Kinetic Concepts says cash will go first to global expansion, product development, then debt repayment

By Jennifer Lanning Drey

Portland, Ore., Jan. 27 - Kinetic Concepts Inc. will continue to make investments in global expansion and new product development as its first priority for cash flow from operations, followed by debt repayment, Martin Landon, the company's chief financial officer, said Tuesday during Kinetic Concepts' fourth-quarter earnings call.

The company ended 2008 with $1.67 billion of long-term debt, which included $950 million under its term loan A facility, $690 million of convertible notes due 2015 and $29 million on its revolving credit facility.

Following the Dec. 31 close of the fourth quarter, Kinetic Concepts made voluntary senior credit facility payments totaling $79.0 million from cash on hand.

Kinetic Concepts had total cash of $247.8 million at the end of the fourth quarter.

The company is restricted from repurchasing a large portion of its convertible debt under its credit agreements but regularly evaluates the possibility of repurchasing some of the debt, as permitted, Landon said.

Free cash flow was $108.8 million for the fourth quarter and $285.6 million for full-year 2008.

The leverage ratio was 2.7 times the 2008 consolidated EBITDA at year-end.

The company posted fourth-quarter net earnings of $52.1 million, compared with net earnings of $66.5 million in the year-ago fourth quarter. Total revenue increased 14% in the fourth quarter to $492.5 million, which included $68.0 million of revenue from LifeCell, which Kinetic Concepts acquired in May 2008.

"While we are in the midst of a challenging environment, our business remains healthy," Catherine Burzik, chief executive officer of Kinetic Concepts, said during the call.

During the fourth quarter, the company continued to make progress in its strategic areas of focus, which include research and development innovation, global expansion and diversification, Burzik said.

Kinetic Concepts is a San Antonio medical technology company specializing in advanced wound care and therapeutic support systems.

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