KINETIC CONCEPTS INC - FORM 8-K - EX-99.01 - 4TH QTR 2010 EARNINGS RELEASE

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8-K - 8-K - KINETIC CONCEPTS INC	r4qtr20108k020111.htm

Exhibit 99.1

FOR MORE INFORMATION, CONTACT:

Investors:

Todd Wyatt

Office: 210-255-6157

Wireless: 210-347-3540

todd.wyatt@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 2010

Fourth Quarter Highlights

- Worldwide revenue of $527.5 million, up from $526.8 million in the prior-year period, as reported, and up 1% on a constant currency basis

- Worldwide Active Healing SolutionsTM (“AHS”) revenue of $367.1 million, comparable to $367.2 million in the prior-year period, as reported, and up 1% on a constant currency basis

- Worldwide Regenerative Medicine revenue of $93.7 million, up 22% from the prior-year period on both a reported and constant currency basis

- Worldwide Therapeutic Support Systems (“TSS”) revenue of $66.6 million, down 19% from the prior-year period and down 17% on a constant currency basis

- Diluted net earnings per share of $1.03, up 11% from the prior-year period

San Antonio, Texas, February 1, 2011 – Kinetic Concepts, Inc. (NYSE: KCI) today reported fourth quarter and full year 2010 total revenue of $527.5 million and $2.02 billion, respectively, compared to $526.8 million and $1.99 billion in the corresponding periods of the prior year. Foreign currency exchange movements unfavorably impacted total revenue for the fourth quarter of 2010 by 1% while having no significant impact on revenue for the full year of 2010 compared to the corresponding periods of the prior year.

Net earnings for the fourth quarter of 2010 were $74.0 million, or $1.03 per diluted share, compared to $66.3 million, or $0.93 per diluted share, for the fourth quarter of 2009, representing increases of 12% and 11%, respectively, from the prior-year period. For the full year of 2010, net earnings were $256.1 million, or $3.57 per diluted share, compared to $228.7 million, or $3.24 per diluted share for 2009, representing increases of 12% and 10%, respectively, from the prior year. Net earnings per diluted share on a comparable, non-GAAP basis were $1.17 and $4.29 for the fourth quarter and full year of 2010, respectively, up 6% and 8% from the same corresponding periods of the prior year.

“We were very pleased with our fourth quarter results, particularly the outstanding performance of our LifeCell division and the stability of the U.S. AHS business,” said Catherine M. Burzik, President and Chief Executive Officer of KCI. “KCI continues to execute to its strategy. With the introduction of several new products and therapies, for example our new VAC Via Therapy, our geographic expansion and our demonstrated operating discipline, KCI is well positioned to deliver unparalleled value to its patients, caregivers, payers, and investors.”

Revenue Recap – Fourth Quarter and Full Year of 2010

Worldwide revenue from AHS products was $367.1 million for the fourth quarter of 2010 and $1.41 billion for the full year of 2010, which was essentially flat compared to the same corresponding periods of 2009. Compared to the prior-year periods, foreign currency exchange movements unfavorably impacted worldwide AHS revenue by 1% in the fourth quarter of 2010 while having no significant impact on worldwide AHS revenue for the full year of 2010. On a non-GAAP, constant currency basis, the growth in fourth quarter 2010 AHS revenue was attributable primarily to increased sales volumes.

North American AHS revenue of $279.4 million for the fourth quarter increased 2% from the prior-year quarter due primarily to improved rental and sales volumes. For the full year of 2010, North American AHS revenue was $1.07 billion, which was comparable to the prior year. Fourth quarter AHS revenue in the U.S. increased 1% over the prior-year quarter due largely to rental and sales volume growth.

EMEA/APAC AHS revenue decreased 6% to $87.7 million for the fourth quarter of 2010 and decreased 2% to $334.8 million for the full year of 2010, respectively, compared to the same corresponding periods of 2009. On a constant currency basis, EMEA/APAC AHS revenue decreased by 2% compared to the fourth quarter of the prior year while being comparable to the full year of 2009. The fourth quarter revenue decrease was due primarily to lower pricing and sales volumes in price sensitive and highly-competitive markets driven largely by governmental austerity measures in response to a challenging economic environment. The lower AHS revenue in EMEA was partially offset by volume growth related to new products and new geographies, particularly in Japan.

Total revenue from our LifeCell division was $93.7 million for the fourth quarter of 2010 and $341.4 million for the full year of 2010. Regenerative Medicine revenue increased 22% and 19% for the fourth quarter and full year of 2010, respectively, as compared to the same periods one year ago. Direct sales of Strattice™, our porcine-based reconstructive tissue matrix, generated $40.0 million of revenue in the quarter, or 43% of total Regenerative Medicine revenue for the period. Direct sales of Strattice in the fourth quarter of 2010 increased $12.9 million, or 48%, from the same period one year ago. The EMEA region contributed approximately 180 and 170 basis points of the Regenerative Medicine overall revenue growth rate for the fourth quarter and full year of 2010, respectively, as we continued to penetrate the European markets. We have now introduced our Regenerative Medicine products into eleven European countries.

Worldwide TSS revenue was $66.6 million for the fourth quarter and $270.2 million for the full year of 2010 compared to $82.7 million and $300.2 million, respectively, for the same corresponding periods of the prior year. North American revenue from TSS was $43.2 million for the fourth quarter of 2010, a 21% decrease from the prior-year period, due primarily to decreased demand in our critical care business stemming from a much less severe flu season than in 2009. North American TSS revenue for the full year of 2010 was $178.0 million, down 9% from the prior year revenue of $196.4 million. EMEA/APAC TSS revenue of $23.4 million and $92.2 million for the fourth quarter and full year of 2010, decreased 17% and 11%, respectively, compared to the corresponding periods of 2009. Excluding foreign currency exchange rate movements, EMEA/APAC TSS revenue decreased 10% and 8%, respectively, for the fourth quarter and the full year of 2010 compared to the same periods in the prior year due primarily to decreased rental volume and average rental pricing.

Profit Margins Stable

Gross profit for the fourth quarter and the full year of 2010 was $301.3 million and $1.14 billion, respectively, compared to $304.9 million and $1.11 billion, respectively, in the corresponding periods of the prior year. Gross profit margin was approximately 57% for the fourth quarter of 2010, down slightly from 58% in the prior-year period due primarily to additional investment in our AHS sales force during the second half of 2010, higher royalty expense, and lower TSS critical care rentals, partially offset by favorable margins in our Regenerative Medicine business.

Research and development expenses for the fourth quarter of 2010 decreased 5% from the prior-year period to $22.9 million. The majority of this decrease was due to the commercialization of new products in the second half of 2010 which were previously under development. Total research and development expenses represented approximately 4.5% of revenue for the full year of 2010.

Selling, general and administrative (“SG&A”) expenses for the fourth quarter were $146.1 million, a decrease of approximately 1% from the fourth quarter of the prior year. The lower SG&A spend was due to lower spending in shared services functions partially offset by continuing investment in the LifeCell sales force and our Japanese infrastructure.

Other Income/Expense Reflects Continued Deleveraging

Fourth quarter 2010 interest expense was $19.7 million compared to $24.5 million in the same period of the prior year due to a combination of scheduled and voluntary debt payments made over the last twelve months and lower interest rates. Long-term debt outstanding as of December 31, 2010 consisted of a senior secured term loan of $527.3 million due 2013 and 3.25% senior convertible notes of $690.0 million due 2015.

Foreign currency transaction losses were $1.4 million in the fourth quarter of 2010 compared to $108,000 in the prior-year period due primarily to continued volatility in currency exchange rates.

Income Tax Rate

The effective income tax rate for both the fourth quarter and full year of 2010 was 28.0% compared to 32.9% and 31.6%, respectively, for the corresponding periods of the prior year. The decrease in the effective income tax rate for the fourth quarter and full year 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 fourth quarter tax rate also benefited from the extension of the U.S. research and development credit.

Financial Position Provides Flexibility and Strength

Total cash at year-end was $316.6 million, an increase of $53.4 million from year-end 2009. During the fourth quarter and year ended December 31, 2010, the Company made scheduled and voluntary senior credit facility repayments totaling $37.7 million and $222.7 million, respectively, from cash-on-hand. Operating cash flow less net capital expenditures for the full year of 2010 was $275.4 million. Total long-term debt outstanding at December 31, 2010 was $1.11 billion on a GAAP-basis, including the discount associated with our adoption of required accounting standards, and $1.22 billion on an economic, or debt-instrument, basis.

Subsequent Event

Our liquidity and financial flexibility were enhanced in January 2011 when we entered into a new credit agreement which was used to refinance our existing senior credit facility and will also be used for strategic and general corporate purposes. The new credit agreement provides for (i) a $550.0 million term A facility that matures in January 2016, and (ii) a $650.0 million revolving credit facility that matures in January 2016, which represents a $350.0 million increase from our previous revolving credit facility. The Company also has the right at any time to increase its borrowings under the new credit agreement by an aggregate additional amount up to $500.0 million.

2011 Outlook

The following guidance is based on current information and expectations as of February 1, 2011 (in millions, except per share data):

			% Change
	FY 2010	FY 2011	from 2010
Total revenue	$2,018	$2,050 - $2,090	2% - 4%

Diluted EPS – GAAP basis	$3.57	$3.82 - $3.96	7% - 11%
Acquisition-related adjustments:
Amortization-related adjustments	0.43	0.36
Non-cash interest – accounting
for convertible debt	0.18	0.20
Restructuring and other charges (1)	0.11	0.07 – 0.09

Adjusted Diluted EPS – non-GAAP basis	$4.29	$4.45 - $4.61	4% - 7%

Diluted weighted average shares outstanding	71.7	72.0 – 72.7	0% - 1%

(1) 2011 guidance includes $0.03 per diluted share related to our January 2011 debt refinancing.

The revenue guidance reflects our expectation of (i) flat to low-single digit growth in AHS resulting from emerging market penetration and new product introductions, partially offset by lower realized pricing and competitive share loss, (ii) mid-to-upper teens growth in Regenerative Medicine revenue and (iii) low-to-mid single digit contraction in TSS revenue. Our 2011 outlook also assumes foreign currency exchange rates are comparable to 2010 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. Historically, approximately 23% to 24% of our total annual revenue is realized during the first three months of the year.

The 2011 earnings guidance does not consider any potential impact to our royalty obligations resulting from ongoing patent litigation. KCI and its affiliates, together with Wake Forest University Health Sciences (“Wake Forest”) are involved in multiple patent infringement suits against companies including Smith & Nephew, all of whom are challenging the validity of the Wake Forest patents. In October 2010, the Federal District Court for the Western District of Texas entered an order in the Smith & Nephew case invalidating the patent claims involved in the lawsuit. In light of the ruling, KCI believes that continued payment of the royalties scheduled under the Wake Forest license is inappropriate and the Company is pursuing various alternatives.

While we expect 2011 to be an investment year in terms of expanding our presence in 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 financial leverage. In addition, during the first half of 2011, 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, 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 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 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, February 1, 2011. 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:	37886174

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 – Q4 and Year End 2010 Kinetic Concepts, Inc. Earnings Conference Call. An archive of the web cast will be available until January 31, 2012 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 6,900 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 V.A.C. Therapy resulting from increased competition, the seasonal slowing of V.A.C. 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 February 1, 2011. 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, June 30, 2010 and September 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 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, 2010, which is expected to be filed with the SEC in late February 2011.

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


	Three months ended December 31,								Year ended December 31,
							%								%
	2010			2009			Change		2010			2009			Change
	(unaudited)			(unaudited)					(unaudited)
Revenue:
Rental	$	288,523		$	305,183		(5.5	)%	$	1,140,568		$	1,178,138		(3.2	)%
Sales		238,944			221,634		7.8			877,184			814,506		7.7

Total revenue		527,467			526,817		0.1			2,017,752			1,992,644		1.3

Rental expenses		160,671			154,883		3.7			625,277			640,346		(2.4	)
Cost of sales		65,471			67,039		(2.3	)		250,253			244,784		2.2

Gross profit		301,325			304,895		(1.2	)		1,142,222			1,107,514		3.1

Selling, general and administrative expenses		146,063			147,462		(0.9	)		568,166			532,308		6.7
Research and development expenses		22,880			24,017		(4.7	)		90,255			92,088		(2.0	)
Acquired intangible asset amortization		8,856			10,158		(12.8	)		37,426			40,634		(7.9	)

Operating earnings		123,526			123,258		0.2			446,375			442,484		0.9

Interest income and other		307			173		77.5			851			819		3.9
Interest expense		(19,693	)		(24,469	)	(19.5	)		(87,053	)		(104,918	)	(17.0	)
Foreign currency loss		(1,381	)		(108	)	-			(4,500	)		(4,004	)	12.4

Earnings before income taxes		102,759			98,854		4.0			355,673			334,381		6.4

Income taxes		28,766			32,523		(11.6	)		99,589			105,679		(5.8	)

Net earnings	$	73,993		$	66,331		11.6	%	$	256,084		$	228,702		12.0	%

Net earnings per share:
Basic	$	1.04		$	0.94		10.6	%	$	3.61		$	3.26		10.7	%

Diluted	$	1.03		$	0.93		10.8	%	$	3.57		$	3.24		10.2	%

Weighted average shares outstanding:
Basic		71,120			70,334					70,869			70,110

Diluted		72,043			70,974					71,748			70,542

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


	December 31,		December 31,
	2010		2009
	(unaudited)

Assets:
Current assets:
Cash and cash equivalents	$	316,603	$	263,157
Accounts receivable, net		414,083		425,042
Inventories, net		172,552		121,044
Deferred income taxes		30,112		11,715
Prepaid expenses and other		34,199		37,330

Total current assets		967,549		858,288

Net property, plant and equipment		271,063		296,055
Debt issuance costs, net		22,622		35,191
Deferred income taxes		17,151		17,513
Goodwill		1,328,881		1,328,881
Identifiable intangible assets, net		453,802		489,213
Other non-current assets		14,931		13,424

	$	3,075,999	$	3,038,565

Liabilities and Shareholders' Equity:
Current liabilities:
Accounts payable	$	60,137	$	63,301
Accrued expenses and other		225,524		226,823
Current installments of long-term debt		169,500		132,353
Income taxes payable		-		18,484

Total current liabilities		455,161		440,961

Long-term debt, net of current installments and discount		935,290		1,173,808
Non-current tax liabilities		35,588		29,074
Deferred income taxes		163,386		212,257
Other non-current liabilities		3,495		4,994

Total liabilities		1,592,920		1,861,094

Shareholders' equity:
Common stock; authorized 225,000 at 2010 and 2009,
issued and outstanding 71,996 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		852,152		804,111
Retained earnings		613,434		357,350
Accumulated other comprehensive income, net		17,421		15,939

Shareholders' equity		1,483,079		1,177,471

	$	3,075,999	$	3,038,565

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


	Year ended December 31,
	2010			2009
	(unaudited)
Cash flows from operating activities:
Net earnings	$	256,084		$	228,702
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Amortization of convertible debt discount		21,296			19,718
Depreciation and other amortization		156,465			155,860
Provision for bad debt		10,602			10,166
Write-off of deferred debt issuance costs		2,301			3,035
Share-based compensation expense		32,781			32,506
Excess tax benefit from share-based payment arrangements		(1,505	)		(1,214	)
Change in assets and liabilities:
Decrease (increase) in accounts receivable, net		2,717			(29,271	)
Increase in inventories, net		(51,266	)		(11,953	)
Decrease (increase) in prepaid expenses and other		3,133			(1,560	)
Increase (decrease) in accounts payable		(3,005	)		9,530
Increase (decrease) in accrued expenses and other		6,107			(28,291	)
Increase (decrease) in tax liabilities, net		(13,731	)		16,649
Decrease in deferred income taxes, net		(69,258	)		(16,356	)

Net cash provided by operating activities		352,721			387,521

Cash flows from investing activities:
Additions to property, plant and equipment		(85,883	)		(103,289	)
Decrease in inventory to be converted into equipment
for short-term rental		8,531			8,462
Dispositions of property, plant and equipment		2,100			4,976
Business acquired in purchase transaction, net of cash acquired		-			(173	)
Increase in identifiable intangible assets and other non-current assets		(18,680	)		(62,894	)

Net cash used by investing activities		(93,932	)		(152,918	)

Cash flows from financing activities:
Proceeds from revolving credit facility		-			105,000
Repayments of long-term debt, revolving credit facility and
capital lease obligations		(222,727	)		(334,000	)
Excess tax benefit from share-based payment arrangements		1,505			1,214
Proceeds from exercise of stock options		12,221			1,850
Purchase of immature shares for minimum tax withholdings		(1,741	)		(1,419	)
Proceeds from the purchase of stock in ESPP and other		6,540			5,938

Net cash used by financing activities		(204,202	)		(221,417	)

Effect of exchange rate changes on cash and cash equivalents		(1,141	)		2,204

Net increase in cash and cash equivalents		53,446			15,390
Cash and cash equivalents, beginning of year		263,157			247,767

Cash and cash equivalents, end of year	$	316,603		$	263,157

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


	Three months ended December 31,
	2010									GAAP		Constant
						Constant		2009		%		Currency %
	GAAP		FX Impact			Currency		GAAP		Change		Change (1)

Total Revenue:
AHS
North America	$	279,401	$	(457	)	$	278,944	$	274,287	1.9	%	1.7	%
EMEA/APAC		87,721		3,629			91,350		92,961	(5.6	)	(1.7	)

Total AHS		367,122		3,172			370,294		367,248	-		0.8

Regenerative Medicine
North America		91,425		(19	)		91,406		75,943	20.4		20.4
EMEA/APAC		2,287		31			2,318		910	151.3		154.7

Total Regenerative Medicine		93,712		12			93,724		76,853	21.9		22.0

TSS
North America		43,199		(304	)		42,895		54,537	(20.8	)	(21.3	)
EMEA/APAC		23,434		1,925			25,359		28,179	(16.8	)	(10.0	)

Total TSS		66,633		1,621			68,254		82,716	(19.4	)	(17.5	)

Total North America revenue		414,025		(780	)		413,245		404,767	2.3		2.1
Total EMEA/APAC revenue		113,442		5,585			119,027		122,050	(7.1	)	(2.5	)

Total Revenue	$	527,467	$	4,805		$	532,272	$	526,817	0.1	%	1.0	%

AHS:
North America revenue
Rental	$	194,112	$	(221	)	$	193,891	$	191,471	1.4	%	1.3	%
Sales		85,289		(236	)		85,053		82,816	3.0		2.7

Total North America revenue		279,401		(457	)		278,944		274,287	1.9		1.7

EMEA/APAC revenue
Rental		39,826		1,760			41,586		44,478	(10.5	)	(6.5	)
Sales		47,895		1,869			49,764		48,483	(1.2	)	2.6

Total EMEA/APAC revenue		87,721		3,629			91,350		92,961	(5.6	)	(1.7	)

Total rental revenue		233,938		1,539			235,477		235,949	(0.9	)	(0.2	)
Total sales revenue		133,184		1,633			134,817		131,299	1.4		2.7

Total AHS Revenue	$	367,122	$	3,172		$	370,294	$	367,248	-	%	0.8	%

Regenerative Medicine Revenue:
North America rental revenue	$	211	$	-		$	211	$	-	-	%	-	%
North America sales revenue		91,214		(19	)		91,195		75,943	20.1	%	20.1	%
EMEA/APAC sales revenue		2,287		31			2,318		910	151.3		154.7

Total Regenerative Medicine Revenue	$	93,712	$	12		$	93,724	$	76,853	21.9	%	22.0	%

TSS Revenue:
North America revenue
Rental	$	35,717	$	(236	)	$	35,481	$	47,065	(24.1	) %	(24.6	) %
Sales		7,482		(68	)		7,414		7,472	0.1		(0.8	)

Total North America revenue		43,199		(304	)		42,895		54,537	(20.8	)	(21.3	)

EMEA/APAC revenue
Rental		18,657		1,603			20,260		22,169	(15.8	)	(8.6	)
Sales		4,777		322			5,099		6,010	(20.5	)	(15.2	)

Total EMEA/APAC revenue		23,434		1,925			25,359		28,179	(16.8	)	(10.0	)

Total rental revenue		54,374		1,367			55,741		69,234	(21.5	)	(19.5	)
Total sales revenue		12,259		254			12,513		13,482	(9.1	)	(7.2	)

Total TSS Revenue	$	66,633	$	1,621		$	68,254	$	82,716	(19.4	) %	(17.5	) %


(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)


	Year ended December 31,
	2010									GAAP		Constant
						Constant		2009		%		Currency %
	GAAP		FX Impact			Currency		GAAP		Change		Change (1)

Total Revenue:
AHS
North America	$	1,071,408	$	(4,456	)	$	1,066,952	$	1,066,124	0.5	%	0.1	%
EMEA/APAC		334,785		4,910			339,695		340,451	(1.7	)	(0.2	)

Total AHS		1,406,193		454			1,406,647		1,406,575	-		-

Regenerative Medicine
North America		334,800		(44	)		334,756		284,075	17.9		17.8
EMEA/APAC		6,605		151			6,756		1,823	262.3		270.6

Total Regenerative Medicine		341,405		107			341,512		285,898	19.4		19.5

TSS
North America		177,950		(2,954	)		174,996		196,354	(9.4	)	(10.9	)
EMEA/APAC		92,204		3,776			95,980		103,817	(11.2	)	(7.5	)

Total TSS		270,154		822			270,976		300,171	(10.0	)	(9.7	)

Total North America revenue		1,584,158		(7,454	)		1,576,704		1,546,553	2.4		1.9
Total EMEA/APAC revenue		433,594		8,837			442,431		446,091	(2.8	)	(0.8	)

Total Revenue	$	2,017,752	$	1,383		$	2,019,135	$	1,992,644	1.3	%	1.3	%

AHS:
North America revenue
Rental	$	758,956	$	(2,115	)	$	756,841	$	757,745	0.2	%	(0.1	) %
Sales		312,452		(2,341	)		310,111		308,379	1.3		0.6

Total North America revenue		1,071,408		(4,456	)		1,066,952		1,066,124	0.5		0.1

EMEA/APAC revenue
Rental		156,035		2,244			158,279		164,950	(5.4	)	(4.0	)
Sales		178,750		2,666			181,416		175,501	1.9		3.4

Total EMEA/APAC revenue		334,785		4,910			339,695		340,451	(1.7	)	(0.2	)

Total rental revenue		914,991		129			915,120		922,695	(0.8	)	(0.8	)
Total sales revenue		491,202		325			491,527		483,880	1.5		1.6

Total AHS Revenue	$	1,406,193	$	454		$	1,406,647	$	1,406,575	-	%	-	%

Regenerative Medicine Revenue:
North America rental revenue	$	211	$	-		$	211	$	-	-	%	-	%
North America sales revenue		334,589		(44	)		334,545		284,075	17.8		17.8
EMEA/APAC sales revenue		6,605		151			6,756		1,823	262.3		270.6

Total Regenerative Medicine Revenue	$	341,405	$	107		$	341,512	$	285,898	19.4	%	19.5	%

TSS Revenue:
North America revenue
Rental	$	151,250	$	(2,414	)	$	148,836	$	172,893	(12.5	) %	(13.9	) %
Sales		26,700		(540	)		26,160		23,461	13.8		11.5

Total North America revenue		177,950		(2,954	)		174,996		196,354	(9.4	)	(10.9	)

EMEA/APAC revenue
Rental		74,116		3,330			77,446		82,550	(10.2	)	(6.2	)
Sales		18,088		446			18,534		21,267	(14.9	)	(12.9	)

Total EMEA/APAC revenue		92,204		3,776			95,980		103,817	(11.2	)	(7.5	)

Total rental revenue		225,366		916			226,282		255,443	(11.8	)	(11.4	)
Total sales revenue		44,788		(94	)		44,694		44,728	0.1		(0.1	)

Total TSS Revenue	$	270,154	$	822		$	270,976	$	300,171	(10.0	) %	(9.7	) %


(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 December 31,
							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	$	123,526	$	8,856	$	-	$	-	$	-	$	132,382	$	133,416	(0.8	) %
Net earnings (1)	$	73,993	$	5,446	$	1,488	$	3,369	$	-	$	84,296	$	77,918	8.2	%
Diluted earnings per share	$	1.03	$	0.08	$	0.02	$	0.04	$	-	$	1.17	$	1.10	6.4	%


	Year ended December 31,
							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	$	446,375	$	37,426	$	-	$	-	$	12,711	$	496,512	$	492,474	0.8	%
Net earnings (1)	$	256,084	$	23,017	$	7,729	$	13,097	$	7,818	$	307,745	$	281,408	9.4	%
Diluted earnings per share	$	3.57	$	0.32	$	0.11	$	0.18	$	0.11	$	4.29	$	3.99	7.5	%

	Three months ended December 31,
							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	$	123,258	$	10,158	$	-	$	-	$	-	$	133,416
Net earnings (1)	$	66,331	$	6,248	$	2,220	$	3,119	$	-	$	77,918
Diluted earnings per share	$	0.93	$	0.09	$	0.03	$	0.05	$	-	$	1.10


	Year ended December 31,
							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	$	442,484	$	40,634	$	-	$	-	$	9,356	$	492,474
Net earnings (1)	$	228,702	$	24,990	$	9,289	$	12,126	$	6,301	$	281,408
Diluted earnings per share	$	3.24	$	0.36	$	0.13	$	0.17	$	0.09	$	3.99


(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.

Attached files

KINETIC CONCEPTS INC Reports

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