October 24, 2012

Hill-Rom Reports Fiscal Fourth Quarter And Full Year Results; Announces 2013 Financial Outlook

BATESVILLE, Ind., Oct. 24, 2012 /PRNewswire/ -- 

  • Fourth quarter revenue of $432 million was flat versus prior year
  • Adjusted diluted earnings per share for the fourth quarter decreased 22 percent to $0.56 compared to $0.72 in the prior year
  • Reported diluted earnings per share for the fourth quarter decreased 38 percent to $0.63 compared to $1.01 in the prior year
  • Full year revenue of $1,634 million increased 3 percent versus the prior year
  • Adjusted diluted earnings per share for the full year decreased 1 percent to $2.24 compared to $2.27 in the prior year
  • Reported diluted earnings per share for the full year decreased 7 percent to $1.94 compared to $2.09 in the prior year
  • Adjusted EBITDA for the full year of $324 million compares to $318 million in the prior year, an increase of 2 percent
  • Financial guidance: Full year reported revenue is expected to increase 7 to 8 percent (no impact from currency at current rates) with adjusted earnings per diluted share of $2.12 to $2.22, excluding $0.17 resulting from the estimated impact of the U.S. Medical Device excise tax; Full year adjusted EBITDA is expected to be $315 million to $325 million

Hill-Rom Holdings, Inc. (NYSE: HRC) announced financial results for its fiscal fourth quarter ended September 30, 2012 and provided its initial outlook for 2013.  Adjusted earnings per diluted share decreased 22 percent to $0.56 from $0.72 due to lower gross margin, driven by adverse product mix, and increased investment in research and development.  Reported earnings per diluted share also decreased to $0.63 from $1.01 in the prior year.   Adjustments relate to business restructuring, gains associated with a vendor product recall, costs associated with recent acquisitions, litigation items and non-recurring tax matters.  See detail in schedule provided.

Hill-Rom's quarterly reported revenue of $432 million was flat compared to last year, but increased 2.3 percent on a constant currency basis.  Domestic revenue decreased 8 percent to $286 million, while revenue outside the United States increased 20 percent to $146 million in the same period (27 percent on a constant currency basis). 

For the full year, revenue was $1,634 million compared to $1,592 million for the prior year, an increase of 3 percent on an as reported basis and 4 percent on a constant currency basis.  Adjusted earnings per diluted share for fiscal 2012 were $2.24 compared to $2.27 in 2011, a decrease of 1 percent.  Reported earnings per diluted share for the full year were $1.94 compared to $2.09 for the prior year, a decrease of 7 percent.

Management Comments

"Despite a year that was more challenging than expected, we made two strategically significant acquisitions—Volker and Aspen Surgical—while  returning approximately 30 percent of our operating cash flow to shareholders," stated John J. Greisch, President & CEO.  "While our fiscal 2013 outlook assumes continued weakness in the macro environment, we plan to maintain our disciplined capital allocation strategy in order to increase shareholder value."

Financial and Operational Highlights

-- Fourth quarter revenue highlights reflect the previously announced reclassification of segments:

-- North America.  This segment includes most of our former North America Acute Care segment, combined with our North America Post-Acute Extended Care and Home Care businesses.  North America revenue declined 14 percent to $250 million.  Capital sales declined 16 percent due primarily to lower orders and shipments of patient support systems, while rental revenue declined 10 percent.  Patient support systems sales increased sequentially 7 percent, but declined 24 percent compared to the prior year due to an extraordinarily large sale recorded in the fourth quarter of 2011.  Excluding the effects of that sale, patient support systems declined 9 percent versus last year.   

-- International.  International segment revenue, which excludes Canada, increased 20 percent to $126 million, due primarily to the impact of the Volker acquisition, along with growth in Latin America and Australia.  Segment revenue increased 28 percent on a constant currency basis.  Excluding Volker, International revenue increased 8 percent on a constant currency basis.

-- Surgical/Respiratory Care.  This segment comprises our Allen Medical, Respiratory Care and Aspen Surgical businesses.  Surgical/Respiratory Care revenue increased 63 percent to $56 million.  Capital sales increased 155 percent and rental revenue decreased 15 percent versus the prior year.  Excluding Aspen Surgical, segment revenue decreased 4 percent.

-- Full year operating cash flow was $262 million, compared to $223 million in the prior year.

-- Adjusted EBITDA for the year was $324 million, compared to $318 million in the prior year.

-- Consistent with its previously announced capital deployment strategy, the Company announced the expansion of its share repurchase authorization by 3.5 million shares. 

-- In keeping with its commitment to optimize its portfolio, Hill-Rom implemented a plan to exit from certain portions of its Home Care business. 

Please see the attached schedules for additional information, including condensed financial information, summary balance sheet, cash flow statement and reconciliations of GAAP to adjusted financial measures. 

For a more complete review of Hill-Rom's results, please refer to our Annual Report on Form 10-K for the year ended September 30, 2012, which will be filed in November.

Financial Guidance Summary

For full year fiscal 2013, Hill-Rom expects reported revenue growth of 7 to 8 percent.  This reflects:

  • organic constant currency revenue decline of 1 to 2 percent;
  • no currency impact at current rates; and
  • incremental revenue from fiscal 2012 acquisitions of approximately $145 million.

Adjusted earnings per diluted share are expected to be $1.95 to $2.05 for the full year, including approximately $0.17 per share associated with the implementation of the medical device excise tax effective January 1, 2013.  Excluding this cost, adjusted earnings per diluted share would be $2.12 to $2.22.

Cash flow from operations for the full year is expected to be approximately $265 to $275 million and adjusted EBITDA is expected to be approximately $315 to $325 million.

For the first quarter of fiscal 2013, Hill-Rom expects reported revenue growth of 9 to 10 percent.  This reflects:

  • organic constant currency revenue decline of 3 to 4 percent;
  • adverse impact from foreign currency of approximately 1 percent; and
  • incremental revenue from fiscal 2012 acquisitions of approximately $55 million

Adjusted earnings per diluted share are expected to be $0.43 to $0.45 for the quarter. 

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.

Discussion of Adjusted Financial Measures

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.  In addition, we are providing adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA).  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.

Reconciliations of GAAP measures to adjusted measures appear in the financial tables of this release.

Conference Call Webcast and Dial-in Information

As previously announced, the Company will host a conference call and webcast tomorrow morning on Thursday, October 25, 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=119138. 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: 33260102. 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 November 1, 2012, domestically at 855-859-2056 and internationally at 404-537-3406. For the replay, callers will need to use confirmation code 33260102. 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) 

 
             
       

 Quarter Ended September 30 

 

 Year Ended September 30 

 
                       
       

2012

 

2011

 

2012

 

2011

 

Net revenues

                 
 

Capital sales

 

$                330.1

 

$                316.3

 

$             1,198.2

 

$             1,119.0

 
 

Rental revenues

 

101.5

 

114.3

 

436.1

 

472.7

 
   

Total revenues

 

431.6

 

430.6

 

1,634.3

 

1,591.7

 

Cost of revenues

                 
 

Cost of goods sold

 

185.3

 

170.8

 

690.4

 

606.8

 
 

Rental expenses

 

45.2

 

49.2

 

189.2

 

203.6

 
   

Total cost of revenues

 

230.5

 

220.0

 

879.6

 

810.4

 

Gross profit

                 
 

Capital

 

144.8

 

145.5

 

507.8

 

512.2

 
 

Rental

 

56.3

 

65.1

 

246.9

 

269.1

 
   

Total gross profit

 

201.1

 

210.6

 

754.7

 

781.3

 

As a percentage of sales

 

46.6%

 

48.9%

 

46.2%

 

49.1%

 
                       

Research and development expenses

 

18.7

 

15.5

 

66.9

 

63.8

 

Selling and administrative expenses

 

130.1

 

126.9

 

496.4

 

502.0

 

Impairment of other intangibles

 

-

 

-

 

8.0

 

-

 

Litigation (credit) charge

 

(3.6)

 

5.0

 

(3.6)

 

47.3

 

Special charges

 

8.5

 

-

 

18.2

 

1.4

 
                       

Operating profit

 

47.4

 

63.2

 

168.8

 

166.8

 
                       

Other income/(expense), net

 

(2.5)

 

(2.6)

 

(5.3)

 

(7.1)

 
                       

Income tax expense (benefit)

 

5.7

 

(2.9)

 

42.7

 

26.2

 
                       

Net income 

 

39.2

 

63.5

 

120.8

 

133.5

 
                       
 

Less:  Net income attributable to noncontrolling interest

-

 

-

 

-

 

0.2

 
                       

Net income attributable to common shareholders

 

$                  39.2

 

$                  63.5

 

$                120.8

 

$                133.3

 
                       

Diluted earnings per share:

                 
 

Earnings per share 

 

$                  0.63

 

$                  1.01

 

$                  1.94

 

$                  2.09

 
                       

Average common shares outstanding - diluted (thousands)

62,318

 

63,117

 

62,361

 

63,899

 
                       

Dividends per common share

 

$              0.1250

 

$              0.1125

 

$              0.4875

 

$              0.4300

 

 

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)

                     
   

Quarter Ended September 30

   

2012

 

Foreign Exchange 

 

2012

 

2011

 

Constant Currency

   

As Reported

 

Impact

 

Adjusted

 

As Reported

 

Change

                     

Capital sales

 

$                330.1

 

$                  (7.4)

 

$                337.5

 

$                316.3

 

6.7%

Rental revenues

 

101.5

 

(1.3)

 

102.8

 

114.3

 

-10.1%

Total

 

$                431.6

 

$                  (8.7)

 

$                440.3

 

$                430.6

 

2.3%

                     
                     

North America

 

$                249.7

 

$                      -

 

$                249.7

 

$                291.4

 

-14.3%

Surgical and Respiratory Care

 

55.6

 

-

 

55.6

 

34.1

 

63.0%

International 

 

126.3

 

(8.7)

 

135.0

 

105.1

 

28.4%

Total 

 

$                431.6

 

$                  (8.7)

 

$                440.3

 

$                430.6

 

2.3%

                     
                     
   

Year Ended September 30

   

2012

 

Foreign Exchange 

 

2012

 

2011

 

Constant Currency

   

As Reported

 

Impact

 

Adjusted

 

As Reported

 

Change

                     

Capital sales

 

$             1,198.2

 

$                 (20.1)

 

$             1,218.3

 

$             1,119.0

 

8.9%

Rental revenues

 

436.1

 

(3.4)

 

439.5

 

472.7

 

-7.0%

Total

 

$             1,634.3

 

$                 (23.5)

 

$             1,657.8

 

$             1,591.7

 

4.2%

                     
                     

North America

 

$                998.2

 

$                  (1.0)

 

$                999.2

 

$             1,057.2

 

-5.5%

Surgical and Respiratory Care

 

153.2

 

-

 

153.2

 

132.9

 

15.3%

International 

 

482.9

 

(22.5)

 

505.4

 

401.6

 

25.8%

Total 

 

$             1,634.3

 

$                 (23.5)

 

$             1,657.8

 

$             1,591.7

 

4.2%

 

Hill-Rom Holdings, Inc. and Subsidiaries

Reconciliation: Earnings Per Share

(Dollars in millions except per share data)

                         
   

Quarter Ended September 30, 2012

 

Quarter Ended September 30, 2011

   

Income Before Income Taxes

 

Income Tax Expense

 

Diluted EPS

 

Income Before Income Taxes 

 

Income Tax Expense

 

Diluted EPS

                         

Reported Earnings

 

$             44.9

 

$              5.7

 

$                0.63

 

$             60.6

 

$            (2.9)

 

$            1.01

Adjustments:

                       

Vendor product recall

 

(1.7)

 

(0.6)

 

(0.02)

 

(0.9)

 

(0.4)

 

(0.01)

Acquisition and integration costs

 

6.2

 

1.4

 

0.08

 

1.0

 

0.4

 

0.01

Special charges

 

8.5

 

3.2

 

0.09

 

-

 

(0.2)

 

-

Litigation charge (credit)

 

(3.6)

 

(1.3)

 

(0.04)

 

5.0

 

1.9

 

0.05

International tax restructuring and recognition of

                       

unrecognized tax attributes

 

-

 

11.0

 

(0.18)

 

-

 

21.5

 

(0.34)

Adjusted Earnings

 

$             54.3

 

$            19.4

 

$                0.56

 

$             65.7

 

$            20.3

 

$            0.72

                         
                         
                         
   

Year Ended September 30, 2012

 

Year Ended September 30, 2011

   

Income Before Income Taxes  

 

Income Tax Expense

 

Diluted EPS (1)

 

Income Before Income Taxes and NCI (1) (2)

 

Income Tax Expense (1)

 

Diluted EPS

                         

Reported Earnings

 

$            163.5

 

$            42.7

 

$                1.94

 

$            159.7

 

$            26.2

 

$            2.09

Adjustments:

                       

Vendor product recall

 

(6.5)

 

(2.5)

 

(0.06)

 

(2.3)

 

(0.9)

 

(0.02)

Acquisition and integration costs

 

11.7

 

2.9

 

0.14

 

1.0

 

0.4

 

0.01

Special charges

 

18.2

 

6.8

 

0.18

 

1.4

 

0.5

 

0.01

Impairment of other intangibles

 

8.0

 

2.1

 

0.09

 

-

 

-

 

-

Field corrective action

 

16.0

 

5.9

 

0.16

 

-

 

-

 

-

Litigation charge (credit)

 

(3.6)

 

(1.3)

 

(0.04)

 

47.3

 

14.2

 

0.52

International tax restructuring and recognition of

                       

unrecognized tax attributes

 

-

 

11.0

 

(0.18)

 

-

 

21.5

 

(0.34)

Adjusted Earnings

 

$            207.3

 

$            67.6

 

$                2.24

 

$            207.2

 

$            61.8

 

$            2.27

                         
                         

(1) May not add due to rounding.

                   

(2) NCI refers to our noncontrolling interest in our former Encompass joint venture.

           
                         
                         
                         
                         
   

Reconciliation: Adjusted EBITDA

       
   

(Dollars in millions)

       
                         
   

 Quarter Ended September 30 

 

 Year Ended September 30 

       
   

2012

 

2011

 

2012

 

2011

       
                         

Adjusted income before income taxes and NCI

 

$             54.3

 

$            65.7

 

$              207.3

 

$            207.2

       

Add back:

                       

Other expense

 

2.5

 

2.6

 

5.3

 

7.1

       

Depreciation and amortization

 

31.0

 

25.8

 

111.7

 

103.9

       

Adjusted EBITDA

 

$             87.8

 

$             94.1

 

$             324.3

 

$             318.2

       

 

Hill-Rom Holdings, Inc. and Subsidiaries

 

Condensed Consolidated Balance Sheets

 

(Dollars in millions)

 
               
               
       

September 30, 2012

 

September 30, 2011

 

Assets

           

Current Assets

         
 

Cash and cash equivalents

 

$                         84.3

 

$                       224.6

 
 

Trade accounts receivable, net of allowances

 

392.6

 

386.2

 
 

Inventories, net

 

126.9

 

95.6

 
 

Other current assets

 

78.0

 

85.3

 
   

Total current assets

 

681.8

 

791.7

 
               

Property, plant and equipment, net

 

250.1

 

222.8

 

Goodwill

 

335.2

 

87.2

 

Other assets

 

360.5

 

197.4

 
               

Total Assets

 

$                     1,627.6

 

$                     1,299.1

 
               

Liabilities

         

Current Liabilities

         
 

Trade accounts payable

 

$                         80.7

 

$                         64.8

 
 

Short-term borrowings

 

115.2

 

100.3

 
 

Other current liabilities

 

182.2

 

168.9

 
   

Total current liabilities

 

378.1

 

334.0

 
               

Long-term debt

 

237.5

 

50.8

 

Other long-term liabilities

 

199.4

 

172.6

 
               

Total Liabilities

 

815.0

 

557.4

 
               

Shareholders' Equity

 

812.6

 

741.7

 
               

Total Liabilities and Shareholders' Equity

 

$                     1,627.6

 

$                     1,299.1

 

 

Hill-Rom Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Dollars in millions)

             
       

 Year Ended September 30 

             
       

2012

 

2011

Operating Activities

       
 

Net income 

 

$                       120.8

 

$                       133.5

 

Adjustments to reconcile net income to net cash provided by

       
 

   operating activities:

       
   

Depreciation and amortization

 

111.7

 

103.9

   

Provision for deferred income taxes

 

(32.3)

 

(21.5)

   

Loss on disposal of property, equipment leased to others,

       
   

       intangible assets and impairments

 

8.1

 

1.3

   

Stock compensation

 

11.6

 

12.2

   

Tax settlement

 

-

 

(4.9)

   

Defined benefit plan funding

 

(1.6)

 

(1.4)

   

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

 

20.1

 

(24.7)

   

Inventories

 

4.4

 

14.7

   

Other current assets

 

20.9

 

14.4

   

Trade accounts payable

 

0.3

 

(18.0)

   

Accrued expenses and other liabilities

 

(6.1)

 

10.0

   

Other, net

 

5.1

 

9.8

Net cash provided by operating activities

 

261.7

 

222.5

             

Investing Activities

       
 

Capital expenditures and purchase of intangibles

 

(77.8)

 

(68.9)

 

Proceeds on sales of property and equipment leased to others

 

10.6

 

5.9

 

Payment for acquisition of businesses, net of cash acquired

 

(476.8)

 

(15.5)

 

Proceeds on investment sales and maturities

 

4.5

 

0.5

Net cash used in investing activities

 

(539.5)

 

(78.0)

             

Financing Activities

       
 

Net change in short-term debt

 

(7.8)

 

(0.4)

 

Net change in revolver

 

60.0

 

(0.2)

 

Proceeds from long-term debt

 

200.0

 

-

 

Payment of long-term debt

 

(50.0)

 

-

 

Debt issuance costs

 

(2.6)

 

-

 

Purchase of noncontrolling interest

 

(1.6)

 

(11.8)

 

Payment of cash dividends

 

(30.1)

 

(27.0)

 

Proceeds on exercise of options

 

7.7

 

43.1

 

Proceeds from stock issuance

 

2.9

 

2.9

 

Excess tax benefits from employee stock plans

 

1.3

 

6.8

 

Treasury stock acquired

 

(44.2)

 

(115.3)

Net cash provided by (used in) financing activities

 

135.6

 

(101.9)

             

Effect of exchange rate changes on cash

 

1.9

 

(2.5)

             

Total Cash Flows

 

(140.3)

 

40.1

             

Cash and Cash Equivalents:

       
 

At beginning of period

 

224.6

 

184.5

 

At end of period

 

$                         84.3

 

$                       224.6

             

 

SOURCE Hill-Rom Holdings, Inc.

 


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