February 1, 2016

Hill-Rom Reports Strong First Quarter Results Exceeding Previous Guidance and Increases Full Year Earnings Outlook

-- Reported revenue increased 42 percent from prior year to $661 million, driven by the Welch Allyn acquisition and 3 percent organic constant currency growth
-- Adjusted operating margin of 13.2 percent increased 430 basis points compared to the prior year
-- Adjusted diluted earnings per share of $0.68 increased 39 percent compared to $0.49 in the prior year
-- Reported diluted earnings per share of $0.07 decreased 67 percent compared to $0.21 in the prior year
-- Operating cash flow increased to $46 million from $31 million in the prior year
-- Fiscal year 2016 adjusted earnings per share are now expected to be $3.24 to $3.30; Full-year reported revenue is expected to be between $2.66 and $2.70 billion

CHICAGO, Feb. 1, 2016 /PRNewswire/ -- Hill-Rom Holdings, Inc., (NYSE: HRC) announced financial results for its first quarter ended December 31, 2015, and updated its fiscal year 2016 financial outlook.  Adjusted earnings per diluted share of $0.68 represent an increase of 39 percent from $0.49 in the prior year, while reported earnings per diluted share decreased 67 percent from $0.21 to $0.07. Adjustments to reported earnings are detailed in the reconciliation schedules provided.

Hill-Rom's quarterly revenue of $661 million increased 42 percent compared to last year, or 47 percent on a constant currency basis, primarily due to the Welch Allyn acquisition and strong growth in North America.   Excluding Welch Allyn, constant currency revenue growth was 3 percent. Domestic revenue was $443 million, up 56 percent, while revenue outside the United States of $218 million increased 34 percent on a constant currency basis.     

Management Comments

"We are pleased to report another quarter of strong revenue and adjusted earnings growth and an improved full year outlook," said John J. Greisch, Hill-Rom's president and CEO. "We demonstrated solid execution of our plan to drive significant margin expansion, delivering a 430 basis point increase in adjusted operating margin this quarter. Our revenue performance in North America and Welch Allyn were ahead of our expectations, more than offsetting the challenges we continue to face in our international business."

First Quarter Highlights

-- Revenue:

-- North America. North America revenue increased 11 percent to $249 million. On a constant currency basis, capital sales increased 11 percent, while rental revenue increased 12 percent. 

-- Welch Allyn. Welch Allyn revenue was $198 million, which on a pro-forma basis represents approximately 7 percent constant currency growth year over year.

-- Surgical/Respiratory Care. Surgical and Respiratory Care revenue of $121 million was flat on a constant currency basis, or down 5 percent on a reported basis.

-- International. International segment revenue of $94 million was down 9 percent on a constant currency basis and 17 percent on a reported basis. 

-- Adjusted operating margin increased 430 basis points to 13.2 percent.

-- First quarter operating cash flow increased to $46 million from $31 million in the prior year.

-- On January 21, Hill-Rom and Intuitive Surgical announced U.S. FDA clearance for Integrated Table Motion, which seamlessly synchronizes the movements of the da Vinci® Xi®, Intuitive Surgical's latest robotic-assisted surgical system, and Trumpf Medical's advanced operating table, the TruSystem® 7000dv. Integrated Table Motion allows surgeons and anesthesiologists the real-time ability to reposition the operating table with the surgical robotic arms docked, a first-of-its-kind innovation.  

Please see the attached schedules for additional information and reconciliations of GAAP to adjusted financial measures. 

For a more complete review of Hill-Rom's results, please refer to the company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2015.

Financial Guidance Summary

Revenue: For fiscal 2016, Hill-Rom expects reported revenue to be between $2.66 and $2.70 billion. This reflects:

  • low- to mid-single-digit constant currency organic growth;
  • mid-single digit pro-forma constant currency growth from Welch Allyn, compared to 3 to 5 percent previously; and
  • negative currency impact of 2 to 3 percent at current rates, compared to 1 to 2 percent previously.

For the second quarter of fiscal 2016, Hill-Rom expects reported revenue to be between $645 and $655 million. This reflects:

  • low- to mid-single-digit constant currency organic growth;
  • negative currency impact of 1 to 2 percent at current rates.

Adjusted Earnings per Diluted Share: The company expects full year adjusted earnings per diluted share to be $3.24 to $3.30, compared to $3.08 to $3.14 previously.  

Second quarter adjusted earnings per diluted share are expected to be $0.68 to $0.70

Cash Flow: Hill-Rom expects cash flow from operations for the full year to be approximately $315 million, which includes non-recurring outflows related to our ongoing restructuring and integration activities. Capital expenditures are expected to be approximately $110 to $120 million.

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. This measure excludes strategic developments, acquisition and integration costs, special charges 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. 

The company also excludes expenses associated with the amortization of intangible assets associated with prior business acquisitions. This adjustment is made to allow investors to evaluate and understand operating trends excluding the non-cash impact of acquired intangible amortization on operating income, earnings per share and other measures.    

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 today at 8:00 a.m. ET.

Webcast: To join the live webcast with audio on February 1, visit http://edge.media-server.com/m/p/ogipjy6m. 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: 11376288. 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 February 6, 2016. To access the replay, dial 855-859-2056 domestic callers / 404-537-3406 international callers. For the replay, callers will need to use confirmation code 11376288. 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 global medical technology company with 10,000 employees worldwide. We partner with health care providers in more than 100 countries by focusing on patient care solutions that improve clinical and economic outcomes in five core areas: Advancing Mobility, Wound Care and Prevention, Clinical Workflow, Surgical Safety and Efficiency, and Respiratory Health. Around the world, Hill-Rom's people, products, and programs work towards one mission: 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) 

 (unaudited) 

 
     
       

 Quarter Ended December 31 

 
               
       

2015

 

2014

 

Net revenue

         
 

Capital sales

 

$                565.1

 

$                373.4

 
 

Rental revenue

 

96.1

 

91.6

 
   

Total revenue

 

661.2

 

465.0

 

Cost of revenue

         
 

Cost of goods sold

 

323.1

 

220.5

 
 

Rental expenses

 

47.4

 

44.6

 
   

Total cost of revenue

 

370.5

 

265.1

 

Gross profit

         
 

Capital

 

242.0

 

152.9

 
 

Rental

 

48.7

 

47.0

 
   

Total gross profit

 

290.7

 

199.9

 

As a percentage of sales

 

44.0%

 

43.0%

 
               

Research and development expenses

 

33.6

 

21.8

 

Selling and administrative expenses

 

221.2

 

155.1

 

Special charges

 

7.1

 

3.7

 
               

Operating profit 

 

28.8

 

19.3

 
               

Other income/(expense), net

 

(23.0)

 

(2.3)

 
               

Income tax expense

 

1.5

 

4.9

 
               
               

Net income

 

4.3

 

12.1

 
               

Less:  Net loss attributable to noncontrolling interests

(0.5)

 

-

 
               

Net income attributable to common shareholders

$                   4.8

 

$                  12.1

 
               

Diluted earnings per share:

         
 

Earnings per share 

 

$                  0.07

 

$                  0.21

 
               

Average common shares outstanding - diluted (thousands)

66,274

 

58,154

 
               

Dividends per common share

 

$              0.1600

 

$              0.1525

 
               

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. Hill-Rom uses 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

Revenue - Constant Currency

(Dollars in millions)

 
                     
   

Quarter Ended December 31

   

2015

 

Foreign Exchange 

 

2015

 

2014

 

Constant Currency

   

As Reported

 

Impact

 

Adjusted

 

As Reported

 

Change

                     

Capital sales

 

$                565.1

 

$                 (22.0)

 

$                587.1

 

$                373.4

 

57.2%

Rental revenue

 

96.1

 

(1.4)

 

97.5

 

91.6

 

6.4%

Total

 

$                661.2

 

$                 (23.4)

 

$                684.6

 

$                465.0

 

47.2%

                     
                     

North America 

 

$                248.9

 

$                  (1.3)

 

$                250.2

 

$                225.2

 

11.1%

Surgical and Respiratory Care

 

120.6

 

(6.1)

 

126.7

 

126.3

 

0.3%

International 

 

93.7

 

(9.8)

 

103.5

 

113.5

 

-8.8%

Welch Allyn

 

198.0

 

(6.2)

 

204.2

 

-

 

 N/M 

Total 

 

$                661.2

 

$                 (23.4)

 

$                684.6

 

$                465.0

 

47.2%

                     
                     
                     

N/M - Not Meaningful

                   
                     

 

 

 

Hill-Rom Holdings, Inc. and Subsidiaries

Reconciliation: Earnings Per Share

(Dollars in millions except per share data)

 
                                     
   

Quarter Ended December 31, 2015

 

Quarter Ended December 31, 2014

   

Operating Margin1

 

Income Before Income Taxes

 

Income Tax Expense

 

NCI

 

Diluted EPS1

 

Operating Margin

 

Income Before Income Taxes

 

Income Tax Expense

 

Diluted EPS

                                     

GAAP Basis

 

4.4%

 

$       5.8

 

$       1.5

 

$      (0.5)

 

$     0.07

 

4.2%

 

$     17.0

 

$       4.9

 

$     0.21

Adjustments:

                                   

Acquisition and integration costs

 

3.9%

 

25.8

 

7.6

 

-

 

0.27

 

1.9%

 

8.9

 

2.8

 

0.10

Acquisition-related intangible asset amortization

 

3.7%

 

24.2

 

8.3

 

-

 

0.24

 

1.7%

 

8.1

 

2.2

 

0.10

FDA remediation expenses

 

-

 

-

 

-

 

-

 

-

 

0.1%

 

0.5

 

0.2

 

0.01

Field corrective actions

 

0.2%

 

1.1

 

0.2

 

-

 

0.01

 

0.2%

 

1.1

 

0.5

 

0.01

Special charges

 

1.1%

 

7.1

 

2.0

 

-

 

0.08

 

0.8%

 

3.7

 

0.2

 

0.06

                                     

Adjusted Basis

 

13.2%

 

$     64.0

 

$     19.6

 

$      (0.5)

 

$     0.68

 

8.9%

 

$     39.3

 

$     10.8

 

$     0.49

                                     

1Does not add due to rounding.

                                   

NCI = Net loss attributable to noncontrolling interests

                                   
                                     

 

 

Hill-Rom Holdings, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Dollars in millions)

(unaudited)

             
       

December 31, 2015

 

September 30, 2015

Assets

         

Current Assets

       
 

Cash and cash equivalents

 

$                       174.4

 

$                       192.8

 

Trade accounts receivable, net of allowances

 

460.6

 

494.7

 

Inventories, net

 

248.9

 

267.4

 

Other current assets

 

105.4

 

186.1

   

Total current assets

 

989.3

 

1,141.0

             

Property, plant and equipment, net

 

375.3

 

378.4

Intangible assets:

       
 

Goodwill

 

1,607.8

 

1,610.5

 

Software and other, net

 

1,221.6

 

1,247.7

Other assets

 

77.6

 

80.0

             

Total Assets

 

$                    4,271.6

 

$                    4,457.6

             

Liabilities

       

Current Liabilities

       
 

Trade accounts payable

 

$                       114.7

 

$                       136.3

 

Short-term borrowings

 

64.4

 

58.0

 

Other current liabilities

 

314.3

 

384.5

   

Total current liabilities

 

493.4

 

578.8

             

Long-term debt

 

2,136.2

 

2,175.2

Other long-term liabilities

 

495.8

 

546.7

             

Total Liabilities

 

3,125.4

 

3,300.7

             

Total Shareholders' Equity Attributable to Common Shareholders

 

1,136.7

 

1,146.9

             

Noncontrolling interests

 

9.5

 

10.0

             

Total Shareholders' Equity

 

1,146.2

 

1,156.9

             

Total Liabilities and Shareholders' Equity

 

$                    4,271.6

 

$                    4,457.6

             

 

 

Hill-Rom Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Dollars in millions)

(unaudited)

       

 Quarter Ended December 31 

             
       

2015

 

2014

Operating Activities

       
 

Net income 

 

$                          4.3

 

$                         12.1

 

Adjustments to reconcile net income to net cash provided by

       
 

   operating activities:

       
   

Depreciation

 

23.6

 

17.3

   

Amortization

 

4.3

 

2.9

   

Acquisition-related intangible asset amortization

 

24.2

 

8.1

   

Provision for deferred income taxes

 

22.3

 

0.3

   

Loss (gain) on disposal of property, equipment leased to others,

       
   

       intangible assets and impairments

 

0.7

 

(0.3)

   

Stock compensation

 

5.0

 

4.7

   

Excess tax benefits from employee stock plans

 

(1.0)

 

(1.0)

   

Change in working capital excluding cash, current debt,

       
   

acquisitions and dispositions:

       
   

Trade accounts receivable

 

31.6

 

36.1

   

Inventories

 

17.4

 

4.3

   

Other current assets

 

3.5

 

(3.2)

   

Trade accounts payable

 

(23.8)

 

(16.0)

   

Accrued expenses and other liabilities

 

(66.1)

 

(30.6)

   

Other, net

 

0.2

 

(3.7)

Net cash provided by operating activities

 

46.2

 

31.0

             

Investing Activities

       
 

Capital expenditures and purchases of intangible assets

 

(17.7)

 

(44.9)

 

Proceeds on sales of property and equipment leased to others

 

0.3

 

0.5

Net cash used in investing activities

 

(17.4)

 

(44.4)

             

Financing Activities

       
 

Net change in short-term debt

 

-

 

(0.7)

 

Borrowings on revolving credit facility

 

-

 

95.0

 

Payment of long-term debt

 

(34.5)

 

(3.8)

 

Purchase of noncontrolling interest of former joint venture

 

(0.4)

 

(1.0)

 

Payment of cash dividends

 

(10.4)

 

(8.6)

 

Proceeds on exercise of stock options

 

0.7

 

4.7

 

Proceeds from stock issuance

 

0.8

 

0.7

 

Excess tax benefits from employee stock plans

 

1.0

 

1.0

 

Treasury stock acquired

 

(2.8)

 

(56.9)

Net cash provided by (used in) financing activities

 

(45.6)

 

30.4

             

Effect of exchange rate changes on cash

 

(1.6)

 

(2.6)

             

Net Cash Flows

 

(18.4)

 

14.4

             

Cash and Cash Equivalents:

       
 

At beginning of period

 

192.8

 

99.3

 

At end of period

 

$                       174.4

 

$                       113.7

             

 

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SOURCE Hill-Rom Holdings, Inc.

 

 

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