Hillenbrand Inc (HI)

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Hillenbrand, Inc. (HI)

F4Q09 Earnings Call

November 24, 2009 8:00 am ET


Mark Lanning – Treasurer, Vice President Investor Relations

Kenneth Camp – President, Chief Executive Officer

Joe Raver – President, Chief Executive Officer Batesville Caskets

Cynthia Lucchese – Chief Financial Officer


Drew for Clinton Fendley – Davenport & Company

Stephen O’Neill – Hilliard Lyons

Jamie Clement – Sidoti & Company



Welcome to Hillenbrand’s earnings call for the fourth quarter of 2009. Today’s conference is being recorded and will be available for replay through midnight Eastern time, Wednesday, December 9, 2009 domestically at 888-203-1112 and internationally at 719-457-0820. For the replay, callers will need to use the confirmation code of 8439251. If you are unable to listen to the live audio webcast it will be archived at www.hillenbrandinc.com through November 24, 2015. If you ask a question today it will be included for any future use of this recording. Also note that any recording transcript or other transmission of the text or audio is not permitted without Hillenbrand’s written consent.

Now at this time it is my pleasure to turn the conference over to Mark Lanning, Treasurer and Vice President of Investor Relations.

Mark Lanning

Good morning everyone. Welcome to our earnings call which will include results from both the fourth quarter and the full 2009 fiscal year. With me today are Hillenbrand’s President and Chief Executive Officer Ken Camp, Batesville Casket President and Chief Operating Officer, Joe Raver and Hillenbrand’s Chief Financial Officer, Cynthia 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 financial 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 obligation to update or correct any forward-looking statements.

Now let me provide some information regarding our call. We have scheduled an hour and will start with prepared remarks that should last approximately 30 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 call me at 812-934-7256 or email me at mrlanning@hillenbrand.com.

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

Kenneth Camp

Good morning everyone. We appreciate you joining us during our busy holiday week. During today’s call I’ll start with a brief overview of our performance for the fourth quarter and the fiscal year, both of which ended September 30. Then I’ll turn the call over to Joe Raver to discuss the current state of the funeral services industry and Batesville Casket’s strategic initiatives.

Cynthia Lucchese will then provide details about our quarterly and annual financial results. She’ll also walk you through our fiscal 2010 guidance which was announced in our press release this morning.

After the prepared portion of this call, we will be available to take your questions.

As you can see by our press release this morning, our fourth quarter net revenue declined 3.6% compared with the fourth quarter of 2008. Annually, net revenue declined 4.3% versus last year, and even though we were pleased with our strong recovery from the effects of the economy that we saw in the second quarter we are not satisfied with having a year over year decline in revenue.

Although ours is typically a very stable industry, even funeral service felt some effect of the economy’s lows in 2009. The convergence of a mild flu season, a remarkably unstable and frankly fear inducing recessionary economy, and the resulting spike in cremations which yielded more than 80,000 fewer burials in 2009, made this one of the industry’s most challenging years on record.

Fortunately, we had contingency plans on the shelf which we used to respond quickly and decisively to competitive actions. As a result, we feel that we not only weathered the storm this year, but are well positioned to capitalize on our strengths in the year ahead.

Fortunately, Batesville’s deep competency and continuous improvement and lean business coupled with somewhat favorable rates for the purchase of fuel and some raw materials helped us increased gross profit margin percentages for the quarter by 170 basis points and for the year by a total of 90 basis points.

As a result of these items, and some other favorable factors such as lower spending on separation costs, earnings per share increased 19.4% for the quarter, going from $0.31 to $0.37. For the year, earnings per share increased 11.4% from $1.49 in 2008 to $1.66 in 2009.

Perhaps even more important, we maintained a strong cash flow posting $38.3 million in operating cash flow for the fourth quarter. Year over year we increased cash flow 21% ending at $123.2 million for the year.

We also used a portion of our cash to pay a quarterly dividend of $0.185 per share in September reflecting an annual dividend rate of $0.74 per share.

Now I’ll turn the discussion over to Joe Raver.

Joe Raver

Good morning everyone. I’d like to begin by briefly recapping the past year. We began the year with relative stability and results were in line with our expectations in the first quarter. As we entered the second quarter, the economic crisis was in full swing and consumer confidence was at historic lows.

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