CHICAGO, Aug. 4, 2016 /PRNewswire/ -- Hill-Rom Holdings, Inc., (NYSE: HRC) today announced financial results for its fiscal third quarter ended June 30, 2016, and updated its full-year 2016 financial outlook. During the quarter, Hill-Rom reported earnings of $0.68 per diluted share, an increase of 106 percent, compared to $0.33 per diluted share in the prior-year period.
On an adjusted basis, earnings of $0.81 per diluted share rose 31 percent from $0.62 per diluted share in the prior-year period, and exceeded the company's previously-issued guidance of $0.75 to $0.77 per diluted share. These results reflect strong revenue, particularly in North America, and management's continued focus on operational execution and margin expansion. Adjustments to reported earnings are detailed in the reconciliation schedules provided.
"We delivered a strong quarter of revenue and earnings growth that exceeded our expectations, and as a result we have raised our full-year adjusted earnings outlook," said John J. Greisch, president and Chief Executive Officer of Hill-Rom. "This performance reflects the value of our diversified portfolio, our disciplined focus on commercial and operational execution, and our commitment to cost management and margin improvement across our businesses."
Third Quarter Financial Highlights
Hill-Rom's third quarter worldwide revenue of $655 million grew 38 percent (or 39 percent on a constant currency basis) compared to the prior-year period. On a pro-forma constant currency basis, revenue increased 2 percent. Domestic revenue of $451 million advanced 47 percent (or 6 percent on a pro forma basis), while revenue outside the United States of $204 million increased 23 percent (but declined 4 percent on a pro forma constant currency basis). Pro-forma revenue reflects the inclusion of Welch Allyn in both the current and prior-year periods.
Business highlights below reflect revised reporting segments as disclosed by Hill-Rom in the fiscal 2016 second quarter. Please refer to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, for additional details.
-- North America: North America revenue of $268 million advanced 6 percent on a reported and constant currency basis.
-- Front Line Care: Front Line Care, which includes Welch Allyn and Respiratory Care, generated revenue of $193 million. On a pro-forma constant currency basis, Front Line Care revenue increased approximately 2 percent.
-- Surgical Solutions: Surgical revenue of $102 million increased 3 percent on a reported and constant currency basis.
-- International: International revenue of $93 million declined 8 percent on a reported and constant currency basis.
-- Gross margin improved by 390 basis points to 48.1 percent; adjusted gross margin expanded by 340 basis points to 48.1 percent.
-- Operating margin improved by 230 basis points to 8.9 percent; adjusted operating margin expanded by 370 basis points to 15.2 percent.
-- Year-to-date operating cash flow increased $81 million, or 65 percent, to $205 million compared to the prior year.
Recent Highlights
- During the third quarter, the company introduced the VisiVestAirway Clearance System, a connected therapeutic solution for patients with chronic lung disease. The VisiVest System provides therapy adherence data that may help inform decisions caregivers make for their patients, resulting in reduced risk of respiratory infections, hospitalizations and medical costs.
- In continuation of Hill-Rom's global footprint optimization strategy, the company announced the closure of two European manufacturing facilities, which will be completed during 2017. In total, the company has now initiated or completed five facility closures.
Financial Outlook
For fiscal 2016, Hill-Rom now expects reported revenue to be approximately $2.65 billion, compared to $2.64 and $2.67 billion previously. This reflects:
- 2% to 3% pro forma constant currency growth, and
- Negative currency impact of approximately 2 percent at current rates
In addition, the company now expects full-year 2016 adjusted earnings to be $3.32 to $3.34 per diluted share, compared to the previous guidance range of $3.26 to $3.30 per diluted share. Cash flow from operations for the full year is now expected to be approximately $320 million, compared to $315 million previously, which includes outflows related to our ongoing restructuring and integration activities. Capital expenditures are now expected to be approximately $90 million, compared to $110 to $120 million previously.
For the fourth quarter of fiscal 2016, Hill-Rom expects reported revenue to be between $695 and $705 million. This reflects:
- Approximately flat pro forma constant currency growth, and
- Negative currency impact of approximately 1 percent at current rates
In addition, the company expects fourth quarter adjusted earnings to be $1.12 to $1.14 per diluted share.
Discussion of Adjusted Financial Measures
Hill-Rom Holdings, Inc. routinely provides earnings per share results and guidance on an adjusted basis because the company's management believes this measures contributes to an understanding of our financial performance and provides an additional analytical tool to understand our results from core operations and reveal underlying trends. This measure excludes strategic developments, acquisition and integration costs, special charges or other unusual events. The company also excludes expenses associated with the amortization of intangible assets associated with prior business acquisitions. This adjustment is made to allow investors to evaluate and understand operating trends excluding the non-cash impact of acquired intangible amortization on operating income and earnings per share.
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