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For full-year fiscal 2008, revenues and earnings per fully diluted sharefrom continuing operations were $1,507.7 million and $1.07, respectively,compared to $1,356.5 million and $1.13 for full-year fiscal 2007. Thecompany's 11.1 percent revenue increase reflects balanced growth of bothcapital sales and rental revenue. On an as adjusted basis, fully dilutedearnings per share from continuing operations for the full 2008 fiscal yearwere $1.40 compared to $1.13 per fully diluted share in 2007, an increase of23.9 percent. Adjustments made in fiscal year 2008 were related to specialcharges, a stock modification charge, a loss on the extinguishment of debt,and other separation related costs. During fiscal year 2007, adjustments wererelated to anti-trust litigation, other special charges, and separationrelated costs.
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On March 31, 2008, Hill-Rom completed the spin-off of its funeral servicesbusiness operating under the Batesville Casket name. Accordingly, the resultsof operations of the funeral services business, including certain separationrelated costs and other income and expenses assigned to the funeral servicesbusiness, have been presented as discontinued operations for all periodspresented in the Condensed Consolidated Statements of Income.
Management Comments
Peter H. Soderberg, president and CEO of Hill-Rom, commented, "Ourperformance this quarter reflects a strong finish to an important transitionalyear. Our selective investments in research and development, enhanced saleschannels, and manufacturing efficiency are continuing to yield results acrossthe care continuum and around the world. In spite of more pronouncedinflationary pressures during the quarter, we saw 190 basis points of grossmargin improvement in the year-over-year quarterly period, primarily due toimproved rental margins."
"We anticipate that fiscal year 2009 will bring heightened economicchallenges to our customers. While we have not yet experienced moderatingcustomer demand as evidenced by our strong fourth quarter revenue, earnings,and backlog positions, our organic revenue expectations for 2009 reflect adecidedly more cautious outlook. While this lack of certainty is unsettling,Hill-Rom's compelling technology offerings and disciplined expense controlshould help mitigate the impact of economic headwinds," Soderberg continued.
"Our North America Acute Care segment revenue grew nearly nine percent,led by over 40 percent growth in our ICU patient support systems, and over 30percent growth in our proprietary therapy support system capital and rentalproducts. Our International and Surgical segment revenue once again showedstrong growth of 23.0 percent (18.2 percent on a constant currency basis),reflecting continuing market share gains and a particularly strong mid-20percent sales increase in Europe. Finally, our North America Post-Acute Caresegment saw nearly 30 percent growth, reflecting double digit sales gainsacross all major product categories," Soderberg continued.
As previously disclosed, Hill-Rom recorded two special charges in thefourth quarter totaling $20.5 million (pre-tax) related to streamlining theorganization and improving profitability in our MEMS business. Of thisamount, $13.8 million will be non-cash in nature. Annual savings resultingfrom these specific actions are expected to approximate $18 million, most ofwhich will impact 2009. These savings are reflected in financial guidance.
Commenting on the previously announced acquisition of Liko on October 1,2008, Soderberg stated, "We have now operated Liko for nearly six weeks, andwe continue to be very enthusiastic about the opportunities to enhance patientand caregiver outcomes through the combination of Liko with Hill-Rom. Theacquisition, which is expected to be accretive in the first year, is highlyconsistent with our strategies to expand both our global footprint andpresence across the care continuum."
"We are reaffirming financial guidance introduced at our investorconference early last month. Our outlook anticipates more conservativeorganic revenue growth reflecting moderation of some customers' purchasingpatterns, recovery of credit markets occurring early in calendar 2009, andrecessionary pressures continuing until mid-2009. Nevertheless, we expectmargin expansion and productivity initiatives, combined with the accretiveLiko acquisition, to produce meaningful operating income and earnings pershare growth," Soderberg concluded.
Other fourth quarter revenue highlights regarding Hill-Rom businesssegments include:
-- North America Acute Care. Hill-Rom North America Acute Care revenueincreased $21.9 million, or 8.7 percent, to $272.5 million. Capital salesincreased 7.0 percent, or $14.0 million, due in part to strong customerreaction to our new TotalCare Connect(TM) ICU bed platform. Our healthcareinformation technology unit also showed good growth due to the Septemberlaunch of its new, all digital Navicare (TM) NurseCall system.
Rental revenue increased by $7.9 million, or 15.1 percent, during thequarter, due to sharply higher volumes from 2007 product launches in bariatricand wound care products, and the impact of strategic adjustments made to oursales channel implemented over the last fiscal year. Revenues also benefitedfrom prior year rental receivable reserve adjustments which did not repeat inthe current year, while lower MEMS revenues partially offset thisfavorability.
-- International and Surgical. Hill-Rom International and Surgicalcapital and rental revenue increased $19.3 million, or 23.0 percent, to $103.3million, principally driven by strong performance in Europe, Asia, and LatinAmerica. Capital sales increased $17.1 million, or 24.1 percent. Rentalrevenue was also higher by $2.2 million, or 17.1 percent. Our surgical unit,Allen Medical, recorded continued mid-teens growth driven primarily by theacceptance of new products.
-- North America Post-Acute Care. Hill-Rom North America Post-Acute Carerevenue increased $11.5 million, or 29.6 percent, to $50.3 million. Capitalsales revenue increased by $2.0 million, or 24.0 percent, primarily due tosales channel initiatives and new product sales. Rental revenue increased$9.5 million, or 31.1 percent, primarily related to increased activityassociated with our home care rentals and respiratory care, and prior yearrental receivable reserve adjustments which did not repeat in the currentyear.
-- Hill-Rom gross profit grew $30.2 million, or 18.9 percent. Rentalgross profit grew by 37.5 percent and associated gross margin improved 660basis points, due primarily to increased revenue, the leveraging of our fieldservice network, and the impact of the prior year receivable reserveadjustments outlined above. Capital gross profit grew by 11.7 percent, andgross margin was flat versus the prior year as improvement in product mix oncapital margins was offset by unfavorable geographic mix and inflationarypressures. Consolidated gross margin increased 190 basis points to 44.7percent.
-- Operating expense growth moderated significantly and was considerablylower than sales growth. Operating expenses grew 6.1 percent or $7.7 million.Most of the expense growth was attributable to our strategic initiativesrelated to sales channel expansion and product launch spending (up 8.8percent) offset by reductions or slower growth in other areas resulting fromexpense control initiatives.
Other:
-- On October 2, 2008, the Company announced the acquisition of Liko forapproximately $183 million. Liko, based in Lulea, Sweden, is a leadingsupplier and developer of lifts and slings that facilitate the safe movementand transfer of patients around the world and across the care continuum. Theacquisition is consistent with the previously disclosed strategy for growthand expansion via highly selective acquisitions. The transaction is expectedto be slightly accretive to Hill-Rom's GAAP earnings per share in 2009 andincreasingly accretive thereafter.
-- Cash flow from operations was $43.3 million for the fourth quarter,down $45.2 million from the prior year comparable period. Of this decline,$35.2 million relates to prior year cash flows from the former funeralservices business while the remainder relates primarily to movements inworking capital, including higher receivables associated with strong fourthquarter revenues. Full year cash flow from operations was $270.5 million,down $14.8 million, or 5.2 percent from the prior year, but up over 40 percentafter taking into account the current and prior year cash flows from thefuneral services business of $56.8 million and $136.2 million, respectively.
-- Income tax expense in the fourth quarter includes discrete period taxbenefits of $1.5 million, or $0.02 per fully diluted share, pertaining tovarious tax matters resolved during the quarter. The prior year periodincluded a lesser amount of discrete tax benefits.
Please see the attached schedules for additional information, includingreconciliations of earnings in accordance with U.S. generally acceptedaccounting principles ("GAAP") to as adjusted income and earnings per share,condensed financial information, summary balance sheet information, andsegment sales summaries.
For a more complete review of Hill-Rom's results, please refer to ourAnnual Report on Form 10-K for the year ended September 30, 2008, which willbe filed later this month.
Financial Guidance Summary For 2009
Management reaffirmed full year 2009 guidance initially provided onOctober 7, 2008 in conjunction with Hill-Rom's investor conference:Hill-Rom's consolidated revenue guidance range for fiscal 2009 is expected tobe $1.633 - $1.683 billion; earnings per fully diluted share from continuingoperations is expected to be $1.40 - $1.64. This guidance includes theresults from our Liko acquisition for a full twelve months. Financialguidance in tabular format is included as an attachment.
Hill-Rom Holdings, Inc. provides earnings per share guidance on anadjusted basis from continuing operations because the company's managementbelieves that the presentation provides useful information to investors.This measure excludes strategic developments, special charges and the impactof significant litigation. Such items may be highly variable, difficult topredict, and of a size that sometimes have substantial impact on the company'sreported operations for a period. Often, prospective quantification of suchitems is not feasible. Management uses these measures internally forplanning, forecasting and evaluating the performance of the business,including evaluating results relative to employee performance compensationtargets. Investors should consider non-GAAP measures in addition to, not as asubstitute for, or as superior to, measures of financial performance preparedin accordance with GAAP.
Additional assumptions and discussion will be provided during theCompany's conference call to be held tomorrow morning. Information to accessthe webcast is provided below.
Conference Call Replay and Webcast
The company will sponsor a conference call and webcast for the investingpublic at 8 a.m. EST, 7 a.m. CST, on Tuesday, November 11, 2008. During theevent, management will discuss the results for the fiscal fourth quarter endedSeptember 30, 2008, along with expectations for fiscal 2009. The webcast isavailable at http://ir.hill-rom.com/events.cfm orhttp://ir.hill-rom.com/eventdetail.cfm?eventid=61082 and will be archived onthe company's website through November 10, 2009 for those who are unable tolisten to the live webcast. A replay of the call is also available throughNovember 18, 2008 at 888-203-1112 (719-457-0820 International). Code 9788491is needed to access the replay.
ABOUT HILL-ROM HOLDINGS, INC.
Hill-Rom is a leading worldwide manufacturer and provider of medicaltechnologies and related services for the health care industry, includingpatient support systems, safe mobility and handling solutions, non-invasivetherapeutic products for a variety of acute and chronic medical conditions,medical equipment rentals, and information technology solutions. Hill-Rom'scomprehensive product and service offerings are used by health care providersacross the health care continuum and around the world in hospitals, extendedcare facilities and home care settings to enhance the safety and quality ofpatient care.
Disclosure Regarding Forward-Looking Statements
Certain statements in this press release contain forward-lookingstatements, within the meaning of the Private Securities Litigation Reform Actof 1995, regarding the Company's future plans, objectives, beliefs,expectations, representations and projections. The Company has tried,wherever possible, to identify these forward-looking statements using wordssuch as "intend," "anticipate," "believe," "plan," "encourage," "expect,""may," "goal," "become," "pursue," "estimate," "strategy," "will,""projection," "forecast," "continue," "accelerate," "promise," "increase,""higher," "lower," "reduce," "improve," "expand," "progress," "potential" orthe negative of those terms or other variations of them or by comparableterminology. The absence of such terms, however, does not mean that thestatement is not forward-looking. It is important to note that forward-looking statements are not guarantees of future performance, and the Company'sactual results could differ materially from those set forth in any forward-looking statements. Factors that could cause actual results to differ fromforward-looking statements include but are not limited to: the Company'sdependence on its relationships with several large group purchasingorganizations, whether the Company's new products are successful in themarketplace, changes in customers' Medicare reimbursements, collections ofaccounts receivable, compliance with FDA regulations, antitrust litigation,potential exposure to product liability or other claims, failure of theCompany's announced or future strategic initiatives and restructuring andrealignment activities to achieve expected growth, efficiencies or costreductions, disruptions in the Company's business or other adverseconsequences resulting from the recent spin-off of the funeral servicebusiness, failure to realize the anticipated benefits of the spin-off, failureof the Company to execute its acquisition and business alliance strategythrough the consummation and successful integration of acquisitions or entryinto joint ventures or other business alliances, increased costs orunavailability of raw materials, adverse changes in global economic conditionsor disruptions of credit markets, labor disruptions, the ability to retainexecutive officers and other key personnel, and certain tax-related matters.For a more in depth discussion of these and other factors that could causeactual results to differ from those contained in forward-looking statements,see the discussions under the heading "Risk Factors" in the Company's AnnualReport on Form 10-K for the period ended September 30, 2007, its CurrentReport on Form 8-K filed with the SEC on March 17, 2008, and the Annual Reporton Form 10-K for the year ended September 30, 2008, which will be filed laterthis month. The Company assumes no obligation to update or revise anyforward-looking statements.Other Fourth Quarter Financial and Operational Highlights Gross Profit and Operating Expenses:
SOURCE Hill-Rom Holdings, Inc.
