On March 21, 2012, Hill-Rom Holdings, Inc. (the “Company”) approved a plan to improve its cost structure and streamline its organization by, among other things, eliminating approximately 200 positions across the Company, or about 3% of the Company’s workforce. The Company is making these changes to help offset pressures from challenging macroeconomic conditions, regulatory and reimbursement pressures, and the new medical device tax. Impacted employees are being offered severance and other benefits.
Details of the charge will be discussed on the Company’s second quarter earnings call in April 2012.
In addition, and in connection with the preparation of the Company’s financial statements for the second quarter of fiscal year 2012, the Company determined that it would incur an impairment of a previously acquired trade name whose assessment was triggered by strategic changes in how the asset would be utilized on a go forward basis.
The Company also determined that as a result of other strategic decisions it had made it would incur an impairment of certain tangible assets for which the carrying values could not be fully recovered.
As a result of the plan and the impairments, the Company estimates incurring a total pre-tax charge of between $14 and $17 million in the second quarter of fiscal year 2012, along with an additional charge of between $5 and $7 million over the balance of fiscal year 2012. The total charge of approximately $19 to $22 million will consist of approximately $8 to $10 million for employee termination and severance costs, $3 million for the impairment of certain tangible assets, $7 to $9 million for the impairment of certain intangible assets, and approximately $1 million for lease and other contract termination costs.
The charges for the impairment of the intangible and tangible assets will be non-cash charges. All remaining charges will be cash expenditures. The Company estimates that the plan and related cash expenditures will be substantially complete by the end of fiscal year 2012, although some of the lease and contract termination payments will extend longer.