Good day ladies and gentlemen and welcome to the Alphatec Spine’s First Quarter 2014 Earnings Call. (Operator Instructions) As a reminder this conference is being recorded, if you have any objections you may now disconnect at this time. I would now like to introduce your host for today’s conference, Ms. Christine Zedelmayer, Head of Investor Relations at Alphatec Spine. You may begin the conference.

Good afternoon and welcome to Alphatec Spine’s quarterly update conference call to discuss our first quarter 2014 financial and operating results as well as our upcoming CEO transition that we announced earlier this afternoon. This conference call contains forward-looking statements that involve risks and uncertainties including statements regarding the Company’s expectations regarding its financial performance, strategies for revenue growth, development of new products, customer acceptance of the company’s products and overall trends and economic conditions in the Company’s market. The Company undertakes no obligation to update the information presented on the conference call. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risk factors. For more information about potential factors that affect our business and financial results, we suggest you review our filings with the Securities and Exchange Commission. Throughout the conference call the Company will reference some financial metrics that are derived in accordance with generally accepted accounting principles or GAAP while other metrics are not in accordance with GAAP. This approach is consistent with how management measures the Company’s results internally. However, non-GAAP results are not in accordance with GAAP and may not be comparable to non-GAAP information provided by other companies. Non-GAAP information should be considered as supplement to and not as a substitute for financial statements prepared in accordance with GAAP. A reconciliation of a non-GAAP information to the corresponding GAAP measures is in the press release that was filed today prior to this conference call. Now, let me introduce the other members of the Alphatec management team that are here today. Les Cross, Chairman and Chief Executive Officer; Mike O’Neill, Vice President-Finance and Chief Financial Officer, Mike Plunkett, Chief Operating Officer and Ebun Garner, General Counsel. I will now turn the call over to Mr. Les Cross.

Great. Thank you, Christine. Good day everyone and welcome to Alphatec Spine’s conference call to discuss our first quarter operating results and the upcoming leadership changes. This afternoon our comments will build on both press releases issued earlier today. In the interest of providing ample time to review our results and answer your questions we will keep prepared remarks to a minimum. After my introductory remarks Mike will provide additional details on the first quarter 2014 financial results and provide detail on our outlook and guidance for the remainder of the year. Well today is a big day for me, when the board asked me two years ago to step out of retirement and lead Alphatec as its CEO I saw a great opportunity and was excited to participate in transforming the company and helping it unleash the values that this company can deliver. Over the past couple of years I have worked carefully and deliberately to build a strong lean foundation for Alphatec that will generate positive momentum in the business and serve as an important platform for the future growth of this company. During my tenure I'm proud of the results the organization has delivered, the strength of the leadership team we've established and the overall company culture which is the fostered and is embedded throughout the organization worldwide. With the ship now righted [ph] and sailing in the right direction it is opportune time for me to turn over the helm to a solid committed CEO who can take this business to the next level that I know we can achieve. I am excited that we were able to recruit an excellent CEO successor Jim Corbett. Jim brings demonstrated experience in the medical device industry and most recently as the CEO of Vertos Medical, a medical device…

Thank you, Les. I will focus the majority of my remarks on the reported operating performance for the first quarter ended March 31, 2014. I will then provide some additional comments with respect to our recently announced debt facility and the ongoing debt service costs associated with Alphatec settlement obligations. Finally I will provide an update on full-year 2014 guidance. Given the changes in our business when comparing results to prior periods, in 2013 I encourage you to look at the non-GAAP reconciliation tables accompanying our press release for more detailed information. These measures represent important metrics that we use to measure the ongoing operations of our business. As I go through this review, there are number of adjustments I will need to highlight in order to give you a better understanding of our underlying performance. Moving to gross profit and gross margin. The gross profit for Q1 2014 was $33.3 million or 67.7% of revenue compared to 32.7 million or 64.9% of revenue in Q1 2013. We achieved a 280 basis point improvement in gross margin over the same period in 2013. 220 basis points were attributable to the reduction in cost of revenues as a result of the conclusion of amortization expense associated with the Cross Medical settlement in the fourth quarter of 2013. The remaining 60 basis point improvement was a function of underlying cost improvements as well as favorable variations in regional and product mix. U.S. gross margin was 71.9% in Q1 2014 compared to 67.8% in Q1 2013 demonstrating continued underlying performance improvements as well as the reduction in costs associated with the ending of the Cross Medical amortization. It should be noted that while the amortization expense associated with Cross Medical has ended the 1 million per quarter payment obligation is not set to…

Well, I think you choked up much. Thank you, Mike. Thank you very much. Thank you. As I look back on my 10 years as the CEO of Alphatec what I am most proud of the talented team of people here at Alphatec. The employees and now business partners worldwide, the business capabilities that we’ve delivered to build together the results that we have delivered together, with the strong foundation that we’ve built, I believe we have the right vision and strategies in place to expand our global business and continue to establish long-term stakeholder value. We have a huge opportunity to continue to advance our mission of providing patient and physician inspired solutions for patients with spinal disorders. Our leadership team and many, many dedicated employees of Alphatec Spine remain focused on managing the business today and continue to lay the necessary foundation for success tomorrow. I would like to acknowledge and thank the employees and business partners, it has been a great pleasure to have worked with you over the last couple of years. The Alphatec team’s hard work and commitment and ability to change and grow has enabled us to deliver annual improvements and improved business results. I am really excited about working with Jim to continue this journey and unlock the value I know it’s in this company and I'm really looking forward to working with the whole leadership team and help drive this company to success. So thank you and let’s turn it over to questions.

(Operator Instructions) Our first question comes from the line of William Plovanic from Canaccord Genuity. William Plovanic – Canaccord Genuity: So a couple of questions here, first of all just on the stocking business in the quarter, what is that running quarterly right now?

We are less than 4 million a quarter right now. William Plovanic – Canaccord Genuity: And then as we look at that, obviously you expect that to continue to stay flat or go down going forward?

It’s going – drift down as the year proceeds and I will point out that the stocking business is not all businesses that are subject to classification, we have legitimate stocking distributors that take final [ph] product. William Plovanic – Canaccord Genuity: And then switching over, if you look at pricing what was the impact of pricing in the US in the quarter?

Mid-single digits on our core hospital metal implant and [indiscernible] business. William Plovanic – Canaccord Genuity: And I tell you don't look at the stocking business that way, it's solid, there's no change in pricing in that piece of business?

It’s pretty much contract pricing, Bill. So it tends -- we don't have any new contract that came in the Q1, we probably have less contracts now. William Plovanic – Canaccord Genuity: Okay and then to switch over just in terms of the guidance, has the new CEO worked with you at all in establishing this updated guidance?

Jim, actually he doesn’t arrive here until tomorrow and so he has s not been involved in the guidance discussion yet. William Plovanic – Canaccord Genuity: Okay and then lastly, just Les, pleasure working with you for the second time around. And then just – as you come to your timeframe here just wondering if why -- the decision and why such a short transition?

Well, first of all thanks for your kind words, Bill. We started this journey of transitioning towards the end of last year and in fact, met Jim early this year and what happened was the OrthoTec verdict kind of put it on hold, until we found a solution to that I don't think that it would have been fair to bring in a new CEO. So once we came up with the right solution for that, then Jim was ready to step in but I just want to say, we’ve really been thinking about this, been very thoughtful, very thorough search process, really over about four months period. But sadly the verdict got in the way of the transformational happening a little earlier.

Our next question comes from the line of Matt Miksic from Piper Jaffray. Matt Miksic – Piper Jaffray: I wanted to focus for a minute Mike if I could on the drawdowns in the credit facility and warrants that come with that. So just so I understand that we've been filing it, -- I think we understand that revaluation expense to be operating line but if you can give us a sense of – I am sorry if I missed this, been juggling a couple of calls here. But where we should expect, with some precision the share count to go as you progress through the year?

So we’ve drawn down 10.25 -- the warrants that have been issued, 6.25 million on the consummation of the deal, and 4 million on the 20 million draw down. So there are 10 million warrants that are associated with the company's ability to draw down up to $50 million. So we drew down $20 million for the first tranche. So it's essentially 40% of the 10 million, so that’s how we came up with the 4 million warrants that we now consider the draw warrants. So 10.25 warrants valued at the end of March 31, actually $10.4 million, so we had a slight charge in P&L. Matt Miksic – Piper Jaffray: Slight charge in the P&L and the impact on the share count is just – goes up by 10.5 million or am I not understanding this correctly?

The shares --the warrants are right to purchase 10.25 million shares, no warrant has been exercised yet, so our share count potentially at this point could go up by 10.25 million. Matt Miksic – Piper Jaffray: Were they to be exercised?

Were they to be exercised. Matt Miksic – Piper Jaffray: Again I apologize if you mentioned this, I heard you talking about the schedule of drawdowns, are we expecting another drawdowns before the end of the year?

We don’t have to make that decision right now, we’ve drawn down sufficient monies to cover the 2014 OrthoTec obligations. We will evaluate as we go through the year because we need to determine by the end of the year the maximum amount that we want to draw down against the Deerfield facility. It doesn’t really roll into ’15. So we need to make that determination by the end of this year. Matt Miksic – Piper Jaffray: And then so if we put a – the amount that you drew down, how much – if you have a sense of – just sort of I am trying to understand is how much additional cash you have on hand and how important was this draw down – we’re all looking to be as gentle at this thing as you can be I think and that’s –

So part of the prepared remarks there was to really try to identify what we have pulled down, which combined facilities is about $73 million, of total availability of $121 million. Within our revolver we have the opportunity of our asset base expense to hold another 10 million and we have a maximum of 15 million from Deerfield that we could pull down the general purpose needs for the company. So we have the flexibility to pull down more, I think the discussion right now is as we approach the end of the year, how much more do we want to pull down to satisfy the operating needs of the business? I think the reality is that as we get through the French restructuring cash expense as we get into the operating needs of the business and our capital those decisions are in front of us but I think I can safely say we don’t see ourselves pulling down the entire facilities. Matt Miksic – Piper Jaffray: And then maybe one on just the business, I think I already have the sense of the answer, but I love to hear you talk about, if there has been any flow-through of all of this activity, the settlement, the cash, the credit facility, maybe the sense a month or two ago that you’re going to be more cash constrained than that you are at the moment with these facilities in place? And have you seen any concerns about disruptions or loss of distributors or de-focusing of the sales force or anything like that?

Not widespread, I mean definitely there was concern within the company when the verdict first was issued. I think Mike and I and even did a good job communicating with the team but it certainly has been a distraction during the quarter. It possibly could have been part of the reason for the US slowness. But since then we have actually dozen employee and the salesmen the distributors survey. And everyone's back on track now that is behind this. In fact, it's the best result we’ve ever had for new employee survey. So I think there was a distraction, that had to be but certainly behind this now. Matt Miksic – Piper Jaffray: And then finally, maybe the third time I am apologizing here but did you carveout any or call out any particular weather or seasonal or selling day impacts in the quarter – seems to have a different mix here?

We did, we definitely saw some impact from the weather in the Midwest and in the Northeast. I don't think it was, I mean if you look at our numbers relative to prior year and relative to our plan, it was not the biggest reason for the miss. We had a general sense of biologics was down because of PureGen year-over-year, stocking was down given that we had anticipated that. But I don't think – it would be fair for us to characterize the miss as all weather-related. Matt Miksic – Piper Jaffray: And anything more than just a seasonal sequential Q4 to Q1 dynamic that you normally see or –

It was slightly exaggerated. Matt Miksic – Piper Jaffray: Which I guess is in line with some of other folks who spend -- bigger Q4 than smaller Q1 –

We didn’t really have selling day issue.

As you mentioned, throw in the distraction of the judgment, on top of all of the normal events and weather, I think this at all tends to add up to where the quarter was a little bit slow but we’re very comfortable that we can -- until Jim gets a look at it, we’re comfortable that we can recover and certainly we have a plan from our sales team, I would expect to recover most of this.

Our next question comes from the line of Josh Jennings from Cowen and Company. Joshua Jennings – Cowen and Company: I wanted to focus – more focus first on just EBITDA performance and margin performance in the quarter, in the setting of some US results [indiscernible] expected, just in terms of where you were from the internal plan on the margin and EBITDA performance, then looking out to the rest of the year and looking for both an uptick on the margin side and EBITDA side with restructuring that was – the French business, how should we thinking of this $30 million to $33 million full year guidance for EBITDA, not to guess [ph] you should have changed that guidance, so early in the year but just in terms of the level of concern that’s now baked in?

So I think when we developed the EBITDA guidance for the year, obviously our French restructuring had been announced, it was certainly well down the execution path. And I think all we have seen as an organization in the intervening month or so, or 6 weeks since we published our annual guidance is a reconfirmation that the French plans are going very much in line what we had expected. One, so the reason we reconfirmed is we still feel very comfortable with the EBITDA projection based on what we can see internally. I think we had a good quarter on a not so positive topline. We would like to see that to continue but we are also going into the final aspects of our French restructuring. And so we still have some heavy lifting in front of us. And I think it would be inappropriate for us to get too carried away at this point. Joshua Jennings – Cowen and Company: And then just in terms of strength in the international business and in Japan, I am not sure if you mentioned this in your prepared remarks, with Japan reimbursement revisions [indiscernible] impacts we expect in the back half –

The state mandatory reimbursement adoption was part of the Japanese plans in the beginning of the year and it’s still a part of the Japanese plan as we go forward. So obviously the kind of growth that we saw in Q1 will moderate I think as the year progresses. So we need to factor that in. Overall if you can strip away the French commercial restructuring which is about $5.5 million to $6.5 million year-over-year, we are seeing improvements in our core European businesses, and frankly we're looking forward to registration approvals in China and Brazil with the Alphatec products, so we think and provide some upside to our plan and not go into the plan right now. So I feel pretty good that the international team is focused – we’re focusing on some of our core markets and we’re deploying the Alphatec business into those markets. I think probably of note all of our shipments Scient'x and Alphatec products now come from Carlsbad. So my product [ph] team has complete responsibility for global shipments now and we’ve executed that transition pretty much flawlessly from a customer service perspective. So I feel pretty good that international is performing well. Joshua Jennings – Cowen and Company: And then just last on the product portfolio, Les, you commented on focus on invasive surgical technology as well as biologics, I was just hoping you could just quickly review kind of where you are on biologics, how the biologics business is performing and then what’s in the pipeline and then how you are taking up now the franchise?

Absolutely, so biologics obviously in the first quarter felt the impact of the discontinuation of the PureGen but actually they are performing well through their internal plan. They have added a profuse chip product to the line which is really accelerating profuse growth. Corex is certainly opening some doors for the biologic group. So it will continue to grow. The products that you are going to see coming out in the first half of the year really are going to be our new medical screw system – sorry the second half of the year but that is a complete system that will do the generation of the entire works, so that’s pretty exciting. Auto lock [ph] which was the Biogen Pedicle screw system will be coming out but really we will be expanding around the Illico system of minimally invasive surgery in the second half of the year once we get the Pedicle screw system out.

Our next question comes from the line of Mark Landy with Summer Street. Mark Landy – Summer Street: I guess, like Mike stays long enough, you can ask him to rank all the CEOs, right?

Well the next one is going to be the best. Mark Landy – Summer Street: Mike, just look a little at R&D picked up in the quarter, is that going to be a peak for the year or are you going to run R&D a little harder a year than you did last year?

We are into the burn rate on development for our Pedicle screw system. So I am not capitalizing data set because there is a high likelihood that it’s going to be modified and revised. So it’s a little high right now in the first half of the year as we get through some of that understanding, it will moderate in the back half of the year. Mark Landy – Summer Street: And then can I – if you can maybe just give us a sense of the US market, you commented the growth was there – but can you give us a sense between lumbar and cervical what you guys saw and how those two markets behave for you guys are growing relative to the competition?

I guess I would say we probably saw more reimbursement push backs in lumbar in Q1 than we did on the cervical side. I think there has been some pushback on the cervical side for the PEEK in the bodies as opposed to the biologics. So we definitely felt some of that. So I guess internally we tend to look at cervical as higher growth category than lumbar. But having said that, when you're introducing products like Solus for a company our size, the newest technologies tend to make more of the difference. So we may not really be a proxy for the category given some of the focuses of the new products.

So operator there are no further questions at this time. We will end the call. Thank you for those kind words from my friends that I have worked with for many years and I am sure I will see you around. And we look forward to reporting – I look forward to hearing to Jim reports the results of Q2, but I will probably show up and say a few words. But thanks for your time and attention today. We really appreciate it.