Hill-Rom Reports Fiscal Second Quarter Results; Maintains Full-Year Earnings Per Share Guidance

- Second quarter revenue of $415 million declined 2 percent versus prior year

- Adjusted diluted earnings per share for the second quarter of $0.57 compares to earnings of $0.56 in the prior year

- Reported diluted loss per share for the second quarter of $0.06 compares to earnings of $0.37 per share in the prior year

- Year to date operating cash flow of $78 million compares to $113 million in the prior year

- Full year adjusted earnings per share are expected to be $2.18 to $2.28

May 02, 2014, 06:00 ET from Hill-Rom Holdings, Inc.

BATESVILLE, Ind., May 2, 2014 /PRNewswire/ -- Hill-Rom Holdings, Inc. (NYSE: HRC) announced financial results for its fiscal second quarter ended March 31, 2014 and maintained its 2014 earnings outlook.  Adjusted earnings per diluted share of $0.57 increased 2 percent from $0.56 in the prior year.  Reported loss per diluted share of $0.06 compares to $0.37 earnings per diluted share in the prior year.  Adjustments to reported earnings and EBITDA are detailed in the reconciliation schedules provided.

Hill-Rom's quarterly revenue was $415 million, a 2 percent decrease compared to last year on a reported basis and a 3 percent decrease on a constant currency basis.  Domestic revenue was $263 million, down 4 percent, while revenue outside the United States decreased 1 percent to $152 million on a constant currency basis.   

Management Comments

"We are pleased to deliver adjusted earnings per share ahead of expectations despite continued revenue pressure across our portfolio," said John Greisch, Hill-Rom President and Chief Executive Officer.    "We increased operating margins compared to last year and sequentially from the first quarter. We will maintain our disciplined focus on operational improvements, margin expansion and sustainable cash flow while we pursue portfolio diversification opportunities in order to enhance shareholder value."

Second Quarter Financial and Operational Results

-- Revenue:

-- North America.  North America revenue declined 6 percent to $224 million.  Capital revenue decreased 6 percent, while rental revenue declined 7 percent. 

-- International.  International segment revenue increased slightly to $125 million compared with the prior year (down 2 percent on a constant currency basis) on strength in Latin America and Asia Pacific, offset by lower revenue in the Middle East and Europe.  Capital revenue declined slightly while rental revenue increased 5 percent.

-- Surgical/Respiratory Care.  Surgical/Respiratory Care revenue increased 7 percent to $66 million, due to continued strong results in our surgical businesses.

-- Year to date operating cash flow was $78 million compared to $113 million in the prior year.

-- Year to date adjusted EBITDA was $125 million, compared to $150 million in the prior year.

-- Share repurchases for the quarter amounted to approximately $29 million.

-- In a continuing effort to rationalize Hill-Rom's portfolio and improve margins, the Company discontinued the remaining portion of its home care bed rental business in North America.  This resulted in an incremental restructuring charge of $12 million, of which $8 million is non-cash, and is in addition to the restructuring programs announced last quarter.

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 the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2014.

Financial Guidance Summary

Revenue:  Hill-Rom now expects a full year 2014 revenue decline of approximately 4 to 5 percent (constant currency), which includes an approximate 1 percent reduction due to exiting the home care rental bed frame business.  This compares to prior guidance of a 2 to 4 percent decline. Third quarter revenue is expected to decline 4 to 6 percent compared to the prior year (constant currency). 

Adjusted Earnings per Diluted Share:  The Company's guidance for full year adjusted earnings per diluted share remains unchanged at $2.18 to $2.28, which excludes approximately $0.31 of acquisition-related intangible amortization expense.   For comparison, full year 2013 adjusted earnings per diluted share would have been $2.38, excluding $0.29 of acquisition-related intangible amortization expense.

Third quarter adjusted earnings per diluted share are expected to be $0.56 to $0.60, which excludes approximately $0.08 of acquisition-related intangible amortization expense.  For comparison, third quarter 2013 adjusted earnings per diluted share would have been $0.57, excluding $0.08 of acquisition-related intangible amortization expense.

Cash Flow:  Hill-Rom continues to expect cash flow from operations for the full year to be approximately $250 to $260 million, excluding cash outflows related to restructuring actions.

Adjusted EBITDA:  Hill-Rom continues to expect adjusted EBITDA for the full year to be approximately $280 to $290 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.  In addition, we are providing adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) for the same reason.  These measures exclude strategic developments, 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 that have historically included this expense.    

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, go to http://ir.hill-rom.com/events.cfm or http://www.media-server.com/m/p/wqne2xjc. 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: 17317774. 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 May 8, 2014, domestically at 855-859-2056 and internationally at 404-537-3406. For the replay, callers will need to use confirmation code 17317774. 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 (Loss) 

 (Dollars in millions except per share data) 

 Quarter Ended March 31 

 Year To Date Ended March 31 

2014

2013

2014

2013

Net revenue

Capital sales

$                313.6

$                318.3

$                609.1

$                642.7

Rental revenue

101.7

107.4

199.6

211.4

Total revenue

415.3

425.7

808.7

854.1

Cost of revenue

Cost of goods sold

169.5

181.7

340.7

370.6

Rental expenses

43.1

47.9

88.5

96.0

Total cost of revenue

212.6

229.6

429.2

466.6

Gross profit

Capital

144.1

136.6

268.4

272.1

Rental

58.6

59.5

111.1

115.4

Total gross profit

202.7

196.1

379.5

387.5

As a percentage of total revenue

48.8%

46.1%

46.9%

45.4%

Research and development expenses

16.4

18.3

32.8

35.5

Selling and administrative expenses

130.1

141.4

268.1

278.5

Special charges

28.4

2.9

29.4

2.9

Operating profit

27.8

33.5

49.2

70.6

Other income/(expense), net

(2.5)

(3.5)

(4.5)

(5.3)

Income tax expense

28.6

7.7

34.8

19.0

Net income (loss)

$                  (3.3)

$                  22.3

$                   9.9

$                  46.3

Diluted earnings (loss) per share:

Earnings per share 

$                 (0.06)

$                  0.37

$                  0.17

$                  0.76

Average common shares outstanding - diluted (thousands)

57,303

60,612

58,612

60,818

Dividends per common share

$              0.1525

$              0.1250

$              0.2900

$              0.2500

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 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

Revenue - Constant Currency

(Dollars in millions)

Quarter Ended March 31

2014

Foreign Exchange 

2014

2013

Constant Currency

As Reported

Impact

Adjusted

As Reported

Change

Capital sales

$

313.6

$

1.8

$

311.8

$

318.3

-2.0%

Rental revenue

101.7

0.3

101.4

107.4

-5.6%

Total

$

415.3

$

2.1

$

413.2

$

425.7

-2.9%

North America 

$

224.5

$

(1.4)

$

225.9

$

239.7

-5.8%

Surgical and Respiratory Care

65.6

0.5

65.1

61.2

6.4%

International 

125.2

3.0

122.2

124.8

-2.1%

Total 

$

415.3

$

2.1

$

413.2

$

425.7

-2.9%

Year To Date Ended March 31

2014

Foreign Exchange 

2014

2013

Constant Currency

As Reported

Impact

Adjusted

As Reported

Change

Capital sales

$

609.1

$

4.1

$

605.0

$

642.7

-5.9%

Rental revenue

199.6

0.7

198.9

211.4

-5.9%

Total

$

808.7

$

4.8

$

803.9

$

854.1

-5.9%

North America 

$

430.0

$

(2.0)

$

432.0

$

474.4

-8.9%

Surgical and Respiratory Care

128.9

0.5

128.4

120.2

6.8%

International 

249.8

6.3

243.5

259.5

-6.2%

Total 

$

808.7

$

4.8

$

803.9

$

854.1

-5.9%

 

Hill-Rom Holdings, Inc. and Subsidiaries

Reconciliation: Earnings Per Share

(Dollars in millions except per share data)

Quarterly Period Ended March 31, 2014

Quarterly Period Ended March 31, 2013

Income Before

Income Taxes

Income Tax

Expense

Diluted EPS *

Income Before

Income Taxes

Income Tax

Expense

Diluted EPS*

GAAP Earnings

$             25.3

$            28.6

$              (0.06)

$             30.0

$             7.7

$            0.37

Adjustments:

Acquisition and integration costs

1.7

0.6

0.02

2.2

0.7

0.02

Acquisition-related intangible asset amortization

6.9

2.0

0.09

6.7

2.4

0.07

Field corrective actions

(1.9)

(1.2)

(0.01)

5.2

1.9

0.05

Employee benefits change

(12.2)

(4.7)

(0.13)

-

-

-

FDA remediation expenses

0.8

0.2

0.01

1.9

0.7

0.02

Litigation charge

-

-

-

(0.5)

0.1

(0.01)

Special charges

28.4

9.9

0.32

2.9

1.0

0.03

Foreign valuation allowance

-

(19.6)

0.34

-

-

-

Adjusted Earnings

$             49.0

$            15.8

$               0.57

$             48.4

$            14.5

$            0.56

Year To Date Period Ended March 31, 2014

Year To Date Period Ended March 31, 2013

Income Before

Income Taxes

Income Tax

Expense

Diluted EPS

Income Before

Income Taxes

Income Tax

Expense

Diluted EPS*

GAAP Earnings

$             44.7

$            34.8

$               0.17

$             65.3

$            19.0

$            0.76

Adjustments:

Acquisition and integration costs

3.6

1.2

0.04

5.7

1.9

0.06

Acquisition-related intangible asset amortization

13.8

4.2

0.16

13.9

4.6

0.15

Field corrective actions

(0.7)

(0.8)

-

7.7

2.8

0.08

Employee benefits change

(12.2)

(4.7)

(0.13)

-

-

-

FDA remediation expenses

1.7

0.6

0.02

1.9

0.7

0.02

Litigation charge

-

-

-

0.5

0.5

-

Special charges

29.4

10.3

0.33

2.9

1.0

0.03

Foreign valuation allowance

-

(19.6)

0.34

-

-

-

Adjusted Earnings

$             80.3

$            26.0

$               0.93

$             97.9

$            30.5

$            1.11

* Does not add due to rounding.

 

Reconciliation: Adjusted EBITDA

(Dollars in millions)

 Quarter Ended March 31 

 Year To Date Ended March 31 

2014

2013

2014

2013

Adjusted income before income taxes 

$             49.0

$            48.4

$               80.3

$             97.9

Add back:

Other expense

2.5

3.5

4.5

5.3

Depreciation and amortization

19.7

22.3

40.6

46.3

Adjusted EBITDA

$             71.2

$            74.2

$             125.4

$           149.5

 

Hill-Rom Holdings, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Dollars in millions)

March 31, 2014

September 30, 2013

Assets

Current Assets

Cash and cash equivalents

$                       120.3

$                       127.4

Trade accounts receivable, net of allowances

346.0

361.8

Inventories, net

120.0

118.3

Other current assets

75.0

80.5

Total current assets

661.3

688.0

Property, plant and equipment, net

222.4

234.3

Goodwill

351.6

342.8

Other assets

285.0

321.7

Total Assets

$                    1,520.3

$                    1,586.8

Liabilities

Current Liabilities

Trade accounts payable

$                         66.5

$                         80.8

Short-term borrowings

124.7

81.2

Other current liabilities

166.9

183.4

Total current liabilities

358.1

345.4

Long-term debt

218.6

225.8

Other long-term liabilities

139.3

156.9

Total Liabilities

716.0

728.1

Shareholders' Equity

804.3

858.7

Total Liabilities and Shareholders' Equity

$                    1,520.3

$                    1,586.8

 

Hill-Rom Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Dollars in millions)

 Year to Date Period Ended March 31 

2014

2013

Operating Activities

Net income 

$                          9.9

$                         46.3

Adjustments to reconcile net income to net cash provided by

operating activities:

Depreciation

33.6

36.9

Amortization

7.0

9.4

Acquisition-related intangible asset amortization

13.8

13.9

Provision for deferred income taxes

6.5

(9.4)

Loss on disposal of property, equipment leased to others,

intangible assets and impairments

7.8

0.3

Stock compensation

9.0

7.6

Excess tax benefits from employee stock plans

0.6

(0.3)

Change in working capital excluding cash, current investments,

current debt and acquisitions and dispositions:

Trade accounts receivable

15.8

33.3

Inventories

0.9

(3.8)

Other current assets

(1.3)

(7.8)

Trade accounts payable

(14.5)

(6.5)

Accrued expenses and other liabilities

(14.6)

(3.1)

Other, net

3.4

(4.1)

Net cash provided by operating activities

77.9

112.7

Investing Activities

Capital expenditures and purchases of intangible assets

(31.4)

(34.4)

Proceeds on sale of property and equipment leased to others

1.3

4.8

Payment on acquisition of businesses, net of cash acquired

(9.7)

(0.2)

Net cash used in investing activities

(39.8)

(29.8)

Financing Activities

Net change in short-term debt

(0.2)

-

Borrowings (payments) on revolving credit facility

41.0

(20.0)

Proceeds from long-term debt

0.6

-

Payment of long-term debt

(5.0)

(5.3)

Purchase of noncontrolling interest

(1.0)

(1.0)

Payment of cash dividends

(16.7)

(15.0)

Proceeds on exercise of stock options

7.4

5.0

Proceeds from stock issuance

1.3

1.3

Excess tax benefits from employee stock plans

(0.6)

0.3

Treasury stock acquired

(71.6)

(44.0)

Net cash used in financing activities

(44.8)

(78.7)

Effect of exchange rate changes on cash

(0.4)

(1.2)

Net Cash Flows

(7.1)

3.0

Cash and Cash Equivalents:

At beginning of period

127.4

84.3

At end of period

$                       120.3

$                         87.3

 

SOURCE Hill-Rom Holdings, Inc.



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http://www.hill-rom.com