Hill-Rom Reports Fiscal Third Quarter Results; Announces Aspen Surgical Acquisition; Lowers Full Year Financial Outlook

-- Third quarter revenue of $406 million grew 6 percent versus prior year

BATESVILLE, Ind., July 25, 2012 /PRNewswire/ -- Hill-Rom Holdings, Inc. (NYSE: HRC) announced financial results for its fiscal third quarter ended June 30, 2012 and lowered its outlook for 2012. Adjusted earnings per diluted share increased 19 percent to $0.56 from $0.47 due to stronger sales and cost reduction initiatives.  Reported earnings per diluted share also increased to $0.37 from $0.02 in the prior year.  Adjustments in the current period include previously announced items related to business restructuring, a gain associated with a continuing vendor product recall, a charge related to a field corrective action and costs associated with recent acquisitions.  Adjustments in the prior year included a gain associated with a vendor product recall, restructuring charges and a litigation settlement.

Hill-Rom's quarterly revenue of $406 million increased 6 percent compared to last year or 9 percent on a constant currency basis.  Domestic revenue decreased 6 percent to $258 million, while revenue outside the United States increased 34 percent to $148 million in the same period.  Excluding the impact of foreign currency, Hill-Rom's international revenue increased 44 percent. 

In addition, the Company today announced its acquisition of Aspen Surgical Products, a manufacturer of surgical consumable products.

"While we achieved solid growth in revenue and earnings this quarter, North American and European economic and healthcare environments continue to be challenging.  We have experienced further deterioration in our North American capital business and have updated our outlook accordingly," stated John J. Greisch, President and CEO.  "We continue to implement operational improvements and are taking prudent steps to diversify our portfolio, as demonstrated by our acquisition of Aspen Surgical."

Financial and Operational Highlights

-- Third quarter revenue highlights include:

-- North America Acute Care.  North America Acute Care revenue declined 5 percent to $226 million.  Capital sales declined 5 percent due primarily to lower orders and shipments of patient support systems, while rental revenue declined 7 percent.  Patient support systems sales declined 12 percent.

-- International.  International segment revenue, which excludes Canada, increased 42 percent to $134 million, due primarily to growth in the Middle East and Eastern Europe and the impact of the Volker acquisition.  Segment revenue increased 54 percent on a constant currency basis.  Excluding Volker, International revenue increased 28 percent on a constant currency basis.

-- North America Post-Acute Care.  North America Post-Acute Care revenue declined 11 percent to $46 million.  Capital sales decreased 2 percent and rental revenue decreased 14 percent versus the prior year.  Revenue declined in all three businesses, primarily across Home Care and Respiratory Care.

-- Year to date operating cash flow was $187 million, compared to $189 million in the prior year.

-- Hill-Rom recognized a pre-tax charge of $16 million in the quarter for a field corrective action on one of its med-surg product lines related to an intermittent circuit board connection issue. This voluntary action by the Company does not limit the manufacture, sale or ongoing use of these beds.

Please see the attached schedules for additional information, including condensed financial information, summary balance sheet, cash flow statement and segment sales summaries. 

For a more complete review of Hill-Rom's results, please refer to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, which will be filed later this week.

Aspen Surgical Products Acquisition

Today, the Company announced the acquisition of Aspen Surgical Products.  Aspen Surgical provides a portfolio of well-established surgical consumable and specialty medical products, focused on improving the safety of patients and health care professionals. The product lines include market leading Bard-Parker® conventional and safety scalpels and blades, Colby fluid collection products, Richard-Allan™ specialty needles, a variety of other operating room disposables and instrument care products as well as wound care dressings. The acquisition of Aspen Surgical further develops Hill-Rom's surgical business, adding a portfolio of consumable products and expanding its position in North American and European surgical markets.  The transaction is expected to be accretive approximately $0.02 to fiscal year 2012 earnings per share, excluding non-recurring purchase accounting items and other acquisition and integration related costs.   

For further information, see the acquisition press release issued by the Company today.

Financial Guidance Summary

For the fourth quarter of fiscal 2012, Hill-Rom expects reported revenue of $413 to $421 million. This reflects organic constant currency revenue decline of 10 to 12 percent, adverse impact from foreign currency of approximately 3 percent and revenue from 2012 acquisitions of approximately $45 million.  Adjusted earnings per diluted share are expected to be $0.53 to $0.55 for the quarter. 

For the full year, Hill-Rom expects reported revenue of $1,615 to $1,623 million.  This reflects organic constant currency revenue decline of approximately 2 percent, adverse impact from foreign currency of approximately 2 percent and revenue from 2012 acquisitions of approximately $80 million.  Adjusted earnings per diluted share are expected to be $2.21 to $2.23 compared to prior guidance of $2.45 to $2.50.  Cash flow from operations for the full year is expected to be approximately $260 to $270 million compared with prior guidance of $290 to $300 million.

Hill-Rom Holdings, Inc. routinely provides earnings per share results and guidance on an adjusted basis because the Company's management believes that the presentation provides useful information to investors.  These measures exclude strategic developments, special charges and the impact of significant litigation or other unusual events.  Such items may be highly variable, difficult to predict and of a size that sometimes have substantial impact on the Company's reported operations for a period. Often, prospective quantification of such items is not feasible.  Management uses these measures internally for planning, forecasting and evaluating the performance of the business. Investors should consider non-GAAP measures in addition to, not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP.

Additional assumptions and discussion will be provided during the Company's conference call to be held tomorrow morning.  Information to access the webcast is provided below.

Conference Call Webcast and Dial-in Information

As previously announced, the company will host a conference call and webcast tomorrow morning on Thursday, July 26, 2012, at 8:00 a.m. ET.

Webcast: To join the live webcast with audio, go to http://ir.hill-rom.com/events.cfm or http://ir.hillrom.com/eventdetail.cfm?eventid=115107. The webcast slide deck will be posted to the Hill-Rom website prior to the webcast.

Conference Call Audio Only Dial-in information: To join the live conference call, dial 877-304-8969 domestic callers / 631-291-4543 international callers.  The following Confirmation Code is required for both: 90822300. Callers will need to provide their name, company affiliation and telephone number to the conference operator.  A recording of the webcast/call audio will be available for telephone replay through August 2, 2012, domestically at 855-859-2056 and internationally at 404-537-3406. For the replay, callers will need to use confirmation code 90822300. If you are unable to listen to the live webcast or the telephone replay, the webcast will be archived at http://ir.hill-rom.com/events.cfm.

ABOUT HILL-ROM HOLDINGS, INC.

Hill-Rom is a leading worldwide manufacturer and provider of medical technologies and related services for the health care industry, including patient support systems, safe mobility and handling solutions, non-invasive therapeutic products for a variety of acute and chronic medical conditions, medical equipment rentals, surgical products and information technology solutions.  Hill-Rom's comprehensive product and service offerings are used by health care providers across the health care continuum and around the world in hospitals, extended care facilities and home care settings to enhance the safety and quality of patient care.

Hill-Rom...enhancing outcomes for patients and their caregivers.

www.hill-rom.com

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements herein contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, regarding the Company's future plans, objectives, beliefs, expectations, representations and projections. It is important to note that forward-looking statements are not guarantees of future performance, and the Company's actual results could differ materially from those set forth in any forward-looking statements. For a more in depth discussion of factors that could cause actual results to differ from those contained in forward-looking statements, see the discussions under the heading "Risk Factors" in the Company's previously filed most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q. The Company assumes no obligation to update or revise any forward-looking statements.

 

Hill-Rom Holdings, Inc. and Subsidiaries

 Condensed Consolidated Statements of Income

 (Dollars in millions except per share data)

           
       

 Quarterly Period Ended June 30

 

 Year To Date Period Ended June 30

                     
       

2012

 

2011

 

2012

 

2011

Net revenues

               
 

Capital sales

 

$            300.6

 

$            267.2

 

$            868.1

 

$            802.7

 

Rental revenues

 

105.9

 

117.6

 

334.6

 

358.4

   

Total revenues

 

406.5

 

384.8

 

1,202.7

 

1,161.1

Cost of revenues

               
 

Cost of goods sold

 

188.1

 

145.4

 

505.1

 

436.0

 

Rental expenses

 

45.7

 

51.8

 

144.0

 

154.4

   

Total cost of revenues

 

233.8

 

197.2

 

649.1

 

590.4

Gross profit

               
 

Capital

 

112.5

 

121.8

 

363.0

 

366.7

 

Rental

 

60.2

 

65.8

 

190.6

 

204.0

   

Total gross profit

 

172.7

 

187.6

 

553.6

 

570.7

As a percentage of sales

 

42.5%

 

48.8%

 

46.0%

 

49.2%

                     

Research and development expenses

 

16.1

 

17.3

 

48.2

 

48.3

Selling and administrative expenses

 

120.5

 

124.6

 

366.3

 

375.1

Impairment of other intangibles

 

-

 

-

 

8.0

 

-

Litigation charge

 

-

 

42.3

 

-

 

42.3

Special charges

 

1.7

 

(1.2)

 

9.7

 

1.4

                     

Operating profit

 

34.4

 

4.6

 

121.4

 

103.6

                     

Other income/(expense), net

 

(1.0)

 

(1.0)

 

(2.8)

 

(4.5)

                     

Income tax expense

 

10.0

 

2.1

 

37.0

 

29.1

                     

Net income

 

23.4

 

1.5

 

81.6

 

70.0

                     
 

Less:  Net income attributable to noncontrolling interest

-

 

-

 

-

 

0.2

                     

Net income attributable to common shareholders

$              23.4

 

$                1.5

 

$              81.6

 

$              69.8

                     

Diluted earnings per share:

               
 

Earnings per share

 

$              0.37

 

$              0.02

 

$              1.31

 

$              1.09

                     

Average common shares outstanding - diluted (thousands)

62,570

 

64,211

 

62,423

 

64,139

                     

Dividends per common share

 

$           0.1250

 

$           0.1125

 

$           0.3625

 

$           0.3175

Non-GAAP Financial Disclosures and Reconciliations

While Hill-Rom reports financial results in accordance with U.S. GAAP, this press release includes non-GAAP measures. These non-GAAP measures are not in accordance with, nor are they a substitute for, GAAP measures. Hill-Rom uses the non-GAAP measures to evaluate and manage its operations and provides the information to assist investors in performing financial analysis that is consistent with financial models developed by research analysts. Investors should consider non-GAAP measures in addition to, not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP.

Hill-Rom Holdings, Inc. and Subsidiaries

Revenues - Constant Currency

(Dollars in millions)

                     
   

Quarterly Period Ended June 30

   

2012

 

Foreign Exchange

 

2012

 

2011

 

Constant Currency

   

As Reported

 

Impact

 

Adjusted

 

As Reported

 

Change

                     

Capital sales

 

$ 300.6

 

$ (9.5)

 

$ 310.1

 

$ 267.2

 

16.1%

Rental revenues

 

105.9

 

(1.5)

 

107.4

 

117.6

 

-8.7%

Total

 

$ 406.5

 

$ (11.0)

 

$ 417.5

 

$ 384.8

 

8.5%

                     
                     

Acute Care

 

$ 226.5

 

$ (0.5)

 

$ 227.0

 

$ 239.1

 

-5.1%

Post-Acute Care

 

46.0

 

-

 

46.0

 

51.6

 

-10.9%

International

 

134.0

 

(10.5)

 

144.5

 

94.1

 

53.6%

Total

 

$ 406.5

 

$ (11.0)

 

$ 417.5

 

$ 384.8

 

8.5%

                     
                     
   

Year To Date Period Ended June 30

   

2012

 

Foreign Exchange

 

2012

 

2011

 

Constant Currency

   

As Reported

 

Impact

 

Adjusted

 

As Reported

 

Change

                     

Capital sales

 

$ 868.1

 

$ (12.7)

 

$ 880.8

 

$ 802.7

 

9.7%

Rental revenues

 

334.6

 

(2.1)

 

336.7

 

358.4

 

-6.1%

Total

 

$ 1,202.7

 

$ (14.8)

 

$ 1,217.5

 

$ 1,161.1

 

4.9%

                     
                     

Acute Care

 

$ 700.5

 

$ (1.0)

 

$ 701.5

 

$ 708.5

 

-1.0%

Post-Acute Care

 

145.6

 

-

 

145.6

 

156.1

 

-6.7%

International

 

356.6

 

(13.8)

 

370.4

 

296.5

 

24.9%

Total

 

$ 1,202.7

 

$ (14.8)

 

$ 1,217.5

 

$ 1,161.1

 

4.9%

 

Hill-Rom Holdings, Inc. and Subsidiaries

Reconciliation: Earnings Per Share

(Dollars in millions except per share data)

                         
   

Quarterly Period Ended June 30, 2012

 

Quarterly Period Ended June 30, 2011

   

Income Before Income Taxes

 

Income Tax Expense

 

Diluted EPS**

 

Income Before Income Taxes

 

Income Tax Expense

 

Diluted EPS

                         

Reported Earnings

 

$             33.4

 

$            10.0

 

$            0.37

 

$               3.6

 

$             2.1

 

$            0.02

Adjustments:

                       

Vendor product recall

 

(1.7)

 

(0.7)

 

(0.02)

 

(0.6)

 

(0.2)

 

(0.01)

Acquisition and integration costs

 

1.9

 

0.7

 

0.02

 

-

 

-

 

-

Special charges

 

1.7

 

0.6

 

0.02

 

(1.2)

 

(0.3)

 

(0.01)

Field corrective action

 

16.0

 

5.9

 

0.16

 

-

 

-

 

-

Litigation charge

 

-

 

-

 

-

 

42.3

 

12.3

 

0.47

Adjusted Earnings

 

$             51.3

 

$            16.5

 

$            0.56

 

$             44.1

 

$            13.9

 

$            0.47

                         
                         
                         
   

Year To Date Period Ended June 30, 2012

 

Year To Date Period Ended June 30, 2011

   

Income Before Income Taxes

 

Income Tax Expense

 

Diluted EPS**

 

Income Before Income Taxes and NCI*

 

Income Tax Expense

 

Diluted EPS**

                         

Reported Earnings

 

$           118.6

 

$            37.0

 

$            1.31

 

$             99.1

 

$            29.1

 

$            1.09

Adjustments:

                       

Vendor product recall

 

(4.8)

 

(1.9)

 

(0.05)

 

(1.4)

 

(0.5)

 

(0.01)

Acquisition and integration costs

 

5.5

 

1.5

 

0.06

 

-

 

-

 

-

Special charges

 

9.7

 

3.6

 

0.10

 

1.4

 

0.7

 

0.01

Impairment of other intangibles

 

8.0

 

2.1

 

0.09

 

-

 

-

 

-

Field corrective action

 

16.0

 

5.9

 

0.16

 

-

 

-

 

-

Litigation charge

 

-

 

-

 

-

 

42.3

 

12.3

 

0.47

Adjusted Earnings

 

$           153.0

 

$            48.2

 

$            1.68

 

$           141.4

 

$            41.6

 

$            1.55

                         

* NCI refers to our noncontrolling interest in our former Encompass joint venture.

     

** May not add due to rounding.

       

 

Hill-Rom Holdings, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Dollars in millions)

             
             
       

June 30, 2012

 

September 30, 2011

Assets

         

Current Assets

       
 

Cash and cash equivalents

 

$                       220.0

 

$                       224.6

 

Trade accounts receivable, net of allowances

 

351.0

 

386.2

 

Inventories, net

 

106.7

 

95.6

 

Other current assets

 

81.2

 

85.3

   

Total current assets

 

758.9

 

791.7

             

Property, plant and equipment, net

 

227.2

 

222.8

Goodwill

 

121.2

 

87.2

Other assets

 

193.1

 

197.4

             

Total Assets

 

$                    1,300.4

 

$                    1,299.1

             

Liabilities

       

Current Liabilities

       
 

Trade accounts payable

 

$                         61.5

 

$                         64.8

 

Short-term borrowings

 

45.0

 

100.3

 

Other current liabilities

 

165.7

 

168.9

   

Total current liabilities

 

272.2

 

334.0

             

Long-term debt

 

50.0

 

50.8

Other long-term liabilities

 

167.2

 

172.6

             

Total Liabilities

 

489.4

 

557.4

             

Shareholders' Equity

 

811.0

 

741.7

             

Total Liabilities and Shareholders' Equity

 

$                    1,300.4

 

$                    1,299.1

 

Hill-Rom Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Dollars in millions)

             
       

Year To Date Period Ended June 30

             
       

2012

 

2011

Operating Activities

       
 

Net income

 

$ 81.6

 

$ 70.0

 

Adjustments to reconcile net income to net cash provided by

       
 

operating activities:

       
   

Depreciation and amortization

 

80.7

 

78.1

   

Provision for deferred income taxes

 

(9.9)

 

1.8

   

Loss on disposal of property, equipment leased to others,

       
   

intangible assets and impairments

 

7.7

 

1.7

   

Stock compensation

 

9.0

 

9.2

   

Litigation charge

 

-

 

42.3

   

Excess tax benefits from employee stock plans

 

(1.3)

 

(6.8)

   

Change in working capital excluding cash, current investments,

       
   

current debt and acquisitions and dispositions:

       
   

Trade accounts receivable

 

46.0

 

12.6

   

Inventories

 

(1.4)

 

(0.6)

   

Other current assets

 

9.3

 

5.8

   

Trade accounts payable

 

(11.8)

 

(20.0)

   

Accrued expenses and other liabilities

 

(16.7)

 

(10.6)

   

Other, net

 

(5.8)

 

5.7

Net cash provided by operating activities

 

187.4

 

189.2

             

Investing Activities

       
 

Capital expenditures and purchase of intangibles

 

(55.9)

 

(52.0)

 

Proceeds on sales of property and equipment leased to others

 

7.1

 

5.2

 

Payment for acquisition of business, net of cash acquired

 

(77.0)

 

-

 

Proceeds on investment sales and maturities

 

4.5

 

0.4

Net cash used in investing activities

 

(121.3)

 

(46.4)

             

Financing Activities

       
 

Change in short-term debt

 

(7.8)

 

1.8

 

Payment of long-term debt

 

(47.5)

 

-

 

Purchase of noncontrolling interest

 

(1.3)

 

(11.5)

 

Payment of cash dividends

 

(22.5)

 

(20.0)

 

Proceeds on exercise of options

 

6.2

 

42.0

 

Proceeds from stock issuance

 

2.2

 

2.1

 

Excess tax benefits from employee stock plans

 

1.3

 

6.8

 

Treasury stock acquired

 

(1.8)

 

(70.0)

Net cash used in financing activities

 

(71.2)

 

(48.8)

             

Effect of exchange rate changes on cash

 

0.5

 

4.0

             

Total Cash Flows

 

(4.6)

 

98.0

             

Cash and Cash Equivalents:

       
 

At beginning of period

 

224.6

 

184.5

 

At end of period

 

$ 220.0

 

$ 282.5

             

SOURCE Hill-Rom Holdings, Inc.