it on the way. I'll also remind everyone is, once we receive our PMA, we do then have the capability to begin some initial sales within the veteran affairs world, but that also then kick offs our journey into CMS and with the Max, which is how you get to the mid year 2016 for an impact on DFU.

That's helpful. Thank you.

Next we'll go to Steven Lichtman with Oppenheimer.

Good morning. Pete, now that we're closer on the total ankle, any further details you can provide as to how you see that platform differentiating from others on the market, or just how you see that impacting momentum in your extremities franchise when you guys can add that to the bag?

I would just say on the design Steve, we're not ready to talk about it mainly for competitive reasons. There is a lot of things going on in space and so that's - we believe that it is something that we want to keep proprietary at this point. I would tell you, our focus has been on driving this product out in a way that it really focuses on our mission which is around limiting uncertainty for caregivers and surgeons in the case of an ankle product that can be effectively utilized when revisions are needed to come up, obviously we have a large fixation market within United States. The other areas have been a very good focus by the team on the instrumentation to allow them to be a lot more simpler design. And the third part of it has been a focus on being able to do this in such a way that we can have launches in multiple parts of the world, not just the United States when it's ready. So that's kind of that component of it. In 2015, its going to have a minimal impact at all, we're going to be methodical in our control market release which is really about making sure our manufacturing partner can ramp up effectively our labs, our training, all of that are on track, our instrumentation is right and then we’ll ramp up with a higher acquisition of capital. And as you know that will be guided basically by the amount of capital you get out for sets. Our direct lower extremities sales team will be the key focal point through that and then at the same time, we'll also be supplementing in growing more of our wound care capabilities and reps that will sell different products in that case DFU and some of other skin products. So, longer term, we think it's going to be an impactful product. We think it’s going to be a really nice fit within the focus that we deliver on and I'm just really excited that the team is moving on track but little ahead of plan.

Got it. And then secondly, instruments outlook on an organic basis in 2015. Just wondering your thoughts there? Overall 2014, I know had a number of headwinds, but where do you see that business on an organic basis going in 2015?

Our comment on that Glenn - add a few comments. If you saw the fourth quarter numbers, alternate say, it's still little soft, we actually really had some very good lighting performance, and we think our lighting franchise can benefit from some even more growth with some headers and changes into that line.’ It was also to see the acute care business start to pick up a little bit. And as we talked about through most of 2014, we just didn’t see as many new starts in centers where they were buying new instrumentation. I wouldn't say we see significant changes early on in the year but we are more optimistic that we're going to see a little bit more of a pick up within that area. I will also say that the integration in with specialty surgical one of the key things that we wanted to do this, is to create a capability where fundamentally 90% of our products, there may a lot of similarities in that space to other players. But in that 10% area where we have some really differentiated products, we now have some sales capabilities to detail those to surgeons that can create some additional pull through in acute care side and that will be part of our strategy as we come into 2015, to change our trajectory on our instruments business. I don’t know, Glenn if you want to comment a little bit further about how we look at the growth rates.

So Steve I agree with Pete's comments obviously. Organically we were expecting this business to be up in the low single digits for the reasons that Pete mentioned acute care doing a little bit better now, our lighting business doing well. So overall from a global perspective we see our instruments business being a low single digit grower for us in 2015.

I would say one thing just to add on instruments that we're really excited about and why MicroFrance was a great acquisition for us is. Two-thirds of those revenues come from outside the United Sates and yes they are impacted by currency rate now. But it does give a large enough base in Europe, that we have some markets that we can entertain going direct which means not only selling the MicroFrance products, but now that we actually have a sales force bringing the rest of our portfolio through. And that will be a process through 2015 and most likely something that will benefits us going into 2016 but it a nice enabler and we are quite happy with that acquisition, the quality of the people, the quality of the products. It's a really great fit for Integra.

Great. Thanks guys.

And now we’ll take a question from Jason Bedford with Raymond James.

Good morning, guys. Thanks for taking the questions. Just a quick clarification. I think Pete mentioned that SeaSpine will have $30 million to $40 million in cash upon the spin. Is that on a net basis?

So we’re going to put $30 million to $40 million of cash on the balance sheet of SeaSpine but no debt.

With no debt. Okay. And then just on R&D. Over the last few years, you've been kind of walking down the R&D investment. In the fourth quarter, it was below 5%, which is the lowest in a while. And I realize you've given guidance of 6% of sales, but if I exclude what was likely an elevated spend associated with the DFU trial, you haven't been there in a while. So I guess my question is, strategically, can you bring down R&D, and do you kind of view it as a bit of a source of cushion in the P&L?

So Jason from my perspective, we are looking to spend more on R&D rather than less. So could we bring it down, absolutely, but we want to make sure we’re continuing to pump a lot of money in clinical studies, new product development and so 6% is our targeted spend. That's a number we want to actually drive up in terms of our overall spending including going into areas of exploratory areas such as regeneration and things of that nature. It's one of the things that's quite exciting for us, you might remember we created this office of the Chief Scientific Officer about a year ago. We've centralized our clinical resources for the whole company and the spirit of – really the changes with the ACA and changes around the world, we're up on clinical studies. Some of these are even very small studies but studies that create evidence on our products across the board. In that 6% there is definitely significantly larger portion of clinical studies that provide proof at the point of launch. If you looked at us as a company four years ago, and candidly, any med-tech company, the amount of studies that one had at launch was quite small. We are really changing that quite a bit investing appropriately there. And the other areas where Glenn mentioned which is, at our core, we're regenerative medicine company. We've been a leader in skin technologies. We have some really interesting products coming out in the nerve space within tendon repair and other areas of skin. And the fact is that, they take a little bit larger R&D up front but with our capabilities, with success, we believe they will bring the highest returns for the company. And so that's the areas where the money is going in regenerative and also the clinical work to make sure that our products have the reimbursement power that is expected of them.

Okay. Thank you.

[Operator Instructions] We’ll next go to Dale Dutile with The Boston Company.

Good morning, guys. Just a question on the ERP system. I think you said you have 80% of revenues now running through that. In which case, I would have thought that the spend next year would be down more considerably than you're suggesting. Why is it you're still spending $18 million on that?

Dale, this is Glenn. We are reducing our spend next year relative to the ERP system. So, between capital expenditures and the amount we actually run through our P&L expense, expect it to be down probably by $7 million to $8 million in 2015 and that significantly drops off in 2016.

So the rate of spend is not commensurate with units getting on revenues flowing through it?

We still have additional locations to roll out in 2015. So we just completed the roll out of Australia and Canada. We have more locations to roll out in 2015 including some of our U.S. manufacturing side. So, once those are completed in 2015, you really are going to see that taper off in 2016.

The other part of it is well is that, once you get the systems in place, even skip the other 20%, we've got the United States, we've got a lot of our business running through it. Now that we have that common system, there's a wind of time here where we can utilize that platform to rethink how we do some things. So where we had multiple ERP systems, we might have had hard so to speak of work in either customer service or we had work in different capabilities in the company. Really over this next year we'll be able to kind of streamline that into Glenn's point. That's where we see additional value that can come through the company by leveraging this new platform that we have in place.

Okay. And then on the structural optimization charges, those are up next year? I know you closed, was it Andover and something else? I'm forgetting. Are they more facility closures, or what's in that number for this year?

So the two plans – I have Glenn give you the details on that. We closed our Andover U.K. facility and we closed our facility up in Massachusetts, Burlington and consolidated those into our existing footprint. So yes, out of that, there were clearly charges for severance and also for charges of closing the facility. And now we start seeing the direct P&L benefit of that coming in from those shut downs, actually beginning here in Q1.

And as I mentioned in some of my prepared remarks relative to the savings for Andover and Burlington, some of that being offset in our gross margin relative to the new Collagen Manufacturing Center. So, you don't necessarily see the gross benefit coming through in 2015, but we also have more plans in 2015 as well relative to additional site closures. So we have some things going on in the U.S. as well as outside the U.S. and so I'll call it phase 2 of our consolidation plans are moving forward as well.

Have you announced what those are? Could you give us any sense?

We have not.

Okay. Thank you.

At this time we have no further questions. So I would like to turn it back over to our speakers for any additional or closing remarks.

Thank you. I'd like to thank everyone for attending our call today, the questions - I just like to take couple of minutes just to reiterate some of our key points here. We're clearly proud of the achievements in the financial performance of the organization during 2014 and we feel confident about our position as we start this New Year. In 2015, we will be focused on the following four key objectives which I commented on my prepared remarks. First, is executing on 2015 targets which include delivering organic revenue growth of at least 4% to 5%. Driving margin improvement in any adjusted earnings per share growth of 10% or more excluding currency impact. Second, completing the spinoff of SeaSpine and integrating the new organization into a two divisional global structure. Third, investing in channel strategies and new product introductions to strengthen our international infrastructure, leverage our enterprise selling organization, and generate roughly a quarter of our organic growth from new product introductions. And then lastly, we'll pursue strategic tuck-in M&A in the core markets of our key business specialty surgical and orthopedics and tissue technology. So again, thanks again for listening and we look forward to speaking with all of you in the near future. Have a great day. Thank you.