Hillenbrand Management Discusses Q3 2012 Results - Earnings Call Transcript

Hillenbrand (HI)

Q3 2012 Earnings Call

August 02, 2012 8:00 am ET


Chris Gordon

Kenneth A. Camp - Chief Executive Officer, President, Director, Chairman of K-Tron International and Chief Executive Officer of K-Tron International

Cynthia L. Lucchese - Chief Financial Officer and Senior Vice President

Joe A. Raver - Senior Vice President and President of Process Equipment Group

Kimberly K. Dennis - President


Daniel Moore - CJS Securities, Inc.

Clint D. Fendley - Davenport & Company, LLC, Research Division

Stephen A. O'Neil - Hilliard Lyons, Research Division

James Clement - Sidoti & Company, LLC



Good morning, everyone, and welcome to Hillenbrand's Earnings Call for the Third Fiscal Quarter 2012. A replay of the call will be available until midnight EST, Thursday, August 16, 2012, by dialing 1 (855) 859-2056 toll-free in the United States and Canada or 1 (404) 537-3406 internationally and using the conference ID number 43750340. This webcast will be archived on the company's website at www.hillenbrand.com through August 2, 2013. If you 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 Hillenbrand's written consent.

At this time, it is my pleasure to turn the conference over to Chris Gordon, Director of Investor Relations. Mr. Gordon, please go ahead.

Chris Gordon

Thank you, Allie, and good morning. Welcome to our earnings call for the third quarter of fiscal 2012, which ended on June 30. With me on today's call are Hillenbrand President and Chief Executive Officer, Ken Camp; and Chief Financial Officer, Cindy Lucchese. During the course of today's conference call and the question-and-answer session that follows, we may make projections or other forward-looking statements that are subject to the Safe Harbor Provisions of the Securities Laws regarding future events or the financial performance of the company. We caution you that these statements are only our view of the future and that actual results may differ materially. We also alert you to the risks described in the documents we file with the Securities and Exchange Commission, such as our annual and quarterly reports on Forms 10-K and 10-Q. We do not undertake any obligations to update or correct any forward-looking statements.

Now let me provide some information regarding our call. We've scheduled an hour, and we'll start with prepared remarks from Ken and Cindy that should last approximately 20 minutes. Ken will start with an overview of the business for the past quarter, Cindy will follow with financial results and Ken will wrap up the prepared portion of the call with some closing comments. After that, we'll move directly to Q&A, when we'll be joined by Batesville President, Kim Dennis; and Process Equipment Group President, Joe Raver. If you have follow-up questions after the call has ended, please feel free to call me at (812) 931-5001 or e-mail me at chris.gordon@hillenbrand.com.

Now it's my pleasure to turn the call over to Ken Camp, Hillenbrand's President and Chief Executive Officer. Ken?

Kenneth A. Camp

Thanks, Chris, and good morning, everyone. Thank you for joining us today. After the market closed yesterday, we released our earnings and filed the 10-Q and both documents are available for our peer review on our website. As you saw, we were able to achieve double-digit revenue growth over the third quarter last year and delivered $0.37 per share in adjusted earnings. Once again, our results were strengthened significantly as a result of our acquisition strategy and the growth of those acquisitions as we continue to diverse our holdings into various growth industries.

The Process Equipment Group continues its strong performance, contributing nearly 70% -- well, I'm sorry, 40% of total enterprise revenue and over 1/3 of our total EBITDA. This has led to consolidated revenue growth of 13% to $238 million for the quarter. Our diversification strategy continues to expand geographic reach with 17% of our revenue now coming from outside the United States. As most of you know, we manage the business for predictable and sustainable cash flow. And despite the headwinds in burials the funeral products industry is experiencing, consolidated cash flow from operations remains strong at $50 million for the quarter, an increase of 17% over the prior year when we exclude the one-time effect last year of the Forethought Note repayment. As you can see, we continue to achieve positive results from the execution of our strategy, even in the midst of a volatile global economy.

I'll begin with a couple thoughts on the performance of the platforms and start with an overview of the Process Equipment Group. This platform has grown revenue 53% over the prior year to $93 million and while a significant amount of this increase came from the addition of Rotex, the Process Equipment Group grew approximately 5% organically compared to the prior year. The Process Equipment Group's consolidated order backlog grew 3% sequentially to $140 million during the quarter. This backlog continues to represent approximately 1/3 of the platform's annual revenue and gives us some good visibility through the rest of the fiscal year and somewhat beyond. This visibility is beginning to expose a degree of uncertainty as global markets have demonstrated some softness for a little while now and the U.S. energy sector continues to evolve.

I don't think it will surprise any of you that there is an increased perception of risk in the European markets and the Asian economy, dominated by China, has slowed its growth over the past few quarters. For China, this means their economy grew at an annual rate of 8%, down from a 9% rate last quarter, and they have historically grown at about 10%. Additionally, we've seen some impact related to the U.S. energy market changes.

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