• Fourth quarter revenue grew 6.5% compared to the prior-year period, on a constant currency basis
• Fourth quarter 2014 Adjusted EBITDAfrom continuing operations1 grew 5.4% compared to the prior-year period, on a constant currency basis
• Fourth quarter loss from continuing operations was $30.9 million compared to $52.0 million for the prioryear period
“I am pleased with our execution in the fourth quarter, which has again led to solid financial performance and continued momentum in the business, particularly within Advanced Wound Therapeutics devices where we reached record volumes,” said Joe Woody, President and Chief Executive Officer. “Our Systagenix integration continues as planned and is translating into a strategic growth platform for Acelity. We continue to make focused investments in market development, geographic expansion and innovation to further accelerate growth for the long term.”
Results of the fourth quarter and year ended December 31, 2014
Acelity revenue for the fourth quarter of 2014 was $482.7 million, up from the prior-year period by 4.4% as reported and 6.5% on a constant currency basis.
• Advanced Wound Therapeutics ("AWT") revenue was $369.0 million, up 7.6% as reported and 10.3% on a constant currency basis, compared to the prior-year period. Excluding Systagenix, AWTrevenue grew 6.0% on a constant currency basis due primarily to NPWT volume growth during the quarter. The remaining AWT growth was fueled by the fourth quarter 2013 addition of Systagenix to our global portfolio of product offerings.
• Regenerative Medicine revenue was $109.3 million, down 5.9% as reported and 5.4% on a constant currency basis, compared to the prior-year period. The decline was primarily due to lower volumes associated with hernia repair procedures, partially offset by growth in breast reconstruction and growth in international markets.
Adjusted EBITDA from continuing operations for the fourth quarter of 2014 increased 3.6% to $198.3 million from $191.5 million in the prior-year period. The growth rate of Adjusted EBITDA from continuing operations was negatively impacted by 1.8% due to unfavorable movements in foreign exchange rates. Our loss from continuing operations for the fourth quarter of 2014 was $30.9 million, compared to $52.0 million in the prior-year period.
Acelity revenue for the year ended December 31, 2014, was $1.866 billion, up from the prior year by 7.7% as reported and 8.3% on a constant currency basis.
• AWT revenue was $1.420 billion, up 10.3% as reported and 11.1% on a constant currency basis, compared to the prior year. Year-over-year revenue growth was primarily the result of our acquisition of Systagenix in the fourth quarter of 2013. Excluding Systagenix, our AWT business declined 1.9% on a constant currency basis due primarily to lower average pricing resulting from increased competition, healthcare reform and declining reimbursement. Higher volumes from our North America NPWT business and continued growth in the fastest growing markets around the globe partially offset this decline.
• Regenerative Medicine revenue was $428.1 million, down 3.2% as reported and 3.1% on a constant currency basis, compared to the prior year. This decline was due primarily to reduced volumes in our hernia repair business, partially offset by growth in our breast reconstruction business and continued international growth.
Adjusted EBITDA from continuing operations for the year ended December 31, 2014, declined 0.8% to $712.1 million from $717.6 million in the prior year. On a constant currency basis, Adjusted EBITDA from continuing operations for the year endedDecember 31, 2014 declined 0.2%. Our loss from continuing operations for the year ended December 31, 2014 was $235.0 million compared to $555.1 million in the prior year.
Total cash at December 31, 2014, was $183.5 million. During 2014, Acelity generated cash of $91.8 million from operations, used cash of $78.3 million in investing activities and used cash of $28.7 million in financing activities.
As of December 31, 2014, total long-term debt outstanding was $4.84 billion and our Net Leverage Ratio2 was 6.2x.
The Company's key highlights include:
• Achieving double digit volume growth in U.S. AWT devices business;
• Attaining new record for AWT devices volumes in the fourth quarter of 2014;
• Delivering record PrevenaTM Incision Management System revenues on further market expansion;
• Recent clinical data on ABTheraTM Open Abdomen Negative Pressure Therapy published in the Annals of Surgery observed a greater than 50% reduction in 90-day mortality in patients who received ABThera versus the traditional Barker's vacuum- packing technique for treatment of the open abdomen;
• In October, Acelity announced the appointment of Greg Kayata as Senior Vice President, Human Resources;
• In November, Acelity announced the appointment of Thomas Casey as Executive Vice President and Chief Financial Officer;
• In December, Acelity announced the appointment of Gaurav S. Agarwal as Group President, Businesses and Innovation.
Acquisition of Systagenix
In the fourth quarter of 2013, we closed the acquisition of Systagenix, an established provider of advanced wound therapeutics products. Financial results of Systagenix are included within our consolidated financial statements for the period subsequent to the acquisition date. Combining Systagenix' advanced wound dressings with our KCI wound care business and innovation pipeline has enabled us to create additional value for customers by providing more complete solutions for patients and clinicians.
Transfer of SPY® Elite System Marketing and Distribution Rights
On October 29, 2014, LifeCell Corporation entered into an agreement with Novadaq® Technologies Inc. (“Novadaq”) to transfer all marketing and distribution rights to the SPY® Elite System from LifeCell to Novadaq, effective November 30, 2014. In connection with the transfer, the parties agreed to terminate various distribution agreements entered into between 2010 and 2011. The U.S. agreement for the core fields of plastic, general and gastrointestinal surgeries was set to expire in November 2015. The termination agreement provided for a one-time payment of $4.5 million to LifeCell on November 30, 2014, and the repurchase of existing inventory. These operations are classified as gain (loss) from discontinued operations, net of tax within the accompanying Condensed Consolidated Statements of Operations.
Acelity is a non-operating holding company whose business is comprised of the operations of wholly owned subsidiaries that commercialize our advanced wound therapeutics and regenerative medicine products. Our Advanced Wound Therapeutics business is conducted by KCI and its subsidiaries, including Systagenix, and our Regenerative Medicine business is conducted by LifeCell. Acelity is controlled by investment funds advised by Apax Partners and controlled affiliates of Canada Pension Plan Investment Board, the Public Sector Pension Investment Board and certain other co-investors. Unless otherwise noted in this report, the terms “we,” “our” or “Company,” refer to Acelity and its subsidiaries, collectively.
Non-GAAP Financial Information
Within this document, we have presented 1) Adjusted EBITDAfrom continuing operations, as defined in our senior secured credit agreement and 2) supplemental revenue and EBITDA data to exclude the impact of foreign currency fluctuations on a non-GAAP basis.
These non-GAAP financial measures do not replace the presentation of our GAAP results. We have provided this supplemental non-GAAP information because it may provide meaningful information regarding our results on a basis that better facilitates an understanding of our results of operations which may not be otherwise apparent under GAAP. Management uses this non-GAAPfinancial information, along with GAAPinformation, for reviewing the operating results of its business segments and for analyzing potential future business trends. In addition, we believe some investors may use this information in a similar fashion. A reconciliation of certain GAAP selected financial information for the periods presented to the non-GAAP selected financial information provided is included herein.
Click here to view the Condensed Consolidated Financial Statements and Supplemental Data .
1Adjusted EBITDA from continuing operations excludes the operations of our previously divested TSS business, the impact of our SPYElite business and the impact of merger-related expenses, foreign currency gains or losses, business optimization expenses and other expenses specified in the reconciliation within this release.
2 The Net Leverage Ratio represents Net Debt divided by Consolidated EBITDA for the last twelve months. Net Debt consists of total indebtedness including capital leases and other financing obligations, less cash and cash equivalents up to the greater of $300.0 million or 40% of Consolidated EBITDA for the last twelve months. Consolidated EBITDA, as defined in our senior secured credit agreement, represents Adjusted EBITDA from continuing operations plus "run rate" cost savings.