Strong 3Q for Kinetic - Analyst Blog
24 Octobre 2011 - 12:45PM
Zacks
Kinetic Concepts
Inc. (KCI) reported third quarter 2011 EPS of $1.16, up 9%
from the year-ago quarter. However, adjusted EPS (excluding
acquisition-related expenses related to LifeCell purchase in 2008
and expenses associated with the proposed merger during the
quarter) came in at $1.35, surpassing the Zacks Consensus Estimate
of $1.31 and 12.5% higher than the year-ago quarter.
Revenues of $531.4 million
increased 5% year over year and also exceeded the Zacks Consensus
Estimate of $525 million. Reported revenues witnessed a favorable
foreign currency exchange movement of 2% during the quarter.
Rental income (52.5% of revenues)
during the quarter declined 3.4% to $279.1 million. Revenue derived
from the North American market increased 3.2% to $413.4 million
while EMEA/APAC revenues jumped 11.1% to $117.9 million.
The company’s product segments,
namely, Active Healing Solutions (AHS), Regenerative Medicine
(LifeCell) and Therapeutic Support Systems (TSS) reported sales of
$372.1 million (up 1.4% at CER), $97.4 million (up 14.4%) and $61.8
million (down 6.4%), respectively.
Within the AHS segment, favorable
foreign currency movement, higher volumes from new markets, capital
sales and recent product launches were partially offset by lower
rental revenue in established markets. Foreign exchange movements
favorably impacted worldwide AHS revenues by 2%.The AHS Americas
revenues increased 2% year over year due to a combination of
increased sales volumes of V.A.C. Therapy units and increased
revenue from the adoption of newly-launched negative pressure-based
therapies in the US, partially offset by a decrease in rental
volumes and realized pricing on V.A.C.Therapy rental units.
Sales in the EMEA region declined
5% at CER due to continued pricing pressures on V.A.C. Therapy
rental units and a decline in rental and sales volumes, partially
offset by higher sales volume of V.A.C.Via, ABThera and V.A.C.
Therapy units. However, AHS revenues from APAC surged 32% at CER
primarily due to higher rental and sales volumes in Japan.
The company’s LifeCell business
witnessed strong growth mainly on the back of increased penetration
into EMEA markets. During the quarter, the company reported EMEA
sales of $2.9 million compared with $1.7 million in the prior-year
quarter based on the successful introduction of LifeCell products
across new geographical regions.
The TSS division reported revenues
of $37.7 million in Americas, down 9.8% while sales from EMEA/APAC
increased 12.1% to $24.1 million. The overall TSS revenue declined
as the rental business during the quarter experienced increased
competitive pressure and modest share loss.
Kinetic’s gross margin expanded 530
basis points (bps) to 62% during the reported quarter. This was
driven by lower royalty expense associated with Kinetic’s license
agreement with Wake Forest University, relating to patent disputes
with Smith & Nephew (SNN) since 2008. Further,
higher gross margins associated with LifeCell business unit, lower
rental fleet depreciation and favorable product mix favorably
impacted the gross margin.
Adjusted operating margin for the
third quarter expanded 320 bps to 28.7% due to lower royalty
expense, favorable foreign currency movements and year-ago charges
relating to TSS portfolio rationalization and Global Business
Transformation, partially offset by higher costs associated with
the proposed acquisition of Kinetic.
Outlook
With regards to Kinetic’s pending
merger with the Apax consortium and related recapitalization,
Kinetic has suspended its fiscal 2011 outlook.
Earlier in July, Apax Partners
along with two Canadian pension funds decided to acquire Kinetic.
The deal, including Kinetic's outstanding debt, is valued at
approximately $6.3 billion. As per the terms of the agreement,
Kinetic’s shareholders will receive $68.50 in cash for each share
of the company. The company expects this transaction to close in
November 2011.
However, following the
announcement, some of the company’s shareholders initiated legal
actions challenging the merger. However, in order to resolve the
problem, Kinetic has called for a shareholders meet on October
28.
KINETIC CONCPTS (KCI): Free Stock Analysis Report
SMITH & NEPHEW (SNN): Free Stock Analysis Report
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