Good afternoon and thank you for participating in today's conference call to discuss Merit Medical's financial results for Fourth Quarter and Full Year 2015 and Guidance for 2016. All lines have been placed on mute to prevent any background noise. Please note that this call is being recorded. I'll now turn call over to Fred Lampropoulos, Chairman and Chief Executive Officer of Merit Medical. You may begin your conference.

Thank you. And good afternoon, ladies and gentlemen. We appreciate you taking the time to join us. Along with our staff, we have with us today Bernard Birkett, our Chief Financial Officer, who will be making part of this presentation. Before I turn the time over to our attorney to read our safe harbor provision, I would like to remind you that we're doing this a little bit different than we've done in the past. We will be posting slides and if you go to our Website, and our Home Page you can pull up this presentation, which I think will be helpful to you now and in the future. To access these slides as I mentioned, just go to www.merit.com and it will direct you to the appropriate location. I think at this time we'll go ahead and we'll ask David Lewis, one of our staff attorneys if he would read our safe harbor provision. David?

Thank you, Fred. During our discussion today, reference may be made to projections, anticipated events, or other information which is not purely historical. Please be aware that statements made in the call, which are not purely historical may be considered forward-looking statements. We caution you that all forward-looking statements involve risks, unanticipated events, and uncertainties that could cause our actual results to differ materially from those anticipated in such statements. Many of these risks are discussed in our Annual Report on Form 10-K and other reports and filings with the Securities and Exchange Commission available on our website. Any forward-looking statements made in this call are made only as of today's date, and we do not assume obligation to update such statements. Although Merit's financial statements are prepared in accordance with accounting principles which are generally accepted in the United States, Merit's management believes that certain non-GAAP financial measures provide investors with useful information regarding the underlying business trends and performance of Merit's ongoing operations and can be useful for period-over-period comparisons of such operations. The tables included in our release and discussed on this call sets forth supplemental financial data and corresponding reconciliations to GAAP financial statements. Investors should consider these non-GAAP measures in addition to, not as a substitute for, financial reporting measures prepared in accordance with GAAP. These non-GAAP financial measures exclude some items that affect net income. Finally, these calculations may not be comparable with similarly titled measures of other companies.

David, thank you very much and I just know how much fun you have reading that. It's right up to your alley and thank you very much. So ladies and gentlemen, as you know and have known in the past, there is always a lot going on at Merit. As we think about last year, we think about the Mexico project, we think about the new products we've introduced. We think about an acquisition that we started on in early December and then competed. We think about the opportunities for the future, but at the same time, as all of you are aware, there is lot of turmoil in the world. We have currency. We have oil prices. We have problems between nations and the complexities of nations. All of those facing us and yet despite all that, we were able to accomplish and meet the goals of our year one of our three-year plan. Now not all those goals were exact numbers and by that I mean we didn't hit every number that we had anticipated, but we did hit the topline and the bottom line and so I am going to ask Bernard Birkett if he wants to go through the highlights of the year on a financial basis and then we'll come back and we'll start taking about next year. So Bernard here we go.

Thank you, Fred. We like to report Q4 revenues of $138.4 million or $141 million in constant currency and that's an increase of 4.2% as reported and 6.2% on a comparable, constant currency basis. For the year 2015, revenues were $542.1 million. On a constant currency basis we achieved $553.4 million. That's an increase of 6.4% as reported and 8.6% on a comparable, constant currency basis, therefore hitting our first year of our three-year plan, which we had guided in the range of $535 million to $545 million. Our Q4 non-GAAP earnings per share was $0.24. For the year 2015 non-GAAP earnings per share was $0.87, therefore, hitting our three-year plan and a range of $0.85 to $0.89. Q4 non-GAAP gross profit was 45.6%, compared to 47.4% in Q4 2014. For the year 2015, gross profit was 45.6% of sales, compared to 46.4% for the year 2014. Q4 SG&A on a non-GAAP basis was $36.9 million or 26.7% of sales, compared to $35.2 million for the same period or 26.5%. For the year 2015, SG&A on a non-GAAP basis was $146.6 million or 27% of sales, compared to $143.1 million or 28.1% for the year 2014. Q4 R&D was $11.4 million or 8.3% of sales compared to $9.5 million or 7.2% for the same period in '14. Excluding regulatory cost and clinical trials R&D was $8.2 million or 5.9% of sales compared to $6.8 million or 5.1% in Q4 2014. For the year, our R&D expense was $40.8 million on a non-GAAP basis or 7.5% compared to $36.6 million or 7.2% in the year 2014. Excluding regulatory cost and clinical trials, R&D was $29.5 million or 5.4%, compared to $27.3 million or 5.4% of '14 remaining flat as a percentage of sales year on year. Q4 GAAP earnings per share $0.14 and for the year 2015 GAAP earnings was $0.53. This was outside of our planned range for the first year of our three year plan, which was $0.63 to $0.67 and the primary reasons for this were severance cost and acquisition costs that we incurred in Q3 and Q4 of '15.

Bernard, thank you. That’s a lot of information and again a remainder that much of this is not only in the press release, but it is available on the slide deck. Let’s talk a little bit about what that drove these numbers. As you all know not only have there been business issues that we've had to deal with, issues like China, the Euro, gas prices and the issues those have created in terms of currencies in Russia, the Arabian Peninsula at places like Brazil. But despite all of these issues the company I think performed very, very well in fact what we've done is we’ve adjusted to this. I’ll talk about some of those adjustments in a moment. As well we're all aware that there been some major management changes here that of course is not something that’s enjoyable, but all of the changes and the things what we've done in our estimation and the estimation of the Board were things that needed to be accomplished and they have been. So I’m happy to report you today that the company is stable. I think Bernard has stepped in and done a terrific job and I think you'll start to see some of his finger prints on both our presentations and how we're doing things and certainly in the data going forward. So, along with those kinds of issues, let’s talk about all the positive things. As we look forward to next year, we first of all have the Mexico facility as you well aware up and running. We have just in the last two or three weeks moved a several new production lines to Mexico and we expect to move another one in less than a month At that point all the things will be in place to cover…

Thank you, Fred and for 2016 we're guiding revenues in the range of $587 million to $597 million. Gross margin on a GAAP basis at 44.5% to 45.5%, gross margin on a non-GAAP basis between 46.5% and 47.5%, earnings per share on a GAAP basis $0.74 to $0.80 and on a non-GAAP basis $0.97 to $1.03 and just to know that our 2016 guidance includes revenues and earnings for the HeRO acquisition that we completed earlier this year.

Okay. Well I sense you what we're saying as we believe that in terms of topline and bottom line, we accomplished our first year. What we're saying is that we're reaffirming our initial forecast on our three-year plan for our second year of the three year plan. A lot of work to be done, a lot of acceleration of the business, but these products are here to do what the business has the capacity to do it because of the capital investments we've made in the past. So there is it ladies and gentlemen, it's what we've done, where we are and where we're going. We I think are excited about the opportunities and look forward to being with reports here in the future. With that being said, we'll now turn the time over to the operator and Bernard and I will be available for your questions now. And as a reminder when the call is over, if there is more clarification or other thing that you didn't ask or didn't get us on the line, Bernard and I will be here for about an hour until we're able to meet with you and answer your questions. So with that said, operator, I will turn it over to you.

[Operator Instructions] Our first question comes from the line of Thom Gunderson of Piper Jaffray. Your line is now open.

Hi. Good afternoon, everybody.

Hey Thom, how are you?

Am good, thanks. So I've got two basic areas, ones on revenues, ones on earnings or gross margin actually and on the revenue side Fred, it's still new for us this HeRO graft and has an impact to your numbers and to your guidance for 2016. So as we try to model this, if they did $7.5 million in sales last year, without having that extra euro bump that you'll get by having broader distribution and I think you said 11% growth, but it's not for a full year. How should we proportion that? When do we start to see a quarter-over-quarter kind of growth that would reflect that 11%?

Thom, just a reminder and I am glad that you brought this subject upfront. Just a reminder to everybody that as you model our numbers, everybody is aware from what we do in the past that our first quarter because of the way we shut down at the end of the year and we ramp up and we don't take any credit for production, it does to the sterilizer. We always have that little lag and we then catch up in the second quarter and again a reminder, on this particular transaction that we're going to have about $85,000 a month in inventory mark-up and that's going to take four to six months to work that off and then you have that cost but plus 25 and that is so that we can get a smooth transaction. I got a report from our Vice President of Engineering, we have teams down there. We have people that will be there for a month. So we're there and the kind of the comment we got earlier today was that we think it wasn’t probably move up to date maybe by 30 days or so. But essentially all of that will be produced here. As you pointed out, there is about 11 months worth of revenue because of when we closed and so we're going to only have the benefit of 11 months of that, but despite that we think that we'll still grow off that base by about 11% on an annualized basis above what they did minus that first month. I am confusing myself Thom, not you, but -- so we're going to get 11, 12 of the $7.5 million and then we're going to take that and that's going to go 11%. Now we have actually here today 60 to…

You did throw a lot of stuff out there, but you also answered the question. So thanks. I got exactly what I wanted and little bit more/. So thank you. The other question is on gross margin. It was just a tad hardly worth mentioning, but you're trying to grow gross margin. I know it was a tad lower than what we had estimated. In the Q3 10-Q, you attributed lower gross margin than you wanted to Mexico, which you talked about and embolization product production being lower and messing up overhead a little bit and then international discounting to account for the strong dollar with your distributors, is that about the same in Q4? Is it getting better and how do you see those parameters in 2016?

Well there were number of issues as you pointed out, Nippon Kayaku, which is a distributor for our embolic materials, there was about $1.5 million less revenue in the fourth quarter because what they do is they make large orders, but that being said, I would also say that we were a little bit disappointed in the performance there. We had the issue of a devaluation of yuan. That affected us both on the revenue side and gross margin side. We had the Russian issue and that's just simply because we're doing -- we have to do heavy discounting. We don't change the prices, but we rebate to our distributors and again I think it's the same issues and then on top of that, you have the Mexico issue, which were still in that start-up phase. So I think comparatively speaking, and Bernard maybe you can weigh in here, I think those are the comparable basis, I think we're showing about 160 basis points of gross margin improvement going forward and that takes into account mix, it takes into account these things essentially our comparative basis being stable quarter-over-quarter. It takes into account Mexico coming online and even though you do have some startup expenses, with some of the new products, we're not going to get as much gross margin for the first nine months on any new products just because you're ramping up. But that will start accelerating. We do have the benefit Thom of having a number of these products on the -- that we launched last year and I got to talk about a couple of these because they're so exciting. If you take the Microcatheter the SwiftNINJA, oh my goodness, here we're selling this thing for $1200 a pop, gross margins is up 65%, 70% and…

That's correct Fred. Primarily we've identified two areas specifically for margin improvement where we targeted sales mix and geographic expansion. So we've set targets for our sales force on that and also from an operational efficiency point of view and that includes the Mexico facility that we know from each of our facilities what they need to contribute for gross margin improvement. So we're very focused on us is what drives a lot of our numbers. We've set really clear goals for our people. So we've got a good plan in place and we believe it's achievable.

One more thought here Thom, I just got through this one last thing in as in terms of staff compensation and bonuses and those sorts of things, it's about 40% on the revenue side and about 40% on the bottom line side with a couple of other little tickers in the middle. Gross margins are of course important, but we had paid by hitting these numbers and so it certainly has our attention in terms of how to accomplish these things.

Got it. Thanks Fred. Thanks Bernard. I am done.

Thanks Thom.

Thank you. And our next question comes from the line of Jayson Bedford of Raymond James. Your line is now open.

Hi. Good afternoon.

We can, just fine Jayson. How are you?

Well thanks. So I guess maybe just a few financial questions. To start, I would love to get Bernard's view of the business here. he has been in the CFO role here for what three four months. Maybe you can speak to some of the newer initiatives and processes that you're putting in place in the finance side and you kind of alluded to it in answering the last question. But outside of the gross margin line, do you see opportunities for the business to become more efficient on the operating line?

Yes, we have targeted certain levels of operation like spend to drive the profitability that we're looking for. We've done it on three different areas. On the revenue perspective, we've really got focused on growing the revenue in a number of different markets. We've identified new markets and we've also identified new products and products that will be introduced. And then on the margin side, again we're focused on delivering higher margins. So focusing on those higher margin products while maintaining our existing legacy business. So a lot of the sales force, they're actually being compensated now on one revenue growth and margin and ASP growth. So we've got sales force aligned with where we want the business to go. From the operational side, we've also been very specific with our operational group to identify the cost savings that we expect to deliver on the margin and forecast that we have. So it's like a two pronged approach and again these guys are incentivized on delivering on the operational cost saving initiatives that we have in place.

And can I add one more thing Jayson to that if I could and that is we had our Board of Directors meeting this weekend. We had our audit committee and we also had a presentation by our independent auditors and whenever you go through some of the changes that we went through, they did more I don't want to call it inspection, but testing. They did more of this. They did more of that and here as the glowing report, the glowing report was there were no adjustments. There were no deficiencies at all and in fact they were very, very complimentary in terms of and I think speaks volumes to not only the business as it was, but the effectiveness that the accounting staff had to get through these things and get them done efficiently effectively, particularly now that we're reporting as a larger company and then the audit time was reduced by three weeks. So I want to let you know that all the concerns that a lot of people had, which I understand as a fair thing when you have these kinds of issues that the compliment was as we get it better than we've ever done it before and that they feel very comfortable and they delivered that report to the audit committee. So that was that's satisfying to me and I am sure to all of you guys and our shareholders. We will take your next question.

So it doesn’t just stop at the margin line where there is a lot of focus is well on SG&A and R&D expense and to make sure that they are in line with what we've forecasted and budgeted, so there is a lot more accountability being pushed back to the various functional heads to manage their budgets and to be essentially within that budget throughout the year and maybe working very closely with these guys to make sure that happens and to drive the profitability out of the business that we know it can deliver.

Let me tell you with more detail how we're going to do that. In the past Jayson you know as well as anybody, we have two really great guys. We had Greg and camp who did a great job for many years, but in terms of delegation and some of those issues, they grew up with the business. That's the way they've always done it. I think what Bernard has done is when he talks about responsibility part of what we've done is that we've hired these analysts that work for Bernard and work with the Department Head. So it's not just making a statement. There are people who are signed in the accounting department. These are new heads we've added in the last year and what they have specific departments that they have responsible work to work with those department heads and to take a look to make sure there are plans all kind of add up. So it's not just a statement being made from 30 feet. We got big ground troops on the ground working with the departments and making sure that they are in alignment and I think that's a huge improvement so that we get not just what we say, but then we get the performance because it's been reviewed and they're responsible for, but it doesn’t go three or six months. They're looking at every months and those analysts are working with them to make sure that they're on plan and wherever there is a deficiency, where they can go through and make sure they have answers to make sure that they stay on plan. That's different than we've done in the past where we can get down actually help the departments and that's a big change.

Okay. Thanks for that. I guess just another one for Bernard on the financial side, R&D was higher than we had modeled, higher frankly than it had been in the past, than your 8.5% of sales, I know you gave us some additional color, but just can you comment on what it seemed elevated in the fourth quarter and then what does this ratio R&D as a percent of sales look like in 2016.

In 2016 we forecast just R&D at the same level as a percentage of sales as what we would have achieved in 2015. So if you look at R&D itself, and just look at it for '15 over '14, we were 5.4% of sales and each year. So year-over-year and that's what we will be targeting for 2016. So at least maintain that ratio. The other cost that have been included in there are regulatory cost and clinical trials. So obviously as you're launching a lot of new products which we have at the end of 2015 and through the early part of 2016, there is a lot of regulatory cost that goes along with that for the filings and the registration. And also we've got to be conscious of that with the regulatory department that we're actually expanding into new markets. We're opening up in Australia, Canada and areas like that. We will have cost there, but again what we wanted -- what we've done is we've broken it down into each of the specific areas. So we really understand what is driving that number and so we're confident with the way we forecasted is in broad terms we're not seeing an increase as a percentage of sales on our SG&A and R&D expenses.

Jayson, just a little bit on that, as you know that some of these studies as you get larger enrollments both of the PAE and in the high quality study and others, the more than you go in that direction, you have more expense. Now we hope and I am going to just throw a little teaser out here, but there are some very, very exciting challenge or potentials on that area that would be very, very helpful to the company in terms of finishing up some of those studies and I am not talking about discontinuing. I am talking about I've got to be careful here and let me just say there are going to be opportunities, which would allow us to sell sooner and be able to have less expense and then hopefully we can talk to you about that in the next 60 days should all those things develop. And then another reminder that we have as part of our R&D we have these other long-term projects like the CVO and those as time goes along, those get more expensive, but so that we have the discipline, we're cutting back in other areas, we're utilizing the expense that we have. So this would be as you know, as we've discussed in the past, these are very exciting game changers, but this is going to end up being a seven-year project when it's all said and done. So just to give you a little color on that.

Right. Okay. And maybe just lastly, what was U.S. growth in the quarter? Similarly what was international growth?

5.9 in the U.S. and let me just check the international one.

Can you just give me U.S. what was your U.S. revenue?

The U.S. 7.9% on an international basis that was the growth.

Okay, that’s fine.

Domestic was 5.4%.

Okay, thank you. I will jump back in queue.

Okay. Thanks.

Thank you. And our next question comes from the line of Jim Sidoti of Sidoti & Company. Your line is now open.

Good afternoon Fred, can you hear me?

We can Jim. Thank you.

Good. Just a quick question on the quarter that ended. Malvern, I expected that number to be little higher because of the new sheet that you had approved did that one not start the Prelude SNAP? Has that not started to ship yet?

No, no I don’t think -- I don’t know we're coming after that Malvern now that we have launched the Prelude SNAP, we had pretty dramatic growth on the SNAP around the taking repair, replacing the classic. We had a major OEM company that has come forward and we’re delivering products there, but I think it shows that was down 0.8%. So I just think it’s more of those things where I think last year something like that we were shipping to Boston Scientific and some of those things. So it's more of a timing issue then it is a business issue.

Okay. So would you expect that business to rebound early in 2015?

Listen if you take a look on Malvern what's interesting it's probably the most efficient facility that we have. We grew our Worley business last year, watch to look at the Worley business but these are the coronary sinus guides last year grew I’m going to say 25% to 30%, but we'll get the exact number here. And then we have another new product coming up this year. This is the non-valve Prelude SNAP and then -- and the one that I think that we grew -- let me come back here, on the Worley business we grew at 80% year-over-year. We added about a $1.5 million for about 17 to 32. So that came out of there. So what happened is that we loss some business on the classic side on the OEM side. We made it up with direct sales on the Worley side and the snap. We have other additional products and one of the things that we are doing Jim on the snap we have FDA approval and CE mark on the PreludeEASE Hydrophilic. And that’s a product we're not going to make available to OEM customers and that’s going to be all of sales I talking about the SNAP, I said EASE, the SNAP, and so I think maybe in the quarter was just really a timing issue more than anything else.

All right and then the -- I just wanted -- you talked about a lot of different devices before. The product that you're moving production early this year that you think will hurt earnings a little bit that was the hemodialysis graft.

That’s the HeRO, yes, that's the one we just purchased. That’s the HeRO, that’s the stent graft and what we're doing there is of course we have the first quarter in which you have the mark up of inventory which is a requirement and then we’re paying them as a vendor at their cost plus 25% and then we'll be producing it there for three to four months and then in the mean time all of it is being transferred. So we have other production lines and those things are being up and running and all the people are being trained. I think we had -- how many people do we have down there this week or next. We have seven people that are there engineering, quality, operators and that sort of thing and they will be doing after the next three or four weeks in that facility while they're building products. So there will be additional expenses that you're required to make and will affect gross margins, but it’s a relatively short term situation and something that of course is required on all acquisitions when you have inventory as you know and that amount is about $85,000 a month and to we use up that inventory. Then we'll have the inventory they make and several effect gross margins not a lot, but it's there and then assumes that side of the way then you'll see those gross margins accelerate in the second half. And interdentally we can also from our point of view produce the product substantially less expensive. Let me tell you why. They have their facilities on the campus in the Innovation Center at Georgia Tech. So they have their expense. This fits right in downstairs some of the things that we move to Mexico we can…

All right and then my last question, if you look at the mid-point of your guidance, it looks like your guidance was about 15% bottom line growth for 2016 on a pro forma basis, this has been -- Bernard, this is the first year you've given guidance, I just want to get a feel for how comfortable you are with that projection and if you think that's something that you can sustain for the next several years?

We're comfortable with this. Obviously there is a lot of volatility in the markets and we've taken that into account, but we're still comfortable with the numbers. A lot of it is going to be down to driving that gross margin number and which we've already spoken about and the discipline in controlling our cost base and which we're committed to. And we've shown this year well in 2015 that we have the ability to grow profits at kind of range and so we believe it's there in the business and looking at '17 again I would think it's achievable.

Jim let me add that on the sales forecast because one of the questions that we thought we would hear and I think we have to some extent is okay wait a second, you're going from this 49 adjusted for constant currency, is about 6% and now you guys are talking about 8% plus another 150 basis points that's pretty aggressive growth, but what we did is these aren’t my numbers. These are numbers that we've gone to our staff and we sat down with OEM, sensors the direct sales force both European, Asian and U.S. and Central South America, these are their numbers and in fact to be very fair, their numbers were actually a little higher and we can’t put those back which I think is always wise to do. But these are pretty impressive numbers and again there they are, you guys can decide what you think of them, but this is what our staff and what our sales organizations have committed to.

And if you look at we have proven in the past that we can grow that legacy business and with the products that are coming out of R&D and with the recent acquisition that we have, I think that gives us a lot of comfort with these numbers and belief that we will deliver on them.

Okay. Thank you.

Thank you. And our next question comes from the line of Mike Petusky of Barrington Research. Your line is now open.

Hey Mike, how are you?

Good afternoon. Great, great. So I just want to drill down again a little bit on the guidance. So what's the tax rate that's assumed for '16 in this guidance?

In the guidance we're looking at a range of between 27% and 29% and that's really affected by the mix of earnings and that's what has driven our tax rate in 2015, that mix can vary slightly year-from-year and that obviously has a big impact on the rates. But we're comfortable at 27% to 29%.

And then so what I’m hearing you say is really no leverage on R&D and not that no leverage on SG&A as well or do you get a little leverage there?

We will get a little leverage there.

Okay. So maybe yes…

Mike what I was going to say is that as I talked about later, we've got these expenses and they're start-up expenses with these new products that are coming online. Even this transfer is I don’t know if we're accounting that for R&D or not. But you've got some clinical support and these kinds of things that you need to have to be successful to drive that topline, but as Bernard pointed out the biggest drivers here are really the gross margin side, the facilities, Mexico, product mix and so on and so forth. That's where you get the biggest bank for your buck.

Okay. And so on the gross margin, how much of that gross margin improvement is coming from the device tax being suspended is that like 70, 80 basis points something like that?

Yes. That's correct.

Okay. And then -- so as we look at some of these issues in the first half of the year the HeRO and Mexico getting to a place where it can cover its overhead, is it fair to say that this year in terms of adjusted EPS it's pretty backend loaded maybe it's like 40% in the first half, 60% in the second half or is it even swung more towards the second half than that?

It will be obviously weighted towards the backend of the year as Fred already alluded to, we've got start-up cost in January and that affects our Q1 number. So we would expect margin to improve throughout the year and that's coming from not just Mexico but as we gain operational efficiencies as we leverage the new markets that we're entering that will obviously improve throughout the year. So you should see consistent improvement.

I’m just trying to get a sense of magnitude; for instance do you expect Q1 to be a negative comp in terms of adjusted EPS versus the year prior quarter?

I wouldn’t expect it to be a negative.

Okay. All right, what about CapEx for the year? Do you have any general guidance around CapEx for the year?

In a range of $35 million to $40 million.

All right…

Just on the CapEx, CapEx spend has been reducing from Q2, you can see it reduce through Q3 and Q4 of 2015. So it should level off in 2016. We don’t have a lot of the large building expense that we would had in the first half of '15.

Okay. And then in terms of your assumptions around currency is it just an assumption that it stays consistent with current levels or what are you assuming around currently?

Well, we’ve actually flexed it. So we’ve looked at a number of different alternatives and on a number of currencies and the ones that affected us the most are the Euro and the Yuan. So we are fairly active and looking at that. We brought on a Director of Treasury who just joined us in the last couple of weeks. So there is a lot of focus on that and managing that situation, but again as you know the markets are very volatile but we have tried to built into our forecast as much as we can.

Let me ask a question Bernard what is the standard you are using the rate in your modeling of the Euro?

110.

110.

Yeah and what we’ve done there is we’ve got forecast from a number of different banks. We’ve looked at the consensus numbers. You got some that were coming in lower than that but some are coming in much higher we’ve taken the middle group.

And Mike let me come back to your question on the SG&A, as I mentioned earlier in the call, we've hired probably four or five analysts that are working and working with the Department so that we can make sure there is more accountability and more visibility. We have hired this treasure who was formerly Stryker and Zimmer, excuse me, Zimmer and yeah he is laughing at me now okay. We can make it Stryker but anyway, I think Met with the Board as I mentioned earlier in the call this weekend and we've started going through the functions and the help but I think the big changes here are that we have I think this is the Bernard's model. He has been able to go out and build this. We'll have better accounting. We'll have better visibility more help for the staff. More ability, this is a complex business. If you take a look at the currencies in Australia, one of the interesting parts if you take a look at these margins and I talked about some of our projects getting as much as 50% or 75% more. This is when you’ve seen the Australian dollar decreasing value by 30% and we’re still getting those. If we get back to some level in the future, so I think we have a lot of most of the downside coverage has been already, is already built into that and there is opportunities in the future as we see oil prices improve and other commodity issues. Over time I am not looking for any big bounce, but I think that the numbers we're giving you are numbers on the currency side that are kind of where I think where they're pretty well going to be leveled out. So I could be wrong on that. We've modeled it 1/10 and then everything has to be converted. But now we've got a treasurer here to help and to take on his responsibility that knows how to hedge. By the way, I want to make sure everybody has chance. This is not speculation. We're not speculating on markets is what we're doing is we're hedging essentially the revenues that we have in the receivables and that sort of thing. Do you want to comment on that?

It's just a hedging strategy. So to be risk management more than actively setting on currency.

We're not in the currency business. The point is the question was on the leverage on SG&A and I think as the business is more complicated what we're trying to do is to make sure that we do a better job of understanding and managing the risk of the business. And we've hired people in this department to do so. And we haven't hired anybody by the way in accounting. These guys try to do it all. They did a good job, but we think there is more that can be done, particularly down at the division and down at the department level.

Okay. And just last quick one, free cash flow generation I am assuming mostly used for debt pay down over the next 12 months, is that the likely.

Yes, that's correct.

Thanks, really appreciate.

Thanks Mike. I think we generated, no one asked about this, you just asked about it before and now that we're nobody asked any question, but I think we generated almost $70 million in operating cash flow last year and that's pretty significant improvement. So again lot of the questions and we appreciate them. Operator, we'll come back to you and see if there is anybody out with any further questions.

And our final question comes from the line of Marco Rodriguez of Stonegate Capital. Your line is now open.

Good afternoon, guys. I finally got in there.

We're delighted to have you. Thank you.

Thanks. Most of my questions have actually been asked and well answered, just kind of one real quick follow-up, do you guys have a handle on where D&A is going to be coming out in 2016 with the Cryo acquisition?

Did you say G&A?

No, depreciation and amortization.

Oh, okay. Go ahead, do you want to talk about that.

We're still working through that. We have some valuations to do and that will be completed before the end of the quarter.

The aggregate is built into our numbers on the depreciation and amortization.

Yes we've got estimates in there, but we need to confirm.

And we have to go to our third party to get the folks and has to do with goodwill. It has to do with intellectual property. It has to do with developed technology and all that sort of stuff. So I don't think it is confidential information and if we can share that with you once the valuation comes out, we'll be more than happy to do that Marco.

Got you. Appreciate that and then maybe I missed this, did you guys updated EBITDA guidance for '16?

We haven't issued that at this stage.

Okay. All right. Very good. Appreciate it guys.

Okay. Great. Thanks Marco.

And there are no further questions at this time.

Well ladies and gentlemen, we summarized, as I mentioned in my earlier comments we hit out topline and our bottom line for last year. We missed some things in the middle and it's not a science, it's an art but I think we accomplished the midline of progress. I think we've restructured the business in terms of our accounting department and the accountability part of our business. We're restructured our compensation so that our sales force management, everybody is compensated on the personal lines all those into revenues, gross margins and ASPs. We have plenty of products to sell and we've already seen with the Microcatheter, we're seeing it with our balloons and so it's not just anecdotal or hope. We're seeing that already and then on top of that you add what we think is a great tuck in acquisition, but something that has a lot more implications for the long run. When we buy our share business several years ago, it was a really nice business, very profitable business, but it wasn’t a business segment per se. I think with this along with our other vascular products, it's kind of is a very, very big deal and that we expect a lot out of it and we're looking forward. And it's manageable. We've proven for years and years that these tuck ins are very digestible for us and I think it's been probably one of the things we've done best. So topline we expect a good year. The gross margin part is again the area that we think we can get the most leverage on and then but the business is changing and so yes, we're not going to get a lot of leverage on the SG&A side because of clinical specialists and launching these products and fans.…