Hill-Rom Holdings, Inc. is a medical technology company, which focuses on patient care solutions that improve clinical and economic outcomes. It operates through the following business segments: Patient Support System, Front Line Care, and Surgical Solutions. The Patient Support Systems segment provides bed frames and surfaces, mobility, and clinical workflow solutions. The Front Line Care segment offers respiratory care products; and sells medical diagnostic equipment and a diversified portfolio of devices. The Surgical Solutions segment supplies surgical products including tables, lights, pendants, positioning devices, various other surgical products, and accessories. The company was founded by William A. Hillenbrand on August 7, 1969 and is headquartered in Chicago, IL.
We face significant uncertainty in our industry due to government health care reform, medical device tax provisions in healthcare reform laws, changes in Medicare, Medicaid and other governmental medical program reimbursements, and we cannot predict how these reforms will impact our operating results.
We operate in a highly competitive industry that is subject to the risk of declining demand and pricing pressures, which could adversely affect our operating results.
We have a substantial amount of indebtedness. This level of indebtedness could adversely affect our ability to raise additional capital to fund operations, our flexibility in operating our business and our ability to react to changes in the economy or our industry.
Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.
Adverse developments in general domestic and worldwide economic conditions and instability and disruption of credit markets could have an adverse effect on our operating results, financial condition, or liquidity.
We might not be able to grow or achieve expected cost savings or profitability if we are unable to successfully acquire and integrate, or form business relationships with, other companies.
Failure to comply with regulations due to our contracts with U.S. government entities could adversely affect our business and results of operations.
The assets in our pension plans are subject to market disruptions. In addition, our pension plans are underfunded.
The majority of our products are manufactured at a single facility or location, and the material damage or loss of, or partial or complete labor-related work stoppage at, one or more of these facilities or locations could prevent us from manufacturing some of the various products we sell.
Our international sales and operations are subject to risks and uncertainties that vary by country and which could have a material adverse effect on our business and/or results of operations. Compliance with international laws and regulations, import and export limitations, trade agreements, anti-corruption laws, and exchange controls may be difficult, burdensome and expensive.
Unfavorable outcomes related to uncertain tax positions could result in significant tax liabilities.
We might not be able to attract, retain and develop key personnel.
We might not be successful in achieving expected operating efficiencies and sustaining or improving operating expense reductions, and might experience business disruptions and adverse tax consequences associated with restructuring, realignment and cost reduction activities.
We might be adversely affected by new regulations relating to conflict minerals.
The rationalization and transformation of our Enterprise Resource Planning (“ERP”) software solutions and other information technology systems could result in significant disruptions to our operations.
Our stock price and trading volume has been, and may continue to be, volatile from time to time and we may experience continued fluctuations in the future that could negatively impact the value of our outstanding shares.
In this section, we provide an overview of our results of operations. We disclose segment information that is consistent with the way in which management operates and views the business. Our operating structure contains the following reportable segments:
See Note 1, Summary of Significant Accounting Policies and Note 2, Revenue Recognition, of our Consolidated Financial Statements in this Form 10-K for additional information on the impact of adoption of ASC 606 as of October 1, 2018.
Product sales and service revenue increased under ASC 606 by $112.2 million. This increase was primarily due to the accelerated recognition and reclassification from Rental revenue of $95.3 million for Front Line Care where it was determined for respiratory health products, there were no on-going performance obligations after delivery of the product to the customer, whereas previously this revenue was recognized over the period the Company was reimbursed by third parties. It also reflects an additional $13.5