- Hill-Rom Holdings' CEO Discusses F2Q12 Results - Earnings Call Transcript

Hill-Rom Holdings, Inc. (HRC)

F2Q12 (Qtr End 03/31/2012) Earnings Call

April 26, 2012 8:00 am ET


Andy Rieth - VP, IR

John Greisch - President and CEO

Mark Guinan - SVP and CFO


Matt Miksic - Piper Jaffray

Larry Keusch - Raymond James

Jon Demchick - Morgan Stanley

Lennox Ketner - Bank of America-Merrill Lynch

Chris Cooley - Stephens, Inc.

Gary Lieberman - Wells Fargo



Good morning and welcome to the Hill-Rom Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded and will be available for telephone replay through May 03, 2011. See Hill-Rom's website for access information. The webcast will also be archived in the Investor Relations section of Hill-Rom's website, www.hill-rom.com.

If you choose to ask a question today, it will be included in any future use of this recording. Also note that any recording, transcript or other transmission of the text or audio is not permitted without the written consent of Hill-Rom. (Operator Instructions)

Now, I would turn the conference call over to Mr. Andy Rieth, Vice President, Investor Relations.

Blair Reith

Good morning and thanks for joining us for our second quarter fiscal year 2012 earnings call.

Before we begin, I'd like to provide our usual caution that this morning's call may contain forward-looking statements such as forecasts of business performance and company results as well as expectations about the company's plans and future initiatives. Actual results may differ materially from those projected. For an in-depth discussion of risk factors that could cause actual results to differ from those contained in forward-looking statements made on today's call, please see the risk factors in our Annual Report on Form 10-K and subsequent quarterly reports on Form 10-Q. We plan to file our 10-Q for the second quarter later this week.

Joining me on the call today will be Mr. John Greisch, President and CEO of Hill-Rom; and Mr. Mark Guinan, Hill-Rom's Senior Vice President and Chief Financial Officer. The usual ground rules will apply to make the call today more efficient. We scheduled an hour in order to accommodate our prepared remarks and leave plenty of time for Q&A.

During Q&A, please limit your inquiries to one question plus a follow-up per person. If you have additional questions, you may rejoin the queue. As you listen to our remarks, we're also displaying slides that amplify our disclosure. I would encourage you to follow along with us. The slides were posted last night on our website and will also be a part of this archive.

With that, I’ll turn the call over to John.

John Greisch

Thanks, Andy. Good morning, everybody, and thanks for joining us today. We're pleased to report second quarter results that were in line with our revenue expectations as well as better than anticipated adjusted earnings per share. We continue to have topline challenges in several areas, but we remain focused on meeting our commitments to improve earnings and cash flow, and I'm pleased that we have delivered 9% adjusted earnings growth this quarter.

It is clear that Europe will remain difficult for the foreseeable future as will some of our other markets. And as evidenced by our recent restructuring actions, we plan to take cost out of the business where it makes sense in order to respond to these conditions. At the same time, we remain committed to invest to grow our business both inorganically as evidenced by our recent Volker acquisition and organically through investment in R&D and our international sales and marketing resources.

Let me continue with some comments our performance this quarter, starting with our largest business North America acute care. Consistent with the guidance that we provided last quarter, we experienced a low single-digit revenue decline compared to last year when we had a record quarter in Canada. While revenue declined year-over-year, we're encouraged that orders grew sequentially from the first quarter. Our orders increased sequentially compared to the first quarter. As expected, orders were down from last year when we recorded two of the largest single orders in the history of the company.

Our patient support systems category, the largest component of our North America acute care capital business, was flat in the United States. However, a decline in our patient support systems sales in Canada where we had a record quarter last year resulted in an 8% overall decline in our patient support systems category.

As you all know, patient support systems in North America has been our strongest performing business over the past couple of years, achieving over 25% growth in 2011. As we previously discussed, we expected the rate of growth to decline for 2012, which we've seen across the industry. Despite the challenges our customers continue to face and the uncertainty in the overall healthcare environment, we expect to see relatively stable order rates in this business for the rest of the year compared to the first six months of fiscal 2012.

Overall, our international segment performed well this quarter, slightly ahead of our revenue guidance. While European revenue declined, we experienced strong double-digit growth in several other regions, particularly the Middle East. Orders in Europe declined slightly year-over-year, but have remained relatively stable over the past several quarters.

We've seen good momentum in regions outside of Europe and we're encouraged by the results we have achieved in countries where we have been investing in sales and marketing resources over the past two years. Although this business tends to be driven by one-off tenders, I'm encouraged by the progress we are making around the world. Revenue will remain lumpy on quarter-to-quarter basis, but we are building a sustainable presence in many of these markets.

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