r3qtr20108k102610.htm

Net earnings for the third quarter of 2010 were $75.8 million, or $1.06 per diluted share on a GAAP basis, compared to $64.6 million, or $0.91 per diluted share, for the third quarter of 2009, representing increases of 17% and 16%, respectively, from the prior-year period. Third quarter net earnings per diluted share on a non-GAAP basis, excluding non-cash, acquisition-related items were $1.20, up 11% from the prior-year period on a comparable, non-GAAP basis.

“I am pleased with our third quarter performance, particularly in our important US V.A.C.® Therapy segment which grew both year-over-year and sequentially,” said Catherine Burzik, President and Chief Executive Officer of KCI. “Additionally, we are now realizing benefits from our strategic investments: AHS expansion into Japan, LifeCell expansion into EMEA and introduction of innovative therapies including: V.A.C.VIA™, single patient use V.A.C.® Therapy, ABThera™ for the open abdomen and Prevena™ for surgically-closed incisions. We believe these initiatives hold great promise for our future.”< /font>

Revenue Recap – Third Quarter and First Nine Months of 2010

Worldwide revenue from AHS products was $358.4 million for the third quarter of 2010 and $1.039 billion for the first nine months of 2010, compared to $360.6 million and $1.039 billion, respectively, for the corresponding periods of 2009. On a constant currency basis, worldwide AHS revenue in the third quarter of 2010 increased approximately 1% from the prior-year period due primarily to higher global rental and sales volumes, partially offset by lower realized pricing. For the first nine months of 2010 worldwide AHS revenue was comparable to the prior-year period.

North American AHS revenue of $275.5 million for the third quarter of 2010 increased 2% from the prior-year period resulting from improved unit volumes. Third quarter 2010 AHS revenue from the United States increased slightly more than 1% from the same period one year ago and 3% sequentially. Revenue of $792.0 million for the first nine months of 2010 was comparable to the same period of the prior year. Foreign currency exchange rate movements had a negligible impact on North American AHS revenue for the third quarter and first nine months of 2010 as compared to the prior-year periods.

EMEA/APAC AHS revenue was $82.9 million for the third quarter of 2010, down from $89.7 million in the prior-year period due primarily to foreign currency exchange rate movements, which unfavorably impacted third quarter EMEA/APAC AHS revenue by 6% compared to the prior-year period. On a constant currency basis, third quarter EMEA/APAC AHS revenue decreased 2% compared to the same period one year ago due largely to continued pricing pressures stemming from increased levels of competitive activity and increased European Union healthcare spending austerity measures, partially offset by increased rental and sales volumes in the region due primarily to the successful launch of V.A.C.® Therapy in Japan. For the first nine months of 2010, AHS revenue in the EMEA/APAC region was $247.1 million, compared to $247.5 million in the first nine months of 2009. For the first nine months of 2010, foreign currency exchange rate movements negatively impacted EMEA/APAC AHS revenue by 1% compared to the prior year.

Total revenue from our LifeCell division was $84.9 million and $247.7 million for the third quarter and first nine months of 2010, respectively, up 18% from both prior-year periods. Sales of Strattice™, our porcine-based reconstructive tissue matrix, comprised 42% of total Regenerative Medicine revenue for the period, up from 33% in the comparable prior-year period. The EMEA region contributed 2% of the Regenerative Medicine overall revenue growth for both the third quarter and first nine months of 2010 as we continued to penetrate the European markets. We have now introduced our Regenerative Medicine products into eleven European countries.

Total TSS revenue was $63.4 million for the third quarter and $203.5 million for the first nine months of 2010 compared to $72.1 million and $217.5 million, respectively, for the same periods one year ago due primarily to lower rental volumes globally, resulting from continued economic weakness and its impact on acute care facilities, a lower incidence of influenza and unfavorable changes in product mix, partially offset by slightly higher levels of capital sales. Foreign currency exchange rate movements unfavorably impacted worldwide TSS revenue by 2% for the third quarter of 2010 while having no significant impact on the first nine months of 2010 compared to the corresponding prior-year periods.

North American TSS revenue was $41.8 million for the third quarter of 2010, a 10% decrease from the prior-year period, due primarily to fewer hospital therapy days and reduced hospital spending on higher cost therapies, partially offset by increased levels of wound care capital sales. Foreign currency exchange rate movements favorably impacted North American TSS revenue by 1% in the third quarter. North American TSS revenue for the first nine months of 2010 was $134.8 million, down 5% from the prior-year period and down 7% on a constant currency basis. On a constant currency basis, EMEA/APAC TSS revenue decreased 7% for both the third quarter and first nine months of 2010 compared to the same corresponding periods in the prior year due primarily to the impact of prior-year contract losses, as well as ut ilization changes in select countries and accounts.

Profit Margins

Gross profit for the third quarter and first nine months of 2010 was $289.4 million and $840.9 million, respectively, representing increases of 3% and 5%, respectively, from the same periods of the prior year. Gross profit margin was 57% for the third quarter of 2010, an increase of approximately 130 basis points from the same period one year ago. The gross profit margin increase was due primarily to lower product royalty expenses, increased productivity of our service operations and favorable product mix, specifically, higher gross margins associated with our Regenerative Medicine business unit.

Operating profit for the third quarter and first nine months of 2010 was $120.2 million and $322.8 million, respectively, representing increases of 5% and 1%, respectively, from the same periods one year ago. Third quarter selling, general and administrative (“SG&A”) expenses increased $7.1 million, or 5%, over the third quarter of 2009. Third quarter SG&A increases included continued investment associated with our entry into Japan, increased selling costs associated with the growth of our LifeCell division and employee separation costs.

Research and development expenses for the third quarter of 2010 decreased 15% from the prior-year period to $20.9 million. The majority of this decrease was due to the timing of certain programs. Total research and development expenses represented approximately 4% of revenue for the current quarter.

Other Income/Expense Reflects Lower Interest Rates and Focus on Debt Service

Third quarter 2010 interest expense was $21.5 million compared to $25.7 million in the same period of the prior year due to scheduled and voluntary debt payments made over the last twelve months and lower interest rates. Long-term debt outstanding as of September 30, 2010 consisted of a senior secured term loan of $565.0 million due 2013 and 3.25% senior convertible notes of $690.0 million due 2015. Foreign currency transaction gains were $2.1 million in the third quarter of 2010 compared to $3.2 million in the prior-year period due primarily to continued volatility in currency exchange rates.

Income Tax Rate

The effective income tax rate for the third quarter and first nine months of 2010 was 25.0% and 28.0%, respectively, compared to 29.7% and 31.1%, respectively, for the corresponding periods in 2009. The decrease in the effective income tax rate for the third quarter and first nine months of 2010 resulted from a higher percentage of taxable income being generated in lower tax foreign jurisdictions and the favorable resolution of certain tax contingencies during 2010. The resolution of these tax contingencies favorably impacted net earnings by approximately $2.9 million, or $0.04 per diluted share, in the third quarter of 2010.

Financial Position Demonstrates Liquidity and Strength

Total cash at quarter end was $263.3 million compared to $263.2 million at year end 2009. During the third quarter, the Company made scheduled and voluntary senior credit facility repayments of $60.0 million from cash-on-hand. Operating cash flow less net capital expenditures for the first nine months of 2010 was $179.6 million, a decrease of $28.8 million from the same period one year ago due to increases in inventory levels of our Strattice and AlloDerm tissue matrices, and increased income tax payments, partially offset by improved cash collections and higher net earnings. Total long-term debt outstanding at September 30, 2010 was $1.137 billion on a GAAP basis and $1.255 billion on an economic, or debt-instrument, basis. As of September 30, 2010 and December 31, 2009, these convertible no tes had balances of $572.0 million and $556.2 million, respectively, within our condensed consolidated balance sheets.

Outlook

The Company is reaffirming its 2010 revenue guidance and raising its earnings per share guidance, based on current information and expectations as of October 26, 2010 (in millions, except per share data) as follows:

			% Change
	FY 2009	FY 2010	from 2009
Total revenue	$ 1,993	$ 2,000 – $ 2,030	0% – 2%

Diluted EPS – GAAP basis	$ 3.24	$ 3.52 – $ 3.57	9% – 10%
Acquisition-related adjustments:
Amortization-related adjustments	0.49	0.43
Non-cash interest – accounting
for convertible debt	0.17	0.18
Restructuring and other charges	0.09	0.11

Adjusted Diluted EPS – non-GAAP basis	$ 3.99	$ 4.24 – $ 4.29	6% – 8%

Diluted weighted average shares outstanding	70.5	71.0 – 72.0	1% – 2%

The revenue guidance, relative to 2009, reflects our expectation of continuing volatility in foreign currency exchange rates, stable revenue in our AHS business, double-digit growth in Regenerative Medicine revenue and a high single digit contraction in our TSS business. In addition, our GAAP earnings per share guidance and the lower end of our adjusted, non-GAAP earnings per share guidance range have been adjusted to reflect the strong earnings performance reported for the third quarter of 2010.

Non-GAAP Financial Information

Within this document, we have included our results for the third quarter and nine months ended September 30, 2010 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 and other significant charges incurred during the first quarter of 2009 and the second quarter of 2010. In addition, we have presented supplemental revenue data on a non-GAAP basis to exclude the impact of foreign currency fluctuations between 2009 and 2010. 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 resu lts 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 its operating results 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 Daylight Time today, Tuesday, October 26, 2010. The dial-in numbers for this conference call are as follows:

Domestic Dial-in Number:		866-469-0048
International Dial-in Number:		+706-758-3983
Conference ID Number:		17818512

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 Web cast – Q3 2010 Kinetic Concepts, Inc. Earnings Conference Call. An archive of the web cast will be available until October 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 6,800 people and markets its products in 22 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 our V.A.C.® Therapy Systems resulting from increased competition, the seasonal slowing of V.A.C.® Therapy unit growth in the fourth and first quarter of each year, cha nges in payer reimbursement policies and our ability to protect our intellectual property rights. All information set forth in this release and its attachments is as of October 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, 2009 and in our quarterly reports on Form 10-Q for the quarterly periods ended March 31, 2010 and June 30, 2010, 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 web site at www.sec.gov. Additional information may also be set forth in those sections in our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 201 0, which will be filed with the SEC in early November 2010.

KINETIC CONCEPTS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(in thousands, except per share data)
(unaudited)


	Three months ended September 30,								Nine months ended September 30,
							%								%
	2010			2009			Change		2010			2009			Change
Revenue:
Rental	$	288,970		$	298,577		(3.2	)%	$	852,045		$	872,955		(2.4	)%
Sales		217,738			205,820		5.8			638,240			592,872		7.7

Total revenue		506,708			504,397		0.5			1,490,285			1,465,827		1.7

Rental expenses		155,765			163,020		(4.5	)		464,606			485,463		(4.3	)
Cost of sales		61,551			59,940		2.7			184,782			177,745		4.0

Gross profit		289,392			281,437		2.8			840,897			802,619		4.8

Selling, general and administrative expenses		139,512			132,373		5.4			422,103			384,846		9.7
Research and development expenses		20,873			24,669		(15.4	)		67,375			68,071		(1.0	)
Acquired intangible asset amortization		8,855			10,160		(12.8	)		28,570			30,476		(6.3	)

Operating earnings		120,152			114,235		5.2			322,849			319,226		1.1

Interest income and other		265			158		67.7			544			646		(15.8	)
Interest expense		(21,534	)		(25,728	)	(16.3	)		(67,360	)		(80,449	)	(16.3	)
Foreign currency gain (loss)		2,148			3,183		(32.5	)		(3,119	)		(3,896	)	(19.9	)

Earnings before income taxes		101,031			91,848		10.0			252,914			235,527		7.4

Income taxes		25,258			27,279		(7.4	)		70,823			73,156		(3.2	)

Net earnings	$	75,773		$	64,569		17.4	%	$	182,091		$	162,371		12.1	%

Net earnings per share:
Basic	$	1.07		$	0.92		16.3	%	$	2.57		$	2.32		10.8	%

Diluted	$	1.06		$	0.91		16.5	%	$	2.54		$	2.31		10.0	%

Weighted average shares outstanding:
Basic		70,994			70,150					70,784			70,035

Diluted		71,695			70,666					71,647			70,425

KINETIC CONCEPTS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)


	September 30,		December 31,
	2010		2009
	(unaudited)

Assets:
Current assets:
Cash and cash equivalents	$	263,297	$	263,157
Accounts receivable, net		406,043		425,042
Inventories, net		174,695		121,044
Deferred income taxes		21,671		11,715
Prepaid expenses and other		33,403		37,330

Total current assets		899,109		858,288

Net property, plant and equipment		269,581		296,055
Debt issuance costs, net		25,042		35,191
Deferred income taxes		20,133		17,513
Goodwill		1,328,881		1,328,881
Identifiable intangible assets, net		457,781		489,213
Other non-current assets		14,717		13,424

	$	3,015,244	$	3,038,565

Liabilities and Shareholders' Equity:
Current liabilities:
Accounts payable	$	68,326	$	63,301
Accrued expenses and other		202,927		226,823
Current installments of long-term debt		160,083		132,353
Income taxes payable		3,527		18,484

Total current liabilities		434,863		440,961

Long-term debt, net of current installments and discount		976,896		1,173,808
Non-current tax liabilities		34,386		29,074
Deferred income taxes		167,237		212,257
Other non-current liabilities		3,744		4,994

Total liabilities		1,617,126		1,861,094

Shareholders' equity:
Common stock; authorized 225,000 at 2010 and 2009,
issued and outstanding 71,843 at 2010 and 71,256 at 2009		72		71
Preferred stock; authorized 50,000 at 2010 and 2009; issued and
outstanding 0 at 2010 and 2009		-		-
Additional paid-in capital		841,471		804,111
Retained earnings		539,441		357,350
Accumulated other comprehensive income, net		17,134		15,939

Shareholders' equity		1,398,118		1,177,471

	$	3,015,244	$	3,038,565

KINETIC CONCEPTS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)


	Nine months ended September 30,
	2010			2009
Cash flows from operating activities:
Net earnings	$	182,091		$	162,371
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Amortization of convertible debt discount		15,818			14,645
Depreciation and other amortization		119,188			113,869
Provision for bad debt		7,024			7,602
Write-off of deferred debt issuance costs		2,301			2,348
Share-based compensation expense		24,173			22,977
Excess tax benefit from share-based payment arrangements		(1,426	)		(515	)
Change in assets and liabilities, net of business acquired:
Decrease (increase) in accounts receivable, net		14,829			(14,419	)
Increase in inventories, net		(53,353	)		(2,725	)
Decrease (increase) in prepaid expenses and other		3,927			(1,505	)
Increase in accounts payable		5,212			18,484
Decrease in accrued expenses and other		(18,117	)		(46,415	)
Increase (decrease) in tax liabilities, net		(9,227	)		978
Decrease in deferred income taxes, net		(59,325	)		(5,212	)

Net cash provided by operating activities		233,115			272,483

Cash flows from investing activities:
Additions to property, plant and equipment		(63,255	)		(66,019	)
Decrease in inventory to be converted into equipment
for short-term rental		9,771			1,969
Dispositions of property, plant and equipment		1,557			4,298
Business acquired in purchase transaction, net of cash acquired		-			(173	)
Increase in identifiable intangible assets and other non-current assets		(9,632	)		(18,206	)

Net cash used by investing activities		(61,559	)		(78,131	)

Cash flows from financing activities:
Proceeds from revolving credit facility		-			20,000
Repayments of long-term debt, revolving credit facility and
capital lease obligations		(185,059	)		(198,990	)
Excess tax benefit from share-based payment arrangements		1,426			515
Proceeds from exercise of stock options		10,383			784
Purchase of immature shares for minimum tax withholdings		(1,134	)		(242	)
Proceeds from the purchase of stock in ESPP and other		3,452			3,336

Net cash used by financing activities		(170,932	)		(174,597	)

Effect of exchange rate changes on cash and cash equivalents		(484	)		2,532

Net increase in cash and cash equivalents		140			22,287
Cash and cash equivalents, beginning of period		263,157			247,767

Cash and cash equivalents, end of period	$	263,297		$	270,054

KINETIC CONCEPTS, INC. AND SUBSIDIARIES
Reconciliation from GAAP to Non-GAAP
Supplemental Revenue Data
(in thousands)
(unaudited)


	Three months ended September 30,
	2010									GAAP		Constant
						Constant		2009		%		Currency %
	GAAP		FX Impact			Currency		GAAP		Change		Change (1)

Total Revenue:
AHS
North America	$	275,494	$	(0.627	)	$	274,867	$	270,848	1.7	%	1.5	%
EMEA/APAC		82,898		5,123			88,021		89,732	(7.6	)	(1.9	)

Total AHS		358,392		4,496			362,888		360,580	(0.6	)	0.6

Regenerative Medicine
North America		83,213		(16	)		83,197		71,248	16.8		16.8
EMEA/APAC		1,722		60			1,782		519	231.8		243.4

Total Regenerative Medicine		84,935		44			84,979		71,767	18.3		18.4

TSS
North America		41,788		(382	)		41,406		46,542	(10.2	)	(11.0	)
EMEA/APAC		21,593		2,013			23,606		25,508	(15.3	)	(7.5	)

Total TSS		63,381		1,631			65,012		72,050	(12.0	)	(9.8	)

Total North America revenue		400,495		(1,025	)		399,470		388,638	3.1		2.8
Total EMEA/APAC revenue		106,213		7,196			113,409		115,759	(8.2	)	(2.0	)

Total Revenue	$	506,708	$	6,171		$	512,879	$	504,397	0.5	%	1.7	%

AHS:
North America revenue
Rental	$	196,775	$	(308	)	$	196,467	$	193,337	1.8	%	1.6	%
Sales		78,719		(319	)		78,400		77,511	1.6		1.1

Total North America revenue		275,494		(627	)		274,867		270,848	1.7		1.5

EMEA/APAC revenue
Rental		39,072		2,453			41,525		43,214	(9.6	)	(3.9	)
Sales		43,826		2,670			46,496		46,518	(5.8	)	-

Total EMEA/APAC revenue		82,898		5,123			88,021		89,732	(7.6	)	(1.9	)

Total rental revenue		235,847		2,145			237,992		236,551	(0.3	)	0.6
Total sales revenue		122,545		2,351			124,896		124,029	(1.2	)	0.7

Total AHS Revenue	$	358,392	$	4,496		$	362,888	$	360,580	(0.6	) %	0.6	%

Regenerative Medicine Revenue:
North America sales revenue	$	83,213	$	(16	)	$	83,197	$	71,248	16.8	%	16.8	%
EMEA/APAC sales revenue		1,722		60			1,782		519	231.8		243.4

Total Regenerative Medicine Revenue	$	84,935	$	44		$	84,979	$	71,767	18.3	%	18.4	%

TSS Revenue:
North America revenue
Rental	$	35,539	$	(310	)	$	35,229	$	41,325	(14.0	) %	(14.8	) %
Sales		6,249		(72	)		6,177		5,217	19.8		18.4

Total North America revenue		41,788		(382	)		41,406		46,542	(10.2	)	(11.0	)

EMEA/APAC revenue
Rental		17,584		1,802			19,386		20,701	(15.1	)	(6.4	)
Sales		4,009		211			4,220		4,807	(16.6	)	(12.2	)

Total EMEA/APAC revenue		21,593		2,013			23,606		25,508	(15.3	)	(7.5	)

Total rental revenue		53,123		1,492			54,615		62,026	(14.4	)	(11.9	)
Total sales revenue		10,258		139			10,397		10,024	2.3		3.7

Total TSS Revenue	$	63,381	$	1,631		$	65,012	$	72,050	(12.0	) %	(9.8	) %


(1) Represents percentage change between 2010 Non-GAAP Constant Currency revenue and 2009 GAAP revenue.

KINETIC CONCEPTS, INC. AND SUBSIDIARIES
Reconciliation from GAAP to Non-GAAP
Supplemental Revenue Data
(in thousands)
(unaudited)


	Nine months ended September 30,
	2010									GAAP		Constant
						Constant		2009		%		Currency %
	GAAP		FX Impact			Currency		GAAP		Change		Change (1)

Total Revenue:
AHS
North America	$	792,007	$	(3,999	)	$	788,008	$	791,837	-	%	(0.5	) %
EMEA/APAC		247,064		1,281			248,345		247,490	(0.2	)	0.3

Total AHS		1,039,071		(2,718	)		1,036,353		1,039,327	-		(0.3	)

Regenerative Medicine
North America		243,375		(25	)		243,350		208,132	16.9		16.9
EMEA/APAC		4,318		120			4,438		913	372.9		386.1

Total Regenerative Medicine		247,693		95			247,788		209,045	18.5		18.5

TSS
North America		134,751		(2,650	)		132,101		141,817	(5.0	)	(6.9	)
EMEA/APAC		68,770		1,851			70,621		75,638	(9.1	)	(6.6	)

Total TSS		203,521		(799	)		202,722		217,455	(6.4	)	(6.8	)

Total North America revenue		1,170,133		(6,674	)		1,163,459		1,141,786	2.5		1.9
Total EMEA/APAC revenue		320,152		3,252			323,404		324,041	(1.2	)	(0.2	)

Total Revenue	$	1,490,285	$	(3,422	)	$	1,486,863	$	1,465,827	1.7	%	1.4	%

AHS:
North America revenue
Rental	$	564,844	$	(1,894	)	$	562,950	$	566,274	(0.3	) %	(0.6	) %
Sales		227,163		(2,105	)		225,058		225,563	0.7		(0.2	)

Total North America revenue		792,007		(3,999	)		788,008		791,837	-		(0.5	)

EMEA/APAC revenue
Rental		116,209		484			116,693		120,472	(3.5	)	(3.1	)
Sales		130,855		797			131,652		127,018	3.0		3.6

Total EMEA/APAC revenue		247,064		1,281			248,345		247,490	(0.2	)	0.3

Total rental revenue		681,053		(1,410	)		679,643		686,746	(0.8	)	(1.0	)
Total sales revenue		358,018		(1,308	)		356,710		352,581	1.5		1.2

Total AHS Revenue	$	1,039,071	$	(2,718	)	$	1,036,353	$	1,039,327	-	%	(0.3	) %

Regenerative Medicine Revenue:
North America sales revenue	$	243,375	$	(25	)	$	243,350	$	208,132	16.9	%	16.9	%
EMEA/APAC sales revenue		4,318		120			4,438		913	372.9		386.1

Total Regenerative Medicine Revenue	$	247,693	$	95		$	247,788	$	209,045	18.5	%	18.5	%

TSS Revenue:
North America revenue
Rental	$	115,533	$	(2,178	)	$	113,355	$	125,828	(8.2	) %	(9.9	) %
Sales		19,218		(472	)		18,746		15,989	20.2		17.2

Total North America revenue		134,751		(2,650	)		132,101		141,817	(5.0	)	(6.9	)

EMEA/APAC revenue
Rental		55,459		1,727			57,186		60,381	(8.2	)	(5.3	)
Sales		13,311		124			13,435		15,257	(12.8	)	(11.9	)

Total EMEA/APAC revenue		68,770		1,851			70,621		75,638	(9.1	)	(6.6	)

Total rental revenue		170,992		(451	)		170,541		186,209	(8.2	)	(8.4	)
Total sales revenue		32,529		(348	)		32,181		31,246	4.1		3.0

Total TSS Revenue	$	203,521	$	(799	)	$	202,722	$	217,455	(6.4	) %	(6.8	) %


(1) Represents percentage change between 2010 Non-GAAP Constant Currency revenue and 2009 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 September 30,
							Interest
							Expense -
					Debt		Adoption of
			Amortization		Issuance		Required		Restructuring
	2010		of Acquired		Cost		Accounting		and Other		Adjusted		Adjusted		%
	GAAP		Intangibles		Amortization		Standards		Charges		2010		2009		Change

Operating earnings	$	120,152	$	8,855	$	-	$	-	$	-	$	129,007	$	124,395	3.7	%
Net earnings (1)	$	75,773	$	5,446	$	1,800	$	3,305	$	-	$	86,324	$	76,170	13.3	%
Diluted earnings per share	$	1.06	$	0.07	$	0.02	$	0.05	$	-	$	1.20	$	1.08	11.1	%


	Nine months ended September 30,
							Interest
							Expense -
					Debt		Adoption of
			Amortization		Issuance		Required		Restructuring
	2010		of Acquired		Cost		Accounting		and Other		Adjusted		Adjusted		%
	GAAP		Intangibles		Amortization		Standards		Charges		2010		2009		Change

Operating earnings	$	322,849	$	28,570	$	-	$	-	$	12,711	$	364,130	$	359,058	1.4	%
Net earnings (1)	$	182,091	$	17,571	$	6,241	$	9,728	$	7,818	$	223,449	$	203,490	9.8	%
Diluted earnings per share	$	2.54	$	0.24	$	0.09	$	0.14	$	0.11	$	3.12	$	2.89	8.0	%

	Three months ended September 30,
							Interest
							Expense -
					Debt		Adoption of
			Amortization		Issuance		Required		Restructuring
	2009		of Acquired		Cost		Accounting		and Other		Adjusted
	GAAP		Intangibles		Amortization		Standards		Charges		2009

Operating earnings	$	114,235	$	10,160	$	-	$	-	$	-	$	124,395
Net earnings (1)	$	64,569	$	6,248	$	2,293	$	3,060	$	-	$	76,170
Diluted earnings per share	$	0.91	$	0.09	$	0.03	$	0.05	$	-	$	1.08


	Nine months ended September 30,
							Interest
							Expense -
					Debt		Adoption of
			Amortization		Issuance		Required		Restructuring
	2009		of Acquired		Cost		Accounting		and Other		Adjusted
	GAAP		Intangibles		Amortization		Standards		Charges		2009

Operating earnings	$	319,226	$	30,476	$	-	$	-	$	9,356	$	359,058
Net earnings (1)	$	162,371	$	18,742	$	7,069	$	9,007	$	6,301	$	203,490
Diluted earnings per share	$	2.31	$	0.27	$	0.10	$	0.12	$	0.09	$	2.89


(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 “Restructuring and Other Charges” incurred during 2009, 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” incurred during 2009, the tax effect of these adjustments was calculated using a tax rate of 32.7% which represented the blended effective income tax rates for the relevant jurisdictions.

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)

¨	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))

Exhibit No.	Description
99.1	Press Release dated October 26, 2010, entitled "Kinetic Concepts Reports Financial Results For Third Quarter and First Nine Months of 2010."

	KINETIC CONCEPTS, INC. (REGISTRANT)

October 26, 2010	By:	/s/ Martin J. Landon
	Name:	Martin J. Landon
	Title:	Executive Vice President and Chief Financial Officer

Exhibit No.	Description
99.1	Press Release dated October 26, 2010, entitled "Kinetic Concepts Reports Financial Results For Third Quarter and First Nine Months of 2010."