Batesville-based Hill-Rom Holdings Inc. (NYSE: HRC) is reporting a fiscal second quarter loss of $3.3 million, compared to a profit of $22.3 million for the same period the previous year. In addition to major restructuring plans announced in January, the company says it will discontinue what's left of its North America home care bed rental business. May 2, 2014

News Release

BATESVILLE, Ind. – 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.

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.

Source: Hill-Rom Holdings Inc.

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