Hillenbrand Inc (HI)

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Hillenbrand, Inc. (HI)

F3Q09 Earnings Call

August 12, 2009 8:00 am ET

Executives

Mark Lanning - Treasurer, Vice President of Investor Relations

Ken Camp President and Chief Executive Officer

Joe Raver - Batesville Casket President and Chief Operating Officer

Cindy Lucchese - Chief Financial Officer

Analysts

Jamie Clement – Sidoti

Steve O’Neil - Hilliard Lyons

Jack Ripstein - Portrero Capital

Presentation

Operator

(Operator Instructions) Welcome to Hillenbrand’s earnings call for the third quarter 2009. Now at this time it’s my pleasure to turn the conference over to Mark Lanning, Treasurer, and Vice President of Investor Relations.

Mark Lanning

Welcome to our third quarter earnings call. With me today are Hillenbrand President and Chief Executive Officer, Ken Camp, Batesville Casket President and Chief Operating Officer, Joe Raver, and Hillenbrand 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 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 have scheduled one hour and we will start with prepared remarks that should last approximately 20 minutes. We will then move directly to Q&A. If you have follow up questions after the call has ended, please don’t hesitate to phone me at 812-934-7256 or email me at mrlanning@hillenbrand.com.

Now it’s my pleasure to turn the call over to Ken Camp, Hillenbrand’s President and CEO.

Kenneth Camp

As Mark mentioned, also joining us on the call today is Joe Raver, President of Batesville Casket Company. Some of you first met Joe at our Investor Conference in New York last December. For those of you who have not yet met him, he has a great deal of experience with us. Joe has spent more then 14 years with Hillenbrand, about 10 of which have been with Batesville Casket Company in a variety of leadership assignments.

During today’s call I’ll start with a brief overview of our performance for the third quarter of this fiscal year which ended June 30th. Then I’ll turn the call over to Joe to discuss the current state of the funeral services industry and Batesville Casket Company’s response to those changing conditions. Cindy Lucchese will then provide details about our quarterly financial results, after which I’ll wrap up the prepared portion of the call. Then Joe, Cindy, Mark and I will be available to take your questions.

As you can see by this morning’s press release, our third quarter net revenue declined 3.8% compared with the third quarter 2008. Although this is an encouraging improvement over the 10.8% decrease we reported in the second quarter, we continue to see some negative effects at the revenue line. This was the result of continuing lower death numbers, a higher then expected increase in cremation rates and cautious spending on the part of consumers and some of our customers.

On the plus side, we also experienced some favorable rates for the purchase of fuel and some raw materials, particularly when compared with the unusually high prices we saw for these items at the same time last year. These effects, when coupled with Batesville’s never ending and far reaching work to achieve productivity improvements throughout the company, yielded a gross margin improvement of 140 basis points. As a result of these items and other offsetting factors, earnings per share decreased 2.4% going from $0.42 a share to $0.41.

As most of you know, we manage the business for predictable and sustainable cash flow and while that can be a significant challenge in these volatile times, cash flow from operations remains strong at $33.3 million in the third quarter. Excluding a $7.8 million voluntary contribution to our pension plan in June, cash flow remains stable year over year. We also paid a quarterly cash dividend of $0.185 per share in June which reflects an annual dividend rate of $0.74 a share.

Before I turn the discussion over to Joe, I want to update you on the latest information regarding the nearly four year old anti-trust litigation we’ve discussed in previous calls. In late April the US District Court for the Southern District of Texas ordered the dismissal of the suit filed against us and others by Pioneer Valley Casket Company and three other independent casket retailers.

These plaintiffs dismissed their complaint against our company and the other defendants in the case with prejudice, meaning that they cannot re-file that same case again. Both plaintiffs and defendants were responsible for their own legal expenses so no money has or will change hands between the parties. That case is done.

In the other case referred to as the Funeral Consumers Alliance Case, the plaintiffs have had their request for class certification denied at several steps in the judicial process. The FCA plaintiffs then filed a request asking the three judge panel for the court of appeals to reconsider its decision and to ask all the judges on the appeals court for their opinions regarding the panels ruling. On July 29, the Court of Appeals denied both of those requests.

Read the rest of this transcript for free on seekingalpha.com