Hillenbrand Reports Earnings for Fourth Quarter and Fiscal Year 2009

Date 2009-11-24 | Earning Reports

  --  Q409 EPS up 19.4 percent on 3.6 percent lower revenues.
  --  FY09 EPS up 11.4 percent on 4.3 percent lower revenues.
  --  Gross profit margin percentage improved both for the quarter and the
      year, with increases of 170 and 90 basis points, respectively.
  --  Hillenbrand announces guidance for FY2010, which began Oct. 1.

Hillenbrand reported net revenues of $153.1 million for the fourth quarter of 2009, which ended Sept. 30, 2009, a $5.7 million (3.6 percent) decline from the same period in fiscal 2008. The company posted net income of $22.6 million, a $3.4 million (17.7 percent) increase from last year. Included in current fourth-quarter pre-tax operating expenses were approximately $104,000 in legal costs related to antitrust litigation and virtually no separation costs, resulting in a negligible difference in as-adjusted net income. Earnings per diluted share for the fourth quarter of 2009 increased by $0.06 (19.4 percent) over the prior year period, from $0.31 to $0.37.

"North American burials continued to decline in the fourth quarter, even as the number of deaths returned to a more normal seasonal level," said Kenneth A. Camp, president and chief executive officer of Hillenbrand, Inc. "We believe the economic uncertainties have prompted some families to opt for cremation at a rate greater than we've seen in the past. After a very difficult second quarter, these trends appear to be stabilizing, although it is too early to tell if cremation growth rates will return to previous levels."

Decreases in the cost of diesel fuel and some raw materials continued to drive improvement in the company's gross profit margin from 40.3 percent in the fourth quarter of 2008 to 42 percent (170 basis points) during the same period in 2009. Operating expenses were flat at $31.6 million in the fourth quarter of fiscal 2009, compared with $31.7 million in the same period of the prior year. Investment income of $3.7 million was up $1.7 million (85 percent).

Cash flow from operations remained strong at $38.3 million in the fourth quarter, compared with $11 million during the same period in 2008, a difference primarily driven by changes in the timing of tax payments, as well as a discretionary payment into the company's pension plan in the fourth quarter of fiscal 2008.

Fiscal 2009 Results

Net revenues for fiscal 2009 were $649.1 million, a decrease of $29 million (4.3 percent) from fiscal 2008. Net income for the year was $102.3 million, up $9.1 million (9.8 percent) from 2008. Earnings per diluted share increased by $0.17 (11.4 percent) over fiscal year 2008, from $1.49 to $1.66.

The year's gross profit margin was 42.3 percent compared to 41.4 percent in the prior year, an increase of 90 basis points. Operating expenses declined $11.5 million (8.8 percent) in fiscal 2009 compared to 2008. Investment income grew by $2 million (33.9 percent) from $5.9 million in 2008 to $7.9 million in 2009.

Included in the 2009 annual operating expenses were $2.2 million in legal costs related to antitrust litigation and $86,000 in separation costs, compared to $3.3 million and $15.6 million, respectively, for these items in the prior year. Excluding the impact of these costs from both years' operations, net income declined $4.5 million (4.2 percent) from fiscal 2008 to fiscal 2009.

For the year, Hillenbrand generated $123.2 million in net operating cash flow, a 21 percent increase over the prior year.

"In 2009, we reacted swiftly and appropriately in the face some of our industry's most difficult challenges. As a result, we have maintained our market position," Camp said. "We also generated a significant increase in operating cash flow, which has enabled us to return $58.1 million directly to shareholders in the form of increased dividends and share repurchases."

Guidance for Fiscal Year 2010

Guidance for fiscal year 2010 reflects a broader range than Hillenbrand normally gives investors, primarily because a number of uncertainties make it more difficult to predict results. While the economy has shown signs of recovery, the company believes it could be more prolonged than past recessions. In addition, there are many conflicting reports about the potential severity of this year's influenza and pneumonia season, with both normal seasonal and H1N1 flu strains in circulation.

Hillenbrand expects 2010 revenues will be from 3 percent below to 3.1 percent above FY09 revenues, ranging from $630 million to $670 million. Earnings per diluted share will range from $1.40 to $1.67, with net income projected to be between $86 million and $103 million. Excluding approximately $3 million to $5 million in estimated legal costs related to ongoing antitrust litigation, we expect fiscal 2010 earnings per diluted share to range from $1.45 to $1.70. Guidance for 2010 includes modest investments in growth initiatives in the death care industry, although it does not include any impact from future mergers or acquisitions, or the impact of changes in limited partnership investments.

"Although we have traditionally been less susceptible to economic downturns than most industries, the level of uncertainty among consumers remains reasonably high," Camp said. "That makes it more challenging for us to forecast results for the coming fiscal year. We can, however, say with certainty that Hillenbrand's employees are continuing to provide our customers and the families they serve with the innovation, quality and service they expect, which will in turn continue to drive value for our shareholders."

Hillenbrand, Inc. (Unaudited) (amounts in millions, except per share data)

                                             Fiscal year ending
                                                September 30
                                                       FY10 Range
                                       FY09        Low          High
                                       ----        ---          ----

Net revenues $649 $630 $670 Income before taxes $161 $137 $161 Tax rate 36.4% 37% 36% Net income $102 $86 $103 Average diluted shares outstanding 62 62 62 Diluted net income per share $1.66 $1.40 $1.67

Excluding certain non-operating costs (antitrust litigation and separation*)

 Net income                            $104          $89         $105
 Diluted net income per share         $1.68        $1.45        $1.70

*Non-GAAP Financial Disclosures and Reconciliations for Fourth Quarter 2009 and 2010 Guidance

While Hillenbrand, Inc. reports financial results in accordance with U.S. GAAP, this press release includes non-GAAP measures. These non-GAAP measures are not in accordance with, nor are they a substitute for, GAAP measures. Hillenbrand uses the non-GAAP measures to evaluate and manage its operations and provides the information to investors so they can see the results "through the eyes" of management. Hillenbrand further believes that providing this information better enables investors to understand the ongoing operating performance of the company. Investors should consider non-GAAP measures in addition to, not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP.

Hillenbrand, Inc. (Unaudited) (amounts in millions)

                     12 Months Ended          12 Months Ended
                   September 30, 2008        September 30, 2009
                   ------------------        ------------------
                  Pre-   Income    Post-    Pre-  Income    Post-
                  Tax     Taxes     Tax     Tax    Taxes     Tax
                  ----   ------    -----    ----  ------    -----

GAAP income $153.3 $60.1 $93.2 $160.8 $58.5 $102.3

Certain non-

operating costs:

 litigation        3.3      1.2      2.1     2.2     0.8      1.4
Separation        15.6      2.6     13.0     0.1       -      0.1
                  ----      ---     ----     ---     ---      ---

Adjusted income $172.2 $63.9 $108.3 $163.1 $59.3 $103.8

                ======    =====   ======  ======   =====   ======

                    Fiscal Year 2009         Fiscal Year 2010
                    Guidance Midpoint        Guidance Midpoint
                    -----------------        -----------------
                  Pre-   Income    Post-    Pre-  Income    Post-
                  Tax     Taxes     Tax     Tax    Taxes     Tax
                  ----   ------    -----    ----  ------    -----

GAAP income $156.9 $56.3 $100.6 $148.9 $54.3 $94.6

Certain non-

operating costs:

 litigation        7.0      2.6      4.4     4.0     1.5     2.5
Separation         0.2      0.1      0.1       -       -       -
                   ---      ---      ---     ---     ---     ---

Adjusted income $164.1 $59.0 $105.1 $152.9 $55.8 $97.1

====== ===== ====== ====== ===== =====

Additional assumptions and discussion will be provided during the company's conference call later today.

Conference Call and Webcast

The company will sponsor a conference call and webcast for the investing public at 8 a.m. ET Tuesday, Nov. 24, 2009. During the event, management will discuss the results for the fourth quarter and full fiscal year for 2009, which ended Sept. 30, 2009. The webcast will be available at https://ir.hillenbrandinc.com and will be archived on the company's Web site through Nov. 24, 2010, for those unable to listen to the live webcast.

Participants may listen to the conference call by dialing 1-877-681-3378 (1-719-325-4806 for international callers). A replay of the call will be available through midnight Wednesday, Dec. 9, 2009, at 1-888-203-1112 (1-719-457-0820 for international callers). Please use the confirmation code 8439251.

                           Three Months Ended   Twelve Months Ended
                              September 30,         September 30,
                              2009     2008         2009    2008

Net revenues $153.1 $158.8 $649.1 $678.1 Cost of goods sold 88.8 94.8 374.7 397.6

---- ---- ----- -----

Gross profit 64.3 64.0 274.4 280.5 Operating expenses

(including antitrust

and separation costs) 31.6 31.7 119.4 130.9

---- ---- ----- -----

Operating profit 32.7 32.3 155.0 149.6 Interest expense (0.3) (0.8) (2.1) (2.2) Investment income and other 3.7 2.0 7.9 5.9

--- --- --- ---

Income before income taxes 36.1 33.5 160.8 153.3 Income tax expense 13.5 14.3 58.5 60.1

---- ---- ---- ----

Net income $22.6 $19.2 $102.3 $93.2

===== ===== ====== =====

Income per common share-

basic and diluted $0.37 $0.31 $1.66 $1.49 Dividends per common share* $0.185 $0.1825 $0.74 $0.365

Average common shares

outstanding - basic and

diluted 61.7 62.5 61.7 62.5

* Our first dividend as a stand-alone public company was paid

June 30, 2008.

Hillenbrand, Inc. Condensed Consolidated Balance Sheets (Unaudited) (amounts in millions)

                                                September 30,

2009 2008 ASSETS ---- ---- Current Assets Cash and cash equivalents $35.2 $14.7 Trade receivables, net 85.2 88.4 Inventories 42.5 48.6 Auction rate securities and related Put right 30.1 - Interest receivable from Forethought Financial

Group, Inc. 10.0 - Other current assets 29.9 29.9

---- ---- Total current assets 232.9 181.6 Property and intangibles, net 101.6 110.5 Auction rate securities 18.8 51.1 Note and interest receivable from Forethought

Financial Group, Inc., long-term portion 132.8 130.4 Investments 18.8 25.2 Other assets 56.2 46.5

---- ---- Total Assets $561.1 $545.3

====== ======

LIABILITIES Current Liabilities Revolving credit facility $60.0 $100.0 Other current liabilities 74.9 86.0

---- ---- Total current liabilities 134.9 186.0 Long-term liabilities 122.2 70.9

----- ---- Total Liabilities 257.1 256.9

Shareholders' Equity 304.0 288.4

----- ----- Total Liabilities and Shareholders' Equity $561.1 $545.3

====== ======

Hillenbrand, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (amounts in millions)

                                        Fiscal Year Ended
                                           September 30,
                                           2009    2008

---- ---- Net cash provided by operating activities 123.2 101.8 Net cash used in investing activities (5.3) (4.2) Net cash used in financing activities (97.4) (94.4) Effect of exchange rate changes on cash

and cash equivalents - (0.4)

--- ----

Net cash flows 20.5 2.8

Cash and cash equivalents: At beginning of period 14.7 11.9

---- ---- At end of period $35.2 $14.7

                                          =====   =====

  Disclosure Regarding Forward-Looking Statements

Throughout this release, we make a number of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. As the words imply, forward-looking statements are statements about the future, as contrasted with historical information. Our forward-looking statements are based on assumptions that we believe are reasonable, but by their very nature they are subject to a wide range of risks.

Words that could indicate we're making forward-looking statements include the following:

intend believe plan expect may goal become pursue estimate will forecast continue targeted encourage promise improve progress potential

This isn't an exhaustive list, but is simply intended to give you an idea of how we try to identify forward-looking statements. The absence of any of these words, however, does not mean that the statement is not forward-looking.

Here's the key point: Forward-looking statements are not guarantees of future performance, and our actual results could differ materially from those set forth in any forward-looking statements. Any number of factors -- many of which are beyond our control -- could cause our performance to differ significantly from those described in the forward-looking statements. These factors include, but are not limited to: recent global market and economic conditions, including those related to the credit markets; the company's dependence on its relationships with several large national providers; continued fluctuations in mortality rates and increased cremations; the impact - positive or negative - of the company's ability to execute its acquisition and business alliance strategy through the consummation and successful integration of acquisitions or entry into joint ventures or other business alliances; volatility of the company's investment portfolio; competition from nontraditional sources in the funeral services business; increased costs or unavailability of raw materials; the company's ongoing antitrust litigation; ongoing involvement in claims, lawsuits and governmental proceedings related to operations; labor disruptions; and certain tax-related matters. For a more in-depth discussion of these and other factors that could cause actual results to differ from those contained in forward-looking statements, see the discussions under the heading "Risk Factors" in item 1A of the company's Annual Report on Form 10-K for the year ended Sept. 30, 2009, expected to be filed Nov. 24, 2009. The company assumes no obligation to update or revise any forward-looking information.

About Hillenbrand, Inc.

Hillenbrand, Inc. (www.HillenbrandInc.com) is the holding company for Batesville Casket Company, a leader in the North American death care industry through the sale of funeral services products, including burial caskets, cremation caskets, containers and urns, selection room display fixturing, and other personalization and memorialization products. HI-INC-F

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SOURCE: Hillenbrand, Inc.

CONTACT: Investor Relations for Hillenbrand, Inc., Mark R. Lanning, Vice
President of Investor Relations and Treasurer, +1-812-934-7256,
[email protected]

Web Site: https://www.hillenbrandinc.com/