EX-99.1 2 a99120132qearningsrelease.htm PRESS RELEASE 99.1 2013 2Q Earnings Release



FOR MORE INFORMATION, CONTACT:
Chief Financial Officer:
Robert Hureau
Office: 210-255-6180
robert.hureau@kci1.com 
 

CENTAUR GUERNSEY L.P. INC. REPORTS
SECOND QUARTER AND FIRST HALF FINANCIAL RESULTS FOR 2013


-  Second quarter 2013 worldwide Centaur Guernsey L.P. Inc. (“Centaur”) revenue of $432.7 million, down 1.2% from the prior-year period as reported and 0.8% from the prior-year period on a constant currency basis

-  Second quarter 2013 worldwide Kinetic Concepts, Inc. (“KCI”) revenue of $317.8 million, down 3.8% from the prior-year period as reported and 3.2% from the prior-year period on a constant currency basis reflecting continued progression towards a return to growth

-  Second quarter 2013 worldwide LifeCell Corporation (“LifeCell”) revenue of $114.9 million, up 6.6% from the prior-year period as reported and on a constant currency basis

- Second quarter 2013 net loss of $62.6 million compared to a net loss of $54.6 million for the prior-year period

-  Second quarter 2013 total Adjusted EBITDA from continuing operations of $177.0 million compared to $177.3 million for the prior-year period

- KCI to acquire SystagenixTM - Strategic transaction strengthens KCI's leadership position in global wound care market while adding diversification


Highlights of the second quarter and six months ended June 30, 2013

Worldwide Centaur revenue for the second quarter of 2013 was $432.7 million, down from the prior year comparable period by 1.2% as reported and 0.8% on a constant currency basis. Operating earnings for the second quarter of 2013 were $11.1 million, down from $26.8 million in the prior-year period due primarily to non-cash impairment charges of $34.3 million. Total adjusted earnings before interest, taxes, depreciation and amortization from continuing operations1 (“Adjusted EBITDA from continuing operations”) were $177.0 million for the second quarter of 2013, compared to $177.3 million in the prior-year period.

Worldwide Centaur revenue for the six months ended June 30, 2013 was $848.6 million, down from the comparable prior year period by 2.5% as reported and 2.1% on a constant currency basis. Operating earnings for the six months ended June 30, 2013 were $46.7 million, up from $29.4 million in the prior-year period. Total Adjusted EBITDA from continuing operations were $333.8 million for the six months ended June 30, 2013, compared to $340.4 million in the prior-year period.

“We continue to achieve significant milestones in performance associated with our strategic plan, including diversification of portfolio,” said Joseph Woody, President and Chief Executive Officer of KCI and Interim Chief Executive Officer of LifeCell.  “Additionally. I am pleased with our geographic growth and growth in expansion products this quarter.”





Acquisition of Systagenix

On July 30, 2013, KCI announced that it had signed a definitive agreement to acquire Systagenix, an established provider of advanced wound care ("AWC") products, for a purchase price of $485.0 million. Systagenix has a broad portfolio of innovative AWC products with a focus on moist wound healing dressings - including PROMOGRAN PRISMA®, the collagen dressing market leader, TIELLE® (foam) and ADAPTIC® (non adherent contact layers). Systagenix' manufacturing, marketing and sales teams supply and distribute over 20 million advanced wound care dressings each month to more than 100 countries. The company, formerly part of Johnson & Johnson, generates annual revenue of approximately $200.0 million and has approximately 800 employees worldwide, including an experienced team of research and development scientists dedicated to advancing skin and wound care. Combining Systagenix' expertise with KCI's innovation pipeline will create additional value for customers and help speed healing and reduce complications for patients. The acquisition of Systagenix is subject to customary closing conditions, including applicable antitrust approvals. The transaction is expected to close in the fourth quarter of 2013.

“The acquisition of Systagenix enhances our access to the $3.4 billion advanced wound care market by leveraging KCI's well-established customer relationships, brand and commercial scale,” said Joseph Woody, President and Chief Executive Officer of KCI and Interim Chief Executive Officer of LifeCell. “The combination of KCI and Systagenix creates a winning platform across the entire wound care continuum. It increases our ability to address the complete wound healing needs of clinicians and their patients with best-in-class outcomes that help to reduce the overall cost of patient care.”

Financial Position

Total cash at June 30, 2013 was $295.6 million. During the first half of 2013, Centaur generated cash of $40.4 million from operations, used cash of $50.6 million in investing activities and used cash of $75.6 million in financing activities. Financing activities included the amendment our senior secured credit agreement, which effectively reduced the nominal interest rate of our senior secured credit facility by 100 basis points. We anticipate this amendment will result in a $22.5 million decrease in cash interest on an annualized basis. In addition, during the second quarter, we repurchased $38.0 million in principal of our senior unsecured notes.

As of June 30, 2013, total long-term debt outstanding was $4.53 billion and our Net Leverage Ratio2 was 5.7x.

Discontinued Operations

On November 8, 2012, we completed the transaction whereby our Therapeutic Support Systems ("TSS") business was acquired by Getinge AB. As a result of the sale, the results of the operations of our TSS business are presented as discontinued operations in the condensed consolidated statements of operations for all periods presented. Discontinued operations amounts related to TSS exclude the impact of corporate overhead support expenses, incremental expenses related to our transition services agreement with Getinge and the service fee payable by Getinge under the agreement.

Company Structure

Centaur is a non-operating holding company whose business is comprised of the operations of its wholly-owned subsidiaries KCI and LifeCell.  Centaur is controlled by investment funds advised by Apax Partners and controlled affiliates of Canada Pension Plan Investment Board and the Public Sector Pension Investment Board and certain other co-investors.  Unless otherwise noted in this report, the terms “we,” “our” or “Company,” refer to Centaur and its subsidiaries, collectively.

Non-GAAP Financial Information

Within this document, we have presented 1) Adjusted EBITDA from continuing operations, as defined in the senior secured credit agreement and 2) supplemental revenue data to exclude the impact of foreign currency fluctuations on a non-GAAP basis.

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 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 certain GAAP selected financial information for the periods presented to the non-GAAP selected financial information provided is included herein.





1Adjusted EBITDA from continuing operations excludes the operations of our previously-divested TSS business and the impact of merger, foreign currency gains or losses, business optimization expenses and other expenses specified in the reconciliation within this release. Consolidated EBITDA, as defined in our senior secured credit agreement, represents Adjusted EBITDA from continuing operations plus "run rate" cost savings.

2 The Net Leverage Ratio represents Net Debt divided by Consolidated EBITDA1 for the last twelve months. Net Debt consists of total indebtedness including capital leases and other financing obligations, less cash and cash equivalents of $295.6 million.




CENTAUR GUERNSEY L.P. INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(dollars in thousands)
(unaudited)

 
Three months ended June 30,
 
Six months ended June 30,
 
2013
 
2012
 
% Change
 
2013
 
2012
 
% Change
Revenue:
 
 
 
 
 
 
 
 
 
 
 
Rental
$
190,245

 
$
207,502

 
(8.3
)%
 
$
378,408

 
$
415,194

 
(8.9
)%
Sales
242,434

 
230,613

 
5.1

 
470,155

 
455,454

 
3.2

Total revenue
432,679

 
438,115

 
(1.2
)
 
848,563

 
870,648

 
(2.5
)
 
 
 
 
 
 
 
 
 
 
 
 
Rental expenses
90,382

 
120,534

 
(25.0
)
 
187,733

 
247,577

 
(24.2
)
Cost of sales
59,325

 
65,717

 
(9.7
)
 
115,556

 
131,841

 
(12.4
)
Gross profit
282,972

 
251,864

 
12.4

 
545,274

 
491,230

 
11.0

 
 
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
204,983

 
153,728

 
33.3

 
366,425

 
303,003

 
20.9

Research and development expenses
20,397

 
17,542

 
16.3

 
38,179

 
36,310

 
5.1

Acquired intangible asset amortization
46,461

 
53,797

 
(13.6
)
 
94,007

 
122,527

 
(23.3
)
Operating earnings
11,131

 
26,797

 
(58.5
)
 
46,663

 
29,390

 
58.8

 
 
 
 
 
 
 
 
 
 
 
 
Interest income and other
904

 
26

 
—

 
1,062

 
456

 
132.9

Interest expense
(105,658
)
 
(117,297
)
 
(9.9
)
 
(213,746
)
 
(235,187
)
 
(9.1
)
Loss on extinguishment of debt
(2,164
)
 
—

 
—

 
(2,164
)
 
—

 
—

Foreign currency gain (loss)
(7,772
)
 
16,956

 
           nm

 
(3,197
)
 
5,686

 
           nm

Derivative instruments gain (loss)
10,556

 
(13,582
)
 
           nm

 
10,040

 
(19,894
)
 
           nm

Loss from continuing operations before income tax benefit
(93,003
)
 
(87,100
)
 
6.8

 
(161,342
)
 
(219,549
)
 
(26.5
)
Income tax benefit
(31,056
)
 
(32,498
)
 
(4.4
)
 
(56,024
)
 
(79,949
)
 
(29.9
)
Loss from continuing operations
(61,947
)
 
(54,602
)
 
13.5

 
(105,318
)
 
(139,600
)
 
(24.6
)
Loss from discontinued operations, net of tax
(628
)
 
(32
)
 
—

 
(2,044
)
 
(5,712
)
 
(64.2
)
Net loss
$
(62,575
)
 
$
(54,634
)
 
14.5
 %
 
$
(107,362
)
 
$
(145,312
)
 
(26.1
)%









CENTAUR GUERNSEY L.P. INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)

 
June 30,
2013
 
December 31,
2012
Assets:
(unaudited)
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
295,617

 
$
383,150

Accounts receivable, net
346,610

 
355,718

Inventories, net
150,896

 
139,850

Prepaid expenses and other
57,871

 
39,511

Total current assets
850,994

 
918,229

 
 
 
 
Net property, plant and equipment
326,219

 
388,482

Debt issuance costs, net
106,959

 
96,476

Deferred income taxes
19,647

 
20,003

Goodwill
3,479,775

 
3,479,775

Identifiable intangible assets, net
2,561,551

 
2,666,201

Other non-current assets
4,418

 
5,598

 
 
 
 
 
$
7,349,563

 
$
7,574,764

 
 
 
 
Liabilities and Equity:
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
43,891

 
$
40,970

Accrued expenses and other
290,356

 
284,163

Current installments of long-term debt
24,653

 
23,383

Deferred income taxes
33,162

 
57,528

Total current liabilities
392,062

 
406,044

 
 
 
 
Long-term debt, net of current installments and discount
4,507,075

 
4,554,112

Non-current tax liabilities
46,444

 
44,465

Deferred income taxes
1,023,208

 
1,069,480

Other non-current liabilities
33,626

 
43,267

Total liabilities
6,002,415

 
6,117,368

Equity:
 
 
 
General partner's capital
—

 
—

Limited partners’ capital
1,350,084

 
1,457,913

Accumulated other comprehensive loss, net
(2,936
)
 
(517
)
Total equity
1,347,148

 
1,457,396

 
 
 
 
 
$
7,349,563

 
$
7,574,764










CENTAUR GUERNSEY L.P. INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

 
Six months ended June 30,
 
2013
 
2012
Cash flows from operating activities:
 
 
 
Net loss
$
(107,362
)
 
$
(145,312
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Amortization of debt discount
7,006

 
7,163

Depreciation and other amortization
181,393

 
257,483

Loss on disposition of assets
3,315

 
—

Amortization of fair value step-up in inventory
—

 
22,038

Fixed asset impairment
30,259

 
12,443

Write-off of in-process research and development costs
13,400

 
—

Provision for bad debt
3,521

 
4,550

Loss on extinguishment of debt
2,164

 
—

Equity-based compensation expense
1,196

 
989

Deferred income tax benefit
(71,357
)
 
(100,715
)
Unrealized loss (gain) on derivative instruments
(11,697
)
 
19,011

Unrealized gain on revaluation of cross currency debt
(4,318
)
 
(9,202
)
Change in assets and liabilities:
 
 
 
Decrease in accounts receivable, net
5,912

 
18,120

Increase in inventories, net
(10,997
)
 
(29
)
Increase in prepaid expenses and other
(15,315
)
 
(417
)
Increase (decrease) in accounts payable
2,939

 
(6,981
)
Increase in accrued expenses and other
8,359

 
1,931

Increase in tax liabilities, net
1,975

 
860

Net cash provided by operating activities
40,393

 
81,932

 
 
 
 
Cash flows from investing activities:
 
 
 
Additions to property, plant and equipment
(39,981
)
 
(47,196
)
Increase in inventory to be converted into equipment for short-term rental
(8,523
)
 
(623
)
Dispositions of property, plant and equipment
432

 
1,284

Increase in identifiable intangible assets and other non-current assets
(2,558
)
 
(2,825
)
Net cash used by investing activities
(50,630
)
 
(49,360
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Capital contributions from limited partners
—

 
239

Distribution to limited partners
(1,572
)
 
—

Repayments of long-term debt and capital lease obligations
(52,926
)
 
(11,658
)
Payment of debt issuance costs
(21,122
)
 
(111
)
Net cash used by financing activities
(75,620
)
 
(11,530
)
Effect of exchange rate changes on cash and cash equivalents
(1,676
)
 
(720
)
Net increase (decrease) in cash and cash equivalents
(87,533
)
 
20,322

Cash and cash equivalents, beginning of period
383,150

 
215,426

Cash and cash equivalents, end of period
$
295,617

 
$
235,748





CENTAUR GUERNSEY L.P. INC. AND SUBSIDIARIES
Reconciliation from GAAP to Non-GAAP
Supplemental Revenue Data
(dollars in thousands)
(unaudited)
 
Three months ended June 30,
 
GAAP % Change
 
Constant Currency % Change (1)
 
2013
 
2012 GAAP
 
 
 
GAAP
 
FX Impact
 
Constant
Currency
 
 
 
KCI revenue:
 
 
 
 
 
 
 
 
 
 
 
Rental
$
189,232

 
$
1,203

 
$
190,435

 
$
205,998

 
(8.1
)%
 
(7.6
)%
Sales
128,533

 
775

 
129,308

 
124,320

 
3.4

 
4.0

  Total KCI Revenue
317,765

 
1,978

 
319,743

 
330,318

 
(3.8
)
 
(3.2
)
 
 
 
 
 
 
 
 
 
 
 
 
LifeCell revenue:
 
 
 
 
 
 
 
 
 
 
 
Rental
1,013

 
—

 
1,013

 
1,504

 
(32.6
)
 
(32.6
)
Sales
113,901

 
(29
)
 
113,872

 
106,293

 
7.2

 
7.1

  Total LifeCell Revenue
114,914

 
(29
)
 
114,885

 
107,797

 
6.6

 
6.6

 
 
 
 
 
 
 
 
 
 
 
 
Total Revenue:
 
 
 
 
 
 
 
 
 
 
 
Rental
190,245

 
1,203

 
191,448

 
207,502

 
(8.3
)
 
(7.7
)
Sales
242,434

 
746

 
243,180

 
230,613

 
5.1

 
5.4

  Total Consolidated Revenue
$
432,679

 
$
1,949

 
$
434,628

 
$
438,115

 
(1.2
)%
 
(0.8
)%


 
Six months ended June 30,
 
GAAP % Change
 
Constant Currency % Change (1)
 
2013
 
2012 GAAP
 
 
 
GAAP
 
FX Impact
 
Constant
Currency
 
 
 
KCI revenue:
 
 
 
 
 
 
 
 
 
 
 
Rental
$
375,155

 
$
2,127

 
$
377,282

 
$
412,428

 
(9.0
)%
 
(8.5
)%
Sales
248,492

 
1,667

 
250,159

 
244,078

 
1.8

 
2.5

  Total KCI Revenue
623,647

 
3,794

 
627,441

 
656,506

 
(5.0
)
 
(4.4
)
 
 
 
 
 
 
 
 
 
 
 
 
LifeCell revenue:
 
 
 
 
 
 
 
 
 
 
 
Rental
3,253

 
—

 
3,253

 
2,766

 
17.6

 
17.6

Sales
221,663

 
(62
)
 
221,601

 
211,376

 
4.9

 
4.8

  Total LifeCell Revenue
224,916

 
(62
)
 
224,854

 
214,142

 
5.0

 
5.0

 
 
 
 
 
 
 
 
 
 
 
 
Total Revenue:
 
 
 
 
 
 
 
 
 
 
 
Rental
378,408

 
2,127

 
380,535

 
415,194

 
(8.9
)
 
(8.3
)
Sales
470,155

 
1,605

 
471,760

 
455,454

 
3.2

 
3.6

  Total Consolidated Revenue
$
848,563

 
$
3,732

 
$
852,295

 
$
870,648

 
(2.5
)%
 
(2.1
)%

(1) Represents percentage change between 2013 non-GAAP Constant Currency revenue and 2012 GAAP revenue.





CENTAUR GUERNSEY L.P. INC. AND SUBSIDIARIES
Reconciliation from GAAP to Non-GAAP
Selected Financial Information
(dollars in thousands)
(unaudited)

 
Three months ended Three months ended June 30,
 
Three months ended Six months ended June 30,
 
2013
 
2012
 
2013
 
2012
 
 
 
 
 
 
 
 
Net loss
$
(62,575
)
 
$
(54,634
)
 
$
(107,362
)
 
$
(145,312
)
Loss (gain) on disposition of assets
1,015

 
—

 
3,315

 
—

Interest expense, net of interest income
105,531

 
117,137

 
213,463

 
234,857

Income tax benefit
(31,448
)
 
(32,519
)
 
(57,303
)
 
(83,526
)
Foreign currency (gain) loss
7,772

 
(16,956
)
 
3,197

 
(5,686
)
Depreciation and other amortization
84,412

 
111,193

 
171,194

 
248,348

Derivative instruments (gain) loss
(10,556
)
 
13,582

 
(10,040
)
 
19,894

Management fees and expenses
1,350

 
1,982

 
2,752

 
3,308

Equity-based compensation expense
663

 
492

 
1,196

 
989

Acquisition, disposition and financing expenses (1)
12,009

 
4,794

 
15,410

 
8,904

Business optimization expenses(2)
32,833

 
24,537

 
50,600

 
29,854

Other non-cash charges (3)
36,002

 
13,541

 
47,322

 
39,031

Adjusted EBITDA
177,008

 
183,149

 
333,744

 
350,661

Adjusted EBITDA from discontinued operations (4)
7

 
(5,869
)
 
10

 
(10,265
)
Adjusted EBITDA from continuing operations
$
177,015

 
$
177,280

 
$
333,754

 
$
340,396

 
 
 
 
 
 
 
 
Adjusted EBITDA from continuing operations as a percentage of revenue
40.9
%
 
40.5
%
 
39.3
%
 
39.1
%

(1) Represents loss (gain) on disposition of assets, loss (gain) on extinguishment of debt, and labor, travel, training, consulting and other costs associated acquisition and disposition activities, including the disposition of our TSS business.
(2) Represents labor, travel, training, consulting and other costs associated exclusively with our business optimization initiatives.
(3) Represents charges for fixed asset impairment, write-off of in-process research and development assets, amortization of fair value step-up in inventory and the provision for bad debt.
(4) Adjusted EBITDA from discontinued operations includes the (gain) loss from discontinued operations, excluding any related loss on
disposition of assets, adjusted as defined in our senior secured credit agreement.