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Kinetic Concepts Inc.: Time Heals All Wounds

Acquisition charges sink earnings, but company expects to grow with LifeCell deal.

If all goes as planned, it shouldn't take medical device maker Kinetic Concepts Inc. long to recover from a loss posted in the second quarter after the company acquired tissue repair manufacturer LifeCell Corp.

The deal, completed in May, resulted in transaction-related expenses of approximately $71 million in the second quarter and a loss of $2.7 million, compared with net earnings of $58.1 million during the year-earlier period, the company said in a July 24 earnings statement.

Excluding the transaction charges, Kinetic Concepts' second-quarter net earnings were $70.5 million, or 98 cents per share, a 21% increase from the same period last year.

Kinetic Concepts Inc.
At A Glance

Kinetic Concepts Inc.
San Antonio, Texas.
Primary Industry: Medical Instruments & Equipment
Number of Employees: 6,400
2007 In Review
Revenue: $1.6 billion
Profit Margin: 14.73%
Sales Turnover: 1.52
Inventory Turnover: 17.70
Revenue Growth: 17.37%
Return On Assets: 28.15%
Return On Equity: 66.57%

The LifeCell deal is part of Kinetic Concepts' strategy to increase its "presence in the operating room." The 2008 IW 50 Best Manufacturer produces wound care and therapeutic support systems and hospital bedding. The LifeCells acquisition adds tissue regeneration products that utilize donated human skin to Kinetic Concepts' product portfolio.

LifeCell's best-selling product is AlloDerm, which is used for breast reconstruction and to repair damaged hernias. AlloDerm generated $167 million in revenue for LifeCell in 2007, according to Kinetic Concepts. LifeCell's newest product is Strattice, which regenerates tissue using skin taken from pigs.

The combined companies are expected to generate revenue of approximately $2 billion in 2008 and will employ more than 7,000 people.

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