Hill-Rom Reports Second Quarter Revenue Growth of 12.0 Percent to $375.2 Million and Adjusted Earnings Per Fully Diluted Share from Continuing Operations of $0.26, Unchanged from the ...(les which generally carry a lower margin...),Health

million dollars of start-up costs associated with the new Monterrey,

Mexico facility and higher fuel and other commodity costs negatively

impacted gross profit and margins.

-- Other operating expenses increased $24.9 million, or 20.4 percent. The

higher expense levels were primarily due to increased spending

previously outlined as part of our strategic plan, including research

and development (up 18.5 percent over the prior year quarter to $14.8

million), higher sales and marketing expenses of 14.8 percent, and

currency impacts. Other unfavorable expense items during the quarter

include non-recurring separation-related charges of $7.3 million, and a

$4.1 million unfavorable swing for self insurance reserves.

Other:

-- Expenses associated with the separation of the health care and funeral

services businesses into independent companies resulted in the

inclusion of the following items in Hill-Rom's income from continuing

operations on a GAAP basis (these items represent pre-tax adjustments

made in determining Hill-Rom's as adjusted fully diluted earnings per

share figure for continuing operations):

-- Stock modification charge of $5.8 million

-- Debt extinguishment costs of $3.2 million

-- Other separation costs of $1.5 million

-- Cash flow from operations, which includes cash flows from the funeral

services business through March 31, 2008, was $84.1 million for the

second quarter, up $49.3 million, or 141.7 percent, from the prior year

comparable period. Substantially all of the increase in cash flow for

the quarter was generated by Hill-Rom.

Please see the attached schedules for additional information, including reconciliations of earnings in accordance with U.S. generally accepted acco
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