EX-99 2 r2004pr012405.htm KCI 4th Quarter and Full Year Financial Results for 2004

Exhibit 99.1

Contacts:  Martin J. Landon – Investors
KCI
(210) 255-6494

Elliot Sloane – Media
Sloane & Company
(212) 446-1860

 

KINETIC CONCEPTS REPORTS
FOURTH QUARTER AND FULL YEAR
FINANCIAL RESULTS FOR 2004

 

San Antonio, Texas, January 24, 2005 – Kinetic Concepts, Inc. (NYSE: KCI) today reported fourth quarter 2004 net revenue of $273.7 million, an increase of 27% from the fourth quarter of 2003, and full-year 2004 net revenue of $992.6 million, an increase of 30% over the prior year.  Foreign currency exchange movements favorably impacted net revenue for the fourth quarter and the full year 2004 by 3% compared to the corresponding periods of the prior year.


Net earnings for the fourth quarter of 2004 were $34.2 million compared to net earnings of $68.0 million for the same period one year ago.  For the year, net earnings were $96.5 million. Net earnings available to shareholders for the year were $30.9 million, after recognition of $65.6 million of preferred stock dividends in connection with the Company's first quarter initial public offering (“IPO”).  Earnings per diluted share for the fourth quarter of 2004 were $0.47, compared to net earnings per diluted share of $1.03 for the same period in the prior year.  For the year, the Company reported net earnings per diluted share, after preferred dividends, of $0.45, compared to net earnings per diluted share of $0.93 for 2003.


"We are pleased with our revenue growth in 2004 as broader acceptance by physicians and payers helped to bring the benefits of V.A.C. therapy to more patients in need,” said Dennert O. Ware, President and Chief Executive Officer of KCI.  “In addition, during the fourth quarter we commissioned a study to update the V.A.C. market potential in the U.S.,” Ware continued.  “We are pleased to report that the study confirmed our belief that the potential market for V.A.C. in the U.S. is about 40% larger than we initially estimated.  While this should not impact short-term growth, we believe that the overall market potential is higher than we had previously thought.”



Non-GAAP Financial Information (1)


On February 27, 2004, KCI completed an IPO and on June 16, 2004, KCI completed a follow-on secondary stock offering. These transactions had the effect of reducing net earnings for 2004 by $21.8 million.  During 2003, KCI completed a leveraged recapitalization, which resulted in recapitalization expenses totaling $86.4 million on a pretax basis and $54.0 million, or $0.84 per diluted share, net of income taxes.  In the fourth quarter of 2003, the Company recorded a pre-tax gain of $75.0 million, or $46.9 million net of income taxes, from an anti-trust litigation settlement.  Excluding expenses associated with the stock offerings and debt prepayments, net earnings for 2004 were $118.3 million, up 54% from $76.8 million for the same comparable period a year ago.  Earnings per diluted share, excluding expenses and dividends associated with the stock offerings and debt prepayments, were $1.67 for 2004, compared to $1.04 on a comparable basis for the same period in 2003, a 61% improvement.  Earnings per diluted share of $0.47 for the fourth quarter of 2004, increased 47% compared to $0.32 for the fourth quarter of 2003, excluding the anti-trust litigation settlement gain and recapitalization in 2003.



Revenue Recap – Fourth Quarter 2004

Domestic revenue for the fourth quarter of 2004 was $201.7 million, an increase of 24% from the prior-year period due to increased rental and sales volumes for V.A.C. wound healing devices and related disposables.  International revenue of $72.0 million increased 36% compared to the prior-year period.  Foreign currency exchange movements favorably impacted international revenue by 13%, during the fourth quarter.

Worldwide V.A.C. revenue was $198.7 million for the fourth quarter of 2004, an increase of 39% from the prior-year period.  Foreign currency exchange movements favorably impacted worldwide V.A.C. revenue by 3%, compared to the fourth quarter of the prior year.  The growth in V.A.C. revenue stems from volume increases driven by our continued focus on marketing and selling efforts, which are raising customer awareness.

Worldwide surfaces revenue was $75.0 million for the fourth quarter of 2004, an increase of 2% from the prior-year period.  Favorable currency exchange rate movements accounted for all of the fourth quarter 2004 surface revenue increase.



Revenue Recap - Year Ended 2004


Domestic revenue for 2004 was $744.3 million, a 28% increase from 2003 due directly to increased rental and sales volumes for V.A.C. wound healing devices and related disposables.  International revenue of $248.3 million increased 35% compared to 2003.  Foreign currency exchange movements favorably impacted international revenue by 12% during 2004.


Worldwide V.A.C. revenue was $699.0 million for 2004, an increase of 45% from the prior year due primarily to increased rental and sales volumes.  Foreign currency exchange movements favorably impacted 2004 worldwide V.A.C. revenue by 3%.


Worldwide surfaces revenue was $293.6 million for 2004, an increase of 4% from the prior year due to growth in international markets.  For the year, foreign currency exchange movements accounted for approximately 3% of the worldwide surfaces revenue increase.  Higher bariatric surfaces revenue for 2004, which was partially offset by lower wound care surfaces sales, accounted for the remainder of the surfaces revenue increase.



Income Tax Rate

The effective income tax rates for the fourth quarter and full-year 2004 were 34.6% and 35.5% respectively, compared to 37.5% for each of the same periods in 2003.  The income tax rate reduction is primarily attributable to a higher portion of taxable income being generated in lower tax jurisdictions.



Outlook


The following guidance is based on current information and expectations as of January 24, 2005.


As previously announced, KCI presently projects full year 2005 revenue of $1.20 – $1.25 billion based on continued demand for its V.A.C. negative pressure wound therapy devices and related supplies.  Earnings per diluted share for 2005 are currently projected to be $2.10 - $2.20 per share, based upon a weighted average diluted share count estimate of 73.0 – 73.5 million shares.  It is the Company’s practice to provide guidance on a full-year basis, however, it is important to note that we typically experience a seasonal fluctuation in sequential growth from the fourth quarter of each year to the first quarter of the following year.  Also, the Company essentially completed its planned sales force expansion, including territory realignments, by the end of the fourth quarter of 2004.  With the influence of these factors, the Company expects that the first quarter 2005 revenue will approximate, or be slightly higher than, fourth quarter 2004.

 

 

2004

 

2004

 

2005

 

%

(in millions, except EPS)

 Actual  

 

(Non GAAP) (1)

 

       Forecast        

 

   Increase  

Revenue

$ 993    

 

$ 993            

 

$1,200 - $1,250  

 

21% - 26%

Net Earnings

$   96    

 

$ 118            

 

$   154 - $   162  

 

31% - 37%

Diluted EPS

$0.45    

 

$1.67            

 

$  2.10 - $  2.20  

 

26% - 32%

Diluted Shares

67.9    

 

70.9             

 

73.0 -     73.5  

 

3% - 4%  

 

Earnings Release Conference Call

As previously announced, the Company has scheduled an earnings release conference call for 5:00 p.m. eastern standard time today, Monday, January 24, 2005.  The dial-in numbers for this conference call are as follows:

Domestic Dial-in Number:

     800-706-7748

International Dial-in Number:

     +617-614-3473

Participant Code:

     50516246


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 – Q4 2004 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 January 23, 2006.


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.  However, although KCI undertakes no duty to update its business outlook, KCI may update the full business outlook or any portion thereof at any time.


(1) Throughout this press release, we have presented income statement items on a non-GAAP basis to exclude the impact of income and expenses and the acceleration of the in-kind preferred stock dividends incurred as a result of the 2004 stock offerings and debt prepayments, the 2003 anti-trust litigation settlement gain and the 2003 leveraged recapitalization.  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 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 income statement for the periods presented to the non-GAAP financial information provided is included herein.  See the attached Reconciliations of Condensed Consolidated Statement of Earnings.


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 significantly improve clinical outcomes while reducing the overall cost of patient care by accelerating the healing process or preventing complications.  Our advanced wound care systems incorporate our proprietary Vacuum Assisted Closureâ, or V.A.C.â, technology, which has been clinically demonstrated to promote wound healing and reduce the cost of treating patients with difficult-to-treat wounds.  Our therapeutic surfaces, including specialty hospital beds, mattress replacement systems and overlays, are designed to address complications associated with immobility and obesity, such as pressure sores and pneumonia.  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 estimates of future performance, revenue and earnings growth objectives and potential market.  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 and general economic conditions. All information set forth in this release and its attachments is as of January 24, 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, 2003, including, among other sections, under the captions, "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," which is 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 Annual Report on Form 10-K for the fiscal year ended December 31, 2004, which will be filed with the SEC in the first quarter of 2005.

 

KINETIC CONCEPTS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Earnings

(in thousands, except per share data)

(unaudited)

 

 

 

 

    Three months ended December 31,    

                    Year ended December 31,                    

 

 

 

%     

 

 

 

%        

 

     2004    

    2003   

   Change  

      2004     

 

     2003    

   Change   

Revenue:

 

 

 

 

 

 

 

    Rental

$ 196,659 

$161,346 

21.9 %   

$ 726,783 

 

$ 582,801 

24.7 %   

   Sales

76,996 

54,568 

41.1       

265,853 

 

181,035 

46.9       

 

_______ 

_______ 

 

_______ 

 

_______ 

 

      Total revenue

273,655 

215,914 

26.7 %  

992,636 

 

763,836 

30.0 %  

 

 

 

 

 

 

 

 

Rental expenses

127,244 

96,267 

32.2       

457,294 

 

356,075 

28.4       

Cost of goods sold

18,636 

17,708 

5.2       

70,780 

 

64,118 

10.4       

 

_______ 

_______ 

 

_______ 

 

_______ 

 

      Gross profit

127,775 

101,939 

25.3 %  

464,562 

 

343,643 

35.2 %  

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

62,934 

52,137 

20.7       

223,452 

 

170,614 

31.0       

Research and development expenses

9,461 

7,425 

27.4       

31,312 

 

23,044 

35.9       

Initial public offering expenses

- 

- 

-       

19,836 

 

- 

-       

Secondary offering expenses

- 

- 

-       

2,219 

 

- 

-       

Recapitalization expenses

- 

130 

-       

- 

 

70,085 

-       

Litigation settlement

- 

(75,000)

-       

- 

 

(75,000)

-       

 

_______ 

_______ 

 

_______ 

 

_______ 

 

      Operating earnings

55,380 

117,247 

(52.8) % 

187,743 

 

154,900 

21.2 %  

 

 

 

 

 

 

 

 

Interest income

390 

132 

195.5       

1,133 

 

1,065 

6.4       

Interest expense

(7,175)

(10,536)

31.9       

(44,635)

 

(52,098)

14.3       

Foreign currency gain

3,652 

1,883 

93.9       

5,353 

 

7,566 

(29.2)     

 

_______ 

_______ 

 

_______ 

 

_______ 

 

      Earnings before income taxes

52,247 

108,726 

(51.9) % 

149,594 

 

111,433 

34.2 %  

Income taxes

18,061 

40,772 

(55.7)      

53,106 

 

41,787 

27.1       

 

_______ 

_______ 

 

_______ 

 

_______ 

 

      Net earnings

$   34,186 

$  67,954 

(49.7) % 

$   96,488 

 

$   69,646 

38.5 %  

Series A convertible preferred stock dividends

- 

(6,069)

-       

(65,604)

 

(9,496)

-       

 

_______ 

_______ 

 

_______ 

 

_______ 

 

      Net earnings available to

 

 

 

 

 

 

 

         common shareholders

$   34,186 

$  61,885 

(44.8) % 

$   30,884 

 

$  60,150 

(48.7) % 

 

_______ 

_______ 

 

_______ 

 

_______ 

 

      Net earnings per share available

 

 

 

 

 

 

 

         to common shareholders:

 

 

 

 

 

 

 

         Basic

$       0.50 

$      1.50 

(66.7) % 

$        0.49

 

$      1.03 

(52.4) % 

 

_______ 

_______ 

 

_______ 

 

_______ 

 

          Diluted (1)

$       0.47 

$      1.03 

(54.4) % 

$        0.45

 

$      0.93 

(51.6) % 

 

_______ 

_______ 

 

_______ 

 

_______ 

 

      Weighted average shares outstanding:

 

 

 

 

 

 

 

         Basic

68,104 

41,203 

 

62,599 

 

58,599 

 

 

_______ 

_______ 

 

_______ 

 

_______ 

 

         Diluted (1)

72,560 

65,842 

 

67,918 

 

64,493 

 

 

_______ 

_______ 

 

_______ 

 

_______ 

 

 

(1)  Due to their antidilutive effect, 2,990 and 7,522 dilutive potential common shares from the preferred stock conversion have been excluded from the

      diluted weighted average shares calculation for the years ended December 31, 2004 and 2003, respectively.

KINETIC CONCEPTS, INC. AND SUBSIDIARIES

Reconciliation of Condensed Consolidated Statements of Earnings (1)

For the Three Months ended December 31,

(in thousands, except per share data)

(unaudited)

 

 

 

                                         2003                                         

 

 

 

 

 

Excluding

 

 

 

 

Anti-trust

Anti-trust

 

 

 

 

Settlement and

Settlement and

 

 

2004     

 

Recapitalization

Recapitalization

%

 

  GAAP    

  GAAP    

    (non-GAAP)   

   (non-GAAP)   

Change (2)

Revenue:

 

 

 

 

 

   Rental

$ 196,659 

$ 161,346 

$             -         

$ 161,346        

21.9 %       

   Sales

76,996 

54,568 

-         

54,568        

41.1           

 

_______ 

_______ 

_______         

_______        

     

       Total revenue

273,655 

215,914 

-         

215,914        

26.7 %      

 

 

 

 

 

     

Rental expenses

127,244 

96,267 

-         

96,267        

32.2           

Cost of goods sold

18,636 

17,708 

-         

17,708        

5.2           

 

_______ 

_______ 

_______         

_______        

 

      Gross profit

127,775 

101,939 

-         

101,939        

25.3 %      

 

 

 

 

 

 

Selling, general and administrative expenses

62,934 

52,137 

-         

52,137        

20.7           

Research and development expenses

9,461 

7,425 

-         

7,425        

27.4           

Recapitalization expenses

- 

130 

(130)        

-        

-           

Litigation settlement

- 

(75,000)

75,000         

-        

-           

 

_______ 

_______ 

_______         

_______        

 

      Operating earnings

55,380 

117,247 

(74,870)        

42,377        

30.7 %      

 

 

 

 

 

 

Interest income

390 

132 

-         

132        

195.5           

Interest expense

(7,175)

(10,536)

-         

(10,536)       

     31.9           

Foreign currency gain

3,652 

1,883 

-         

1,883        

93.9           

 

_______ 

_______ 

_______         

_______        

 

      Earnings before income taxes

52,247 

108,726 

(74,870)        

33,856        

54.3 %      

Income taxes

18,061 

40,772 

(28,076)        

12,696        

42.3           

 

_______ 

_______ 

_______         

_______        

 

      Net earnings

$   34,186 

$  67,954 

$   (46,794)        

$  21,160        

61.6 %      

 

 

 

 

 

 

Series A convertible preferred stock dividends

- 

(6,069)

-         

(6,069)       

-           

 

_______ 

_______ 

_______         

_______        

 

      Net earnings available to

 

 

 

 

 

         common shareholders

$   34,186 

$  61,885 

$   (46,794)        

$  15,091        

126.5 %      

 

_______ 

_______ 

_______         

_______        

 

      Net earnings per share available

 

 

 

 

 

         to common shareholders:

 

 

 

 

 

         Basic

$       0.50 

$      1.50 

 

$      0.37          

35.1 %      

 

_______ 

_______ 

 

_______          

 

          Diluted

$       0.47 

$      1.03 

 

$      0.32          

46.9 %      

 

_______ 

_______ 

 

_______          

 

      Weighted average shares outstanding:

 

 

 

  

 

         Basic

68,104 

41,203 

 

41,203          

 

 

_______ 

_______ 

 

_______          

 

         Diluted

72,560 

65,842 

 

65,842          

 

 

_______ 

_______ 

 

_______          

 

 

(1)  These non-GAAP financial measures do not replace the presentation of our GAAP financial results.  See footnote 1 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 2004 GAAP results and the 2003 (non-GAAP) results, excluding

       anti-trust settlement and recapitalization.

KINETIC CONCEPTS, INC. AND SUBSIDIARIES

Reconciliation of Condensed Consolidated Statements of Earnings (1)

For the Year ended December 31,

(in thousands, except per share data)

(unaudited)

 

 

                               2004                               

                                    2003                                    

 

 

 

 

Excluding

 

 

 

 

 

 

Costs and

Costs and

 

 

 

 

 

 

Expenses

Expenses

 

 

 

 

 

 

Related to

Related to

 

 

Excluding

 

 

 

Offerings

Offerings

 

Anti-trust

Anti-trust

 

 

 

and Debt

and Debt

 

Settlement and

Settlement and

 

 

 

Prepayments

Prepayments

 

Recapitalization

Recapitalization

%

 

  GAAP     

(non-GAAP)

(non-GAAP)

   GAAP    

   (non-GAAP)   

    (non-GAAP)   

Change (2)

Revenue:

 

 

 

 

 

 

 

   Rental

$ 726,783 

$             -     

$ 726,783      

$ 582,801 

$             -     

$ 582,801      

24.7 %   

   Sales

265,853 

-     

265,853      

181,035 

-     

181,035      

46.9       

 

_______ 

_______     

_______      

_______ 

_______     

_______      

 

       Total revenue

992,636 

-     

992,636      

763,836 

-     

763,836      

30.0 %  

 

 

 

 

 

 

 

 

Rental expenses

457,294 

-     

457,294      

356,075 

-     

356,075      

28.4       

Cost of goods sold

70,780 

-     

70,780      

64,118 

-     

64,118      

10.4       

 

_______ 

_______     

_______      

_______ 

_______     

_______      

 

      Gross profit

464,562 

-     

464,562      

343,643 

-     

343,643      

35.2 %  

 

 

 

 

 

 

 

 

Selling, general and

 

 

 

 

 

 

 

   administrative expenses

223,452 

-     

223,452      

170,614 

-     

170,614      

31.0       

Research and development

 

 

 

 

 

 

 

   expenses

31,312 

-     

31,312      

23,044 

-     

23,044      

35.9       

Initial public offering expenses

19,836 

(19,836)    

-      

- 

-     

-      

-       

Secondary offering expenses

2,219 

(2,219)    

-      

- 

-     

-      

-       

Recapitalization expenses

- 

-     

-      

70,085 

(70,085)    

-      

-       

Litigation settlement

- 

-     

-      

(75,000)

75,000     

-      

-       

 

_______ 

_______     

_______      

_______ 

_______     

_______      

 

      Operating earnings

187,743 

22,055     

209,798      

154,900 

(4,915)    

149,985      

39.9 %  

 

 

 

 

 

 

 

 

Interest income

1,133 

-     

1,133      

1,065 

-     

1,065      

6.4       

Interest expense

(44,635)

11,689     

(32,946)     

(52,098)

16,302     

(35,796)     

8.0       

Foreign currency gain

5,353

-     

5,353      

7,566 

-     

7,566      

  (29.2)      

 

_______ 

_______     

_______      

_______ 

_______     

_______      

 

      Earnings before income

 

 

 

 

 

 

 

         taxes

149,594 

33,744     

183,338      

111,433 

11,387     

122,820      

49.3 %  

Income taxes

53,106 

11,979     

65,085      

41,787 

4,270     

46,057      

41.3       

 

_______ 

_______     

_______      

_______ 

_______     

_______      

 

      Net earnings

$   96,488 

$   21,765     

$  118,253      

$    69,646 

$   7,117     

$   76,763      

54.0 %  

Series A convertible preferred

 

 

 

 

 

 

 

   stock dividends

(65,604)

65,604     

-      

(9,496)

-     

(9,496)      

-       

 

_______ 

_______     

_______      

_______ 

_______     

_______      

 

      Net earnings available

 

 

 

 

 

 

 

         to common shareholders

$   30,884 

$   87,369     

$  118,253      

$   60,150 

$   7,117     

$   67,267      

75.8 %  

 

_______ 

_______     

_______      

_______ 

_______     

_______      

 

      Net earnings per

 

 

 

 

 

 

 

         share available to

 

 

 

 

 

 

 

         common shareholders:

 

 

 

 

 

 

 

         Basic

$       0.49 

 

$       1.89      

$      1.03 

 

$       1.15      

64.3 %  

 

_______ 

 

_______      

_______ 

 

_______      

 

          Diluted  (3)

$       0.45 

 

$       1.67      

$      0.93 

 

$       1.04      

60.6 %  

 

_______ 

 

_______      

_______ 

 

_______      

 

      Weighted average

 

 

 

 

 

 

 

         shares outstanding:

 

 

 

 

 

 

 

         Basic

62,599 

 

62,599      

58,599 

 

58,599      

 

 

_______ 

 

_______      

_______ 

 

_______      

 

         Diluted  (3)

67,918 

 

70,908      

64,493 

 

64,493      

 

 

_______ 

 

_______      

_______ 

 

_______      

 

 

(1)  These non-GAAP financial measures do not replace the presentation of our GAAP financial results.  See footnote 1 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 2004 (non-GAAP) results, excluding costs and expenses related to offerings

       and debt prepayments, and the 2003 (non-GAAP) results, excluding anti-trust settlement and recapitalization.

(3)  For the year ended December 31, 2004, 2,990 dilutive potential common shares from the preferred stock conversion have been excluded from the

       diluted weighted average shares calculation for the GAAP results, due to their antidilutive effect.  In addition, due to their antidilutive effect, 7,522

       dilutive potential common shares from the preferred stock conversion have been excluded from the diluted weighted average shares calculation,

       for the GAAP results and for the Excluding Anti-trust Settlement and Recapitalization results for the year ended December 31, 2003.

 

 

KINETIC CONCEPTS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands)

 

 

 

 

 

               December 31,               

 

        2004       

 

        2003       

 

 

 

 

Assets:

 

 

 

Current assets:

 

 

 

   Cash and cash equivalents

$   124,366   

 

$  156,064    

   Accounts receivable, net

252,822   

 

199,938    

   Inventories, net

35,590   

 

32,253    

   Deferred income taxes

24,836   

 

22,749    

   Prepaid expenses and other current assets

13,296   

 

11,811    

 

_______   

 

_______    

          Total current assets

450,910   

 

422,815    

 

_______   

 

_______    

 

 

 

 

Net property, plant and equipment

183,075   

 

145,208    

Loan and preferred stock issuance costs, less accumulated

 

 

 

    amortization of $8,317 in 2004 and $906 in 2003

11,937   

 

19,779    

Deferred income taxes

7,913   

 

2,227    

Goodwill

49,369   

 

48,797    

Other assets, less accumulated amortization of $8,748

 

 

 

    in 2004 and $8,190 in 2003

29,261   

 

28,497    

 

_______   

 

_______    

 

$ 732,465   

 

$ 667,323    

 

_______   

 

_______    

Liabilities and Shareholders’ Equity (Deficit):

 

 

 

Current liabilities:

 

 

 

   Accounts payable

$    43,246   

 

$   34,386    

   Accrued expenses and other

150,116   

 

115,054    

   Current installments of long-term debt

2,803   

 

4,800    

   Current installments of capital lease obligations

201   

 

1,576    

   Income taxes payable

20,821   

 

39,403    

 

_______   

 

_______    

          Total current liabilities

217,187   

 

195,219    

 

_______   

 

_______    

 

 

 

 

Long-term debt, net of current installments

442,943   

 

678,100    

Capital lease obligations, net of current installments

239   

 

1,351    

Deferred income taxes

13,170   

 

28,793    

Deferred gain, sale of headquarters facility

8,112   

 

9,183    

Other noncurrent liabilities

13   

 

212    

 

_______   

 

_______    

 

681,664   

 

912,858    

Series A convertible preferred stock issued and

 

 

 

   outstanding 0 at 2004 and 264 at 2003

-   

 

261,719    

 

 

 

 

Shareholders' equity (deficit):

 

 

 

   Common stock; authorized 225,000 at 2004 and

 

 

 

      150,000 at 2003; issued and outstanding 68,694

 

 

 

      at 2004 and 41,270 at 2003

69   

 

41    

   Preferred stock; authorized 50,000 in 2004 and 0

 

 

 

      in 2003; issued and outstanding 0 in 2004 and 2003

-    

 

-    

   Additional paid-in capital

517,354   

 

1,157    

   Deferred compensation

(1,906)  

 

185    

   Retained deficit

(488,071)  

 

(518,955)   

   Accumulated other comprehensive income

23,355   

 

10,318    

 

_______   

 

_______    

          Shareholders' equity (deficit)

50,801   

 

(507,254)   

 

_______   

 

_______    

 

$ 732,465   

 

$ 667,323    

 

_______   

 

_______    

 

KINETIC CONCEPTS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

 

 

 

 

           Year ended December 31,              

 

     2004     

 

 

       2003    

 

Cash flows from operating activities:

 

 

 

 

 

   Net earnings

$   96,488 

 

 

  $    69,646 

 

   Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

 

 

 

         Depreciation and amortization

60,901 

 

 

46,893 

 

         Provision for uncollectible accounts receivable

12,346 

 

 

6,702 

 

         Amortization of deferred gain on sale of headquarters facility

(1,070)

 

 

(841)

 

         Write-off of deferred loan issuance costs

5,504 

 

 

5,233 

 

         Non-cash amortization of stock award to directors

442 

 

 

185 

 

         Tax benefit related to exercise of stock options

69,257 

 

 

- 

 

         Non-cash accrual of recapitalization expenses

- 

 

 

7,131 

 

         Change in assets and liabilities:

 

 

 

 

 

               Increase in accounts receivable, net

(63,649)

 

 

(53,597)

 

               Decrease in other accounts receivable

- 

 

 

175,000 

 

               Decrease (increase) in inventories

(2,874)

 

 

5,723 

 

               Decrease (increase) in current deferred income taxes, net

(2,087)

 

 

(78,636)

 

               Decrease (increase) in prepaid expenses and other current assets

170 

 

 

(2,046)

 

               Increase in accounts payable

9,090 

 

 

23,251 

 

               Increase in accrued expenses

44,664 

 

 

44,289 

 

               Increase (decrease) in income taxes payable

(18,582)

 

 

24,788 

 

               Increase (decrease) in deferred income taxes, net

(22,728)

 

 

6,485 

 

 

  _______ 

 

 

  _______ 

 

                  Net cash provided by operating activities

187,872 

 

 

280,206 

 

 

  _______ 

 

 

  _______ 

 

Cash flows from investing activities:

 

 

 

 

 

   Additions to property, plant and equipment

(93,230)

 

 

(76,276)

 

   Decrease (increase) in inventory to be converted into equipment for short-term rental

(100)

 

 

2,100 

 

   Dispositions of property, plant and equipment

1,982 

 

 

3,575 

 

   Business acquisitions, net of cash acquired

(1,247)

 

 

(2,224)

 

   Increase in other assets

(2,573)

 

 

(328)

 

 

  _______ 

 

 

  _______ 

 

                  Net cash used by investing activities

(95,168)

 

 

(73,153)

 

 

  _______ 

 

 

  _______ 

 

Cash flows from financing activities:

 

 

 

 

 

   Repayment of notes payable, long term, capital lease and other obligations

(237,536)

 

 

(114,649)

 

   Proceeds from exercise of stock options

15,352 

 

 

1,725 

 

   Proceeds from purchase of stock in ESPP

1,815 

 

 

- 

 

   Initial public offering of common stock:

 

 

 

 

 

      Proceeds from issuance of common stock

105,000 

 

 

- 

 

      Stock issuance costs

(10,604)

 

 

- 

 

   Recapitalization:

 

 

 

 

 

      Payoff of long-term debt and bonds

- 

 

 

(408,226)

 

      Proceeds from issuance of new debt and bonds

- 

 

 

685,000 

 

      Proceeds from issuance of Series A convertible preferred stock, net

- 

 

 

258,017 

 

      Purchase of common stock

- 

 

 

(509,597)

 

      Debt and preferred stock issuance costs

- 

 

 

(20,729)

 

 

  _______ 

 

 

  _______ 

 

                  Net cash used by financing activities

(125,973)

 

 

(108,459)

 

 

  _______ 

 

 

  _______ 

 

Effect of exchange rate changes on cash and cash equivalents

1,571 

 

 

    2,985 

 

 

  _______ 

 

 

  _______ 

 

Net increase (decrease) in cash and cash equivalents

(31,698)

 

 

101,579 

 

Cash and cash equivalents, beginning of period

 156,064 

 

 

   54,485 

 

 

  _______ 

 

 

  _______ 

 

Cash and cash equivalents, end of period

$  124,366 

 

 

$  156,064 

 

 

_______ 

 

 

_______ 

 

Non-cash activity:

 

 

 

 

 

   Non-cash consideration for exercise of stock options

$     6,480 

 

 

$         334 

 

KINETIC CONCEPTS, INC. AND SUBSIDIARIES

SUPPLEMENTAL REVENUE DATA

(in thousands)

(unaudited)

 

 

 

                   Three months ended December 31,                              

 

 

 

 

 

 

                 Variance                    

 

    2004      

 

         2003   

 

 

       $        

 

        %        

USA

 

 

 

 

 

 

 

 

 

  V.A.C.

 

 

 

 

 

 

 

 

 

     Rental

$ 114,326 

 

$   88,861 

 

 

$  25,465 

 

28.7 

%

     Sales

41,912 

 

28,342 

 

 

13,570 

 

47.9 

 

 

_______ 

 

_______ 

 

 

______ 

 

 

 

          Total V.A.C.

156,238 

 

117,203 

 

 

39,035 

 

33.3 

 

 

 

 

 

 

 

 

 

 

 

  Therapeutic surfaces/other

 

 

 

 

 

 

 

 

 

     Rental

37,782 

 

37,928 

 

 

(146)

 

(0.4)

 

     Sales

7,650 

 

7,851 

 

 

(201)

 

(2.6)

 

 

_______ 

 

_______ 

 

 

______ 

 

 

 

         Total therapeutic surfaces/other

45,432 

 

45,779 

 

 

(347)

 

(0.8)

 

 

 

 

 

 

 

 

 

 

 

  Total USA rental

152,108 

 

126,789 

 

 

25,319 

 

20.0 

 

  Total USA sales

49,562 

 

36,193 

 

 

13,369 

 

36.9 

 

 

_______ 

 

_______ 

 

 

______ 

 

 

 

       Subtotal – USA

$ 201,670 

 

$ 162,982 

 

 

$  38,688 

 

23.7 

%

 

_______ 

 

_______ 

 

 

______ 

 

 

 

International

 

 

 

 

 

 

 

 

 

  V.A.C.

 

 

 

 

 

 

 

 

 

     Rental

$   21,159 

 

$   12,584 

 

 

$   8,575 

 

68.1 

%

     Sales

21,304 

 

12,734 

 

 

8,570 

 

67.3 

 

 

_______ 

 

_______ 

 

 

______ 

 

 

 

         Total V.A.C.

42,463 

 

25,318 

 

 

17,145 

 

67.7 

 

 

 

 

 

 

 

 

 

 

 

  Therapeutic surfaces/other

 

 

 

 

 

 

 

 

 

     Rental

23,392 

 

21,973 

 

 

1,419 

 

6.5 

 

     Sales

6,130 

 

5,641 

 

 

489 

 

8.7 

 

 

_______ 

 

_______ 

 

 

______ 

 

 

 

         Total therapeutic surfaces/other

29,522 

 

27,614 

 

 

1,908 

 

6.9 

 

 

 

 

 

 

 

 

 

 

 

  Total International rental

44,551 

 

34,557 

 

 

9,994 

 

28.9 

 

  Total International sales

27,434 

 

18,375 

 

 

9,059 

 

49.3 

 

 

_______ 

 

_______ 

 

 

______ 

 

 

 

       Subtotal – International

$   71,985 

 

$   52,932 

 

 

$  19,053 

 

36.0 

%

 

_______ 

 

_______ 

 

 

______ 

 

 

 

  Total revenue

$ 273,655 

 

$ 215,914 

 

 

$  57,741 

 

26.7 

%

 

_______ 

 

_______ 

 

 

_______ 

 

 

 

 

 

KINETIC CONCEPTS, INC. AND SUBSIDIARIES

SUPPLEMENTAL REVENUE DATA

(in thousands)

(unaudited)

 

 

 

 

 

                                          Year ended December 31,                                     

 

 

 

 

 

 

                     Variance                   

 

      2004       

 

     2003  

 

 

        $         

 

      %         

USA

 

 

 

 

 

 

 

 

 

  V.A.C.

 

 

 

 

 

 

 

 

 

     Rental

$  417,008 

 

$ 311,662 

 

 

$   105,346 

 

33.8 

%

     Sales

145,627 

 

88,192 

 

 

57,435 

 

65.1 

 

 

_______ 

 

_______ 

 

 

______ 

 

 

 

         Total V.A.C.

562,635 

 

399,854 

 

 

162,781 

 

40.7 

 

 

 

 

 

 

 

 

 

 

 

  Therapeutic surfaces/other

 

 

 

 

 

 

 

 

 

     Rental

152,219 

 

149,460 

 

 

2,759 

 

1.8 

 

     Sales

29,450 

 

30,568 

 

 

(1,118)

 

(3.7)

 

 

_______ 

 

_______ 

 

 

______ 

 

 

 

         Total therapeutic surfaces/other

181,669 

 

180,028 

 

 

1,641 

 

0.9 

 

 

 

 

 

 

 

 

 

 

 

  Total USA rental

569,227 

 

461,122 

 

 

108,105 

 

23.4 

 

  Total USA sales

175,077 

 

118,760 

 

 

56,317 

 

47.4 

 

 

_______ 

 

_______ 

 

 

______ 

 

 

 

       Subtotal – USA

$ 744,304 

 

$ 579,882 

 

 

$  164,422 

 

28.4 

%

 

_______ 

 

_______ 

 

 

______ 

 

 

 

International

 

 

 

 

 

 

 

 

 

  V.A.C.

 

 

 

 

 

 

 

 

 

     Rental

$   68,503 

 

$   41,331 

 

 

$   27,172 

 

65.7 

%

     Sales

67,875 

 

40,615 

 

 

27,260 

 

67.1 

 

 

_______ 

 

_______ 

 

 

______ 

 

 

 

         Total V.A.C.

136,378 

 

81,946 

 

 

54,432 

 

66.4 

 

 

 

 

 

 

 

 

 

 

 

  Therapeutic surfaces/other

 

 

 

 

 

 

 

 

 

     Rental

89,053 

 

80,348 

 

 

8,705 

 

10.8 

 

     Sales

22,901 

 

21,660 

 

 

1,241 

 

5.7 

 

 

_______ 

 

_______ 

 

 

______ 

 

 

 

         Total therapeutic surfaces/other

111,954 

 

102,008 

 

 

9,946 

 

9.8 

 

 

 

 

 

 

 

 

 

 

 

  Total International rental

157,556 

 

121,679 

 

 

35,877 

 

29.5 

 

  Total International sales

90,776 

 

62,275 

 

 

28,501 

 

45.8 

 

 

_______ 

 

_______ 

 

 

______ 

 

 

 

       Subtotal - International

$ 248,332 

 

$  183,954 

 

 

$   64,378 

 

35.0 

%

 

_______ 

 

_______ 

 

 

______ 

 

 

 

  Total revenue

$ 992,636 

 

$ 763,836 

 

 

$ 228,800 

 

30.0 

%

 

_______ 

 

_______ 

 

 

_______