SAN ANTONIO--(BUSINESS WIRE)--Kinetic Concepts, Inc. (NYSE: KCI) today reported third quarter 2011 total revenue of $531.4 million, an increase of 5% from the third quarter of 2010. Total revenue for the first nine months of 2011 was $1.55 billion, which represented a 4% increase from the prior-year period. Foreign currency exchange movements favorably impacted total revenue by 2% for both the third quarter and the first nine months of 2011 compared to the corresponding periods of the prior year.
Net earnings for the third quarter of 2011 were $90.7 million, an increase of 20% compared to $75.8 million for the same period one year ago. Net earnings per diluted share, as reported, were $1.16 for the third quarter, an increase of 9% from the same period one year ago. Fully diluted, weighted average shares outstanding were 78.4 million for the third quarter of 2011 and 74.9 million for the first nine months of 2011, representing increases of 9% and 5%, respectively, from the corresponding periods of the prior year due primarily to the dilutive effect of our convertible notes and related warrants. On a non-GAAP basis, excluding the effects of certain adjustments including acquisition-related expenses related to our 2008 purchase of LifeCell and expenses recorded in the third quarter of 2011 associated with our proposed merger transaction, net earnings per diluted share were $1.35 for the third quarter of 2011 compared to $1.20 from the prior-year period.
“Our third quarter financial performance was very solid, and once again, demonstrates KCI’s commitment to fiscal discipline while simultaneously launching new products and enhancing our global footprint,” said Catherine Burzik, President and Chief Executive Officer of KCI. “While our capital structure will change as a result of our pending merger transaction, we will continue to invest in innovation and geographic expansion in keeping with our perpetual commitment and promise to improve patient outcomes around the globe.”
Revenue Recap – Third Quarter and First Nine Months of 2011
Worldwide revenue from AHS products was $372.1 million for the third quarter of 2011 and $1.07 billion for the first nine months of 2011 compared to $358.4 million and $1.04 billion, respectively, for the corresponding periods of 2010. The growth in third quarter worldwide AHS revenue was attributable primarily to favorable foreign currency movements, higher volumes from new markets, capital sales and recent product introductions, partially offset by lower rental revenue in established markets. Foreign currency exchange movements favorably impacted worldwide AHS revenues in both the third quarter and first nine months of 2011 by 2% compared to the prior-year periods.
AHS revenue from the Americas region of $281.2 million for the third quarter of 2011 was up 2% as compared to the prior-year period and increased 5% from the second quarter of 2011. AHS Americas revenue for the first nine months of 2011 was $805.9 million, a 2% increase from the prior-year period. The increase in AHS Americas revenue during both the third quarter and first nine months of 2011 was attributable to a combination of increased sales volumes of V.A.C.® Therapy units and increased sales revenue from the adoption of recently-launched, new negative pressure-based therapies in the U.S., partially offset by a decrease in rental volumes and realized pricing on V.A.C. Therapy rental units.
AHS EMEA revenue was $73.9 million and $217.9 million, respectively, for the third quarter and first nine months of 2011 compared to $71.5 million and $219.0 million, respectively, for the corresponding periods of the prior year. Foreign currency exchange rate movements favorably impacted AHS EMEA revenue during the third quarter and first nine months of 2011 by 8% and 7%, respectively, compared to the prior-year periods. On a constant currency basis, AHS EMEA revenue decreased 5% and 7% during the third quarter and the first nine months of 2011, respectively, compared to the prior-year periods due to continued pricing pressures on V.A.C. Therapy rental units and a decline in rental and sales volumes, partially offset by volume growth on sales of V.A.C.Via™, ABThera™ and V.A.C. Therapy units.
AHS APAC revenue was $17.0 million and $46.7 million, respectively, for the third quarter and first nine months of 2011 compared to $11.4 million and $28.0 million, respectively, for the corresponding periods of the prior year. Foreign currency exchange rate movements favorably impacted AHS APAC revenue during both the third quarter and first nine months of 2011 by 17% compared to the prior-year periods. On a constant currency basis, AHS APAC revenue increased 32% and 49%, respectively, during the third quarter and the first nine months of 2011 compared to the prior-year periods due primarily to higher rental and sales volumes in Japan. Total AHS revenue generated in Japan was $7.6 million for the third quarter of 2011, an increase of $4.7 million, or 163% from the third quarter of the prior year. Foreign currency exchange rate movements favorably impacted AHS Japan revenue by 25% during the third quarter of 2011, compared to the corresponding period of 2010.
Worldwide LifeCell revenue was $97.4 million and $286.8 million, respectively, for the third quarter and first nine months of 2011, up 15% and 16%, respectively, from the corresponding prior-year periods. LifeCell EMEA sales totaled $2.9 million and $8.8 million, respectively, for the third quarter and first nine months of 2011, up from $1.7 million and $4.3 million, respectively, during the prior-year periods, with revenue growth reported in all geographic locations where we have launched our LifeCell products. Foreign currency exchange movements did not have a significant impact on worldwide LifeCell revenue as compared to the third quarter and first nine months of the prior year.
Worldwide TSS revenue was $61.8 million for the third quarter and $195.0 million for the first nine months of 2011 compared to $63.4 million and $203.5 million, respectively, for the same periods one year ago. TSS Americas revenue was $37.7 million for the third quarter and $123.2 million for the first nine months of 2011 compared to $41.8 million and $134.8 million, respectively, for the same periods in the prior year. The decrease in TSS Americas revenue was driven by our rental business, which has experienced increased competitive pressure and modest share loss. TSS EMEA revenue was $23.9 million for the third quarter and $70.9 million for the first nine months of 2011 compared to $21.1 million and $67.5 million, respectively, for the same periods in the prior year. On a constant currency basis, TSS EMEA revenue increased 4% during the third quarter of 2011 compared to the prior-year period due primarily to strong capital sales. Foreign currency exchange rate movements favorably impacted Americas and EMEA TSS revenue by 1% and 10%, respectively, in the third quarter of 2011 and 1% and 7%, respectively, in the first nine months of 2011 compared to the prior-year periods.
Profit Margins
Gross profit for the third quarter and first nine months of 2011 was $331.7 million and $933.7 million, respectively, representing increases of 15% and 11%, respectively, from the same periods of the prior year. Gross profit margin was 62% and 60%, respectively, for the third quarter and first nine months of 2011, an increase of approximately 530 basis points and 370 basis points, respectively, from the prior-year periods. The gross profit margin increase during the third quarter of 2011 compared to the prior-year period was due primarily to lower royalty expense associated with our previous license agreement with Wake Forest University, higher gross margins associated with our LifeCell business unit, lower rental fleet depreciation and favorable product mix. The year-to-date gross profit margin increase was lower than the current quarter resulting primarily from increased selling expenses related to additional investment in our AHS sales force during the second half of 2010 and first nine months of 2011. During the third quarter of 2010, the Company recorded $23.9 million in royalty expense associated with our previously-existing licensing agreement with Wake Forest.
Selling, general and administrative (“SG&A”) expenses for the third quarter and first nine months of 2011 were $155.9 million and $452.4 million, respectively, representing increases of 12% and 7%, respectively, from the same periods of the prior year. SG&A increases during the third quarter of 2011 compared to the prior-year period included the impact of foreign currency movements, transaction-related costs associated with our recently-announced acquisition, higher selling costs associated with our LifeCell division and higher costs associated with geographic expansion. The year-to-date percentage increase in SG&A expenses was lower than the current quarter resulting primarily from reduced litigation costs and prior-year charges associated with our TSS portfolio rationalization and our Global Business Transformation in the second quarter.
Research and development expenses for the third quarter and first nine months of 2011 were $23.5 million and $68.1 million, respectively, representing increases of 13% and 1% from the corresponding periods in the prior year. Research and development expenses were higher during the third quarter of 2011 compared to the prior-year period due to increased headcount following the 2010 formation of our Center for Advanced Research and Technology. During the third quarter of 2011, total research and development expenses represented 4.4% of revenue compared to 4.1% for the same period one year ago.
Operating earnings for the third quarter and first nine months of 2011 were $143.4 million and $386.6 million, respectively, representing increases of 19% and 20%, respectively, from the corresponding periods of the prior year. The increase in operating earnings resulted from a combination of lower royalty expense, favorable foreign currency movements and prior-year charges associated with our TSS portfolio rationalization and Global Business Transformation, partially offset by higher costs associated with our recently-announced acquisition. During the third quarter of 2011, the Company recorded $6.0 million in expenses associated with our recently-announced acquisition.
Other Income/Expense
Third quarter 2011 interest expense decreased to $17.3 million compared to $21.5 million in the same period of the prior year due to debt payments made over the last twelve months, as well as lower interest rates due, in part, to our debt refinancing completed in the first quarter of 2011. Long-term debt outstanding, on a debt-instrument basis, as of September 30, 2011 consisted of a senior secured term loan of $529.4 million due 2016 and $690.0 million of 3.25% senior convertible notes due 2015. Foreign currency transaction losses were $2.1 million in the third quarter of 2011 compared to gains of $2.1 million in the prior-year period due primarily to significant volatility in the foreign currency markets.
Income Tax Rate
The effective income tax rate for the third quarter and first nine months of 2011 was 27.0% and 27.1%, respectively, compared to 25.0% and 28.0%, respectively, during the corresponding periods in 2010. The increase in the effective income tax rate for the third quarter of 2011 as compared to the prior-year period was due primarily to the favorable resolution of certain tax contingencies during 2010.
Financial Position
Total cash at quarter-end was $656.8 million, an increase of $340.2 million from year-end 2010. Operating cash flow less net capital expenditures for the first nine months of 2011 was $327.1 million, an increase of $147.5 million compared to the prior-year period due primarily to higher net earnings and lower cash outlays for royalty payments, inventory purchases, interest and income taxes, partially offset by higher capital expenditures. Total long-term debt outstanding at September 30, 2011 was $1.12 billion on a GAAP-basis and $1.22 billion on an economic, or debt-instrument, basis.
Other Information
On July 12, 2011, KCI entered into a definitive merger agreement under which a consortium of funds advised by Apax Partners (“Apax”), together with controlled affiliates of Canada Pension Plan Investment Board (“CPPIB”) and the Public Sector Pension Investment Board (“PSP Investments”), will acquire KCI for $68.50 per share in cash in a transaction currently valued at $6.2 billion, inclusive of KCI’s outstanding debt.
The Board of Directors of KCI has unanimously approved the merger agreement and recommended that KCI’s shareholders approve the agreement with the consortium. A special meeting of KCI’s shareholders will be held on October 28, 2011 to approve the merger agreement.
The transaction is subject to certain closing conditions, including the approval of KCI’s shareholders and the satisfaction of other customary closing conditions, but is not subject to any closing condition with regard to the financing of the transaction. The transaction is currently expected to close in November 2011. Given the pending transaction, KCI will not be holding a conference call to discuss third quarter results.
Outlook
In connection with KCI’s pending merger with the Apax consortium and related recapitalization, KCI has suspended its 2011 outlook.
Non-GAAP Financial Information
Within this document, we have included our results for the third quarter and nine months ended September 30, 2011 on a non-GAAP basis to exclude the impact of specified non-cash expenses associated with our 2008 acquisition of LifeCell and the impact of other charges, including costs associated with our TSS portfolio rationalization and our Global Business Transformation incurred in the second quarter of 2010, debt refinancing costs incurred during the first quarter of 2011 and acquisition-related costs incurred during the second and third quarters of 2011 associated with our proposed merger transaction. In addition, we have presented supplemental revenue data on a non-GAAP basis to exclude the impact of foreign currency fluctuations between 2010 and 2011. These non-GAAP financial measures do not replace the presentation of our GAAP results. We have provided this supplemental non-GAAP information because it may provide meaningful information regarding our results on a basis that better facilitates an understanding of our expected results of operations which may not be otherwise apparent under GAAP. Management uses this non-GAAP financial information, along with GAAP information, for reviewing the operating results of its business segments and for analyzing potential future business trends. In addition, we believe some investors may use this information in a similar fashion. A reconciliation of our GAAP selected financial information for the periods presented to the non-GAAP selected financial information provided is included herein.
About KCI
Kinetic Concepts, Inc. (NYSE:KCI) is a leading global medical technology company devoted to the discovery, development, manufacture and marketing of innovative, high-technology therapies and products for the wound care, tissue regeneration and therapeutic support system markets. Headquartered in San Antonio, Texas, KCI's success spans more than three decades and can be traced to a history deeply rooted in innovation and a passion for significantly improving the healing and the lives of patients around the world.
The Company employs approximately 7,100 people and markets its products in more than 20 countries. For more information about KCI and how its products are changing the practice of medicine, visit www.kci1.com.
Additional Information about the Merger and Where to Find It
This press release may be deemed to be solicitation material in respect of the proposed acquisition of KCI by investment funds advised by Apax, together with controlled affiliates of CPPIB and the PSP Investments. KCI filed a definitive proxy statement with the SEC on September 26, 2011 related to the merger (the “Merger”) and the other transactions contemplated by the Agreement and Plan of Merger, dated as of July 12, 2011, by and among KCI, Chiron Holdings, Inc. and Chiron Merger Sub, Inc. INVESTORS AND SECURITY HOLDERS OF KCI ARE ADVISED TO READ THE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THOSE DOCUMENTS CONTAIN AND WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED ACQUISITION. The definitive proxy statement was mailed to shareholders of KCI beginning on September 27, 2011. Investors and security holders may obtain a free copy of the proxy statement, and other documents filed by KCI with the SEC, at the SEC’s web site at www.sec.gov. Free copies of the proxy statement and KCI’s other filings with the SEC may also be obtained from KCI by directing a request to Kinetic Concepts, Inc., Attention: Investor Relations, 8023 Vantage Drive, San Antonio, TX 78230, or by calling 210-255-6157.
Participants in Solicitation
KCI and its directors, executive officers and other members of its management and employees may be deemed to be soliciting proxies from KCI’s shareholders in favor of the proposed Merger. Information regarding KCI’s directors and executive officers is available in its 2010 Annual Report on Form 10-K filed with the SEC on March 1, 2011, and definitive proxy statement relating to its 2011 Annual Meeting of Shareholders filed with the SEC on April 15, 2011. Shareholders may obtain additional information regarding the interests of KCI and its directors and executive officers in the proposed Merger, which may be different than those of KCI’s shareholders generally, by reading the proxy statement and other relevant documents filed with the SEC when they become available.
Forward-Looking Statements
This press release contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements and are subject to a number of risks and uncertainties that could cause or contribute to these differences include, but are not limited to, the possibility that the Merger is not consummated. All information set forth in this release and its attachments is as of October 21, 2011. We undertake no duty to update this information. More information about potential factors that could cause our results to differ or adversely affect our business and financial results is included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010 and in our quarterly reports on Form 10-Q for the quarterly periods ended March 31, 2011 and June 30, 2011, including, among other sections, under the captions, "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." These reports are on file with the SEC and available at the SEC's website at www.sec.gov. Additional information may also be set forth in those sections in our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2011, which is expected to be filed with the SEC in early November 2011.
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KINETIC CONCEPTS, INC. AND SUBSIDIARIES |
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| Condensed Consolidated Statements of Earnings | ||||||||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||
| % | % | |||||||||||||||||||||
| 2011 | 2010 | Change | 2011 | 2010 | Change | |||||||||||||||||
| Revenue: | ||||||||||||||||||||||
| Rental | $ | 279,135 | $ | 288,970 | (3.4 | )% | $ | 837,149 | $ | 852,045 | (1.7 | )% | ||||||||||
| Sales | 252,236 | 217,738 | 15.8 | 715,236 | 638,240 | 12.1 | ||||||||||||||||
| Total revenue | 531,371 | 506,708 | 4.9 | 1,552,385 | 1,490,285 | 4.2 | ||||||||||||||||
| Rental expenses | 136,789 | 155,765 | (12.2 | ) | 433,634 | 464,606 | (6.7 | ) | ||||||||||||||
| Cost of sales | 62,925 | 61,551 | 2.2 | 185,062 | 184,782 | 0.2 | ||||||||||||||||
| Gross profit | 331,657 | 289,392 | 14.6 | 933,689 | 840,897 | 11.0 | ||||||||||||||||
| Selling, general and administrative expenses | 155,855 | 139,512 | 11.7 | 452,377 | 422,103 | 7.2 | ||||||||||||||||
| Research and development expenses | 23,530 | 20,873 | 12.7 | 68,124 | 67,375 | 1.1 | ||||||||||||||||
| Acquired intangible asset amortization | 8,855 | 8,855 | - | 26,567 | 28,570 | (7.0 | ) | |||||||||||||||
| Operating earnings | 143,417 | 120,152 | 19.4 | 386,621 | 322,849 | 19.8 | ||||||||||||||||
| Interest income and other | 297 | 265 | 12.1 | 766 | 544 | 40.8 | ||||||||||||||||
| Interest expense | (17,314 | ) | (21,534 | ) | (19.6 | ) | (55,311 | ) | (67,360 | ) | (17.9 | ) | ||||||||||
| Foreign currency gain (loss) | (2,117 | ) | 2,148 | - | (2,142 | ) | (3,119 | ) | (31.3 | ) | ||||||||||||
| Earnings before income taxes | 124,283 | 101,031 | 23.0 | 329,934 | 252,914 | 30.5 | ||||||||||||||||
| Income taxes | 33,557 | 25,258 | 32.9 | 89,365 | 70,823 | 26.2 | ||||||||||||||||
| Net earnings | $ | 90,726 | $ | 75,773 | 19.7 | % | $ | 240,569 | $ | 182,091 | 32.1 | % | ||||||||||
| Net earnings per share: | ||||||||||||||||||||||
| Basic | $ | 1.25 | $ | 1.07 | 16.8 | % | $ | 3.34 | $ | 2.57 | 30.0 | % | ||||||||||
| Diluted | $ | 1.16 | $ | 1.06 | 9.4 | % | $ | 3.21 | $ | 2.54 | 26.4 | % | ||||||||||
| Weighted average shares outstanding: | ||||||||||||||||||||||
| Basic | 72,546 | 70,994 | 72,017 | 70,784 | ||||||||||||||||||
| Diluted | 78,411 | 71,695 | 74,889 | 71,647 | ||||||||||||||||||
| KINETIC CONCEPTS, INC. AND SUBSIDIARIES | ||||||
| Condensed Consolidated Balance Sheets | ||||||
| (in thousands) | ||||||
| September 30, | December 31, | |||||
| 2011 | 2010 | |||||
| (unaudited) | ||||||
| Assets: | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 656,793 | $ | 316,603 | ||
| Accounts receivable, net | 404,004 | 414,083 | ||||
| Inventories, net | 160,833 | 172,552 | ||||
| Deferred income taxes | 28,140 | 30,112 | ||||
| Prepaid expenses and other | 31,651 | 34,199 | ||||
| Total current assets | 1,281,421 | 967,549 | ||||
| Net property, plant and equipment | 299,037 | 271,063 | ||||
| Debt issuance costs, net | 29,769 | 22,622 | ||||
| Deferred income taxes | 20,643 | 17,151 | ||||
| Goodwill | 1,328,881 | 1,328,881 | ||||
| Identifiable intangible assets, net | 432,388 | 453,802 | ||||
| Other non-current assets | 15,551 | 14,931 | ||||
| $ | 3,407,690 | $ | 3,075,999 | |||
| Liabilities and Shareholders' Equity: | ||||||
| Current liabilities: | ||||||
| Accounts payable | $ | 38,171 | $ | 60,137 | ||
| Accrued expenses and other | 259,025 | 225,524 | ||||
| Current installments of long-term debt | 27,500 | 169,500 | ||||
| Income taxes payable | 24,295 | - | ||||
| Total current liabilities | 348,991 | 455,161 | ||||
| Long-term debt, net of current installments and discount | 1,096,416 | 935,290 | ||||
| Non-current tax liabilities | 38,007 | 35,588 | ||||
| Deferred income taxes | 137,909 | 163,386 | ||||
| Other non-current liabilities | 2,185 | 3,495 | ||||
| Total liabilities | 1,623,508 | 1,592,920 | ||||
| Shareholders' equity: | ||||||
| Common stock; authorized 225,000 at 2011 and 2010, | ||||||
| issued and outstanding 73,081 at 2011 and 71,996 at 2010 | 73 | 72 | ||||
| Preferred stock; authorized 50,000 at 2011 and 2010; issued and | ||||||
| outstanding 0 at 2011 and 2010 | - | - | ||||
| Additional paid-in capital | 919,190 | 852,152 | ||||
| Retained earnings | 854,003 | 613,434 | ||||
| Accumulated other comprehensive income, net | 10,916 | 17,421 | ||||
| Shareholders' equity | 1,784,182 | 1,483,079 | ||||
| $ | 3,407,690 | $ | 3,075,999 | |||
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KINETIC CONCEPTS, INC. AND SUBSIDIARIES |
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| Condensed Consolidated Statements of Cash Flows | ||||||||
| (in thousands) | ||||||||
| (unaudited) | ||||||||
| Nine months ended September 30, | ||||||||
| 2011 | 2010 | |||||||
| Cash flows from operating activities: | ||||||||
| Net earnings | $ | 240,569 | $ | 182,091 | ||||
| Adjustments to reconcile net earnings to net cash provided | ||||||||
| by operating activities: | ||||||||
| Amortization of convertible debt discount | 17,084 | 15,818 | ||||||
| Depreciation and other amortization | 106,333 | 119,188 | ||||||
| Provision for bad debt | 8,350 | 7,024 | ||||||
| Write-off of deferred debt issuance costs | 3,218 | 2,301 | ||||||
| Share-based compensation expense | 23,738 | 24,173 | ||||||
| Deferred income tax benefit | (24,957 | ) | (48,946 | ) | ||||
| Excess tax benefit from share-based payment arrangements | (2,393 | ) | (1,426 | ) | ||||
| Change in assets and liabilities: | ||||||||
| Decrease in accounts receivable, net | 1,101 | 14,829 | ||||||
| Decrease (increase) in inventories, net | 11,659 | (53,353 | ) | |||||
| Decrease in prepaid expenses and other | 2,547 | 3,927 | ||||||
| Increase (decrease) in accounts payable | (21,994 | ) | 5,212 | |||||
| Increase (decrease) in accrued expenses and other | 32,826 | (18,117 | ) | |||||
| Increase (decrease) in tax liabilities, net | 27,118 | (9,227 | ) | |||||
| Decrease in deferred income taxes, net | (2,039 | ) | (10,379 | ) | ||||
| Net cash provided by operating activities | 423,160 | 233,115 | ||||||
| Cash flows from investing activities: | ||||||||
| Additions to property, plant and equipment | (89,029 | ) | (63,255 | ) | ||||
| Decrease (increase) in inventory to be converted into equipment | ||||||||
| for short-term rental | (7,047 | ) | 9,771 | |||||
| Dispositions of property, plant and equipment | 1,186 | 1,557 | ||||||
| Increase in identifiable intangible assets and other non-current assets | (19,093 | ) | (9,632 | ) | ||||
| Net cash used by investing activities | (113,983 | ) | (61,559 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Repayments of long-term debt, revolving credit facility and | ||||||||
| capital lease obligations | (20,734 | ) | (185,059 | ) | ||||
| Proceeds from exercise of stock options | 42,606 | 10,383 | ||||||
| Proceeds from the purchase of stock in ESPP and other | 4,107 | 3,452 | ||||||
| Excess tax benefit from share-based payment arrangements | 2,393 | 1,426 | ||||||
| Purchase of immature shares for minimum tax withholdings | (3,797 | ) | (1,134 | ) | ||||
| Payment of debt issuance costs related to KCI’s pending merger | (827 | ) | - | |||||
| Refinancing of senior credit facility: | ||||||||
| Proceeds from borrowings on refinancing of senior credit facility | 146,012 | - | ||||||
| Repayments on senior credit facility – due 2013 | (123,346 | ) | - | |||||
| Payment of debt issuance costs | (14,676 | ) | - | |||||
| Net cash provided (used) by financing activities | 31,738 | (170,932 | ) | |||||
| Effect of exchange rate changes on cash and cash equivalents | (725 | ) | (484 | ) | ||||
| Net increase in cash and cash equivalents | 340,190 | 140 | ||||||
| Cash and cash equivalents, beginning of period | 316,603 | 263,157 | ||||||
| Cash and cash equivalents, end of period | $ | 656,793 | $ | 263,297 | ||||
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KINETIC CONCEPTS, INC. AND SUBSIDIARIES |
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| Reconciliation from GAAP to Non-GAAP | ||||||||||||||||||||
| Supplemental Revenue Data | ||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||
| Three months ended September 30, | ||||||||||||||||||||
| 2011 | GAAP | Constant | ||||||||||||||||||
| Constant | 2010 | % | Currency % | |||||||||||||||||
| GAAP | FX Impact | Currency | GAAP | Change |
Change (1) |
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| Total Revenue: | ||||||||||||||||||||
| AHS | $ | 372,108 | $ | (8,585 | ) | $ | 363,523 | $ | 358,392 | 3.8 | % | 1.4 | % | |||||||
| LifeCell | 97,441 | (262 | ) | 97,179 | 84,935 | 14.7 | 14.4 | |||||||||||||
| TSS | 61,822 | (2,515 | ) | 59,307 | 63,381 | (2.5 | ) | (6.4 | ) | |||||||||||
| Total Revenue | $ | 531,371 | $ | (11,362 | ) | $ | 520,009 | $ | 506,708 | 4.9 | % | 2.6 | % | |||||||
| AHS: | ||||||||||||||||||||
| Americas revenue | ||||||||||||||||||||
| Rental | $ | 189,056 | $ | (318 | ) | $ | 188,738 | $ | 196,775 | (3.9 | ) | % | (4.1 | ) | % | |||||
| Sales | 92,171 | (354 | ) | 91,817 | 78,719 | 17.1 | 16.6 | |||||||||||||
| Total Americas revenue | 281,227 | (672 | ) | 280,555 | 275,494 | 2.1 | 1.8 | |||||||||||||
| EMEA revenue | ||||||||||||||||||||
| Rental | 29,351 | (2,296 | ) | 27,055 | 33,111 | (11.4 | ) | (18.3 | ) | |||||||||||
| Sales | 44,501 | (3,670 | ) | 40,831 | 38,394 | 15.9 | 6.3 | |||||||||||||
| Total EMEA revenue | 73,852 | (5,966 | ) | 67,886 | 71,505 | 3.3 | (5.1 | ) | ||||||||||||
| APAC revenue | ||||||||||||||||||||
| Rental | 9,528 | (1,093 | ) | 8,435 | 5,961 | 59.8 | 41.5 | |||||||||||||
| Sales | 7,501 | (854 | ) | 6,647 | 5,432 | 38.1 | 22.4 | |||||||||||||
| Total APAC revenue | 17,029 | (1,947 | ) | 15,082 | 11,393 | 49.5 | 32.4 | |||||||||||||
| Total rental revenue | 227,935 | (3,707 | ) | 224,228 | 235,847 | (3.4 | ) | (4.9 | ) | |||||||||||
| Total sales revenue | 144,173 | (4,878 | ) | 139,295 | 122,545 | 17.6 | 13.7 | |||||||||||||
| Total AHS Revenue | $ | 372,108 | $ | (8,585 | ) | $ | 363,523 | $ | 358,392 | 3.8 | % | 1.4 | % | |||||||
| LifeCell Revenue: | ||||||||||||||||||||
| Americas revenue | ||||||||||||||||||||
| Rental | $ | 543 | $ | - | $ | 543 | $ | - | - | % | - | % | ||||||||
| Sales | 93,964 | (30 | ) | 93,934 | 83,213 | 12.9 | 12.9 | |||||||||||||
| Total Americas revenue | 94,507 | (30 | ) | 94,477 | 83,213 | 13.6 | 13.5 | |||||||||||||
| EMEA revenue | ||||||||||||||||||||
| Sales | 2,934 | (232 | ) | 2,702 | 1,722 | 70.4 | 56.9 | |||||||||||||
| Total rental revenue | 543 | - | 543 | - | - | - | ||||||||||||||
| Total sales revenue | 96,898 | (262 | ) | 96,636 | 84,935 | 14.1 | 13.8 | |||||||||||||
| Total LifeCell Revenue | $ | 97,441 | $ | (262 | ) | $ | 97,179 | $ | 84,935 | 14.7 | % | 14.4 | % | |||||||
| TSS Revenue: | ||||||||||||||||||||
| Americas revenue | ||||||||||||||||||||
| Rental | $ | 31,558 | $ | (312 | ) | $ | 31,246 | $ | 35,539 | (11.2 | ) | % | (12.1 | ) | % | |||||
| Sales | 6,129 | (87 | ) | 6,042 | 6,249 | (1.9 | ) | (3.3 | ) | |||||||||||
| Total Americas revenue | 37,687 | (399 | ) | 37,288 | 41,788 | (9.8 | ) | (10.8 | ) | |||||||||||
| EMEA revenue | ||||||||||||||||||||
| Rental | 19,094 | (1,710 | ) | 17,384 | 17,553 | 8.8 | (1.0 | ) | ||||||||||||
| Sales | 4,794 | (364 | ) | 4,430 | 3,503 | 36.9 | 26.5 | |||||||||||||
| Total EMEA revenue | 23,888 | (2,074 | ) | 21,814 | 21,056 | 13.4 | 3.6 | |||||||||||||
| APAC revenue | ||||||||||||||||||||
| Rental | 5 | (2 | ) | 3 | 31 | (83.9 | ) | (90.3 | ) | |||||||||||
| Sales | 242 | (40 | ) | 202 | 506 | (52.2 | ) | (60.1 | ) | |||||||||||
| Total APAC revenue | 247 | (42 | ) | 205 | 537 | (54.0 | ) | (61.8 | ) | |||||||||||
| Total rental revenue | 50,657 | (2,024 | ) | 48,633 | 53,123 | (4.6 | ) | (8.5 | ) | |||||||||||
| Total sales revenue | 11,165 | (491 | ) | 10,674 | 10,258 | 8.8 | 4.1 | |||||||||||||
| Total TSS Revenue | $ | 61,822 | $ | (2,515 | ) | $ | 59,307 | $ | 63,381 | (2.5 | ) | % | (6.4 | ) | % | |||||
| (1) Represents percentage change between 2011 Non-GAAP Constant Currency revenue and 2010 GAAP revenue. | ||||||||||||||||||||
|
KINETIC CONCEPTS, INC. AND SUBSIDIARIES |
||||||||||||||||||||
| Reconciliation from GAAP to Non-GAAP | ||||||||||||||||||||
| Supplemental Revenue Data | ||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||
| Nine months ended September 30, | ||||||||||||||||||||
| 2011 | GAAP | Constant | ||||||||||||||||||
| Constant | 2010 | % | Currency % | |||||||||||||||||
| GAAP | FX Impact | Currency | GAAP | Change |
Change (1) |
|||||||||||||||
| Total Revenue: | ||||||||||||||||||||
| AHS | $ | 1,070,618 | $ | (21,400 | ) | $ | 1,049,218 | $ | 1,039,071 | 3.0 | % | 1.0 | % | |||||||
| LifeCell | 286,785 | (849 | ) | 285,936 | 247,693 | 15.8 | 15.4 | |||||||||||||
| TSS | 194,982 | (6,024 | ) | 188,958 | 203,521 | (4.2 | ) | (7.2 | ) | |||||||||||
| Total Revenue | $ | 1,552,385 | $ | (28,273 | ) | $ | 1,524,112 | $ | 1,490,285 | 4.2 | % | 2.3 | % | |||||||
| AHS: | ||||||||||||||||||||
| Americas revenue | ||||||||||||||||||||
| Rental | $ | 555,396 | $ | (917 | ) | $ | 554,479 | $ | 564,844 | (1.7 | ) | % | (1.8 | ) | % | |||||
| Sales | 250,550 | (991 | ) | 249,559 | 227,163 | 10.3 | 9.9 | |||||||||||||
| Total Americas revenue | 805,946 | (1,908 | ) | 804,038 | 792,007 | 1.8 | 1.5 | |||||||||||||
| EMEA revenue | ||||||||||||||||||||
| Rental | 91,575 | (5,740 | ) | 85,835 | 101,967 | (10.2 | ) | (15.8 | ) | |||||||||||
| Sales | 126,372 | (8,886 | ) | 117,486 | 117,062 | 8.0 | 0.4 | |||||||||||||
| Total EMEA revenue | 217,947 | (14,626 | ) | 203,321 | 219,029 | (0.5 | ) | (7.2 | ) | |||||||||||
| APAC revenue | ||||||||||||||||||||
| Rental | 26,349 | (2,655 | ) | 23,694 | 14,242 | 85.0 | 66.4 | |||||||||||||
| Sales | 20,376 | (2,211 | ) | 18,165 | 13,793 | 47.7 | 31.7 | |||||||||||||
| Total APAC revenue | 46,725 | (4,866 | ) | 41,859 | 28,035 | 66.7 | 49.3 | |||||||||||||
| Total rental revenue | 673,320 | (9,312 | ) | 664,008 | 681,053 | (1.1 | ) | (2.5 | ) | |||||||||||
| Total sales revenue | 397,298 | (12,088 | ) | 385,210 | 358,018 | 11.0 | 7.6 | |||||||||||||
| Total AHS Revenue | $ | 1,070,618 | $ | (21,400 | ) | $ | 1,049,218 | $ | 1,039,071 | 3.0 | % | 1.0 | % | |||||||
| LifeCell Revenue: | ||||||||||||||||||||
| Americas revenue | ||||||||||||||||||||
| Rental | $ | 1,133 | $ | - | $ | 1,133 | $ | - | - | % | - | % | ||||||||
| Sales | 276,879 | (100 | ) | 276,779 | 243,375 | 13.8 | 13.7 | |||||||||||||
| Total Americas revenue | 278,012 | (100 | ) | 277,912 | 243,375 | 14.2 | 14.2 | |||||||||||||
| EMEA revenue | ||||||||||||||||||||
| Sales | 8,773 | (749 | ) | 8,024 | 4,318 | 103.2 | 85.8 | |||||||||||||
| Total rental revenue | 1,133 | - | 1,133 | - | - | - | ||||||||||||||
| Total sales revenue | 285,652 | (849 | ) | 284,803 | 247,693 | 15.3 | 15.0 | |||||||||||||
| Total LifeCell Revenue | $ | 286,785 | $ | (849 | ) | $ | 285,936 | $ | 247,693 | 15.8 | % | 15.4 | % | |||||||
| TSS Revenue: | ||||||||||||||||||||
| Americas revenue | ||||||||||||||||||||
| Rental | $ | 103,586 | $ | (929 | ) | $ | 102,657 | $ | 115,533 | (10.3 | ) | % | (11.1 | ) | % | |||||
| Sales | 19,620 | (302 | ) | 19,318 | 19,218 | 2.1 | 0.5 | |||||||||||||
| Total Americas revenue | 123,206 | (1,231 | ) | 121,975 | 134,751 | (8.6 | ) | (9.5 | ) | |||||||||||
| EMEA revenue | ||||||||||||||||||||
| Rental | 59,084 | (4,005 | ) | 55,079 | 55,381 | 6.7 | (0.5 | ) | ||||||||||||
| Sales | 11,865 | (671 | ) | 11,194 | 12,128 | (2.2 | ) | (7.7 | ) | |||||||||||
| Total EMEA revenue | 70,949 | (4,676 | ) | 66,273 | 67,509 | 5.1 | (1.8 | ) | ||||||||||||
| APAC revenue | ||||||||||||||||||||
| Rental | 26 | (8 | ) | 18 | 78 | (66.7 | ) | (76.9 | ) | |||||||||||
| Sales | 801 | (109 | ) | 692 | 1,183 | (32.3 | ) | (41.5 | ) | |||||||||||
| Total APAC revenue | 827 | (117 | ) | 710 | 1,261 | (34.4 | ) | (43.7 | ) | |||||||||||
| Total rental revenue | 162,696 | (4,942 | ) | 157,754 | 170,992 | (4.9 | ) | (7.7 | ) | |||||||||||
| Total sales revenue | 32,286 | (1,082 | ) | 31,204 | 32,529 | (0.7 | ) | (4.1 | ) | |||||||||||
| Total TSS Revenue | $ | 194,982 | $ | (6,024 | ) | $ | 188,958 | $ | 203,521 | (4.2 | ) | % | (7.2 | ) | % | |||||
| (1) Represents percentage change between 2011 Non-GAAP Constant Currency revenue and 2010 GAAP revenue. | ||||||||||||||||||||
|
KINETIC CONCEPTS, INC. AND SUBSIDIARIES |
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| Three months ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||
| Interest | |||||||||||||||||||||||||||||||||||||||||||||||||
| Expense - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Debt | Adoption of | Refinancing | |||||||||||||||||||||||||||||||||||||||||||||||
| Amortization | Issuance | Required | of Senior | Restructuring | |||||||||||||||||||||||||||||||||||||||||||||
| 2011 | of Acquired | Cost | Accounting | Credit | and Other | Adjusted | Adjusted | % | |||||||||||||||||||||||||||||||||||||||||
| GAAP | Intangibles | Amortization | Standards | Facility | Charges | 2011 | 2010 | Change | |||||||||||||||||||||||||||||||||||||||||
| Operating earnings | $ | 143,417 | $ | 8,855 | $ | - | $ | - | $ | - | $ | 8,110 | $ | 160,382 | $ | 129,007 | 24.3 | % | |||||||||||||||||||||||||||||||
| Net earnings (1) | $ | 90,726 | $ | 5,446 | $ | 1,076 | $ | 3,570 | $ | - | $ | 4,987 | $ | 105,805 | $ | 86,324 | 22.6 | % | |||||||||||||||||||||||||||||||
| Diluted earnings per share | $ | 1.16 | $ | 0.07 | $ | 0.01 | $ | 0.05 | $ | - | $ | 0.06 | $ | 1.35 | $ | 1.20 | 12.5 | % | |||||||||||||||||||||||||||||||
| Nine months ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||
| Interest | |||||||||||||||||||||||||||||||||||||||||||||||||
| Expense - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Debt | Adoption of | Refinancing | |||||||||||||||||||||||||||||||||||||||||||||||
| Amortization | Issuance | Required | of Senior | Restructuring | |||||||||||||||||||||||||||||||||||||||||||||
| 2011 | of Acquired | Cost | Accounting | Credit | and Other | Adjusted | Adjusted | % | |||||||||||||||||||||||||||||||||||||||||
| GAAP | Intangibles | Amortization | Standards | Facility | Charges | 2011 | 2010 | Change | |||||||||||||||||||||||||||||||||||||||||
| Operating earnings | $ | 386,621 | $ | 26,567 | $ | - | $ | - | $ | - | $ | 9,316 | $ | 422,504 | $ | 364,130 | 16.0 | % | |||||||||||||||||||||||||||||||
| Net earnings (1) | $ | 240,569 | $ | 16,339 | $ | 3,160 | $ | 10,507 | $ | 1,979 | $ | 5,729 | $ | 278,283 | $ | 223,449 | 24.5 | % | |||||||||||||||||||||||||||||||
| Diluted earnings per share | $ | 3.21 | $ | 0.22 | $ | 0.04 | $ | 0.14 | $ | 0.03 | $ | 0.08 | $ | 3.72 | $ | 3.12 | 19.2 | % | |||||||||||||||||||||||||||||||
| Three months ended September 30, | |||||||||||||||||||||||||||||||||||||
| Interest | |||||||||||||||||||||||||||||||||||||
| Expense - | |||||||||||||||||||||||||||||||||||||
| Debt | Adoption of | ||||||||||||||||||||||||||||||||||||
| Amortization | Issuance | Required | Restructuring | ||||||||||||||||||||||||||||||||||
| 2010 | of Acquired | Cost | Accounting | and Other | Adjusted | ||||||||||||||||||||||||||||||||
| GAAP | Intangibles | Amortization | Standards | Charges | 2010 | ||||||||||||||||||||||||||||||||
| Operating earnings | $ | 120,152 | $ | 8,855 | $ | - | $ | - | $ | - | $ | 129,007 | |||||||||||||||||||||||||
| Net earnings (1) | $ | 75,773 | $ | 5,446 | $ | 1,800 | $ | 3,305 | $ | - | $ | 86,324 | |||||||||||||||||||||||||
| Diluted earnings per share | $ | 1.06 | $ | 0.07 | $ | 0.02 | $ | 0.05 | $ | - | $ | 1.20 | |||||||||||||||||||||||||
| Nine months ended September 30, | |||||||||||||||||||||||||||||||||||||
| Interest | |||||||||||||||||||||||||||||||||||||
| Expense - | |||||||||||||||||||||||||||||||||||||
| Debt | Adoption of | ||||||||||||||||||||||||||||||||||||
| Amortization | Issuance | Required | Restructuring | ||||||||||||||||||||||||||||||||||
| 2010 | of Acquired | Cost | Accounting | and Other | Adjusted | ||||||||||||||||||||||||||||||||
| GAAP | Intangibles | Amortization | Standards | Charges | 2010 | ||||||||||||||||||||||||||||||||
| Operating earnings | $ | 322,849 | $ | 28,570 | $ | - | $ | - | $ | 12,711 | $ | 364,130 | |||||||||||||||||||||||||
| Net earnings (1) | $ | 182,091 | $ | 17,571 | $ | 6,241 | $ | 9,728 | $ | 7,818 | $ | 223,449 | |||||||||||||||||||||||||
| Diluted earnings per share | $ | 2.54 | $ | 0.24 | $ | 0.09 | $ | 0.14 | $ | 0.11 | $ | 3.12 | |||||||||||||||||||||||||
|
|
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|
(1) |
Adjustments to “Net earnings” are presented net of tax. The tax effect of each reconciling item is calculated using the Company’s estimated incremental U.S. combined federal and state tax rate of 38.5%. |
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