Attached files
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| 8-K - FORM 8-K - Acelity L.P. Inc. | a20133q8-kearningsrelease.htm |
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FOR MORE INFORMATION, CONTACT:
Investors | News Media |
Nathan Speicher | Mike Barger |
Office: (210) 255-6027 | Office: (210) 255-6824 |
nathan.speicher@kci1.com | mike.barger@kci1.com |
CENTAUR GUERNSEY L.P. INC. REPORTS
THIRD QUARTER AND NINE MONTHS FINANCIAL RESULTS FOR 2013
- Third quarter 2013 worldwide Centaur Guernsey L.P. Inc. (“Centaur”) revenue of $440.6 million, up 1.1% from the prior-year period as reported and 1.5% from the prior-year period on a constant currency basis
- Third quarter 2013 worldwide Kinetic Concepts, Inc. (“KCI”) revenue of $320.9 million, down 2.7% from the prior-year period as reported and 2.0% from the prior-year period on a constant currency basis
- Third quarter 2013 worldwide LifeCell Corporation (“LifeCell”) revenue of $119.7 million, up 12.7% from the prior-year period as reported and 12.6% from the prior-year period on a constant currency basis
- Third quarter 2013 net loss of $398.6 million compared to a net loss of $35.8 million for the prior-year period
- Third quarter 2013 total Adjusted EBITDA from continuing operations1 of $191.5 million compared to $202.3 million for the prior-year period
- KCI closed on the previously-announced acquisition of SystagenixTM
Highlights of the third quarter and nine months ended September 30, 2013
Worldwide Centaur revenue for the third quarter of 2013 was $440.6 million, up from the prior-year comparable period by 1.1% as reported and 1.5% on a constant currency basis. Our operating loss for the third quarter of 2013 was $369.9 million compared to operating earnings of $66.6 million in the prior-year period. Adjusted EBITDA from continuing operations were $191.5 million for the third quarter of 2013, compared to $202.3 million in the prior-year period.
Worldwide Centaur revenue for the nine months ended September 30, 2013 was $1,289.1 million, down from the comparable prior-year period by 1.3% as reported and 0.9% on a constant currency basis. Our operating loss for the nine months ended September 30, 2013 was $323.2 million compared to operating earnings of $96.0 million in the prior-year period. Total Adjusted EBITDA from continuing operations were $525.2 million for the nine months ended September 30, 2013, compared to $542.7 million in the prior-year period.
“We are encouraged by the continued momentum in the business and the positive growth we achieved this quarter. Our recent financial performance provides a preview to our long-term potential and is the result of initiatives we’ve been hard at work on since I joined KCI,” said Joe Woody, President and Chief Executive Officer of KCI and LifeCell. “In addition, we are excited about the opportunity to take three outstanding individual franchises in KCI, LifeCell and Systagenix and create the global leader in transformational healing solutions with a world-class wound care and biologics portfolio.”
Acquisition of Systagenix
On October 28, 2013, KCI closed on the previously-announced acquisition of Systagenix. Systagenix has a broad portfolio of innovative advanced wound care products with a focus on moist wound healing dressings - including PROMOGRAN PRISMA®, the collagen dressing market leader, TIELLE® (foam) and ADAPTIC® (non adherent contact layers). Systagenix' manufacturing, marketing and sales teams supply and distribute over 20 million advanced wound care dressings each month to more than 70 countries.
Financial Position
Total cash at September 30, 2013 was $362.9 million. During the first nine months of 2013, Centaur generated cash of $135.5 million from operations, used cash of $72.0 million in investing activities and used cash of $83.6 million in financing activities. Financing activities included the amendment of our senior secured credit agreement, which effectively reduced the nominal interest rate of our senior secured credit facility by 100 basis points.
As of September 30, 2013, total long-term debt outstanding was $4.54 billion and our Net Leverage Ratio2 was 5.8x. On October 28, 2013, upon the closing of the Systagenix acquisition, KCI paid a purchase price of $485.0 million, subject to adjustment, using cash on hand and proceeds from $350 million of incremental borrowings under our existing Senior Secured Credit Facility.
Impairment of Goodwill and Other Intangible Assets
During the third quarter of 2013, we tested goodwill and other intangible assets for impairment. As a result, we recognized impairment charges of $443.4 million related to LifeCell goodwill and other intangible assets.
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 AB and the service fee payable by Getinge AB 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 from continuing operations, as defined in our senior secured credit agreement and 2) supplemental revenue data to exclude the impact of foreign currency fluctuations 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.
1Adjusted EBITDA from continuing operations excludes the operations of our previously-divested TSS business and the impact of merger-related expenses, foreign currency gains or losses, business optimization expenses and other expenses specified in the reconciliation within this release.
2 The Net Leverage Ratio represents Net Debt divided by Consolidated EBITDA for the last twelve months. Net Debt consists of total indebtedness including capital leases and other financing obligations, less cash and cash equivalents up to the greater of$300.0 million or 40% of Consolidated EBITDA for the last twelve months. Consolidated EBITDA, as defined in our senior secured credit agreement, represents Adjusted EBITDA from continuing operations plus "run rate" cost savings.
CENTAUR GUERNSEY L.P. INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(dollars in thousands)
(unaudited)
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||
2013 | 2012 | % Change | 2013 | 2012 | % Change | ||||||||||||||||
Revenue: | |||||||||||||||||||||
Rental | $ | 191,041 | $ | 207,156 | (7.8 | )% | $ | 569,449 | $ | 622,350 | (8.5 | )% | |||||||||
Sales | 249,520 | 228,717 | 9.1 | 719,675 | 684,171 | 5.2 | |||||||||||||||
Total revenue | 440,561 | 435,873 | 1.1 | 1,289,124 | 1,306,521 | (1.3 | ) | ||||||||||||||
Rental expenses | 85,746 | 100,810 | (14.9 | ) | 273,479 | 348,387 | (21.5 | ) | |||||||||||||
Cost of sales | 66,151 | 58,613 | 12.9 | 181,707 | 190,454 | (4.6 | ) | ||||||||||||||
Gross profit | 288,664 | 276,450 | 4.4 | 833,938 | 767,680 | 8.6 | |||||||||||||||
Selling, general and administrative expenses | 152,053 | 142,778 | 6.5 | 518,478 | 445,781 | 16.3 | |||||||||||||||
Research and development expenses | 17,961 | 17,376 | 3.4 | 56,140 | 53,686 | 4.6 | |||||||||||||||
Acquired intangible asset amortization | 45,116 | 49,733 | (9.3 | ) | 139,123 | 172,260 | (19.2 | ) | |||||||||||||
Impairment of goodwill and intangible assets | 443,400 | — | — | 443,400 | — | — | |||||||||||||||
Operating earnings (loss) | (369,866 | ) | 66,563 | — | (323,203 | ) | 95,953 | — | |||||||||||||
Interest income and other | 217 | 174 | 24.7 | 1,279 | 630 | 103.0 | |||||||||||||||
Interest expense | (101,398 | ) | (117,920 | ) | (14.0 | ) | (315,144 | ) | (353,107 | ) | (10.8 | ) | |||||||||
Loss on extinguishment of debt | (200 | ) | — | — | (2,364 | ) | — | — | |||||||||||||
Foreign currency gain (loss) | (8,738 | ) | (5,258 | ) | 66.2 | (11,935 | ) | 428 | — | ||||||||||||
Derivative instruments gain (loss) | (6,840 | ) | (8,579 | ) | (20.3 | ) | 3,200 | (28,473 | ) | — | |||||||||||
Loss from continuing operations before income tax benefit | (486,825 | ) | (65,020 | ) | — | (648,167 | ) | (284,569 | ) | 127.8 | |||||||||||
Income tax benefit | (88,519 | ) | (27,176 | ) | 225.7 | (144,543 | ) | (107,125 | ) | 34.9 | |||||||||||
Loss from continuing operations | (398,306 | ) | (37,844 | ) | — | (503,624 | ) | (177,444 | ) | 183.8 | |||||||||||
Loss from discontinued operations, net of tax | (255 | ) | 2,032 | — | (2,299 | ) | (3,680 | ) | (37.5 | ) | |||||||||||
Net loss | $ | (398,561 | ) | $ | (35,812 | ) | — | % | $ | (505,923 | ) | $ | (181,124 | ) | 179.3 | % | |||||
CENTAUR GUERNSEY L.P. INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
September 30, 2013 | December 31, 2012 | ||||||
Assets: | (unaudited) | ||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 362,919 | $ | 383,150 | |||
Accounts receivable, net | 368,900 | 355,718 | |||||
Inventories, net | 149,986 | 139,850 | |||||
Prepaid expenses and other | 59,499 | 39,511 | |||||
Total current assets | 941,304 | 918,229 | |||||
Net property, plant and equipment | 312,555 | 388,482 | |||||
Debt issuance costs, net | 101,766 | 96,476 | |||||
Deferred income taxes | 21,866 | 20,003 | |||||
Goodwill | 3,207,575 | 3,479,775 | |||||
Identifiable intangible assets, net | 2,343,525 | 2,666,201 | |||||
Other non-current assets | 4,054 | 5,598 | |||||
$ | 6,932,645 | $ | 7,574,764 | ||||
Liabilities and Equity: | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 44,527 | $ | 40,970 | |||
Accrued expenses and other | 351,903 | 284,163 | |||||
Current installments of long-term debt | 24,101 | 23,383 | |||||
Deferred income taxes | 4,610 | 57,528 | |||||
Total current liabilities | 425,141 | 406,044 | |||||
Long-term debt, net of current installments and discount | 4,517,139 | 4,554,112 | |||||
Non-current tax liabilities | 46,461 | 44,465 | |||||
Deferred income taxes | 960,219 | 1,069,480 | |||||
Other non-current liabilities | 38,897 | 43,267 | |||||
Total liabilities | 5,987,857 | 6,117,368 | |||||
Equity: | |||||||
General partner's capital | — | — | |||||
Limited partners’ capital | 952,314 | 1,457,913 | |||||
Accumulated other comprehensive loss, net | (7,526 | ) | (517 | ) | |||
Total equity | 944,788 | 1,457,396 | |||||
$ | 6,932,645 | $ | 7,574,764 | ||||
CENTAUR GUERNSEY L.P. INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) | |||||||
Nine months ended September 30, | |||||||
2013 | 2012 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (505,923 | ) | $ | (181,124 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Amortization of debt issuance costs and discount | 26,356 | 24,417 | |||||
Depreciation and other amortization | 252,026 | 346,895 | |||||
Loss on disposition of assets | 3,189 | — | |||||
Amortization of fair value step-up in inventory | — | 25,021 | |||||
Fixed asset and inventory impairment | 30,259 | 22,116 | |||||
Impairment of goodwill and intangible assets | 443,400 | — | |||||
Write-off of other intangible assets | 16,885 | — | |||||
Provision for bad debt | 5,051 | 7,019 | |||||
Loss on extinguishment of debt | 2,164 | — | |||||
Equity-based compensation expense | 2,046 | 1,186 | |||||
Deferred income tax benefit | (165,456 | ) | (132,639 | ) | |||
Unrealized loss (gain) on derivative instruments | (5,729 | ) | 27,770 | ||||
Unrealized loss (gain) on revaluation of cross currency debt | 8,174 | (2,685 | ) | ||||
Change in assets and liabilities: | |||||||
Decrease (increase) in accounts receivable, net | (23,046 | ) | 10,675 | ||||
Increase in inventories, net | (10,498 | ) | (7,270 | ) | |||
Decrease (increase) in prepaid expenses and other | (17,137 | ) | 3,281 | ||||
Increase (decrease) in accounts payable | 3,273 | (9,445 | ) | ||||
Increase in accrued expenses and other | 68,440 | 48,359 | |||||
Increase in tax liabilities, net | 2,021 | 2,299 | |||||
Net cash provided by operating activities | 135,495 | 185,875 | |||||
Cash flows from investing activities: | |||||||
Additions to property, plant and equipment | (59,868 | ) | (72,044 | ) | |||
Increase (decrease) in inventory to be converted into equipment for short-term rental | (8,881 | ) | 861 | ||||
Dispositions of property, plant and equipment | 1,052 | 1,673 | |||||
Increase in identifiable intangible assets and other non-current assets | (4,273 | ) | (5,380 | ) | |||
Net cash used by investing activities | (71,970 | ) | (74,890 | ) | |||
Cash flows from financing activities: | |||||||
Capital contributions from limited partners | — | 239 | |||||
Distribution to limited partners | (1,572 | ) | (1,970 | ) | |||
Repayments of long-term debt and capital lease obligations | (60,429 | ) | (17,483 | ) | |||
Payment of debt issuance costs | (21,604 | ) | (578 | ) | |||
Net cash used by financing activities | (83,605 | ) | (19,792 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | (151 | ) | 308 | ||||
Net increase (decrease) in cash and cash equivalents | (20,231 | ) | 91,501 | ||||
Cash and cash equivalents, beginning of period | 383,150 | 215,426 | |||||
Cash and cash equivalents, end of period | $ | 362,919 | $ | 306,927 | |||
CENTAUR GUERNSEY L.P. INC. AND SUBSIDIARIES
Reconciliation from GAAP to Non-GAAP
Supplemental Revenue Data
(dollars in thousands)
(unaudited)
Three months ended September 30, | GAAP % Change | Constant Currency % Change (1) | |||||||||||||||||||
2013 | 2012 GAAP | ||||||||||||||||||||
GAAP | FX Impact | Constant Currency | |||||||||||||||||||
KCI revenue: | |||||||||||||||||||||
Rental | $ | 189,528 | $ | 1,234 | $ | 190,762 | $ | 205,415 | (7.7 | )% | (7.1 | )% | |||||||||
Sales | 131,351 | 885 | 132,236 | 124,236 | 5.7 | 6.4 | |||||||||||||||
Total KCI Revenue | 320,879 | 2,119 | 322,998 | 329,651 | (2.7 | ) | (2.0 | ) | |||||||||||||
LifeCell revenue: | |||||||||||||||||||||
Rental | 1,513 | — | 1,513 | 1,741 | (13.1 | ) | (13.1 | ) | |||||||||||||
Sales | 118,169 | (91 | ) | 118,078 | 104,481 | 13.1 | 13.0 | ||||||||||||||
Total LifeCell Revenue | 119,682 | (91 | ) | 119,591 | 106,222 | 12.7 | 12.6 | ||||||||||||||
Total Revenue: | |||||||||||||||||||||
Rental | 191,041 | 1,234 | 192,275 | 207,156 | (7.8 | ) | (7.2 | ) | |||||||||||||
Sales | 249,520 | 794 | 250,314 | 228,717 | 9.1 | 9.4 | |||||||||||||||
Total Consolidated Revenue | $ | 440,561 | $ | 2,028 | $ | 442,589 | $ | 435,873 | 1.1 | % | 1.5 | % | |||||||||
Nine months ended September 30, | GAAP % Change | Constant Currency % Change (1) | |||||||||||||||||||
2013 | 2012 GAAP | ||||||||||||||||||||
GAAP | FX Impact | Constant Currency | |||||||||||||||||||
KCI revenue: | |||||||||||||||||||||
Rental | $ | 564,683 | $ | 3,361 | $ | 568,044 | $ | 617,843 | (8.6 | )% | (8.1 | )% | |||||||||
Sales | 379,843 | 2,552 | 382,395 | 368,314 | 3.1 | 3.8 | |||||||||||||||
Total KCI Revenue | 944,526 | 5,913 | 950,439 | 986,157 | (4.2 | ) | (3.6 | ) | |||||||||||||
LifeCell revenue: | |||||||||||||||||||||
Rental | 4,766 | — | 4,766 | 4,507 | 5.7 | 5.7 | |||||||||||||||
Sales | 339,832 | (153 | ) | 339,679 | 315,857 | 7.6 | 7.5 | ||||||||||||||
Total LifeCell Revenue | 344,598 | (153 | ) | 344,445 | 320,364 | 7.6 | 7.5 | ||||||||||||||
Total Revenue: | |||||||||||||||||||||
Rental | 569,449 | 3,361 | 572,810 | 622,350 | (8.5 | ) | (8.0 | ) | |||||||||||||
Sales | 719,675 | 2,399 | 722,074 | 684,171 | 5.2 | 5.5 | |||||||||||||||
Total Consolidated Revenue | $ | 1,289,124 | $ | 5,760 | $ | 1,294,884 | $ | 1,306,521 | (1.3 | )% | (0.9 | )% | |||||||||
(1) Represents percentage change between 2013 non-GAAP Constant Currency revenue and 2012 GAAP revenue.
CENTAUR GUERNSEY L.P. INC. AND SUBSIDIARIES
Reconciliation from GAAP to Non-GAAP
Selected Financial Information
(dollars in thousands)
(unaudited)
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Net loss | $ | (398,561 | ) | $ | (35,812 | ) | $ | (505,923 | ) | $ | (181,124 | ) | |||
Loss (gain) on disposition of assets | (126 | ) | — | 3,189 | — | ||||||||||
Interest expense, net of interest income | 101,185 | 117,799 | 314,648 | 352,656 | |||||||||||
Income tax benefit | (88,678 | ) | (25,903 | ) | (145,981 | ) | (109,429 | ) | |||||||
Foreign currency (gain) loss | 8,738 | 5,258 | 11,935 | (428 | ) | ||||||||||
Depreciation and other amortization | 80,832 | 98,547 | 252,026 | 346,895 | |||||||||||
Derivative instruments (gain) loss | 6,840 | 8,579 | (3,200 | ) | 28,473 | ||||||||||
Management fees and expenses | 1,371 | 1,803 | 4,123 | 5,111 | |||||||||||
Equity-based compensation expense | 850 | 197 | 2,046 | 1,186 | |||||||||||
Acquisition, disposition and financing expenses (1) | 7,436 | 7,080 | 22,846 | 15,984 | |||||||||||
Business optimization expenses(2) | 18,093 | 12,802 | 68,693 | 42,656 | |||||||||||
Other permitted expenses (3) | 453,160 | 15,124 | 500,482 | 54,155 | |||||||||||
Adjusted EBITDA | 191,140 | 205,474 | 524,884 | 556,135 | |||||||||||
Adjusted EBITDA from discontinued operations (4) | 340 | (3,153 | ) | 350 | (13,418 | ) | |||||||||
Adjusted EBITDA from continuing operations | $ | 191,480 | $ | 202,321 | $ | 525,234 | $ | 542,717 | |||||||
Adjusted EBITDA from continuing operations as a percentage of revenue | 43.5 | % | 46.4 | % | 40.7 | % | 41.5 | % | |||||||
(1) Represents loss (gain) on disposition of assets, loss (gain) on extinguishment of debt, and labor, travel, training, consulting and other costs associated acquisition and disposition activities, including the disposition of our TSS business and acquisition of Systagenix.
(2) Represents labor, travel, training, consulting and other costs associated exclusively with our business optimization initiatives.
(3) Represents charges for the impairment of goodwill, intangible assets and fixed assets; the write-off of in-process research and development and other intangible assets; amortization of the fair value step-up in inventory and other permitted expenses.
(4) Adjusted EBITDA from discontinued operations includes the (gain) loss from discontinued operations, excluding any related loss on
disposition of assets, adjusted as defined in our senior secured credit agreement.