The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Press release from PR Newswire

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

Wednesday, October 24, 2012

Hill-Rom Reports Fiscal Fourth Quarter And Full Year Results; Announces 2013 Financial Outlook17:00 EDT Wednesday, October 24, 2012BATESVILLE, 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 millionHill-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 MeasuresHill-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 InformationAs 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.comDisclosure 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 2012201120122011Net revenuesCapital sales$                330.1$                316.3$             1,198.2$             1,119.0Rental revenues101.5114.3436.1472.7Total revenues431.6430.61,634.31,591.7Cost of revenuesCost of goods sold185.3170.8690.4606.8Rental expenses45.249.2189.2203.6Total cost of revenues230.5220.0879.6810.4Gross profitCapital144.8145.5507.8512.2Rental56.365.1246.9269.1Total gross profit201.1210.6754.7781.3As a percentage of sales46.6%48.9%46.2%49.1%Research and development expenses18.715.566.963.8Selling and administrative expenses130.1126.9496.4502.0Impairment of other intangibles--8.0-Litigation (credit) charge(3.6)5.0(3.6)47.3Special charges8.5-18.21.4Operating profit47.463.2168.8166.8Other income/(expense), net(2.5)(2.6)(5.3)(7.1)Income tax expense (benefit)5.7(2.9)42.726.2Net income 39.263.5120.8133.5Less:  Net income attributable to noncontrolling interest---0.2Net income attributable to common shareholders$                  39.2$                  63.5$                120.8$                133.3Diluted earnings per share:Earnings per share $                  0.63$                  1.01$                  1.94$                  2.09Average common shares outstanding - diluted (thousands)62,31863,11762,36163,899Dividends per common share$              0.1250$              0.1125$              0.4875$              0.4300 Non-GAAP Financial Disclosures and ReconciliationsWhile 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 SubsidiariesRevenues - Constant Currency(Dollars in millions)Quarter Ended September 302012Foreign Exchange 20122011Constant CurrencyAs ReportedImpactAdjustedAs ReportedChangeCapital sales$                330.1$                  (7.4)$                337.5$                316.36.7%Rental revenues101.5(1.3)102.8114.3-10.1%Total$                431.6$                  (8.7)$                440.3$                430.62.3%North America$                249.7$                      -$                249.7$                291.4-14.3%Surgical and Respiratory Care55.6-55.634.163.0%International 126.3(8.7)135.0105.128.4%Total $                431.6$                  (8.7)$                440.3$                430.62.3%Year Ended September 302012Foreign Exchange 20122011Constant CurrencyAs ReportedImpactAdjustedAs ReportedChangeCapital sales$             1,198.2$                 (20.1)$             1,218.3$             1,119.08.9%Rental revenues436.1(3.4)439.5472.7-7.0%Total$             1,634.3$                 (23.5)$             1,657.8$             1,591.74.2%North America$                998.2$                  (1.0)$                999.2$             1,057.2-5.5%Surgical and Respiratory Care153.2-153.2132.915.3%International 482.9(22.5)505.4401.625.8%Total $             1,634.3$                 (23.5)$             1,657.8$             1,591.74.2% Hill-Rom Holdings, Inc. and SubsidiariesReconciliation: Earnings Per Share(Dollars in millions except per share data)Quarter Ended September 30, 2012Quarter Ended September 30, 2011Income Before Income TaxesIncome Tax ExpenseDiluted EPSIncome Before Income Taxes Income Tax ExpenseDiluted EPSReported Earnings$             44.9$              5.7$                0.63$             60.6$            (2.9)$            1.01Adjustments:Vendor product recall(1.7)(0.6)(0.02)(0.9)(0.4)(0.01)Acquisition and integration costs6.21.40.081.00.40.01Special charges8.53.20.09-(0.2)-Litigation charge (credit)(3.6)(1.3)(0.04)5.01.90.05International tax restructuring and recognition ofunrecognized tax attributes-11.0(0.18)-21.5(0.34)Adjusted Earnings$             54.3$            19.4$                0.56$             65.7$            20.3$            0.72Year Ended September 30, 2012Year Ended September 30, 2011Income Before Income Taxes  Income Tax ExpenseDiluted EPS (1)Income Before Income Taxes and NCI (1) (2)Income Tax Expense (1)Diluted EPSReported Earnings$            163.5$            42.7$                1.94$            159.7$            26.2$            2.09Adjustments:Vendor product recall(6.5)(2.5)(0.06)(2.3)(0.9)(0.02)Acquisition and integration costs11.72.90.141.00.40.01Special charges18.26.80.181.40.50.01Impairment of other intangibles8.02.10.09---Field corrective action16.05.90.16---Litigation charge (credit)(3.6)(1.3)(0.04)47.314.20.52International tax restructuring and recognition ofunrecognized 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 2012201120122011Adjusted income before income taxes and NCI$             54.3$            65.7$              207.3$            207.2Add back:Other expense2.52.65.37.1Depreciation and amortization31.025.8111.7103.9Adjusted EBITDA$             87.8$             94.1$             324.3$             318.2 Hill-Rom Holdings, Inc. and SubsidiariesCondensed Consolidated Balance Sheets(Dollars in millions)September 30, 2012September 30, 2011AssetsCurrent AssetsCash and cash equivalents$                         84.3$                       224.6Trade accounts receivable, net of allowances392.6386.2Inventories, net126.995.6Other current assets78.085.3Total current assets681.8791.7Property, plant and equipment, net250.1222.8Goodwill335.287.2Other assets360.5197.4Total Assets$                     1,627.6$                     1,299.1LiabilitiesCurrent LiabilitiesTrade accounts payable$                         80.7$                         64.8Short-term borrowings115.2100.3Other current liabilities182.2168.9Total current liabilities378.1334.0Long-term debt237.550.8Other long-term liabilities199.4172.6Total Liabilities815.0557.4Shareholders' Equity812.6741.7Total Liabilities and Shareholders' Equity$                     1,627.6$                     1,299.1 Hill-Rom Holdings, Inc. and SubsidiariesCondensed Consolidated Statements of Cash Flows(Dollars in millions) Year Ended September 30 20122011Operating ActivitiesNet income $                       120.8$                       133.5Adjustments to reconcile net income to net cash provided by   operating activities:Depreciation and amortization111.7103.9Provision for deferred income taxes(32.3)(21.5)Loss on disposal of property, equipment leased to others,       intangible assets and impairments8.11.3Stock compensation11.612.2Tax 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 receivable20.1(24.7)Inventories4.414.7Other current assets20.914.4Trade accounts payable0.3(18.0)Accrued expenses and other liabilities(6.1)10.0Other, net5.19.8Net cash provided by operating activities261.7222.5Investing ActivitiesCapital expenditures and purchase of intangibles(77.8)(68.9)Proceeds on sales of property and equipment leased to others10.65.9Payment for acquisition of businesses, net of cash acquired(476.8)(15.5)Proceeds on investment sales and maturities4.50.5Net cash used in investing activities(539.5)(78.0)Financing ActivitiesNet change in short-term debt(7.8)(0.4)Net change in revolver60.0(0.2)Proceeds from long-term debt200.0-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 options7.743.1Proceeds from stock issuance2.92.9Excess tax benefits from employee stock plans1.36.8Treasury stock acquired(44.2)(115.3)Net cash provided by (used in) financing activities135.6(101.9)Effect of exchange rate changes on cash1.9(2.5)Total Cash Flows(140.3)40.1Cash and Cash Equivalents:At beginning of period224.6184.5At end of period$                         84.3$                       224.6 SOURCE Hill-Rom Holdings, Inc.For further information: Investor Relations: Blair A. (Andy) Rieth, Jr., Vice President, Investor Relations, +1-812-931-2199, andy.rieth@hill-rom.com, Media: Marylou McNally, Vice President, Corporate Communications, +1-312-819-7233, marylou.mcnally@hill-rom.com