Hill-Rom Announces CutsPosted: Updated:
Batesville-based Hill-Rom Holdings Inc. (NYSE: HRC) is planning major restructuring, which will result in the elimination of approximately 350 positions in the U.S. and Europe. The company is looking to save $30 million annually and has not stated how many will be affected in Indiana. January 23, 2014
BATESVILLE, Ind. - Hill-Rom Holdings, Inc. (NYSE: HRC) announced financial results for its fiscal first quarter ended December 31, 2013 and updated its 2014 financial outlook. Adjusted earnings per diluted share decreased to $0.36 from $0.54 in the prior year. Reported earnings per diluted share decreased to $0.22 from $0.39 in the prior year. Adjustments to reported earnings and EBITDA are detailed in the reconciliation schedules provided.
Hill-Rom's quarterly revenue was $393 million, an 8 percent decrease compared to last year on a reported basis and a 9 percent decrease on a constant currency basis. Domestic revenue was $249 million, down 9 percent, while revenue outside the United States decreased 7 percent to $144 million.
"This quarter demonstrates the inherent volatility and current challenges in our capital equipment markets. We are clearly disappointed by our weaker than expected results. However, we remain committed to driving long-term margin improvement through aggressive management of our operating cost structure, as demonstrated by the restructuring actions we announced today," said John Greisch, Hill-Rom President and Chief Executive Officer. "At the same time, we will pursue improvements to our portfolio, in a manner consistent with our disciplined capital allocation framework, in order to continue to deliver value to our customers and shareholders."
First Quarter Financial and Operational Results
- North America. North America revenue declined 12 percent to $206 million. Capital revenue decreased 14 percent. Rental revenue declined 8 percent.
- International. International segment revenue decreased 8 percent to $125 million (10 percent on a constant currency basis) on lower revenue in the Middle East and Latin America. Capital revenue decreased 9 percent while rental revenue increased 7 percent.
-Surgical/Respiratory Care. Surgical/Respiratory Care revenue increased 7 percent to $63 million, due to strong results in our surgical businesses.
-Operating cash flow for the quarter was $42 million, compared to $65 million in the prior year.
-Adjusted EBITDA for the quarter was $54 million, compared to $75 million in the prior year.
-Share repurchases for the quarter amounted to approximately $42 million.
-During the quarter, the Company launched the Centuris bed system targeted at emerging and developing markets around the world. The Centuris bed system incorporates essential features for both patient care and caregiver support while maintaining compliance to the latest international safety standards.
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 Quarterly Report on Form 10-Q for the quarter ended December 31, 2013.
In line with its efforts to improve long-term operating margins and further rationalize its cost structure, Hill-Rom is implementing a comprehensive restructuring program that will include:
-Reduction of European manufacturing capacity, with the planned closure of one facility and downsizing of capacity throughout its remaining European manufacturing network;
-Streamlining operations in the United States and Europe, including establishing a shared services center in Europe;
These actions will result in the elimination of approximately 350 net positions in the United States and Europe, representing approximately 5 percent of Hill-Rom's global work force.
The Company anticipates substantially completing the domestic portion of the restructuring during the second quarter of 2014. The European restructuring is expected to be completed over the next two years.
When all actions are complete, savings are expected to be approximately $30 million on an annual basis. Savings in 2014 are expected to exceed $8 million, excluding restructuring charges. Restructuring charges associated with completing all actions are expected to be approximately $50 million, with $15 to $20 million to be incurred in the second quarter of 2014. Remaining charges will be incurred throughout the restructuring period.
Financial Guidance Summary
The Company is updating financial guidance as follows:
Revenue: Hill-Rom now expects a full year 2014 revenue decline of approximately 2 to 4 percent and second quarter revenue also to decline 2 to 4 percent compared to the prior year (constant currency).
Adjusted Earnings per Diluted Share: Full year adjusted earnings per diluted share are now expected to be $2.18 to $2.28, which exclude approximately $0.31 of acquisition-related intangible amortization expense. For comparison, full year 2013 adjusted earnings per diluted share, excluding $0.29 of acquisition-related intangible amortization expense, would have been $2.38. 2014 earnings guidance excludes an approximate $0.03 per share benefit associated with the R&D Tax Credit, which was not reinstated for 2014. This benefit was included in the company's previous 2014 guidance.
Second quarter adjusted earnings per diluted share are expected to be $0.50 to $0.53, which exclude approximately $0.08 of acquisition-related intangible amortization expense. For comparison, second quarter 2013 adjusted earnings per diluted share, excluding $0.07 of acquisition-related intangible amortization expense would have been $0.56.
Cash Flow: Cash flow from operations for the full year is expected to be approximately $250 to $260 million, excluding any cash outflow related to the restructuring program announced today.
Adjusted EBITDA: Adjusted EBITDA for the full year is now expected to be approximately $280 to $290 million.
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. http://www.hill-rom.com
Source: Hill-Rom Holdings Inc.