Hill-Rom Holdings Presents At 30th Annual JP Morgan Healthcare Conference (Transcript)

Hill-Rom Holdings, Inc. ( HRC)

30th Annual JP Morgan Healthcare Conference

January 12, 2012 10:30 am ET


John J. Greisch – President and Chief Executive Officer



Good morning and welcome to day four of the JP Morgan Healthcare Conference. I’m Kim Galen with the Medtech team. Presenting next, we have Hill-Rom, and it’s my pleasure to introduce CEO John Greisch. Before I turn it over to John, though, I want to mention two things. (Operator Instructions) Thanks. John.

John Greisch

Thanks, Kim. Good morning, everybody. I appreciate you joining us bright and early here on the last day of the conference. Before I get into the presentation, just to remind everybody, we may be covering non-GAAP information and I’d like to refer you to our SEC filings for any reconciliation required.

Let me just start with a quick run-through of the preannouncement we made a couple days ago, which I’m sure many of you saw. Our first quarter results expect to be reported in about a week and a half with revenue of approximately $381 million, a constant currency growth of 2%. This compares to four to five of our original guidance, and I’ll talk to our updated guidance here in a minute.

You may recall on our fourth quarter earnings call, we did comment that the comps would be tougher in the first half and get more favorable in the second half, so revenue growth was disappointing in the first quarter slightly, but not too far off of our expectation. As you can see here, our largest business unit—our North American Acute Care business—had 7% growth. The core business of that segment for us, our patient support systems, which is our core bedframe and surface product category, grew 13%.

Many of you know over the last couple of years that business has been growing quite strongly. In fiscal 2011, we saw a growth in excess of 20% for the year. We did signal that the rate of growth was expected to slow down, so this is pretty much in line with some of our expectations here for the first quarter, and our capital business within the North American Acute Care segment, which includes software and other products in addition to bedframes and services, grew about 11% for the quarter, so strong quarter for that business.

A decline in revenue in our international segment, as expected. We had some tough comps in that segment. I think you’ll see some accelerated growth rates in that business for the rest of the year, and a little disappointment in our North American Post-Acute business, where we saw some declines in our home care business for the quarter.

With respect to EPS, we’re expected to report $0.52 to $0.53 for the first quarter. This compares to $0.55 last year, and just to remind everybody, last year’s reported results included about $0.03 for catch-up for the R&D tax credit for fiscal 2010. So, on an apples-to-apples basis, we should show some slight improvement over the prior year.

For the full year, just to run through our previous guidance, we came out in October with 4% to 5% expected constant currency growth for the full year, adjusted earnings in the range of $2.45 to $2.55, and adjusted cash flows about $290 million to $300 million.

We’ve taken that down in terms of the top line expectation now for a couple reasons. One, the slightly weaker first quarter revenue results, and we did see a bit of a slowdown in our North American Acute Care order rate during the first quarter, relative to what we had been seeing in fiscal 2011, so we’ve adjusted our revenue guidance down a point to 3% to 4%.

Earnings, we’ve lowered the top end of the range a nickel reflecting two things. One, the impact of the slightly lower revenues, and secondly, we had anticipated in our original guidance the reinstatement of the R&D tax credit for calendar 2012. That has not been reinstated yet by Congress, and as a result, we’ve taken that out of our guidance now and that was worth $0.03 to us in fiscal year 2012.

Cash flow remains the same. So, earnings, despite the revenue shortfall, and I think you’ll see in the first quarter, similar results. We’re managing our cost structure very aggressively to mitigate any revenue shortfall that we experience here for fiscal 2012.

Just for those of you not familiar with the company, let me give you a quick overview of Hill-Rom. As many of you know, we are a global leader in medical technology across the care continuum. Our core business, obviously, is focused on patient handling, patient mobility, and environmental systems within the acute care hospital segment, particularly. Also, very focused on improving outcomes through therapeutic surfaces and various other products, our respiratory care business a good example of that. And again, many of our products span the care continuum from the acute care segment all the way through to the home.

Health IT is an increasingly important area for us, particularly around connectivity of our devices with hospitals, EMR systems and other IT systems within hospitals. Getting patient data to the caregivers as quickly as possible, meaningful data off of our devices, is becoming an increasing demand from our customers, and I think we’re leading the charge in that area, certainly within our segment.

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