Hillenbrand, Inc. (NYSE: HI)
- Q409 EPS up 19.4 percent on 3.6 percent lower revenues.
- FY09 EPS up 11.4 percent on 4.3 percent lower revenues.
- Gross profit margin percentage improved both for the quarter and the year, with increases of 170 and 90 basis points, respectively.
- Hillenbrand announces guidance for FY2010, which began Oct. 1.
Hillenbrand reported net revenues of $153.1 million for the fourth quarter of 2009, which ended Sept. 30, 2009, a $5.7 million (3.6 percent) decline from the same period in fiscal 2008. The company posted net income of $22.6 million, a $3.4 million (17.7 percent) increase from last year. Included in current fourth-quarter pre-tax operating expenses were approximately $104,000 in legal costs related to antitrust litigation and virtually no separation costs, resulting in a negligible difference in as-adjusted net income. Earnings per diluted share for the fourth quarter of 2009 increased by $0.06 (19.4 percent) over the prior year period, from $0.31 to $0.37.
"North American burials continued to decline in the fourth quarter, even as the number of deaths returned to a more normal seasonal level," said Kenneth A. Camp, president and chief executive officer of Hillenbrand, Inc. "We believe the economic uncertainties have prompted some families to opt for cremation at a rate greater than we've seen in the past. After a very difficult second quarter, these trends appear to be stabilizing, although it is too early to tell if cremation growth rates will return to previous levels."
Decreases in the cost of diesel fuel and some raw materials continued to drive improvement in the company's gross profit margin from 40.3 percent in the fourth quarter of 2008 to 42 percent (170 basis points) during the same period in 2009. Operating expenses were flat at $31.6 million in the fourth quarter of fiscal 2009, compared with $31.7 million in the same period of the prior year. Investment income of $3.7 million was up $1.7 million (85 percent).
Cash flow from operations remained strong at $38.3 million in the fourth quarter, compared with $11 million during the same period in 2008, a difference primarily driven by changes in the timing of tax payments, as well as a discretionary payment into the company's pension plan in the fourth quarter of fiscal 2008.
Fiscal 2009 Results
Net revenues for fiscal 2009 were $649.1 million, a decrease of $29 million (4.3 percent) from fiscal 2008. Net income for the year was $102.3 million, up $9.1 million (9.8 percent) from 2008. Earnings per diluted share increased by $0.17 (11.4 percent) over fiscal year 2008, from $1.49 to $1.66.
The year's gross profit margin was 42.3 percent compared to 41.4 percent in the prior year, an increase of 90 basis points. Operating expenses declined $11.5 million (8.8 percent) in fiscal 2009 compared to 2008. Investment income grew by $2 million (33.9 percent) from $5.9 million in 2008 to $7.9 million in 2009.
Included in the 2009 annual operating expenses were $2.2 million in legal costs related to antitrust litigation and $86,000 in separation costs, compared to $3.3 million and $15.6 million, respectively, for these items in the prior year. Excluding the impact of these costs from both years' operations, net income declined $4.5 million (4.2 percent) from fiscal 2008 to fiscal 2009.
For the year, Hillenbrand generated $123.2 million in net operating cash flow, a 21 percent increase over the prior year.
"In 2009, we reacted swiftly and appropriately in the face some of our industry's most difficult challenges. As a result, we have maintained our market position," Camp said. "We also generated a significant increase in operating cash flow, which has enabled us to return $58.1 million directly to shareholders in the form of increased dividends and share repurchases."
Guidance for Fiscal Year 2010
Guidance for fiscal year 2010 reflects a broader range than Hillenbrand normally gives investors, primarily because a number of uncertainties make it more difficult to predict results. While the economy has shown signs of recovery, the company believes it could be more prolonged than past recessions. In addition, there are many conflicting reports about the potential severity of this year's influenza and pneumonia season, with both normal seasonal and H1N1 flu strains in circulation.
Hillenbrand expects 2010 revenues will be from 3 percent below to 3.1 percent above FY09 revenues, ranging from $630 million to $670 million. Earnings per diluted share will range from $1.40 to $1.67, with net income projected to be between $86 million and $103 million. Excluding approximately $3 million to $5 million in estimated legal costs related to ongoing antitrust litigation, we expect fiscal 2010 earnings per diluted share to range from $1.45 to $1.70. Guidance for 2010 includes modest investments in growth initiatives in the death care industry, although it does not include any impact from future mergers or acquisitions, or the impact of changes in limited partnership investments.
"Although we have traditionally been less susceptible to economic downturns than most industries, the level of uncertainty among consumers remains reasonably high," Camp said. "That makes it more challenging for us to forecast results for the coming fiscal year. We can, however, say with certainty that Hillenbrand's employees are continuing to provide our customers and the families they serve with the innovation, quality and service they expect, which will in turn continue to drive value for our shareholders."
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