S-4/A 1 kci09142012s-4a.htm S-4/A KCI 11.02.2012 S-4/A

As filed with the Securities and Exchange Commission on November 5, 2012
 
 
No. 333-184233
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
Amendment No. 1 to
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
__________________________
Kinetic Concepts, Inc.
KCI USA, Inc.
Additional Registrants Listed on Schedule A Hereto
(Exact name of registrant as specified in its charter)
Texas 
Delaware
3841
3841
74-1891727 
74-2152396
(State or other jurisdiction of incorporation
or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer Identification No.)
12930 West Interstate 10, San Antonio, Texas 78249
(210) 524-9000
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)
__________________________
John T. Bibb
Executive Vice President, General Counsel
Kinetic Concepts, Inc
12930 West Interstate 10
San Antonio, Texas 78249
(210) 524-9000
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)
Copies to:
Joshua N. Korff, Esq.
Michael Kim, Esq
Kirkland & Ellis LLP
601 Lexington Avenue
New York, New York 10022-4675
(212) 446-4800
Approximate date of commencement of proposed sale of the securities to the public: The exchange will occur as soon as practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, Check the following box. o
If this Form is filed to registered additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list of Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this form is post-effective amendment filed pursuant to Rule 462(b) under the Securities act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer  o
 
Accelerated filer  o
Non-accelerated filer  x
 
Smaller reporting company o
(do not check if a smaller reporting company)
 
 
CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities
to be Registered
Amount to be
Registered
Proposed Maximum
Offering Price Per Unit(1)
Amount of Registration Fee
10.5% Second Lien Senior Secured Notes due 2018
$1,750,000,000
$1,750,000,000
$238,700
Guarantees of 10.5% Second Lien Senior Secured Notes due 2018
$1,750,000,000
()
(2)
12.5% Senior Notes due 2019
$750,000,000
$750,000,000
$102,300
Guarantees of 12.5% Senior Notes due 2019
$750,000,000
()
(2)
(1)
Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) promulgated under the Securities Act
(2)Pursuant to Rule 457(n), no additional registration fee is payable with respect to the guarantees.
The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
 



Schedule A
Exact Name of
Additional Registrants
 
Jurisdiction of Incorporation or Formation
 
Primary Standard Industrial Classification Code Number
 
I.R.S. Employer Identification Number
Centaur Guernsey L.P. Inc.
 
Guernsey
 
3841
 
98-1022387
Chiron Topco, Inc.
 
Delaware
 
3841
 
45-3012782
Chiron Holdings, Inc.
 
Delaware
 
3841
 
45-2823202
KCI Holding Company, Inc.
 
Delaware
 
3841
 
74-2804102
KCI Real Holdings, L.L.C.
 
Delaware
 
3841
 
46-0975462
KCI International, Inc.
 
Delaware
 
3841
 
51-0307888
KCI Licensing, Inc.
 
Delaware
 
3841
 
74-2928553
KCI USA Real Holdings, L.L.C.
 
Delaware
 
3841
 
46-0946901
LifeCell Corporation
 
Delaware
 
3841
 
76-0172936
KCI HomeCare, Inc.
 
Delaware
 
3841
 
45-2132950
KCI Animal Health, LLC
 
Delaware
 
3841
 
46-0957660
TechniMotion, LLC
 
Delaware
 
3841
 
46-0975557
KCI Properties Limited
 
Texas
 
3841
 
74-2621178
KCI Real Property Limited
 
Texas
 
3841
 
74-2644430





Subject to Completion
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. The prospectus is not an offer to sell these securities nor a solicitation of an offer to buy these securities in any jurisdiction where the offer and sale is not permitted.
Preliminary Prospectus, Dated November 5, 2012
Prospectus
$2,500,000,000

Kinetic Concepts, Inc.    KCI USA, Inc.
Exchange Offer for All Outstanding
$1,750,000,000 aggregate amount of 10.5% Second Lien Senior Secured Notes due 2018 and the guarantees thereto for new 10.5% Second Lien Senior Secured Notes due 2018 and the guarantees thereto that have been registered under the Securities Act of 1933
and
$750,000,000 aggregate amount of 12.5% Senior Notes due 2019 and the guarantees thereto for new 12.5% Senior Notes due 2019 and the guarantees thereto that have been registered under the Securities Act of 1933
Offer for all outstanding 10.5% Second Lien Senior Secured Notes due 2018, in the aggregate principal amount of $1,750,000,000 (which we refer to as the “Old Second Lien Notes”) and the guarantees thereto in exchange for up to $1,750,000,000 in aggregate principal amount of 10.5% Second Lien Senior Secured Notes due 2018 and the guarantees thereto which have been registered under the Securities Act of 1933, as amended (which we refer to as the “Second Lien Exchange Notes”) and for all outstanding 12.5% Senior Notes due 2019 (which we refer to as the "Old Senior Notes" and, together with the Old Second Lien Notes, the "Old Notes") and the guarantees thereto in exchange for up to $750,000,000 in aggregate principal amount of 12.5% Senior Notes due 2019 and the guarantees thereto which have been registered under the Securities Act of 1933, as amended (which we refer to as the "Senior Exchange Notes," together with the Second Lien Exchange Notes, the "Exchange Notes" and, together with the Old Notes, the “notes”).
Terms of the Exchange Offer
Expires 5:00 p.m., New York City time, , 2012, unless extended.
You may withdraw tendered outstanding Old Notes any time before the expiration or termination of the exchange offer.
Not subject to any condition other than that the exchange offer does not violate applicable law or any interpretation of the staff of the Securities and Exchange Commission.
We can amend or terminate the exchange offer.
We will not receive any proceeds from the exchange offer.
The exchange of Old Notes for Exchange Notes should not be a taxable exchange for United States federal income tax purposes. See “Material United States Federal Income Tax Considerations.”
Terms of the Exchange Notes
Kinetic Concepts, Inc. and KCI USA, Inc. are issuing the Exchange Notes as joint and several co-issuers.
The Exchange Notes will rank equally in right of payment with all of our existing and future senior indebtedness and senior in right of payment to all our future senior subordinated and subordinated indebtedness.
Centaur Guernsey L.P. Inc. (“Parent”), Chiron Topco, Inc. (“US Holdco”), Chiron Holdings, Inc (“Holdings”) as the direct and indirect parents of the Issuers and together with all of Parent's existing and future wholly-owned subsidiaries that guarantee our senior secured credit facilities, consisting of a $200 million revolving credit facility (the “Revolving Credit Facility”) and a $2,300 million first lien term loan (the “Term Loan Facility,” and together with the Revolving Credit Facility, the “Credit Facilities”), will initially guarantee the Second Lien Exchange Notes on a senior secured basis and the Senior Exchange Notes on a senior unsecured basis (collectively, the “guarantors”), subject to certain exceptions.
The guarantees will be joint and several, full and unconditional, subject to customary release provisions and rank equally in right of payment with all of our guarantors' existing and future senior indebtedness and senior in right of payment to all of our guarantors' future senior subordinated and subordinated indebtedness. The guarantees will be effectively subordinated to all of the guarantors' existing and future secured indebtedness under our Credit Facilities. In addition, the notes will be structurally subordinated to all of the liabilities of any of Parent's existing and future wholly-owned subsidiaries that do not guarantee the notes, to the extent of the assets of those subsidiaries. See “Description of Exchange Notes-Guarantees.”
The Second Lien Exchange Notes will mature on November 1, 2018 and the Senior Exchange Notes will mature on November 1, 2019.
The Second Lien Exchange Notes will accrue interest at a rate per annum equal to 10.5% and will be payable semi-annually on each May 1 and November 1, beginning on May 1, 2013. The Senior Exchange Notes will accrue interest at a rate per annum equal to 12.5% and will be payable semi-annually on each May 1 and November 1, beginning on May 1, 2013.
We may redeem the Exchange Notes in whole or in part from time to time. See “Description of Second Lien Exchange Notes” and “Description of Senior Exchange Notes.”
If we experience a change of control, the holders of the Exchange Notes will have the right to require us to purchase some of their notes at a price in cash equal to 101% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of purchase.
The terms of the Exchange Notes are substantially identical to those of the outstanding Old Notes, except the transfer restrictions, registration rights and additional interest provisions relating to the Old Notes do not apply to the Exchange Notes.
For a discussion of the specific risks that you should consider before tendering your outstanding Old Notes in the exchange offer, see “Risk Factors” beginning on page 14 of this prospectus.
There is no established trading market for the Old Notes or the Exchange Notes.
Each broker-dealer that receives Exchange Notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. A broker dealer who acquired Old Notes as a result of market making or other trading activities may use this exchange offer prospectus, as supplemented or amended from time to time, in connection with any resales of the Exchange Notes.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Exchange Notes or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is , 2012.













Each broker-dealer that receives Exchange Notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. By so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act of 1933, as amended (the “Securities Act”). A broker dealer who acquired Old Notes as a result of market making or other trading activities may use this prospectus, as supplemented or amended from time to time, in connection with any resales of the Exchange Notes. We have agreed that, for a period of up to 180 days after the closing of the exchange offer, we will make this prospectus available for use in connection with any such resale. See “Plan of Distribution.”
You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy securities other than those specifically offered hereby or an offer to sell any securities offered hereby in any jurisdiction where, or to any person whom, it is unlawful to make such offer or solicitation. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or issuing the Exchange Notes.
TABLE OF CONTENTS



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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes statements that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements.” The forward-looking statements are based on our current expectations and projections about future events. Discussions containing forward-looking statements may be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors,” and elsewhere in this prospectus. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “predicts,” “projects,” “potential,” “continue,” “expects,” “anticipates,” "aims," “future,” “intends,” “plans,” “believes,” “estimates,” or the negative of those terms and other variations of them or by comparable terminology.
These forward-looking statements are only predictions, not historical facts, and involve certain risks and uncertainties, as well as assumptions. Actual results, levels of activity, performance, achievements and events could differ materially from those stated, anticipated or implied by such forward-looking statements. The factors that could contribute to such differences include those discussed under the caption “Risk Factors.” You should consider each of the risk factors and uncertainties under the caption “Risk Factors” in this prospectus among other things, in evaluating our prospects and future financial performance. The occurrence of the events described in the risk factors could harm our business, results of operations and financial condition. These forward-looking statements are made as of the date of this prospectus. Except as required under federal securities laws and the rules and regulations of the SEC, we do not have any intention to update any forward-looking statements to reflect events or circumstances arising after the date of this prospectus, whether as a result of new information, future events or otherwise.
TRADEMARKS, SERVICE MARKS AND COPYRIGHTS
3M™ Tegaderm™ is a licensed trademark of 3M Company; Spirit Select™ is a licensed trademark of Carroll Hospital Group, Inc.; GRAFTJACKET® is a licensed trademark of Wright Medical Technology Inc; Novadaq® and SPY® are licensed trademarks of Novadaq Technologies, Inc. Unless otherwise indicated, all other trademarks appearing in this prospectus are proprietary to KCI Licensing, Inc. or LifeCell Corporation, their affiliates and/or licensors. The absence of a trademark or service mark or logo from this prospectus does not constitute a waiver of trademark or other intellectual property rights of KCI Licensing, Inc. or LifeCell Corporation, their affiliates and/or licensors.
MARKET AND INDUSTRY DATA AND FORECASTS
This prospectus includes industry data and forecasts that we obtained from industry publications and surveys, public filings and internal company sources. Industry publications and surveys and forecasts generally state that the information contained therein has been obtained from sources we believe to be reliable. Statements as to our ranking, market position and market estimates are based on independent industry publications, government publications, third party forecasts and management’s good faith estimates and assumptions about our markets and our internal research. We have not independently verified such third-party information nor have we ascertained the underlying economic assumptions relied upon in those sources. While we are not aware of any misstatements regarding our market, industry or similar data presented herein, such data involve risks and uncertainties and are subject to change based on various factors, including those discussed under the headings “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors” in this prospectus.
DEFINED TERMS
The following terms are used in this prospectus unless otherwise noted or indicated by the context.
the term “issuer” refers to Kinetic Concepts, Inc. ("KCI") and KCI USA, Inc. ("KCI USA"), jointly and severally; and
the terms the "Company," "Centaur," “we,” “our,” and “us” refer to Centaur Guernsey L.P. Inc. and its consolidated subsidiaries.
the term "Merger" refers to the transaction completed on November 4, 2011 pursuant to which KCI was merged with Chiron Merger Sub, Inc. ("Merger Sub"), a direct subsidiary of Chiron Holdings, Inc. ("Holdings") and an indirect subsidiary of Centaur Guernsey L.P. Inc.


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SUMMARY
This summary highlights material information about our business and about this exchange offer. This is a summary of material information contained elsewhere in this prospectus and is not complete and does not contain all the information you should consider. For a more complete understanding of our business and the exchange offer, you should read this entire prospectus, including the sections entitled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our consolidated financial statements and the related notes thereto, each of which are included elsewhere in this prospectus, as well as the pro forma financial information, which gives effect to the Merger, the offering of the Old Notes, the Credit Facilities and the additional financings to fund the purchase price for the Merger and the related transactions (collectively, the “Transactions”). This summary contains forward-looking statements that involve risks and uncertainties. Unless explicitly stated otherwise, references in this section to “we,” “our,” “us” and the “Company” refer to Centaur Guernsey L.P. Inc. and its consolidated subsidiaries.
Overview
KCI is comprised primarily of our Active Healing Solutions ™ (“AHS”) and Therapeutic Support Systems (“TSS”) business units, and is an indirect wholly-owned subsidiary of Centaur. In connection with the Merger, LifeCell Corporation (“LifeCell”), formerly a wholly-owned subsidiary of KCI, was promoted to be a sister corporation of KCI, such that each of KCI and LifeCell™ are now wholly-owned subsidiaries of Centaur.

On August 15, 2012, we announced that we had entered into an asset purchase agreement with Getinge AB, pursuant to which Getinge AB will purchase certain assets and assume certain liabilities, including our Therapeutic Support Systems™ product portfolio. Please see “Recent Developments—Sale of Therapeutic Support Systems Assets”.
We are a leading global medical technology company devoted to the discovery, development, manufacturing and marketing of innovative, high-technology therapies and products that have been designed to leverage the body’s ability to heal, thus improving clinical outcomes while helping to reduce the overall cost of patient care. We have an infrastructure designed to meet the specific needs of medical professionals and patients across all healthcare settings, including acute care hospitals, extended care organizations and patients’ homes. We are engaged in the rental and sale of our products throughout the United States and in over 20 countries worldwide. Our primary business units serve the advanced wound care, regenerative medicine and therapeutic support systems markets. For the year ended December 31, 2011, we generated revenue of $2,065.4 million.

Business Units
We have three reportable operating segments which correspond to our business units: Active Healing Solutions™, Therapeutic Support Systems and LifeCell. Our AHS and TSS business units are based in San Antonio, Texas and our LifeCell business unit is based in Bridgewater, New Jersey.
Active Healing Solutions
Our AHS business unit, which generated 68% of our revenue during the year ended December 31, 2011, is focused on the development and commercialization of advanced wound care therapies primarily based on our Negative Pressure Technology Platform (“NPTP”). NPTP employs negative pressure in a variety of applications to promote wound healing through unique mechanisms of action and to speed recovery times while reducing the overall cost of treating patients with complex wounds. NPTP comprises three primary product categories: Negative Pressure Wound Therapy (“NPWT”), Negative Pressure Surgical Management (“NPSM”) and regenerative medicine.
NPWT, through our proprietary V.A.C® Therapy portfolio, currently represents the primary source of our AHS revenue. NPWT products are used in acute care and post-acute care settings (including long-term care facilities and the home care setting) primarily for creating an environment that promotes wound healing by preparing the wound bed for closure, reducing edema, promoting granulation tissue formation and perfusion and by removing exudate and infectious materials. Since its introduction, V.A.C. ® Therapy technology has changed the way wounds are treated and managed. With more published clinical evidence than any competing offering, V.A.C. ® Therapy has been selected by prescribers as the treatment of choice for more than 6,000,000 patients worldwide.

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NPSM products are used in the acute care setting (operating room) primarily for (i) management of the open abdomen, as temporary bridging of the abdominal wall openings where primary closure is not possible and/or repeat abdominal entries are necessary and (ii) managing surgical incisions by maintaining a closed environment to protect the incision site from external infectious sources, removing exudate, approximating incision edges and reducing edema.
In order to broaden and diversify our AHS revenue stream in the future, our research and development (“R&D”) group continues to develop and commercialize new advanced wound care products and therapies and to broaden our reach across the wound care continuum. In addition, we seek to further grow the business through strategic acquisitions or technology licensing opportunities.
In U.S. acute care and long-term care facilities, we contract with healthcare facilities individually or through Group Purchasing Organizations (“GPOs”). We bill these facilities directly for the rental and sale of our products. In the home care setting, we provide products and services to patients in their homes and bill third-party payers, such as Medicare and private insurance companies, directly. For the fiscal years ended December 31, 2011, 2010 and 2009, we recorded revenue related to Medicare claims of approximately $168.7 million, $161.9 million and $153.6 million, respectively. No one of our individual customers or third-party payers accounted for 10% or more of total AHS revenues for the fiscal years ended December 31, 2011, 2010 or 2009. Outside of the U.S., most of our AHS revenue is generated in the acute care setting on a direct billing basis. By geographic region, the Americas, which is comprised principally of the United States and includes Canada, Puerto Rico and Latin America; EMEA, which is comprised principally of Europe and includes the Middle East and Africa; and APAC, which is comprised of the Asia Pacific region, represented 75%, 20% and 5%, respectively, of AHS revenue during the year ended December 31, 2011.
Therapeutic Support Systems
Our TSS business unit, which generated 13% of revenue for the year ended December 31, 2011, is focused on commercializing specialized therapeutic support systems, including hospital beds, mattress replacement systems, overlays and patient mobility devices. Our TSS business unit rents and sells products in three primary surface categories: critical care, wound care and bariatric care. Our critical care products, typically used in intensive care units (“ICU”), are designed to address pulmonary complications associated with immobility; our wound care surfaces are used to reduce or treat skin breakdown; and our bariatric care surfaces assist caregivers in the safe and dignified handling of obese and morbidly obese patients, while addressing complications related to immobility. We are investing in the development and commercialization of enhanced products designed to meet the needs of ICU patients and to reduce or prevent “never” events such as hospital-acquired pressure ulcers, infections developed in the hospital (nosocomial infections) and injurious falls.
By geographic region, the Americas, EMEA and APAC represented 63%, 37% and 0.5%, respectively, of total TSS revenue for the year ended December 31, 2011. TSS is primarily a rental focused business, with 82% of TSS revenues derived from rentals for the year ended December 31, 2011. The majority of TSS revenue comes from acute care facilities. We have agreements with numerous GPOs that negotiate rental and purchase terms on behalf of large groups of acute care and extended care organizations. We believe that some of our larger customers desire alternatives to rental for at least some of their business, and we continue to evaluate and offer alternative models that will meet our customers’ needs now and into the future.
LifeCell
Our LifeCell business unit, which generated 19% of revenue for the year ended December 31, 2011, is focused on the development and commercialization of regenerative and reconstructive acellular tissue matrices for use in reconstructive, cosmetic, orthopedic and urogynecologic surgical procedures to repair soft tissue defects, as well as for reconstructive and cosmetic procedures. Existing products include our human-based (allograft) tissue matrices, which include AlloDerm® Regenerative Tissue Matrix (“AlloDerm”), and animal-based (xenograft) tissue matrices, which include Strattice™ Reconstructive Tissue Matrix (“Strattice”), in various configurations designed to meet the needs of patients and caregivers. In addition, LifeCell distributes SPY Elite, a real-time operating room based tissue perfusion system.
Allograft-Based Regenerative Tissue Matrix Products
Our allograft-based tissue matrices are made from donated human skin tissue processed with our non-damaging proprietary technique. Our allograft products support the repair or reinforcement of damaged or weakened tissue by providing a foundation for regeneration of healthy human soft tissue. Following transplant, these products revascularize (regenerate blood vessels) and repopulate with the patient’s cells becoming incorporated into the tissue matrix, thus providing a versatile scaffold with multiple surgical applications. Examples of applications include (i) cancer reconstruction procedures including breast reconstruction following mastectomy procedures (removal of one or both breasts), (ii) surgical repair of abdominal wall defects, to repair defects

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resulting from trauma, previous surgery, hernia repair, infection, tumor resection or general failure of musculofascial tissue, (iii) periodontal surgical procedures, to increase the amount of attached gum tissue supporting the teeth as an alternative to autologous connective tissue grafts (grafts in which a patient’s own tissue is transplanted from another area to the tissue repair site), and (iv) the treatment of third-degree and deep second-degree burns requiring skin grafting to replace lost skin.
Xenograft-Based Reconstructive Tissue Matrix Products
Our xenograft-based tissue matrices are made from porcine skin tissue processed with our non-damaging proprietary processing technique that removes cells and is designed to significantly reduce a component believed to play a major role in the rejection response associated with xenogeneic tissue (tissue derived from a non-human species). Similar to allograft-based products, these matrices provide a versatile scaffold for optimal remodeling into the patient’s own tissues. In addition to cancer reconstruction procedures and surgical repair of abdominal wall defects, other clinical applications of xenograft tissue matrix products include (i) challenging hernia repair, (ii) breast augmentation revisionary and mastopexy (breast lift) procedures, and (iii) reinforcement of rotator cuff, patellar, achilles, biceps, quadriceps, or other tendons.
The majority of our LifeCell revenue is generated from the clinical applications of challenging hernia repair and post-mastectomy breast reconstruction, which is generated primarily in the United States in the acute care setting on a direct billing basis. We continue efforts to penetrate markets with our other LifeCell products while developing and commercializing additional tissue matrix products and applications to expand into new markets and geographies.
By geographic region, the Americas and EMEA represented approximately 97% and 3%, respectively, of total LifeCell revenue for the year ended December 31, 2011. Our tissue matrix products are used primarily by general, plastic and reconstruction surgeons for challenging abdominal wall/hernia repair, breast reconstruction post-mastectomy, mastopexy, head and neck trauma and certain cosmetic surgical procedures. Hospitals and ambulatory surgical centers (“ASCs”) are the primary purchasers of our tissue matrix products.
Our Competitive Strengths
We believe we have the following competitive strengths:
Innovation and Commercialization
We have a successful track record spanning over 35 years in commercializing novel technologies that change the clinical practice of medicine by addressing the critical unmet needs of clinicians, restoring the well-being of their patients and helping to reduce the overall cost of patient care. We seek to provide novel, transformative, clinically efficacious solutions and treatment alternatives that increase patient compliance, enhance clinician performance and ease-of-use and ultimately improve healthcare outcomes. We leverage our scientific depth, clinical know-how and market experience, and we manage an active research and development program in all three of our businesses in support of our development and commercialization efforts. Currently we conduct our research and development activities with over 300 employees deployed globally. During fiscal years 2011 and 2010, we incurred R&D expenses of $92.1 million (4.5% of revenue) and $90.3 million (4.5% of revenue), respectively.
Product Differentiation and Superior Clinical Efficacy
We differentiate our portfolio of products by providing effective therapies, supported by a clinically-focused and highly-trained sales and service organization, which combine to produce clinically-proven, superior outcomes. The superior clinical efficacy of our products is supported by an extensive collection of published clinical studies, peer-reviewed journal articles and textbook citations, which aid adoption by clinicians.
In our AHS business, we successfully distinguish our NPWT products from competing offerings through unique marketing claims that have been cleared by the U.S. Food and Drug Administration (“FDA”). These unique claims mirror our novel mechanisms of actions with respect to the creation of an environment that promotes wound healing through the reduction of edema and promotion of granulation tissue formation and perfusion, ultimately preparing the wound bed for closure.

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In our TSS business, we have successfully differentiated our critical care products with clinical data showing the benefits of our Kinetic Therapy surfaces in the reduction of ventilator acquired pneumonia. We have also developed and commercialized our RotoProne™ product, the only ICU therapeutic surface to provide 360 degrees of rotation, essential automated proning therapy for patients with acute respiratory distress syndrome (“ARDS”) and other severe pulmonary conditions associated with immobility. Through our commitment to innovation and diversification, we are well positioned to continue differentiating our products through demonstrated superior clinical efficacy. On August 15, 2012, we announced that we had entered into an asset purchase agreement with Getinge AB, pursuant to which Getinge AB will purchase certain assets and assume certain liabilities, including our Therapeutic Support Systems™ product portfolio. Please see "Recent Developments—Sale of Therapeutic Support Systems Assets."
In our LifeCell business, we differentiate our products through clinically-proven performance demonstrating tissue acceptance, cell recruitment and incorporation, revascularization and angiogenesis and finally tissue remodeling and regeneration. Our proprietary tissue processes minimize the potential for specific rejection of transplanted tissue matrices, and our products offer improved ease-of-use while reducing the risk of complications, including adhesions to the implant. The benefits of using our tissue matrix products over the use of autografts and other processed and synthetic products include reduced susceptibility to infection, resorption, encapsulation, movement away from the transplanted area, and erosion through the skin along with reduced patient discomfort compared to autograft procedures.
Broad Reach and Customer Relationships
Our worldwide sales organization, consisting of approximately 2,200 employees, has fostered strong relationships with prescribers, patients, caregivers and payers over the past three decades by providing a high degree of clinical support and consultation along with our extensive education and training programs.
Because our products address the critical needs of patients who seek treatment in numerous locations where care is provided, we have built a broad and diverse customer network across all healthcare settings and among a wide variety of clinicians and specialized surgeons. We have strong relationships with an extensive list of acute care hospitals worldwide and long-term care facilities, skilled nursing facilities, home healthcare agencies and wound care clinics in the United States. Additionally, our LifeCell sales representatives interact with plastic surgeons, general surgeons, head and neck surgeons, trauma/acute care surgeons and others regarding the use and potential benefits of our tissue matrix products. As we continue to innovate our product portfolio and diversify our business, we plan to leverage our customer relationships to advance the commercialization of essential therapies to patients and caregivers worldwide.
Strong Market Leadership Positions in Core Businesses
Our V.A.C. Therapy devices were the first commercialized products in the global NPWT segment. As the pioneer in this area, we have amassed a wealth of clinical data supporting the efficacy of V.A.C. Therapy products. Furthermore, our LifeCell division holds a leading share in the U.S. Regenerative Medicine breast reconstruction and challenging hernia segments. Acquired in 2008, LifeCell posted over 16% annual revenue growth in the fiscal year ended December 31, 2011. In addition to our strong market positioning in the U.S. market, we have demonstrated growth in new segments and geographies, and we are shifting towards a more global revenue base.
Reimbursement Expertise
During the commercialization process for all of our therapies and products, we dedicate substantial resources to seeking and obtaining reimbursement from third-party payers in each of the countries where we operate. This process requires demonstration of clinical efficacy, determination of economic value and obtaining appropriate pricing and reimbursement for each product offering, which is critical to the commercial success of our products. We have also developed a core competency in post-commercialization reimbursement systems based on processes and technology built and refined over the course of our experience as a national provider. This expertise enables us to efficiently manage our collections and accounts receivable with third-party payers, including commercial and governmental insurers.We leverage a comprehensive set of skills and systems through our Advantage Center operation in the United States to manage billing and collections activities in support of our reimbursement efforts. Our focus on reimbursement provides us with an advantage both in product development and in the responsible management of our working capital. In addition, our expertise in reimbursement is a valuable skill for geographic and end market expansion efforts as demonstrated by our recent successes in Japan and in the post-acute care markets in the U.K. and Germany.


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Extensive Service Center Network
With a network of 108 domestic and 59 international service centers, we are able to rapidly deliver, manage and service our products at major hospitals in the U.S., Canada, Australia, New Zealand, Singapore, South Africa, and most major European countries. We have approximately 1,500 service associates and 1,000 customer service representatives serving our customers globally. This network gives us the ability to deliver products to any major Level I U.S. trauma center rapidly. This extensive network and capability are critical to securing contracts with national GPOs and allows us to directly and efficiently serve the home care market. The network also provides a platform for the introduction of additional products in one or more care settings. For information on developments impacting our service center network, please see “Recent Developments—Sale of the Therapeutic Support Systems Assets.”

Our Business Strategy
We are committed to consistently generating superior clinical outcomes for patients and caregivers using our products and therapies. Our differentiated products, competencies and know-how continue to drive trust and recognition of superior performance among our customers, which we believe translates into strong stakeholder value. We intend to execute on our strategic vision of sustaining leadership positions in each of our businesses by delivering unparalleled outcomes with compelling economic value for our customers and focusing on innovation, globalization and diversification. We are also focused on organizational readiness and are working to enhance our business processes and management systems through a corporate global business transformation initiative to enable us to effectively and efficiently carry out our strategic vision. Key components of our business strategy are outlined below.
Innovation
We focus on our core technologies as platforms for growth through the development of new products and clinical data that enable further penetration across the wound care continuum. In our AHS business, we also plan to leverage our highly successful NPWT franchise, now with its fourth generation V.A.C. Therapy System, into a more expansive portfolio based on the successful development and commercialization of next generation NPWT systems and dressings as well as new products to diversify our AHS revenue in the future.
In our AHS business, in 2009, we launched our first NPSM product, ABThera. ABThera is used as a temporary abdominal closure system to help manage challenging open abdomens. In July 2010, we launched a second NPSM product, Prevena, for the management of higher-risk surgical incisions. In the future, our goal is to commercialize advanced therapies for the treatment of complex wounds and hard tissue defects.
our LifeCell business, in January 2010, we launched new clinical applications including parastomal hernia reinforcement and mastopexy and are continuing development of additional applications for lumpectomy and inguinal hernia. These additional applications will create additional uses and markets for our existing allograft and xenograft product suite. In addition, we are investing in advanced technologies in tissue engineering, genetically-modified animals, and new tissue types to address unmet clinical needs and to improve outcomes through regenerative medicine. In September 2010, LifeCell entered into an exclusive sales and marketing agreement with Novadaq® Technologies, Inc. (“Novadaq”) for the distribution of Novadaq’s SPY® Intraoperative Perfusion Assessment System in certain specified North American surgical markets. The SPY Intraoperative Perfusion Assessment System enables surgeons to see blood perfusion in tissue during surgical procedures, providing surgeons with real-time information needed to modify operative plans and optimize outcomes before the patient leaves the operating table.

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Globalization
We endeavor to increase penetration in existing geographic markets while we expand availability of our product offerings in new countries. Currently, the majority of our revenue from each of our business units is generated in the Americas, while we have notable operations in Europe, Middle East and Africa (“EMEA”) and the Asia Pacific (“APAC”) regions. The goal of our globalization efforts is to increase the share of our revenue generated outside the United States over time while growing our business overall. In our AHS business, we entered the Japan market in April 2010 with our core NPWT product, the V.A.C. Therapy System and related disposables. In other countries, we have identified several opportunities for our NPWT products that may be best served initially by distributors. During the second half of 2010, we also launched NPWT products commercially in China and India. We are working aggressively to construct appropriate networks to launch and expand NPWT products in other emerging markets. We have also expanded our global NPWT dressing portfolio with the SimplaceTM Dressing and GranuFoamTM Bridge products, which are now widely available in the countries where we operate. Since 2009, LifeCell has successfully introduced Strattice into thirteen European countries. Our TSS business currently operates primarily in North America and Europe.
Diversification
Beyond expanding our product offerings and revenue streams through innovation and globalization, we plan to seek additional opportunities to diversify our business through continued technology licensing and strategic acquisitions. We intend to build on the leadership positions held by our businesses through the evaluation and investment in adjacent or enabling technologies and synergistic growth opportunities, supplementing our continued organic innovation efforts.
Organizational Readiness
In an effort to implement our long-term strategy, our management team is focused on organizational readiness, with a goal of improved operations and management systems which transform us into a more agile, progressive and global enterprise. We are currently undertaking a global business transformation initiative designed to identify and implement efficiencies in our systems and operations through standardization and automation that translate into reduced costs and more effective decision-making. As a result of ongoing improvements to our manufacturing operations through improved sourcing and automation, as well as global consolidation of certain shared services, we look forward to substantial and permanent cost reductions by the end of 2012. We are also making significant progress in the rationalization of our service center and distribution infrastructure for our businesses, yielding additional cost savings. As we improve our operations and management systems over time, we will continue to look for new opportunities to augment our business processes and make infrastructure enhancements to improve our efficiency and agility as a company.
Corporate Organization
We are principally engaged in the rental and sale of our products throughout the United States and in over 20 countries internationally. We have research and development facilities in the United States and the U.K., and we maintain manufacturing and engineering operations in the United States, the U.K., Ireland and Belgium. Our operations are run by our three separate business units: AHS, LifeCell and TSS. AHS and TSS are headquartered in San Antonio and LifeCell is headquartered in Bridgewater, New Jersey.
The following diagram is a simplified illustration of our corporate structure:





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(1)
Chiron Holdings, GP, Inc. is owned by investment funds advised by Apax Partners, which is the majority investor, and controlled affiliates of Canada Pension Plan Investment Board and the Public Sector Pension Investment Board.
(2)
Upon the occurrence of a Trigger Event, Parent, US Holdco and, in certain circumstances, LifeCell shall be released from guaranteeing the notes and the Credit Facilities and will not be subject to the covenants in the Indenture and the credit agreement governing the Credit Facilities. Upon the occurrence of a Trigger Event, Holdings shall be released from guaranteeing the notes and will not be subject to the covenants in the Indenture, but will continue to guarantee the Credit Facilities and remain subject to the covenants in the credit agreement governing the Credit Facilities.
(3)
The Credit Facilities and the notes offered hereby will be guaranteed by all existing and future direct and indirect wholly-owned material domestic subsidiaries of Kinetic Concepts, Inc. (subject to certain exceptions).
(4)
The Credit Facilities provide for an aggregate maximum borrowing of approximately $2,500 million equivalent including (i) first lien term loans with a six-and-a-half-year maturity in an aggregate amount of $1,630 million (the “Dollar Term B-1 Facility”), (ii) first lien term loans with a six-and-a-half-year maturity in an aggregate amount of €250 million (the “Euro Term B-1 Facility” and, together with the Dollar Term B-1 Facility, the “Term B-1 Facility”), (iii) first lien term loans with a five-year maturity in an aggregate amount of $325 million (the “Term B-2 Facility” and, together with the Term B-1 Facility,the “Term Loan Facility”) and (iv) the Revolving Credit Facility with a five-year maturity, providing for up to $200 million of revolving extensions of credit outstanding at any time (including revolving loans, swingline loans and letters of credit), excluding original issue discount.

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Recent Developments
Sale of Therapeutic Support Systems Assets

On August 15, 2012, we announced that we had entered into an asset purchase agreement (the “Agreement”) with Getinge AB (“Getinge”). Under the terms of the Agreement, Getinge will purchase certain assets and assume certain liabilities, including our Therapeutic Support Systems™ (“TSS”) product portfolio. In addition, Getinge has also agreed to offer employment to TSS employees and the Company has agreed to provide transition services to Getinge after the close of the transaction. The closing of the transaction, which is targeted in the fourth quarter of 2012, is subject to the satisfaction of customary closing conditions. In connection with the transaction, a significant portion of our historic service center network will be transferred to Getinge. We may enter into leasing or licensing arrangements with Getinge in certain circumstances for a limited transition period to allow us to continue to use most of the service center facilities transferred to Getinge while we evaluate the service center needs of our AHS business on a stand-alone basis.

KCI has made customary representations and warranties and covenants in the Agreement, including covenants regarding: (i) the conduct of the business of the KCI TSS business prior to closing, and (ii) the use of reasonable best efforts to cause the transaction to be consummated. The Agreement also contains mutual indemnification obligations upon the occurrence of certain events, including (i) the breach or inaccuracy of the representations and warranties and (ii) the failure of a party to perform its assumed obligations pursuant to the Agreement. At the closing of the transaction, Getinge will pay to KCI $275,000,000 in cash, subject to certain adjustments. Moreover, each party's obligation to consummate the transaction is subject to certain other conditions including (x) the accuracy of the other party's representations and warranties (subject to customary materiality qualifiers) and (y) the other party's material compliance with its covenants and agreements contained in the Agreement. The Agreement may be terminated in certain circumstances including (i) if the transactions contemplated by the Agreement have not been consummated by August 14, 2013, (ii) if any governmental authority restrains, enjoins or otherwise prohibits the transactions contemplated by the Agreement, and (iii) if either party has breached any of its material obligations under the Agreement.

The Company plans to use the net proceeds from the sale to reinvest in its core business and look for growth opportunities. If the Company has not reinvested all of the proceeds within one year, it must use the remaining amount to repay its long term debt obligations.

The foregoing summary of the Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Agreement, which is filed as Exhibit 10.6 hereto.

Equity Sponsors
On November 4, 2011, KCI completed a merger transaction pursuant to which KCI was merged with an indirect subsidiary of Centaur Guernsey L.P. Inc. Centaur Guernsey L.P. Inc. is a non-operating holding limited partnership controlled indirectly by investment funds advised by Apax Partners ("Apax") and controlled affiliates of Canada Pension Plan Investment Board ("CPPIB") and the Public Sector Pension Investment Board ("PSP Investments" and together with Apax and CPPIB, the "Sponsors").
Apax Partners
Apax is a leading private equity investment firm, operating across the U.S., Europe and Asia, with more than 30 years of investing experience. Apax has a global network of nine offices in three continents and employs over 300 people. Assets under management and advice are currently in excess of $35 billion, and the funds invest in five specialist sectors (Financial and Business Services, Healthcare, Media, Retail and Consumer, and Tech and Telecom). Within the Healthcare sector, the firm has completed more than 100 healthcare transactions since inception. Over the last several years, Apax has invested $3.3 billion of equity in Healthcare buyouts across multiple geographies, including the U.S., Europe and Asia. The team has a range of complementary backgrounds, including operations, academic research, investment banking and consulting, which it utilizes to identify outstanding investment opportunities and to be effective, value-added partners for portfolio company management teams.
Canada Pension Plan Investment Board
CPPIB is a professional investment management organization that invests the funds not needed by the Canada Pension Plan (“CPP”) to pay current benefits on behalf of 17 million Canadian contributors and beneficiaries. In order to build a diversified portfolio of CPP assets, CPPIB invests in public equities, private equities, real estate, inflation-linked bonds, infrastructure and fixed income instruments. Headquartered in Toronto, with offices in London and Hong Kong, CPPIB is governed and managed independently of CPP and at arm’s length from governments. At March 31, 2012, the CPP Fund's net assets totaled C$161.6 billion.

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Public Sector Pension Investment Board
PSP Investments is one of Canada’s largest pension investment managers with over C$64.5 billion of net assets under management as of March 31, 2012, approximately C$6.4 billion of which was invested in private equity. Its highly-skilled and dedicated team of professionals manages a diversified global portfolio including public equities, private equity, bonds and other fixed-income securities, real estate, infrastructure and renewable resources. PSP Investments is a Crown corporation established to manage employer and employee net contributions since April 1, 2000 to the pension funds of the federal Public Service, the Canadian Forces and the Royal Canadian Mounted Police, and since March 1, 2007, of the Reserve Force. PSP Investments’ head office is located in Ottawa, Ontario and its principal business office is in Montreal, Quebec.
See “Certain Relationships and Related Party Transactions” and “Security Ownership” and the documents referred to herein for more information with respect to our relationship with the Sponsors.
Corporate Information
Kinetic Concepts, Inc. is a Texas corporation, and KCI USA, Inc. is a Delaware corporation. Our principal executive offices are located at 12930 Interstate 10 West, San Antonio, Texas 78249 and our telephone number at that address is (210) 524-9000. Our website is located at http://www.kci1.com. Our website and the information contained on our website are not part of this prospectus, and you should rely only on the information contained in this prospectus when making a decision as to whether to invest in the notes.
The Exchange Offer
On November 3, 2011, we sold, through a private placement exempt from the registration requirements of the Securities Act, $1,750,000,000 of our 10.5% Second Lien Senior Secured Notes due 2018 and $750,000,000 of our 12.5% Senior Notes due 2019, all of which are eligible to be exchanged for Exchange Notes. We refer to these notes as “Old Notes” in this prospectus.
Simultaneously with the private placement, we entered into registration rights agreements with the initial purchasers of the Old Notes (the “Registration Rights Agreements”). Under the Registration Rights Agreements, we are required to use our reasonable best efforts to cause a registration statement for substantially identical Notes, which will be issued in exchange for the Old Notes, to be filed with the United States Securities and Exchange Commission (the “SEC”) and to complete the exchange offer within 365 days after the issue date of the Old Notes. We refer to the notes to be registered under this exchange offer registration statement as “Exchange Notes” and collectively with the Old Notes, we refer to them as the “notes” in this prospectus. You may exchange your Old Notes for Exchange Notes in this exchange offer. You should read the discussion under the headings “—Summary of Exchange Offer,” “Exchange Offer,” “Description of Second Lien Exchange Notes” and “Description of Senior Exchange Notes” for further information regarding the Exchange Notes.
Securities Offered
$1,750,000,000 in aggregate principal amount of 10.5% Second Lien Senior Secured Notes due 2018 and $750,000,000 in aggregate principal amount of 12.5% Senior Notes due 2019.
Exchange Offer
We are offering to exchange the Old Notes for a like principal amount at maturity of the Exchange Notes. Old Notes may be exchanged only for a minimum principal amount of $2,000 and in integral principal multiples of $1,000. The exchange offer is being made pursuant to the Registration Rights Agreements which grant the initial purchasers and any subsequent holders of the Old Notes certain exchange and registration rights. This exchange offer is intended to satisfy those exchange and registration rights with respect to the Old Notes. After the exchange offer is complete, you will no longer be entitled to any exchange or registration rights with respect to your Old Notes.

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Expiration Date; Withdrawal of Tender
The exchange offer will expire 5:00 p.m., New York City time, on , 2012, or a later time if we choose to extend this exchange offer in our sole and absolute discretion. You may withdraw your tender of Old Notes at any time prior to the expiration date. All outstanding Old Notes that are validly tendered and not validly withdrawn will be exchanged. Any Old Notes not accepted by us for exchange for any reason will be returned to you at our expense as promptly as possible after the expiration or termination of the exchange offer.
Resales
We believe that you can offer for resale, resell and otherwise transfer the Exchange Notes without complying with the registration and prospectus delivery requirements of the Securities Act so long as:
 
you acquire the Exchange Notes in the ordinary course of business;
you are not participating, do not intend to participate, and have no arrangement or understanding with any person to participate, in the distribution of the Exchange Notes;
you are not an “affiliate” of ours, as defined in Rule 405 of the Securities Act; and
you are not a broker-dealer.
 
If any of these conditions is not satisfied and you transfer any Exchange Notes without delivering a proper prospectus or without qualifying for a registration exemption, you may incur liability under the Securities Act. We do not assume, or indemnify you against, any such liability.
 
Each broker-dealer acquiring Exchange Notes issued for its own account in exchange for Old Notes, which it acquired through market-making activities or other trading activities, must acknowledge that it will deliver a proper prospectus when any Exchange Notes issued in the exchange offer are transferred. A broker-dealer may use this prospectus for an offer to resell, a resale or other retransfer of the Exchange Notes issued in the exchange offer.
Conditions to the Exchange Offer
Our obligation to accept for exchange, or to issue the Exchange Notes in exchange for, any Old Notes is subject to certain customary conditions, including our determination that the exchange offer does not violate any law, statute, rule, regulation or interpretation by the Staff of the SEC or any regulatory authority or other foreign, federal, state or local government agency or court of competent jurisdiction, some of which may be waived by us. We currently expect that each of the conditions will be satisfied and that no waivers will be necessary. See “Exchange Offer—Conditions to the Exchange Offer.
Procedures for Tendering Old Notes held in the Form of Book-Entry Interests
The Old Notes were issued as global securities and were deposited upon issuance with Wilmington Trust, National Association which issued uncertificated depositary interests in those outstanding Old Notes, which represent a 100% interest in those Old Notes, to The Depositary Trust Company (“DTC”).
 
Beneficial interests in the outstanding Old Notes, which are held by direct or indirect participants in DTC, are shown on, and transfers of the Old Notes can only be made through, records maintained in book-entry form by DTC.
 
You may tender your outstanding Old Notes by instructing your broker or bank where you keep the Old Notes to tender them for you. In some cases you may be asked to submit the letter of transmittal that may accompany this prospectus. By tendering your Old Notes you will be deemed to have acknowledged and agreed to be bound by the terms set forth under “Exchange Offer.” Your outstanding Old Notes must be tendered for a minimum principal amount of $2,000 and in multiples of $1,000.

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In order for your tender to be considered valid, the exchange agent must receive a confirmation of book-entry transfer of your outstanding Old Notes into the exchange agent's account at DTC, under the procedure described in this prospectus under the heading “Exchange Offer,” on or before 5:00 p.m., New York City time, on the expiration date of the exchange offer.
United States Federal Income Tax Considerations
The exchange of Old Notes for Exchange Notes in the exchange offer should not be a taxable exchange for United States federal income tax purposes. See “Material United States Federal Income Tax Considerations.”
Use of Proceeds
We will not receive any proceeds from the issuance of the Exchange Notes in the exchange offer.
Exchange Agent
Wilmington Trust, National Association is serving as the exchange agent for the exchange offer.
Shelf Registration Statement
In limited circumstances, holders of Old Notes may require us to register their Old Notes under a shelf registration statement.

Consequences of Not Exchanging Old Notes
If you do not exchange your Old Notes in the exchange offer, your Old Notes will continue to be subject to the restrictions on transfer currently applicable to the Old Notes. In general, you may offer or sell your Old Notes only:
if they are registered under the Securities Act and applicable state securities laws;
if they are offered or sold under an exemption from registration under the Securities Act and applicable state securities laws; or
if they are offered or sold in a transaction not subject to the Securities Act and applicable state securities laws.
We do not currently intend to register the Old Notes under the Securities Act. Under some circumstances, however, holders of the Old Notes, including holders who are not permitted to participate in the exchange offer or who may not freely resell Exchange Notes received in the exchange offer, may require us to file, and to cause to become effective, a shelf registration statement covering resales of Old Notes by these holders. For more information regarding the consequences of not tendering your Old Notes and our obligation to file a shelf registration statement, see “Exchange Offer—Consequences of Exchanging or Failing to Exchange Old Notes,” “Description of Second Lien Exchange Notes—Registration Rights” and “Description of Senior Exchange Notes—Registration Rights.”

Terms of the Exchange Notes
Issuers
Kinetic Concepts, Inc., a Texas corporation, and KCI USA, Inc., a Delaware corporation.
Notes Offered
$1,750,000,000 in aggregate principal amount of 10.5% Second Lien Senior Secured Notes due 2018 and $750,000,000 in aggregate principal amount of 12.5% Senior Notes due 2019.
Maturity Date
The Second Lien Exchange Notes will mature on November 1, 2018. The Senior Exchange Notes will mature on November 1, 2019.
Interest
Interest on the Second Lien Exchange Notes will accrue at a rate of 10.5% per annum. Interest on the Senior Exchange Notes will accrue at a rate of 12.5% per annum. Interest on the Exchange Notes will be payable on May 1 and November 1, beginning on May 1, 2012 and will accrue from the issue date of the notes.

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Guarantees
The Exchange notes will be, jointly and severally and fully and unconditionally, subject to customary release provisions, guaranteed on a senior secured basis by Parent, US Holdco, Holdings and all of Parent's existing and future wholly-owned subsidiaries that guarantee our Credit Facilities. The guarantees of Parent, US Holdco, Holdings and in certain circumstances, LifeCell, will be released upon either (i) the sale or other disposition of LifeCell such that it does not constitute a restricted subsidiary, (ii) the sale, transfer or other disposition of all or substantially all of the assets of LifeCell or (iii) LifeCell becoming a subsidiary of KCI (each a “Trigger Event”).
Ranking
The Second Lien Exchange Notes will be the issuer's senior secured obligations and will:
 
rank equally with all of the issuer's existing and future senior indebtedness;
be effectively senior to the issuer's senior unsecured indebtedness to the extent of the value of the assets securing the second lien notes, including the obligations under the Senior Unsecured Debt;
rank senior to any of the issuer's future senior subordinated indebtedness and subordinated indebtedness; and
be effectively subordinated to the issuer's secured indebtedness that is secured by a senior or prior lien on the collateral for the second lien notes, including the obligations under our Credit Facilities.
 
The guarantees of the Second Lien Exchange Notes by the guarantors will be their senior secured obligations and will:
 
rank equally with all of the existing and future senior indebtedness of such guarantors;
be effectively senior to the senior unsecured indebtedness or such guarantors to the extent of the value of the assets securing the guarantees, including the obligations under the Senior Unsecured Debt;
rank senior to any of the future senior subordinated indebtedness and subordinated indebtedness of such guarantors; and
be effectively subordinated to the secured indebtedness of such guarantors that is secured by a senior or prior lien on the collateral for the guarantees, including the obligations under our Credit Facilities.
 
The Senior Exchange Notes will be the issuers' senior unsecured obligations and will:
 
rank pari passu in right of payment with all of the issuers' existing and future senior indebtedness;
 
rank senior to any of the issuers' future senior subordinated indebtedness and subordinated indebtedness; and
 
be effectively junior to the issuers' secured indebtedness to the extent of the value of the assets securing such indebtedness, including the obligations under our Credit Facilities and second lien notes.
 
The guarantees of the Senior Exchange Notes by the guarantors will be their senior unsecured obligations and will:
 
rank equally with all of the existing and future senior indebtedness of such guarantors;
 
rank senior to any of the future senior subordinated indebtedness and subordinated indebtedness of such guarantors; and
 
be effectively junior to the secured indebtedness of such subsidiaries to the extent of the value of the assets securing the guarantees, including the obligations under our Credit Facilities and the second lien notes.

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In addition, the notes and the related guarantees will be structurally subordinated to any obligations of the issuer's or Parent's future subsidiaries that are not guarantors of the notes.
 
As of December 31, 2011, we and our subsidiaries had approximately $4,780 million (excluding original issue discount) of aggregate principal amount of the indebtedness outstanding, of which $4,030 million was secured indebtedness, and an additional $188 million of unused commitments available to be borrowed under our Revolving Credit Facility.
Collateral
The Second Lien Exchange Notes and the related guarantees will be secured by a second priority lien on substantially all of the issuers' and each guarantor's assets (whether now owned or hereafter acquired), which assets will also secure the issuer's and guarantors’ obligations under our Credit Facilities, subject to certain exceptions and permitted liens.
 
The value of collateral at any time will depend on market and other economic conditions, including the availability of suitable buyers for the collateral. The liens on the collateral may be released without the consent of the holders of the Second Lien Exchange Notes if collateral is disposed of in a transaction that complies with the Second Lien Exchange Notes indenture and the related security documents or in accordance with the provisions of an intercreditor agreement to be entered into related to the collateral securing the Second Lien Exchange Notes and our Credit Facilities. We expect that the certain collateral included in our TSS business will be released upon completion of the sale of our TSS business, as described herein. See "Summary—Recent Developments—Sale of Therapeutic Support Systems Assets," “Risk Factors—It may be difficult to realize the value of the collateral securing the Exchange Notes” and “Description of Second Lien Exchange Notes—Security.”
Intercreditor Agreement
The collateral agent for the Second Lien Exchange Notes and the collateral agent under our Credit Facilities have entered into an intercreditor agreement dated as of November 4, 2011 as to the relative priorities of their respective security interests in the assets securing the Second Lien Exchange Notes and related guarantees and borrowings under the Credit Facilities and certain other matters relating to the administration of security interests. See “Description of Second Lien Exchange Notes—Security—Intercreditor Agreement.”
Optional Redemption of the Second Lien Exchange Notes
On or after November 1, 2015, we may redeem the Second Lien Exchange Notes, in whole or in part, at the redemption prices described under “Description of Second Lien Exchange Notes—Optional Redemption,” plus accrued and unpaid interest to such redemption date. Prior to November 1, 2014, we may on one or more occasions redeem up to 35% of the aggregate principal amount of the second lien notes with the net cash proceeds of certain equity offerings, at a redemption price equal to 110.500% of the aggregate principal amount of the second lien notes to be redeemed plus accrued and unpaid interest. In addition, prior to November 1, 2015, we may redeem all or part of the second lien notes at a redemption price equal to 100% of the aggregate principal amount of the second lien notes to be redeemed, plus a make-whole premium and accrued and unpaid interest.
Optional Redemption of the Senior Exchange Notes
On or after November 1, 2015, we may redeem the Senior Exchange Notes, in whole or in part, at the redemption prices described under “Description of Senior Exchange Notes—Optional Redemption,” plus accrued and unpaid interest to such redemption date. Prior to November 1, 2014, we may on one or more occasions redeem up to 35% of the aggregate principal amount of the senior notes with the net cash proceeds of certain equity offerings, at a redemption price equal to 112.500% of the aggregate principal amount of the senior notes to be redeemed plus accrued and unpaid interest. In addition, prior to November 1, 2015, we may redeem all or part of the senior notes at a redemption price equal to 100% of the aggregate principal amount of the senior notes to be redeemed, plus a make-whole premium and accrued and unpaid interest.
Change of Control Offer and Asset Sales
If we experience certain kinds of changes of control or if we sell certain assets and do not apply the proceeds as required, we will be required to offer to repurchase the notes at prices described under “Description of Exchange Notes—Change of Control” and “Description of Exchange Notes—Limitation on Sales of Assets and Subsidiary Stock.”

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Certain Covenants
We will issue the Exchange Notes under the indenture with Wilmington Trust, National Association, as trustee (the “Indenture”). The Indenture, among other things, limit the issuer's ability and Parent's ability and its other restricted subsidiaries to:
 
incur additional indebtedness and guarantee indebtedness;
pay dividends or make other distributions in respect of, or repurchase or redeem, capital stock;
prepay, redeem or repurchase certain debt;
make loans and investments;
sell or otherwise dispose of assets;
incur liens;
enter into transactions with affiliates;
enter into agreements restricting our subsidiaries’ ability to pay dividends; and
consolidate, merge or sell all or substantially all of our assets.
 
These covenants will be subject to a number of important exceptions and qualifications. For more details, see “Description of Second Lien Exchange Notes” and “Description of Senior Exchange Notes.”
 
Certain of these covenants will cease to apply to the notes at all times when the notes have investment grade ratings from both Moody's Investor Service, Inc. and Standard & Poor's. For more details, see “Description of Second Lien Exchange Notes” and “Description of Senior Exchange Notes.”
 
Upon a Trigger Event, Parent, US Holdco, Holdings and, in certain circumstances, LifeCell will no longer be subject to the foregoing covenants.
Risk Factors
You should carefully consider all information in this prospectus. In particular, you should evaluate the specific risks described in the section entitled “Risk Factors” in this prospectus for a discussion of risks relating to an investment in the notes. Please read that section carefully before you decide whether to invest in the notes.
No Prior Market
The Exchange Notes will be new securities for which there is currently no market. We do not intend to apply for the Exchange Notes to be listed on any securities exchange or included in any automated quotation system. We cannot assure you that a liquid market for the Exchange Notes will develop or be maintained.
Use of Proceeds
We will not receive any proceeds from the issuance of the Exchange Notes pursuant to the exchange offer.







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RISK FACTORS
Any investment in the Exchange Notes involves a high degree of risk. You should carefully consider the risks described below and all of the information contained in this prospectus before deciding whether to purchase the Exchange Notes. The risks and uncertainties described below are not the only risks and uncertainties that we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. If any of those risks actually occurs, our business, financial condition and results of operations would suffer. The risks discussed below also include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements. See “Cautionary Statement Regarding Forward-Looking Statements” in this prospectus. In the section entitled “Risk Factors—Risks Related to the Exchange Notes,” references to “we,” “us” and “our” shall refer to Centaur and its subsidiaries prior to the occurrence of a Trigger Event and to KCI and its subsidiaries after the occurrence of a Trigger Event.
Risks Related to Our Business
We face significant and increasing competition, which could adversely affect our operating results.
We face significant and increasing competition in each of our businesses, which are intensely competitive and are characterized by rapid technological change. We compete with many companies, some of which have longer operating histories, better brand or name recognition, broader product lines and greater access to financial and other resources. Our customers consider many factors when selecting a product, including product reliability, clinical outcomes, product availability, price and services provided by the manufacturer, and market share can shift as a result of technological innovation and other business factors. Our ability to compete with other developers of advanced therapies and technologies will depend in large part on our ability to develop and acquire new products and technologies as well as anticipate technology advances. Product introductions or enhancements by competitors which have advanced technology, better features or lower pricing may make our products or proposed products obsolete or less competitive. Our competitive position can also be adversely affected by product problems, physician advisories and safety alerts, reflecting the importance of product quality in the medical device industry. For additional information regarding our competitive positioning, see “Business—Information Related to Business Units—Active Healing Solutions—Competition; LifeCell—Competition; and Therapeutic Support Systems—Competition.”
We expect competition in our AHS business to increase over time as competitors introduce additional competing products in the advanced wound care market and continue expanding into geographic markets where we currently operate. For example, in August 2012, Smith & Nephew announced the introduction of a competing NPWT product offering in Japan, where Smith & Nephew has already had a presence for 25 years. As our patents in the field of NPWT expire over time, we expect increased competition with products adopting basic NPWT technologies. Some of our earliest improvements to the technology include our first generation wound site pressure feedback (T.R.A.C.TM) technology that has some patents expiring in 2016 and others in 2018. Our latest generation pressure feedback system (SensaT.R.A.C.TM) has patents that expire in 2024. Other patents related to our pressure control algorithms expire in 2021 and later. We also have a number of patents to specific dressings used in our NPWT systems that expire in the 2020s as well. Our next generation Negative Pressure Therapy ("NPT") products, including PrevenaTM Incision Management and ABTheraTM System for the treatment of the open abdomen, are protected by patents expiring in 2023 and later. For the last several years, we and our affiliates have been involved in multiple patent infringement suits where claims under certain patents we previously licensed from Wake Forest University were asserted against providers of competing NPWT products, including Smith & Nephew. Smith & Nephew or third parties may become more aggressive in the marketing of competitive NPWT systems in light of the various invalidity rulings around the world and the Wake Forest royalty litigation. For additional information regarding our patent litigation, see “Business-Legal Proceedings.”
Our NPWT systems also compete with traditional wound care dressings, other advanced wound care dressings, skin substitutes, products containing growth factors and other medical devices used for wound care in the United States and internationally. Our LifeCell business is facing increasing competition from providers of various commercially available products made from synthetic materials or biologic materials of human or animal tissue origin. In addition, consolidation and the entrance of new low-cost competitors to our TSS business have greatly increased competition and pricing pressure in the United States and abroad. These companies have competed in all areas, but most effectively with our most price sensitive customers such as extended care facilities, and have grown in size and scale. If we are unable to effectively differentiate our products from those of our competitors, our market share, sales and profitability could be adversely impacted.

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If we are unable to develop new generations of products and enhancements to existing products, our competitive position may be harmed.
Our success is dependent upon the successful development, introduction and commercialization of new generations of products and enhancements to existing products. Innovation in developing new product lines and in developing enhancements to our existing products is required for us to grow and compete effectively. The completion of development of any new products remains subject to all the risks associated with the commercialization of new products based on innovative technologies, including
unanticipated technical or manufacturing problems; extended lead times in obtaining required regulatory approval of new products; the possibility of significantly higher development costs than anticipated; and gaining customer acceptance. Innovation through enhancements and new products requires significant capital commitments and investments on our part, which we may be unable to recover.
Our current and future products are subject to regulation by the FDA and other national, federal and state governmental authorities. We may be required to undertake time-consuming and costly development and clinical activities and seek regulatory clearance or approval for expanded clinical applications for current products and new products. Clearance and/or approval might not be granted for a new or modified product or expanded uses of existing products on a timely basis, if at all.
Applicable regulations are subject to change as a result of legislative, administrative or judicial action, which may further increase costs or reduce sales. Any substantial increase in requirements that are imposed on us could potentially delay our development and commercialization of new medical device products. We cannot assure that clearance or approval for new uses of existing products, or new products could be obtained in a timely fashion, or at all. Also, our determination that our allograft products are eligible for regulation as human cellular and tissue-based product is limited to their current intended uses. In the future, we may wish to market our allograft products for new intended uses, which may require premarket clearance or approval under FDA medical device or biologic regulations, and could be time consuming and costly. Our failure to maintain clearances or approvals for existing products or to obtain clearance or approval for new or modified products could adversely affect our results of operations and financial condition.
In addition, we may be subject to intellectual property infringement claims from individuals and companies who have acquired or developed patent portfolios in the fields of advanced wound care, therapeutic support systems or regenerative medicine for the purpose of developing competing products, or for the sole purpose of asserting claims against us. Any claims that our products or processes infringe the intellectual property rights of others, regardless of the merit or resolution of such claims, could cause us to incur significant costs in responding to, defending and resolving such claims, and may prohibit or otherwise impair our ability to commercialize new or existing products.
If we are unsuccessful in protecting and maintaining our intellectual property, our competitive position could be harmed.
Our ability to enforce our patents and those licensed to us, together with our other intellectual property, is subject to general litigation risks, as well as uncertainty as to the validity or enforceability of our intellectual property rights in various countries. Changes in either the intellectual property laws or in interpretations of intellectual property laws in the United States and other countries may diminish the value of our intellectual property. For instance, the U.S. Supreme Court has recently modified some tests used by the U.S. Patent and Trademark Office in granting patents during the past 20 years, which may decrease the likelihood that we will be able to obtain patents and increase the likelihood of challenge of any patents we obtain or license. In addition, the U.S. recently enacted sweeping changes to the U.S. patent system under the Leahy-Smith America Invents Act (“AIA”), including changes that would transition the U.S. from a “first-to-invent” system to a “first to file” system and alter the processes for challenging issued patents. These changes could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents. The laws of some foreign countries may not protect our intellectual property rights to the same extent as the laws of the United States, if at all. We own or license numerous patents on our existing products and processes, and we file applications as appropriate for patents covering new technologies as such technologies are developed. However, the patents we own, or in which we have rights, may not be sufficiently broad to protect our technology position against competitors, or may not otherwise provide us with competitive advantages. We often retain certain knowledge that we consider proprietary as confidential and elect to protect such information as trade secrets, as business confidential information or as know-how. In these cases, we rely upon trade secrets, know-how and continuing technological innovation to maintain our competitive position. Our intellectual property rights may not prevent other companies from developing functionally equivalent products, developing substantially similar proprietary processes, or otherwise gaining access to our confidential know-how or trade secrets.

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When we seek to enforce our intellectual property rights, we may be subject to claims that our rights are invalid, are otherwise unenforceable or are already licensed to the party against whom we are asserting a claim. When we assert our intellectual property rights, it is likely that the other party will seek to assert intellectual property rights of its own against us, which may adversely impact our business. All patents are subject to requests for reexamination by third parties and under the AIA additional methods of challenging the validity or enforceability of issued patents will be implemented. When such requests for reexamination are granted, some or all claims may require amendment or cancellation. Since 2007, multiple requests for reexamination of patents owned or licensed by KCI relating to our AHS business were granted by the U.S. Patent and Trademark Office. If we are unable to enforce our intellectual property rights our competitive position could be harmed. We and our affiliates are also involved in multiple intellectual property litigation suits in the United States and Europe. If any of our key patent claims are narrowed in scope or found to be invalid or unenforceable, or we otherwise do not prevail, our share in the markets where we compete could be negatively impacted due to increased competition and pricing of our products could decline significantly, either of which would negatively affect our financial condition and results of operations. For example, in the U.K. and Germany, where certain patent claims relating to NPWT were invalidated in 2009 litigation, we have experienced increased competition and reduced growth rates in AHS revenue as a result. In addition, third parties may become more aggressive in the marketing of competitive NPWT systems in the U.S. and internationally due to the Wake Forest royalty litigation and the invalidation of Wake Forest patent claims around the world. We derived approximately 67% of total revenue during the year ended December 31, 2011 from our NPWT products worldwide. For more information on our current intellectual property litigation, see "Business—Legal Proceedings."
We have agreements with third parties pursuant to which we license patented or proprietary technologies. These agreements commonly include royalty-bearing licenses. If we lose the right to license technologies essential to our businesses, or the costs to license these technologies materially increase, our businesses could be adversely impacted.
The adoption of healthcare reform in the U.S. may adversely affect our business and financial results.
On March 23, 2010, President Obama signed into law major healthcare reform legislation under the Patient Protection and Affordable Care Act of 2010 (“PPACA”) which was modified on March 30, 2010 by the enactment of the Health Care and Education Reconciliation Act of 2010. Under PPACA, it is expected that expanded healthcare coverage will be made available to an additional 30 million Americans. The increased costs to the U.S. government from PPACA are expected to be funded through a combination of payment reductions for providers over time and several new taxes. The PPACA imposes, among other things, an annual excise tax of 2.3% of any entity that manufactures or imports medical devices offered for sale in the United States beginning in 2013, resulting in an anticipated cost to the medical device industry of up to $20 billion over the next decade. We expect to be subject to this excise tax in the future on our sales of certain medical devices we manufacture, product or import. The PPACA also provides for the establishment of an Independent Medicare Advisory Board that could recommend changes in payment for physicians under certain circumstances beginning in 2014. In addition, PPACA authorizes certain voluntary demonstration projects beginning no later than 2013 around development of bundling payments for acute, inpatient hospital services, physician services, and post acute services for episodes of hospital care. PPACA increases fraud and abuse penalties and expands the scope and reach of the Federal Civil False Claims Act (“FCA”) and government enforcement tools, which may adversely impact healthcare companies.

The United States Supreme Court heard a constitutional challenge to the PPACA and in June 2012 held that the PPACA is constitutional. However, states are allowed to opt out of the expansion of eligibility criteria for Medicaid under the PPACA. In addition to PPACA, the effect of which cannot presently be quantified given its recent enactment, various healthcare reform proposals have also emerged at the state level. We cannot predict whether future healthcare initiatives will be implemented at the federal or state level or the effect any future legislation or regulation will have on us. However, we anticipate that the PPACA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and an additional downward pressure on the price that we receive for any approved product, and could adversely affect our business. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. Insurers may also refuse to provide any coverage of uses of approved products for medical indications other than those for which the FDA has granted market approvals, all of which may adversely affect our business, financial condition and results of operations, possibly materially.


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We may not successfully identify and complete acquisitions or strategic alliances on favorable terms or achieve anticipated synergies relating to any acquisitions or alliances, and such acquisitions could result in unforeseen operating difficulties and expenditures, require significant management resources and require significant charges or write-downs.
We regularly review potential acquisitions of complementary businesses, technologies, services or products, as well as potential strategic alliances. We may be unable to find suitable acquisition candidates or appropriate partners with which to form alliances. Even if we identify appropriate acquisition or alliance candidates, we may be unable to complete the acquisitions or alliances on favorable terms, if at all. Future acquisitions may reduce our cash available for operations or other uses. In addition, the process of integrating an acquired business, technology, service or product into our existing operations could result in unforeseen difficulties and expenditures. Integration of an acquired company often requires significant expenditures as well as significant management resources that otherwise would be available for ongoing development of our other businesses. Moreover, we may not realize the anticipated financial or other benefits of an acquisition or alliance.
We may be required to take charges or write-downs in connection with acquisitions. Our financial results could be adversely affected by financial adjustments required by GAAP in connection with our acquisitions where significant goodwill or intangible assets are recorded. To the extent the value of goodwill or identifiable intangible assets with indefinite lives becomes impaired, we may be required to incur material charges relating to the impairment of those assets.
Divestitures of some of our businesses or product lines may adversely affect our business, results of operations and financial condition.

In regularly evaluating the performance of our businesses, we may decide to sell a business or product line. Even if we identify a divestiture opportunity, we may be unable to complete the divestiture on favorable terms, if at all. Any divestitures may result in significant charge-offs or write-downs, including those related to goodwill and other intangible assets, which could have a material adverse effect on our business, results of operations and financial condition. The process of divesting ourselves of a business or product line could result in unforeseen expenditures and risks, including complexities in separating operations, services, products and personnel. Divestitures often require the diversion of management's attention from other business concerns and the disruption of our business, and could result in potential loss of key employees.

On August 15, 2012, we announced that we had entered into an asset purchase agreement (the “Agreement”) with Getinge AB (“Getinge”). Under the terms of the Agreement, Getinge will purchase certain assets and assume certain liabilities, including our Therapeutic Support Systems™ (“TSS”) product portfolio. In addition, Getinge has also agreed to offer employment to TSS employees and the Company has agreed to provide transition services to Getinge after the close of the transaction. The closing of the transaction, which is targeted in the fourth quarter of 2012, is subject to the satisfaction of customary closing conditions.

In connection with the transaction, a significant portion of our historic service center  network will be transferred to Getinge as part of the TSS business. We may enter into leasing or licensing arrangements with Getinge in certain circumstances for a limited transition period to allow us to continue to use some of the service center facilities transferred to Getinge while we evaluate the service center needs of our AHS business on a stand-alone basis. There is no guarantee that we will be able to build or implement the new AHS service network in the time period we expect or at a cost that is satisfactory to us, perform transition services at a cost consistent with levels being reimbursed by Getinge, manage the incremental cost associated with this divestiture, or accomplish these activities without any significant disruption to the AHS business.

We may not be able to successfully manage these or other significant risks related to divesting a business or product line.

Changes in U.S. and international reimbursement regulations, policies and rules, or their interpretation, could reduce the reimbursement we receive for and adversely affect the demand for our products.
The demand for our products is highly dependent on the regulations, policies and rules of third-party payers in the United States and internationally, including the U.S. Medicare and Medicaid programs, as well as private insurance and managed care organizations that reimburse us for the sale and rental of our products. If coverage or payment regulations, policies or rules of existing third-party payers are revised in any material way in light of increased efforts to control healthcare spending or otherwise, the amount we may be reimbursed or the demand for our products may decrease, or the costs of furnishing or renting our products could increase.

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In the United States, the reimbursement of our products by Medicare is subject to review by government contractors that administer payments under federal healthcare programs. These contractors are delegated certain authority to make local or regional determinations and policies for coverage and payment of biologicals, durable medical equipment (“DME”), medical devices, and related supplies in various care settings. Adverse interpretation or application of Medicare contractor coverage policies, adverse administrative coverage determinations or changes in coverage policies can lead to denials of our claims for payment and/or requests to recoup alleged overpayments made to us for our products. Such determinations and changes can often be challenged only through an administrative appeals process. From time to time, we have been engaged in dialogue with the medical directors of the various Medicare contractors, including the Durable Medical Equipment Medicare Administrative Contractors (“DMACs”) in order to clarify local coverage policies for our tissue matrix and NPWT products. In some instances relating to reimbursement of our NPWT products, the DMAC medical directors have indicated that their interpretation of the NPWT coverage policy differs from ours. Although we have informed the DMACs and medical directors of our positions and billing practices, our dialogue has yet to resolve all open issues. In the event that our interpretations of NPWT coverage policies in effect at any given time do not prevail, we could be subject to recoupment or refund of all or a portion of any disputed amounts as well as penalties, which could exceed our related revenue realization reserves, and could negatively impact our AHS revenue from Medicare placements in the United States.
In addition, the current Medicare NPWT coverage policy instructs the DMACs to initially deny payment for any NPWT placements that have extended beyond four months in the home; however, we are permitted to appeal such non-payment on a claim-by-claim basis. As of December 31, 2011, we had approximately $13.7 million in outstanding receivables relating to Medicare NPWT placements that have extended beyond four months in the home, including both unbilled items and claims where coverage or payment was initially denied. We are in the process of submitting all unbilled claims for payment and appealing the remaining claims through the appropriate administrative appeals processes necessary to obtain payment. We may not be successful in collecting these amounts. Further changes in policy or adverse determinations may result in increases in denied claims and outstanding receivables. In addition, if our appeals are unsuccessful and/or there are further policy changes, we may be unable to continue to provide the same types of services that are represented by these disputed claims in the future.
If we are unable to obtain expanded reimbursement for our products in foreign jurisdictions, our international expansion plans could be delayed and our plans for growth could be negatively impacted.
The successful global expansion of our business is dependent upon our ability to obtain expanded reimbursement for our products in the United States and in foreign jurisdictions. We are continuing our efforts to obtain reimbursement for Strattice and V.A.C. Therapy systems and related disposables in foreign jurisdictions. For V.A.C. Therapy systems and related disposables, these efforts have resulted in varying levels of reimbursement from private and public payers in multiple countries, mainly in the acute care setting. In these jurisdictions and others outside the United States, we continue to seek expanded home care reimbursement, which we believe is important in order to increase the demand for V.A.C. Therapy Systems and related disposables in these markets. For our LifeCell business, work has begun to secure appropriate coding, coverage and reimbursement for AlloDerm in Canada, and for Strattice throughout Europe, the Middle East and Africa. If we are unable to obtain expanded reimbursement, our international expansion plans could be delayed and our plans for growth could be negatively impacted. For a more detailed discussion of our reimbursement efforts, see “Business—Information Related to Business Units—Active Healing Solutions—Payment and Reimbursement Coverage; and LifeCell—Payment and Reimbursement Coverage.”
U.S. Medicare reimbursement of competitive products and the implementation of the Medicare competitive bidding program could reduce the reimbursement we receive and could adversely affect the demand for our V.A.C. Therapy Systems in the United States.
From time to time, Medicare publishes reimbursement policies and rates that may unfavorably affect the reimbursement and market for our products. Since 2005, Medicare has assigned NPWT reimbursement codes to several devices being marketed to compete with V.A.C. Therapy Systems. Due to the introduction of competitive products, the Centers for Medicare and Medicaid Services (“CMS”) and other third-party payers could attempt to reduce reimbursement rates on NPWT or its various components through competitive bidding or otherwise, which could negatively impact our AHS revenue from U.S. Medicare placements.
For the year ended December 31, 2011, U.S. Medicare placements of our NPWT products represented approximately 8.2% of our total revenue. In the future, our AHS revenue from U.S. Medicare placements of NPWT products is expected to be subject to Medicare’s durable medical equipment competitive bidding program. In August 2011, CMS announced that NPWT pumps and related supplies and accessories will be included in the next competitive bid process. Inclusion of NPWT products in the Medicare competitive bidding program could result in increased competition and reduced reimbursement for our Medicare placements. In the event that CMS adopts policies or procedures that are unfavorable to us, any resulting reduction in reimbursement could materially and adversely affect our business and operating results.

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U.S. Medicare reimbursement changes applicable to facilities that use our products, such as hospitals and skilled nursing facilities, could adversely affect the demand for our products.
In 2006, CMS finalized new provisions for the hospital inpatient prospective payment system (“IPPS”) that included a significant change in the manner in which it determines the underlying relative weights used to calculate the diagnosis-related group (“DRG”) payment amount made to hospitals for certain patient conditions. In 2007, CMS began to phase-in the use of hospital costs rather than hospital charges for the DRG relative weight determination. As expected, payments have increased for hospitals serving more severely ill patients and decreased for those serving patients who are less severely ill. The fiscal year 2009 IPPS final rule, issued in 2008, announced the completion of the transition to the severity-adjusted DRGs. The changes to IPPS reimbursement procedures have placed downward pressure on prices paid by acute care hospitals to us and have somewhat affected the demand for our products used for inpatient services.
The initiation by U.S. and foreign healthcare, safety and reimbursement agencies of periodic inspections, assessments or studies of the products, services and billing practices we provide could lead to reduced public reimbursement or the inability to obtain reimbursement and could result in reduced demand for our products.
Due to the increased scrutiny and publicity of government efforts to contain rising healthcare costs, we may be subject to future assessments or studies by U.S. and foreign healthcare, safety and reimbursement agencies, which could lead to changes in reimbursement policies that adversely affect our business. We are also currently subject to multiple technology assessments related to our V.A.C. Therapy Systems in foreign countries where we conduct business. Any unfavorable results from these evaluations or technology assessments could result in reduced reimbursement or prevent us from obtaining reimbursement from third-party payers and could reduce the demand or acceptance of our V.A.C. Therapy Systems.
In March 2009, the U.S. Department of Health and Human Services Office of Inspector General (“OIG”) published a report on the comparative pricing of NPWT pumps. In that report, the OIG suggested that CMS is overpaying for NPWT pumps because the current price is based on the price of the V.A.C. Therapy System and did not consider the lower prices of new products added to the NPWT category since 2005. The OIG suggested that CMS should either competitively bid NPWT in the Second Round of DME Competitive Bidding or conduct an inherent reasonableness assessment. In August 2011, CMS announced it will include NPWT in Round Two of its DME Competitive Bidding program, which goes into effect July 1, 2013. This could negatively impact U.S. Medicare reimbursement of our products.
The OIG has also reiterated that it plans to continue to review DME suppliers’ use of certain claims modifiers to determine whether the underlying claims made appropriate use of such modifiers when billing to Medicare. Under the Medicare program, a DME supplier may use these modifiers to indicate that it has the appropriate documentation on file to support its claim for payment. Upon request, the supplier may be required to provide this documentation; however, recent reviews by Medicare regional contractors have indicated that some suppliers have been unable to furnish this information. The OIG intends to continue its work to determine the appropriateness of Medicare payments for certain DME items, including wound care equipment, by assessing whether the suppliers’ documentation supports the claim, whether the item was medically necessary, and/or whether the beneficiary actually received the item. The OIG also plans to review DME that is furnished to patients who are receiving home health services to determine whether the DME is properly billed separately from the home health agency’s reimbursement. In the event that these initiatives result in any assessments with respect to our claims, we could be subject to material refunds, recoupments or penalties. Such initiatives could also lead to further changes to reimbursement or documentation requirements for our products, which could be costly to administer. The results of U.S. or foreign government agency studies could factor into governmental or private reimbursement or coverage determinations for our products and could result in changes to coverage or reimbursement rules which could reduce the amounts we collect for our products and have a material adverse effect on our business.
We may be subject to claims audits that could harm our business and financial results.
As a healthcare supplier, we are subject to claims audits by government regulators, contractors and private payers. Our documentation, billing and other practices are subject to scrutiny by regulators, including claims audits. To ensure compliance with U.S. reimbursement regulations, the Medicare regional contractors and other government contractors periodically conduct audits of billing practices and request medical records and other documents to support claims submitted by us for payment of services rendered to our customers. Such audits may also be initiated as a result of recommendations made by government agencies, such as those in the June 2007 OIG report. For more information on claims audits, see Note 12 of the notes to the consolidated financial statements for the fiscal year ended December 31, 2011. CMS’s Medicaid Integrity Plan, a national strategy to detect and prevent Medicaid fraud and abuse, seeks to identify, recover and prevent inappropriate Medicaid payments through increased review of suppliers of Medicaid services. We could be subjected to such reviews in any number of states potentially resulting in

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demands for refunds or assessments of penalties against us, which could have a material adverse impact on our financial condition and results of operations.
In addition, our agreements with private payers commonly provide that payers may conduct claims audits to ensure that our billing practices comply with their policies. These audits can result in delays in obtaining reimbursement, denials of claims, or demands for significant refunds or recoupments of amounts previously paid to us.
We could be subject to governmental investigations regarding the submission of claims for payment for items and services furnished to federal and state healthcare program beneficiaries.
There are numerous rules and requirements governing the submission of claims for payment to federal and state healthcare programs. In many cases, these rules and regulations are not very clear and have not been interpreted on any official basis by government authorities. If we fail to adhere to these requirements, the government could allege we are not entitled to payment for certain claims and may seek to recoup past payments made. Governmental authorities could also take the position that claims we have submitted for payment violate the FCA. The recoupment of alleged overpayments and/or the imposition of penalties or exclusions under the FCA or similar state provisions could result in a significant loss of reimbursement and/or the payment of significant fines and may have a material adverse effect on our operating results. Even if we were ultimately to prevail, an investigation by governmental authorities of the submission of widespread claims in non-compliance with applicable rules and requirements could have a material adverse impact on our business as the costs of addressing such investigations could be significant.
In February 2009, we received a subpoena from the OIG seeking records regarding our billing practices under the local coverage policies of the four regional DMACs. In response to the initial request, we produced substantial documentation to the OIG and met with the U.S. Department of Justice in order to assist the government in its review. The government made additional informal requests in November and December 2009. We cooperated with all of the inquiries and provided substantial documentation to the OIG and the U.S. Attorneys’ office throughout 2009 and 2010. On May 9, 2011, we received notice that the U.S. Attorneys’ office had declined to intervene in qui tam actions filed against KCI by two former employees in Federal Court in California. The complaints contend that KCI violated the Federal False Claims Act by billing in a manner that was not consistent with the Local Coverage Determinations issued by the DME MACs and seek recovery of monetary damages. These cases were originally filed under seal pending the government's review of the allegations contained therein. Following the completion of the government's review and their decision to decline to intervene in such suits, the live pleadings were ordered unsealed on May 3, 2011. After reviewing the allegations, KCI filed motions seeking the dismissal of the suits on multiple grounds. On January 30, 2012, the Court granted two of KCI's motions dismissing all of the claims in one suit and dismissing all of the claims in the second suit with the exception of a retaliation claim, which has been stayed pending the appeal of the dismissed claims. On February 27, 2012 and June 15, 2012, respectively, the former employees each filed a Notice of Appeal to the U.S. Court of Appeals for the Ninth Circuit seeking to reverse the dismissal of their claims by the trial court. KCI fully intends to vigorously defend the appeals. For a description of other risks relating to governmental review and investigation of our businesses, see each of the risk factors entitled “The initiation by U.S. and foreign healthcare, safety and reimbursement agencies of periodic inspections, assessments or studies of the products, services and billing practices we provide could lead to reduced public reimbursement or the inability to obtain reimbursement and could result in reduced demand for our products;” “We may be subject to claims audits that could harm our business and financial results;” and “We could be subject to governmental investigations under the Anti-Kickback Statute, the Stark Law, the federal False Claims Act or similar state laws with respect to our business arrangements with prescribing physicians and other healthcare professionals.”
We could be subject to governmental investigations under the Anti-Kickback Statute, the Stark Law, the federal False Claims Act or similar state laws with respect to our business arrangements with prescribing physicians and other healthcare professionals.
We are subject to various federal, state and foreign laws pertaining to healthcare pricing and fraud and abuse, including prohibitions on kickbacks and the submission of false claims and restrictions on relationships with physicians and other referral sources. We have numerous business arrangements with physicians and other potential referral sources. Although we believe neither these arrangements nor the remuneration provided thereunder in any way violate the federal Anti-Kickback Statute, the Stark Law or similar state laws, governmental authorities could attempt to take the position that one or more of these arrangements, or the payments or other remuneration provided thereunder, violates these statutes or laws. In addition, if any of our arrangements were found to violate such laws, federal authorities or whistleblowers could take the position that our submission of claims for payment to a federal healthcare program for items or services realized as a result of such violations also violates the FCA. Imposition of penalties or exclusions for violations of the Anti-Kickback Statute, the Stark Law or similar state laws could result in a significant loss of reimbursement and may have a material adverse effect on our financial condition and results of operations. Even the assertion of a violation under any of these provisions could have a material adverse effect on our financial condition and results of operations.

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Failure of any of our clinical studies or third-party assessments to demonstrate desired outcomes in proposed endpoints may reduce physician usage or result in pricing pressures that could have a negative impact on business performance.
We regularly conduct clinical studies designed to test a variety of endpoints associated with product performance and use across a number of applications. If, as a result of poor design, implementation or otherwise, a clinical study conducted by us or others fails to demonstrate statistically significant results supporting performance or use benefits or cost effectiveness of our products, physicians may elect not to use our products as a treatment for conditions that may benefit from them. Furthermore, in the event of an adverse clinical study outcome, our products may not achieve “standard-of-care” designations, where they exist, for the conditions in question, which could deter the adoption of our products. If we are unable to develop a body of statistically significant evidence from our clinical study program, whether due to adverse results or the inability to complete properly designed studies, domestic and international public and private payers could refuse to cover our products, limit the manner in which they cover our products, or reduce the price they are willing to pay or reimburse for our products. In the case of a pre-approval study or a study required by a regulatory body as a condition of approval, a regulatory body can revoke, modify or deny approval of the product in question.
Our business is partly dependent on major contracts with group purchasing organizations (“GPOs”) and integrated delivery networks (“IDNs”). Our relationships with these organizations pose several risks.
Our products can be contracted under national tenders or with larger hospital GPOs. The healthcare industry has been consolidating, and as a result, transactions with customers are larger and more complex. The purchasing power of these larger customers has increased, and may continue to increase, generating downward pressure on product pricing. The majority of our AHS and TSS U.S. hospital sales and rentals are made pursuant to contracts with GPOs. At any given time, we are typically at various stages of responding to bids and negotiating and renewing GPO agreements, including agreements that would otherwise expire. Failure to be included in certain of these agreements could have a material adverse effect on our business, including sales and rental revenues. The contracting practices of GPOs change frequently to meet the needs of their member hospitals. An emerging trend is for GPOs to offer committed programs or standardization programs, where one supplier may be chosen to serve designated members that elect to participate in the program. Participation by us in such programs may require increased discounting, and failure to participate or be selected for participation in such programs may result in a reduction of sales to the member hospitals. In addition, the industry is showing an increased focus on contracting directly with health systems or IDNs (which typically represents influential members and owners of GPOs). IDNs and health systems often make key purchasing decisions and have influence over a GPO’s contract decisions. This presents an opportunity to have more contracts directly with customers, but customers may request additional discounts or enhancements. GPOs, IDNs and large health care providers have communicated that their member hospitals have limited access to capital, and they have increased their focus on pricing and on limiting price increases. Some of our sales contracts contain restrictions on our ability to raise prices, therefore limiting our ability, in the short-term, to respond to significant increases in raw material prices or other factors.
The success of many of our products depends heavily on acceptance by healthcare professionals who prescribe and recommend our products and by end users of our products, and our failure to maintain a high level of confidence in our products could adversely affect our business.
We maintain customer relationships with numerous specialized nurses, surgeons, primary care physicians, home healthcare providers, other specialist physicians and other healthcare professionals. We believe that sales of our products depend significantly on their confidence in, and recommendations of, our products. In addition, our success depends on end users’ acceptance and confidence in the effectiveness, comfort and ease-of-use of our products, including our new products. In order to achieve acceptance by end users and healthcare professionals alike, we seek to educate patients and the healthcare community as to the distinctive characteristics, perceived benefits, clinical efficacy and cost-effectiveness of our products compared to alternative products, including the products offered by our competitors. Acceptance of our products also requires effective training of patients and healthcare professionals in the proper use and application of our products. Failure to effectively educate and train our customers and end-users and failure to continue to develop relationships with leading healthcare professionals and new patients could result in a less frequent recommendation or prescription of our products to patients, which may adversely affect our sales and profitability.

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Because we depend upon a limited group of suppliers and, in some cases, exclusive suppliers for products essential to our business, we may incur significant product development costs and experience material delivery delays if we lose any significant supplier, which could materially impact our rental and sales of AHS, LifeCell and TSS products.
For all three of our business units, we obtain some of our finished products and components from a limited group of suppliers, and we purchase certain supplies from single sources for reasons of quality assurance, cost- effectiveness, availability, or constraints resulting from regulatory requirements. While we work closely with suppliers to assure continuity of supply and maintain high quality and reliability, these efforts may not be successful. Manufacturing disruptions experienced by our suppliers may jeopardize our supply of finished products and components. A change in suppliers could require significant effort or investment in circumstances where the items supplied are integral to product performance or incorporate unique technology. Due to our substantial indebtedness, one or more of our suppliers may refuse to extend us credit with respect to our purchasing or leasing equipment, supplies, products or components, or may only agree to extend us credit on significantly less favorable terms or subject to more onerous conditions. This could significantly disrupt our ability to purchase or lease required equipment, supplies, products and components in a cost-effective and timely manner and could have a material adverse effect on our business. Any casualty, natural disaster or other significant disruption of any of our sole-source suppliers’ operations, or any unexpected loss of any existing exclusive supply contract could have a material adverse effect on our business. For more information regarding our sole-source supply arrangements, see “Business—Information Related to Business Units—Active Healing Solutions—Operations and Manufacturing; LifeCell—Operations and Manufacturing; and Therapeutic Support Systems—Operations and Manufacturing.”
Increased prices for, or unavailability of, raw materials or sub-assemblies used in our products could adversely affect our profitability or revenues.

Our profitability is affected by the prices of the raw materials and sub-assemblies used in the manufacture of our products. These prices may fluctuate based on a number of factors beyond our control, including changes in supply and demand, general economic conditions, labor costs, fuel related delivery costs, competition, import duties, tariffs, currency exchange rates, and government regulation. Significant increases in the prices of raw materials or sub-assemblies that cannot be recovered through productivity gains, price increases or other methods could adversely affect our results of operations.

Any shortfall in our ability to procure unprocessed tissue or manufacture Strattice and AlloDerm in sufficient quantities to meet market demand would negatively impact our growth.
Demand for our tissue matrix products is significant and increasing in the United States, and we have expanded our manufacturing capabilities to meet this demand. In 2009, we finalized the validation of a new manufacturing suite in our existing facility that is now fully operational. We believe that demand for Strattice is likely to increase further during our planned expansion into additional countries in EMEA. Also, demand growth for AlloDerm continues to be strong in the U.S. in light of a demonstrated physician preference for AlloDerm in breast reconstruction applications. Sales of Strattice and AlloDerm may be constrained in the future by our ability to manufacture sufficient quantities to meet demand, as they were in 2009. Since 2010, our inventory levels of Strattice and AlloDerm have been maintained at levels sufficient to meet market demand. However, any inability to manufacture sufficient quantities of our products to meet demand in the future could have a material adverse effect on our LifeCell business. For more information respecting our procurement of tissue for our AlloDerm and Strattice products, see “Business—Information Related to Business Units—LifeCell—Operations and Manufacturing.”
If a natural or man-made disaster strikes our manufacturing facilities, we will be unable to manufacture our products for a substantial amount of time and our sales and profitability will decline.
Our facilities and the manufacturing equipment we use to produce our products would be costly to replace and could require substantial lead-time to repair or replace. The manufacture of all of our LifeCell regenerative medicine products is conducted exclusively at our sole manufacturing facility in Branchburg, New Jersey, where we completed validation of a new manufacturing suite that became operational in 2009. The manufacture of our AHS disposable supplies is conducted at our manufacturing facility in Athlone, Ireland and the manufacturing facility of Avail Medical Products, Inc., one of our third-party suppliers, in Mexico. Any temporary or permanent facility shut-down caused by casualty (property damage caused by fire or other perils), regulatory action, or other unexpected interruptions could cause a significant disruption in our ability to supply our LifeCell products or AHS products, which would impair our LifeCell or AHS revenue growth, respectively. We take precautions to safeguard the facilities, including security, health and safety protocols and off-site backup and storage of electronic data. Additionally, we maintain property insurance that includes coverage for business interruption. However, a natural disaster such as a fire or flood could affect our ability to maintain ongoing operations and cause us to incur additional expenses. Insurance coverage may not be adequate to fully cover losses in any particular case. Accordingly, damage to a facility or other property due to fire, flood or other natural disaster or casualty event could materially and adversely affect our revenues and results of operations.

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Disruptions in service or damage to our data center could adversely affect our business.

Our information technologies and systems are vulnerable to damage or interruption from various causes, including (i) acts of God and other natural disasters, war and acts of terrorism and (ii) power losses, computer system failures, Internet and telecommunications or data network failures, operator error, losses of and corruption of data and similar events. While we maintain a backup of much of our operational and financial data at an offsite disaster recovery site and conduct business continuity planning to mitigate the adverse effects of a disruption, relocation or change in operating environment at the data center we utilize, the situations we plan for and the amount of insurance coverage we maintain may not be adequate in any particular case. Any resulting interruption, delay or cessation in service to our customers could impair or prohibit our ability to provide our services, reduce the attractiveness of our services to current or potential customers and adversely impact our financial condition and results of operations.

We may not be able to maintain our competitive advantages if we are not able to attract and retain key personnel.

Our success depends to a significant extent on our ability to attract and retain key members of our executive, technical, sales, marketing and engineering staff. While we have taken steps to retain such key personnel, there can be no assurance that we will be able to retain the services of individuals whose knowledge and skills are important to our businesses. Our success also depends on our ability to prospectively attract, expand, integrate, train and retain qualified management, technical, sales, marketing
and engineering personnel. Because the competition for qualified personnel is intense, costs related to compensation and retention could increase significantly in the future.

Our international business operations are subject to risks, including risks arising from currency exchange rate fluctuations, which could adversely affect our operating results.

Our operations outside the United States, which represented approximately $542 million, or 26%, of our total revenue for the year ended December 31, 2011 and $510 million, or 25%, of our total revenue for the year ended December 31, 2010, are subject to certain legal, regulatory, social, political, and economic risks inherent in international business operations, including, but not limited to:
less stringent protection of intellectual property in some countries outside the United States;
trade protection measures and import and export licensing requirements;
changes in foreign regulatory requirements and tax laws;
alleged or actual violations of the Foreign Corrupt Practices Act of 1977, and similar local commercial anti-bribery and anti-corruption laws in the foreign jurisdictions in which we do business;
changes in foreign medical reimbursement programs and policies, and other healthcare reforms;
political and economic instability;
complex tax and cash management issues;
potential tax costs associated with repatriating cash from our non-U.S. subsidiaries; and
longer-term receivables than are typical in the United States, and greater difficulty of collecting receivables in certain foreign jurisdictions.
Because a significant portion of our business is conducted outside the United States, we face exposure to adverse movements in foreign currency exchange rates related to the value of the U.S. dollar. While we enter into foreign currency exchange contracts designed to reduce the short-term impact of foreign currency fluctuations, we cannot eliminate the risk, which may adversely affect our expected results.

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If we fail to comply with the extensive array of laws and regulations that apply to our business, we could suffer civil or criminal penalties or be required to make significant changes to our operations that could reduce our revenue and profitability.
We are required to comply with extensive and complex laws and regulations at the federal, state and local government levels relating to among other things:
billing practices;
product pricing and price reporting;
quality of medical equipment and services and qualifications of personnel;
confidentiality, maintenance and security of patient medical records;
marketing and advertising, and related fees and expenses paid; and
business arrangements with other providers and suppliers of healthcare services.
For example, the Health Insurance Portability and Accountability Act defines two new federal crimes: (i) healthcare fraud and (ii) false statements relating to healthcare matters, the violation of which may result in fines, imprisonment, or exclusion from government healthcare programs. Further, under separate statutes, any improper submission of claims for payment, causing any claims to be submitted that are “not provided as claimed,” or improper price reporting for products, may lead to civil monetary penalties, criminal fines and imprisonment, and/or exclusion from participation in Medicare, Medicaid and other federally funded state health programs. We are subject to numerous other laws and regulations, the application of which could have a material adverse impact on our operating results. For more information regarding the application of regulations to our business see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Other Matters.”
We are subject to regulation by the FDA and its foreign counterparts that could materially reduce the demand for and limit our ability to distribute our products and could cause us to incur significant compliance costs.
The production and marketing of substantially all of our products and our ongoing research and development activities are subject to regulation by the FDA and its foreign counterparts. Complying with FDA requirements and other applicable regulations imposes significant costs on our operations. If we fail to comply with applicable regulations or if postmarket safety issues arise, we could be subject to enforcement sanctions, our promotional practices may be restricted, and our marketed products could be subject to recall or otherwise impacted. Each of these potential actions could result in a material adverse effect on our operating results.
On May 9, 2011, LifeCell Corporation received a warning letter dated May 5, 2011 from the FDA following an inspection by the FDA at LifeCell in November 2010. The warning letter primarily related to KCI’s failure to submit required documentation to the FDA prior to conduct of certain clinical studies. The FDA also identified certain observed non-compliance with FDA regulations covering the promotion of LifeCell’s Strattice/LTM product in relation to these studies. KCI submitted a written response to the FDA on May 31, 2011 and has provided timely updates to the FDA since that time on the corrective actions undertaken by KCI. As part of these corrective actions, KCI has made a clinical study Investigational Device Exemption (IDE) filing with the FDA relating to its clinical studies. KCI continues to dialogue with the FDA regarding the corrective actions and we believe that the corrective actions likely will resolve the FDA’s concerns without a material impact on KCI’s business. However, KCI cannot give any assurances that the FDA will be satisfied with its response to the warning letter or as to the expected date of the resolution of the matters included in the warning letter.
In November 2009, the FDA issued a Preliminary Public Health Notice (“PHN”) notifying caregivers and patients of potential complications associated with the use of NPWT products. The FDA updated the notice in February 2011. The complications cited by the FDA and the recommendations for care givers and patients are consistent with the labeling and training we provide in our professional education programs. Although the FDA did not specifically tie KCI or V.A.C. Therapy to safety issues in the PHN, it is possible that the FDA’s recent focus on NPWT safety could lead to future inspections of our AHS quality systems by the FDA or its foreign counterparts. It is also possible that the PHN or future communications by the FDA regarding safety concerns related to NPWT could negatively impact demand for our products, which could have a material adverse effect on our operating results.

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In addition, new FDA guidance and new and amended regulations that regulate the way we do business likely will result in increased compliance costs. Any substantial increase in requirements imposed on us could potentially delay our development and commercialization of new medical device products. In 2007, standardization agencies in Europe and Canada adopted the revised standard, IEC 60601, requiring labeling and electro-magnetic compatibility modifications to several product lines in order for them to remain state-of-the-art. Compliance with the IEC 60601 third edition series of standards is expected to be mandatory in Europe and Canada effective in 2012 and in the United States effective in 2013. These revised standards will entail increased costs relating to compliance with the new mandatory requirements that could adversely affect our operating results.
Adverse changes in general domestic and global economic conditions and instability and disruption of credit markets could adversely affect our operating results, financial condition or liquidity.
We are subject to risks arising from adverse changes in general domestic and global economic conditions, including recession or economic slowdown and disruption of credit markets. Recently, the credit and capital markets experienced extreme volatility and disruption, leading to recessionary conditions and depressed levels of consumer and commercial spending. We continue to see signs of weakness in the U.S. and global economies. We believe the economic downturn may generally decrease hospital census and the demand for elective surgeries. Also, the global financial crisis, continuing high levels of unemployment and general economic uncertainties have made it more difficult and more expensive for hospitals and health systems to obtain credit, which may contribute to pressures on their operating margins. We believe that rising unemployment reduces the number of individuals covered by private insurance, which has resulted in a noticeable increase in our charity-care placements and may increase the cost of uncompensated care for hospitals. Higher unemployment may also result in a shift in reimbursement patterns as unemployed individuals switch from private plans to public plans such as Medicaid or Medicare. If the economic downturn persists and unemployment remains high or increases, any significant shift in coverage for the unemployed may have an unfavorable impact on our reimbursement mix and may result in a decrease in our overall average unit prices.
Further disruption in the credit markets could impede our access to capital, which could be further adversely affected if we are unable to maintain our current credit ratings. Should we have limited access to additional financing sources, we may need to defer capital expenditures or seek other sources of liquidity, which may not be available to us on acceptable terms if at all. Similarly, if our suppliers face challenges in obtaining credit or other financial difficulties, they may be unable to provide the materials required to manufacture our products.
All of these factors related to the global economic situation, which are beyond our control, could negatively impact our business, results of operations, financial condition and liquidity.
We are exposed to product liability claims that may materially and adversely affect our revenues and results of operations.
Our businesses expose us to product liability risks inherent in the testing, manufacturing, marketing and use of medical products. We maintain product liability insurance; however, we cannot be certain that (i) the level of insurance will provide adequate coverage against potential liabilities, (ii) the type of claim will be covered by the terms of the insurance coverage, (iii) adequate product liability insurance will continue to be available in the future, or (iv) the insurance can be maintained on acceptable terms. The legal expenses associated with defending against product liability claims and the obligation to pay a product liability claim in excess of available insurance coverage would increase operating expenses and could materially and adversely affect our results of operations and financial position.
Some LifeCell products (AlloDerm, GRAFTJACKET, AlloCraft DBM and Repliform) contain donated human cadaveric tissue. The implantation of tissue products derived from donated cadaveric tissue creates the potential for transmission of communicable disease. LifeCell Corporation is accredited by the American Association of Tissue Banks and voluntarily complies with its guidelines. LifeCell Corporation and its tissue suppliers are registered with and regulated by the FDA and state regulatory bodies. These regulations have strict requirements for testing donors to prevent communicable disease transmission. However, there can be no assurance that our tissue suppliers will comply with such regulations intended to prevent communicable disease transmission, or even if such compliance is achieved, that our products have not been or will not be associated with disease transmission, or a patient otherwise infected with disease would not erroneously assert a claim that the use of our products resulted in disease transmission. LifeCell Corporation is currently named as a defendant in a number of lawsuits that are related to the distribution of its products, including multiple lawsuits relating to certain human-tissue based products because the organization that recovered the tissue, BTS, may not have followed FDA requirements for donor consent and/or screening to determine if risk factors for communicable diseases existed. Although LifeCell Corporation intends to defend against these actions, there can be no assurance that LifeCell Corporation will prevail. Any actual or alleged transmission of communicable disease could result in patient claims, litigation, distraction of management’s attention and potentially increased expenses. LifeCell Corporation is also a party to approximately 260 lawsuits filed by individuals alleging personal injury and seeking monetary damages for failed hernia

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repair procedures using LifeCell Corporation’s AlloDerm products. These cases have been consolidated for centralized management in Middlesex County, New Jersey. These cases are in the early stages of litigation and have not yet been set for trial. The law firms representing plaintiffs in these cases are actively soliciting and publicly advertising in an effort to recruit additional plaintiffs for hernia repair cases. The publicity around the BTS cases and the active solicitation of plaintiffs in the AlloDerm cases could potentially harm our reputation with our customers and disrupt our ability to market our products, which may materially and adversely impact the growth rates of our LifeCell business.
The National Organ Transplant Act (“NOTA”) could be interpreted in a way that could reduce our revenues and income in the future.
Procurement of certain human organs and tissue for transplantation is subject to the restrictions of NOTA, which prohibits the sale of any human organ or tissue, but permits the reasonable payment of costs associated with the removal, transportation, implantation, processing, preservation, quality control and storage of human tissue, including skin. We reimburse tissue banks for expenses incurred that are associated with the recovery and transportation of donated cadaveric human skin that the tissue bank processes and distributes. In addition to amounts paid to tissue banks to reimburse them for their expenses associated with the procurement and transportation of human skin, we include in our pricing structure certain costs associated with tissue processing, tissue preservation, quality control and storage of the tissue, and marketing and medical education expenses.
NOTA payment allowances may be interpreted to limit the amount of costs and expenses that we may recover in our pricing for our products, thereby negatively impacting our future revenues and profitability. If we are found to have violated NOTA’s prohibition on the sale of human tissue, we also are potentially subject to criminal enforcement sanctions that may materially and adversely affect our results of operations.
Risks Related to the Exchange Notes
Our substantial indebtedness could adversely affect our financial condition and prevent us from fulfilling our obligations under the Exchange Notes.
We have a significant amount of indebtedness. At December 31, 2011, we and our subsidiaries had approximately $4,780 million (excluding original issue discount) of aggregate principal amount of indebtedness outstanding, of which $4,030 million was secured indebtedness, and an additional $188 million of unused commitments available to be borrowed under our Revolving Credit Facility. Our substantial level of indebtedness increases the risk that we may be unable to generate cash sufficient to pay amounts due in respect of our indebtedness. Our substantial indebtedness could have other important consequences to you and significant effects on our business. For example, it could:
make it more difficult for us to satisfy our obligations with respect to the Exchange Notes and our other debt;
increase our vulnerability to adverse changes in general economic, industry and competitive conditions;
require us to dedicate a substantial portion of our cash flow from operations to make payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes;
limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
require us to repatriate cash for debt service from our foreign subsidiaries resulting in dividend tax costs or require us to adopt other disadvantageous tax structures to accommodate debt service payments;
restrict us from capitalizing on business opportunities;
make it more difficult to satisfy our financial obligations, including payments on the Exchange Notes;
place us at a competitive disadvantage compared to our competitors that have less debt; and
limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions, debt service requirements, execution of our business strategy or other general corporate purposes.

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In addition, the credit agreement governing our Credit Facilities and the Indentures contain, and the agreements governing future indebtedness may contain, restrictive covenants that limit our ability to engage in activities that may be in our long-term best interests. Our failure to comply with those covenants could result in an event of default that, if not cured or waived, could result in the acceleration of all of our indebtedness.
KCI has nominal net worth and will depend on distributions from its subsidiaries or other guarantors to fulfill our obligations under the Exchange Notes.
KCI has nominal net worth. KCI is a holding company and its assets consist primarily of investments in its subsidiaries. KCI’s ability to service its debt obligations, including its ability to pay the interest on and principal of the Exchange Notes when due, will be dependent upon cash dividends and distributions or other transfers from its subsidiaries. Payments to KCI by its subsidiaries or other guarantors will be contingent upon their respective earnings and subject to any limitations on the ability of such entities to make payments or other distributions to us. Its subsidiaries and other guarantors are separate and distinct legal entities and have no obligation, other than under the guarantee of the Exchange Notes and guarantees of certain of its other indebtedness, to make any funds available to KCI. In addition, under U.S. federal and foreign bankruptcy laws and comparable provisions of state and foreign fraudulent transfer laws, its incurrence of joint and several liability in respect of its obligations under the Exchange Notes, could be voided in certain circumstances.
Despite our current level of indebtedness, we may still be able to incur substantially more debt. This could further exacerbate the risks associated with our substantial leverage.
We may be able to incur significant additional indebtedness in the future. Although the Indentures and the credit agreement governing our Credit Facilities limit our ability and the ability of our present and future subsidiaries to incur additional indebtedness, the terms of the Credit Facilities and the Indentures permit us to incur significant additional indebtedness. At December 31, 2011, we and our subsidiaries had approximately $4,780 million (excluding original issue discount on the Term Loan Facility and the second lien notes) of aggregate principal amount of indebtedness outstanding, of which $4,030 million was secured indebtedness, and an additional $188 million of unused commitments available to be borrowed under our Revolving Credit Facility. Moreover, all amounts outstanding at any time under our Credit Facilities are effectively senior to the notes to the extent of the value of the collateral. In addition, the credit agreement governing our Credit Facilities and the Indentures do not prohibit us from incurring obligations that do not constitute indebtedness as defined therein. To the extent that we incur additional indebtedness or such other obligations, the risk associated with our substantial indebtedness described above, including our possible inability to service our debt, will increase. In addition, because our Credit Facilities bear interest at variable rates of interest, we are exposed to risk from fluctuations in interest rates. We may enter into interest rate swaps that involve the exchange of floating for fixed rate interest payments in order to reduce interest rate volatility. However, we may not maintain interest rate swaps with respect to all of our variable rate indebtedness, and any swaps we enter into may not fully mitigate our interest rate risk, or may create additional risks.
To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control and any failure to meet our debt service obligations could harm our business, financial condition and results of operations.
Our ability to make payments on and to refinance our indebtedness, including the Exchange Notes, and to fund working capital needs and planned capital expenditures will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, business, legislative, regulatory and other factors that are beyond our control.
If our business does not generate sufficient cash flow from operations or if future borrowings are not available to us in an amount sufficient to enable us to pay our indebtedness, including the Exchange Notes, or to fund our other liquidity needs, we may need to refinance all or a portion of our indebtedness, including the Exchange Notes, on or before the maturity thereof, sell assets, reduce or delay capital investments or seek to raise additional capital, any of which could have a material adverse effect on our operations. In addition, we may not be able to affect any of these actions, if necessary, on commercially reasonable terms or at all. Our ability to restructure or refinance our indebtedness, including the Exchange Notes, will depend on the condition of the capital markets and our financial condition at such time Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. The terms of existing or future debt instruments, including the Indentures, may limit or prevent us from taking any of these actions. In addition, any failure to make scheduled payments of interest and principal on our outstanding indebtedness would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness on commercially reasonable terms or at all. Our inability to generate sufficient cash flow to satisfy our debt service obligations, or to refinance or restructure our obligations on commercially reasonable terms or at all, would have an adverse effect, which could be material, on our business, financial condition and results of operations, as well as on our ability to satisfy our obligations in respect of the Exchange Notes.

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Our failure to comply with the agreements relating to our outstanding indebtedness, including as a result of events beyond our control, could result in an event of default that could materially and adversely affect our financial condition and results of operations.
If there were an event of default under any of the agreements relating to our outstanding indebtedness, the holders of the defaulted debt could cause all amounts outstanding with respect to that debt to be due and payable immediately. We cannot assure you that our assets or cash flow would be sufficient to fully repay borrowings under our outstanding debt instruments if accelerated upon an event of default. Further, if we are unable to repay, refinance or restructure our indebtedness under our secured debt, the holders of such debt could proceed against the collateral securing that indebtedness. In addition, any event of default or declaration of acceleration under one debt instrument could also result in an event of default under one or more of our other debt instruments. As a result, any default by us on our indebtedness could have a material adverse effect on our business and could impact our ability to make payments under the Exchange Notes.
The Indentures and the credit agreement governing our Credit Facilities will restrict our current and future operations, particularly our ability to respond to changes or to take certain actions.
The Indentures and the credit agreement governing our Credit Facilities will impose significant operating and financial restrictions and limit the issuer’s ability and our ability and its other restricted subsidiaries to:
incur additional indebtedness and guarantee indebtedness;
pay dividends or make other distributions in respect of, or repurchase or redeem, capital stock;
prepay, redeem or repurchase certain debt;
make loans and investments;
sell or otherwise dispose of assets;
sell stock of our subsidiaries;
incur liens;
enter into transactions with affiliates;
enter into agreements restricting our subsidiaries’ ability to pay dividends; and
consolidate, merge or sell all or substantially all of our assets.
As a result of these covenants and restrictions, we are and will be limited in how we conduct our business, and we may be unable to raise additional debt or equity financing to compete effectively or to take advantage of new business opportunities. In addition, we will be required to maintain specified financial ratios and satisfy other financial condition tests. The terms of any future indebtedness we may incur could include more restrictive covenants. We cannot assure you that we will be able to maintain compliance with these covenants in the future and, if we fail to do so, that we will be able to obtain waivers from the lenders and/or amend the covenants.
Our failure to comply with the restrictive covenants described above as well as others contained in our future debt instruments from time to time could result in an event of default, which, if not cured or waived, could result in our being required to repay these borrowings before their due date. If we are forced to refinance these borrowings on less favorable terms, our results of operations and financial condition could be adversely affected.
The lien on the collateral securing the Second Lien Exchange Notes is junior and subordinate to the lien on the collateral securing our Credit Facilities and certain other first lien obligations.
 
The Second Lien Exchange Notes will be secured by second priority liens granted by the issuer, the guarantors and any future guarantor on the issuer's assets and the assets of the guarantors that secure obligations under the Credit Facilities and certain hedging and cash management obligations, subject to certain permitted liens and encumbrances described in the security documents governing the Second Lien Exchange Notes.

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As set out in more detail under “Description of Second Lien Exchange Notes,” the lenders under our Credit Facilities and holders of certain of the issuer's hedging and cash management obligations will be entitled to receive all proceeds from the realization of the collateral under certain circumstances, including upon default in payment on, or the acceleration of, any obligations under the issuer's Credit Facilities, or in the event of the issuer's, or any of the guarantors', bankruptcy, insolvency, liquidation, dissolution, reorganization or similar proceeding, to repay such obligations in full before the holders of the Second Lien Exchange Notes will be entitled to any recovery from such collateral.
 
In addition, the Second Lien Exchange Notes indenture and the related security documents permit the issuer and the guarantors to create additional liens under specified circumstances. Any obligations secured by such liens may further limit the recovery from the realization of the collateral available to satisfy holders of the Second Lien Exchange Notes.
 
Holders of the Second Lien Exchange Notes will not control decisions regarding collateral.
 
The lenders under our Credit Facilities, as holders of first priority lien obligations, control substantially all matters related to the collateral pursuant to the terms of the intercreditor agreement. The holders of the first priority lien obligations may cause the collateral agent thereunder (the “first lien agent”) to dispose of, release, or foreclose on, or take other actions with respect to, the collateral (including amendments of and waivers under the security documents) with which holders of the Second Lien Exchange Notes may disagree or that may be contrary to the interests of holders of the Second Lien Exchange Notes, even after a default under the Second Lien Exchange Notes. To the extent collateral is released from securing the first priority lien obligations in connection with any sale or other disposition thereof permitted by the New Credit Facility and the Intercreditor Agreement or in connection with the exercise of remedies by the agent under the Credit Facilities, the second priority liens securing the Second Lien Exchange Notes will also be released. In addition, the security documents related to the second priority liens generally provide that, so long as the first priority lien obligations are in effect, the holders of the first priority lien obligations may change, waive, modify or vary the security documents governing such first priority liens without the consent of the holders of the Second Lien Exchange Notes (except under certain limited circumstances) and that the security documents governing the second priority liens will be automatically changed, waived and modified in the same manner. Further, the security documents governing the second priority liens may not be amended in certain circumstances without the consent of the first lien agent until the first priority lien obligations are paid in full. The security agreement governing the second priority liens prohibits second priority lienholders from foreclosing on the collateral until payment in full of the first priority lien obligations.
 
In the event of a foreclosure by the holders of the first priority lien obligations, the proceeds from the sale of collateral may not be sufficient to satisfy all or any of the amounts outstanding under the Second Lien Exchange Notes after payment in full of the obligations secured by first priority liens on the collateral.
 
It may be difficult to realize the value of the collateral securing the Second Lien Exchange Notes.
 
The collateral securing the Second Lien Exchange Notes will be subject to any and all exceptions, defects, encumbrances, liens and other imperfections as may be accepted by the trustee for the Second Lien Exchange Notes and any other creditors that have the benefit of first liens on the collateral securing the Second Lien Exchange Notes from time to time, whether on or after the date the Second Lien Exchange Notes are issued. The existence of any such exceptions, defects, encumbrances, liens and other imperfections could adversely affect the value of the collateral securing the Second Lien Exchange Notes as well as the ability of the collateral agent to realize or foreclose on such collateral.
 
The value of the collateral at any time will depend on market and other economic conditions, including the availability of suitable buyers. By their nature, some or all of the pledged assets may be illiquid and may have no readily ascertainable market value. We cannot assure you that the fair market value of the collateral as of the date of this prospectus exceeds the principal amount of the debt secured thereby. The value of the assets pledged as collateral for the Second Lien Exchange Notes could be impaired in the future as a result of changing economic conditions, our failure to implement our business strategy, competition, unforeseen liabilities and other future events. Accordingly, there may not be sufficient collateral to pay all or any of the amounts due on the Second Lien Exchange Notes. Any claim for the difference between the amount, if any, realized by holders of the Second Lien Exchange Notes from the sale of the collateral securing the Second Lien Exchange Notes and the obligations under the Second Lien Exchange Notes will rank equally in right of payment with all of our other unsecured unsubordinated indebtedness and other obligations, including trade payables. Additionally, in the event that a bankruptcy case is commenced by or against us, if the value of the collateral is less than the amount of principal and accrued and unpaid interest on the Second Lien Exchange Notes and all other senior secured obligations, interest may cease to accrue on the Second Lien Exchange Notes from and after the date the bankruptcy petition is filed.
 

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To the extent that third parties enjoy prior liens, such third parties may have rights and remedies with respect to the property subject to such liens that, if exercised, could adversely affect the value of the collateral. Additionally, the terms of the Second Lien Exchange Notes indenture allow us to issue additional notes and incur change of control refinancing indebtedness in certain circumstances. The Second Lien Exchange Notes indenture does not require that we maintain the current level of collateral or maintain a specific ratio of indebtedness to asset values. Under the Second Lien Exchange Notes indenture, any additional notes issued pursuant to the Second Lien Exchange Notes indenture and change of control refinancing indebtedness incurred in accordance with the terms of the Second Lien Exchange Notes indenture will rank pari passu with the Second Lien Exchange Notes and be entitled to the same rights and priority with respect to the collateral. Thus, the issuance of additional notes pursuant to the Second Lien Exchange Notes indenture may have the effect of significantly diluting your ability to recover payment in full from the then existing pool of collateral. Releases of collateral from the liens securing the Second Lien Exchange Notes will be permitted under some circumstances.
 
In the future, the obligation to grant additional security over assets, or a particular type or class of assets, whether as a result of the acquisition or creation of future assets or subsidiaries, the designation of a previously unrestricted subsidiary or otherwise, is subject to the provisions of the intercreditor agreement. The intercreditor agreement sets out a number of limitations on the rights of the holders of the Second Lien Exchange Notes to require security in certain circumstances, which may result in, among other things, the amount recoverable under any security provided by any subsidiary being limited and/or security not being granted over a particular type of class or assets. Accordingly, this may affect the value of the security provided by us and our subsidiaries. Furthermore, upon enforcement against any collateral or in insolvency, under the terms of the intercreditor agreement the claims of the holders of the Second Lien Exchange Notes to the proceeds of such enforcement will rank behind the claims of the holders of obligations under the Credit Facilities, which are first priority obligations, and holders of additional secured indebtedness (to the extent permitted to have priority by the Second Lien Exchange Notes indenture). The security interest of the collateral agent is subject to practical problems generally associated with the realization of security interests in collateral. For example, the collateral agent may need to obtain the consent of a third party to obtain or enforce a security interest in a contract. The collateral agent may not be able to obtain any such consent. Also, the consents of any third parties may not necessarily be given when required to facilitate a foreclosure on such assets. Accordingly, the collateral agent may not have the ability to foreclose upon those assets and the value of the collateral may significantly decrease.
 
The rights of holders of Second Lien Exchange Notes in the collateral may be adversely affected by the failure to perfect security interests in the collateral and other issues generally associated with the realization of security interests in the collateral.
 
Applicable law requires that a security interest in certain tangible and intangible assets can only be properly perfected and its priority retained through certain actions undertaken by the secured party. The liens on the collateral securing obligations under the Second Lien Exchange Notes from time to time owned by the issuer or the guarantors may not be perfected if the collateral trustee has not taken the actions necessary to perfect any of those liens upon or prior to the issuance of the Second Lien Exchange Notes. The inability or failure of the collateral trustee to promptly take all actions necessary to create properly perfected security interests in the collateral may result in the loss of the priority, or a defect in the perfection, of the security interest for the benefit of the noteholders to which they would have been otherwise entitled.
 
In addition, applicable law requires that certain property and rights acquired after the grant of a general security interest can only be perfected at the time such property and rights are acquired and identified. We cannot assure you that the collateral trustee will monitor, or that the issuer or the guarantors will inform such collateral trustee of, the future acquisition of property and rights that constitute collateral, and that the necessary action will be taken to properly perfect the security interest in such after acquired collateral. The collateral trustee for the Second Lien Exchange Notes has no obligation to monitor the acquisition of additional property or rights that constitute collateral or the perfection of any security interest. Such failure may result in the loss of the security interest in the collateral or the priority of the security interest in favor of the Second Lien Exchange Notes and the note guarantees against third parties.
 
The security interest of the collateral trustee will be subject to practical challenges generally associated with the realization of security interests in the collateral. For example, the collateral trustee may need to obtain the consent of a third party to obtain or enforce a security interest in an asset. The issuer cannot assure you that the collateral trustee will be able to obtain any such consent or that the consents of any third parties will be given when required to facilitate a foreclosure on such assets. As a result, the collateral trustee may not have the ability to foreclose upon those assets and the value of the collateral may significantly decrease. In addition, if the collateral trustee forecloses on our assets, including our stock or the stock of our subsidiaries, it may constitute a change of control or assignment under our long-term contracts with our customers, and the counterparties may be entitled to amend or terminate the contracts, which could adversely affect the value of the collateral.
 

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The ability of the collateral agent to realize upon the capital stock securing the Second Lien Exchange Notes will be automatically limited to the extent the pledge of such capital stock would require the filing with the SEC of separate financial statements for any of our subsidiaries.
 
Under Rule 3-16 of Regulation S-X, if the par value, book value as carried by us or market value (whichever is greatest) of the capital stock of any subsidiary of Parent pledged as part of the collateral is greater than or equal to 20% of the aggregate principal amount of the Second Lien Exchange Notes then outstanding that are then registered or being registered, such subsidiary would be required to provide separate financial statements to the SEC. As a result, the Indenture and the related security documents provide that to the extent that separate financial statements of any of Parent's subsidiaries would be required by the rules of the SEC due to the fact that such subsidiary's capital stock secures registered notes, the pledge of such capital stock constituting collateral securing such registered notes will automatically be limited such that the value of the portion of such capital stock that the trustee of the registered notes may realize upon will, in the aggregate, be less than 20% of the aggregate principal amount of the then outstanding registered notes. See “Description of Second Lien Notes-Security-Release of Liens.” As a result, holders of the Second Lien Exchange Notes could lose the benefit of a portion or all of the security interest securing the Second Lien Exchange Notes in the capital stock or other securities of those subsidiaries. It may be more difficult, costly and time-consuming for the collateral agent to foreclose on the assets of a subsidiary than to foreclose on its capital stock or other securities, so the proceeds realized upon any such foreclosure could be significantly less than those that would have been received upon any sale of the capital stock or other securities of such subsidiary.
 
Security over all of the collateral may not be in place upon the date of issuance of the Second Lien Exchange Notes or may not be perfected on such date.
 
Certain security interests, including mortgages and related documentation, may not be in place on the date of issuance of the notes or will not be perfected on such date. We will be required to file or cause to filed financing statement's under the Uniform Commercial Code to perfect the security interests that can be perfected by such filings. We will be required to use commercially reasonable efforts to have all security interests that are required to be perfected by the security documents to be in place perfected no later than 90 days after the date of issuance of the secured priority notes, and to continue to use commercially reasonable efforts to take such actions to the extent such security interest has not been granted within 90 days after the date of issuance of the secured priority notes. Any issues that we are not able to resolve in connection with the delivery and recordation of such mortgages and security interests may negatively impact the value of the collateral To the extent a security interest in certain collateral is perfected following the date of issuance of the notes, or otherwise it might be avoidable in bankruptcy. See “-Any future pledge of collateral might be avoidable in bankruptcy.”
 
Bankruptcy laws may limit your ability to realize value from the collateral.
 
The right of the collateral agent to repossess and dispose of the collateral or to take certain other actions upon the occurrence of an event of default under the Second Lien Exchange Notes indenture or otherwise is likely to be significantly impaired or otherwise prohibited by applicable bankruptcy law if a bankruptcy case were to be commenced by or against the issuer and/or any guarantor before the collateral agent repossessed and disposed of the collateral and/or took certain other actions. Upon the commencement of a case under the bankruptcy code, a secured creditor such as the collateral agent is prohibited from repossessing its security from a debtor in a bankruptcy case, from disposing of security repossessed from such debtor, and/or taking certain other actions without bankruptcy court approval, which may not be given depending on the circumstances. Moreover, the bankruptcy code permits the debtor to continue to retain and use collateral even though the debtor is in default under the applicable debt instruments or otherwise, provided that the secured creditor is given “adequate protection” under the bankruptcy code. The meaning of the term “adequate protection” may vary according to circumstances and the particular bankruptcy court, but it is intended in general to protect the value of the secured creditor's interest in the collateral and may include cash payments or the granting of additional security if and at such times as the bankruptcy court in its discretion determines that the value of the secured creditor's interest in the collateral is declining during the pendency of the bankruptcy case or for certain other reasons. A bankruptcy court may determine that a secured creditor may not require actual monetary or other compensation for a diminution in the value of its collateral or other adequate protection if the value of the collateral exceeds the debt it secures or for other reasons.
 
In view of the lack of a precise definition of the term “adequate protection” and the broad discretionary power of a bankruptcy court with respect to what may be adequate protection and in general, it is impossible to predict:
 
how long payments, if any, under the Second Lien Exchange Notes could be delayed following commencement of a bankruptcy case;
 
whether or when the collateral agent could repossess or dispose of the collateral;

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the value of the collateral at the time of the filing of the bankruptcy petition or some other relevant time thereafter; or
 
whether or to what extent holders of the Second Lien Exchange Notes would be compensated for any delay in payment or loss of value of the collateral through the requirement of “adequate protection” or otherwise.
 
In addition, the intercreditor agreement provides that, in the event of a bankruptcy, the trustee and the collateral agent may not object to a number of important matters following the filing of a bankruptcy petition so long as any first priority lien obligations are outstanding and other conditions set forth in the intercreditor agreement are met. After such a filing, the value of the collateral securing the Second Lien Exchange Notes could materially deteriorate because of such restrictions and the holders of the Second Lien Exchange Notes would be unable to raise an objection or take certain other actions. The right of the holders of obligations secured by first priority liens on the collateral to foreclose upon and sell the collateral upon the occurrence of an event of default or otherwise also would be subject to limitations under applicable bankruptcy laws if we or any of our subsidiaries becomes subject to a bankruptcy proceeding.
 
Any disposition of the collateral during a bankruptcy case would also require permission from the bankruptcy court. Furthermore, in the event a bankruptcy court determines the value of the collateral is not sufficient to repay all amounts due on first priority lien debt and, thereafter, the Second Lien Exchange Notes, the holders of the Second Lien Exchange Notes would hold a secured claim only to the extent of the value of the collateral to which the holders of the Second Lien Exchange Notes are entitled and unsecured claims with respect to such shortfall or deficiency, unless the holders of the Second Lien Exchange Notes were to elect otherwise under section 1111(b) of the bankruptcy code, in which case such holders would not be able to assert any such unsecured deficiency claims but rather would retain their entire secured claim. The bankruptcy code only permits the payment and accrual of post-petition interest, costs and attorney's fees to a secured creditor during a debtor's bankruptcy case to the extent the value of its collateral is determined by the bankruptcy court to exceed the aggregate outstanding principal amount of the obligations secured by the collateral, and the intercreditor agreement would require holders of the Second Lien Exchange Notes to turnover any recoveries to the holders of the first priority lien obligations if collateral value were insufficient and post-petition interest or other adequate protection were not provided to the holders of the first priority lien obligations. In such instance, any recovery for holders of the Second Lien Exchange Notes would be reduced.

Chiron Guernsey Holdings L.P. Inc., Chiron Guernsey GP Co. Limited, and Centaur Guernsey L.P. Inc. are subject to insolvency laws in the Island of Guernsey which may not be as favorable to unsecured creditors as insolvency laws in other jurisdictions.
Chiron Guernsey Holdings L.P. Inc., Chiron Guernsey GP Co. Limited, and Centaur Guernsey L.P. Inc. are incorporated or registered under the laws of the Island of Guernsey and insolvency proceedings with respect to each of these companies or limited partnerships could be required to proceed under the laws of the Island of Guernsey. In the event that insolvency proceedings with respect to a Guernsey company or limited partnership could proceed under the laws of more than one jurisdiction, a Guernsey Court would consider the question of which jurisdiction is the most appropriate center for the main insolvency proceedings and what level of international assistance may be appropriate to offer another jurisdiction seized of insolvency proceedings, based on common law principles.
Under certain circumstances a court could cancel the Exchange Notes or the related guarantees under fraudulent conveyance laws.
The issuer’s issuance of the Exchange Notes and the related guarantees may be subject to review under federal or state fraudulent transfer or conveyance law or similar laws. If the issuer becomes a debtor in a case under the bankruptcy code or encounters other financial difficulty, a court might avoid or cancel its obligations under the Exchange Notes. The court might do so, if it found that, when the issuer issued the Exchange Notes, (i) it received less than reasonably equivalent value or fair consideration and (ii) the issuer (1) was rendered insolvent, (2) was left with inadequate capital to conduct its business or (3) believed or reasonably should have believed that it would incur debts beyond its ability to pay. The court could also avoid the Exchange Notes, without regard to factors (i) and (ii), if it found that the issuer’s issued the Exchange Notes with actual intent to hinder, delay or defraud the issuer’s creditors.
Similarly, if one of the guarantors becomes a debtor in a case under the bankruptcy code or encounters other financial difficulty, a court might avoid or cancel its guarantee if it finds that when such guarantor issued its guarantee (or in some jurisdictions, when payments became due under the guarantee), factors (i) and (ii) above applied to such guarantor, such guarantor was a defendant in an action for money damages or had a judgment for money damages docketed against it (if, in either case, after final judgment the judgment is unsatisfied), or without regard to factors (i) and (ii), if it found that such guarantor issued its guarantee with actual intent to hinder, delay or defraud its creditors.

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In addition, a court could avoid or undo any payment by the issuer or any guarantor pursuant to the Exchange Notes or a guarantee, and require the disgorgement and return to the issuer or guarantor of any payment or the return of any realized value to the issuer or the guarantor, as each case may be, or to a fund for the benefit of the creditors of the issuer or the guarantor. In addition, under inappropriate circumstances, a court could subordinate rather than avoid obligations under the Exchange Notes or the guarantees, and in that event, the guarantees would be subordinated (including structurally) to all of that guarantor’s other debt. If the court were to avoid, cancel or subordinate any guarantee, funds may not be available to pay the Exchange Notes from another guarantor or from any other source.
The test for determining solvency for purposes of the foregoing and below will vary depending on the law of the jurisdiction being applied. In general, a court would consider an entity insolvent either if the sum of its existing debts exceeds the fair value of all of its property, or its assets’ present fair saleable value is less than the amount required to pay the probable liability on its existing debts as they become due. For this analysis, “debts” includes contingent and unliquidated debts. A court could also find that an entity was insolvent if it either was engaged in business or a transaction, or was about to engaged in business or a transaction, with unreasonably small capital, or it intended to incur, or believed that it would incur, debts beyond its ability to pay as such debts matured.
The Indentures will limit the liability of each guarantor on its guarantee to the maximum amount that such guarantor can incur without risk that its guarantee will be subject to avoidance as a fraudulent transfer. This limitation will not necessarily protect such guarantees from fraudulent transfer challenges or, if it does, that the remaining amount due and collectible under the guarantees would suffice, if necessary, to pay the Exchange Notes in full when due. It is not clear, however, whether those limits would ultimately be adhered to or otherwise enforceable.
If a court avoided the issuer’s obligations under the Exchange Notes and the obligations of all of the guarantors under their guarantees, you could cease to be the issuer’s creditor or creditor of the guarantors and would likely have no source from which to recover amounts due under the Exchange Notes. Even if the guarantee of a guarantor is not avoided as a fraudulent transfer, a court may subordinate the guarantee to that guarantor’s other debt, and in that event, the guarantees would be subordinated (including structurally) to all of that guarantor’s other debt.
Your right to receive payments on the Exchange Notes will be effectively subordinated to the right of lenders who have a security interest in our assets to the extent of the value of those assets.
Subject to the restrictions in the Indenture, we may incur significant additional indebtedness secured by assets. If we are declared bankrupt or insolvent, or if we default under any of our existing or future indebtedness, including our Credit Facilities, that are secured by assets, the holders of such indebtedness could declare all of the funds borrowed thereunder, together with accrued interest, immediately due and payable. If we were unable to repay such indebtedness, the holders of such indebtedness could foreclose on such assets to the exclusion of holders of the Exchange Notes, even if an event of default exists under the Indenture at such time. Furthermore, if the holders of such indebtedness foreclose and sell the equity interests in any guarantor under the Exchange Notes, then that guarantor will be released from its guarantee of the Exchange Notes automatically and immediately upon such sale. In any such event, because the Exchange Notes will not be secured by such assets or the equity interests in guarantors, it is possible that there would be no assets remaining from which your claims could be satisfied or, if any assets remained, they might be insufficient to satisfy your claims fully.
The Exchange Notes will be effectively subordinated to the claims of the creditors of non-guarantor subsidiaries.
We conduct a substantial portion of our business through our subsidiaries. Certain of our subsidiaries do not guarantee the Exchange Notes. Claims of creditors of our non-guarantor subsidiaries, including trade creditors, will generally have priority with respect to the assets and earnings of such subsidiaries over the claims of our creditors, including holders of the Exchange Notes. The Indenture permits the incurrence of certain additional indebtedness by our non-guarantor subsidiaries in the future.
Upon a Trigger Event, Centaur, US Holdco, Holdings and, in certain circumstances, LifeCell will no longer guarantee the Exchange Notes.
We may be unable to repurchase the Exchange Notes upon a change of control.
Upon the occurrence of specified kinds of change of control events, we will be required to offer to repurchase all outstanding Exchange Notes at a price equal to 101% of the principal amount of the Exchange Notes, together with accrued and unpaid interest to the date of repurchase.

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However, it is possible that we will not have sufficient funds at the time of the change of control to make the required repurchase of the Exchange Notes. If we are required to repurchase the Exchange Notes, we would probably require third party financing. We cannot be sure that we would be able to obtain third party financing on acceptable terms, or at all.
One of the circumstances under which a change of control may occur is upon the sale or disposition of all or substantially all of our assets. However, the phrase “all or substantially all” will likely be interpreted under applicable state law and will be dependent upon particular facts and circumstances. As a result, there may be a degree of uncertainty in ascertaining whether a sale or disposition of “all or substantially all” of our capital stock or assets has occurred, in which case, the ability of a holder of the Exchange Notes to obtain the benefit of an offer to repurchase all of a portion of the Exchange Notes held by such holder may be impaired. See “Description of Second Lien Exchange Notes— Change of Control,” “Description of Senior Exchange Notes— Change of Control,” “Description of Second Lien Exchange Notes—Limitation on Sales of Assets and Subsidiary Stock” and “Description of Senior Exchange Notes—Limitation on Sales of Assets and Subsidiary Stock.”
It is also possible that the events that constitute a change of control may also be events of default under our Credit Facilities, the Old Notes and/or our senior notes. These events may permit the lenders under our Credit Facilities and lenders and/or holders of our Old Notes or senior notes to accelerate the indebtedness outstanding thereunder. If we are required to repurchase the Exchange Notes pursuant to a change of control offer and repay certain amounts outstanding under our Credit Facilities, our Old Notes and/or our senior notes if such indebtedness is accelerated, we would probably require third- party financing. We cannot be sure that we would be able to obtain third-party financing on acceptable terms, or at all. If the indebtedness under our Credit Facilities and/or our Old Notes is not paid, the lenders thereunder may seek to enforce security interests in the collateral securing such indebtedness, thereby limiting our ability to raise cash to purchase the Exchange Notes, and reducing the practical benefit of the offer to purchase provisions to the holders of the Exchange Notes. Any future debt agreements may contain similar provisions.
Also, if specified kinds of change of control events occur, we will have to make a change of control offer and might incur change of control refinancing indebtedness to repurchase all or a portion of the Exchange Notes validly tendered in connection therewith. If the aggregate principal amount of the change of control refinancing indebtedness that is outstanding at any time exceeds the aggregate principal amount of the remaining Exchange Notes that are outstanding at such time, the holders of the change of control refinancing indebtedness will, subject to the terms of the intercreditor agreement (if then outstanding), control all decisions regarding amendments, waivers and other modifications to such security documents as well as directions to be provided to the collateral agent with respect to the taking or its refraining from taking any action with respect to the collateral.
If the Exchange Notes are rated investment grade by both Standard & Poor’s and Moody’s, certain covenants contained in the Indenture will be suspended and you will lose the protection of these covenants unless or until the Exchange Notes subsequently fall back below investment grade.
The Indenture contains certain covenants that will be suspended for so long as the Exchange Notes are rated investment grade by both Standard & Poor’s Ratings Services and Moody’s Investors Service, Inc. These covenants restrict, among other things, our and our restricted subsidiaries’ ability to:
incur additional indebtedness or issue preferred stock;
make distributions or other restricted payments;
sell capital stock or other assets;
engage in transactions with affiliates; and
designate our subsidiaries as unrestricted.
Because these restrictions will not apply when the Exchange Notes are rated investment grade, we will be able to incur additional debt and consummate transactions that may impair our ability to satisfy our obligations with respect to the Exchange Notes. In addition, we will not have to make certain offers to repurchase the Exchange Notes. These covenants will only be restored if the credit ratings assigned to the Exchange Notes later fall below investment grade.

36


Ratings of the Exchange Notes may affect the market price and marketability of the Exchange Notes.
The Exchange Notes have been rated by Standard & Poor’s Ratings Services and Moody’s Investors Service, Inc. These ratings are limited in scope and do not address all material risks relating to an investment in the Exchange Notes, but rather reflect only the view of each rating agency at the time the rating is issued. An explanation of the significance of such rating may be obtained from such rating agency. There is no assurance that such credit ratings will remain in effect for any given period of time or that such ratings will not be lowered, suspended or withdrawn entirely by the ratings agencies, if, in each rating agency’s judgment, circumstances so warrant. It is also possible that such ratings may be lowered in connection with the application of the proceeds of this offering or in connection with future events, such as future acquisitions. Holders of Exchange Notes will have no recourse against us or any other parties in the event of a change in or suspension or withdrawal of such ratings. Any lowering, suspension or withdrawal of such ratings may have an adverse effect on the market price or marketability of the Exchange Notes.
Our principal equity holders’ interests may conflict with yours.
The Sponsors beneficially (directly and indirectly) own a substantial majority of our outstanding stock. As a result, the Sponsors are in a position to control all matters affecting us, including decisions regarding extraordinary business transactions, fundamental corporate transactions, appointment of members of our management, election of directors and our corporate and management policies.
The interests of the Sponsors could conflict with your interests. For example, if we encounter financial difficulties or are unable to pay our debts as they mature, the interests of the Sponsors might conflict with your interests as a holder of the Exchange Notes. The Sponsors may also have an interest in pursuing acquisitions, divestitures, financings or other transactions that, in their judgment, could enhance their equity investments, even though such transactions might involve risks to you as a holder of the Exchange Notes. See “Certain Relationships and Related Party Transactions” and “Security Ownership.”
Your ability to transfer the notes may be limited by the absence of an active trading market and an active trading market may not develop for the notes.
The notes will be a new issue of securities for which there is no established trading market for them or for the Old Notes. We do not intend to list the notes or any exchange notes on any national securities exchange or include the notes or any exchange notes in any automated quotation system. You may not be able to sell your notes at a particular time or at favorable prices. Therefore, an active market for the notes or the exchange notes may not develop or be maintained, which would adversely affect the market price and liquidity of the notes or the exchange notes. In that case, the holders of the Old Notes or the Exchange Notes may not be able to sell their notes at a particular time or at a favorable price. Accordingly, you may be required to bear the financial risk of your investment in the Exchange Notes indefinitely. The liquidity of any market for the notes will depend on a number of factors, including:
the number of holders of notes;
our operating performance and financial condition;
our ability to complete the offer to exchange the notes for the exchange notes;
the market for similar securities;
the interest of securities dealers in making a market in the notes;
prevailing interest rates; and
the aggregate principal amount of notes outstanding.
Even if an active trading market for the the Exchange Notes does develop, there is no guarantee that it will continue. Historically, the market for non-investment grade debt has been subject to severe disruptions that have caused substantial volatility in the prices of securities similar to the Exchange Notes. The market, if any, for the Exchange Notes may experience similar disruptions, and any such disruptions may adversely affect the liquidity in that market or the prices at which you may sell your Exchange Notes. In addition, subsequent to their initial issuance, the Exchange Notes may trade at a discount from their initial offering price, depending upon prevailing interest rates, the market for similar notes, our performance and other factors.

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Holders of Old Notes who fail to exchange their Old Notes in the exchange offer will continue to be subject to restrictions on transfer.
If you do not exchange your Old Notes for Exchange Notes in the exchange offer, you will continue to be subject to the restrictions on transfer applicable to the Old Notes. The restrictions on transfer of your Old Notes arise because we issued the Old Notes under exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, you may only offer or sell the Old Notes if they are registered under the Securities Act and applicable state securities laws, or offered and sold under an exemption from these requirements. We do not plan to register the Old Notes under the Securities Act. For further information regarding the consequences of tendering your Old Notes in the exchange offer, see the discussion below under the caption “Exchange Offer—Consequences of Failure to Exchange.”
You must comply with the exchange offer procedures in order to receive new, freely tradable Exchange Notes.
Delivery of Exchange Notes in exchange for Old Notes tendered and accepted for exchange pursuant to the exchange offer will be made only after timely receipt by the exchange agent of book-entry transfer of Old Notes into the exchange agent’s account at DTC, as depositary, including an Agent’s Message (as defined herein). We are not required to notify you of defects or irregularities in tenders of Old Notes for exchange. Exchange Notes that are not tendered or that are tendered but we do not accept for exchange will, following consummation of the exchange offer, continue to be subject to the existing transfer restrictions under the Securities Act and, upon consummation of the exchange offer, certain registration and other rights under the Registration Rights Agreements will terminate. See “Exchange Offer—Procedures for Tendering Old Notes” and “Exchange Offer—Consequences of Failure to Exchange.”
Some holders who exchange their Old Notes may be deemed to be underwriters, and these holders will be required to comply with the registration and prospectus delivery requirements in connection with any resale transaction.
If you exchange your Old Notes in the exchange offer for the purpose of participating in a distribution of the Exchange Notes, you may be deemed to have received restricted securities and, if so, will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction.
If we file a bankruptcy petition, or if a bankruptcy petition is filed against us, you may receive a lesser amount for your claim under the notes than you would have been entitled to receive under the Indenture governing the notes.
If we file a bankruptcy petition under the bankruptcy code after the issuance of the Exchange Notes, or if such a bankruptcy petition is filed against us, your claim against us for the principal amount of your Exchange Notes may be limited to an amount equal to:
the original issue price for the Exchange Notes; and
the portion of original issue discount that does not constitute “unmatured interest” for purposes of the bankruptcy code.
Any original issue discount that was not amortized as of the date of any bankruptcy filing would constitute unmatured interest. Accordingly, under these circumstances, you may receive a lesser amount than you would have been entitled to receive under the terms of the Indenture governing the Exchange Notes, even if sufficient funds are available.

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USE OF PROCEEDS
This exchange offer is intended to satisfy our obligations under the Registration Rights Agreements. We will not receive any cash proceeds from the issuance of the Exchange Notes. In consideration for issuing the Exchange Notes contemplated in this prospectus, we will receive outstanding securities in like principal amount, the form and terms of which are substantially the same as the form and terms of the Exchange Notes, except as otherwise described in this prospectus. The Old Notes surrendered in exchange for the Exchange Notes will be retired and canceled. Accordingly, no additional debt will result from the exchange offer. We will bear the expense of the exchange offer.


CAPITALIZATION
The following table sets forth our unaudited consolidated cash and cash equivalents and capitalization as of June 30, 2012 on an actual basis.
The information in this table is presented and should be read in conjunction with the information under “Use of Proceeds,” “Unaudited Pro Forma Condensed Consolidated Financial Information,” “Selected Historical Consolidated Financial and Other Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Description of Certain Indebtedness” and the historical financial statements and related notes included elsewhere in this prospectus.
 
As of June 30, 2012
(dollars in millions)
Actual
Cash and cash equivalents
$
236

Debt:
 
Term Loan Facility(1)   
$
2,258

Revolving Credit Facility(1)   

Old Second Lien Notes(2)   
1,750

3.25% Convertible Senior Notes
1

Less: original issue discount on Term Loan Facility
and the second lien notes
(105
)
Total secured debt
3,904

Old Senior Notes (3)   
750

Less: original issue discount on Old Senior Notes
(4
)
Total debt
4,650

Total shareholders’ equity
1,446

Total capitalization   
$
6,096

    
(1)
The Credit Facilities consists of (i) the Dollar Term B-1 Facility in an aggregate amount of $1,622 million, (ii) the Euro Term B-1 Facility in an aggregate amount of €249 million, (iii) the Term B-2 Facility in an aggregate amount of $323 million and (iv) the Revolving Credit Facility with a five-year maturity, providing for up to $200 million of revolving extensions of credit outstanding at any time (including revolving loans, swingline loans and letters of credit), excluding original issue discount.
(2)
The Old Second Lien Notes consist of $1,750 million aggregate principal amount of 10.5% second lien notes, excluding original issue discount.
(3)
The Old Senior Notes consist of $750 million aggregate principal amount of 12.5% senior notes, excluding original issue discount.


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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Merger Completed November 2011
The following pro forma condensed consolidated financial information has been developed by applying pro forma adjustments to the historical audited consolidated financial statements of Centaur included elsewhere in this prospectus. The unaudited pro forma condensed consolidated statement of operations of Centaur is presented to show how Centaur might have looked if the Merger had occurred on January 1, 2011.
The unaudited pro forma condensed consolidated statement of operations includes unaudited pro forma adjustments that are factually supportable and directly attributable to the Merger. In addition, the unaudited pro forma adjustments are expected to have a continuing impact on the consolidated results. The unaudited pro forma condensed consolidated statement of operations was prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805—Business Combinations and are based on KCI’s historical audited statement of operations for the period from January 1, 2011 through November 3, 2011, and Centaur's historical audited statement of operations for the period from November 4, 2011 through December 31, 2011.
The unaudited pro forma condensed consolidated statement of operations does not include the following non-recurring items: (i) transaction costs associated with the Merger that are no longer capitalized as part of the acquisition; (ii) the write-off of previous debt issuance costs; and (iii) the additional expense associated with accelerated vesting of share-based compensation.
For purposes of preparing the unaudited pro forma condensed consolidated statement of operations, the Merger has been accounted for using the acquisition method of accounting which is based on ASC 805 which requires recognition and measurement of all identifiable assets acquired and liabilities assumed at their full fair value as of the date control is obtained. The valuation of the tangible and identifiable intangible assets acquired and liabilities assumed was used by management to prepare the unaudited condensed consolidated financial information. The unaudited pro forma condensed consolidated statement of operations is presented for informational purposes only. The unaudited pro forma condensed consolidated statement of operations does not purport to represent what our results of operations would have been had the Merger actually occurred on the date indicated, nor does it purport to project our results of operations for any future period. The unaudited pro forma condensed consolidated statement of operations should be read in conjunction with the information included under the headings “Selected Historical Consolidated Financial and Other Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the consolidated financial statements of Centaur included elsewhere in this prospectus. All pro forma adjustments and their underlying assumptions are described more fully in the notes to our unaudited pro forma condensed consolidated statement of operations.


40


CENTAUR GUERNSEY L.P. INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year ended December 31, 2011
(in thousands)
 
Period from
November 4
through
December 31, 2011
 
Period from
January 1 through November 3, 2011
 
Pro forma adjustments
 
Pro forma
year ended December 31, 2011
 
Successor
 
Predecessor
 
 
Revenue:
 
 
 
 
 
 
 
Rental
$
175,566

 
$
925,892

 
$

 
$
1,101,458

Sales
171,690

 
792,230

 

 
963,920

Total revenue   
347,256

 
1,718,122

 

 
2,065,378

 
 
 
 
 
 
 
 
Rental expenses
109,460

 
479,121

 
118,268
 (a)
 
706,849

Cost of sales
48,520

 
205,377

 
25,021
 (b)
 
278,918

Gross profit   
189,276

 
1,033,624

 
(143,289
)
 
1,079,611

 
 
 
 
 
 
 
 
Selling, general and administrative expenses
222,693

 
594,157

 
(197,837
) (c)
 
619,013

Research and development expenses
16,114

 
75,953

 

 
92,067

Acquired intangible asset amortization
16,678

 
29,518

 
162,561
 (c)
 
208,757

Operating earnings (loss)
(66,209
)
 
333,996

 
(108,013
)
 
159,774

 
 
 
 
 
 
 
 
Interest income and other
148

 
972

 
(1,070
) (d)
 
50

Interest expense
(114,992
)
 
(61,931
)
 
(307,813
) (e)
 
(484,736
)
Foreign currency gain (loss)
22,250

 
(2,778
)
 

 
19,472

Earnings (loss) before income taxes   
(158,803
)
 
270,259

 
(416,896
)
 
(305,440
)
Income tax expense (benefit)
(43,934
)
 
79,321

 
(152,981
) (f)
 
(117,594
)
Net earnings (loss)   
$
(114,869
)
 
$
190,938

 
$
(263,915
)
 
$
(187,846
)


41


NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
Note 1—Basis of Presentation
On November 4, 2011, KCI completed the Merger with Merger Sub, a direct subsidiary of Holdings and an indirect subsidiary of Centaur, pursuant to the terms of the Agreement and Plan of Merger, dated as of July 12, 2011, by and among Holdings, Merger Sub and KCI.

The Merger has been accounted for as a business combination using the acquisition method. The allocation of the total purchase price to KCI’s and LifeCell’s tangible and identifiable intangible assets was finalized during the third quarter of 2012 and was based on their estimated fair values as of the acquisition date. The excess of the purchase price over the identifiable intangible and net tangible assets, in the amount of $3.5 billion, was allocated to goodwill, which is not deductible for tax purposes.

The following tables represent the calculation of the total purchase price and the allocation of the purchase price (dollars in thousands):

(in thousands)
 
Cash used to acquire equity
$
5,185,359

Cash and cash equivalents
(711,885
)
         Total purchase price
$
4,473,474

 
 
Goodwill
$
3,471,907

Identifiable intangible assets
2,890,570

Tangible assets acquired and liabilities assumed:
 
   Accounts receivable
403,677

   Inventories
194,628

   Other current assets
43,919

   Property, plant and equipment
596,985

   Other non-current assets
15,177

   Current liabilities
(328,000
)
   Long-term debt and other non-current liabilities
(1,502,318
)
   Noncurrent tax liabilities
(38,252
)
   Net deferred tax liability
(1,274,819
)
         Total purchase price
$
4,473,474



42


Note 2—Pro Forma Adjustments and Assumptions
Adjustments included in the column under the heading “Pro forma adjustments” are related to the following:
(a)
Reflects the estimated additional depreciation expense resulting from the step up in value of equipment for short-term rental. Equipment for short-term rental is a component of property, plant and equipment. The estimated additional depreciation was calculated on a straight-line basis using the estimated remaining useful lives of the equipment for short-term rental.
(b)
Reflects the estimated additional cost of sales resulting from the sale of inventory at its estimated fair value. The estimated additional cost of sales was calculated based on the estimated number of inventory turns during the period.
(c)
Represents the estimated Sponsor advisory fee as further discussed in “Certain Relationships and Related Party Transactions,” the adjustment for depreciation expense based on the estimated fair value and estimated remaining useful lives of property, plant and equipment other than equipment for short-term rental, the elimination of nonrecurring transaction related costs and equity-based compensation expense directly associated with the Merger, and the net adjustments to amortization expense related to the change in fair value or new identifiable intangible assets acquired in the Merger from those being amortized in association with KCI’s acquisition of LifeCell in 2008. The revised amortization expense was calculated using the range of estimated useful lives of 2 to 20 years. The amounts allocated to the identifiable intangible assets and the estimated useful lives are based on fair value estimates under the guidance of ASC 805. The purchase price allocation was made only for the purpose of presenting unaudited pro forma condensed consolidated financial information. The calculation of the net adjustments to Selling, General and Administrative Expenses and Acquired Intangible Asset Amortization is as follows:
(in thousands)
Year ended
December 31,
2011
Estimated Sponsor advisory fee
$
5,149

Adjustment for additional depreciation expense associated with the step up of property, plant and equipment
12,429

Elimination of nonrecurring transaction related costs and acceleration of equity-based compensation expense directly associated with the Merger
(200,615
)
Elimination of pre-Merger amortization expense classified as Selling, General and Administrative Expenses
(14,800
)
Net adjustments to Selling, General and Administrative Expenses
$
(197,837
)
 
 
Additional amortization expense for acquired identifiable intangible assets
$
192,079

Elimination of pre-Merger amortization expense included in Acquired Intangible Asset Amortization
(29,518
)
Net adjustments to Acquired Intangible Asset Amortization
$
162,561


(d)
Represents the reduction of interest income based on the historical cash balance as of January 1, 2011.

43


(e)
Reflects cash interest expense, discount amortization and debt issuance cost amortization associated with the following debt transactions:
(in thousands)
Year ended
December 31,
2011
Pro forma interest expense related to the Credit Facilities of $2,300 million (including borrowings on the revolver as applicable) and the second lien notes of $1,750 million and the senior notes of $750 million (a 1/8% increase or decrease in our assumed interest rate would result in a corresponding change in our annual interest expense by $6.0 million)
$
470,466

Elimination of interest expense related to long-term debt repaid from proceeds from the Merger, elimination of the write-off of previously-existing debt issuance costs, and the elimination of post-Merger interest expense included in the full-year pro forma interest expense disclosed above
(162,653
)
Net adjustments
$
307,813


(f)
Reflects the impact of the net tax benefit arising from the acquisition.

NONRECURRING CHARGES
The pro forma condensed consolidated statement of operations for the year ended December 31, 2011, does not reflect the impact of $145.6 million of transaction costs and the acceleration of $55.0 million of equity-based compensation expense directly related to the transaction or the write-off of $69.6 million of previously-existing debt issuance costs on interest expense. Under SEC rules and regulations relating to pro forma financial statements, these amounts are considered to be nonrecurring charges and are excluded from the pro forma statement of operations. However, Centaur’s historical statements of operations were impacted by these pro forma adjustments.

44


Sale of Therapeutic Support Systems Assets

On August 15, 2012, we announced that we had entered into an asset purchase agreement (the “Agreement”) with Getinge AB (“Getinge”). Under the terms of the Agreement, Getinge will purchase certain assets and assume certain liabilities, including our Therapeutic Support Systems™ (“TSS”) product portfolio. In addition, Getinge has also agreed to offer employment to TSS employees and the Company has agreed to provide transition services to Getinge after the close of the transaction. The closing of the transaction, which is targeted in the fourth quarter of 2012, is subject to the satisfaction of customary closing conditions. Following the close of the transaction, the historical results of operations of the disposal group will be reported as discontinued operations.

The following pro forma condensed consolidated financial information has been developed by applying pro forma adjustments to the individual historical audited and unaudited consolidated financial statements of Centaur included elsewhere in this prospectus. The unaudited pro forma condensed consolidated financial information of Centaur is presented to show how the historical financial statements of Centaur might have looked had the Agreement been entered into prior to June 30, 2012.

The unaudited pro forma condensed consolidated financial information includes unaudited pro forma adjustments that are factually supportable and directly attributable to the transaction. The unaudited pro forma condensed consolidated financial information was prepared in conformity with GAAP and is based on KCI’s historical audited financial statements for the years ended December 31, 2009 and 2010 and the period from January 1, 2011 through November 3, 2011, KCI’s historical unaudited financial statements for the three months and six months ended June 30, 2011, Centaur's audited financial statements for the period from November 4, 2011 through December 31, 2011 and Centaur's historical unaudited financial statements as of and for the three months and six months ended June 30, 2012.

The unaudited pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable under the circumstances. The unaudited pro forma condensed consolidated financial information is presented for informational purposes only and does not purport to represent what our results of operations or financial condition would have been had the transaction actually occurred on the dates indicated, nor do they purport to project our results of operations or financial condition for any future period or as of any future date. The unaudited pro forma condensed consolidated financial information should be read in conjunction with the information included under the headings “Selected Historical Consolidated Financial and Other Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the consolidated financial statements of Centaur included elsewhere in this prospectus. All unaudited pro forma adjustments and their underlying assumptions are described more fully in the notes to our unaudited pro forma condensed consolidated financial information.



45



CENTAUR GUERNSEY L.P. INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of June 30, 2012
(in thousands)
 
June 30, 2012
 
Pro forma
adjustments (a)
 
Pro forma
June 30, 2012
Assets:
 
 
 
 
 
Current assets:
 
 
 
 
 
Cash and cash equivalents
$
235,748

 
$

 
$
235,748

Accounts receivable, net
376,975

 

 
376,975

Inventories, net
154,992

 
(23,436
)
 
131,556

Deferred income taxes
18,706

 
(1,727
)
 
16,979

Prepaid expenses and other
47,352

 
(2,332
)
 
45,020

Assets held for sale

 
106,913

 
106,913

Total current assets
833,773

 
79,418

 
913,191

Net property, plant and equipment
498,647

 
(63,458
)
 
435,189

Debt issuance costs, net
102,373

 

 
102,373

Deferred income taxes
20,231

 

 
20,231

Goodwill
3,471,907

 

 
3,471,907

Identifiable intangible assets, net
2,756,329

 
(15,960
)
 
2,740,369

Other non-current assets
6,490

 

 
6,490

 
$
7,689,750

 
$

 
$
7,689,750

 
 
 
 
 
 
Liabilities and Equity:
 
 
 
 
 
Current liabilities:
 
 
 
 
 
Accounts payable
$
42,966

 
$

 
$
42,966

Accrued expenses and other
314,064

 
(5,045
)
 
309,019

Current installments of long-term debt
23,399

 

 
23,399

Liabilities related to assets held for sale

 
14,161

 
14,161

Total current liabilities
380,429

 
9,116

 
389,545

Long-term debt, net of current installments and discount
4,626,385

 

 
4,626,385

Non-current tax liabilities
39,147

 

 
39,147

Deferred income taxes
1,166,120

 
(9,116
)
 
1,157,004

Other non-current liabilities
31,527

 

 
31,527

Total liabilities
6,243,608

 

 
6,243,608

Shareholders’ equity
1,446,142

 

 
1,446,142

 
$
7,689,750

 
$

 
$
7,689,750



46


CENTAUR GUERNSEY L.P. INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year ended December 31, 2009
(in thousands)
 
Year ended December 31, 2009
 
Pro forma adjustments (b)
 
Pro forma
year ended December 31, 2009
Revenue:
 
 
 
 
 
Rental
$
1,174,802

 
$
(255,443
)
 
$
919,359

Sales
813,684

 
(44,728
)
 
768,956

Total revenue   
1,988,486

 
(300,171
)
 
1,688,315

 
 
 
 
 
 
Rental expenses
640,346

 
(174,409
)
 
465,937

Cost of sales
244,784

 
(19,104
)
 
225,680

Gross profit   
1,103,356

 
(106,658
)
 
996,698

 
 
 
 
 
 
Selling, general and administrative expenses
528,150

 
(25,531
)
 
502,619

Research and development expenses
92,088

 
(475
)
 
91,613

Acquired intangible asset amortization
40,634

 

 
40,634

Operating earnings (loss) 
442,484

 
(80,652
)
 
361,832

 
 
 
 
 
 
Interest income and other
819

 

 
819

Interest expense
(104,918
)
 

 
(104,918
)
Foreign currency loss
(4,004
)
 

 
(4,004
)
Earnings from continuing operations before income taxes   
334,381

 
(80,652
)
 
253,729

 
 
 
 
 
 
Income tax expense from continuing operations
105,679

 
(12,831
)
 
92,848

Earnings from continuing operations
228,702

 
(67,821
)
 
160,881

 
 
 
 
 
 
Earnings from discontinued operations, net of tax

 
67,821

 
67,821

Net earnings
$
228,702

 
$

 
$
228,702



47


CENTAUR GUERNSEY L.P. INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year ended December 31, 2010
(in thousands)
 
Year ended December 31, 2010
 
Pro forma adjustments (b)
 
Pro forma
year ended December 31, 2010
Revenue:
 
 
 
 
 
Rental
$
1,137,232

 
$
(225,366
)
 
$
911,866

Sales
876,362

 
(44,788
)
 
831,574

Total revenue   
2,013,594

 
(270,154
)
 
1,743,440

 
 
 
 
 
 
Rental expenses
625,277

 
(156,302
)
 
468,975

Cost of sales
250,253

 
(20,732
)
 
229,521

Gross profit   
1,138,064

 
(93,120
)
 
1,044,944

 
 
 
 
 
 
Selling, general and administrative expenses
564,008

 
(33,290
)
 
530,718

Research and development expenses
90,255

 
(4,664
)
 
85,591

Acquired intangible asset amortization
37,426

 

 
37,426

Operating earnings (loss) 
446,375

 
(55,166
)
 
391,209

 
 
 
 
 
 
Interest income and other
851

 

 
851

Interest expense
(87,053
)
 

 
(87,053
)
Foreign currency loss
(4,500
)
 

 
(4,500
)
Earnings from continuing operations before income taxes   
355,673

 
(55,166
)
 
300,507

 
 
 
 
 
 
Income tax expense from continuing operations
99,589

 
(9,920
)
 
89,669

Earnings from continuing operations
256,084

 
(45,246
)
 
210,838

 
 
 
 
 
 
Earnings from discontinued operations, net of tax

 
45,246

 
45,246

Net earnings
$
256,084

 
$

 
$
256,084



48



CENTAUR GUERNSEY L.P. INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Three months ended June 30, 2011
(in thousands)
 
Three months
ended June 30,
2011
 
Pro forma adjustments (b)
 
Pro forma
three months
ended June 30,
2011
Revenue:
 
 
 
 
 
Rental
$
278,463

 
$
(53,841
)
 
$
224,622

Sales
240,330

 
(11,682
)
 
228,648

Total revenue   
518,793

 
(65,523
)
 
453,270

 
 
 
 
 
 
Rental expenses
146,353

 
(39,295
)
 
107,058

Cost of sales
60,418

 
(4,493
)
 
55,925

Gross profit   
312,022

 
(21,735
)
 
290,287

 
 
 
 
 
 
Selling, general and administrative expenses
151,118

 
(8,450
)
 
142,668

Research and development expenses
23,411

 
(1,312
)
 
22,099

Acquired intangible asset amortization
8,856

 

 
8,856

Operating earnings   
128,637

 
(11,973
)
 
116,664

 
 
 
 
 
 
Interest income and other
267

 

 
267

Interest expense
(17,157
)
 

 
(17,157
)
Foreign currency loss
(206
)
 

 
(206
)
Earnings from continuing operations before income taxes   
111,541

 
(11,973
)
 
99,568

 
 
 
 
 
 
Income tax expense from continuing operations
30,116

 
(2,195
)
 
27,921

Earnings from continuing operations
81,425

 
(9,778
)
 
71,647

 
 
 
 
 
 
Earnings from discontinued operations, net of tax

 
9,778

 
9,778

Net earnings
$
81,425

 
$

 
$
81,425





49



CENTAUR GUERNSEY L.P. INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Six months ended June 30, 2011
(in thousands)
 
Six months
ended June 30, 2011
 
Pro forma adjustments (b)
 
Pro forma
six months
ended June 30, 2011
Revenue:
 
 
 
 
 
Rental
$
556,355

 
$
(112,032
)
 
$
444,323

Sales
462,643

 
(21,118
)
 
441,525

Total revenue
1,018,998

 
(133,150
)
 
885,848

 
 
 
 
 
 
Rental expenses
296,845

 
(79,332
)
 
217,513

Cost of sales
122,137

 
(8,348
)
 
113,789

Gross profit
600,016

 
(45,470
)
 
554,546

 
 
 
 
 
 
Selling, general and administrative expenses
294,506

 
(16,719
)
 
277,787

Research and development expenses
44,594

 
(2,989
)
 
41,605

Acquired intangible asset amortization
17,712

 

 
17,712

Operating earnings
243,204

 
(25,762
)
 
217,442

 
 
 
 
 
 
Interest income and other
469

 

 
469

Interest expense
(37,997
)
 

 
(37,997
)
Foreign currency loss
(25
)
 

 
(25
)
Earnings from continuing operations before income taxes   
205,651

 
(25,762
)
 
179,889

 
 
 
 
 
 
Income tax expense from continuing operations
55,808

 
(5,802
)
 
50,006

Earnings from continuing operations
149,843

 
(19,960
)
 
129,883

 
 
 
 
 
 
Earnings from discontinued operations, net of tax

 
19,960

 
19,960

Net earnings
$
149,843

 
$

 
$
149,843




50



CENTAUR GUERNSEY L.P. INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Period from January 1, 2011 through November 3, 2011
(in thousands)
 
Period from
January 1 through November 3, 2011
 
Pro forma adjustments (b)
 
Pro forma
period from
January 1 through November 3, 2011
Revenue:
 
 
 
 
 
Rental
$
925,892

 
$
(179,089
)
 
$
746,803

Sales
792,230

 
(35,638
)
 
756,592

Total revenue   
1,718,122

 
(214,727
)
 
1,503,395

 
 
 
 
 
 
Rental expenses
479,121

 
(128,359
)
 
350,762

Cost of sales
205,377

 
(14,450
)
 
190,927

Gross profit   
1,033,624

 
(71,918
)
 
961,706

 
 
 
 
 
 
Selling, general and administrative expenses
594,157

 
(28,647
)
 
565,510

Research and development expenses
75,953

 
(6,202
)
 
69,751

Acquired intangible asset amortization
29,518

 

 
29,518

Operating earnings
333,996

 
(37,069
)
 
296,927

 
 
 
 
 
 
Interest income and other
972

 

 
972

Interest expense
(61,931
)
 

 
(61,931
)
Foreign currency loss
(2,778
)
 

 
(2,778
)
Earnings from continuing operations before income taxes   
270,259

 
(37,069
)
 
233,190

 
 
 
 
 
 
Income tax expense from continuing operations
79,321

 
(4,955
)
 
74,366

Earnings from continuing operations
190,938

 
(32,114
)
 
158,824

 
 
 
 
 
 
Earnings from discontinued operations, net of tax

 
32,114

 
32,114

Net earnings
$
190,938

 
$

 
$
190,938






51


CENTAUR GUERNSEY L.P. INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Period from November 4, 2011 through December 31, 2011
(in thousands)
 
Period from
November 4
through
December 31, 2011
 
Pro forma adjustments (b)
 
Pro forma
period from November 4 through December 31, 2011
Revenue:
 
 
 
 
 
Rental
$
175,566

 
$
(32,605
)
 
$
142,961

Sales
171,690

 
(9,889
)
 
161,801

Total revenue
347,256

 
(42,494
)
 
304,762

 
 
 
 
 
 
Rental expenses
109,460

 
(24,332
)
 
85,128

Cost of sales
48,520

 
(4,759
)
 
43,761

Gross profit
189,276

 
(13,403
)
 
175,873

 
 
 
 
 
 
Selling, general and administrative expenses
222,693

 
(4,975
)
 
217,718

Research and development expenses
16,114

 
(1,983
)
 
14,131

Acquired intangible asset amortization
16,678

 
(217
)
 
16,461

Operating earnings
(66,209
)
 
(6,228
)
 
(72,437
)
 
 
 
 
 
 
Interest income and other
148

 

 
148

Interest expense
(114,992
)
 

 
(114,992
)
Foreign currency gain
22,250

 

 
22,250

Loss from continuing operations before income taxes   
(158,803
)
 
(6,228
)
 
(165,031
)
 
 
 
 
 
 
Income tax benefit from continuing operations
(43,934
)
 
(2,398
)
 
(46,332
)
Loss from continuing operations
(114,869
)
 
(3,830
)
 
(118,699
)
 
 
 
 
 
 
Earnings from discontinued operations, net of tax

 
3,830

 
3,830

Net loss
$
(114,869
)
 
$

 
$
(114,869
)



52



CENTAUR GUERNSEY L.P. INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Three months ended June 30, 2012
(in thousands)
 
Three months
ended June 30,
2012
 
Pro forma adjustments (b)
 
Pro forma
three months
ended June 30,
2012
Revenue:
 
 
 
 
 
Rental
$
252,798

 
$
(45,296
)
 
$
207,502

Sales
242,261

 
(11,648
)
 
230,613

Total revenue   
495,059

 
(56,944
)
 
438,115

 
 
 
 
 
 
Rental expenses
162,430

 
(41,896
)
 
120,534

Cost of sales
69,683

 
(3,966
)
 
65,717

Gross profit   
262,946

 
(11,082
)
 
251,864

 
 
 
 
 
 
Selling, general and administrative expenses
161,393

 
(7,665
)
 
153,728

Research and development expenses
20,483

 
(2,941
)
 
17,542

Acquired intangible asset amortization
54,325

 
(528
)
 
53,797

Operating earnings   
26,745

 
52

 
26,797

 
 
 
 
 
 
Interest income and other
26

 

 
26

Interest expense
(134,345
)
 

 
(134,345
)
Foreign currency gain
20,421

 

 
20,421

Loss from continuing operations before income taxes   
(87,153
)
 
52

 
(87,101
)
 
 
 
 
 
 
Income tax benefit from continuing operations
(32,519
)
 
20

 
(32,499
)
Loss from continuing operations
(54,634
)
 
32

 
(54,602
)
 
 
 
 
 
 
Loss from discontinued operations, net of tax

 
(32
)
 
(32
)
Net loss
$
(54,634
)
 
$

 
$
(54,634
)




53



CENTAUR GUERNSEY L.P. INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Six months ended June 30, 2012
(in thousands)
 
Six months
ended June 30,
2012
 
Pro forma adjustments (b)
 
Pro forma
six months
ended June 30,
2012
Revenue:
 
 
 
 
 
Rental
$
509,429

 
$
(94,235
)
 
$
415,194

Sales
476,653

 
(21,199
)
 
455,454

Total revenue   
986,082

 
(115,434
)
 
870,648

 
 
 
 
 
 
Rental expenses
342,007

 
(94,431
)
 
247,576

Cost of sales
139,748

 
(7,906
)
 
131,842

Gross profit   
504,327

 
(13,097
)
 
491,230

 
 
 
 
 
 
Selling, general and administrative expenses
318,606

 
(15,603
)
 
303,003

Research and development expenses
41,870

 
(5,559
)
 
36,311

Acquired intangible asset amortization
123,750

 
(1,223
)
 
122,527

Operating earnings   
20,101

 
9,288

 
29,389

 
 
 
 
 
 
Interest income and other
456

 

 
456

Interest expense
(254,929
)
 

 
(254,929
)
Foreign currency gain
5,534

 

 
5,534

Loss from continuing operations before income taxes   
(228,838
)
 
9,288

 
(219,550
)
 
 
 
 
 
 
Income tax benefit from continuing operations
(83,526
)
 
3,576

 
(79,950
)
Loss from continuing operations
(145,312
)
 
5,712

 
(139,600
)
 
 
 
 
 
 
Loss from discontinued operations, net of tax

 
(5,712
)
 
(5,712
)
Net loss
$
(145,312
)
 
$

 
$
(145,312
)


54


NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS



Note 1—Basis of Presentation
On August 15, 2012, we announced that we had entered into an asset purchase agreement (the “Agreement”) with Getinge AB (“Getinge”). Under the terms of the Agreement, Getinge will purchase certain assets and assume certain liabilities, including our Therapeutic Support Systems™ (“TSS”) product portfolio. In addition, Getinge has also agreed to offer employment to TSS employees and the Company has agreed to provide transition services to Getinge after the close of the transaction. The closing of the transaction, which is targeted in the fourth quarter of 2012, is subject to the satisfaction of customary closing conditions. In connection with the transaction, a significant portion of our historic service center network will be transferred to Getinge. We may enter into leasing or licensing arrangements with Getinge in certain circumstances for a limited transition period to allow us to continue to use some of the service center facilities transferred to Getinge while we evaluate the service center needs of our AHS business on a stand-alone basis.

Certain assets and liabilities included in the disposal group are expected to be replaced by the ongoing entity after the close of the transaction. In addition, certain assets and liabilities associated with the TSS operations will be retained and settled by the ongoing entity after the close of the transaction. As a result, the unaudited pro forma condensed consolidated balance sheet does not purport to project our financial position at any future date.

The unaudited pro forma condensed consolidated statements of operations do not include the allocation of general corporate overhead to discontinued operations. Additionally, certain indirect costs previously allocated to the disposal group are expected to migrate to the ongoing entity. As a result, the unaudited pro forma condensed consolidated statements of operations do not purport to project our results of operations for any future period.



Note 2—Pro Forma Adjustments and Assumptions
Adjustments included in the column under the heading “Pro forma adjustments” are related to the following:
(a)
Represents the reclassification of the assets and liabilities subject to the Agreement to held for sale status.
(b)
Represents the reclassification of the results of operations of the disposal group to discontinued operations.






55


SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA
The following tables summarize our consolidated financial data for the periods presented. You should read the following financial information together with the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the notes to those consolidated financial statements appearing elsewhere in this prospectus. The selected consolidated balance sheet data for fiscal years 2010 and 2011 and the selected consolidated statement of operations data for fiscal years 2009, 2010, the period from January 1 through November 3, 2011, and the period from November 4 through December 31, 2011 are derived from our audited consolidated financial statements included elsewhere in this prospectus. The selected consolidated statement of operations data for fiscal years 2007 and 2008 and the selected consolidated balance sheet data for fiscal years 2007, 2008 and 2009 are derived from our audited consolidated financial statements not included in this prospectus. The selected consolidated statement of operations data for the six months ended June 30, 2011 and 2012 and the selected consolidated balance sheet data as of June 30, 2012 are derived from our unaudited consolidated financial statements included elsewhere in this prospectus. Reclassifications have been made to our results from prior years to conform to our current presentation (in thousands).
 
Fiscal Year Ended December 31,
 
 
 
 
 
Six Months Ended June 30,
 
2007
 
2008(1)

 
2009
 
2010
 
Period from January 1 through November 3, 2011
 
Period from November 4 through December 31, 2011(2)
 
2011
(unaudited)
 
2012(2) (unaudited)
 
Predecessor
 
Predecessor
 
Predecessor
 
Predecessor
 
Predecessor
 
Successor
 
Predecessor
 
Successor
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 </