Hill-Rom Holdings' revenue increases 19% to $475 million in third quarter 2015

Hill-Rom Holdings, Inc. (NYSE: HRC) announced financial results for its third quarter ended June 30, 2015 and updated its 2015 financial outlook. Adjusted earnings per diluted share of $0.62 increased 5 percent from $0.59 in the prior year, while reported earnings per diluted share of $0.33 decreased from $0.45. Adjustments to reported earnings are detailed in the reconciliation schedules provided.

Hill-Rom's quarterly revenue of $475 million increased 19 percent compared to last year, or 26 percent on a constant currency basis, primarily due to the Trumpf Medical acquisition and strong North America capital revenue growth. Excluding the benefit of Trumpf, our constant currency growth was 11 percent, driven primarily by 25 percent growth in the North America capital business. Domestic revenue was $308 million, up 21 percent, while revenue outside the United States of $167 million increased 36 percent on a constant currency basis.

Management Comments

"We are pleased to report another quarter of strong revenue and adjusted earnings growth. Our double-digit organic revenue growth was driven by strength in our North America capital business, which increased 25 percent in the quarter," said John Greisch, Hill-Rom President and Chief Executive Officer. "In addition, we accelerated our growth strategy with our agreement to acquire Welch Allyn. We are confident that our combination with Welch Allyn will advance our strategic objectives and create a stronger platform from which to deliver increased shareholder value."

Third Quarter Financial Results and Operational Highlights

-- Revenue:

-- North America. North America revenue increased 19 percent to $252 million. On a constant currency basis, capital sales increased 25 percent, while rental revenue increased 15 percent, excluding the impact of the previously exited third party reimbursed home care rental business. As reported, rental revenue grew 9 percent.

-- International. International segment revenue was flat on a constant currency basis and was down 15 percent on a reported basis to $102 million. On a constant currency basis, capital revenue was flat with the prior year, while rental revenue decreased 2 percent.

-- Surgical/Respiratory Care. Surgical and Respiratory Care revenue increased 81 percent to $120 million, or 94 percent on a constant currency basis, reflecting 3 percent organic constant currency growth plus the addition of Trumpf Medical.

-- Year to date operating cash flow was $124 million compared to $134 million in the prior year.

Welch Allyn Acquisition

As previously announced, Hill-Rom and Welch Allyn entered into a definitive merger agreement for Hill-Rom to acquire Welch Allyn for approximately $2.05 billion in cash and stock. Hill-Rom expects the transaction will close on or before October 1, 2015, subject to customary closing conditions.

Please see the attached schedules for additional information, including condensed financial information, a summary balance sheet, a 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 June 30, 2015.

Financial Guidance Summary

All financial guidance excludes the effects of Welch Allyn, including all costs and cash flows necessary to complete the acquisition.

Revenue: For fiscal 2015, Hill-Rom expects reported revenue growth of 12 to 13 percent, compared to 10 to 11 percent previously. This reflects:

• mid-single-digit constant currency organic growth, compared to low-to-mid-single digit growth previously; and
• negative currency impact of approximately 6 percent.

For the fourth quarter of fiscal 2015, Hill-Rom expects reported revenue growth of 1 to 3 percent. This reflects:

• low-single-digit constant currency organic growth; and
• negative currency impact of approximately 5 percent.

Adjusted Earnings per Diluted Share: The Company expects full year adjusted earnings per diluted share to be $2.51 to $2.54, compared to $2.50 to $2.54 previously.

Fourth quarter adjusted earnings per diluted share are expected to be $0.76 to $0.79.

Cash Flow: Hill-Rom now expects cash flow from operations for the full year to be approximately $235 million, compared to $250 million previously. Capital expenditures are now expected to be $125 million, compared to $140 million previously.