Hill-Rom CEO John Greisch offered good and bad news to shareholders at their annual meeting March 8.
The Batesville-based company expanded its international presence to 34 percent of consolidated sales in 2012, despite a challenging economic environment, he reported.
Thirty percent of operating cash flow was returned to shareholders. That capital allocation strategy will continue, the president promised.
Even though total revenue grew about 3 percent to $1.63 billion during the fiscal year that ended Sept. 30, 2012, adjusted earnings per share declined from $2.27 in 2011 to $2.24 in 2012.
A bit subdued while fighting off a cold, Greisch said he was “very pleased” with two acquisitions.
He concluded, “As we look forward, we’re in a challenging health care environment. Despite those challenges, we’re confident we’ve got” focus. Leaders will continue to reduce costs.
When board Chairman Rolf Classon asked for questions, the 18 or so mostly company executives were silent. The meeting was adjourned in under 10 minutes.
The 2012 annual report tells the rest of the story about Hill-Rom’s fiscal year.
In a foreward, Greisch wrote that Völker, a German company known for its quality bed systems, was purchased in February 2012. “We have found that Hill-Rom and Völker share a great deal of history and culture, including our strong values, our commitment to enhancing outcomes and dedication to creating an environment of safe and dignified care for patients and caregivers. We have learned much from each other .... In a matter of months, we launched the excellent Völker products into the North America post-acute care markets.”
The transaction to acquire Aspen Surgical, which makes surgical consumables, such as safety scalpels and blades, fluid collection products, specialty needles and wound care dressings, closed last July. He noted, “Patient and caregiver safety in the operating room is the focus of the Aspen™ product portfolio.” The purchase will benefit Hill-Rom, too: “We now have a reliable and recurring revenue source.”
Research and development remained important. The company’s investment in R&D programs increased nearly 5 percent to $67 million, according to Greisch. “We launched 18 product innovations in 2012.”
Infrastructure and product offerings were increased and customer relationships were deepened in five emerging global markets:
• The Hill-Rom EEMEA region (Eastern Europe, Middle East and Africa), “which covers a diverse geopolitical and socioeconomic landscape that includes nearly 100 countries, had a strong year,” the annual report stated.
• After Russian leaders decided to improve health care, company experts met with them in Moscow. “The result was an opportunity for Hill-Rom to provide a number of our leading products – including frames, surfaces and furniture – to upgrade the more than 75 facilities in the Moscow regional hospital system.”
• By 2020, about $55 billion in health care investments will be made in the Gulf Cooperation Council (GCC), a union of Arab states bordering the Persian Gulf. By 2050, 130,000 new hospital beds are expected to be added there to improve the current 2:1 patient-to-bed ratio. “Hill-Rom is increasingly viewed as a strong partner in this region.”
• As the sixth fastest growing economy in the world and with 40 percent of South America’s population, Brazil will be a key player in the firm’s expansion. “The Hill-Rom Brazil team drove exceptional performance during the year. Their work ... has not gone unnoticed.” Hill-Rom earned two awards there as the preferred hospital supplier.
• In Asia, company teams are helping to upgrade health care systems in various price ranges.
The executive team has grown from 11 in 2010 to 18 in 2011 to 17 now. After a flurry of new hires, the team has stabilized with just two new persons added over the past year: Greg Pritchard, senior vice president and Surgical and Respiratory Care president; and Larry Ruffin, internal audit vice president.
Greisch wrote, “Our portfolio and our company overall benefitted from fresh, innovative thinking during 2012.
“Creative strategic thinking not only led to two strong acquisitions, but also led to the turnaround or elimination of previously underperforming businesses. This was the case with the successful turnaround of our Healthcare IT Solutions business and our commercial operations in Australia. This was also true of our decision to exit certain aspects of our Home Care rental business.”
There was still time for generosity. “In 2012, Hill-Rom’s Hospital Beds for Humanity® program deliveries increased 192 percent compared with 2011. Employees refurbished more than 2,400 products, which were delivered to facilities in need in Central and South America, Africa, Asia and the U.S.,” according to the report.
The CEO concluded, “Our mission and the inspiration that comes from our patients and caregivers defines our work, energizes us and makes us unstoppable.
“We care deeply about the people we serve, and we know that when we get it right, when we do our jobs better than we imagined we could, we help other people and make their lives better.”
About 89.4 percent of shareholders, who own almost 60 million shares of Hill-Rom stock, were represented at the meeting either in person or by proxy.
• Eight board members (Rolf Classon, James Giertz, Charles Golden, John Greisch, Gus Hillenbrand, Ronald Malone, Eduardo Menasce and Dr. Joanne Smith) were re-elected and new board member William “Hank” Kucheman was elected to one-year terms.
• Shareholders approved a nonbinding resolution on executive compensation.
• They also voted to retain Pricewaterhouse-Coopers, Indianapolis, for the fiscal year ending Sept. 30.