HILLENBRAND, INC., 10-Q filed on 5/8/2013
Quarterly Report
Document and Entity Information
6 Months Ended
Mar. 31, 2013
Apr. 25, 2013
Document and Entity Information
 
 
Entity Registrant Name
Hillenbrand, Inc. 
 
Entity Central Index Key
0001417398 
 
Document Type
10-Q 
 
Document Period End Date
Mar. 31, 2013 
 
Amendment Flag
false 
 
Current Fiscal Year End Date
--09-30 
 
Entity Current Reporting Status
Yes 
 
Entity Filer Category
Large Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
62,799,089 
Document Fiscal Year Focus
2013 
 
Document Fiscal Period Focus
Q2 
 
Consolidated Statements of Income (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Mar. 31, 2013
Mar. 31, 2012
Consolidated Statements of Income
 
 
 
 
Net revenue
$ 398.5 
$ 259.7 
$ 703.7 
$ 491.3 
Cost of goods sold
261.9 
155.4 
456.5 
293.3 
Gross profit
136.6 
104.3 
247.2 
198.0 
Operating expenses
111.0 
60.5 
197.5 
120.8 
Operating profit
25.6 
43.8 
49.7 
77.2 
Interest expense
6.8 
2.8 
11.3 
5.7 
Other income (expense), net
(0.3)
(0.3)
0.6 
(0.8)
Income before income taxes
18.5 
40.7 
39.0 
70.7 
Income tax expense
5.3 
13.3 
11.2 
12.0 
Consolidated net income
13.2 
27.4 
27.8 
58.7 
Less: Net income attributable to noncontrolling interests
0.5 
 
0.8 
 
Net income
$ 12.7 1
$ 27.4 1
$ 27.0 1
$ 58.7 1
Net income - per share of common stock:
 
 
 
 
Basic earnings per share (in dollars per share)
$ 0.20 
$ 0.44 
$ 0.43 
$ 0.95 
Diluted earnings per share (in dollars per share)
$ 0.20 
$ 0.44 
$ 0.43 
$ 0.94 
Weighted average shares outstanding - basic (in shares)
62.7 
62.2 
62.6 
62.1 
Weighted average shares outstanding - diluted (in shares)
63.1 
62.6 
62.9 
62.4 
Cash dividends per share (in dollars per share)
$ 0.1950 
$ 0.1925 
$ 0.3900 
$ 0.3850 
Consolidated Statements of Comprehensive Income (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Mar. 31, 2013
Mar. 31, 2012
Consolidated Statements of Comprehensive Income
 
 
 
 
Consolidated net income
$ 13.2 
$ 27.4 
$ 27.8 
$ 58.7 
Other comprehensive income (loss), net of tax
 
 
 
 
Currency translation adjustment
(19.2)
7.9 
(9.0)
1.3 
Pension and postretirement benefit plan adjustments
0.2 
1.1 
1.3 
1.2 
Change in net unrealized loss on derivative instruments
(0.9)
(0.3)
(0.7)
(0.4)
Change in net unrealized gain (loss) on available-for-sale securities
 
0.2 
(0.2)
(0.9)
Total other comprehensive income (loss), net of tax
(19.9)
8.9 
(8.6)
1.2 
Consolidated comprehensive income (loss)
(6.7)
36.3 
19.2 
59.9 
Less: Comprehensive income attributable to noncontrolling interests
0.5 
 
0.8 
 
Comprehensive income (loss)
$ (7.2)1
$ 36.3 1
$ 18.4 1
$ 59.9 1
Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Mar. 31, 2013
Sep. 30, 2012
Current Assets
 
 
Cash and cash equivalents
$ 40.7 
$ 20.2 
Trade receivables, net
188.5 
150.7 
Unbilled receivables from long-term manufacturing contracts
128.4 
 
Inventories
191.3 
90.0 
Deferred income taxes
33.3 
19.6 
Other current assets
54.8 
24.8 
Total current assets
637.0 
305.3 
Property, plant, and equipment, net
168.3 
117.9 
Intangible assets, net
573.7 
313.9 
Goodwill
532.2 
303.7 
Other assets
52.9 
46.7 
Total Assets
1,964.1 
1,087.5 
Current Liabilities
 
 
Trade accounts payable
175.3 
35.3 
Liabilities from long-term manufacturing contracts and advances
78.0 
15.9 
Current portion of long-term debt
10.0 
 
Accrued compensation
24.9 
29.3 
Deferred income taxes
20.9 
0.9 
Other current liabilities
125.2 
70.4 
Total current liabilities
434.3 
151.8 
Long-term debt
709.6 
271.6 
Accrued pension and postretirement healthcare
234.9 
111.8 
Deferred income taxes
32.5 
21.7 
Other long-term liabilities
39.8 
24.3 
Total Liabilities
1,451.1 
581.2 
Commitments and contingencies
   
   
EQUITY
 
 
Common stock, no par value, 63.1 and 63.2 shares issued, 62.8 and 62.6 shares outstanding, 0.3 and 0.3 shares restricted
   
   
Additional paid-in capital
320.1 
321.9 
Retained earnings
240.0 
238.3 
Treasury stock, 0.3 and 0.6 shares
(3.4)
(11.5)
Accumulated other comprehensive loss
(51.0)
(42.4)
Total Hillenbrand Shareholders' Equity
505.7 
506.3 
Noncontrolling interests
7.3 
 
Total Equity
513.0 
506.3 
Total Liabilities and Equity
$ 1,964.1 
$ 1,087.5 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Millions, except Per Share data, unless otherwise specified
Mar. 31, 2013
Sep. 30, 2012
Consolidated Balance Sheets
 
 
Common stock, par value (in dollars per share)
$ 0 
$ 0 
Common stock, shares issued
63.1 
63.2 
Common stock, shares outstanding
62.8 
62.6 
Common stock, restricted
0.3 
0.3 
Treasury stock, shares
0.3 
0.6 
Consolidated Statements of Cash Flow (USD $)
In Millions, unless otherwise specified
6 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Operating Activities
 
 
Consolidated net income
$ 27.8 
$ 58.7 
Adjustments to reconcile net income to cash provided by operating activities:
 
 
Depreciation and amortization
42.9 
21.7 
Deferred income taxes
(15.9)
(5.8)
Equity in net (gain) loss from affiliates
0.6 
(0.4)
Share-based compensation
6.0 
6.9 
Trade accounts receivable and receivables on long-term manufacturing contracts
(4.6)
(2.3)
Inventories
6.1 
(7.5)
Other current assets
(20.3)
(5.7)
Trade accounts payable
0.3 
(1.5)
Accrued expenses and other current liabilities
(37.0)
(4.7)
Income taxes payable
13.0 
(4.4)
Defined benefit plan funding
(4.3)
(1.2)
Defined benefit plan expense
8.5 
6.3 
Other, net
(3.4)
 
Net cash provided by operating activities
19.7 
60.1 
Investing Activities
 
 
Capital expenditures
(11.2)
(8.1)
Proceeds on sales of property, plant, and equipment
1.1 
 
Proceeds from sales of investments
1.8 
 
Acquisition of business, net of cash acquired
(415.6)
 
Net cash used in investing activities
(423.9)
(8.1)
Financing Activities
 
 
Proceeds from term loan
200.0 
 
Repayments on term loan
(5.0)
 
Proceeds from revolving credit facilities, net of financing costs
576.7 
 
Repayments on revolving credit facilities
(323.0)
(84.0)
Payment of dividends on common stock
(24.3)
(23.8)
Other, net
(0.4)
 
Net cash provided by (used in) financing activities
424.0 
(107.8)
Effect of exchange rates on cash and cash equivalents
0.7 
0.4 
Net cash flow
20.5 
(55.4)
Cash and cash equivalents
 
 
At beginning of period
20.2 
115.5 
At end of period
$ 40.7 
$ 60.1 
Background and Basis of Presentation
Background and Basis of Presentation

1.              Background and Basis of Presentation

 

Hillenbrand, Inc. (“Hillenbrand”) is a global diversified industrial company that makes and sells premium business-to-business products and services for a wide variety of industries.  Hillenbrand has two business platforms:  the Process Equipment Group and Batesville.  The Process Equipment Group is a recognized leader in the design and production of equipment and systems used in processing applications, and Batesville® is a recognized leader in the North American funeral products industry.  “Hillenbrand,” “the Company,” “we,” “us,” “our,” and similar words refer to Hillenbrand and its subsidiaries.

 

The accompanying unaudited consolidated financial statements include the accounts of Hillenbrand and its subsidiaries, including Coperion Capital GmbH (“Coperion”), which was acquired on December 1, 2012.  The acquisition of Coperion resulted in Hillenbrand holding less than 100% ownership in certain Coperion subsidiaries.  These unaudited financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements and therefore do not include all information required in accordance with accounting principles generally accepted in the United States (“GAAP”).  The unaudited consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements as of and for the fiscal year ended September 30, 2012.  Certain prior period balances have been reclassified to conform to the current presentation.  In the opinion of management, these financial statements reflect all normal and recurring adjustments considered necessary to present a fair statement of the Company’s consolidated financial position and the consolidated results of operations and cash flow as of the dates and for the periods presented.

 

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of certain assets and liabilities and disclosures of contingent assets and liabilities as of the dates presented.  Actual results could differ from those estimates.  Examples of such estimates include, but are not limited to, revenue recognition under the percentage-of-completion method, the establishment of reserves related to customer rebates, doubtful accounts, warranties, early-pay discounts, inventories, income taxes, litigation, self-insurance, and progress toward achievement of performance criteria under the incentive compensation programs.

Summary of Significant Accounting Policies
Summary of Significant Accounting Policies

2.              Summary of Significant Accounting Policies

 

The significant accounting policies used in preparing these financial statements are consistent with the accounting policies described in our Annual Report on Form 10-K for the fiscal year ended September 30, 2012.  The following represents additions to our accounting policies due to the acquisition of Coperion.

 

Revenue Recognition

 

With the acquisition of Coperion, a portion of the Company’s revenue is derived from long-term manufacturing contracts.  This revenue is recognized based on the percentage-of-completion method.  Under this method, revenue is recognized based upon the costs incurred to date as compared to the total estimated cost of the project and are included in net revenues on the consolidated income statement.  Revenues in excess of billings are presented as unbilled receivables from long-term manufacturing contracts, and deposits in excess of billings are presented as liabilities from long-term manufacturing contracts on the consolidated balance sheet.  Approximately 20% of the Company’s revenue related to revenue from these long-term manufacturing contracts for the three and six months ended March 31, 2013.  Revenue for components, replacement parts, and service is recognized on a completed contract basis when title and risk of loss passes to the customer.

 

Derivative Financial Instruments

 

We use derivative financial instruments to manage the economic impact of fluctuations in currency exchange rates.  These include foreign currency exchange forward contracts, which generally have terms from 1 to 24 months.  The aggregate notional amount of these derivative instruments was $87.7 at March 31, 2013, and $46.0 at September 30, 2012.

 

We measure all derivative instruments at fair value and report them on our consolidated balance sheet as assets or liabilities.  Derivative instruments designated as hedges for customer orders or intercompany purchases have an offsetting tax-adjusted amount in accumulated other comprehensive gain (loss) and derivative instruments designated to hedge foreign currency exposures within our balance sheet have an offsetting amount recorded in other income or expense.  The carrying value of all of these contracts, at fair value, resulted in assets of $0.7 and $0.0, included in other current assets at March 31, 2013 and September 30, 2012, and liabilities of $2.2 and $0.4, included in other current liabilities at March 31, 2013, and September 30, 2012.  See Note 13 for additional information on the fair value of our derivative instruments.

 

Changes in the fair value of derivatives are accounted for depending on the intended use of the derivative, designation of the hedging relationship, and whether or not the criteria to apply hedge accounting has been satisfied.  Gains and losses on derivative instruments reported in accumulated other comprehensive gain (loss) are subsequently included in earnings in the periods in which earnings are affected by the hedged item.  The amounts recognized in accumulated other comprehensive income and subsequently through earnings were not material for the three or six months ended March 31, 2013 and 2012.  Net gains and losses on all derivative instruments were substantially offset by foreign exchange effects on the hedged items.

 

Recently Adopted and Issued Accounting Standards

 

In June 2011, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update titled Presentation of Comprehensive Income.  This update eliminates the current option to report other comprehensive income and its components in the statement of changes in equity.  An entity can elect to present items of net income and other comprehensive income in one continuous statement or in two separate consecutive statements.  Each component of net income and other comprehensive income, together with totals for comprehensive income and its two parts, net income and other comprehensive income, must be displayed under either alternative. The new disclosure requirements became effective and were adopted as of October 1, 2012.  As the new standard relates to presentation only, the adoption of this standard did not have a significant impact on our consolidated financial statements.

 

In January 2013, the FASB issued an accounting standards update titled Balance Sheet: Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities.  This standard limits the scope of accounting standards update titled Balance Sheet, issued in December 2011, to derivatives, repurchase agreements and securities lending transactions to the extent that they are (1) offset in the financial statements or (2) subject to an enforceable master netting arrangement or similar agreement.  The disclosure requirements shall be applied retrospectively for all periods presented and will be effective for our fiscal year beginning October 1, 2013.  We do not expect the adoption of this standard to have a significant impact on our consolidated financial statements.

 

In February 2013, the FASB issued an accounting standards update titled Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.  This standard is intended to improve the reporting of reclassifications out of accumulated other comprehensive income of various components.  An entity is required to present significant amounts reclassified from each component of accumulated other comprehensive income and the income statement line items affected by the reclassification.  The new disclosure requirements will be effective for our fiscal year beginning October 1, 2013.  As the new standard relates to disclosure only, we do not expect the adoption of this standard to have a significant impact on our consolidated financial statements.

 

In March 2013, the FASB issued an accounting standard updated titled Foreign Currency Matters — Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity.  This update specifies that a cumulative translation adjustment should be released into earnings when an entity ceases to have a controlling financial interest in a subsidiary or group of assets within a consolidated foreign entity and the sale or transfer results in the complete or substantially complete liquidation of the foreign entity.  The guidance will be effective for our fiscal year beginning October 1, 2014.  We do not expect the adoption of this standard to have a significant impact on our consolidated financial statements.

Business Acquisitions
Business Acquisitions

3.              Business Acquisitions

 

We completed the acquisition of Coperion on December 1, 2012, in a transaction valued at $540.7.  The aggregate purchase consideration consisted of $269.1 of cash, net of cash acquired, and the assumption of $146.0 of debt and $125.6 of pension liabilities.  We utilized $426.3 of borrowings under our revolving credit facility and cash on hand to finance the acquisition, including the repayment of the $146.0 of debt outstanding under Coperion’s prior financing arrangements.

 

Based in Stuttgart, Germany, Coperion is a global leader in the manufacture of compounding, extrusion, and bulk material handling equipment used in a broad range of industries, including plastics, chemicals, food processing, pharmaceutical, and aluminum. Coperion has been in business since 1879, and has nine manufacturing sites in Germany, the United States (“U.S.”), China, and India, and sales offices in approximately 30 locations in the Americas, Europe, and Asia.  Coperion had approximately 2,000 employees worldwide as of March 31, 2013.  Approximately 30% of Coperion’s revenue is derived from replacement parts and service, generating a large portion of recurring business due to its well-positioned service network and active installed base of equipment across the world.

 

Coperion revenues consist of large system sales, equipment, components, replacement parts, and service.  Large system sales are fulfilled over 12 to 18 months on average, whereby customers generally pay a deposit and make progress payments before and during the manufacture of the order, reducing or eliminating extensive working capital investments otherwise necessary to finance the manufacturing process.  System sales include many components, including those manufactured by Coperion as well as materials manufactured by third parties.  The Coperion business model includes a higher proportion of third-party-sourced products compared to the rest of the Process Equipment Group.  As a result, we expect gross profit margins in the Process Equipment Group to be lower on certain systems projects.  Hillenbrand believes that selling complete systems provides a significant competitive advantage and increases margin dollars.

 

This acquisition is the largest in the Company’s history and represents an important step in our strategic plans to further diversify Hillenbrand and accelerate the growth of the Process Equipment Group business platform.  The integration of Coperion with the Process Equipment Group will be a key initiative for the next 18 to 24 months.  Combining our product offerings to provide a more complete system solution is our highest priority from an integration perspective.  In addition, we believe leveraging Coperion’s global infrastructure will enable the existing businesses within the Process Equipment Group platform to enter new global markets more quickly.  Additionally, we expect the Process Equipment Group’s existing strong U.S. sales network will enhance Coperion’s expansion in North America.  Finally, the application of the Company’s lean tools and principles to Coperion’s operations is expected to contribute to improved margins and increased customer satisfaction.

 

The following table summarizes preliminary estimates of fair values of the assets acquired and liabilities assumed in the Coperion acquisition:

 

 

 

December 1,
2012

 

Cash and cash equivalents

 

$

32.8

 

Inventory

 

109.1

 

Current assets, excluding cash and cash equivalents and inventory

 

179.9

 

Property, plant, and equipment

 

54.4

 

Identifiable intangible assets

 

291.8

 

Goodwill

 

234.0

 

Other assets

 

2.1

 

Total assets acquired

 

904.1

 

 

 

 

 

Current liabilities

 

284.0

 

Accrued pension obligations

 

125.6

 

Deferred income taxes

 

33.4

 

Other long-term liabilities

 

6.7

 

Total liabilities assumed

 

449.7

 

 

 

 

 

Noncontrolling interest assumed

 

6.5

 

 

 

 

 

Aggregate purchase price

 

$

447.9

 

 

The estimation of fair value of Coperion’s assets and liabilities is preliminary and subject to adjustment based on finalization of the closing balance sheet, including deferred tax balances.

 

During the second quarter, we revised the presentation of certain customer advances classified as trade receivables, net to long-term manufacturing contracts and advances, resulting in a change in classification of $15.7.

 

Goodwill is not deductible for tax purposes and was allocated entirely to our Process Equipment Group.  Excluding the acquisition of Coperion, the change in goodwill during the six months ended March 31, 2013, was due to the change in foreign currency.

 

Fair value amounts assigned to identifiable definite-lived intangible assets are being amortized on a straight-line basis over their estimated useful lives.  The amounts assigned at the time of acquisition and their useful lives were:

 

 

 

Fair Values

 

Estimated
Useful Lives

(years)

 

Trade names

 

$

55.6

 

Indefinite

 

Customer relationships

 

157.7

 

20

 

Technology, including patents

 

44.2

 

12

 

Backlog

 

34.3

 

<1

 

Total identifiable intangible assets

 

$

291.8

 

 

 

 

The unaudited pro forma information for the periods set forth below gives effect to the Coperion acquisition as if it had occurred at the beginning of the earliest period presented.  It includes adjustments for additional interest expense, depreciation, and amortization.  The unaudited pro forma information for the three and six months ended March 31, 2012, includes acquisition costs of $2.5 and $10.7 as well as backlog amortization and inventory step-up costs of $21.3 and $42.2.  Acquisition costs, backlog amortization, and inventory step-up costs are not included in the pro forma information for the three and six months ended March 31, 2013.  The unaudited pro forma information is presented for informational purposes only and does not necessarily reflect the results of operations that would actually have been achieved had the acquisition been consummated as of that time.

 

 

 

Three Months Ended
March 31,

 

Six Months Ended
March 31,

 

 

 

2013

 

2012

 

2013

 

2012

 

Pro forma net revenue

 

$

398.5

 

$

425.3

 

$

818.9

 

$

859.9

 

Pro forma net income(1)

 

29.7

 

18.3

 

58.0

 

32.3

 

Pro forma basic earnings per share

 

$

0.48

 

$

0.29

 

$

0.93

 

$

0.52

 

Pro forma diluted earnings per share

 

$

0.47

 

0.29

 

$

0.93

 

0.52

 

 

(1) Pro forma net income attributable to Hillenbrand

 

We incurred $2.5 and $10.7 of net business acquisition costs associated with the acquisition during the three and six months ended March 31, 2013.  These costs consist of $1.9 and $10.9 of operating expenses and $0.6 and $0.6 of interest expense for the three and six months ended March 31, 2013, partially offset by $0.8 of other income during the first six months.

 

Coperions results are included in our Process Equipment Group results.  The acquisition of Coperion resulted in Hillenbrand holding less than 100% ownership in certain Coperion subsidiaries.  The portion of the business that is not owned by the Company is presented as noncontrolling interests within equity in the Consolidated Balance Sheets.  Income attributable to the noncontrolling interests was $0.5 and $0.8 for the three and six months ended March 31, 2013, is separately reported within the Consolidated Statements of Income, and is also excluded from total Hillenbrand Shareholder’s Equity.

Supplemental Balance Sheet Information
Supplemental Balance Sheet Information

4.              Supplemental Balance Sheet Information

 

 

 

March 31,

 

September 30,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

Trade accounts receivable reserves

 

$

18.9

 

$

16.5

 

 

 

 

 

 

 

Accumulated depreciation on property, plant, and equipment

 

$

262.4

 

$

263.9

 

 

 

 

 

 

 

Accumulated amortization on intangible assets

 

$

97.3

 

$

69.4

 

 

 

 

 

 

 

Inventories:

 

 

 

 

 

Raw materials and components

 

$

59.8

 

$

39.1

 

Work in process

 

82.1

 

13.9

 

Finished goods

 

49.4

 

37.0

 

Total inventories

 

$

191.3

 

$

90.0

Financing Agreements
Financing Agreements

5.              Financing Agreements

 

 

 

March 31,

 

September 30,

 

 

 

2013

 

2012

 

$700 revolving credit facility (excludes outstanding letters of credit)

 

$

375.9

 

$

123.0

 

$200 term loan

 

195.0

 

 

$150 senior unsecured notes, due July 15, 2020, net of discount

 

148.7

 

148.6

 

Total debt

 

719.6

 

271.6

 

Less: current portion of term loan

 

10.0

 

 

Total long-term debt

 

$

709.6

 

$

271.6

 

 

In November 2012, we fully exercised the $300 accordion feature under our revolving credit facility to increase our financing capacity.  This increase consisted of a $200 term loan and a $100 increase in our borrowing capacity under our revolving credit facility, to $700.  The Company also has the potential, under certain circumstances and with the lenders’ approval, to increase the total borrowing capacity under the revolving credit facility by an additional $300.  Deferred financing costs of $3.8 are being amortized to interest expense over the term of the revolving credit facility.

 

As of March 31, 2013, we (i) had $151.6 in outstanding letters of credit issued under our $700 revolving credit facility, (ii) were in compliance with all covenants set forth in the credit agreement for the revolving credit facility, and (iii) had $172.5 of remaining borrowing capacity available under the revolving credit facility.  The weighted-average interest rates on borrowings under the revolving credit facility were 1.39% and 1.38% for the three- and six-month periods ended March 31, 2013, and 0.71% for the three- and six-month periods ended March 31, 2012.  The weighted average interest rates on the term loan were 1.71% and 1.74% for the three- and six-month periods ended March 31, 2013.  In the normal course of business, the Process Equipment Group is required to provide customers bank guarantees in support of performance, warranty, advance payment, and other contract obligations.  This form of trade finance is customary in the industry and, as a result, we are required to maintain adequate capacity to provide the guarantee.

 

As of March 31, 2013, our Swiss subsidiary maintained additional availability of $15.3 through local credit facilities secured by cash or real property.  There were no borrowings under these facilities as of March 31, 2013, and availability was reduced by $3.6 for outstanding bank guarantees.  Coperion has a $64.1 guaranty facility under which availability was reduced for outstanding bank guarantees totaling $46.8 as of March 31, 2013.  We had $17.3 additional outstanding letters of credit and bank guarantees with other financial institutions and restricted cash of $1.3 at March 31, 2013.

 

On July 9, 2010, we issued $150 fixed-rate senior unsecured notes due July 15, 2020 (the “Notes”).  The Notes bear interest at a fixed rate of 5.5%, payable semi-annually in arrears.  The Notes were issued at an original issue discount of $1.6, which is being amortized to interest expense over the term of the Notes using the effective interest rate method, resulting in an annual interest rate of 5.65%.  Deferred financing costs of $2.1 are being amortized to interest expense over the term of the Notes.

Retirement Benefits
Retirement Benefits

6.             Retirement Benefits

 

In connection with the Coperion acquisition, we acquired the Coperion defined benefit pension plans based in Germany and the U.S., which were recorded at fair value on the acquisition date.  The aggregate fair value of the total projected benefit obligations acquired was $141.6 and the plan assets at fair value totaled $16.0, resulting in an assumed liability of $125.6 at December 1, 2012.  We estimate we will be required to make minimum contributions of $7.7 during the remainder of fiscal year 2013 related to these Coperion defined benefit pension plans, although we may make additional discretionary contributions.

 

Defined Benefit Plans

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

March 31,

 

March 31,

 

 

 

2013

 

2012

 

2013

 

2012

 

Service costs

 

$

1.6

 

$

1.5

 

$

3.2

 

$

3.0

 

Interest costs

 

4.4

 

3.1

 

7.9

 

6.3

 

Expected return on plan assets

 

(3.5

)

(3.3

)

(6.9

)

(6.7

)

Amortization of unrecognized prior service costs, net

 

0.2

 

0.2

 

0.4

 

0.4

 

Amortization of net loss

 

1.8

 

1.5

 

3.6

 

2.9

 

Net pension costs

 

$

4.5

 

$

3.0

 

$

8.2

 

$

5.9

 

 

Postretirement Healthcare Plans — Net postretirement healthcare costs were $0.2 and $0.2 for the three months ended March 31, 2013 and 2012, and $0.3 and $0.4 for the six months ended March 31, 2013 and 2012.

 

Defined Contribution Plans — Expenses related to our defined contribution plans were $2.1 and $2.1 for the three months ended March 31, 2013 and 2012, and $4.1 and $3.9 for the six months ended March 31, 2013 and 2012.

Income Taxes
Income Taxes

7.              Income Taxes

 

The effective tax rates for the three months ended March 31, 2013 and 2012 were 28.6% and 32.7%.  The improvement in the effective tax rate was primarily the result of the Coperion acquisition, because Coperion produces a larger percentage of income from foreign sources in lower tax rate jurisdictions.  The effective tax rates for the six months ended March 31, 2013 and 2012 were 28.7% and 17.0%.  The change in the effective tax rates between these six-month periods was largely due to the $10.4 reduction of income tax expense in the first quarter of fiscal year 2012, attributable to the permanent reinvestment assertion on historical earnings of certain Swiss operations.

Earnings Per Share
Earnings Per Share

8.              Earnings Per Share

 

At March 31, 2013 and 2012, potential dilutive effects of 2.0 million and 1.7 million shares relating to unvested time-based restricted stock units and stock options were excluded from the computation of earnings per share as their effects were anti-dilutive.  At March 31, 2013 and 2012, potential dilutive effects of 2.0 million and 1.8 million shares relating to unvested performance-based stock awards were excluded from the computation of diluted earnings per share as the related performance period is not yet complete.  The effects of these performance-based shares will be dilutive in the future to the extent various levels of performance criteria are met.

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

March 31,

 

March 31,

 

 

 

2013

 

2012

 

2013

 

2012

 

Net income(1)

 

$

12.7

 

$

27.4

 

$

27.0

 

$

58.7

 

Weighted average shares outstanding — basic (millions)

 

62.7

 

62.2

 

62.6

 

62.1

 

Effect of dilutive stock options and unvested time-based restricted stock awards (millions)

 

0.4

 

0.4

 

0.3

 

0.3

 

Weighted average shares outstanding — diluted (millions)

 

63.1

 

62.6

 

62.9

 

62.4

 

 

 

 

 

 

 

 

 

 

 

Earnings per share — basic

 

$

0.20

 

$

0.44

 

$

0.43

 

$

0.95

 

Earnings per share — diluted

 

$

0.20

 

$

0.44

 

$

0.43

 

$

0.94

 

 

(1) Net income attributable to Hillenbrand

Shareholders' Equity
Shareholders' Equity

9.              Shareholders’ Equity

 

During the six months ended March 31, 2013, we paid $24.3 of cash dividends.  The decline in treasury stock is primarily the result of the distribution of vested awards during the first quarter of fiscal year 2013.

Share-Based Compensation
Share-Based Compensation

10.       Share-Based Compensation

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

March 31,

 

March 31,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation costs

 

$

1.5

 

$

1.6

 

$

6.0

 

$

6.9

 

Less income tax benefit

 

0.6

 

0.5

 

2.2

 

2.5

 

Share-based compensation costs, net of tax

 

$

0.9

 

$

1.1

 

$

3.8

 

$

4.4

 

 

During the six months ended March 31, 2013, we made the following grants:

 

 

 

Number of
Units

 

Stock options

 

497,818

 

Time-based stock awards

 

80,762

 

Performance-based stock awards (maximum that can be earned)

 

765,564

 

 

Stock options granted had a weighted-average exercise price of $20.68 and a weighted-average grant date fair value of $4.89.  Our time-based stock awards and performance-based stock awards had a weighted-average grant date fair value of $22.68 and $20.68.

Other Income and Expense, Net
Other Income and Expense, Net

11.       Other Income and Expense, Net

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

March 31,

 

March 31,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Equity in net income (loss) of affiliates

 

$

(0.4

)

$

0.5

 

$

(0.6

)

$

0.4

 

Foreign currency exchange gain (loss)

 

0.3

 

(0.2

)

1.1

 

(0.2

)

Business acquisition costs, net

 

 

 

0.8

 

 

Other, net

 

(0.2

)

(0.6

)

(0.7

)

(1.0

)

Other income and expense, net

 

$

(0.3

)

$

(0.3

)

$

0.6

 

$

(0.8

)

 

The acquisition of Coperion was transacted in euros during our first fiscal quarter of 2013.  Business acquisition costs within other income and expense represent the foreign exchange gain recognized on euro-denominated cash required to fund the acquisition, offset by the costs of derivative contracts that hedged currency exposure on the funds required to close the transaction.

Commitments and Contingencies
Commitments and Contingencies

12.       Commitments and Contingencies

 

Lease Commitments — We lease certain manufacturing facilities, warehouse distribution centers, service centers, and sales offices under operating leases.  The aggregate future minimum lease payments for operating leases, including those lease obligations assumed through our Coperion acquisition, as of March 31, 2013, were as follows:

 

 

 

Amount

 

2013 (remaining six months)

 

$

12.4

 

2014

 

13.3

 

2015

 

11.5

 

2016

 

10.8

 

2017

 

10.2

 

Thereafter

 

53.5

 

 

 

$

111.7

 

 

Litigation

 

General

 

Like most companies, we are involved on an ongoing basis in claims, lawsuits, and government proceedings relating to our operations, including environmental, antitrust, patent infringement, business practices, commercial transactions, product and general liability, workers’ compensation, auto liability, employment, and other matters.  The ultimate outcome of these matters cannot be predicted with certainty.  An estimated loss from these contingencies is recognized when we believe it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated; however, it is difficult to measure the actual loss that might be incurred related to litigation.  If a loss is not considered probable and/or cannot be reasonably estimated, we are required to make a disclosure if there is at least a reasonable possibility that a material loss may have been incurred.  Legal fees associated with claims and lawsuits are generally expensed as incurred.

 

Claims other than employment and related matters have deductibles and self-insured retentions ranging from $0.5 to $1.0 per occurrence or per claim, depending upon the type of coverage and policy period.  Outside insurance companies and third-party claims administrators assist in establishing individual claim reserves, and an independent outside actuary provides estimates of ultimate projected losses, including incurred but not reported claims, which are used to establish reserves for losses.  Claim reserves for employment-related matters are established based upon advice from internal and external counsel and historical settlement information for claims and related fees, when such amounts are considered probable of payment.

 

The recorded amounts represent our best estimate of the costs we will incur in relation to such exposures, but it is possible that actual costs will differ from those estimates.

 

Matthews Litigation

 

In August 2010, the York Group, Inc., Milso Industries Corporation, and Matthews International Corporation (collectively “Matthews”) filed a lawsuit against Scott Pontone and Batesville Casket Company, Inc. in the United States District Court, Western District of Pennsylvania, which was subsequently amended by Matthews in February 2011 to include two additional defendants, Harry Pontone and Pontone Casket Company, LLC (the “Matthews Litigation”).  The Matthews Litigation arises, in part, as a result of a Marketing Consulting Agreement entered into between Batesville and Pontone Casket Company effective June 24, 2010, and Batesville’s hiring of two former employees of certain Matthews entities in June 2010.  Scott Pontone provides consulting services to Batesville pursuant to the Marketing Consulting Agreement entered into between Batesville and Pontone Casket Company.  Matthews alleges that Scott Pontone and Harry Pontone breached contractual and business obligations with Matthews and that Batesville induced certain of those breaches as part of its sales initiatives in the New York metropolitan area.

 

Matthews claims that it has lost revenue and will lose future revenue in the New York metropolitan area, although the amount of those alleged damages is unspecified.  Matthews seeks to: (i) recover compensatory damages, punitive damages, attorneys’ fees and costs; and (ii) enjoin certain activities by Harry Pontone, Scott Pontone, Pontone Casket Company, and Batesville and its employees in the New York metropolitan area.  Although Matthews originally moved for a preliminary injunction, that request was withdrawn.  Discovery has closed.  Batesville has moved for summary judgment on Matthews’ claims.  No trial date has been set.

 

The Company believes Batesville acted lawfully and intends to defend this matter vigorously.  The Company does not believe, based on currently available information, that the outcome of this lawsuit will have a material adverse effect on the Company’s financial condition and liquidity.  If Matthews prevails at trial, however, the outcome could be materially adverse to the Company’s operating results or cash flows for the particular period, depending, in part, upon the operating results or cash flows for such period.

 

Horstmann Litigation

 

On March 18, 2013, a joint and several judgment was entered by the Higher Regional Court (OLG) Hamm, Germany, in favor of plaintiff, Jürgen Horstmann, and against defendants, Atlas-Vermögensverwaltungs GmbH, ThyssenKrupp Technologies Beteiligungen (“ThyssenKrupp”), and Hillenbrand subsidiary, Coperion, in the amount of €10.3, plus interest, for a total estimated judgment of €18.5 to €19.6 (the “Horstmann Litigation”).   In the Horstmann Litigation, the plaintiff alleged numerous claims relating to its purchase from ThyssenKrupp of a former ThyssenKrupp business in 1996.  This judgment reversed a ruling on September 1, 2010, by the Court of First Instance that previously dismissed these claims.

 

Pursuant to a Framework Agreement entered into in 2000 between ThyssenKrupp and Admini Zweiundsiebzig (“Admini”) (predecessor to Coperion), ThyssenKrupp agreed to indemnify Coperion for all liability associated with the Horstmann Litigation.  Additionally, pursuant to the Share Purchase Agreement by which the Company acquired Coperion, sellers indemnify Hillenbrand in the event ThyssenKrupp does not fulfill its indemnification obligations, subject to the terms and conditions of such share such Share Purchase Agreement.

 

Defendants in the Horstmann Litigation are currently analyzing whether or not the March 18 judgment can be appealed.  Hillenbrand believes it is fully indemnified with respect to the Horstmann Litigation and does not believe that the outcome of this lawsuit will have a material adverse effect on the Company’s financial condition and liquidity.  Hillenbrand’s balance sheet at March 31, 2013, includes a long-term liability and a corresponding indemnification receivable, recorded in other assets, for $8.0.

Fair Value Measurements
Fair Value Measurements

13.       Fair Value Measurements

 

Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date.  The authoritative guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.  Observable inputs are from sources independent of the Company.  Unobservable inputs reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances.  The categorization of financial assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.  The hierarchy is broken down into three levels:

 

Level 1:    Inputs are quoted prices in active markets for identical assets or liabilities.

Level 2:    Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly.

Level 3:    Inputs are unobservable for the asset or liability.

 

 

 

Carrying

 

 

 

 

 

Value at

 

Fair Value at March 31, 2013

 

 

 

March 31,

 

Using Inputs Considered as:

 

 

 

2013

 

Level 1

 

Level 2

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

40.7

 

$

40.7

 

$

 

$

 

Equity investments

 

1.0

 

 

 

1.0

 

Investments in rabbi trust

 

5.3

 

5.3

 

 

 

Derivative instruments

 

0.7

 

 

0.7

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

$150 senior unsecured notes

 

148.7

 

164.5

 

 

 

Revolving credit facility

 

375.9

 

 

375.9

 

 

Term loan

 

195.0

 

 

195.0

 

 

Derivative instruments

 

2.2

 

 

2.2

 

 

 

The fair values of the revolving credit facility and term loan approximated book value at March 31, 2013.  The fair values of the revolving credit facility and term loan are estimated based on internally developed models, using current market interest rate data for similar issues, as there is no active market for our revolving credit facility and term loan, which are Level 2 valuation techniques.

 

We estimate the fair value of our foreign currency derivatives using industry accepted models.  The significant Level 2 inputs used in the valuation of our derivatives include spot rates, forward rates, and volatility.  These inputs are obtained from pricing services, broker quotes, and other sources.

Segment and Geographical Information
Segment and Geographical Information

14.       Segment and Geographical Information

 

The acquisition of Coperion on December 1, 2012, resulted in the addition of Coperion to the Process Equipment Group segment.

 

 

 

Three Months Ended March 31,

 

Six Months Ended March 31,

 

 

 

2013

 

2012

 

2013

 

2012

 

Net revenue

 

 

 

 

 

 

 

 

 

Process Equipment Group

 

$

227.4

 

$

96.2

 

$

381.1

 

$

181.9

 

Batesville

 

171.1

 

163.5

 

322.6

 

309.4

 

Total

 

$

398.5

 

$

259.7

 

$

703.7

 

$

491.3

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

 

 

 

 

 

 

 

 

Process Equipment Group

 

$

24.2

 

$

21.2

 

$

45.2

 

$

37.4

 

Batesville

 

48.4

 

44.4

 

86.9

 

83.4

 

Corporate

 

(8.5

)

(7.4

)

(16.5

)

(14.6

)

 

 

 

 

 

 

 

 

 

 

Net revenue (1)

 

 

 

 

 

 

 

 

 

United States

 

$

234.7

 

$

213.0

 

$

440.2

 

$

407.4

 

International

 

163.8

 

46.7

 

263.5

 

83.9

 

Total

 

$

398.5

 

$

259.7

 

$

703.7

 

$

491.3

 

 

(1)   We attribute revenue to a geography based upon the location of the business unit that consummates the external sale.

 

 

 

March 31,
2013

 

September 30,
2012

 

Total assets

 

 

 

 

 

Process Equipment Group

 

$

1,654.6

 

$

769.7

 

Batesville

 

245.6

 

236.2

 

Corporate

 

63.9

 

81.6

 

Total

 

$

1,964.1

 

$

1,087.5

 

 

 

 

 

 

 

Tangible long-lived assets

 

 

 

 

 

United States

 

$

103.7

 

$

100.4

 

International

 

64.6

 

17.5

 

Total

 

$

168.3

 

$

117.9

 

 

The following schedule reconciles segment adjusted EBITDA to consolidated net income.

 

 

 

Three Months Ended
March 31,

 

Six Months Ended
March 31,

 

 

 

2013

 

2012

 

2013

 

2012

 

Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

Process Equipment Group

 

$

24.2

 

$

21.2

 

$

45.2

 

$

37.4

 

Batesville

 

48.4

 

44.4

 

86.9

 

83.4

 

Corporate

 

(8.5

)

(7.4

)

(16.5

)

(14.6

)

Interest income

 

0.2

 

0.1

 

0.3

 

0.3

 

Interest expense

 

(6.8

)

(2.8

)

(11.3

)

(5.7

)

Income tax expense

 

(5.3

)

(13.3

)

(11.2

)

(12.0

)

Depreciation and amortization

 

(27.8

)

(9.5

)

(42.9

)

(21.7

)

Business acquisition costs

 

(1.8

)

(0.5

)

(10.0

)

(1.0

)

Inventory step-up

 

(8.1

)

 

(10.7

)

 

Restructuring

 

(1.3

)

(4.7

)

(1.9

)

(4.7

)

Antitrust litigation

 

 

(0.1

)

(0.1

)

(0.5

)

Long-term incentive compensation related to the international integration

 

 

 

 

(2.2

)

Consolidated net income

 

$

13.2

 

$

27.4

 

$

27.8

 

$

58.7

 

 

Condensed Consolidating Information
Condensed Consolidating Information

15.       Condensed Consolidating Information

 

On January 9, 2013, the Company’s subsidiary, Coperion Corporation, a Delaware corporation, was joined as a party to the Guaranty dated July 27, 2012 (“Guaranty”), by certain subsidiaries of the Company (including Coperion Corporation, the “Guarantors”), which was entered into in connection with the Company’s revolving credit facility.  In accordance with the terms of the revolving credit facility, Coperion Corporation was required to join the Guaranty as a material domestic subsidiary of the Company following the acquisition of Coperion Capital GmbH.

 

On January 10, 2013, the Company, the Guarantors, and U.S. Bank National Association (“Trustee”) entered into a supplemental indenture pursuant to which the Guarantors agreed to guarantee the obligations of the Company under its 5.50% Notes due 2020 issued pursuant to an Indenture entered into on July 9, 2010 between the Company and the Trustee.

 

As such, certain 100% owned subsidiaries of Hillenbrand fully and unconditionally, jointly and severally, guarantee all of the indebtedness relating to our obligations under our 5.50% Notes due 2020.  The following are the condensed consolidating financial statements, including the guarantors, which present the statements of income, balance sheets, and cash flows of (i) the parent holding company, (ii) the guarantor subsidiaries, (iii) the non-guarantor subsidiaries, and (iv) eliminations necessary to arrive at the information for Hillenbrand on a consolidated basis.

 

 

Condensed Consolidating Statements of Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31, 2013

 

Three months ended March 31, 2012

 

 

 

Parent

 

Guarantors

 

Non-
Guarantors

 

Eliminations

 

Consolidated

 

Parent

 

Guarantors

 

Non-
Guarantors

 

Eliminations

 

Consolidated

 

Net revenue

 

$

 

$

227.6

 

$

216.6

 

$

(45.7

)

$

398.5

 

$

 

$

211.4

 

$

89.8

 

$

(41.5

)

$

259.7

 

Cost of goods sold

 

 

114.7

 

163.6

 

(16.4

)

261.9

 

 

104.4

 

65.9

 

(14.9

)

155.4

 

Gross profit

 

 

112.9

 

53.0

 

(29.3

)

136.6

 

 

107.0

 

23.9

 

(26.6

)

104.3

 

Operating expenses

 

9.7

 

67.9

 

62.7

 

(29.3

)

111.0

 

8.1

 

60.5

 

18.5

 

(26.6

)

60.5

 

Operating profit

 

(9.7

)

45.0

 

(9.7

)

 

25.6

 

(8.1

)

46.5

 

5.4

 

 

43.8

 

Interest expense

 

5.5

 

0.1

 

1.2

 

 

6.8

 

2.8

 

 

 

 

2.8

 

Other income (expense), net

 

 

(0.8

)

0.5

 

 

(0.3

)

 

 

(0.3

)

 

(0.3

)

Equity in net income (loss) of subsidiaries

 

22.0

 

2.7

 

 

(24.7

)

 

34.1

 

0.8

 

 

(34.9

)

 

Income (loss) before income taxes

 

6.8

 

46.8

 

(10.4

)

(24.7

)

18.5

 

23.2

 

47.3

 

5.1

 

(34.9

)

40.7

 

Income tax expense (benefit)

 

(5.9

)

16.4

 

(5.2

)

 

5.3

 

(4.2

)

17.1

 

0.4

 

 

13.3

 

Consolidated net income

 

12.7

 

30.4

 

(5.2

)

(24.7

)

13.2

 

27.4

 

30.2

 

4.7

 

(34.9

)

27.4

 

Less: Net income attributable to noncontrolling interests

 

 

 

0.5

 

 

0.5

 

 

 

 

 

 

Net income (loss)(1)

 

$

12.7

 

$

30.4

 

$

(5.7

)

$

(24.7

)

$

12.7

 

$

27.4

 

$

30.2

 

$

4.7

 

$

(34.9

)

$

27.4

 

Consolidated Comprehensive income (loss)

 

$

(7.2

)

$

31.7

 

$

(26.3

)

$

(4.9

)

$

(6.7

)

$

36.3

 

$

31.5

 

$

12.3

 

$

(43.8

)

$

36.3

 

Less: Comprehensive income attributable to noncontrolling interests

 

 

 

0.5

 

 

0.5

 

 

 

 

 

 

Comprehensive income (loss)(2)

 

$

(7.2

)

$

31.7

 

$

(26.8

)

$

(4.9

)

$

(7.2

)

$

36.3

 

$

31.5

 

$

12.3

 

$

(43.8

)

$

36.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended March 31, 2013

 

Six months ended March 31, 2012

 

 

 

Parent

 

Guarantors

 

Non-
Guarantors

 

Eliminations

 

Consolidated

 

Parent

 

Guarantors

 

Non-
Guarantors

 

Eliminations

 

Consolidated

 

Net revenue

 

$

 

$

426.3

 

$

364.8

 

$

(87.4

)

$

703.7

 

$

 

$

398.9

 

$

172.3

 

$

(79.9

)

$

491.3

 

Cost of goods sold

 

 

213.2

 

274.4

 

(31.1

)

456.5

 

 

193.2

 

128.2

 

(28.1

)

293.3

 

Gross profit

 

 

213.1

 

90.4

 

(56.3

)

247.2

 

 

205.7

 

44.1

 

(51.8

)

198.0

 

Operating expenses

 

27.8

 

128.7

 

97.3

 

(56.3

)

197.5

 

16.9

 

122.3

 

33.4

 

(51.8

)

120.8

 

Operating profit

 

(27.8

)

84.4

 

(6.9

)

 

49.7

 

(16.9

)

83.4

 

10.7

 

 

77.2

 

Interest expense

 

9.6

 

0.1

 

1.6

 

 

11.3

 

5.7

 

 

 

 

5.7

 

Other income (expense), net

 

1.5

 

(1.7

)

0.8

 

 

0.6

 

 

(0.4

)

(0.4

)

 

(0.8

)

Equity in net income (loss) of subsidiaries

 

47.1

 

4.2

 

 

(51.3

)

 

61.1

 

1.5

 

 

(62.6

)

 

Income before income taxes

 

11.2

 

86.8

 

(7.7

)

(51.3

)

39.0

 

38.5

 

84.5

 

10.3

 

(62.6

)

70.7

 

Income tax expense (benefit)

 

(15.8

)

30.8

 

(3.8

)

 

11.2

 

(20.2

)

30.7

 

1.5

 

 

12.0

 

Consolidated net income

 

27.0

 

56.0

 

(3.9

)

(51.3

)

27.8

 

58.7

 

53.8

 

8.8

 

(62.6

)

58.7

 

Less: Net income attributable to noncontrolling interests

 

 

 

0.8

 

 

0.8

 

 

 

 

 

 

Net income (loss)(1)

 

$

27.0

 

$

56.0

 

$

(4.7

)

$

(51.3

)

$

27.0

 

$

58.7

 

$

53.8

 

$

8.8

 

$

(62.6

)

$

58.7

 

Consolidated Comprehensive income (loss)

 

$

18.4

 

$

57.3

 

$

(11.1

)

$

(45.4

)

$

19.2

 

$

59.9

 

$

54.2

 

$

9.5

 

$

(63.7

)

$

59.9

 

Less: Comprehensive income attributable to noncontrolling interests

 

 

 

0.8

 

 

0.8

 

 

 

 

 

 

Comprehensive income (loss)(2)

 

$

18.4

 

$

57.3

 

$

(11.9

)

$

(45.4

)

$

18.4

 

$

59.9

 

$

54.2

 

$

9.5

 

$

(63.7

)

$

59.9

 

 

 

(1) Net income attributable to Hillenbrand

(2) Comprehensive income attributable to Hillenbrand

 

Condensed Consolidating Balance Sheets

 

 

 

As of March 31, 2013

 

As of September 30, 2012

 

 

 

Parent

 

Guarantors

 

Non-
Guarantors

 

Eliminations

 

Consolidated

 

Parent

 

Guarantors

 

Non-
Guarantors

 

Eliminations

 

Consolidated

 

Cash and equivalents

 

$

0.8

 

$

8.8

 

$

31.1

 

$

 

$

40.7

 

$

3.9

 

$

6.3

 

$

10.0

 

$

 

$

20.2

 

Trade receivables, net

 

 

101.4

 

87.1

 

 

188.5

 

 

110.4

 

40.3

 

 

150.7

 

Unbilled receivables from long-term manufacturing contracts

 

 

1.7

 

126.7

 

 

128.4

 

 

 

 

 

 

Inventories

 

 

77.7

 

116.2

 

(2.6

)

191.3

 

 

62.5

 

29.9

 

(2.4

)

90.0

 

Deferred income taxes

 

6.3

 

30.6

 

3.3

 

(6.9

)

33.3

 

 

26.5

 

 

(6.9

)

19.6

 

Intercompany receivables

 

215.0

 

861.9

 

173.4

 

(1,250.3

)

 

211.6

 

819.0

 

52.5

 

(1,083.1

)

 

Other current assets

 

1.8

 

7.6

 

45.4

 

 

54.8

 

7.5

 

3.8

 

15.2

 

(1.7

)

24.8

 

Total current assets

 

223.9

 

1,089.7

 

583.2

 

(1,259.8

)

637.0

 

223.0

 

1,028.5

 

147.9

 

(1,094.1

)

305.3

 

Property, plant and equipment, net

 

7.0

 

70.9

 

90.4

 

 

168.3

 

7.1

 

66.0

 

44.8

 

 

117.9

 

Intangible assets, net

 

2.6

 

203.8

 

367.3

 

 

573.7

 

1.6

 

185.5

 

126.8

 

 

313.9

 

Goodwill

 

 

211.1

 

321.1

 

 

532.2

 

 

176.0

 

127.7

 

 

303.7

 

Investment in consolidated subsidiaries

 

1,815.1

 

688.2

 

 

(2,503.3

)

 

1,399.0

 

367.9

 

 

(1,766.9

)

 

Other assets

 

11.8

 

27.7

 

13.4

 

 

52.9

 

9.8

 

77.4

 

0.9

 

(41.4

)

46.7

 

Total Assets

 

$

2,060.4

 

$

2,291.4

 

$

1,375.4

 

$

(3,763.1

)

$

1,964.1

 

$

1,640.5

 

$

1,901.3

 

$

448.1

 

$

(2,902.4

)

$

1,087.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade accounts payable

 

$

0.2

 

$

24.3

 

$

150.8

 

$

 

$

175.3

 

$

0.7

 

$

18.2

 

$

16.4

 

$

 

$

35.3

 

Liabilities from long-term manufacturing contracts and advances

 

 

19.7

 

58.3

 

 

78.0

 

 

9.6

 

6.3

 

 

15.9

 

Current portion of long-term debt

 

10.0

 

 

 

 

10.0

 

 

 

 

 

 

Accrued compensation

 

2.0

 

17.1

 

5.8

 

 

24.9

 

 

22.2

 

8.8

 

(1.7

)

29.3

 

Deferred income taxes

 

 

 

27.8

 

(6.9

)

20.9

 

 

 

7.8

 

(6.9

)

0.9

 

Intercompany payable

 

913.8

 

236.5

 

102.6

 

(1,252.9

)

 

853.5

 

222.0

 

10.0

 

(1,085.5

)

 

Other current liabilities

 

4.5

 

45.6

 

75.1

 

 

125.2

 

8.4

 

49.9

 

12.1

 

 

70.4

 

Total current liabilities

 

930.5

 

343.2

 

420.4

 

(1,259.8

)

434.3

 

862.6

 

321.9

 

61.4

 

(1,094.1

)

151.8

 

Long-term debt

 

623.6

 

 

86.0

 

 

709.6

 

271.6

 

 

 

 

271.6

 

Accrued pension and postretirement healthcare

 

 

128.3

 

106.6

 

 

234.9

 

 

111.8

 

 

 

111.8

 

Deferred income taxes

 

0.5

 

11.7

 

20.3

 

 

32.5

 

 

56.3

 

6.8

 

(41.4

)

21.7

 

Other long-term liabilities

 

0.1

 

25.0

 

14.7

 

 

39.8

 

 

24.3