Good afternoon, ladies and gentlemen, and welcome to the Orthofix International Second Quarter Earnings Release Conference Call. At this time, all participants have been placed on a listen-only mode. The floor will be opened for your questions and comments following the presentation. It is now my pleasure to turn the floor over to your host, Dan Yarbrough. Sir, the floor is yours.

Thanks, Mandy. Good afternoon, everybody, and thanks for joining us to discuss Orthofix International's financial results for the second quarter of 2010. During this call, we will be making forward-looking statements that involve risks and uncertainties. All statements other than statements of historical fact are forward-looking statements, including any earnings guidance we provide, and any statements about our plans, beliefs, strategies, expectations, objectives, or goals. Factors that could cause actual results to differ materially from the forward-looking statements made by us on this call include the risks that we disclosed under the risk heading Risk Factors in our 2009 Form 10-K, and our subsequent Form 10-Qs filed with the SEC. With me on today's call are Orthofix's President and Chief Executive Officer, Alan Milinazzo; our Executive Vice President and Chief Financial Officer, Bob Vaters, and Brian McCollum our Senior Vice President of Corporate Finance. And at this point I will turn the call over to Alan.

Thanks, Dan, and good afternoon, everyone. On today's call we'll cover three main areas. First, I'll start with a summary of our strong second quarter results. Next, Bob Vaters will then just provide some additional financial details on the second quarter including the key elements of our earnings, balance sheet and our cash flow, and an update of our expectations for the remainder of 2010. Third, I'll then make some comments about how Orthofix is successfully navigating through the current healthcare environment. Starting of with our second quarter results, we reported solid revenue growth in our Spine Stimulation, Spine Implants and biologics and orthopedic businesses which represent 81% of our total revenue in the quarter. These revenues collectively grew 11% over prior year and continued to outpace the growth rates of their respective overall markets. Sports Medicine, which represented about 16% of our business, was soft as we expected due to lingering effects of weak economy impacting some of our products used primarily in elective procedures. We expect improvement over the coming months as we continue to launch new products into this market. With regard to the performance of our spine business we believe we continue to take market share in our spine stimulation segment with another quarter of 12% sales growth from our broad customer base of more than 1500 surgeons around the country. We continue to benefit from the fact that we have the only FDA approved stimulator for the cervical spine which is a significant competitive advantage in an environment where surgeons continue to look for safe clinically effective treatments for their patients. We also believe our spine stimulation customer base represents a substantial growth opportunity for our spinal implants and biologic business and we are beginning to focus on increasing the penetration of our spine implant…

Thanks Alan and good afternoon everyone. I am extremely pleased that our initiatives to drive improved operating performance are evident in the numbers. Over the course of the last two years, we've made great strides to get back to our historical standards, and we will continue to find ways to increase our operating margins. Let me focus on three primary areas. First, the income statement including only one item in the earnings reconciliation and the continued improvement in our operating results, particularly at our Spinal Implants division, second, I will talk about EBITDA and the balance sheet, including our cash balance as well as a second quarter transaction in which we paid off our interest rates swap. And third, I will go over some revised guidance metrics for 2010. As Alan mentioned, total second quarter revenue was up 4% year-over-year as reported in on a constant currency basis. Excluding the impact of the sale of our vascular business in the first quarter of the year, revenue increased 6% on adjusted basis. This Spinal Implant and Biologics division grew 10% overall, with our cervical and lumbar implant revenue increasing by more than 16%. This was partially offset by the year-over-year decrease in revenue from Biologics. As we previously discussed in recent earnings calls, the Biologics revenue decrease was the result of our deal with MTS where we recorded marketing fee equal to 70% of the end user sales price for Trinity Evolution versus previously recording 100% of the end user sales price for our previous stem cell allograft. If we adjust for this year-over-year difference in the basis for recording Trinity revenue, our total Spinal Implants and Biologics revenue increased by approximately 16% over the last year. This will be the last quarter we have to make this adjustment as we…

Thanks Bob. Before we take some questions, I'd like to comment on our perspective on the recent dynamics in Spine market. A number of our competitors in the Spine market have recently released their earnings results which have given investors concerns about the growth rate of the Spinal Implants market. We believe our second quarter results indicate that we have not been impacted in the same ways nor to the same extent as some of our peers. However, Orthofix's spine business is not completely immune to increase competition and pricing pressures. We actively monitored the market, and are aware of the dynamics which have created challenges for some of our competitors. Given that our share of the total U.S. Spine market is approximately 2% as more hospitals opened up their RFP processes to new participants. We view this as a positive development that gives us increased opportunities to generate incremental revenue and increase our market share. The new products we launched last year as well as the product introductions plan for this year are making us more competitive in the marketplace as we are able to offer a more complete and more advanced portfolio of products to our surgeon customers. Our internal data indicates that within our Spinal Implants division, overall we have not experienced erosion in either average sales price, or our procedure behind this over the last few quarters. Additionally, it has not been necessary for us to offer more broad-based or substantially higher discounts during that period. Our second quarter results indicate our Spinal Implants business grew 16% on an adjusted basis and we improved our levels of profitability as a result of the significant re-organization and consolidation plan, we have now essentially completed, and that has already improved our efficiency and decreased our operating cost. This…

Thank you, ladies and gentlemen the call is now open for questions. (Operator Instructions). Our first question today is with Raj Denhoy from Jefferies & Co. Please pose your question.

Hi good afternoon guys. Jefferies & Co: Hi good afternoon guys.

Hey Raj.

What if I could ask a little bit on the Trinity Evolution side? I think you mentioned 6.9 million. How much of that with spine, and how much was in areas outside of the spine? Jefferies & Co: What if I could ask a little bit on the Trinity Evolution side? I think you mentioned 6.9 million. How much of that with spine, and how much was in areas outside of the spine?

Hey Raj, you may remember last quarter after the litigation began we decided that it would probably not be in our best interest to disclose the break between Spine and Ortho. But obviously, the majority of the business is still on spine.

Okay, I'm just trying to reconcile that -- the 16% adjusted growth, what that would imply for Trinity versus Hardware growth, I mean there is no fermentations but I don't know if you could give us some clarity on whether they are both growing equally or whether we are seeing better growth out of the hardware side or the biologic side? Jefferies & Co: Okay, I'm just trying to reconcile that -- the 16% adjusted growth, what that would imply for Trinity versus Hardware growth, I mean there is no fermentations but I don't know if you could give us some clarity on whether they are both growing equally or whether we are seeing better growth out of the hardware side or the biologic side?

We are seeing good growth in both.

Okay, but no more details than that? Jefferies & Co: Okay, but no more details than that?

No, I mean at this point I would say although we have talked about growth on our metal side picking up being north of 13%, 14%, so and we feel good about both the metal as well as the biologics growth.

Okay, and then I think you mentioned a couple of times, the number of 300 million for spine for the year, is that -- should we take that as guidance or is that really just kind of a number which you think you guys can do well north of how should we be thinking about that 300 million? Jefferies & Co: Okay, and then I think you mentioned a couple of times, the number of 300 million for spine for the year, is that -- should we take that as guidance or is that really just kind of a number which you think you guys can do well north of how should we be thinking about that 300 million?

Yeah, it's our run rate, Raj. So, that's what I'm alluding to.

Okay, okay. So I sort of did that math and I thought maybe you were sort of saying wouldn't have much growth in the second half but that's a little too conservative, I think. Jefferies & Co: Okay, okay. So I sort of did that math and I thought maybe you were sort of saying wouldn't have much growth in the second half but that's a little too conservative, I think.

That's our run rate.

Okay. I think in the quarter, there was a $200,000 loss on the vascular sale, which was included in your results. In the first quarter, when you had the gain on the vascular, you excluded it from your results but you chose not to do that this quarter. Was there a reason for that? I think it was a about a penny in the quarter? Jefferies & Co: Okay. I think in the quarter, there was a $200,000 loss on the vascular sale, which was included in your results. In the first quarter, when you had the gain on the vascular, you excluded it from your results but you chose not to do that this quarter. Was there a reason for that? I think it was a about a penny in the quarter?

Can you repeat the question? I don't understand.

In the expenses, you had a $211,000 loss on the sale of the vascular operation. In the first quarter I think you had about $12 million gain which was excluded. This quarter you didn't break that out from your adjusted numbers. I'm curious why that was. Jefferies & Co: In the expenses, you had a $211,000 loss on the sale of the vascular operation. In the first quarter I think you had about $12 million gain which was excluded. This quarter you didn't break that out from your adjusted numbers. I'm curious why that was.

Well, as you can imagine, we don't really do a lot of those adjustments anymore and we're really trying to get as close to GAAP as possible. In this quarter we only had one breakout number which was the interest rates swap.

Okay. Fair enough. And then just maybe last one on the operating margins. If you are adjusting there something around 15% which I think is, again better progress than many -- I've been thinking, any thoughts on the pace of the margin expansion, whether we should think about it accelerating here. Just some general thoughts around how that's progressing for you guys. Jefferies & Co: Okay. Fair enough. And then just maybe last one on the operating margins. If you are adjusting there something around 15% which I think is, again better progress than many -- I've been thinking, any thoughts on the pace of the margin expansion, whether we should think about it accelerating here. Just some general thoughts around how that's progressing for you guys.

Sure. This is Bob. As you can imagine, the biggest driver for our operating margin expansion has been the improvement in gross margins from Trinity Evolution; in addition to efforts we've had related to our consolidation which are starting to bear fruit, consolidating more of our operations in Dallas. We are going to continue to put a lot of efforts in to continuing to grow that operating margin but not with any specific element. It's going to be across the board efforts in every part of our business, particularly in the Spinal Implants business to get to more of what we consider appropriate standards for the Spinal Implant business. In this quarter our profitability -- operating income from that business was 2.4 million, which is three straight quarters above 2 million. So, we think we can take that to a higher level and we're going to have a lot of efforts on that.

Just one follow-up on that and I'll then jump off. You mentioned that the pricing environment is allowing you to potentially compete for more business as more hospitals open up in the RFP process. How do you balance the notion that competing for lower price and potentially lower margin business versus your desire to continue to grow margins for the overall business? Jefferies & Co: Just one follow-up on that and I'll then jump off. You mentioned that the pricing environment is allowing you to potentially compete for more business as more hospitals open up in the RFP process. How do you balance the notion that competing for lower price and potentially lower margin business versus your desire to continue to grow margins for the overall business?

I won't say it's a lower margin business. We can pickup competitive business given our cost structure, Raj and still have high 70s, low 80s middle gross margins. So we don't think it's at all lower margin business. And that's not our strategy. Our strategy certainly is to pursue the differentiation from the stem cell product or our relationship on the stem side with 1500 discreet customers but my point was simply that at 2% share, what may be challenging for some companies actually creates an opportunity for us. So we can go into accounts where otherwise, we might have been locked out and participate in some of these processes. That could be a benefit to us. Overall as I mentioned, we haven't seen a real change to our discounting rates on the Spinal Implants side. That does vary by product but we're benefitting from the fact that we've got recent product introductions which allow to keep our ASPs fairly high. But even on the discounted basis, we're still high 70s to low 80s.

Alright. So, I guess, the prices which are necessary been sensed into those hospital contracts aren't at a point that its really hitting your margins at this point I guess. Jefferies & Co: Alright. So, I guess, the prices which are necessary been sensed into those hospital contracts aren't at a point that its really hitting your margins at this point I guess.

That's correct.

Okay, fair enough. Thanks guys. Jefferies & Co: Okay, fair enough. Thanks guys.

Thanks Raj.

Thank you. Our next question with Michael Matson with Wells Fargo. Please pose your question.

Hi, I guess I just wanted to dig a little deeper on your commentary on your prices. I think the comment you made about prices was just that your ASPs were unchanged in the past few quarters. Is that correct and would I be correct in assuming that that means that, that there was some positive mix, maybe offsetting some negative pricing or are you just saying that you could have even had ASPs going up and that trend hasn't changed?

Hey Michael. It's Alan. No, certainly mix plays into that. We have a broad enough portfolio where we've got a good mix of Firebird now on the (inaudible) side. We are seeing price competition. So I don't want to tell we're not seeing price competition but at 2% share, what we're seeing in the marketplace is that if bids are out, we can discount our product, still be successful in getting into new accounts and enjoy high 70s, low 80s gross margin on metal products. So, that's not our strategy as I said earlier but it doesn't impact us in a negative way as it may someone with a higher share of some of these traditional products. So, and again, I recognize there are market head wins out there. Some of those are going to be challenging for us to participate in and we'll be selective. But at this point in time, as I look at our Spinal Implant ASPs, it does help us but overall our discounts haven't increased really dramatically.

Okay, let me -- that's helpful but let me just pose the question another way then. Are your ASPs right now, if you include mix and price, are those positive or negative on a year-over-year basis?

Neutral.

Neutral, okay, all right. And then the training facility, I think you're going to have done in Texas, is that up and running now and if so or if not, I mean what are the plans there in terms of number of surgeons, frequency of courses and things like that?

Yeah, we're very excited, Michael. We actually just moved in last weekend. We held our first cadaveric training program. The first weekend we were open for our spinal implant business. So we're very excited the move went off extremely well. So all of the operations activities have now moved from New Jersey, from Massachusetts and from McKinney into the Louisville building and we did it very effectively without any business interruption. The first training program as I said happened last weekend but our target is to train as many physicians in the U.S. as we train outside and we've told you in the past that we train about a 1,000 physicians each year in Verona, Italy, largely on our orthopedic fixation products and our target is to do at least that many in the U.S.

And that training would be all on spine or just on all of your products?

A combination but initially we're going to focus on spine because we really haven't had this sort of an ability with spine. We have on the orthopedic side because of Verona but we haven't really had on spine. So the majority of our customers initially were targeting our spine but we also expect to train a fair number of orthopedic surgeons. And again we've never had, nor in Italy have we had the in-house ability to train on cadavers. So that's a huge increase for us.

Okay and then just a couple of questions for Bob. I guess first of all, I'm glad to see that the leverage ratio is below two now. Does that change at all your plans for use of cash in terms of looking at things like M&A or share repurchases and I guess just how strict are the covenants at this point, how far below those covenants are in terms of what your leverage ratio is?

Well, with our existing credit facility we have a covenant of 275 and we finished the quarter at 1.9. So that's just short of return of EBITDA. Our trailing EBITDA was 121.8 million. So that tells you what sort of flexibility. Having said that we're certainly in a better position than we were two years ago to make acquisitions. We're not sitting here today analyzing game changing acquisitions but I do think that we are spending more time looking at enhancements to our existing platforms and certainly the flexibility that we have today allows us to do that, whereas a couple of years ago it was not the case.

Okay and just on the debt, I know that there has been some discussion about potentially refinancing the remaining debt. Is there any chance that that could still happen? Is that something you're still looking at?

Well, we look at that all the time. I could tell you this. If the goal is to lower our interest expense and improve earnings, we took a big step at the end of the quarter by paying off our swap and those with the drivers were increasing our guidance. We've lowered our interest rate -- our average interest rate just a little over 2% across the board just by that one move and as to a broader refinancing, I think you should stay tuned. We're going to be looking at that very closely. And then to the extent we do something we'll let you know.

Alright, that's all I have. Thanks a lot.

Thanks Mike.

Thank you. (Operator Instructions). Our next question is from Shawn Bevec with SIG. Please pose your question.

Hi guys, just a question on the spine side. How many -- how much of the growth year was you servicing your old accounts versus making inroads in new accounts?

We haven't broken it down but I'd say the majority is from existing distributors that are bringing in new customers. We really haven't expanded our distribution footprints significantly. We're still probably in the 50 to 54 range. So we wanted to get through the integration process from New Jersey, Massachusetts, and McKinney into the new facility where we really felt like we could begin to open it up to new docs. So by and large it's current distributers bringing in new docks.

Okay great and is there any update on the three clinical trials that you had going for Trinity Evolution? I believe there was two in spine and one foot and ankle.

Yeah, we're not really prepared to tell you where we are the enrolment but all three trials are enrolling and as we get closer to finishing enrolment we'll let everybody know.

Okay and then lastly, looking at the Sports Med, it looks like this is the first quarter that sort of -- the adjusted growth was negative. Should we see weakness throughout the balance of the year or could we see it picking up a little bit?

We're going to continue to see it be soft probably through the rest of the year. We do have some programs that we put in place to improve the sales performance but I'd say yeah, it not going to be -- I wouldn't look for a major recovery this year. We've baked that into our guidance. But new products are launching. We are launching eight new products this year in that division, augmented by some selling activities. I think we'll see softness but we're doing some things to address it. In addition we're looking at ways to increase the services that we provide.

Okay, those eight new products -- have any of those been launched already or are those for the second half of the year?

No, we launched a couple of them already but we're getting ready to launch -- probably the two most important ones of the eight really are an upgrade to the fusion line and an improved upgrade called Therapy Line. So both of those are coming out over the next four to six weeks. So again I'd say Shawn you're looking at soft through the rest of the year, but improving.

Okay great, thank you.

Thank you. Our next question is from Patrick Clingan from Lazard Capital Management. Please pose your question.

Hi, guys. Congrats on a good quarter.

Thanks Patrick.

I apologize if my voice comes in and out, got a little bit of cold. But try to struggle through this. First one is, just on the distribution side following up on the last question. Now that you have everything consolidated down in Texas, do you plan to try to be more aggressive in terms of extending your footprint?

Absolutely, it's something that, we wanted to make sure we were in the new building. We are transacting business with our existing customer base. The two things that, really were are sort of key to us expanding. One is, obviously the operational stability, which we think we're in -- at right now, and feel very good about the new facility being up and running. The second is improving the inventory in Trinity Evolution which we should start to see improvements in our inventory in Q3. That would allow us to open up, bring out some new distributors as wells as some new customer. So, I look forward to improve in the back half of the year, Patrick. And then, assuming everything goes well, we would like to our next step in 2011, to expand distribution. Because we still have a pretty small footprint, on a relative basis into our competition in the U.S.

And then, the follow-up on your comment on Trinity Evolution Supply, where are you today in terms of selling it across the various sales force that you have in the various physicians customers you've got?

So, we're selling to, still a fairly limited number of docs, both on the Spine and the Orthopedic side, where we still roughly somewhere in the, you know, 85, 15, split although we are starting to given a little bit more to our Orthopedic team. But, we still have just a couple of hundred users, and within that a much smaller group that represents high volume. We've begun to see more inventories flowing in from MTS, which is what we expected when we did the investment late last year. So, our ability to begin to open up some new docs is really in this quarter. So, we had said earlier that we think 15 to 20% sequential growth each quarter is likely given that investment. And we did 15 in the first quarter, we did 17 in this quarter and we would expect to be in that range throughout the year.

So, under that supply, sort of environment, do you believe that you at any point be selling it fully across your overall distribution footprint or is going to continue with somewhat of a limited distribution over the balance of the year?

No. It's a great question. The balance of the year, I would say still, we are going to be improved but still limited. It's a very good question Patrick because we'll improve but still limited. We won't be out across our entire footprint. Our objective would be for next year, we can be out across our entire footprint.

Alright, Great and then a quick one for Bob, I know you guys guided earlier this year to operating profit margins of 13% to 14%. Looks like year-to-date, you are slightly above that range. Is there anything that we should be thinking about that might pressure the operating margins over the back half of the year?

Not as evident today.

Okay great and then on, move to Texas. You noted the $2 million savings this year. Has any of that benefited accrued year-to-date or is that all I heard about you in second half of the year?

No. It certainly is in part of the increase in operating margins. If you look at the total G&A, this year, over the last year, we were actually down.

All right, great and then last question from me. On the swap, you noticed I think $0.05 of the improved guidance came from retiring the swap. Is it right to think that that annualizes about $0.10 for 2011? I appreciate you all for taking my question.

So, to be clear it's $0.05 based on the current debt levels. Obviously, that analysis is different if you lower the debt but its offset by lower interest expense overall. So, if the debt is flat, then it's really $0.05 per quarter.

All right, great. Thanks again for all the questions.

Thank you. Our next question is of Bill Plovanic with Canaccord. Please pose your question.

Great, thank you, good evening.

Hey Bill.

Congratulations.

Thank you.

Bob, what's the assumed interest rate going forward on the balance to the debt?

We're down to roughly over six but that assumes no additional refinancing.

And does that include the amortization of the expenses and everything? Like what do I use, what's the interest rate I used? Canaccord: And does that include the amortization of the expenses and everything? Like what do I use, what's the interest rate I used?

Approximately seven, but again that does not assume any refinancing or further lower interest rate, that assumes based on the current configuration post swap.

Great and then --

Which is by the way, as what I said earlier, it's about a 2.25% decrease. So, where the $0.05 comes from is the 2.25% on roughly 224 million of debt.

Got it and then I know you got the away from giving details on incremental expenses that are absorbed in the P&L through the quarter? I was wondering just if you can give us a ballpark on any inventory step up, a legal or any other expenses that you're absorbing that you are not calling out today.

Well, again, we did that from the perspective of being true to GAAP and not making it exception to our earnings. And I did callout something's in my script so for example, our legal expenses is a $1 million higher this year versus last year.

Okay.

So, I did give that example already.

Okay.

Obviously, Bill, with our G&A down from 21.1 million to 20.3, that's a benefit of the result of our integration and you're starting to see that flow through, so when you look at our operating expenses, we've been able to move overhead-type costs towards sales and marketing cost and that appears to be a better investment.

Okay, so of the 2 million you expect in savings due to the tradition of the facility this year. How much have you already benefited, can you quantify that?

We haven't quantified it but we know we're well on our way to that target.

Okay and I'm trying to nail you down here, Bob, it doesn't sound like I am going to be able to but it sounds like that 2 million is the low-end for this year and we're probably going to see significantly higher number than that.

You said that I did not.

All right.

I can tell you that we're on track, so we extent -- we basically started from the get-go of this year, so I think we're on the good spot on that.

And then, just looking at the gross margin it was down a bit sequentially and Spine revenues were up, I was wondering if there's anything else that placed into that gross margin negatively that would have caused it to be down sequentially.

The only other things placed to it which I wouldn't use as a predictor is the expense of our P&L reserve but that's a hard one to read. I would look more towards the upside being driven by Trinity Evolution sales.

Okay, so you the reserves is really the only thing that swings it one way or the other at this point and then mix is what drives it higher?

Mix, of course, in Trinity Evolution the better, but yeah that's the only real sort of quarter-to-quarter driver.

Okay and then I think looking at other revenues they were a little over $4 million this quarter and trying to give a -- you had a lot of changes, sold and stuff bought, to assume it's kind of hard to know that that number is nominally do you expect that number to remain at the 4.4 million for Q3-Q4? Is that how we should work for it -- look at the other revenue line?

I expect that to decline, particularly as one of our partnerships expires.

Yeah Bill, the majority of that comes from an anesthesia distribution agreement that expired at the end of Q2 and so that number is going to go down pretty substantially.

It's a small product line, so I'm just trying to get a feel, is it going to be 2 million a quarter going forward? How should I look at it?

I'm not sure I'd say cut it in half, but part of that is because we do have some transactions services agreement and we don't necessarily have good visibility of what the ordering pattern maybe, but I think if I want to be conservative, say cut it in half.

Okay and then if you look at the business and you talk about somebody already asked the operating margin question, but where is the future levers on the operating margin coming from? Is it just straight sales increases, outside of the incremental 2 million this year and 3 million next year from the consolidation to manufacturing, are there any other marked levers on the operating margin line that we should be aware of?

Yeah, I mean obviously increase in Trinity Evolution sales has a big impact, second is the number that you mentioned and the third is focused efforts across the board principally driven by been co-located in Louisville .

And Bill we've talked in the past about out legacy condition rates on the spinal implant business in particular and as we begin to add some distribution muscle there, we really see some improvements on the commission line there, we've giving out distributors a much bigger portfolio products to sell, so maybe -- this quarter for example we're really entering into a $1 billion opportunity when you combine the minimally invasive launches and the deformity correction launches and so, it allows us to appropriately rationalize those commissions.

Okay and then last questions are just litigation, any update on an invasive litigation or the BGS investigation you'd like to highlight?

No, updates other than what's in our 10Q which is out tomorrow, but I don't think there are significant updates as the process continues.

Alright great, thanks a lot and again congratulations on a great quarter.

Thanks Bill.

Thank you, our next question is from Stan Manny with Manny Family Investment. Please pose your questions.

Good job gentlemen, a lot of questions have been answered but I have a couple, on Trinity Evolution. Your still supply limited?

Yeah, go Stan we're just coming to a point where the investment we made at the end of last year is starting to deliver more inventory to us, so we've run the first half of the year largely constrained, I'd say second half of the year I would call limited, not constrained. So, it will allow us to begin to open up some other channel for us. We have less than half of our current spine docs are using the product, less than 20% of our orthopedic docs are using the product, so we will become less constrained but not unlimited in terms our opportunity. So, again that's 15% to 20% sequential growth per quarter. That gives you a 28 to $30 million number this year and it looks quite achievable. Having said that, we look for this business as we've talked about before, to really gain steam as we go forward because we think that demand for stem cell products and given some of the other news about some of the other Biologics products, we think that the demand for stem cell products is just going to increase.

Okay. So can you, exiting 2010 Alan what would you, based on what you've said, what would the exit sales rate annually be exiting 2010 for Trinity with what you see now?

Well, we did close at $7 million this quarter. So look for 15 to 20% improvement each quarter and that gets you to roughly $30 million -- 28 to $30 million number. Now remember if we were to normalize those dollars for Q2, we would be almost I think closer to $10 million in terms of revenue.

Right, because of the….

So it gets you already on an end-market basis at about $40 million business.

Going in to 2011?

Right, growing 15 to 20% a quarter.

Okay. The second question, operating margin target. On the last quarterly call, you were comfortable with looking forward for like high teens and it looks like you're really moving on it. How do you feel right now looking out with no time horizon on it? What do you think our operating margin goals could be? High teens?

Certainly the high teens as a long-term goal and I agree with you that we're on our way. But we're being careful about what we say in terms of our quarter-to-quarter goal. We've always said, we think that the Spinal Implant business in the future will be operating at a much higher margin than it is today. That would drive the overall business.

Okay. My last question is on the cash EPS, annualized cash EPS, it looks like it's still about $1.20 add on to EPS, when you add the cash portion, the depreciation, amortization. Is that in the ballpark?

Honestly Stan, we don't even do cash EPS anymore. So I'd have to go back and calculate it.

Your 20 million in depreciation divided by 18 million in shares? It's in that range?

Yeah. Our LTM, depreciation and amortization is 22 million. So yeah.

So, it's about $1.20 which is a pretty good add-on.

Yes.

Okay. But anyway, good job. Great job gentlemen. Thank you.

Thanks a lot Stan. Thank you.

Thank you. That was our last question. I'll now turn the floor back over to Alan for closing remarks.

Okay. Thanks operator. Again, everyone thanks for joining us today. We're excited about our results through the middle of 2010 and we look forward to updating everyone at the conclusion of our third quarter. Thanks again.

Thank you. Ladies and gentlemen, this does conclude today's conference call. You may disconnect your phones lines at this time and have a wonderful day. Thank you for your participation.