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

BATESVILLE, Ind., May 8, 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 Tax Diluted EPS * Income Before Income Tax Diluted EPS*

Income Taxes Expense Income Taxes Expense
———— ——- ———— ——-

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 Tax Diluted EPS Income Before Income Tax Diluted EPS*

Income Taxes Expense Income Taxes Expense
———— ——- ———— ——-

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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