Kinetic Concepts CEO Discusses Q3 2010 Results - Earnings Call Transcript

Kinetic Concepts CEO Discusses Q3 2010 Results - Earnings Call Transcript
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Kinetic Concepts Inc, (

KCI

)

Q3 2010 Earnings Conference Call

October 26, 08:31 am EST

Executives

Todd Wyatt - Vice President, Investor Relations

Cathy Burzik - President and Chief Executive Officer

Butch Hulse - Associate General Counsel

Michael Genau - Global President, Active Healing Solutions

Lisa Colleran - President, LifeCell Corporation

Analysts

Mike Weinstein - JPMorgan

Paul Choi - Caris & Company

Chris Cooley - Stevens

Jayson Bedford - Raymond James

Lennox Ketner - Bank of America

Presentation

Operator

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Previous Statements by KCI
» Kinetic Concepts, Inc. Q2 2010 Earnings Call Transcript
» Kinetic Concepts Q1 2010 Earnings Call Transcript
» Kinetic Concepts Inc. Q4 2009 Earnings Call Transcript
» Kinetic Concepts Inc. Q3 2009 Earnings Call Transcript

Good morning and welcome to the KCI Third Quarter 2010 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator instructions). Thank you Todd Wyatt, Vice President of Investor Relations. You may begin your conference

Todd Wyatt

Thank you and welcome to the KCI third quarter 2010 earnings conference call. Today, we will review the results that we announced in our press release earlier this morning.

Today's webcasted conference call will include prepared remarks by Cathy Burzik, our President and Chief Executive Officer; and Marty Landon, our Chief Financial Officer. We are also joined by other selected members of our senior leadership team.

If you have not received a copy of KCI's earnings release, it is currently available on our corporate website at www.kci1.com. A replay of this webcast will be made available on our website shortly after conclusion of the call.

Our conference call this morning will include forward-looking statements about our business, including guidance on future plans, revenues and earnings. These statements are based on our current expectations and are subject to a number of risks and uncertainties, which could cause actual results to differ from our expectations. More information about potential risk factors may be found in our filings with the SEC.

Also, quarterly and full year results discussed on this call may reflect adjustments to revenues for changes in foreign currency exchange rates or adjustments to expenses related to the LifeCell acquisition and restructuring and other charges incurred during periods discussed. Please refer to the non-GAAP reconciliation of these metrics contained in our earnings release issued this morning.

I would now like to turn the call over to Cathy Burzik, President and Chief Executive Officer of Kinetic Concepts. Cathy?

Cathy Burzik

Thank you, Todd, and good morning, everyone. We appreciate your joining us to discuss our third quarter 2010 results. On today's call, I will review some of the highlights of the third quarter and then review the performance of our three businesses, including an update on new products and strategic initiatives. Marty Landon will review our financial results. We will conclude with a question-and-answer session.

Before I begin, I’d like to comment on last week’s trial ruling in the US where the court held that the patent claims license by KCI from Wake Forest University were invalid. We disagree with the court’s decision and are evaluating our next step. Regardless of outcome, KCI has been preparing for an operating in an environment without these patterns for the past several years.

We are executing well to the strategy we laid out 3 years ago, the call for expansion of our business through new product innovations, diversification and geographic expansion. For over 15 years, KCI has offered the most proven and innovative NPWT solutions in the marketplace to our many generations [about] therapy products. Our clinical evidence, our clinical expertise, our field service and our commitment to clinicians and patients worldwide are unmatched in the industry, positioning us well to continue to win in the NPWT marketplace globally. Continuing now with the quarterly comments, the global healthcare landscape has faced many challenges in 2010n this past quarter with no exception.

During this time, we have remained focused on numerous investments to support our strategic initiatives and I’m pleased to report that our investments are beginning to bear fruit as evidenced by our 2% constant currency revenue growth from the prior year quarter. The launch of VAC therapy in Japan is off to a good start and several AHS products have launched or will be launching soon on a global basis.

Also, we continue to see significant growth in our LifeCell business, including the successful expansion of LifeCell into Europe and our new regenerative medicine applications are gaining tractions. For the third quarter, total worldwide revenue of approximately $507 million was comparable to Q3 ’09 on an as reported basis. EPS on an adjusted non-GAAP basis was $1.20, an increase of approximately 11% versus the prior year quarter.

Key business developments since our last call, beyond the headline of the trial verdict, includes the US launch of our Pervena incision management system for use in the operating room. The Pervena system is now available at a worldwide basis. The execution of an exclusive sales and marketing agreement for distribution of Novadaq Technology spy system, this is used by surgeons for real time operating room evaluation of tissue profusion, the release of exciting 12 month data from the Rich study that demonstrates Stratus being used as a safe and effective alternative to a 2 stage or a synthetic mesh repair. And additionally, our US acute and post acute VAC therapy has rebounded modestly, with unit growth across both care settings on a sequential basis and units up on a year-over-year basis in acute care and stable and post acute.

We posted a record quarter in the regenerative medicine business, led by strong growth in both [aladome] and Stratus and our core applications of challenging hernia repair and breast reconstructions, despite both competitive and price pressures, and good performance in Europe as our LifeCell presence expands.

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