EX-99.1 2 a99120134qearningsrelease.htm EARNINGS RELEASE 99.1 2013 4Q Earnings Release


         

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
FOURTH QUARTER AND FULL YEAR FINANCIAL RESULTS FOR 2013


-  Fourth quarter 2013 Centaur Guernsey L.P. Inc. (“Centaur” or the "Company") revenue of $469.8 million, up 6.8% from the prior-year period as reported and 7.3% from the prior-year period on a constant currency basis

- Fourth quarter 2013 loss from continuing operations of $51.7 million compared to $56.2 million for the prior-year period

-  Fourth quarter 2013 total Adjusted EBITDA from continuing operations1 of $191.9 million compared to $193.0 million for the prior-year period

- KCI closed on the previously-announced acquisition of SystagenixTM


Highlights of the fourth quarter and year ended December 31, 2013

Centaur revenue for the fourth quarter of 2013 was $469.8 million, up from the prior-year comparable period by 7.3% on a constant currency basis. Our loss from continuing operations for the fourth quarter of 2013 was $51.7 million compared to $56.2 million in the prior-year period. Adjusted EBITDA from continuing operations were $191.9 million for the fourth quarter of 2013, compared to $193.0 million in the prior-year period.

Centaur revenue for the year ended December 31, 2013 was $1,758.9 million, up from the prior year by 1.2% on a constant currency basis. Our loss from continuing operations for the year ended December 31, 2013 was $555.4 million compared to $233.6 million in the prior-year period. Adjusted EBITDA from continuing operations were $717.1 million for the year ended December 31, 2013, compared to $735.8 million in the prior-year period.

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 distributes over 20 million advanced wound care dressings each month to more than 70 countries.

The successful completion of the Systagenix acquisition marks an important milestone in the advancement of our long-term strategy to be the global leader in transformational healing solutions. Over the coming quarters, we will continue integrating the Systagenix business into our broader wound care portfolio of products and therapies. As a result, we have renamed our business segments. Revenues related to KCI and Systagenix products are included within the Advanced Wound Therapeutics segment and revenue related to LifeCell is now reported under the Regenerative Medicine segment. We believe these segments reflect the nature of our businesses and are consistent with the manner in which we manage the Company.

“We are pleased with both the performance of our Regenerative Medicine business and the progress we continue to make in our Advanced Wound Therapeutics business,” said Joe Woody, President and Chief Executive Officer. 

Our consolidated financial statements include Systagenix results for the period subsequent to the close date of the acquisition.





Financial Position

Total cash at December 31, 2013 was $206.9 million. During 2013, Centaur generated cash of $136.8 million from operations, used cash of $563.8 million in investing activities and generated cash of $250.6 million in financing activities. Investing and financing activities included the acquisition of Systagenix. On January 22, 2014 we entered into an amendment of our senior secured credit agreement which reduced the nominal interest rate of our senior secured credit facility by 50 basis points.

As of December 31, 2013, total long-term debt outstanding was $4.89 billion and our Net Leverage Ratio2 was 6.0x. 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.

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 and a pro forma adjustment related to EBITDA of Systagenix for the first 10 months of 2013, which is not included in our consolidated financial statements.




CENTAUR GUERNSEY L.P. INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(dollars in thousands)


 
Three months ended December 31,
 
Year ended December 31,
 
2013
 
2012
 
% Change
 
2013
 
2012
 
% Change
Revenue:
 
 
 
 
 
 
 
 
 
 
 
Rental
$
180,803

 
$
199,851

 
(9.5
)%
 
$
750,252

 
$
822,201

 
(8.8
)%
Sales
288,984

 
240,081

 
20.4

 
1,008,659

 
924,252

 
9.1

Total revenue
469,787

 
439,932

 
6.8

 
1,758,911

 
1,746,453

 
0.7

 
 
 
 
 
 
 
 
 
 
 
 
Rental expenses
85,116

 
95,059

 
(10.5
)
 
358,595

 
443,446

 
(19.1
)
Cost of sales
79,862

 
58,884

 
35.6

 
261,569

 
249,338

 
4.9

Gross profit
304,809

 
285,989

 
6.6

 
1,138,747

 
1,053,669

 
8.1

 
 
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
177,697

 
157,000

 
13.2

 
696,175

 
602,781

 
15.5

Research and development expenses
19,484

 
18,173

 
7.2

 
75,624

 
71,859

 
5.2

Acquired intangible asset amortization
49,448

 
48,724

 
1.5

 
188,571

 
220,984

 
(14.7
)
Impairment of goodwill and intangible assets
—

 
—

 
—

 
443,400

 
—

 
—

Operating earnings (loss)
58,180

 
62,092

 
(6.3
)
 
(265,023
)
 
158,045

 
—

 
 
 
 
 
 
 
 
 
 
 
 
Interest income and other
323

 
199

 
62.3

 
1,602

 
829

 
93.2

Interest expense
(104,733
)
 
(113,515
)
 
(7.7
)
 
(419,877
)
 
(466,622
)
 
(10.0
)
Loss on extinguishment of debt
—

 
(31,481
)
 
—

 
(2,364
)
 
(31,481
)
 
(92.5
)
Foreign currency loss
(10,291
)
 
(13,429
)
 
(23.4
)
 
(22,226
)
 
(13,001
)
 
71.0

Derivative instruments gain (loss)
(1,624
)
 
(2,960
)
 
(45.1
)
 
1,576

 
(31,433
)
 
—

Loss from continuing operations before income tax benefit
(58,145
)
 
(99,094
)
 
(41.3
)
 
(706,312
)
 
(383,663
)
 
84.1

Income tax benefit
(6,414
)
 
(42,923
)
 
(85.1
)
 
(150,957
)
 
(150,048
)
 
0.6

Loss from continuing operations
(51,731
)
 
(56,171
)
 
(7.9
)
 
(555,355
)
 
(233,615
)
 
137.7

Gain (loss) from discontinued operations, net of tax
(1,004
)
 
95,878

 
—

 
(3,303
)
 
92,198

 
—

Net earnings (loss)
$
(52,735
)
 
$
39,707

 
—
 %
 
$
(558,658
)
 
$
(141,417
)
 
—
 %









CENTAUR GUERNSEY L.P. INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)

 
December 31,
2013
 
December 31,
2012
Assets:
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
206,949

 
$
383,150

Accounts receivable, net
407,578

 
355,718

Inventories, net
181,567

 
139,850

Deferred income taxes
23,621

 
—

Prepaid expenses and other
53,161

 
39,511

Total current assets
872,876

 
918,229

 
 
 
 
Net property, plant and equipment
333,725

 
388,482

Debt issuance costs, net
102,054

 
96,476

Deferred income taxes
31,459

 
20,003

Goodwill
3,378,661

 
3,479,775

Identifiable intangible assets, net
2,549,201

 
2,666,201

Other non-current assets
4,669

 
5,598

 
 
 
 
 
$
7,272,645

 
$
7,574,764

 
 
 
 
Liabilities and Equity:
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
50,316

 
$
40,970

Accrued expenses and other
328,975

 
284,163

Current installments of long-term debt
26,311

 
23,383

Income taxes payable
3,368

 
—

Deferred income taxes
2,199

 
57,528

Total current liabilities
411,169

 
406,044

 
 
 
 
Long-term debt, net of current installments and discount
4,865,503

 
4,554,112

Non-current tax liabilities
53,682

 
44,465

Deferred income taxes
1,003,784

 
1,069,480

Other non-current liabilities
40,432

 
43,267

Total liabilities
6,374,570

 
6,117,368

Equity:
 
 
 
General partner's capital
—

 
—

Limited partners’ capital
900,218

 
1,457,913

Accumulated other comprehensive loss, net
(2,143
)
 
(517
)
Total equity
898,075

 
1,457,396

 
 
 
 
 
$
7,272,645

 
$
7,574,764










CENTAUR GUERNSEY L.P. INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)

 
Year ended December 31,
 
2013
 
2012
Cash flows from operating activities:
 
 
 
Net loss
$
(558,658
)
 
$
(141,417
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Amortization of debt issuance costs and discount
35,838

 
29,155

Depreciation and other amortization
335,959

 
436,370

Loss (gain) on disposition of assets
4,423

 
(152,701
)
Amortization of fair value step-up in inventory
3,162

 
25,021

Fixed asset and inventory impairment
30,580

 
22,116

Impairment of goodwill and intangible assets
443,400

 
—

Write-off of other intangible assets
16,885

 
—

Provision for bad debt
7,308

 
8,984

Loss on extinguishment of debt
2,364

 
31,481

Equity-based compensation expense
2,925

 
2,069

Deferred income tax benefit
(187,089
)
 
(126,389
)
Unrealized loss (gain) on derivative instruments
(4,645
)
 
30,002

Unrealized loss on revaluation of cross currency debt
14,450

 
6,272

Change in assets and liabilities:
 
 
 
Decrease (increase) in accounts receivable, net
(10,924
)
 
37,574

Increase in inventories, net
(17,171
)
 
(18,797
)
Decrease (increase) in prepaid expenses and other
(9,338
)
 
2,468

Increase (decrease) in accounts payable
1,137

 
(8,815
)
Increase (decrease) in accrued expenses and other
20,449

 
(24,537
)
Increase in tax liabilities, net
5,724

 
3,837

Net cash provided by operating activities
136,779

 
162,693

 
 
 
 
Cash flows from investing activities:
 
 
 
Additions to property, plant and equipment
(80,911
)
 
(91,567
)
Increase in inventory to be converted into equipment for short-term rental
1,286

 
5,269

Dispositions of property, plant and equipment
1,298

 
2,630

Proceeds from disposition of assets held for sale
—

 
244,317

Business acquired in purchase transaction, net of cash acquired
(478,748
)
 
(15,097
)
Increase in identifiable intangible assets and other non-current assets
(6,747
)
 
(1,017
)
Net cash provided (used) by investing activities
(563,822
)
 
144,535

 
 
 
 
Cash flows from financing activities:
 
 
 
Capital contributions from limited partners
—

 
239

Distribution to limited partners
(1,572
)
 
(2,199
)
Settlement of profits interest units
(176
)
 
—

Repayments of long-term debt and capital lease obligations
(69,396
)
 
(118,767
)
Payment of debt issuance costs
(20,477
)
 
(19,473
)
Acquisition financing for Systagenix:
 
 
 
Proceeds from borrowings on Incremental Term Loan D-1
349,563

 
—

Payment of debt issuance costs
(7,340
)
 
—

Net cash provided (used) by financing activities
250,602

 
(140,200
)
Effect of exchange rate changes on cash and cash equivalents
240

 
696

Net increase (decrease) in cash and cash equivalents
(176,201
)
 
167,724

Cash and cash equivalents, beginning of period
383,150

 
215,426

Cash and cash equivalents, end of period
$
206,949

 
$
383,150





CENTAUR GUERNSEY L.P. INC. AND SUBSIDIARIES
Reconciliation from GAAP to Non-GAAP
Supplemental Revenue Data
(dollars in thousands)
(unaudited)
 
Three months ended December 31,
 
GAAP % Change
 
Constant Currency % Change (1)
 
2013
 
2012 GAAP
 
 
 
GAAP
 
FX Impact
 
Constant
Currency
 
 
 
Advanced Wound Therapeutics revenue:
 
 
 
 
 
 
 
 
 
 
 
Rental
$
179,135

 
$
1,362

 
$
180,497

 
$
197,717

 
(9.4
)%
 
(8.7
)%
Sales
167,066

 
918

 
167,984

 
128,384

 
30.1

 
30.8

  Total
346,201

 
2,280

 
348,481

 
326,101

 
6.2

 
6.9

 
 
 
 
 
 
 
 
 
 
 
 
Regenerative Medicine revenue:
 
 
 
 
 
 
 
 
 
 
 
Rental
1,668

 
—

 
1,668

 
2,134

 
(21.8
)
 
(21.8
)
Sales
121,918

 
(125
)
 
121,793

 
111,697

 
9.2

 
9.0

  Total
123,586

 
(125
)
 
123,461

 
113,831

 
8.6

 
8.5

 
 
 
 
 
 
 
 
 
 
 
 
Total Revenue:
 
 
 
 
 
 
 
 
 
 
 
Rental
180,803

 
1,362

 
182,165

 
199,851

 
(9.5
)
 
(8.8
)
Sales
288,984

 
793

 
289,777

 
240,081

 
20.4

 
20.7

  Total
$
469,787

 
$
2,155

 
$
471,942

 
$
439,932

 
6.8
 %
 
7.3
 %


 
Year ended December 31,
 
GAAP % Change
 
Constant Currency % Change (1)
 
2013
 
2012 GAAP
 
 
 
GAAP
 
FX Impact
 
Constant
Currency
 
 
 
Advanced Wound Therapeutics revenue:
 
 
 
 
 
 
 
 
 
 
 
Rental
743,818

 
4,723

 
$
748,541

 
815,560

 
(8.8
)%
 
(8.2
)%
Sales
546,909

 
3,470

 
550,379

 
496,698

 
10.1

 
10.8

  Total
1,290,727

 
8,193

 
1,298,920

 
1,312,258

 
(1.6
)
 
(1.0
)
 
 
 
 
 
 
 
 
 
 
 
 
Regenerative Medicine revenue:
 
 
 
 
 
 
 
 
 
 
 
Rental
6,434

 
—

 
6,434

 
6,641

 
(3.1
)
 
(3.1
)
Sales
461,750

 
(278
)
 
461,472

 
427,554

 
8.0

 
7.9

  Total
468,184

 
(278
)
 
467,906

 
434,195

 
7.8

 
7.8

 
 
 
 
 
 
 
 
 
 
 
 
Total Revenue:
 
 
 
 
 
 
 
 
 
 
 
Rental
750,252

 
4,723

 
754,975

 
822,201

 
(8.8
)
 
(8.2
)
Sales
1,008,659

 
3,192

 
1,011,851

 
924,252

 
9.1

 
9.5

  Total
$
1,758,911

 
$
7,915

 
$
1,766,826

 
$
1,746,453

 
0.7
 %
 
1.2
 %

(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 December 31,
 
Year ended December 31,
 
2013
 
2012
 
2013
 
2012
 
 
 
 
 
 
 
 
Net earnings (loss)
$
(52,735
)
 
$
39,707

 
$
(558,658
)
 
$
(141,417
)
Loss (gain) on disposition of assets
1,234

 
(152,701
)
 
4,423

 
(152,701
)
Interest expense, net of interest income
104,689

 
113,332

 
419,337

 
465,988

Income tax expense (benefit)
(7,044
)
 
17,099

 
(153,025
)
 
(92,330
)
Foreign currency loss
10,291

 
13,429

 
22,226

 
13,001

Depreciation and other amortization
83,933

 
89,475

 
335,959

 
436,370

Derivative instruments (gain) loss
1,624

 
2,960

 
(1,576
)
 
31,433

Management fees and expenses
4,787

 
1,478

 
8,910

 
6,589

Equity-based compensation expense
879

 
883

 
2,925

 
2,069

Acquisition, disposition and financing expenses (1)
13,518

 
53,675

 
36,364

 
69,659

Business optimization expenses(2)
22,832

 
13,769

 
91,525

 
56,425

Other permitted expenses (3)
7,745

 
2,198

 
508,227

 
56,353

Adjusted EBITDA
191,753

 
195,304

 
716,637

 
751,439

Adjusted EBITDA from discontinued operations (4)
148

 
(2,263
)
 
498

 
(15,681
)
Adjusted EBITDA from continuing operations
$
191,901

 
$
193,041

 
$
717,135

 
$
735,758

 
 
 
 
 
 
 
 
Adjusted EBITDA from continuing operations as a percentage of revenue
40.8
%
 
43.9
%
 
40.8
%
 
42.1
%

(1) Represents loss (gain) on extinguishment of debt, and labor, travel, training, consulting and other costs associated with 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 gain or loss on
disposition of assets, adjusted as defined in our senior secured credit agreement.