Hill-Rom Holdings' fourth-quarter revenue increases 20% to $574 million

Hill-Rom Holdings, Inc. (NYSE: HRC) announced financial results for its fourth quarter ended September 30, 2015, and its fiscal year 2016 financial outlook. Adjusted earnings per diluted share of $0.89 increased 20 percent from $0.74 in the prior year. The reported loss per diluted share was $0.16 as compared to income of $0.42 in the prior year, reflecting acquisition and integration expenses, restructuring expenses and other items excluded from adjusted earnings. Adjustments to reported earnings are detailed in the reconciliation schedules provided.

Hill-Rom's quarterly revenue of $574 million increased 20 percent compared to last year, or 25 percent on a constant currency basis, primarily due to strong North America capital revenue growth and the Trumpf Medical and Welch Allyn acquisitions. Excluding the benefit of acquisitions, our constant currency growth was 7 percent, driven primarily by 13 percent growth in North America and 6 percent growth in the Surgical and Respiratory Care businesses. Domestic revenue was $384 million, up 26 percent, while revenue outside the United States of $190 million increased 22 percent on a constant currency basis.

For the full year, revenue was $1,988 million compared to $1,686 million for the prior year, an increase of 18 percent on a reported basis and 24 percent on a constant currency basis. Excluding acquisitions, constant currency growth was 7 percent. Adjusted earnings per diluted share for fiscal 2015 were $2.64 compared to $2.25 in 2014, an increase of 17 percent. Reported earnings per diluted share for the full year were $0.82 compared to $1.04 for the prior year.

Management Comments

"We finished the year ahead of our expectations with strong fourth quarter results that included a 20 percent increase in adjusted earnings and constant currency revenue growth of 7 percent, excluding acquisitions," said John Greisch, Hill-Rom President and Chief Executive Officer. "Our ongoing focus on margin expansion resulted in a significant increase in adjusted operating margin of 220 basis points for the quarter. For the full year, we delivered record adjusted earnings of $2.64 per diluted share, a 17 percent increase."

Greisch continued, "We are very pleased with the progress we made in 2015 on a number of fronts. We strengthened our management team with several key appointments during the year and we significantly enhanced our portfolio with the additions of Trumpf Medical and Welch Allyn. Together with new product introductions and our continued focus on operational excellence, we have improved our customer value proposition and are driving strong growth in revenue and adjusted earnings for 2016 and beyond."

Fourth Quarter Financial Highlights

-- Revenue:

-- North America. North America revenue increased 12 percent to $278 million. On a constant currency basis, capital sales increased 13 percent, while rental revenue increased 14 percent. Strong sales of our Progressa ICU bed system and Clinical Workflow Solutions led capital sales growth while incremental volume drove rental growth.

-- Surgical/Respiratory Care. Surgical and Respiratory Care revenue increased 32 percent to $141 million, or 40 percent on a constant currency basis. Excluding Trumpf Medical, constant currency growth was 6 percent.

-- International. International segment revenue of $106 million was down 5 percent on a constant currency basis and 16 percent on a reported basis. On a constant currency basis, capital revenue was down nearly 5 percent compared to the prior year, while rental revenue decreased 11 percent.

-- Welch Allyn. Welch Allyn revenue was $50 million for the period following the close of the transaction on September 8, 2015.

-- Adjusted operating margin increased 220 basis points to 14.6 percent reflecting improvement in organic margins as well as accretion from Welch Allyn.

-- Excluding net cash outflows of $21 million associated with the Welch Allyn transaction, full year operating cash flow of $235 million compares to $210 million in the prior year.

Please see the attached schedules for additional information and reconciliations of GAAP to adjusted financial measures.

For a more complete review of Hill-Rom's results, please refer to the Company's Annual Report on Form 10-K for the year ended September 30, 2015, which will be filed later this month.

Financial Guidance Summary

Revenue: For fiscal 2016, Hill-Rom expects reported revenue to be between $2.66 and $2.70 billion. This reflects:

• low to mid-single-digit constant currency organic growth;
• 3 to 5 percent pro-forma constant currency growth from Welch Allyn; and
• negative currency impact of 1 to 2 percent at current rates.

For the first quarter of fiscal 2016, Hill-Rom expects reported revenue to be between $645 and $655 million. This reflects:

• low to mid-single-digit constant currency organic growth;
• revenue contribution from Welch Allyn; and
• negative currency impact of 3 to 4 percent at current rates.

Adjusted Earnings per Diluted Share: The Company expects full year adjusted earnings per diluted share to be $3.08 to $3.14.

First quarter adjusted earnings per diluted share are expected to be $0.60 to $0.62.

Cash Flow: Hill-Rom expects cash flow from operations for the full year to be approximately $300 million, which includes non-recurring outflows related to our ongoing restructuring and integration activities. Capital expenditures are expected to be approximately $110 to $120 million.