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| 8-K - 8-K - Acelity L.P. Inc. | a20131q8-kpressrelease.htm |
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FOR MORE INFORMATION, CONTACT:
Treasury: Kent Tuholsky Office: 210-255-6547 Wireless: 210-412-3167 kent.tuholsky@kci1.com | |
CENTAUR GUERNSEY L.P. INC. REPORTS
FIRST QUARTER FINANCIAL RESULTS FOR 2013
First Quarter Highlights - Continued Progress Towards Strategic Goals
- Worldwide Centaur Guernsey L.P. Inc. (“Centaur”) revenue of $415.9 million, down 3.8% from the prior-year period as reported and 2.9% from the prior-year period on a constant currency basis after adjusting for the number of calendar days in the quarter compared to the prior-year period due to leap year
- Worldwide Kinetic Concepts, Inc. (“KCI”) revenue of $305.9 million, down 6.2% from the prior-year period as reported and 5.0% from the prior-year period on a constant currency basis after adjusting for the number of calendar days in the quarter compared to the prior-year period due to leap year
- Worldwide LifeCell Corporation (“LifeCell”) revenue of $110.0 million, up 3.4% from the prior-year period as reported and on a constant currency basis
- Total Adjusted EBITDA of $156.7 million
- Total liquidity of $636.7 million as of March 31, 2013
“We continue to make solid progress quarter to quarter towards our strategic goals for both businesses. In particular, growth in focus markets outside the U.S. and expansion product growth for KCI® was promising,” said Joseph F. Woody, President and Chief Executive Officer of KCI and Interim Chief Executive Officer of LifeCell™.
Results of Operations
Worldwide Centaur revenue for first quarter of 2013 was $415.9 million, down from the prior year comparable period by 3.8% as reported and 3.4% on a constant currency basis before adjusting for the number of calendar days in the quarter compared to the prior-year period due to leap year. There was one less calendar day during the first quarter of 2013 which had an unfavorable impact of approximately 0.5% on worldwide Centaur revenue during the first quarter of 2013 compared to the prior-year period. After adjusting for the calendar days variance, Centaur revenue on a constant currency basis was down 2.9% compared to the prior-year period. The decline in worldwide KCI revenue from the comparable prior-year period was attributable primarily to lower rental revenue and disposable sales volumes in established markets, partially offset by increased revenues from expansion products and focus markets outside the U.S. which were up over 20% and over 100%, respectively. The lower rental and disposable sales revenue in established markets resulted primarily from a combination of lower volumes and lower average pricing. Foreign currency exchange movements had a slightly unfavorable impact on worldwide KCI revenue during the first quarter of 2013 compared to the prior-year period. The growth in worldwide LifeCell revenue over the prior-year period was due primarily to increased demand for our products.
Gross profit for the first quarter of 2013 was $262.3 million. Gross profit increased during the first quarter of 2013 compared to the same period of the prior year due primarily to a decrease in depreciation related to the fixed asset step up associated with purchase accounting, an increase in LifeCell revenue, lower commission expense due to the decrease in rental revenue and a reduction in operational expenses due to cost control measures, partially offset by lower KCI revenue.
Operating earnings for the first quarter of 2013 were $35.5 million. Operating earnings increased during the first quarter of 2013 compared to the prior-year period due primarily to the increase in gross profit and a reduction in acquired intangible asset amortization, partially offset by an increase in merger and restructuring-related expenses and a write-off of $9.4 million of in-process research and development costs due to the discontinuation of certain projects.
Total adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) were $156.7 million for the first quarter of 2013. Adjusted EBITDA excludes the impact of merger, foreign currency gains or losses, business optimization expenses and other expenses specified in the reconciliation within this release.
Financial Position
Total cash at March 31, 2013 was $448.2 million, an increase of $65.1 million from year-end 2012. Operating cash flow less net capital expenditures for the first quarter of 2013 was $72.9 million compared to $79.6 million in the prior-year period due primarily to higher cash outlays for capital expenditures. Total long-term debt outstanding (excluding $11.5 million in letters of credit) at March 31, 2013 was $4.57 billion. As of March 31, 2013, total liquidity, including our undrawn revolving credit facility, was $636.7 million, consisting of cash and cash equivalents and amounts available under our revolving credit facility, net of undrawn letters of credit.
Discontinued Operations
On November 8, 2012, we completed the transaction whereby our Therapeutic Support Systems ("TSS") business was acquired by Getinge AB. As a result of the sale, the results of the operations of our TSS business are presented as discontinued operations in the condensed consolidated statements of operations for all periods presented. Discontinued operations amounts related to TSS exclude the impact of corporate overhead support expenses, incremental expenses related to our transition services agreement with Getinge and the service fee payable by Getinge under the agreement.
Company Structure
Centaur is a non-operating holding company whose business is comprised of the operations of its wholly-owned subsidiaries KCI and LifeCell. Centaur is controlled by investment funds advised by Apax Partners and controlled affiliates of Canada Pension Plan Investment Board and the Public Sector Pension Investment Board and certain other co-investors. Unless otherwise noted in this report, the terms “we,” “our” or “Company,” refer to Centaur and its subsidiaries, collectively.
Non-GAAP Financial Information
Within this document, we have presented 1) Adjusted EBITDA, as defined in the senior secured credit agreement and 2) supplemental revenue data to exclude the impact of foreign currency fluctuations and adjust for the difference in the number of calendar days in the quarter between 2013 and 2012 due to leap year on a non-GAAP basis.
These non-GAAP financial measures do not replace the presentation of our GAAP results. We have provided this supplemental non-GAAP information because it may provide meaningful information regarding our results on a basis that better facilitates an understanding of our results of operations which may not be otherwise apparent under GAAP. Management uses this non-GAAP financial information, along with GAAP information, for reviewing the operating results of its business segments and for analyzing potential future business trends. In addition, we believe some investors may use this information in a similar fashion. A reconciliation of certain GAAP selected financial information for the periods presented to the non-GAAP selected financial information provided is included herein.
CENTAUR GUERNSEY L.P. INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(dollars in thousands)
(unaudited)
Three months ended March 31, | ||||||||||
2013 | 2012 | % Change | ||||||||
Revenue: | ||||||||||
Rental | $ | 188,163 | $ | 207,692 | (9.4 | )% | ||||
Sales | 227,721 | 224,841 | 1.3 | |||||||
Total revenue | 415,884 | 432,533 | (3.8 | ) | ||||||
Rental expenses | 97,351 | 127,043 | (23.4 | ) | ||||||
Cost of sales | 56,231 | 66,124 | (15.0 | ) | ||||||
Gross profit | 262,302 | 239,366 | 9.6 | |||||||
Selling, general and administrative expenses | 161,442 | 149,275 | 8.2 | |||||||
Research and development expenses | 17,782 | 18,768 | (5.3 | ) | ||||||
Acquired intangible asset amortization | 47,546 | 68,730 | (30.8 | ) | ||||||
Operating earnings | 35,532 | 2,593 | nm | |||||||
Interest income and other | 158 | 430 | (63.3 | ) | ||||||
Interest expense | (108,088 | ) | (117,890 | ) | (8.3 | ) | ||||
Foreign currency gain (loss) | 4,575 | (11,270 | ) | nm | ||||||
Derivative instruments loss | (516 | ) | (6,312 | ) | (91.8 | ) | ||||
Loss from continuing operations before income tax benefit | (68,339 | ) | (132,449 | ) | (48.4 | ) | ||||
Income tax benefit | (24,968 | ) | (47,451 | ) | (47.4 | ) | ||||
Loss from continuing operations | (43,371 | ) | (84,998 | ) | (49.0 | ) | ||||
Loss from discontinued operations, net of tax | (1,416 | ) | (5,680 | ) | (75.1 | ) | ||||
Net loss | $ | (44,787 | ) | $ | (90,678 | ) | (50.6 | )% | ||
CENTAUR GUERNSEY L.P. INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
March 31, 2013 | December 31, 2012 | ||||||
Assets: | (unaudited) | ||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 448,234 | $ | 383,150 | |||
Accounts receivable, net | 337,490 | 355,718 | |||||
Inventories, net | 148,382 | 139,850 | |||||
Prepaid expenses and other | 31,838 | 39,511 | |||||
Total current assets | 965,944 | 918,229 | |||||
Net property, plant and equipment | 370,502 | 388,482 | |||||
Debt issuance costs, net | 92,018 | 96,476 | |||||
Deferred income taxes | 19,307 | 20,003 | |||||
Goodwill | 3,479,775 | 3,479,775 | |||||
Identifiable intangible assets, net | 2,609,759 | 2,666,201 | |||||
Other non-current assets | 5,227 | 5,598 | |||||
$ | 7,542,532 | $ | 7,574,764 | ||||
Liabilities and Equity: | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 46,109 | $ | 40,970 | |||
Accrued expenses and other | 343,170 | 284,163 | |||||
Current installments of long-term debt | 23,284 | 23,383 | |||||
Income taxes payable | 4,493 | — | |||||
Deferred income taxes | 43,911 | 57,528 | |||||
Total current liabilities | 460,967 | 406,044 | |||||
Long-term debt, net of current installments and discount | 4,542,472 | 4,554,112 | |||||
Non-current tax liabilities | 45,003 | 44,465 | |||||
Deferred income taxes | 1,037,992 | 1,069,480 | |||||
Other non-current liabilities | 43,635 | 43,267 | |||||
Total liabilities | 6,130,069 | 6,117,368 | |||||
Equity: | |||||||
General partner's capital | — | — | |||||
Limited partners’ capital | 1,413,654 | 1,457,913 | |||||
Accumulated other comprehensive loss, net | (1,191 | ) | (517 | ) | |||
Total equity | 1,412,463 | 1,457,396 | |||||
$ | 7,542,532 | $ | 7,574,764 | ||||
CENTAUR GUERNSEY L.P. INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) | |||||||
Three months ended March 31, | |||||||
2013 | 2012 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (44,787 | ) | $ | (90,678 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Amortization of debt discount | 3,757 | 3,589 | |||||
Depreciation and other amortization | 91,431 | 141,831 | |||||
Loss on disposition of assets | 2,300 | — | |||||
Amortization of fair value step-up in inventory | — | 10,864 | |||||
Fixed asset impairment | — | 12,443 | |||||
Write-off of in-process research and development costs | 9,400 | — | |||||
Provision for bad debt | 1,920 | 2,183 | |||||
Equity-based compensation expense | 533 | 497 | |||||
Deferred income tax benefit | (43,411 | ) | (60,855 | ) | |||
Unrealized loss (gain) on derivative instruments | (1,013 | ) | 5,185 | ||||
Unrealized loss (gain) on revaluation of cross currency debt | (9,851 | ) | 9,900 | ||||
Change in assets and liabilities: | |||||||
Decrease in accounts receivable, net | 16,954 | 17,410 | |||||
Decrease (increase) in inventories, net | (9,343 | ) | 1,980 | ||||
Decrease in prepaid expenses and other | 10,485 | 8,008 | |||||
Increase (decrease) in accounts payable | 5,176 | (7,817 | ) | ||||
Increase in accrued expenses and other | 58,681 | 43,814 | |||||
Increase in tax liabilities, net | 5,034 | 512 | |||||
Decrease in deferred income taxes, net | (1,687 | ) | (773 | ) | |||
Net cash provided by operating activities | 95,579 | 98,093 | |||||
Cash flows from investing activities: | |||||||
Additions to property, plant and equipment | (16,043 | ) | (15,890 | ) | |||
Increase in inventory to be converted into equipment for short-term rental | (6,590 | ) | (2,563 | ) | |||
Dispositions of property, plant and equipment | 142 | 763 | |||||
Increase in identifiable intangible assets and other non-current assets | (281 | ) | (1,345 | ) | |||
Net cash used by investing activities | (22,772 | ) | (19,035 | ) | |||
Cash flows from financing activities: | |||||||
Capital contributions from limited partners | — | 239 | |||||
Repayments of long-term debt and capital lease obligations | (5,691 | ) | (5,926 | ) | |||
Payment of debt issuance costs | (190 | ) | — | ||||
Net cash used by financing activities | (5,881 | ) | (5,687 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | (1,842 | ) | 653 | ||||
Net increase in cash and cash equivalents | 65,084 | 74,024 | |||||
Cash and cash equivalents, beginning of period | 383,150 | 215,426 | |||||
Cash and cash equivalents, end of period | $ | 448,234 | $ | 289,450 | |||
CENTAUR GUERNSEY L.P. INC. AND SUBSIDIARIES
Reconciliation from GAAP to Non-GAAP
Supplemental Revenue Data
(dollars in thousands)
(unaudited)
Three months ended March 31, | GAAP % Change | Constant Currency % Change (1) | |||||||||||||||||||
2013 | 2012 GAAP | ||||||||||||||||||||
GAAP | FX Impact | Constant Currency | |||||||||||||||||||
KCI revenue: | |||||||||||||||||||||
Rental | $ | 185,923 | $ | 924 | $ | 186,847 | $ | 206,430 | (9.9 | )% | (9.5 | )% | |||||||||
Sales | 119,959 | 892 | 120,851 | 119,758 | 0.2 | 0.9 | |||||||||||||||
Total KCI Revenue | 305,882 | 1,816 | 307,698 | 326,188 | (6.2 | ) | (5.7 | ) | |||||||||||||
LifeCell revenue: | |||||||||||||||||||||
Rental | 2,240 | — | 2,240 | 1,262 | 77.5 | 77.5 | |||||||||||||||
Sales | 107,762 | (33 | ) | 107,729 | 105,083 | 2.5 | 2.5 | ||||||||||||||
Total LifeCell Revenue | 110,002 | (33 | ) | 109,969 | 106,345 | 3.4 | 3.4 | ||||||||||||||
Total Revenue: | |||||||||||||||||||||
Rental | 188,163 | 924 | 189,087 | 207,692 | (9.4 | ) | (9.0 | ) | |||||||||||||
Sales | 227,721 | 859 | 228,580 | 224,841 | 1.3 | 1.7 | |||||||||||||||
Total Consolidated Revenue | $ | 415,884 | $ | 1,783 | $ | 417,667 | $ | 432,533 | (3.8 | )% | (3.4 | )% | |||||||||
Three months ended March 31, | Adjusted Constant Currency % Change (2) | |||||||||||||||||
2012 | 2013 Constant Currency | |||||||||||||||||
GAAP | Calendar Day Adjustment | Adjusted for Calendar Day | ||||||||||||||||
KCI revenue: | ||||||||||||||||||
Rental | $ | 206,430 | $ | (2,281 | ) | $ | 204,149 | $ | 186,847 | (8.5 | )% | |||||||
Sales | 119,758 | — | 119,758 | 120,851 | 0.9 | |||||||||||||
Total KCI Revenue | 326,188 | (2,281 | ) | 323,907 | 307,698 | (5.0 | ) | |||||||||||
LifeCell revenue: | ||||||||||||||||||
Rental | 1,262 | — | 1,262 | 2,240 | 77.5 | |||||||||||||
Sales | 105,083 | — | 105,083 | 107,729 | 2.5 | |||||||||||||
Total LifeCell Revenue | 106,345 | — | 106,345 | 109,969 | 3.4 | |||||||||||||
Total Revenue: | ||||||||||||||||||
Rental | 207,692 | (2,281 | ) | 205,411 | 189,087 | (7.9 | ) | |||||||||||
Sales | 224,841 | — | 224,841 | 228,580 | 1.7 | |||||||||||||
Total Consolidated Revenue | $ | 432,533 | $ | (2,281 | ) | $ | 430,252 | $ | 417,667 | (2.9 | )% | |||||||
(1) Represents percentage change between 2013 non-GAAP Constant Currency revenue and 2012 GAAP revenue.
(2) Represents percentage change between 2013 non-GAAP Constant Currency revenue and 2012 non-GAAP revenue adjusted to remove the impact of the one extra calendar day in the 2012 period due to the leap year.
CENTAUR GUERNSEY L.P. INC. AND SUBSIDIARIES
Reconciliation from GAAP to Non-GAAP
Selected Financial Information
(dollars in thousands)
(unaudited)
Three months ended Three months ended March 31, | |||||||
2013 | 2012 | ||||||
Net loss | $ | (44,787 | ) | $ | (90,678 | ) | |
Interest expense, net of interest income | 107,932 | 117,720 | |||||
Income tax benefit | (25,855 | ) | (51,007 | ) | |||
Foreign currency (gain) loss | (4,575 | ) | 11,270 | ||||
Depreciation and other amortization | 86,782 | 137,155 | |||||
Derivative instruments loss | 516 | 6,312 | |||||
Loss on disposition of assets | 2,300 | — | |||||
Equity-based compensation expense | 533 | 497 | |||||
Provision for bad debt | 1,920 | 2,183 | |||||
Merger-related expenses(1) | 1,402 | 1,634 | |||||
Amortization of fair value step-up in inventory | — | 10,864 | |||||
Fixed asset impairment | — | 12,443 | |||||
Write-off of in-process research and development costs | 9,400 | — | |||||
Business optimization expense(2) | 21,168 | 9,119 | |||||
Adjusted EBITDA | 156,736 | 167,512 | |||||
Adjusted EBITDA from discontinued operations (3) | 3 | (4,396 | ) | ||||
Adjusted EBITDA from continuing operations | $ | 156,739 | $ | 163,116 | |||
(1) Represents management fees and other expenses incurred related to KCI’s merger, which was completed on November 4, 2011.
(2) Represents labor, travel, training, consulting and other costs associated exclusively with our business optimization initiatives,
including the disposition of our TSS business.
(3) Adjusted EBITDA from discontinued operations includes the loss from discontinued operations, excluding any related loss on
disposition of assets, adjusted as defined in our senior secured credit agreement.