Exhibit 99.1
Contacts: Martin J. Landon – Investors
KCI
(210) 255-6494
Elliot Sloane – Media
Sloane & Company
(212) 446-1860
KINETIC CONCEPTS REPORTS
THIRD QUARTER AND NINE MONTH
FINANCIAL RESULTS FOR 2005
Third Quarter Highlights
- Total revenue increased 21% to $312.3 million
- U.S. V.A.C. revenue increased 26% to $188.0 million
- Novamedix litigation settlement charge of $72.0 million before taxes, $47.4 million after-tax, or
$0.65 per diluted share
- Net loss of $1.2 million and net loss per diluted share of $0.02, including litigation settlement
expense, compared to net earnings of $32.8 million and net earnings per diluted share of $0.46 in the
2004 quarter
- Non-GAAP net earnings and diluted earnings per share of $46.3 million and $0.63, representing
increases of 41% and 37%, respectively, over the prior year
Nine Month Highlights
- Total revenue increased 23% to $886.5 million
- U.S. V.A.C. revenue increased 26% to $511.6 million
- Net earnings of $75.8 million, including $47.4 million litigation settlement expense, compared to a
net loss of $3.3 million, including 2004 IPO and follow-on stock offering expenses
- Net earnings per diluted share of $1.04, which was reduced by $0.65 litigation settlement expense
San Antonio, Texas, October 25, 2005 – Kinetic Concepts, Inc. (NYSE: KCI) today reported third quarter 2005 total revenue of $312.3 million, an increase of 21% from the third quarter of 2004. Total revenue for the first nine months of 2005 was $886.5 million, a 23% increase from the prior-year period. Foreign currency exchange movements favorably impacted total revenue for the third quarter and first nine months of 2005 by 1% and 2%, respectively, compared to the corresponding periods of the prior year.
During the 2005 third quarter, the Company announced that it reached an agreement to settle its 13-year old litigation with Novamedix Limited. Under the terms of the settlement, KCI agreed to pay Novamedix $75.0 million. The settlement payment resulted in a charge of $72.0 million, net of recorded reserves of $3.0 million, or $47.4 million and $0.65 per diluted share, net of taxes.
As a result of the litigation settlement, the Company reported a net loss for the third quarter of 2005 of $1.2 million compared to net earnings of $32.8 million for the same period in 2004. For the third quarter, the Company reported a corresponding net loss per diluted share of $0.02 compared to net earnings per diluted share of $0.46 for the third quarter of 2004. On a non-GAAP basis, excluding the litigation settlement expense, third quarter net earnings of $46.3 million increased 41% from the prior year. Diluted earnings per share on a non-GAAP basis, excluding the litigation expense, were $0.63 per share for the 2005 third quarter compared to $0.46 per diluted share under GAAP in 2004, an increase of 37%.
For the first nine months of 2005, net earnings were $75.8 million, including litigation settlement expense, compared to a net loss of $3.3 million for the same period in 2004, including IPO and follow-on stock offering expenses. Earnings per diluted share were $1.04 for the first nine months of 2005 compared to a net loss per share of $0.05 for the same period of 2004.
On a non-GAAP basis, excluding the litigation settlement expense for 2005 and IPO and follow-on stock offering expenses for 2004, net earnings for the first nine months of 2005 were $123.2 million compared to $83.9 million for the same period in 2004, an increase of 47%. Earnings per diluted share, on that same non-GAAP basis, were $1.69 for the first nine months of 2005, an increase of 42% from the year-ago period.
“Our third quarter financial results reflect continuing demand for V.A.C. therapy in our U.S. and international markets,” said Dennert O. Ware, President and Chief Executive Officer of KCI. “We settled a long-outstanding legal case that pertained to a product line that is not core to our business, while generating strong operating returns during the period.”
Revenue Recap
Domestic revenue was $232.3 million for the third quarter and $646.4 million for the first nine months of 2005, representing increases of 20% and 19%, respectively, from the prior year due to increased rental and sales volumes for V.A.C. wound healing devices and related disposables. International revenue of $80.0 million for the third quarter and $240.1 million for the first nine months of 2005 increased 25% and 36%, respectively, compared to the prior year, due to increased V.A.C. demand and higher than expected first quarter surfaces sales. Foreign currency exchange movements favorably impacted international revenue by 2% during the third quarter and 6% during the first nine months of 2005.
Worldwide V.A.C. revenue was $240.5 million for the third quarter of 2005, and $658.9 million for the first nine months, representing increases of 30% and 32%, respectively, from the corresponding periods of the prior year. Foreign currency exchange movements favorably impacted worldwide V.A.C. revenue by 1% during the third quarter and first nine months of the prior year. The growth in V.A.C. revenue stemmed from volume increases driven by our continued focus on marketing and selling efforts combined with higher than expected international V.A.C. sales in the first quarter of 2005.
Worldwide surfaces revenue was $71.8 million for the third quarter and $227.6 million for the first nine months of 2005, representing continued stability in the third quarter and a 4% increase for the first nine months resulting primarily from higher international surfaces sales in the first quarter. For the third quarter, higher international units in use were offset by lower unit pricing due to pricing pressure on lower-end therapies, which was partially offset by favorable product mix shifts in the U.S. Foreign currency exchange movements favorably impacted worldwide surfaces revenue by 1% in the third quarter and by 2% for the first nine months of 2005 compared to the same periods one year ago.
Income Tax Rate
The effective income tax rate for the first nine months of 2005 was 34.0% compared to 36.0% for the same period in 2004. The income tax rate reduction was primarily attributable to a higher portion of taxable income being generated in lower tax jurisdictions, as well as favorable resolution of certain foreign tax audits.
Outlook
The following guidance is based on current information and expectations as of October 25, 2005:
KCI presently projects full year 2005 total revenue of $1.20 – $1.25 billion based on continued demand for its V.A.C. negative pressure wound therapy devices and related supplies. The Company currently projects full year 2005 U.S. V.A.C. revenue to be $705 – $730 million. Net earnings per diluted share for 2005 are currently projected on a non-GAAP basis to be $2.25 – $2.30 per share, or on a GAAP basis, including the settlement, $1.60 – $1.65 per diluted share, in each case based upon a weighted average diluted share count estimate of 73.0 – 73.5 million shares.
KCI's business outlook as of today is expected to be available on KCI's Investor Relations web site. It is currently expected that a business outlook update will not be announced until the release of KCI's next quarterly earnings announcement, notwithstanding subsequent developments. Although KCI undertakes no duty to update its business outlook, KCI may update the full business outlook or any portion thereof at any time.
Earnings Release Conference Call
As previously announced, we have scheduled an earnings release conference call for 8:30 a.m. eastern daylight time today, Tuesday, October 25, 2005. The dial-in numbers for this conference call are as follows:
Domestic Dial-in Number: | 800-291-9234 |
International Dial-in Number: | +617-614-3923 |
Participant Code: | 92754634 |
This call is being webcast by CCBN and can be accessed at the Kinetic Concepts, Inc. web site at http://www.kci1.com/investor/index.asp, and clicking on Web cast – Q3 2005 Kinetic Concepts Earnings Call. The webcast is also being distributed over CCBN's Investor Distribution Network to both institutional and individual investors. Individual investors can listen to the call through CCBN's individual investor center at www.fulldisclosure.com and institutional investors can access the call via CCBN's password-protected event management site, StreetEvents (www.streetevents.com). An archive of the webcast will be available at http://www.kci1.com/investor/index.asp until October 24, 2006.
Non-GAAP Financial Information
We have presented net earnings and earnings per share for periods in 2005 and 2004 on a non-GAAP basis to exclude the litigation settlement charge in 2005 and the impact of costs and expenses and the acceleration of the in-kind preferred stock dividends incurred as a result of the initial public and follow-on offerings in 2004. These non-GAAP financial measures do not replace the presentation of our GAAP financial results. We have provided this supplemental non-GAAP information because it may provide meaningful information regarding our results on a basis that better facilitates comparisons between the periods presented. Management uses this non-GAAP financial information, along with GAAP information, for evaluating historical results. In addition, management believes some investors may use this information in a similar fashion.
The non-GAAP information is not prepared in accordance with U.S. generally accepted accounting principles and may differ from the non-GAAP information used by other companies. Non-GAAP information should not be considered in isolation from, or as a substitute for, information prepared in accordance with GAAP. Moreover, there are material limitations associated with the use of non-GAAP information. In this regard, while the specific transactions causing the non-GAAP expenses or dividends are historical, the Company in the future may effect other transactions, such as settlements, public offerings, acquisitions or restructurings, that may trigger similar expenses. For these reasons, our non-GAAP information may be less useful to investors than the GAAP information also provided. A reconciliation of our non-GAAP information to our GAAP information appears following the financial statements.
About KCI
Kinetic Concepts, Inc. is a global medical technology company with leadership positions in advanced wound care and therapeutic surfaces. We design, manufacture, market and service a wide range of proprietary products that can improve clinical outcomes while helping to reduce the overall cost of patient care. Our advanced wound care systems incorporate our proprietary V.A.C.® technology, which has been clinically demonstrated to help promote wound healing and can help reduce the cost of treating patients with serious wounds. Our therapeutic surfaces, including specialty hospital beds, mattress replacement systems and overlays, are designed to address pulmonary complications associated with immobility and to prevent skin breakdown. We have an infrastructure designed to meet the specific needs of medical professionals and patients across all health care settings including acute care hospitals, extended care facilities and patients' homes both in the United States and abroad.
Forward-Looking Statements
This press release contains forward-looking statements including, among other things, management's outlook, estimates of future performance, revenue and earnings growth objectives. The forward-looking statements contained herein are based on our current expectations and are subject to a number of risks and uncertainties which could cause us to fail to achieve our current financial projections and other expectations, such as a change in the demand for the V.A.C. resulting from increased competition, a change in payer reimbursement policies, our ability to protect our intellectual property rights, related and other litigation, and general economic conditions. All information set forth in this release and its attachments is as of October 25, 2005. 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, 2004 and our Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2005 and June 30, 2005, including, among other sections, under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," which are on file with the SEC and available at the SEC's website at www.sec.gov. Additional information will also be set forth in those sections in our Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2005, which will be filed with the SEC in early November 2005.
KINETIC CONCEPTS, INC. AND SUBSIDIARIES |
Condensed Consolidated Statements of Operations |
(in thousands, except per share data) |
(unaudited) |
| | |
| | |
| Three months ended September 30, | Nine months ended September 30, |
| | | % | | | | % |
| 2005 | 2004 | Change | 2005 | | 2004 | Change |
Revenue: | | | | | | | |
Rental | $ 221,747 | $ 188,637 | 17.6 % | $ 628,732 | | $ 530,124 | 18.6 % |
Sales | 90,601 | 68,525 | 32.2 | 257,799 | | 188,857 | 36.5 |
| _______ | _______ | | _______ | | _______ | |
Total revenue | 312,348 | 257,162 | 21.5 | 886,531 | | 718,981 | 23.3 |
| | | | | | | |
Rental expenses | 136,160 | 112,422 | 21.1 | 394,412 | | 323,392 | 22.0 |
Cost of goods sold | 22,564 | 18,816 | 19.9 | 64,682 | | 52,144 | 24.0 |
| _______ | _______ | | _______ | | _______ | |
Gross profit | 153,624 | 125,924 | 22.0 | 427,437 | | 343,445 | 24.5 |
| | | | | | | |
Selling, general and administrative expenses | 73,269 | 61,728 | 18.7 | 201,494 | | 167,176 | 20.5 |
Research and development expenses | 7,724 | 7,544 | 2.4 | 20,697 | | 21,851 | (5.3) |
Litigation settlement expense | 72,000 | - | - | 72,000 | | - | - |
Initial public offering expenses | - | - | - | - | | 19,836 | - |
Secondary offering expenses | - | - | - | - | | 2,219 | - |
| _______ | _______ | | _______ | | _______ | |
Operating earnings | 631 | 56,652 | (98.9) | 133,246 | | 132,363 | 0.7 |
| | | | | | | |
Interest income and other | 2,504 | 214 | - | 3,522 | | 743 | 374.0 |
Interest expense | (5,989) | (7,566) | (20.8) | (18,898) | | (37,460) | (49.6) |
Foreign currency gain (loss) | 218 | 1,964 | (88.9) | (3,040) | | 1,701 | - |
| _______ | _______ | | _______ | | _______ | |
Earnings (loss) before income | | | | | | | |
taxes (benefit) | (2,636) | 51,264 | - | 114,830 | | 97,347 | 18.0 |
| | | | | | | |
Income taxes (benefit) | (1,484) | 18,455 | - | 39,042 | | 35,045 | 11.4 |
| _______ | _______ | | _______ | | _______ | |
Net earnings (loss) | $ (1,152) | $ 32,809 | - | $ 75,788 | | $ 62,302 | 21.6 % |
| | | | | | | |
Series A convertible preferred stock dividends | - | - | - | - | | (65,604) | - |
| _______ | _______ | | _______ | | _______ | |
Net earnings (loss) available to | | | | | | | |
common shareholders | $ (1,152) | $ 32,809 | - | $ 75,788 | | $ (3,302) | - |
| _______ | _______ | | _______ | | _______ | |
Net earnings (loss) per share available | | | | | | | |
to common shareholders: | | | | | | | |
Basic | $ (0.02) | $ 0.49 | - | $ 1.09 | | $ (0.05) | - |
| _______ | _______ | | _______ | | _______ | |
Diluted (1) | $ (0.02) | $ 0.46 | - | $ 1.04 | | $ (0.05) | - |
| _______ | _______ | | _______ | | _______ | |
Weighted average shares outstanding: | | | | | | | |
Basic | 69,587 | 66,767 | | 69,229 | | 60,751 | |
| _______ | _______ | | _______ | | _______ | |
Diluted (1) | 69,587 | 71,774 | | 73,019 | | 60,751 | |
| _______ | _______ | | _______ | | _______ | |
| | | | | | | |
(1) Due to their antidilutive effect, 3,545 dilutive potential common shares from stock options have been excluded from the diluted weighted |
average shares calculation for the three months ended September 30, 2005. In addition, due to their antidilutive effect, 5,606 dilutive |
potential common shares from stock options and 3,994 dilutive potential common shares from the preferred stock conversion have been |
excluded from the diluted weighted average shares calculation for the nine months ended September 30, 2004. |
KINETIC CONCEPTS, INC. AND SUBSIDIARIES |
Reconciliation of Non-GAAP Condensed Consolidated Statements of Operations (1) |
For the three months ended September 30, |
(in thousands, except per share data) |
(unaudited) |
|
| 2005 | | | |
| | | Excluding | | | |
| | Litigation | Litigation | | | |
| | Settlement | Settlement | | 2004 | % |
| GAAP | (non-GAAP) | (non-GAAP) | | GAAP | Change (2) |
Revenue: | | | | | | |
Rental | $ 221,747 | $ - | $ 221,747 | | $ 188,637 | 17.6 % |
Sales | 90,601 | - | 90,601 | | 68,525 | 32.2 |
| _______ | _______ | _______ | | _______ | |
Total revenue | 312,348 | - | 312,348 | | 257,162 | 21.5 % |
| | | | | | |
Rental expenses | 136,160 | - | 136,160 | | 112,422 | 21.1 |
Cost of goods sold | 22,564 | - | 22,564 | | 18,816 | 19.9 |
| _______ | _______ | _______ | | _______ | |
Gross profit | 153,624 | - | 153,624 | | 125,924 | 22.0 % |
| | | | | | |
Selling, general and administrative expenses | 73,269 | - | 73,269 | | 61,728 | 18.7 |
Research and development expenses | 7,724 | - | 7,724 | | 7,544 | 2.4 |
Litigation settlement expense | 72,000 | (72,000) | - | | - | - |
| _______ | _______ | _______ | | _______ | |
Operating earnings | 631 | 72,000 | 72,631 | | 56,652 | 28.2 % |
| | | | | | |
Interest income and other | 2,504 | - | 2,504 | | 214 | - |
Interest expense | (5,989) | - | (5,989) | | (7,566) | (20.8) |
Foreign currency gain | 218 | - | 218 | | 1,964 | (88.9) |
| _______ | _______ | _______ | | _______ | |
Earnings (loss) before income taxes (benefit) | (2,636) | 72,000 | 69,364 | | 51,264 | 35.3 % |
Income taxes (benefit) | (1,484) | 24,559 | 23,075 | | 18,455 | 25.0 |
| _______ | _______ | _______ | | _______ | |
Net earnings (loss) | $ (1,152) | $ 47,441 | $ 46,289 | | $ 32,809 | 41.1 % |
| _______ | _______ | _______ | | _______ | |
Net earnings (loss) per share: | | | | | | |
Basic | $ (0.02) | $ 0.69 | $ 0.67 | | $ 0.49 | 36.7 % |
| _______ | _______ | _______ | | _______ | |
Diluted (3) | $ (0.02) | $ 0.65 | $ 0.63 | | $ 0.46 | 37.0 % |
| _______ | _______ | _______ | | _______ | |
Weighted average shares outstanding: | | | | | | |
Basic | 69,587 | | 69,587 | | 66,767 | |
| _______ | | _______ | | _______ | |
Diluted (3) | 69,587 | | 73,132 | | 71,774 | |
| _______ | | _______ | | _______ | |
|
(1) These non-GAAP financial measures do not replace the presentation of our GAAP financial results. See “Non-GAAP Financial Information” |
on page 3 of this press release for further discussion of our non-GAAP financial information. |
(2) The percentage change reflects the percentage variance between the 2005 non-GAAP results, excluding the litigation settlement, and the |
2004 GAAP results. |
(3) Due to their antidilutive effect, 3,545 dilutive potential common shares from stock options have been excluded from the GAAP diluted |
weighted average shares calculation for the three months ended September 30, 2005 |
|
KINETIC CONCEPTS, INC. AND SUBSIDIARIES |
Reconciliation of Non-GAAP Condensed Consolidated Statements of Earnings (1) |
For the nine months ended September 30, |
(in thousands, except per share data) |
(unaudited) |
|
| 2005 | 2004 | |
| | | | | | Excluding | |
| | | | | Costs and | Costs and | |
| | | | | Expenses | Expenses | |
| | | | | Related to | Related to | |
| | | Excluding | | Offerings | Offerings | |
| | Litigation | Litigation | | and Debt | and Debt | |
| | Settlement | Settlement | | Prepayments | Prepayments | % |
| GAAP | (non-GAAP) | (non-GAAP) | GAAP | (non-GAAP) | (non-GAAP) | Change (2) |
Revenue: | | | | | | | |
Rental | $ 628,732 | $ - | $ 628,732 | $ 530,124 | $ - | $ 530,124 | 18.6 % |
Sales | 257,799 | - | 257,799 | 188,857 | - | 188,857 | 36.5 |
| _______ | ______ | _______ | _______ | _______ | _______ | |
Total revenue | 886,531 | - | 886,531 | 718,981 | - | 718,981 | 23.3 % |
| | | | | | | |
Rental expenses | 394,412 | - | 394,412 | 323,392 | - | 323,392 | 22.0 |
Cost of goods sold | 64,682 | - | 64,682 | 52,144 | - | 52,144 | 24.0 |
| _______ | ______ | _______ | _______ | _______ | _______ | |
Gross profit | 427,437 | - | 427,437 | 343,445 | - | 343,445 | 24.5 % |
| | | | | | | |
Selling, general and | | | | | | | |
administrative expenses | 201,494 | - | 201,494 | 167,176 | - | 167,176 | 20.5 |
Research and development | | | | | | | |
expenses | 20,697 | - | 20,697 | 21,851 | - | 21,851 | (5.3) |
Litigation settlement expense | 72,000 | (72,000) | - | - | - | - | - |
Initial public offering expenses | - | - | - | 19,836 | (19,836) | - | - |
Secondary offering expenses | - | - | - | 2,219 | (2,219) | - | - |
| _______ | ______ | _______ | _______ | _______ | _______ | |
Operating earnings | 133,246 | 72,000 | 205,246 | 132,363 | 22,055 | 154,418 | 32.9% |
| | | | | | | |
Interest income and other | 3,522 | - | 3,522 | 743 | - | 743 | 374.0 |
Interest expense | (18,898) | - | (18,898) | (37,460) | 11,689 | (25,771) | (26.7) |
Foreign currency gain (loss) | (3,040) | - | (3,040) | 1,701 | - | 1,701 | - |
| _______ | ______ | _______ | _______ | _______ | _______ | |
Earnings before income | | | | | | | |
taxes | 114,830 | 72,000 | 186,830 | 97,347 | 33,744 | 131,091 | 42.5 % |
Income taxes | 39,042 | 24,559 | 63,601 | 35,045 | 12,148 | 47,193 | 34.8 |
| _______ | ______ | _______ | _______ | _______ | _______ | |
Net earnings | $ 75,788 | $ 47,441 | $ 123,229 | $ 62,302 | $ 21,596 | $ 83,898 | 46.9 % |
Series A convertible preferred | | | | | | | |
stock dividends | - | - | - | (65,604) | 65,604 | - | - |
| _______ | ______ | _______ | _______ | _______ | _______ | |
Net earnings (loss) | | | | | | | |
available to common | | | | | | | |
shareholders | $ 75,788 | $ 47,441 | $ 123,229 | $ (3,302) | $ 87,200 | $ 83,898 | 46.9 % |
| _______ | ______ | _______ | _______ | _______ | _______ | |
Net earnings (loss) per | | | | | | | |
share available to | | | | | | | |
common shareholders: | | | | | | | |
Basic | $ 1.09 | $ 0.69 | $ 1.78 | $ (0.05) | $ 1.43 | $ 1.38 | 29.0 % |
| _______ | _______ | _______ | _______ | _______ | _______ | |
Diluted (3) | $ 1.04 | $ 0.65 | $ 1.69 | $ (0.05) | $ 1.24 | $ 1.19 | 42.0 % |
| _______ | _______ | _______ | _______ | _______ | _______ | |
Weighted average | | | | | | | |
shares outstanding: | | | | | | | |
Basic | 69,229 | | 69,229 | 60,751 | | 60,751 | |
| _______ | | _______ | _______ | | _______ | |
Diluted (3) | 73,019 | | 73,019 | 60,751 | | 70,351 | |
| _______ | | _______ | _______ | | _______ | |
|
(1) These non-GAAP financial measures do not replace the presentation of our GAAP financial results. See “Non-GAAP Financial |
Information” on page3 of this press release for further discussion of our non-GAAP financial information. |
(2) The percentage change reflects the percentage variance between the 2005 non-GAAP results, excluding the litigation settlement, |
and the 2004 non-GAAP results, excluding offering and debt prepayment related costs and expenses. |
(3) Due to their antidilutive effect, 5,606 dilutive potential common shares from stock options and 3,994 dilutive potential common shares |
from the preferred stock conversion have been excluded from the GAAP diluted weighted average shares calculation for the nine |
months ended September 30, 2004. |
KINETIC CONCEPTS, INC. AND SUBSIDIARIES |
Condensed Consolidated Balance Sheets |
(in thousands) |
| | | |
| September 30, | | December 31, |
| 2005 | | 2004 |
| (unaudited) | | |
Assets: | | | |
Current assets: | | | |
Cash and cash equivalents | $ 79,491 | | $ 124,366 |
Accounts receivable, net | 269,313 | | 252,822 |
Inventories, net | 32,881 | | 35,590 |
Deferred income taxes | 23,568 | | 24,836 |
Prepaid expenses and other current assets | 19,680 | | 13,296 |
| _______ | | _______ |
Total current assets | 424,933 | | 450,910 |
| _______ | | _______ |
| | | |
Net property, plant and equipment | 175,301 | | 183,075 |
Loan issuance costs, less accumulated amortization of $11,744 | | | |
in 2005 and $8,317 in 2004 | 8,510 | | 11,937 |
Deferred income taxes | 11,808 | | 7,913 |
Goodwill | 49,369 | | 49,369 |
Other assets, less accumulated amortization of $9,089 in 2005 | | | |
and $8,748 in 2004 | 29,199 | | 29,261 |
| _______ | | _______ |
| $ 699,120 | | $ 732,465 |
| _______ | | _______ |
Liabilities and Shareholders’ Equity: | | | |
Current liabilities: | | | |
Accounts payable | $ 42,776 | | $ 43,246 |
Accrued expenses and other | 146,531 | | 150,317 |
Current installments of long-term debt | 2,420 | | 2,803 |
Income taxes payable | 26,456 | | 20,821 |
| _______ | | _______ |
Total current liabilities | 218,183 | | 217,187 |
| _______ | | _______ |
| | | |
Long-term debt, net of current installments | 317,483 | | 442,943 |
Deferred income taxes | 10,668 | | 13,170 |
Other noncurrent liabilities | 9,370 | | 8,364 |
| _______ | | _______ |
| 555,704 | | 681,664 |
| | | |
Shareholders' equity: | | | |
Common stock; authorized 225,000 at September 30, 2005 | | | |
and December 31, 2004; issued and outstanding | | | |
69,784 at September 30, 2005 and 68,694 at December 31, 2004 | 70 | | 69 |
Preferred stock; authorized 50,000 at September 30, 2005 and | | | |
December 31, 2004; issued and outstanding 0 at September 30, | | | |
2005 and December 31, 2004 | - | | - |
Additional paid-in capital | 551,247 | | 517,354 |
Deferred compensation | (6,142) | | (1,906) |
Retained deficit | (412,283) | | (488,071) |
Accumulated other comprehensive income | 10,524 | | 23,355 |
| _______ | | _______ |
Shareholders' equity | 143,416 | | 50,801 |
| _______ | | _______ |
| $ 699,120 | | $ 732,465 |
| _______ | | _______ |
KINETIC CONCEPTS, INC. AND SUBSIDIARIES | |
Condensed Consolidated Statements of Cash Flows | |
(in thousands) | |
(unaudited) | |
| Nine months ended September 30, | |
| 2005 | | 2004 | |
Cash flows from operating activities: | | | | |
Net earnings | $ 75,788 | | $ 62,302 | |
Adjustments to reconcile net earnings to net cash provided | | | | |
by operating activities: | | | | |
Depreciation and amortization | 51,213 | | 43,114 | |
Provision for uncollectible accounts receivable | 12,979 | | 7,904 | |
Amortization of deferred gain on sale of headquarters facility | (803) | | (803) | |
Write-off of deferred loan issuance costs | 2,308 | | 5,127 | |
Non-cash amortization of stock awards | 1,196 | | 218 | |
Tax benefit related to exercise of stock options | 19,978 | | 42,402 | |
Change in assets and liabilities: | | | | |
Increase in accounts receivable, net | (27,920) | | (46,476) | |
Decrease (increase) in inventories, net | 3,066 | | (1,059) | |
Decrease (increase) in current deferred income taxes, net | 1,268 | | (1,566) | |
Decrease (increase) in prepaid expenses and other current assets | (5,932) | | 527 | |
Decrease in accounts payable | (293) | | (4,147) | |
Increase (decrease) in accrued expenses and other | (1,306) | | 20,657 | |
Increase (decrease) in income taxes payable | 5,635 | | (36,186) | |
Increase (decrease) in deferred income taxes, net | (6,556) | | 2,058 | |
| _______ | | _______ | |
Net cash provided by operating activities | 130,621 | | 94,072 | |
| _______ | | _______ | |
Cash flows from investing activities: | | | | |
Additions to property, plant and equipment | (54,716) | | (63,849) | |
Decrease (increase) in inventory to be converted into equipment | | | | |
for short-term rental | 1,300 | | (2,200) | |
Dispositions of property, plant and equipment | 803 | | 1,471 | |
Increase in other assets | (405) | | (642) | |
| _______ | | _______ | |
Net cash used by investing activities | (53,018) | | (65,220) | |
| _______ | | _______ | |
Cash flows from financing activities: | | | | |
Repayment of notes payable, long-term debt, capital lease | | | | |
and other obligations | (125,710) | | (217,289) | |
Proceeds from exercise of stock options | 6,264 | | 9,556 | |
Proceeds from purchase of stock in ESPP | 2,213 | | - | |
Initial public offering of common stock: | | | | |
Proceeds from issuance of common stock | - | | 105,000 | |
Stock issuance costs | - | | (10,604) | |
| _______ | | _______ | |
Net cash used by financing activities | (117,233) | | (113,337) | |
| _______ | | _______ | |
Effect of exchange rate changes on cash and cash equivalents | (5,245) | | (43) | |
| _______ | | _______ | |
Net decrease in cash and cash equivalents | (44,875) | | (84,528) | |
Cash and cash equivalents, beginning of period | 124,366 | | 156,064 | |
| _______ | | _______ | |
Cash and cash equivalents, end of period | $ 79,491 | | $ 71,536 | |
| _______ | | _______ | |
Cash paid during the nine months for: | | | | |
Interest (1) | $ 13,548 | | $ 29,701 | |
Income taxes | $ 15,413 | | $ 30,724 | |
Non-cash activity: | | | | |
Non-cash consideration for exercise of stock options | $ 7 | | $ 6,443 | |
| | | | |
(1) The amount reflected for 2004 includes purchase premiums of $7.7 million related to the prepayments on |
our 7 3/8% Senior Subordinated Notes due 2013. |
KINETIC CONCEPTS, INC. AND SUBSIDIARIES |
Supplemental Revenue Data |
(in thousands) |
(unaudited) |
|
| Three months ended September 30, | |
| | | | | | Variance | |
| 2005 | | 2004 | | | $ | | % | |
Total Revenue: | | | | | | | | | |
V.A.C. | | | | | | | | | |
Rental | $ 162,814 | | $ 129,885 | | | $ 32,929 | | 25.4 % | |
Sales | 77,715 | | 55,636 | | | 22,079 | | 39.7 | |
| _______ | | _______ | | | ______ | | | |
Total V.A.C. | 240,529 | | 185,521 | | | 55,008 | | 29.7 | |
| | | | | | | | | |
Therapeutic surfaces/other | | | | | | | | | |
Rental | 58,933 | | 58,752 | | | 181 | | 0.3 | |
Sales | 12,886 | | 12,889 | | | (3) | | - | |
| _______ | | _______ | | | ______ | | | |
Total therapeutic surfaces/other | 71,819 | | 71,641 | | | 178 | | 0.2 | |
| | | | | | | | | |
Total rental revenue | 221,747 | | 188,637 | | | 33,110 | | 17.6 | |
Total sales revenue | 90,601 | | 68,525 | | | 22,076 | | 32.2 | |
| _______ | | _______ | | | ______ | | | |
Total Revenue | $ 312,348 | | $ 257,162 | | | $ 55,186 | | 21.5 % | |
| _______ | | _______ | | | _______ | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
USA Revenue: | | | | | | | | | |
V.A.C. | | | | | | | | | |
Rental | $ 137,252 | | $ 111,328 | | | $ 25,924 | | 23.3 % | |
Sales | 50,791 | | 37,431 | | | 13,360 | | 35.7 | |
| _______ | | _______ | | | ______ | | | |
Total V.A.C. | 188,043 | | 148,759 | | | 39,284 | | 26.4 | |
| | | | | | | | | |
Therapeutic surfaces/other | | | | | | | | | |
Rental | 37,438 | | 37,230 | | | 208 | | 0.6 | |
Sales | 6,859 | | 7,056 | | | (197) | | (2.8) | |
| _______ | | _______ | | | ______ | | | |
Total therapeutic surfaces/other | 44,297 | | 44,286 | | | 11 | | - | |
| | | | | | | | | |
Total USA rental | 174,690 | | 148,558 | | | 26,132 | | 17.6 | |
Total USA sales | 57,650 | | 44,487 | | | 13,163 | | 29.6 | |
| _______ | | _______ | | | ______ | | | |
Total – USA Revenue | $ 232,340 | | $ 193,045 | | | $ 39,295 | | 20.4 % | |
| _______ | | _______ | | | _______ | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
International Revenue: | | | | | | | | | |
V.A.C. | | | | | | | | | |
Rental | $ 25,562 | | $ 18,557 | | | $ 7,005 | | 37.7 % | |
Sales | 26,924 | | 18,205 | | | 8,719 | | 47.9 | |
| _______ | | _______ | | | ______ | | | |
Total V.A.C. | 52,486 | | 36,762 | | | 15,724 | | 42.8 | |
| | | | | | | | | |
Therapeutic surfaces/other | | | | | | | | | |
Rental | 21,495 | | 21,522 | | | (27) | | (0.1) | |
Sales | 6,027 | | 5,833 | | | 194 | | 3.3 | |
| _______ | | _______ | | | ______ | | | |
Total therapeutic surfaces/other | 27,522 | | 27,355 | | | 167 | | 0.6 | |
| | | | | | | | | |
Total International rental | 47,057 | | 40,079 | | | 6,978 | | 17.4 | |
Total International sales | 32,951 | | 24,038 | | | 8,913 | | 37.1 | |
| _______ | | _______ | | | ______ | | | |
Total – International Revenue | $ 80,008 | | $ 64,117 | | | $ 15,891 | | 24.8 % | |
| _______ | | _______ | | | _______ | | | |
KINETIC CONCEPTS, INC. AND SUBSIDIARIES |
Supplemental Revenue Data |
(in thousands) |
(unaudited) |
|
| Nine months ended September 30, | |
| | | | | | Variance | |
| 2005 | | 2004 | | | $ | | % | |
Total Revenue: | | | | | | | | | |
V.A.C. | | | | | | | | | |
Rental | $ 445,837 | | $ 350,026 | | | $ 95,811 | | 27.4 % | |
Sales | 213,104 | | 150,286 | | | 62,818 | | 41.8 | |
| _______ | | _______ | | | ______ | | | |
Total V.A.C. | 658,941 | | 500,312 | | | 158,629 | | 31.7 | |
| | | | | | | | | |
Therapeutic surfaces/other | | | | | | | | | |
Rental | 182,895 | | 180,098 | | | 2,797 | | 1.6 | |
Sales | 44,695 | | 38,571 | | | 6,124 | | 15.9 | |
| _______ | | _______ | | | ______ | | | |
Total therapeutic surfaces/other | 227,590 | | 218,669 | | | 8,921 | | 4.1 | |
| | | | | | | | | |
Total rental revenue | 628,732 | | 530,124 | | | 98,608 | | 18.6 | |
Total sales revenue | 257,799 | | 188,857 | | | 68,942 | | 36.5 | |
| _______ | | _______ | | | ______ | | | |
Total Revenue | $ 886,531 | | $ 718,981 | | | $ 167,550 | | 23.3 % | |
| _______ | | _______ | | | _______ | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
USA Revenue: | | | | | | | | | |
V.A.C. | | | | | | | | | |
Rental | $ 376,162 | | $ 302,682 | | | $ 73,480 | | 24.3 % | |
Sales | 135,458 | | 103,715 | | | 31,743 | | 30.6 | |
| _______ | | _______ | | | ______ | | | |
Total V.A.C. | 511,620 | | 406,397 | | | 105,223 | | 25.9 | |
| | | | | | | | | |
Therapeutic surfaces/other | | | | | | | | | |
Rental | 114,511 | | 114,437 | | | 74 | | 0.1 | |
Sales | 20,314 | | 21,800 | | | (1,486) | | (6.8) | |
| _______ | | _______ | | | ______ | | | |
Total therapeutic surfaces/other | 134,825 | | 136,237 | | | (1,412) | | (1.0) | |
| | | | | | | | | |
Total USA rental | 490,673 | | 417,119 | | | 73,554 | | 17.6 | |
Total USA sales | 155,772 | | 125,515 | | | 30,257 | | 24.1 | |
| _______ | | _______ | | | ______ | | | |
Total – USA Revenue | $ 646,445 | | $ 542,634 | | | $ 103,811 | | 19.1 % | |
| _______ | | _______ | | | _______ | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
International Revenue: | | | | | | | | | |
V.A.C. | | | | | | | | | |
Rental | $ 69,675 | | $ 47,344 | | | $ 22,331 | | 47.2 % | |
Sales | 77,646 | | 46,571 | | | 31,075 | | 66.7 | |
| _______ | | _______ | | | ______ | | | |
Total V.A.C. | 147,321 | | 93,915 | | | 53,406 | | 56.9 | |
| | | | | | | | | |
Therapeutic surfaces/other | | | | | | | | | |
Rental | 68,384 | | 65,661 | | | 2,723 | | 4.1 | |
Sales | 24,381 | | 16,771 | | | 7,610 | | 45.4 | |
| _______ | | _______ | | | ______ | | | |
Total therapeutic surfaces/other | 92,765 | | 82,432 | | | 10,333 | | 12.5 | |
| | | | | | | | | |
Total International rental | 138,059 | | 113,005 | | | 25,054 | | 22.2 | |
Total International sales | 102,027 | | 63,342 | | | 38,685 | | 61.1 | |
| _______ | | _______ | | | ______ | | | |
Total – International Revenue | $ 240,086 | | $ 176,347 | | | $ 63,739 | | 36.1 % | |
| _______ | | _______ | | | _______ | | | |