Summary of HILL-ROM HOLDINGS, INC.

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ("MD&A")

Forward-Looking Statements and Factors That May Affect Future Results Certain statements in this Quarterly Report on Form 10-Q contain forward-looking statements within the meanings of the Private Securities Litigation Reform Act of 1995 regarding our future plans, objectives, beliefs, expectations, representations and projections. We have tried, whenever possible, to identify these forward-looking statements by using words such as "intend," "anticipate," "believe," "plan," "encourage," "expect," "may," "goal," "become," "pursue," "estimate," "strategy," "will," "projection," "forecast," "continue," "accelerate," "promise," "increase," "higher," "lower," "reduce," "improve," "expand," "progress," "potential," or the negative of those terms or other variations of them or by comparable terminology. The absence of such terms, however, does not mean that the statement is not forward-looking. We caution readers that any such forward-looking statements are based on assumptions that we believe are reasonable, but are subject to a wide range of risks. It is important to note that forward-looking statements are not guarantees of future performance, and our actual results could differ materially from those set forth in any forward-looking statements. There are a number of factors - many of which are beyond our control - that could cause actual conditions, events or results to differ significantly from those described in the forward-looking statements. For a more in depth discussion of these factors that could cause actual results to differ from those contained in forward-looking statements, see the discussions under the heading "Risk Factors" in our Annual Report on Form 10-K for the year ended September 30, 2007 and our Current Report on Form 8-K on the spin-off of the funeral services business as filed with the U.S. Securities and Exchange Commission on March 17, 2008. Risk factors, or portions thereof, included in that Form 10-K that related to the funeral services business are no longer applicable to the Company, except for the risk related to the purported Batesville Casket antitrust lawsuit discussed in Note 15 of our Condensed Consolidated Financial Statements. We assume no obligation to update or revise any forward-looking statements. Readers should also refer to the various disclosures made by us in our periodic reports on Form 10-Q and Form 8-K filed with the U.S. Securities and Exchange Commission. Overview
The following discussion and analysis should be read in conjunction with the accompanying interim financial statements and our Annual Report on Form 10-K ("Form 10-K") for the fiscal year ended September 30, 2007. Hill-Rom is a leading worldwide manufacturer and provider of medical technologies and related services for the health care industry, including patient support systems, non-invasive therapeutic products for a variety of acute and chronic medical conditions, medical equipment rentals and health information technology solutions. Hill-Rom's comprehensive product and service offerings are used by health care providers across the health care continuum in hospitals, extended care facilities and home care settings worldwide, to enhance the safety and quality of patient care and patient customers. Spin-off of Funeral Services Business
On March 31, 2008, the Company completed the spin-off of the funeral services business operating under the Batesville Casket name, through a tax-free stock dividend to its shareholders. In connection with the distribution, the Company (formerly known as Hillenbrand Industries, Inc.) changed its name to Hill-Rom Holdings, Inc. and is now trading under the symbol "HRC" on the New York Stock Exchange ("NYSE").
Immediately prior to the effective time of the spin-off, the Company contributed all of the assets and liabilities of the funeral services business to Hillenbrand, Inc., the recently formed holding company for the funeral services business. The Company then distributed approximately 62 million shares of Hillenbrand, Inc. common stock to the Company's shareholders. As a result, Hillenbrand, Inc. is now an independent publicly traded company trading under the symbol "HI" on the NYSE.

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In accordance with Statement of Financial Accounting Standards No. 144 (SFAS No. 144), Accounting for the Impairment or Disposal of Long-Lived Assets, the results of operations of the funeral services business have been presented as a discontinued operation for all periods presented in this Form 10-Q. See Note 3 of our condensed consolidated financial statements for a further discussion of the spin-off of the funeral services business. Unless otherwise noted, this MD&A excludes information related to the funeral services business. The Company's Board of Directors authorized the separation of the funeral services business from the medical technology business based on the Board's belief that the separation should improve our strategic, operational and financial flexibility. Although there can be no assurance, the Board authorized the separation based on its belief that, over time, the common stock of Hill-Rom Holdings, Inc. and Hillenbrand, Inc. should have a greater aggregate market value than the Company did prior to the separation, assuming the same market conditions and the realization of the expected benefits of the separation. For a detailed discussion of industry trends, strategy and other factors impacting our businesses, see "MD&A - Industry Trends, Strategy and Other Factors Impacting Hill-Rom's Business" in our Annual Report on Form 10-K for the fiscal year ended September 30, 2007.
Current Progress against Strategic Plan
As referred to above, in our last Annual Report on Form 10-K for the fiscal year ended September 30, 2007, we described our key strategic initiatives, which support our goal to grow organic revenue by an average of six to eight percent and operating income by an average of 12 to 15 percent over the 2007 to 2010 time frame. We provided a brief update in our Quarterly Report on Form 10-Q for the quarter ended December 31, 2007 and continue to make progress against each of our strategic initiatives. The most significant updates since the filing of our latest Form 10-Q were related to several of our strategic imperatives and included:
North America Acute Care: Differentiate the Core and Revitalize Rental Business
• In response to slowed sales of our patient support systems for intensive care settings as a result of an aging product offering and new competitive products, we released our new TotalCare® Connect and TotalCare® Connect Bariatric bed platforms in March 2008. These platforms provide differentiated connectivity and a user-friendly caregiver interface. Immediately upon commercial launch, these new products provided positive incremental sales during the latter part of the quarter, which allowed us to maintain flat ICU sales versus 2007. We believe these products will generate positive revenue growth for the balance of fiscal 2008 and beyond.

• Our accelerated new product research and development efforts continue to deliver as evidenced by the introduction of new products during the quarter and other key product launches scheduled for our third quarter. Among these new and/or improved products for acute care are an additional wound surface for our TotalCare® patient support system and a refreshed version of our VersaCare® patient support system with additional caregiver safety features and functionality.

• As previously disclosed, we have continued to invest in our moveable medical equipment ("MME") rental business. Specifically, we recently added new leadership and key sales executives and completed the hiring and training of a designated sales team for our MME products. Our MME rental business continues to face increasing competitive pressures, but we believe our initiatives will help counter pricing pressures and some recent customer losses. Another direct benefit of our sales channel investments for MME is a more focused therapy rental sales channel which has already begun to benefit from that increased focus on their area of clinical expertise.

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• Also reflecting our increasing focus on new product development, our Asia-Pacific Innovation Center in Singapore became operational during the second quarter. The first wave of engineering and sourcing personnel have been hired and are undergoing training. With the on boarding of that team nearly complete, the new innovation center will be fully engaged in product development efforts during the fourth quarter.

• Another noteworthy area of progress with respect to future product development efforts includes two new alliances with leading health care companies announced during the second quarter. Our alliance with Cerner Corporation is aimed at improving the interoperability in acute care facilities by allowing Hill-Rom intelligent hospital beds to communicate directly with the Cerner Millennium healthcare computing platform. Our other alliance is with NanoHorizons Inc., whose nanoAg+™ antimicrobial technology will be included in our patient support surfaces aims to provide new levels of protection against institutionally-borne pathogens.

Post-Acute: Achieve Leadership
• To speed our progress in the expansion of our post-acute care business in North America, we have utilized strategic relationships with certain suppliers to aid in the development of our rental and capital sales product portfolios. Most recently, we completed the initial fleet purchase of a semi-electric patient platform for the home care environment, which was co-developed with a key supplier and will be available to the market in our third quarter.

• Additionally, our post-acute care capital sales have increased markedly due to our development efforts over the past 18 months. We have begun to see growth from the prior year launch of a new version of our highly successful Vest® respiratory product designed specifically for acute care applications. We are also growing sales as a result of the first quarter 2008 launch of the Hill-Rom® 100 Low Bed, a new line of furniture, a new bariatric frame and new powered and non-powered surface offerings for our extended care customers.

• We are seeing good demand for our new rental frames (Hill-Rom® Low Bed and bariatric) and a new non-powered pressure relieving surface for home care. While we've experienced some start-up product quality issues with the Hill-Rom® 100 Low Bed, which has slowed product availability, we have corrected the underlying issues and introduced the required design changes into production. We anticipate being able to fully alleviate product availability issues and reduce the current backlog for the product to normal levels by the end of our third quarter. We continue to believe that these products will be well received by our customers and are encouraged by the reception we have seen thus far.

International: Expand Across Continuum
• The increased pace of product launches in 2007 and 2008 has helped drive revenue growth in excess of 20 percent in each of the last two years within our International business. An example of another product launch specifically for the international market is a new version of our highly successful AvantGuard™ patient support system designed for the European intensive care setting which will be commercially launched during the third quarter.

• Additionally, we have made substantial progress in our initiatives to grow our presence within medicalized long-term care in Europe. Specifically, new patient support and furniture products have been well received and have supported significant revenue growth during the first half of 2008. We have also demonstrated an ability to successfully utilize our existing sales channel capacity to help drive increased volume, specifically from new product introductions, in Western Europe.

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Improve Gross Margins
• With the development and launch of new bed platforms, in particular, we have successfully implemented our initial platforming efforts designed to increase the use of common sub-assemblies and modules across multiple product platforms which will enable us to meet customer needs faster, provide consistent styling in our products and improve our overall gross margin rates. Looking ahead, we anticipate accelerating the pace of platforming efforts to provide even further efficiencies and reduce product costs in fiscal 2009 and 2010.

• During the second quarter, we began to transition production of our stretcher line to our Monterrey, Mexico production facility. Production of our CareAssist® patient support system also continues to be performed in Monterrey, where we have been pleased with the level of efficiency and quality during the ramp up phase of this new facility.

• We have also continued other low-cost region efforts to source raw materials, components and sub-assemblies from Mexico (primarily for use in our Monterrey facility), Eastern Europe and India (primarily for products sold in Europe, Middle East and Africa), as well as from various Asian markets. As a result of these efforts, we expect to increase our sourcing spend in these regions by more than 20 percent this year. Partially offsetting the benefits from these efforts, however, are the relatively weak U.S. dollar and inflation experienced this year in various commodities, including fuel, steel, plastics and chemicals. Despite the inflationary cost pressures, we believe our low-cost region sourcing initiatives will continue to provide us with cost efficiencies and capabilities.

As a result of continuing the strategic initiatives we disclosed in October 2006 and updated in connection with our spin-off of the funeral services business, we continued to incur higher operating expenses related to research and development, marketing and sales channel initiatives during the second quarter of fiscal 2008. Compared to the prior year, we expect the level of spending to begin to level off as we continue these and other various initiatives to position ourselves to best execute our strategies to accelerate growth in the latter half of the year and beyond. For additional details regarding the current year financial impact of these strategic initiatives, see "Consolidated Results of Operations" which follows in this Form 10-Q. Consolidated Results of Operations
In this section, we provide a high-level overview of our consolidated results of operations. Immediately following this section is a discussion of our results of operations by reportable segment.