Balance Sheet

Total cash at the end of FY09 was $263.2 million, up $15.4 million from FY08. During 4Q09 and FY09, the company made scheduled and voluntary senior credit facility repayments totaling $50.0 million and $200.0 million, respectively, from cash-on-hand.  Free Cash Flow was $292.7 million in FY09.

Total long-term debt outstanding on December 31, 2009 was $1.306 billion on a GAAP-basis, including the discount associated with the adoption of required accounting standards, and $1.440 billion on an economic, or debt-instrument, basis. Long-term debt outstanding consisted of a senior secured term loan of $750.0 million due 2013 and $690.0 million of 3.25% senior convertible notes due 2015.

Share Repurchases: In 4Q09, Kinetic did not repurchase any shares.  It has approximately $50 million remaining in the buyback program.

Others

Litigation Update:  In June 2009, the Federal Court of Australia issued a temporary injunction against Smith & Nephew until the patent infringement hearing.  However, in October 2009, the appeals court lifted the injunction until the trial court hears the patent infringement case, scheduled in June 2010.  In the US, Smith & Nephew launched its Renasys EZ NPWT system with foam dressing in March 2009.  A trial is scheduled for February 2010 for infringement of patents for KCI’s foam technology.  A loss for KCI means no change to the current competitive dynamic, while victory could take competitors off the market.
 

The most significant risks include a greater-than-expected impact on market share from competitors' penetration (Smith & Nephew (SNN)), pricing pressure from competitive bidding and private payors, LifeCell integration risks, patent litigation losses, and reimbursement cuts.

KCI holds a considerable amount of debt on its balance sheet that could limit the company’s access to additional debt financing for future acquisitions, or be difficult to refinance if the credit markets remain tight for an extended period.