Hill-Rom Reports Fiscal Fourth Quarter and Full Year Results; Provides 2012 Financial Outlook

BATESVILLE, Ind., Oct. 26, 2011 /PRNewswire/ — Hill-Rom Holdings, Inc. (NYSE:
HRC), announced financial results for its fiscal fourth quarter ended September
30, 2011 and provided its outlook for 2012. Adjusted earnings per diluted share
increased 7 percent during the period, to $0.72 from $0.67. Reported earnings
per diluted share in the fourth quarter increased to $1.01, compared to $0.79 in
the same period in the prior year, and net income increased to $64 million from
$51 million over the same period. Reported net income includes a net after-tax
gain of $18 million, primarily related to previously unrecognized tax benefits
associated with international operating loss carryforwards, partially offset by
legal settlement costs.

Hill-Rom’s quarterly revenue of $431 million increased 9 percent on a reported
basis and 7 percent on a constant currency basis compared to last year. Domestic
revenue increased 12 percent to $309 million, while revenue outside the United
States increased 2 percent to $122 million in the same period. Excluding the
impact of foreign currency, Hill-Rom’s revenue outside the United States
declined 4 percent.

For the full year, revenue was $1,592 million compared to $1,470 million for the
prior year, an increase of 8 percent on a reported basis and 7 percent on a
constant currency basis. Adjusted earnings per diluted share for fiscal 2011
were $2.27 compared to $1.76 in 2010, an increase of 29 percent. Reported
earnings per diluted share for the full year were $2.09 compared to $1.97 for
the prior year, an increase of 6 percent.

Management Comments

“We completed the year with strong revenue performance in the fourth quarter as
continued growth in our North America Acute Care business more than offset
weaker international results,” stated John J. Greisch, President & CEO. “This
quarter concludes a year of increased revenue growth, margin expansion, solid
earnings improvement and significant cash flow generation. As we look forward to
fiscal year 2012, we anticipate an increasingly challenging economic and
healthcare environment. However, we remain committed to revenue and earnings
growth consistent with our long range plan objectives.”

Financial and Operational Highlights

— Fourth quarter revenue highlights include:
o North America Acute Care. North America Acute Care revenue grew 15
percent to $273 million. Capital sales increased 21 percent due
primarily to higher sales of patient support systems, which grew 30
percent. Rental revenue declined 2 percent versus the prior year.
o International. International segment revenue, which excludes Canada,
declined 2 percent to $105 million. On a constant currency basis,
revenue decreased 8 percent, as European sales growth was more than
offset by sales declines in the Middle East and Asia-Pacific regions.
o North America Post-Acute Care. North America Post-Acute Care revenue
increased 2 percent to $53 million. Capital sales increased 5 percent
and rental revenue increased 1 percent versus the prior year. Both
respiratory care and home care revenue grew while extended care
revenue was flat to the prior year.
— Full year operating cash flow was $223 million, compared to $140 million
in the prior year, an increase of 59 percent. Fiscal year 2011 operating
cash flow includes outflows of $47 million for legal settlements.
— Adjusted operating margin for the quarter decreased 50 basis points to
15.9 percent and for the full year increased 100 basis points to 13.5
percent.
— The Company received Food and Drug Administration (FDA) marketing
clearance via the 510-k process for a powered stretcher product which we
expect to commercialize in the first quarter of fiscal 2012.
— During the quarter, the Company completed the acquisition of Liko
distributors in France and Switzerland for approximately $20 million.

Please see the attached schedules for additional information, including
condensed financial information, summary balance sheet, cash flow statement and
segment sales summaries.

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, 2011, which will be filed
in November.

Financial Guidance Summary for 2012

Financial guidance for fiscal 2012 is as follows: Hill-Rom expects full-year
constant currency revenue growth of between 4 and 5 percent. The Company expects
adjusted earnings guidance of $2.45 to $2.55 per diluted share. Cash flow from
operations for the full year is expected to be approximately $290 to $300
million.

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. 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.

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.

Conference Call Webcast and Replay

The Company will sponsor a conference call and webcast for the investing public
at 8:00 a.m. ET, on Thursday, October 27, 2011. The webcast is available at
http://ir.hill-rom.com/events.cfm or
http://ir.hill-rom.com/eventdetail.cfm?eventid=103080 and will be archived on
the Company’s website for those who are unable to listen live. A replay of the
call is also available through November 4, 2011 at 855-859-2056 (404-537-3406
International). Code 12399914 is needed to access the replay.

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 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 in this press release 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. The Company has tried, wherever possible, to
identify these forward-looking statements using words such 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” or the negative of those terms or other
variations of them or by comparable terminology. The absence of such terms,
however, does not mean that the statement is not forward-looking. 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. Factors that could cause actual
results to differ from forward-looking statements include but are not limited
to: the Company’s dependence on its relationships with several large group
purchasing organizations, whether the Company’s new products are successful in
the marketplace, impacts of healthcare reform, compliance with federal
healthcare programs, collections of accounts receivable, compliance with FDA
regulations, antitrust and other litigation, potential exposure to product
liability or other claims, failure of the Company’s announced or future
strategic initiatives and restructuring and realignment activities to achieve
expected growth, efficiencies or cost reductions, adverse consequences resulting
from the spin-off of the funeral services business, failure of the Company to
execute its acquisition and business alliance strategy through the consummation
and successful integration of acquisitions or entry into joint ventures or other
business alliances, increased costs or unavailability of raw materials, adverse
changes in global economic conditions or disruptions of credit markets, labor
disruptions, the ability to retain executive officers and other key personnel,
and certain tax-related matters. For a more in depth discussion of these and
other 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)

Quarterly Period Ended September 30 Year Ended September 30
———————————– ———————–

2011 2010 2011 2010
—- —- —- —-
Net revenues
Capital sales $316.3 $282.6 $1,119.0 $996.6
Rental revenues 114.3 114.0 472.7 473.0
—– —– —– —–
Total revenues 430.6 396.6 1,591.7 1,469.6
Cost of revenues
Cost of goods sold 170.8 151.2 606.8 548.6
Rental expenses 49.2 49.4 203.6 204.4
—- —- —– —–
Total cost of revenues 220.0 200.6 810.4 753.0
Gross profit
Capital 145.5 131.4 512.2 448.0
Rental 65.1 64.6 269.1 268.6
—- —- —– —–
Total gross profit 210.6 196.0 781.3 716.6
As a percentage of sales 48.9% 49.4% 49.1% 48.8%

Research and development
expenses 15.5 14.9 63.8 58.3
Selling and
administrative expenses 126.9 116.0 502.0 474.6
Litigation charge
(credit) 5.0 (21.2) 47.3 (21.2)
Special charges – 8.2 1.4 13.2
— — — —-

Operating profit 63.2 78.1 166.8 191.7

Other income (expense),
net (2.6) (3.9) (7.1) (8.8)

Income tax (benefit)
expense (2.9) 23.4 26.2 56.9

Net income 63.5 50.8 133.5 126.0

Less: Net income
attributable to
noncontrolling interest – 0.1 0.2 0.7
— — — —

Net income attributable
to common shareholders $63.5 $50.7 $133.3 $125.3
===== ===== ====== ======

Diluted earnings per
share: $1.01 $0.79 $2.09 $1.97

Average common shares
outstanding -diluted
(thousands) 63,117 64,328 63,899 63,739

Dividends per common
share $0.1125 $0.1025 $0.43 $0.41

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)

Quarterly Period Ended September 30
———————————–
Constant
2011 Foreign Exchange 2011 2010 Currency
As Reported Impact Adjusted As Reported Change
———– —— ——– ———– ——

Capital sales $316.3 $5.6 $310.7 $282.6 9.9%
Rental revenues 114.3 1.3 113.0 114.0 -0.9%
Total $430.6 $6.9 $423.7 $396.6 6.8%
====== ==== ====== ====== ===

Acute Care $272.5 $0.6 $271.9 $237.6 14.4%
Post-Acute Care 53.0 – 53.0 52.1 1.7%
International 105.1 6.3 98.8 106.9 -7.6%
Total $430.6 $6.9 $423.7 $396.6 6.8%
====== ==== ====== ====== ===

Year Ended September 30
———————–
Constant
2011 Foreign Exchange 2011 2010 Currency
As Reported Impact Adjusted As Reported Change
———– —— ——– ———– ——

Capital sales $1,119.0 $14.3 $1,104.7 $996.6 10.8%
Rental revenues 472.7 2.5 470.2 473.0 -0.6%
Total $1,591.7 $16.8 $1,574.9 $1,469.6 7.2%
======== ===== ======== ======== ===

Acute Care $981.0 $3.6 $977.4 $875.8 11.6%
Post-Acute Care 209.1 – 209.1 205.7 1.7%
International 401.6 13.2 388.4 388.1 0.1%
Total $1,591.7 $16.8 $1,574.9 $1,469.6 7.2%
======== ===== ======== ======== ===

Hill-Rom Holdings, Inc. and Subsidiaries
Reconciliation: Earnings Per Share
(Dollars in millions except per share data)

Quarterly Period Ended September 30, Quarterly Period Ended September 30,
2011 2010
————————————- ————————————-
Income Income Diluted Income Income Diluted
Before Tax EPS Before Tax EPS
Income Taxes Expense ——– Income Taxes Expense* ——–
———— ——- and NCI ——–
——-

GAAP Earnings $60.6 $(2.9) $1.01 $74.2 $23.4 $0.79
Adjustments:
Litigation charge
(credit) 5.0 1.9 0.05 (21.2) (8.3) (0.20)
Vendor product recall (0.9) (0.4) (0.01) – – -
Special charges – (0.2) – 8.2 3.3 0.08
Acquisition and
integration costs 1.0 0.4 0.01 – – -
Recognition of
previously
unrecognized tax
attributes – 21.5 (0.34) – – -
Adjusted Earnings $65.7 $20.3 $0.72 $61.2 $18.3 $0.67
===== ===== ===== ===== ===== =====

Year Ended September 30, 2011 Year Ended September 30, 2010
—————————– —————————–
Income Income Diluted Income Income Diluted
Before Tax EPS Before Tax EPS*
Income Taxes Expense* ——– Income Taxes Expense ——–
and NCI* ——– and NCI ——-
——– ——-
GAAP Earnings $159.7 $26.2 $2.09 $182.9 $56.9 $1.97
Adjustments:
Litigation charge
(credit) 47.3 14.2 0.52 (21.2) (8.3) (0.20)
Vendor product recall (2.3) (0.9) (0.02) – – -
Special charges 1.4 0.5 0.01 13.2 5.0 0.13
Acquisition and
integration costs 1.0 0.4 0.01 – – -
Recognition of
previously
unrecognized tax
attributes – 21.5 (0.34) – – -
Gain on sale of non-
strategic assets – – – – 1.7 (0.03)
Tax settlement – – – – 6.5 (0.10)
Adjusted Earnings $207.2 $61.8 $2.27 $174.9 $61.8 $1.76
====== ===== ===== ====== ===== =====

* May not add due to rounding.

Hill-Rom Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Dollars in millions)

September 30, 2011 September 30, 2010
—————— ——————
Assets
Current Assets
Cash and cash
equivalents $224.6 $184.5
Trade accounts
receivable, net of
allowances 386.2 353.1
Inventories, net 95.6 108.5
Other current
assets 85.3 93.1
—- —-
Total current
assets 791.7 739.2

Property, plant and
equipment, net 222.8 243.7
Goodwill 87.2 81.1
Other assets 197.4 181.6
—– —–

Total Assets $1,299.1 $1,245.6
======== ========

Liabilities
Current Liabilities
Trade accounts
payable $64.8 $80.6
Short-term
borrowings 100.3 53.1
Other current
liabilities 168.9 155.0
—– —–
Total current
liabilities 334.0 288.7

Long-term debt 50.8 98.5
Other long-term
liabilities 172.6 142.6
—– —–

Total Liabilities 557.4 529.8
—– —–

Noncontrolling
interest – 8.3

Shareholders’
Equity 741.7 707.5
—–

Total Liabilities,
Noncontrolling
Interest $1,299.1 $1,245.6
and Shareholders’
Equity ========

Hill-Rom Holdings, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in millions)

Year Ended September 30
———————–

2011 2010
— —
Operating Activities
Net income $133.5 $126.0
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 103.9 99.7
Provision for deferred income taxes (21.5) 21.2
Loss on disposal of property,
equipment leased to others,
intangible assets and impairments 1.3 7.3
Stock compensation 12.2 12.0
Excess tax benefits from employee
stock plans (6.8) -
IRS tax settlement (4.9) (8.2)
Litigation credit – (21.2)
Defined benefit plan funding (1.4) (52.3)
Change in working capital excluding
cash, current investments,
current debt and acquisitions and
dispositions:
Trade accounts receivable (24.7) (7.0)
Inventories 14.7 (16.2)
Other current assets 14.4 (37.5)
Trade accounts payable (18.0) (2.4)
Accrued expenses and other
liabilities 10.0 12.5
Other, net 9.8 5.9
— —
Net cash provided by operating
activities 222.5 139.8
—– —–

Investing Activities
Capital expenditures and purchase of
intangibles (68.9) (64.7)
Proceeds on sales of property and
equipment leased to others 5.9 2.5
Acquisitions of businesses, net of
cash acquired (15.5) (7.3)
Proceeds on investment sales/
maturities 0.5 31.3
— —-
Net cash used in investing
activities (78.0) (38.2)
—– —–

Financing Activities
Change in short-term debt (0.4) (4.1)
Payment on revolver (0.2) (45.0)
Purchase of noncontrolling interest (11.8) -
Distribution to noncontrolling
interest partner – (1.1)
Payment of cash dividends (27.0) (25.8)
Proceeds on exercise of options 43.1 22.9
Proceeds from stock issuance 2.9 2.6
Excess tax benefits from employee
stock plans 6.8 -
Treasury stock acquired (115.3) (36.9)
—— —–
Net cash used in financing
activities (101.9) (87.4)
—— —–

Effect of exchange rate changes on
cash (2.5) (0.3)
—- —-

Total Cash Flows 40.1 13.9

Cash and Cash Equivalents:
At beginning of period 184.5 170.6
—– —–
At end of period $224.6 $184.5
====== ======

SOURCE Hill-Rom Holdings, Inc.