8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

        Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

        Date of report (Date of earliest event reported):  January 26, 2010

                       Kinetic Concepts, Inc.

(Exact name of registrant as specified in its charter)

Texas	0001-09913	74-1891727
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)
8023 Vantage Drive San Antonio, Texas		78230
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code:  (210) 524-9000

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:

¨    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.  Results of Operations and Financial Condition

The registrant published a press release, dated January 26, 2010, announcing its financial results for the three and twelve months ended December 31, 2009.  A copy of the press release is furnished as Exhibit 99.1 hereto.

Item 9.01.  Financial Statements and Exhibits

(d) Exhibits

Exhibit No.	Description
99.1	Press Release dated January 26, 2010, entitled "Kinetic Concepts Reports Fourth Quarter and Full Year Financial Results For 2009."

SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	KINETIC CONCEPTS, INC. (REGISTRANT)
January 26, 2010	By:	/s/ Martin J. Landon
	Name:	Martin J. Landon
	Title:	Executive Vice President and Chief Financial Officer

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press Release dated January 26, 2010, entitled "Kinetic Concepts Reports Fourth Quarter and Full Year Financial Results For 2009."

EX-99.01

Exhibit 99.1

FOR MORE INFORMATION, CONTACT:

Investors: Adam Rodriguez Office: 210-255-6197 Wireless: 210-861-7969 adam.rodriguez@kci1.com Media: Kevin Belgrade Office: 210-255-6232 Wireless: 210-216-1236 kevin.belgrade@kci1.com  

KINETIC CONCEPTS REPORTS

FOURTH QUARTER AND FULL YEAR

FINANCIAL RESULTS FOR 2009

Fourth Quarter Highlights

-  Total revenue of $526.8 million, up 7% from the prior-year period as reported and up 4% on a constant currency basis

-  North American Active Healing Solutions (“AHS”), formerly V.A.C. Therapy®, revenue of $274.3 million, up 3% as reported and 2% on a constant currency basis

-  Worldwide AHS revenue of $367.2 million, up 6% as reported and 2% on a constant currency basis

   - -   Regenerative Medicine revenue of $76.9 million, up 13% from the prior-year period

-  Worldwide Therapeutic Support Systems (“TSS”) revenue of $82.7 million, up 7% as reported and 3% on a constant currency basis

-  Diluted earnings per share of $0.93, up 33% as reported, and $1.10, up 12%, on a non-GAAP basis adjusted for non-cash acquisition-related items

San Antonio, Texas, January 26, 2010 – Kinetic Concepts, Inc. (NYSE: KCI) today reported fourth quarter and full year 2009 total revenue of $526.8 million and $1.993 billion, respectively, an increase of 7% and 6% from the same respective periods of 2008.  Foreign currency exchange movements favorably impacted total revenue for the fourth quarter of 2009 by 3%, but unfavorably impacted revenue for the full year of 2009 by 2%, compared to the corresponding periods of the prior year.

Net earnings for the fourth quarter of 2009 were $66.3 million, or $0.93 per diluted share, compared to $49.4 million, or $0.70 per diluted share, for the fourth quarter of 2008, representing increases of 34% and 33%, respectively, from the prior-year period.  Net earnings per diluted share on a comparable, non-GAAP basis, which excludes non-cash acquisition-related items, were $1.10 for the fourth quarter of 2009, up $0.12, or 12%, from the prior-year period.

For the full year of 2009, net earnings were $228.7 million, or $3.24 per diluted share, compared to $166.4 million, or $2.32 per diluted share for 2008, representing increases of 37% and 40%, respectively, from the prior year.  Net earnings per diluted share on a comparable, non-GAAP basis were $3.99 for the full year of 2009, up $0.21, or 6% from the prior year.

“I am pleased with the resilience we demonstrated this quarter and year, particularly in the face of such a challenging 2009,” said Catherine M. Burzik, President and Chief Executive Officer of KCI.  “For 2010, we look forward to several new product launches, the launch of V.A.C. Therapy in Japan, continued expansion of our LifeCell business domestically and in Europe, and stabilization of our TSS business.”

Revenue Recap – Fourth Quarter and Full Year of 2009

Worldwide revenue from AHS products was $367.2 million for the fourth quarter of 2009 and $1.407 billion for the full year of 2009, compared to $347.5 million and $1.394 billion, respectively, for the corresponding periods of 2008, representing increases of 6% and 1%, respectively, from the prior-year periods.  Foreign currency exchange movements favorably impacted worldwide AHS revenue by 3% in the fourth quarter of 2009, but unfavorably impacted worldwide AHS revenue by 2% for the full year of 2009, compared to the prior-year periods.  On a constant currency basis, the growth in AHS revenue stemmed from increased market penetration of V.A.C. Therapy, resulting in higher rental and sales unit volumes.  North American AHS revenue of $274.3 million for the fourth quarter and $1.066 billion for the full year of 2009 represented increases of approximately 3% and 2%, respectively, compared to the same periods of the prior year due to continued market penetration and increased therapy unit sales activity.  Average U.S. rental unit volume during the fourth quarter and full year of 2009 increased approximately 1% and 4%, respectively, over the corresponding periods of 2008, due to continued market penetration, partly offset by reduced treatment periods and a lower average realized price due to payer mix and lower Medicare pricing.  U.S. V.A.C. sales revenue increased 11% in the fourth quarter of 2009, due to higher disposable sales associated with increased rental units combined with an increase in sales of therapy units, primarily to large facilities and other customers.  EMEA/APAC AHS revenue increased 16% to $93.0 million for the fourth quarter yet decreased 1% to $340.5 million for the full year of 2009 from $80.1 million and $344.7 million, respectively, for the fourth quarter and full year of 2008.  On a non-GAAP, constant currency basis, EMEA/APAC AHS revenue increased by 3% and 5%, respectively, for the fourth quarter and full year of 2009 compared to the same periods one year ago.

Total revenue from our Regenerative Medicine division was $76.9 million and $285.9 million for the fourth quarter and full year of 2009, respectively.  Fourth quarter Regenerative Medicine revenue increased 13% as compared to the same period one year ago.  For the full year of 2009, Regenerative Medicine revenue increased 18%, compared to the prior year on a pro forma basis.  Sales of Strattice™, our porcine-based reconstructive tissue matrix, generated $27.1 million of total sales in the quarter, or 35% of total Regenerative Medicine revenue for the period.  Total Strattice sales in the fourth quarter of 2009 increased $12.1 million, or 80%, from the same period one year ago.

Worldwide TSS revenue was $82.7 million for the fourth quarter and $300.2 million for the full year of 2009 compared to $77.0 million and $327.1 million, respectively, for the same periods in the prior year.  North American revenue from TSS was $54.5 million for the fourth quarter of 2009, a 1% increase from the prior-year period, due primarily to increased demand in our rental business partially offset by lower sales resulting from prolonged customer capital constraints.  North American TSS revenue for the full year of 2009 was $196.4 million, down 11% from the prior year revenue of $221.7 million.  EMEA/APAC TSS revenue of $28.2 million and $103.8 million for the fourth quarter and full year of 2009, increased 22% yet decreased 2%, respectively, compared to the corresponding periods of 2008.  Excluding foreign currency exchange rate movements, EMEA/APAC TSS revenue increased 9% and 4%, respectively, for the fourth quarter and the full year of 2009 compared to the same periods in the prior year due primarily to increased rental volume of our bariatric and wound care products and higher wound care sales volumes.

Profit Margins Improve on Mix and Productivity Initiatives

Gross profit for the fourth quarter and the full year of 2009 was $297.6 million and $1.080 billion, respectively, representing increases of 19% and 14% from the corresponding periods of the prior year.  Gross profit margin was approximately 56.5% for the fourth quarter of 2009, an increase of approximately 580 basis points from the same period one year ago.  The gross profit margin increase was due primarily to higher V.A.C. Therapy unit sales, increased field service operations productivity, higher gross margins associated with the Regenerative Medicine business unit and lower product royalty rates.

Fourth quarter selling, general and administrative (“SG&A”) expenses increased approximately $16.7 million, or 13%, over the fourth quarter of 2008.  SG&A increases included higher legal expenses associated with pending litigation matters, higher share-based compensation expense, increased costs associated with the Company’s upcoming market entry in Japan, higher marketing expenses related to new product launches and global business transformation initiatives.

Research and development expenses for the fourth quarter of 2009 increased 6% from the prior-year period to $24.0 million, due in part to increased activity related to the development of our next generation of AHS products.  Total research and development expenses represented approximately 5% of revenue for the fourth quarter of 2009.

Other Income/Expense Reflects Continued Deleveraging Progress

Fourth quarter 2009 interest expense decreased to $24.5 million, from $31.7 million in the same period of the prior year, due to scheduled and voluntary debt payments made over the last twelve months.  Long-term debt outstanding as of December 31, 2009 consisted of a senior secured term loan of $750.0 million due 2013 and $690.0 million of 3.25% senior convertible notes due 2015.

During the first quarter of 2009, the Company adopted required accounting standards related to the accounting for certain convertible debt instruments.  The standards specify that issuers of such instruments should account separately for the liability and equity components in a manner that reflects the entity’s estimated non-convertible borrowing rate at the date of issuance.  As a result of the Company’s adoption of these standards, we recorded $3.1 million, or $0.05 per diluted share, of additional after-tax non-cash interest expense during the fourth quarter of 2009.  The required retroactive application of these standards also resulted in additional after-tax, non-cash interest expense for the fourth quarter of 2008 of $2.9 million, or $0.04 per diluted share.

Income Tax Rate

The effective income tax rate for the fourth quarter and full year of 2009 was 32.9% and 31.6%, respectively, compared to 26.2% and 39.5% for the prior-year periods.  The effective income tax rate for the fourth quarter of 2008 was impacted by the favorable resolution of certain tax contingencies while the higher full year 2008 tax rate resulted from $61.6 million of non-deductible costs associated with our LifeCell acquisition.

Reconciliation to Adjusted Diluted Earnings per Share

Diluted earnings per share, on a non-GAAP basis, adjusted for certain non-cash acquisition-related expenses and restructuring charges, were as follows:

	Three months ended				Year ended
	December 31,				December 31,
	2009		2008		2009		2008
Diluted EPS – GAAP basis	$	0.93	$	0.70	$	3.24	$	2.32
Acquisition-related adjustments:
Amortization of acquired intangibles		0.09		0.09		0.36		0.21
Debt issuance cost amortization		0.03		0.03		0.13		0.08
Expense from LifeCell inventory write-up		-		0.04		-		0.13
In-process research and development		-		-		-		0.86
Interest expense – adoption of required accounting standards for convertible debt		0.05		0.04		0.17		0.10
Restructuring and other charges		-		0.08		0.09		0.08
Adjusted diluted EPS – non-GAAP basis	$	1.10	$	0.98	$	3.99	$	3.78

Financial Position Again Demonstrates Liquidity and Strength

Total cash at year-end was $263.2 million, an increase of $15.4 million from year-end 2008.  During the fourth quarter and year ended December 31, 2009, the Company made scheduled and voluntary senior credit facility repayments totaling $50.0 million and $200.0 million, respectively, from cash-on-hand.  Operating cash flow less net capital expenditures for the full year of 2009 was $292.7 million.  Total long-term debt outstanding at December 31, 2009 was $1.306 billion on a GAAP-basis, including the discount associated with our adoption of required accounting standards, and $1.440 billion on an economic, or debt-instrument, basis.  The long-term debt balances in our condensed consolidated balance sheets reflect the discount associated with applying the estimated non-convertible borrowing rate upon the issuance of the convertible notes.  The total discount will accrete over the term of the notes.  As of December 31, 2009 and 2008, these convertible notes had balances of $556.2 million and $536.4 million, respectively, within our condensed consolidated balance sheets.

Outlook

The following guidance is based on current information and expectations as of January 26, 2010 (in millions, except per share data):

			% Change
	FY 2009	FY 2010	from 2009
Total revenue	$ 1,993	$ 2,050 – $ 2,090	3% – 5%
Diluted EPS – GAAP basis	$ 3.24	$ 3.56 – $ 3.66	10% – 13%
Acquisition-related adjustments:
Amortization-related adjustments	0.49	0.49
Non-cash interest – accounting for convertible debt	0.17	0.19
Restructuring and other charges	0.09	0.08 – 0.12
Adjusted Diluted EPS – non-GAAP basis	$ 3.99	$ 4.32 – $ 4.46	8% – 12%
Diluted weighted average shares outstanding	70.5	71.0 – 72.0	1% – 2%

The revenue guidance reflects our expectation of (i) low-single digit growth in AHS resulting from increased market penetration, partially offset by lower realized pricing, (ii) mid-teens growth in Regenerative Medicine revenue and (iii) stable revenue in the TSS business.  Our 2010 outlook also assumes foreign currency exchange rates are comparable to 2009 and assumes the seasonal slowing of AHS revenue growth which we have historically seen beginning late in the fourth quarter and continuing into the first quarter.  We believe this seasonal pattern is generally caused by year-end clinical treatment patterns, such as the postponement of elective surgeries and increased discharges of individuals from the acute care setting around the winter holidays.

While we expect 2010 to be an investment year in terms of entering the Japanese market and continuing with our global business transformation efforts, earnings leverage is expected to be realized through favorable product mix, operating efficiencies and continued debt reduction activities.  In addition, during the first half of 2010, the Company expects to incur certain charges associated with its global business transformation and other business unit initiatives.

Non-GAAP Financial Information

Within this document, we have included our results for the fourth quarter and full year ended December 31, 2009, along with our outlook on a non-GAAP basis to exclude the impact of the specified non-cash expenses set forth above associated with our acquisition of LifeCell in the second quarter of 2008 and the impact of restructuring charges incurred during the first quarter of 2009 and 2010 and the fourth quarter of 2008.  In addition, we have presented supplemental revenue data on a non-GAAP basis to exclude the impact of foreign currency fluctuations between 2008 and 2009.  These non-GAAP financial measures do not replace the presentation of our GAAP results and outlook.  We have provided this supplemental non-GAAP information because it may provide meaningful information regarding our results and outlook on a basis that better facilitates an understanding of our expected results of operations which may not be otherwise apparent under GAAP.  Management uses this non-GAAP financial information, along with GAAP information, for reviewing the operating results of its business segments and for analyzing potential future business trends.  In addition, we believe some investors may use this information in a similar fashion.  A reconciliation of our GAAP selected financial information for the periods presented to the non-GAAP selected financial information provided is included herein.

Earnings Release Conference Call

As previously announced, we have scheduled an earnings release conference call for 8:30 a.m. Eastern Standard Time today, Tuesday, January 26, 2010.  The dial-in numbers for this conference call are as follows:

Domestic Dial-in Number:	866-336-4900
International Dial-in Number:	+702-696-5179
Conference ID Number:	50849669

This call is being webcast and can be accessed at the Kinetic Concepts, Inc. Web site at http://www.kci1.com/investor/index.asp, by clicking on Webcast – Q4 and Year End 2009 Kinetic Concepts, Inc. Earnings Conference Call.  An archive of the web cast will be available until January 25, 2011 at http://www.kci1.com/investor/index.asp.

KCI's business outlook as of today is expected to be available on KCI's Investor Relations web site.  KCI does not currently expect to update this business outlook 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.

About KCI

Kinetic Concepts, Inc. (NYSE:KCI), is a leading global medical technology company devoted to the discovery, development, manufacture and marketing of innovative, high-technology therapies and products for the wound care, tissue regeneration and therapeutic support system markets.  Headquartered in San Antonio, Texas, KCI's success spans more than three decades and can be traced to a history deeply rooted in innovation and a passion for significantly improving the healing and the lives of patients around the world.

The Company employs approximately 6,700 people and markets its products in more than 20 countries.  For more information about KCI and how its products are changing the practice of medicine, visit www.KCI1.com.

Forward-Looking Statements

This press release contains forward-looking statements including, among other things, management's outlook, estimates of future performance, revenue, earnings per share, growth objectives and weighted average shares outstanding.  The forward-looking statements contained herein are based on our current expectations and are subject to a number of risks and uncertainties that could cause us to fail to achieve our current financial projections and other expectations, such as changes in the demand for AHS Therapy resulting from increased competition, the seasonal slowing of AHS Therapy unit growth in the fourth and first quarter of each year, changes in payer reimbursement policies or in our ability to protect our intellectual property rights.  All information set forth in this release and its attachments is as of January 26, 2010.  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, 2008 and in our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2009, June 30, 2009 and September 30, 2009, including, among other sections, under the captions, "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."  These reports are on file with the SEC and available at the SEC's website at www.sec.gov.  Additional information may also be set forth in those sections in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009, which is expected to be filed with the SEC in late February 2010.

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,
							%								%
	2009			2008 (1)			Change		2009			2008 (1)			Change
Revenue:
Rental	$	305,183		$	293,385		4.0	%	$	1,178,138		$	1,199,778		(1.8	)%
Sales		221,634			199,085		11.3			814,506			678,131		20.1
Total revenue		526,817			492,470		7.0			1,992,644			1,877,909		6.1
Rental expenses		162,176			176,483		(8.1	)		667,440			715,152		(6.7	)
Cost of sales		67,039			66,283		1.1			244,784			218,503		12.0
Gross profit		297,602			249,704		19.2			1,080,420			944,254		14.4
Selling, general and administrative expenses		140,169			123,517		13.5			505,214			433,331		16.6
Research and development expenses		24,017			22,560		6.5			92,088			75,839		21.4
Acquired intangible asset amortization		10,158			10,158		-			40,634			25,001		62.5
In-process research and development		-			-		-			-			61,571		-
Operating earnings		123,258			93,469		31.9			442,484			348,512		27.0
Interest income and other		173			1,104		(84.3	)		819			6,101		(86.6	)
Interest expense		(24,469	)		(31,691	)	(22.8	)		(104,918	)		(80,753	)	29.9
Foreign currency gain (loss)		(108	)		4,048		-			(4,004	)		1,308		-
Earnings before income taxes		98,854			66,930		47.7			334,381			275,168		21.5
Income taxes		32,523			17,539		85.4			105,679			108,724		(2.8	)
Net earnings	$	66,331		$	49,391		34.3	%	$	228,702		$	166,444		37.4	%
Net earnings per share:
Basic	$	0.94		$	0.70		34.3	%	$	3.26		$	2.33		39.9	%
Diluted	$	0.93		$	0.70		32.9	%	$	3.24		$	2.32		39.7	%
Weighted average shares outstanding:
Basic		70,334			70,594					70,110			71,464
Diluted		70,974			70,845					70,542			71,785
(1) 2008 amounts for the periods presented have been restated to reflect the adoption of a required accounting standard regarding convertible notes.  This standard was applied retroactively, as required.

KINETIC CONCEPTS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
	December 31,
	2009		2008(1)
Assets:
Current assets:
Cash and cash equivalents	$	263,157	$	247,767
Accounts receivable, net		425,042		406,007
Inventories, net		121,044		109,097
Deferred income taxes		11,715		19,972
Prepaid expenses and other		37,330		34,793
Total current assets		858,288		817,636
Net property, plant and equipment		296,055		303,799
Debt issuance costs, less accumulated amortization of
$23,000 at 2009 and $7,896 at 2008		35,191		50,295
Deferred income taxes		17,513		8,635
Goodwill		1,328,881		1,337,810
Identifiable intangible assets, net		489,213		472,547
Other non-current assets		13,424		12,730
	$	3,038,565	$	3,003,452
Liabilities and Shareholders' Equity:
Current liabilities:
Accounts payable	$	63,301	$	53,765
Accrued expenses and other		226,823		258,666
Current installments of long-term debt		132,353		100,000
Income taxes payable		18,484		-
Total current liabilities		440,961		412,431
Long-term debt, net of current installments and discount		1,173,808		1,415,443
Non-current tax liabilities		29,074		26,205
Deferred income taxes		212,257		239,621
Other non-current liabilities		4,994		6,382
		1,861,094		2,100,082
Shareholders' equity:
Common stock; authorized 225,000 at 2009 and 2008,
issued and outstanding 71,256 at 2009 and 70,524 at 2008		71		71
Preferred stock; authorized 50,000 at 2009 and 2008; issued and
outstanding 0 at 2009 and 2008		-		-
Additional paid-in capital		804,111		765,645
Retained earnings		357,350		128,648
Accumulated other comprehensive income, net		15,939		9,006
Shareholders' equity		1,177,471		903,370
	$	3,038,565	$	3,003,452
(1) 2008 amounts for the period presented have been restated to reflect the adoption of a required accounting standard regarding convertible notes.  This standard was applied retroactively, as required.

KINETIC CONCEPTS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
	Year ended December 31,
	2009			2008 (1)
Cash flows from operating activities:
Net earnings	$	228,702		$	166,444
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation, amortization and other		156,930			134,709
Provision for bad debt		10,166			10,605
Amortization of deferred gain on sale of headquarters facility		(1,070	)		(1,070	)
Amortization of convertible debt discount		19,718			12,777
Write-off of deferred debt issuance costs		3,035			860
Share-based compensation expense		32,506			26,315
Excess tax benefit from share-based payment arrangements		(1,214	)		(1,917	)
Write-off of in-process research and development		-			61,571
Change in assets and liabilities, net of business acquired:
Increase in accounts receivable, net		(29,271	)		(39,884	)
Decrease (increase) in inventories, net		(11,953	)		5,632
Decrease (increase) in prepaid expenses and other		(1,560	)		2,528
Increase (decrease) in deferred income taxes, net		(16,356	)		80,108
Increase (decrease) in accounts payable		9,530			(15,618	)
Decrease in accrued expenses and other		(28,291	)		(6,085	)
Increase (decrease) in tax liabilities, net		16,649			(9,844	)
Net cash provided by operating activities		387,521			427,131
Cash flows from investing activities:
Additions to property, plant and equipment		(103,289	)		(131,283	)
Decrease (increase) in inventory to be converted into equipment
for short-term rental		8,462			(11,200	)
Dispositions of property, plant and equipment		4,976			5,998
Business acquired in purchase transaction, net of cash acquired		(173	)		(1,745,743	)
Increase in identifiable intangible assets and other non-current assets		(62,894	)		(5,007	)
Net cash used by investing activities		(152,918	)		(1,887,235	)
Cash flows from financing activities:
Proceeds from revolving credit facility		105,000			114,000
Repayments of long-term debt, revolving credit facility and
capital lease obligations		(334,000	)		(135,260	)
Repurchase of common stock in open-market transactions		-			(50,000	)
Excess tax benefit from share-based payment arrangements		1,214			1,917
Proceeds from exercise of stock options		1,850			2,454
Purchase of immature shares for minimum tax withholdings		(1,419	)		(1,010	)
Proceeds from the purchase of stock in ESPP and other		5,938			4,457
Acquisition financing:
Proceeds from senior credit facility		-			1,000,000
Proceeds from convertible senior notes		-			690,000
Repayment of long-term debt		-			(68,000	)
Proceeds from convertible debt warrants		-			102,458
Purchase of convertible debt hedge		-			(151,110	)
Payment of debt issuance costs		-			(60,697	)
Net cash provided (used) by financing activities		(221,417	)		1,449,209
Effect of exchange rate changes on cash and cash equivalents		2,204			(7,331	)
Net increase (decrease) in cash and cash equivalents		15,390			(18,226	)
Cash and cash equivalents, beginning of year		247,767			265,993
Cash and cash equivalents, end of year	$	263,157		$	247,767
_______________
(1) 2008 amounts for the period presented have been restated to reflect the adoption of a required accounting standard regarding convertible notes.  This standard was applied retroactively, as required.

KINETIC CONCEPTS, INC. AND SUBSIDIARIES
Reconciliation from GAAP to Non-GAAP
Supplemental Revenue Data
(in thousands)
(unaudited)
	Three months ended December 31,
	2009									GAAP		Constant
						Constant		2008		%		Currency %
	GAAP		FX Impact			Currency		GAAP		Change		Change (1)
Total Revenue:
AHS
North America	$	274,287	$	(1,301	)	$	272,9867	$	267,331	2.6	%	2.1	%
EMEA/APAC		92,961		(10,411	)		82,550		80,122	16.0		3.0
Total AHS		367,248		(11,712	)		355,536		347,453	5.7		2.3
Regenerative Medicine
North America		75,943		(24	)		75,919		68,001	11.7		11.6
EMEA/APAC		910		(100	)		810		-	-		-
Total Regenerative Medicine		76,853		(124	)		76,729		68,001	13.0		12.8
TSS
North America		54,537		(708	)		53,829		53,979	1.0		(0.3	)
EMEA/APAC		28,179		(3,032	)		25,147		23,037	22.3		9.2
Total TSS		82,716		(3,740	)		78,976		77,016	7.4		2.5
Total North America revenue		404,767		(2,033	)		402,734		389,311	4.0		3.4
Total EMEA/APAC revenue		122,050		(13,543	)		108,507		103,159	18.3		5.2
Total Revenue	$	526,817	$	(15,576	)	$	511,241	$	492,470	7.0	%	3.8	%
AHS:
North America revenue
Rental	$	191,471	$	(589	)	$	190,882	$	192,886	(0.7	) %	(1.0	) %
Sales		82,816		(712	)		82,104		74,445	11.2		10.3
Total North America revenue		274,287		(1,301	)		272,986		267,331	2.6		2.1
EMEA/APAC revenue
Rental		44,478		(4,899	)		39,579		38,692	15.0		2.3
Sales		48,483		(5,512	)		42,971		41,430	17.0		3.7
Total EMEA/APAC revenue		92,961		(10,411	)		82,550		80,122	16.0		3.0
Total rental revenue		235,949		(5,488	)		230,461		231,578	1.9		(0.5	)
Total sales revenue		131,299		(6,224	)		125,075		115,875	13.3		7.9
Total – AHS Revenue	$	367,248	$	(11,712	)	$	355,536	$	347,453	5.7	%	2.3	%
Regenerative Medicine Revenue:
North America sales revenue	$	75,943	$	(24	)	$	75,919	$	68,001	11.7	%	11.6	%
EMEA/APAC sales revenue		910		(100	)		810		-	-		-
Total – Regenerative Medicine Revenue	$	76,853	$	(124	)	$	76,729	$	68,001	13.0	%	12.8	%
TSS Revenue:
North America revenue
Rental	$	47,065	$	(593	)	$	46,472	$	43,299	8.7	%	7.3	%
Sales		7,472		(115	)		7,357		10,680	(30.0	)	(31.1	)
Total North America revenue		54,537		(708	)		53,829		53,979	1.0		(0.3	)
EMEA/APAC revenue
Rental		22,169		(2,520	)		19,649		18,508	19.8		6.2
Sales		6,010		(512	)		5,498		4,529	32.7		21.4
Total EMEA/APAC revenue		28,179		(3,032	)		25,147		23,037	22.3		9.2
Total rental revenue		69,234		(3,113	)		66,121		61,807	12.0		7.0
Total sales revenue		13,482		(627	)		12,855		15,209	(11.4	)	(15.5	)
Total – TSS Revenue	$	82,716	$	(3,740	)	$	78,976	$	77,016	7.4	%	2.5	%
_______________
(1) Represents percentage change between 2009 Non-GAAP Constant Currency revenue and 2008 GAAP revenue.

KINETIC CONCEPTS, INC. AND SUBSIDIARIES
Reconciliation from GAAP to Non-GAAP
Supplemental Revenue Data
(in thousands)
(unaudited)
	Year ended December 31,
	2009									GAAP		Constant
						Constant		2008		%		Currency %
	GAAP		FX Impact			Currency		GAAP		Change		Change (1)
Total Revenue:
AHS
North America	$	1,066,124	$	2,960		$	1,069,084	$	1,049,215	1.6	%	1.9	%
EMEA/APAC		340,451		20,208			360,659		344,735	(1.2	)	4.6
Total AHS		1,406,575		23,168			1,429,743		1,393,950	0.9		2.6
Regenerative Medicine
North America		284,075		(75	)		284,000		156,837	81.1		81.1
EMEA/APAC		1,823		(164	)		1,659		-	-		-
Total Regenerative Medicine		285,898		(239	)		285,659		156,837	82.3		82.1
TSS
North America		196,354		2,233			198,587		221,684	(11.4	)	(10.4	)
EMEA/APAC		103,817		5,611			109,428		105,438	(1.5	)	3.8
Total TSS		300,171		7,844			308,015		327,122	(8.2	)	(5.8	)
Total North America revenue		1,546,553		5,118			1,551,671		1,427,736	8.3		8.7
Total EMEA/APAC revenue		446,091		25,655			471,746		450,173	(0.9	)	4.8
Total Revenue	$	1,992,644	$	30,773		$	2,023,417	$	1,877,909	6.1	%	7.7	%
AHS:
North America revenue
Rental	$	757,745	$	1,659		$	759,404	$	755,868	0.2	%	0.5	%
Sales		308,379		1,301			309,680		293,347	5.1		5.6
Total North America revenue		1,066,124		2,960			1,069,084		1,049,215	1.6		1.9
EMEA/APAC revenue
Rental		164,950		10,873			175,823		169,658	(2.8	)	3.6
Sales		175,501		9,335			184,836		175,077	0.2		5.6
Total EMEA/APAC revenue		340,451		20,208			360,659		344,735	(1.2	)	4.6
Total rental revenue		922,695		12,532			935,227		925,526	(0.3	)	1.0
Total sales revenue		483,880		10,636			494,516		468,424	3.3		5.6
Total – AHS Revenue	$	1,406,575	$	23,168		$	1,429,743	$	1,393,950	0.9	%	2.6	%
Regenerative Medicine Revenue:
North America sales revenue	$	284,075	$	(75	)	$	284,000	$	156,837	81.1	%	81.1	%
EMEA/APAC sales revenue		1,823		(164	)		1,659		-	-		-
Total – Regenerative Medicine Revenue	$	285,898	$	(239	)	$	285,659	$	156,837	82.3	%	82.1	%
TSS Revenue:
North America revenue
Rental	$	172,893	$	1,790		$	174,683	$	188,083	(8.1	) %	(7.1	) %
Sales		23,461		443			23,904		33,601	(30.2	)	(28.9	)
Total North America revenue		196,354		2,233			198,587		221,684	(11.4	)	(10.4	)
EMEA/APAC revenue
Rental		82,550		4,530			87,080		86,169	(4.2	)	1.1
Sales		21,267		1,081			22,348		19,269	10.4		16.0
Total EMEA/APAC revenue		103,817		5,611			109,428		105,438	(1.5	)	3.8
Total rental revenue		255,443		6,320			261,763		274,252	(6.9	)	(4.6	)
Total sales revenue		44,728		1,524			46,252		52,870	(15.4	)	(12.5	)
Total – TSS Revenue	$	300,171	$	7,844		$	308,015	$	327,122	(8.2	) %	(5.8	) %
_______________
(1) Represents percentage change between 2009 Non-GAAP, Constant Currency revenue and 2008 GAAP revenue.

KINETIC CONCEPTS, INC. AND SUBSIDIARIES
Selected Financial Information - GAAP to Non-GAAP Reconciliation
(in thousands, except per share data)
(unaudited)
	Three months ended December 31,
							Interest
							Expense -
					Debt		Adoption of
			Amortization		Issuance		Required		Restructuring
	2009		of Acquired		Cost		Accounting		and Other		Adjusted		Adjusted		%
	GAAP		Intangibles		Amortization		Standards		Charges		2009		2008		Change
Operating earnings	$	123,258	$	10,158	$	-	$	-	$	-	$	133,416	$	117,818	13.2	%
Net earnings(1)	$	66,331	$	6,248	$	2,220	$	3,119	$	-	$	77,918	$	69,199	12.6	%
Diluted earnings per share	$	0.93	$	0.09	$	0.03	$	0.05	$	-	$	1.10	$	0.98	12.2	%
	Year ended December 31,
							Interest
							Expense -
					Debt		Adoption of
			Amortization		Issuance		Required		Restructuring
	2009		of Acquired		Cost		Accounting		and Other		Adjusted		Adjusted		%
	GAAP		Intangibles		Amortization		Standards		Charges		2009		2008		Change
Operating earnings	$	442,484	$	40,634	$	-	$	-	$	9,356	$	492,474	$	459,437	7.2	%
Net earnings(1)	$	228,702	$	24,990	$	9,289	$	12,126	$	6,301	$	281,408	$	271,739	3.6	%
Diluted earnings per share	$	3.24	$	0.36	$	0.13	$	0.17	$	0.09	$	3.99	$	3.78	5.6	%

	Three months ended December 31,
							Interest
							Expense -
					Debt		Adoption of						In-Process
			Amortization		Issuance		Required		Restructuring				Research
	2008		of Acquired		Cost		Accounting		and Other		Inventory		and		Adjusted
	GAAP		Intangibles		Amortization		Standards		Charges		Write-up		Development		2008
Operating earnings	$	93,469	$	10,158	$	-	$	-	$	9,324	$	4,867	$	-	$	117,818
Net earnings(1)	$	49,391	$	6,247	$	1,945	$	2,889	$	5,734	$	2,993	$	-	$	69,199
Diluted earnings per share	$	0.70	$	0.09	$	0.03	$	0.04	$	0.08	$	0.04	$	-	$	0.98
	Year ended December 31,
							Interest
							Expense -
					Debt		Adoption of						In-Process
			Amortization		Issuance		Required		Restructuring				Research
	2008		of Acquired		Cost		Accounting		and Other		Inventory		and		Adjusted
	GAAP		Intangibles		Amortization		Standards		Charges		Write-up		Development		2008
Operating earnings	$	348,512	$	25,001	$	-	$	-	$	9,324	$	15,029	$	61,571	$	459,437
Net earnings(1)	$	166,444	$	15,376	$	5,512	$	7,859	$	5,734	$	9,243	$	61,571	$	271,739
Diluted earnings per share	$	2.32	$	0.21	$	0.08	$	0.10	$	0.08	$	0.13	$	0.86	$	3.78
(1) Adjustments to “Net earnings” are presented net of tax. The tax effect of each reconciling item is calculated using the Company’s estimated incremental tax rate for the period.  With the exception of the adjustments for “In-Process Research and Development” and “Restructuring and Other Charges,” the tax effect of the adjustments was calculated using the estimated incremental U.S. combined federal and state tax rate of 38.5%.  Due to the global nature of the “Restructuring and Other Charges,” the tax effect of these adjustments was calculated using the Company’s consolidated effective income tax rate for the period.  The consolidated effective income tax rate was 32.9% and 26.2% for the three months ended December 31, 2009 and 2008, respectively, and was 31.6% and 39.5% for the year ended December 31, 2009 and 2008, respectively.  There is no tax effect calculated for the “In-Process Research and Development” adjustment as this was not deductible for tax purposes.