2015 ANNUAL REVIEW WELCOME TO OUR

Transcription

1 2015 ANNUAL REVIEW

2 WELCOME TO OUR 2015 ANNUAL REVIEW 2015 was a remarkable year for Hill-Rom one of the most successful in our 86-year history. We reshaped our business, significantly expanded our portfolio and meaningfully increased the value we bring to our customers. We posted record financial results, driven by the strength of our recently acquired businesses and continued growth in our legacy businesses. The centerpiece of the year was our acquisition of Welch Allyn, which brings together two medical technology leaders and will now allow us to offer customers solutions that cross the entire continuum of care. As you read on you ll learn more about our achievements in This review is a companion to our 2015 Annual Report, which provides detailed reporting on our company s operations and financial performance. You can find it at ir.hill-rom.com. I hope you ll take the time to read both, and that you ll come away with a deeper understanding of how our company has grown and changed, and our vision for the future. In a year of full of accomplishments, I am proudest that our company remains singularly focused on our mission even as we grow. It s a commitment that directs, motivates and challenges each of us at Hill-Rom. It is our compass when making decisions and the measurement that most accurately reflects our success: Every day, around the world, we enhance outcomes for patients and their caregivers. We are gratified to know that our successes in 2015 further advanced our mission and set a course toward even greater impact in the years ahead. Sincerely, JOHN J. GREISCH, PRESIDENT AND CEO Review

3 4 Leadership in the Clinic: Welcome Welch Allyn 6 Solutions Across the Continuum of Care 12 Financials 14 Leadership 15 Shareholder Information 10 When the Professional Becomes Personal 2015 Review 3

4 LEADERSHIP IN THE CLINIC: WELCOME WELCH ALLYN IN 2015, HILL-ROM ACQUIRED WELCH ALLYN, BRINGING TOGETHER TWO OF THE WORLD'S LEADING HEALTH CARE TECHNOLOGY COMPANIES DEDICATED TO SERVING PATIENTS AND CAREGIVERS AROUND THE WORLD. PRODUCT CATEGORIES Physical Exam Patient Monitoring Blood Pressure Measurement Cardiopulmonary Medical Exam Lighting Software and Services Thermometry For a century, Welch Allyn has supported patients and caregivers with a diversified portfolio of devices that assess, diagnose and manage a wide variety of illnesses and diseases. Welch Allyn is the only company focused on meeting the needs at the front line of care doctor s offices, hospital emergency rooms, clinics and skilled nursing facilities where 95 percent of all patients seek treatment. From stethoscopes and thermometers to blood pressure cuffs and extending far beyond, almost every patient interaction across the continuum of care involves a Welch Allyn diagnostic device. Combining Hill-Rom's leading position in hospitals and operating rooms worldwide with Welch Allyn's leading position in pointof-care diagnostics and testing expands both companies' ability to help health care providers deliver patient care solutions that improve clinical and economic outcomes. Together, Hill-Rom and Welch Allyn offer a wider range of innovative solutions to a global customer base. Welch Allyn has a portfolio of diagnostic devices that capture both vital signs and cardiopulmonary information and transmit the data to many leading electronic medical record systems directly or through Welch Allyn software. Physicians and hospitals rely on patientfriendly devices that produce accurate clinical information for use with electronic databases. As Hill-Rom continues to move into patient sensing at the bedside and in the operating room, this deep expertise and Welch Allyn s complementary products will yield advanced, Review

5 integrated smart solutions throughout the hospital and beyond. The combined company will provide customers with solutions that deliver patient-centric care across settings, using tools with strong interoperability, proven clinical relevance and established cost-effectiveness. In recent years, Hill-Rom has aggressively pursued external growth opportunities to build a stronger, more diversified organization with the scale, resources and geographic reach needed to support health systems around the globe. The addition of Welch Allyn is a significant step in that transformation, strengthening both organizations ability to enhance outcomes and deliver for customers worldwide. THE FRONT LINE OF CARE Clinicians Offices Hospitals Clinics Community Health Centers Medical Schools 2015 Review 5

6 Primary Care Office SOLUTIONS ACROSS THE CONTINUUM OF CARE 2015 saw Hill-Rom continue to introduce innovative solutions to support patients and caregivers. Welch Allyn, a long-trusted brand for front line care, continues to innovate to provide caregivers with solutions that leverage the latest technology to help improve patient care. Among its innovations in 2015 is the Welch Allyn Spot Vision Screener, a tool that lets clinicians easily screen infants to seniors for a range of vision conditions including astigmatism all at a comfortable distance of three feet away. The company also introduced the new Connex Spot Monitor, which collects a full set of patient vital signs and provides immediate access to that data in electronic medical records (EMR), streamlining clinical workflow. Innovations like these demonstrate the company s dedication to delivering tools and technology aligned to 21st century health care Review

7 Patient Rooms Operating Room Seventy-five percent of obese patients have at least one condition that complicates their health. Obese patients often require more frequent and more extensive health care. This year Hill-Rom introduced the next generation of its bariatric portfolio, centered on the new Compella Bariatric Bed and LikoGuard Lift system, designed to help hospitals meet the physical and emotional needs of patients. The Compella Bariatric Bed features powered transport, length and width expansion and on-board therapies to provide a comfortable, dignified and clinically advanced care environment. The LikoGuard overhead lift system supports the transfer and movement of patients, including bariatric patients, with a state-of the-art system that helps protect caregivers from injury. Together, they help hospitals streamline workflow and ensure caregivers can provide safe, high-quality care while protecting patient dignity. Trumpf Medical ushered in a new era in operating room lighting with the introduction of the iled system. This year it set a new standard with the iled surgical light a surgical lighting system that thinks. The iled surgical light uses 3D sensor technology to analyze the surgical area, automatically adapting lighting and eliminating the need for manual adjustment to ensure consistent lighting throughout a procedure. An innovative shadow management system eliminates unwanted shadows, such as those cast by the surgeon s head. Trumpf Medical lighting is just one of Hill-Rom s extensive offerings to surgeons, which includes Aspen Surgical s goldstandard Bard-Parker scalpels, surgical staff safety equipment and instrument care products, as well as Allen Medical s industry-leading patient positioning systems. Together, they offer a stateof-the-art surgical suite dedicated to ensuring surgical staff can remain focused on achieving the best possible outcomes for their patients. 7

8 SOLUTIONS ACROSS THE CARE CONTINUUM Intensive Care Unit Long-Term and Respiratory Care Improving outcomes and reducing costs is essential throughout the hospital particularly in the ICU. This year, researchers using mobility protocols and the features of an advanced ICU bed from Hill-Rom showed that movement had a major impact on recovery for patients who experienced strokes, brain tumors and other neurologic conditions. The mobility protocol included movement while patients were in bed and then progressively sitting, standing and walking. Analysis showed that both direct and indirect hospital costs were reduced by nearly a third for patients who were mobilized using Hill-Rom technology versus those who received standard care. Hill-Rom provides hospitals with solutions from the Progressive Mobility program, to patient lifting equipment, to advanced features on ICU beds like the Progressa bed system designed to leverage the power of early mobility to achieve better outcomes for their patients while reducing costs. Health care doesn t end when a patient leaves the doctor s office or is discharged from the hospital. Hill-Rom has a wide array of solutions for long-term and home care, ranging from beds and furniture, to specialized therapies that are useful in multiple environments. Within the hospital and long-term care settings, use of the award-winning MetaNeb 4.0 System grew quickly this year, setting a new standard for effective lung clearance. The MetaNeb system provides three capabilities in one device enhancing mucus clearance from the lungs, delivering lung expansion to support normal breathing and assisting with the treatment and prevention of complete or partial lung collapse. Whether used in the hospital for surgical patients, in a long-term care setting for patients managing conditions such as emphysema or chronic obstructive pulmonary disease (COPD), or in the home with cystic fibrosis patients, the MetaNeb system shows how innovative products can help patients across the continuum of care. 8

9 Protecting Patients by Anticipating Care SM An automated smart hospital is no longer conceptual. Today, wireless technology has become an essential member of the patient care team, helping smooth workflow, protect patient safety and provide access to information where and when it s needed. Hill-Rom Clinical Workflow Solutions leverages wireless technology and data integration for a number of innovative solutions that protect patients by anticipating care. This year the Hill-Rom Hand Hygiene Compliance Solution demonstrated that hospitals using the system achieved an average 226 percent improvement in hand washing compliance, while some institutions compliance rates nearly tripled. The Hill-Rom Hand Hygiene Compliance Solution provides automatic, continuous monitoring and recording of every time a staff member uses a handhygiene station. The newly introduced NaviCare Patient Safety Application equipped hospitals with a powerful new tool for preventing patient falls. NaviCare allows patients who are at risk for falls to be protected by an automated protocol that sets safety settings on connected smart beds and alerts caregivers when necessary based on the status of the bed Review 9

10 WHEN THE PROFESSIONAL BECOMES PERSONAL FOR A SALES PERSON, THE HIGHEST MARK OF CONFIDENCE IS TELLING A CUSTOMER THAT YOU WOULD CHOOSE A PRODUCT FOR YOURSELF. FOR TWO MEMBERS OF THE RESPIRATORY CARE TEAM, THAT ENDORSEMENT ISN T A HYPOTHETICAL IT S EXPERIENCE. SCOTT HAMLIN, METANEB SYSTEM ACCOUNT EXECUTIVE, TEXAS Years of working with health care professionals had given Scott Hamlin deep insight into respiratory care, but an accident in 2013 added the empathy of a fellow patient to his training. As a long-time instructor, Scott helps novices learn one of the most adrenalineinducing sports there is: skydiving. Confident after 24 years of experience, one weekend the unthinkable happened. During a routine jump, a momentary distraction triggered a serious accident. Scott woke up in the hospital having broken his shoulder, collar bone, wrist and every rib on the left side of his body except one. It was really serious. With that level of trauma in your body, every breath hurts, says Scott. Everyone on his care team knew he needed help to restore his lung capacity, but, he explains, I was scared to try anything due to my injuries. Scott s Hill-Rom colleagues swung into action to get a MetaNeb airway clearance system to the ICU treating him. The first treatment forever changed how he viewed the product he had sold so many times. I was amazed. It didn t hurt at all because it does the lung expansion for you. After the first 10-minute treatment, it was incredible to realize how much lung capacity I had lost and how much easier it was to breathe. Scott was treated with the MetaNeb system throughout his time in the hospital and credits the technology with helping aid a dramatic recovery. Just five months after the accident, Scott was back in the air. I was nervous that first flight, but skydiving is my passion," he says. Scott also has a new passion helping people understand the MetaNeb system. You really can t ask for a better treatment. I know from experience. A skydiving team in formation as viewed by instructor, and MetaNeb patient, Scott Hamlin. Photo courtesy Scott Hamlin Review

11 LISA GORSKY, RESPIRATORY CARE ACCOUNT EXECUTIVE, ILLINOIS As a respiratory therapist, Lisa Gorsky has spent her entire career dedicated to helping patients breathe easier, motivated by the early experiences of watching her grandfather suffer from emphysema. But she found the tables turned eight years ago when she herself started experiencing shortness of breath. Years of failed treatments followed until, finally, a diagnosis: a rare diaphragmatic hernia, which meant her abdominal organs had moved into her chest. Recovery would require a complicated surgery by an experienced surgeon. In her job with Hill-Rom, Lisa works with a variety of hospitals in the Chicago area helping them learn to use the company s respiratory products. One day she went to meet a new surgeon joining the thoracics department at a major academic medical center. After the meeting, small talk turned personal. The surgeon was an expert in exactly the type of repair Lisa needed. Given that other surgeons were telling Lisa they could experiment with the procedure, Lisa knew she d found the right professional to trust with her health. Two weeks later she was being prepped for the operating room. Within hours of surgery, Lisa received her first MetaNeb system treatment. The MetaNeb system made a huge difference for me, she says. I didn t develop any pulmonary complications from the surgery and I credit MetaNeb with that. I have become a walking testimonial, Lisa laughs, noting her X-rays have become a favorite discussion point for the physicians she meets. I had two serious surgeries, never developed pneumonia and recovered more quickly than expected. It s hard to beat that. THE METANEB SYSTEM MADE A HUGE DIFFERENCE FOR ME... I DIDN T DEVELOP ANY PULMONARY COMPLICATIONS FROM THE SURGERY AND I CREDIT METANEB WITH THAT Review 11

12 HILL-ROM BY THE NUMBERS Financial Overview Fiscal Year Ended September 30 (Dollars in millions except per share data) Net Revenue Capital sales $ 1,604.5 $ 1,301.4 $ 1,308.3 Rental revenue Total Revenue 1, , ,716.2 Gross Profit Capital sales Rental revenue Total Gross Profit Research and development expenses Selling and administrative expenses Special charges Operating Profit Other income (expense), net (18.0) (7.4) (10.9) Income Before Income Taxes Income tax expense Net Income Less: Net loss attributable to noncontrolling interests (0.9) - - Net Income Attributable to Common Shareholders $ 47.7 $ 60.6 $ Net Income Attributable to Common Shareholders per Common Share - Diluted $ 0.82 $ 1.04 $ 1.74 Dividends per Common Share $ $ $ Average Common Shares Outstanding - Diluted (thousands) 58,536 58,523 60,250 Shareholders (a) 20,800 19,000 19,500 Employees 10,200 7,325 6,775 See Management s Discussion and Analysis of Financial Condition and Results of Operations and Notes to Consolidated Financial Statements for more information. (a) Reflects shareholders of record as of November 12, 2015, November 12, 2014, and November 13, Adjusted Financial Data Reconciliation (Dollars in millions except per share data) GAAP Operating Income $ 83.1 $ $ Adjustments: Acquisition and integration costs Acquisition-related intangible asset amortization Employee benefits change - (13.4) - FDA remediation expenses Field corrective actions 4.5 (1.7) 12.2 Litigation settlements and expenses (0.6) Special charges Supplemental stock compensation charge Adjusted Operating Income $ $ $ Adjusted Operating Margin 11.8% 11.5% 12.6% Depreciation and Amortization $ $ $ Adjusted EBITDA $ $ $ Adjusted Diluted Earnings Per Share $ 2.64 $ 2.25 $ Review

13 Five-Year Summary Fiscal Year Ended September 30 (Dollars in millions except per share data) Results of Operations: Net revenue $ 1,988.2 $ 1,686.1 $ 1,716.2 $ 1,634.3 $ 1,591.7 Cost of revenue and operating expenses $ 1,863.9 $ 1,526.4 $ 1,555.6 $ 1,442.9 $ 1,376.2 Litigation charge (credit) $ - $ - $ - $ (3.6) $ 47.3 Impairment of other intangibles $ - $ - $ - $ 8.0 $ - Special charges (a) $ 41.2 $ 37.1 $ 5.7 $ 18.2 $ 1.4 Operating profit $ 83.1 $ $ $ $ Other income (expense), net $ (18.0) $ (7.4) $ (10.9) $ (5.3) $ (7.1) Income before income taxes $ 65.1 $ $ $ $ Percent of net revenue 3.3% 6.8% 8.4% 10.0% 10.0% Income tax expense $ 18.3 $ 54.6 $ 39.0 $ 42.7 $ 26.2 Effective rate (b) 28.1% 47.4% 27.1% 26.1% 16.4% Net income $ 46.8 $ 60.6 $ $ $ Percent of net revenue 2.4% 3.6% 6.1% 7.4% 8.4% Less: Net income (loss) attributable to noncontrolling interests $ (0.9) $ - $ - $ - $ 0.2 Net income attributable to common shareholders $ 47.7 $ 60.6 $ $ $ Per Share Data: Net income attributable to common shareholders - Diluted $ 0.82 $ 1.04 $ 1.74 $ 1.94 $ 2.09 Cash dividends $ $ $ $ $ Average common shares outstanding - Diluted (thousands) 58,536 58,523 60,250 62,361 63,899 (a) Special charges reflect actions taken including streamlining the organization, realignment of certain operations, the write-down of underperforming and rationalized assets, and the reversal of prior special charge provisions in excess of requirements (see Note 8 to the Consolidated Financial Statements). (b) See Note 9 to the Consolidated Financial Statements for a reconciliation of income tax expense reported for financial reporting purposes and that computed based upon the application of the statutory U.S. Federal tax rate to the reported income before income taxes. Fiscal Year Ended September Financial Position: Current assets $ 1,141.0 $ $ $ $ Current liabilities $ $ $ $ $ Working capital $ $ $ $ $ Current ratio Equipment leased to others and property, net $ $ $ $ $ Total assets $ 4,457.6 $ 1,751.3 $ 1,586.8 $ 1,627.6 $ 1,299.1 Long-term debt $ 2,175.2 $ $ $ $ 50.8 Shareholders' equity $ 1,156.9 $ $ $ $ Other Data: Capital expenditures $ $ 62.7 $ 65.3 $ 77.8 $ 68.9 Depreciation and amortization $ $ $ $ $ Net cash provided by operating activities $ $ $ $ $ Employees 10,200 7,325 6,775 6,950 6,230 Shareholders (c) 20,800 19,000 19,500 20,400 19,500 Stock price range - high and low $ $ $ $ $ (c) Reflects shareholders of record as of November 12, 2015, November 12, 2014, and November 13, Review 13

14 HILL-ROM BOARD OF DIRECTORS HILL-ROM EXECUTIVE LEADERSHIP TEAM Rolf Classon Chairman, Hill Rom Elected in 2002 Charles Golden Retired Executive Vice President and Chief Financial Officer of Eli Lilly and Company Elected in 2002 Eduardo Menascé Retired President, ESG, Verizon Communications Elected in 2004 Ronald Malone Retired CEO of Gentiva Health Services, Inc. Elected in 2007 James Giertz Senior Vice President and Chief Financial Officer of H.B. Fuller Company Elected in 2009 John Greisch President and CEO, Hill Rom Elected in 2010 William H. (Hank) Kucheman Retired CEO of Boston Scientific Corporation Natick, Massachusetts Elected in 2013 William G. Dempsey Retired Executive Vice President, Global Pharmaceuticals, Abbott Laboratories Elected in 2014 Stacy Enxing Seng Former President, Vascular Therapies, Covidien Elected in 2015 John Greisch President and CEO Carlyn Solomon Chief Operating Officer Carlos Alonso Senior Vice President and President, International Dirk Ehlers Senior Vice President and President, Surgical Solutions Andreas Frank Senior Vice President, Corporate Development and Strategy David Helsel Senior Vice President, Global Supply Chain Brian Lawrence Chief Technology Officer Sue-Jean Lin Chief Information Officer Ken Meyers Senior Vice President and Chief Human Resources Officer Michael Murphy Senior Vice President, Quality Assurance and Regulatory Affairs Deborah Rasin Senior Vice President, Corporate Secretary and Chief Legal Officer Alton Shader Senior Vice President and President, Front Line Care Ilana Shulman Chief Compliance Officer Taylor Smith Senior Vice President, Corporate Solutions Steven Strobel Senior Vice President, Finance and Chief Financial Officer Review

15 SHAREHOLDER INFORMATION DISCLOSURE READING FORWARD-LOOKING STATEMENTS Stock Exchange Hill Rom common stock is traded on the New York Stock Exchange (NYSE) under the ticker symbol HRC. Transfer Agent If you have questions about your stock certificates such as lost certificates, registration of certificates, dividend payments or any other stock-related question please contact our transfer agent: Computershare Trust Company, N.A. P.O. BOX College Station, TX (Within U.S., U.S. Territories and Canada) (Outside U.S., U.S. Territories and Canada) Certain statements herein contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, regarding the Company s future plans, objectives, beliefs, expectations, representations and projections. It is important to note that forward-looking statements are not guarantees of future performance, and the Company s actual results could differ materially from those set forth in any forward-looking statements. For a more in-depth discussion of factors that could cause actual results to differ from those contained in forward-looking statements, see the discussions under the heading Risk Factors in the Company s previously filed most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q. The Company assumes no obligation to update or revise any forward-looking statements. Reinvestment of Dividends and Direct Stock Service Hill Rom offers its shareholders opportunities to reinvest dividends and to transfer their certificates into electronic accounts. In order to obtain information for these features, please contact our transfer agent, Computershare Trust Company, N.A. Annual Meeting Hill Rom s annual meeting of shareholders will be held on Tuesday, March 15, 2016, at 10:00 a.m. CST at: The offices of Hill Rom Holdings, Inc. 180 North Stetson Avenue Two Prudential Plaza Suite 1630 Chicago, IL Investor Relations Requests for the Hill Rom Annual Report, Form 10-K, Annual Proxy Statement or other information on the company should be directed in writing to: Investor Relations Hill Rom Holdings, Inc State Route 46 East Batesville, IN investors@hill Rom.com Or visit our website at: Rom.com 2015 Review 15

16 Copyright 2016 Hill-Rom Services, Inc. Two Prudential Plaza, Suite N. Stetson Avenue Chicago, IL