Hillenbrand, Inc. (HI)
F1Q10 Earnings Call
February 4, 2010 8:00 am ET
Mark R. Lanning - Vice President Investor Relations and Treasurer
Kenneth A. Camp - President, Chief Executive Officer, Director
Joe A. Rover – President Batesville Casket
Cynthia L. Lucchese - Chief Financial Officer, Senior Vice President
Jamie Clement - Sidoti & Company
Clinton Fendley – Davenport Securities
Previous Statements by HI
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If you ask a question today it will be included in any future use of this recording. Also note that any record, 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, Treasure and Vice President of Investor Relations.
Mark R. Lanning
Welcome to our earnings call for the first quarter of 2010 which ended December 31, 2009. With me today are Hillenbrand President and CEO Ken Camp; Batesville Casket President Joe Rover; 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 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 risk described in the documents we file with the Securities & Exchange Commission such as our annual and quarterly reports on Form 10K and 10Q. 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 15 to 20 minutes. We will then move directly to question and answer. If you have any 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’s my pleasure to turn the call over to Ken Camp, Hillenbrand’s President and CEO.
Kenneth A. Camp
I’ll start today’s call with a brief overview of our performance for the first quarter. Then, I’ll turn the call over to Joe Rover, President of Batesville Casket Company who will talk to you about Batesville’s business and the funeral services industry in general. Cindy Lucchese will then provide details about our quarterly financial results. After the prepared portion of this call Joe, Cindy, Mark and I will be available to take your questions.
As you read in this morning’s press release, Hillenbrand is reporting a 3% decline in revenue for our first quarter of 2010. While I am certainly not satisfied in reporting a drop in quarter-over-quarter results, I am encouraged that this is our third consecutive quarter of improving revenue comparables since the economic meltdown nearly a year ago. I believe that you’ll see more consistent and favorable revenue comparables as the year goes on.
We have a clearer picture of whether the economy is returning to more normal levels and how consumers are choosing to respond. A positive effect of the current economic challenges is that some commodity prices have returned to more normal levels compared to the very high commodity prices we experienced in 2008 and most of 2009. In addition, our core operating business, Batesville Casket is well schooled in lean business practices that enable them to effectively manage costs.
These factors help us once again increase our gross profit margin percentage for the quarter, this time by 270 basis points over the same period in 2009. We mentioned on our last call that operating expenses would increase as a result of fully accruing for our short term incentive comp plans and the impact of pension expense and they did. This was offset by the favorable effect of a onetime sales tax adjustment. Cindy will describe this in greater detail in her remarks.
Combined with other favorable factors such as lower spending on antitrust litigation offset by some new costs of our planned acquisition of K-Tron International, earnings per share increased 11.6% for the quarter going from $0.43 to $0.48. Our operating cash flow remains strong in the opening months of 2010, increasing more than 56% over 2009. We used a portion of that cash to uphold our commitment to providing shareholders with meaningful returns increasing our annual dividend by $0.01 per share just as we did last December.
Now, I’ll turn the discussion over to Joe Rover for a more detailed description of results at Batesville Casket.
Joe A. Rover
I’ll begin today by reviewing the current funeral service environment and how it impacted our first quarter results. Then, I’ll spend a little time updating you on a number of our key strategic initiatives. Our analysis shows that North America deaths continue to decline compared to the same period a year ago. Generally the incidence of pneumonia and influenza are key factors in determining the total number of deaths in the first two quarters of our fiscal year.