Exhibit 99.3
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
On January 8, 2010,
Hillenbrand, Inc. (Hillenbrand, we and our) entered into
an Agreement and Plan of Merger
with K-Tron International, Inc. (K-Tron), pursuant to which
Hillenbrand acquired all of the stock of K-Tron for an aggregate purchase price of $435.2
million ($369.0 million, net of $66.2 million of cash
acquired). The acquisition closed on April 1, 2010, and was financed with existing cash on hand and $375.0 million of borrowings on
our $400 million revolving credit facility.
The unaudited pro forma combined condensed financial information has been prepared to illustrate
the effect of the acquisition of K-Tron by Hillenbrand. The Unaudited Pro Forma Combined Condensed
Balance Sheet combines the historical balance sheets of Hillenbrand and K-Tron, giving effect to
the acquisition as if it had occurred on March 31, 2010. The Unaudited Combined Condensed
Statements of Income combine the historical statements of income of Hillenbrand and K-Tron giving
effect to the acquisition as if it had occurred on October 1, 2008. The historical financial
information has been adjusted to give effect to matters that are (1) directly attributable to the
acquisition, (2) factually supportable, and (3) with respect to the statements of income, expected
to have a continuing impact on the operating results of the combined company. The unaudited pro
forma combined condensed financial information should be read in conjunction with the accompanying
Notes to the unaudited pro forma combined condensed financial
information and:
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The historical audited financial statements of Hillenbrand included in our Annual Report on
Form 10-K for the fiscal year ended September 30, 2009, and filed with the Securities and
Exchange Commission (SEC) on November 24, 2009; |
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|
The historical unaudited interim financial statements of Hillenbrand included in our
quarterly report on Form 10-Q for the three months ended March 31, 2010, and filed with the
Securities and Exchange Commission (SEC) on May 6, 2010; |
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|
The historical audited consolidated statement of financial position of K-Tron
International, Inc. and Subsidiaries as of January 2, 2010 and January 3, 2009, and the
consolidated results of their operations and their cash flows for the fiscal years ended
January 2, 2010, January 3, 2009, and December 29,
2007, attached as exhibit 99.1 to the Form
8-K/A to which this unaudited pro forma combined condensed financial
information is attached; |
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|
|
The historical unaudited consolidated statement of financial position of K-Tron
International, Inc. and Subsidiaries as of April 1, 2010 and January 2, 2010, and the
consolidated results of their operations and their cash flows for the three months ended April
1, 2010 and April 4, 2009, attached as exhibit 99.2 to the Form
8-K/A to which this unaudited pro forma combined condensed financial
information is attached. |
The historical information of K-Tron for the six months ended April 1, 2010,
has been compiled using both the three months ended January 2, 2010 and April 1, 2010. The historical information of K-Tron for the
year ended October 3, 2009 has been compiled using both the nine months ended October 3, 2009, and the three months ended January 3, 2009.
The unaudited pro forma combined condensed financial information has been prepared using the
acquisition method of accounting. The unaudited pro forma combined condensed financial information
will differ from our final acquisition accounting for a number of reasons, including the fact that
our estimates of fair value are preliminary and subject to change when our formal valuation and
other studies are finalized. The differences that will occur between the preliminary estimates and
the final acquisition accounting could have a material impact on the accompanying unaudited pro
forma combined condensed financial information.
The unaudited pro forma combined condensed financial information is presented for informational
purposes only. It has been prepared in accordance with the regulations of the SEC and is not
necessarily indicative of what our financial position
or results of operations actually would have been had we completed the acquisition at the dates
indicated, nor does it purport to project the future financial position or operating results of the
combined company. It also does not reflect any cost savings, operating synergies or revenue
enhancements that we may achieve with respect to the combined company nor the costs necessary to
achieve those costs savings, operating synergies and revenue enhancements, or to integrate the operations
of Hillenbrand and K-Tron.
HILLENBRAND, INC.
Unaudited Pro Forma Combined Condensed Balance Sheet
As of March 31, 2010
(amounts in millions)
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Pro Forma |
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Pro Forma |
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Hillenbrand |
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K-Tron |
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Adjustments |
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Notes |
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Combined |
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ASSETS |
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Current Assets |
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Cash and cash equivalents |
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$ |
72.9 |
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$ |
66.2 |
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$ |
(60.2 |
) |
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(1 |
)(2) |
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$ |
78.9 |
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Trade receivables, net |
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|
88.0 |
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|
18.1 |
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106.1 |
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Inventories |
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42.9 |
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30.4 |
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11.8 |
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(2 |
) |
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85.1 |
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Auction rate securities and Forethought
Financial Group, Inc. interest receivable |
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39.7 |
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39.7 |
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Other current assets |
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39.0 |
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6.9 |
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(0.7 |
) |
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(2 |
)(3) |
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45.2 |
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Total current assets |
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282.5 |
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|
121.6 |
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(49.1 |
) |
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355.0 |
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Property, net |
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84.5 |
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22.6 |
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11.1 |
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(2 |
) |
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118.2 |
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Intangible assets, net |
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9.6 |
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21.5 |
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197.2 |
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(2 |
) |
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228.3 |
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Goodwill |
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5.7 |
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31.1 |
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140.6 |
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(2 |
) |
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177.4 |
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Auction rate
securities and investments |
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31.8 |
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31.8 |
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Note and interest receivable from
Forethought Financial Group, Inc.,
long-term portion |
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139.0 |
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139.0 |
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Other assets |
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57.0 |
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5.3 |
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(35.9 |
) |
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(2 |
) |
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26.4 |
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Total Assets |
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$ |
610.1 |
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$ |
202.1 |
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$ |
263.9 |
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$ |
1,076.1 |
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LIABILITIES |
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Current Liabilities |
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Revolving credit facilities |
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$ |
29.7 |
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$ |
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$ |
7.0 |
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(1 |
) |
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$ |
36.7 |
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Trade accounts payable |
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17.4 |
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12.5 |
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29.9 |
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Accrued compensation and customer rebates |
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45.0 |
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45.0 |
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Other current liabilities |
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|
47.8 |
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32.3 |
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8.2 |
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(3 |
) |
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88.3 |
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Total current liabilities |
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139.9 |
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|
44.8 |
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|
15.2 |
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|
199.9 |
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Accrued pension and postretirement
healthcare, long-term portion |
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|
86.4 |
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86.4 |
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Revolving credit facilities, long-term portion |
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7.0 |
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368.0 |
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(1 |
) |
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375.0 |
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Deferred income taxes |
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|
9.7 |
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3.2 |
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|
32.8 |
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(2 |
) |
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|
45.7 |
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Other long-term liabilities |
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25.9 |
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25.9 |
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Total Liabilities |
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261.9 |
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|
55.0 |
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|
416.0 |
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732.9 |
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Commitments and Contingencies |
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SHAREHOLDERS EQUITY |
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Common stock, no par value |
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Additional paid-in capital |
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302.2 |
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32.4 |
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(32.4 |
) |
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(2 |
) |
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302.2 |
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Retained earnings |
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114.7 |
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|
132.5 |
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(137.5 |
) |
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(2 |
)(3) |
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|
109.7 |
|
Treasury stock at cost |
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|
(15.4 |
) |
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|
(30.1 |
) |
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|
30.1 |
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(2 |
) |
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|
(15.4 |
) |
Accumulated other comprehensive income
(loss) |
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|
(53.3 |
) |
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|
12.3 |
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|
(12.3 |
) |
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(2 |
) |
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|
(53.3 |
) |
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Total Shareholders Equity |
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|
348.2 |
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|
147.1 |
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(152.1 |
) |
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|
343.2 |
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Total Liabilities and Shareholders Equity |
|
$ |
610.1 |
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$ |
202.1 |
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$ |
263.9 |
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$ |
1,076.1 |
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See accompanying notes to the unaudited pro forma combined condensed financial information.
HILLENBRAND, INC.
Unaudited Pro Forma Combined Condensed Statement of Income
Six Months Ended March 31, 2010
(amounts in millions, except per share amounts)
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Pro Forma |
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Pro Forma |
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|
Hillenbrand |
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K-Tron |
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Adjustments |
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Notes |
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Combined |
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Net revenues |
|
$ |
331.4 |
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|
$ |
81.7 |
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$ |
|
|
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$ |
413.1 |
|
Cost of goods sold |
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|
182.4 |
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|
44.7 |
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0.2 |
|
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|
(5 |
) |
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|
227.3 |
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Gross profit |
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149.0 |
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|
37.0 |
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(0.2 |
) |
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|
185.8 |
|
Operating expenses |
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|
65.7 |
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|
36.3 |
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|
(9.7 |
) |
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|
(4 |
) (7) |
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|
92.3 |
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Operating profit |
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|
83.3 |
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|
0.7 |
|
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|
9.5 |
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|
93.5 |
|
Interest expense |
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|
(0.5 |
) |
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|
(0.2 |
) |
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|
(2.1 |
) |
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|
(6 |
) |
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|
(2.8 |
) |
Investment income and other |
|
|
8.1 |
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8.1 |
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Income before income taxes |
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|
90.9 |
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|
0.5 |
|
|
|
7.4 |
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|
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|
98.8 |
|
Income tax expense |
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|
32.0 |
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|
0.8 |
|
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|
0.7 |
|
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|
(8 |
) |
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|
33.5 |
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|
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Net income (loss) |
|
$ |
58.9 |
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|
$ |
(0.3 |
) |
|
$ |
6.7 |
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$ |
65.3 |
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|
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Income per common share basic and diluted |
|
$ |
0.95 |
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|
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$ |
1.06 |
|
Dividends per common share |
|
$ |
0.375 |
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$ |
0.375 |
|
Average
common shares outstanding
basic and diluted |
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|
61.9 |
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|
|
|
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|
|
61.9 |
|
See accompanying notes to the unaudited pro forma combined condensed financial information.
HILLENBRAND, INC.
Unaudited Pro Forma Combined Condensed Statement of Income
Year Ended September 30, 2009
(amounts in millions, except per share amounts)
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Pro Forma |
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Pro Forma |
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|
Hillenbrand |
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K-Tron |
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Adjustments |
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|
Notes |
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Combined |
|
Net revenues |
|
$ |
649.1 |
|
|
$ |
212.8 |
|
|
$ |
|
|
|
|
|
|
|
$ |
861.9 |
|
Cost of goods sold |
|
|
374.7 |
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|
124.9 |
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|
0.4 |
|
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|
(5 |
) |
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|
500.0 |
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|
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Gross profit |
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|
274.4 |
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|
|
87.9 |
|
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|
(0.4 |
) |
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|
361.9 |
|
Operating expenses |
|
|
119.4 |
|
|
|
55.1 |
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|
9.6 |
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|
(4 |
) |
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|
184.1 |
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|
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|
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Operating profit |
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|
155.0 |
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|
32.8 |
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(10.0 |
) |
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|
177.8 |
|
Interest expense |
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|
(2.1 |
) |
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|
(1.0 |
) |
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|
(4.1 |
) |
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|
(6 |
) |
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|
(7.2 |
) |
Investment income and other |
|
|
7.9 |
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|
3.0 |
|
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|
10.9 |
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|
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Income before income taxes |
|
|
160.8 |
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|
34.8 |
|
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|
(14.1 |
) |
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|
181.5 |
|
Income tax expense |
|
|
58.5 |
|
|
|
12.1 |
|
|
|
(4.7 |
) |
|
|
(8 |
) |
|
|
65.9 |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
102.3 |
|
|
$ |
22.7 |
|
|
$ |
(9.4 |
) |
|
|
|
|
|
$ |
115.6 |
|
|
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|
Income per common share basic and diluted |
|
$ |
1.66 |
|
|
|
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|
|
|
|
|
|
|
|
|
|
$ |
1.87 |
|
Dividends per common share |
|
$ |
0.74 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.74 |
|
Average
common shares outstanding
basic and diluted |
|
|
61.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61.7 |
|
See accompanying notes to the unaudited pro forma combined condensed
financial information.
Note 1 Financing for the Acquisition
These adjustments represent the $375.0 million borrowed under our $400 million revolving
credit facility on April 1, 2010, to fund the acquisition and related business acquisition costs.
For purposes of the unaudited pro forma combined condensed financial
information, we have
classified a portion of our combined borrowings as long-term (based upon our forecasted
repayment of principal over the next 12 months). We have assumed our borrowing under our revolving
credit facility was at an annual interest rate of 1.1% (based on our actual interest rate as of
March 31, 2010).
Note 2 Preliminary Allocation of Cash Consideration
For the purpose of preparing the unaudited pro forma combined condensed financial information,
certain of the assets acquired and liabilities assumed have been measured using preliminary fair
values. Accordingly, the fair values of the assets and liabilities are subject to change pending
additional information that may become known to us.
Of the
$218.7 million of acquired intangible assets, $150.3 million was assigned to customer
relationships with estimated economic lives of between 10 and 22 years, $16.1 million was allocated
to technology with an estimated economic life of 5 years, and
$1.7 million was allocated to backlog
with an estimated life of less than 1 year. The remaining $50.6 million was allocated to trade
names which were determined to be of an indefinite economic life. The determination of fair value
for these assets was primarily based upon the expected discounted cash flows. The determination of
useful life was based upon historical experience, economic factors, and projected future cash flows
of the combined company.
Inventories
reflect an adjustment of $11.8 million to record the inventory at its estimated fair
market value. This amount is recorded in the March 31, 2010 Unaudited Pro Forma Combined Condensed
Balance Sheet. The increased inventory fair value adjustment and backlog intangible will
temporarily impact our cost of sales and operating expenses, respectively, after the closing and
therefore are considered non-recurring and are not included in the Unaudited Pro Forma Combined
Condensed Statement of Income.
Property, net, reflects an adjustment of $11.1 million to adjust it to the estimated
fair value.
An aggregate deferred tax liability of $72.6 million has been recognized to reflect the estimated tax effect
of the book and tax basis differences of the intangible and tangible assets acquired. This amount has been appropriately netted with existing deferred tax assets and liabilities resulting in a
$3.9 million and $35.9 million reduction in current and other assets, respectively. The remaining $32.8 million is reflected as an increase in long-term deferred income taxes.
A net
adjustment of $140.6 million to Goodwill has been recorded to reflect the excess of the purchase price
over the fair value of the net assets acquired.
$147.1 million represents the elimination of K-Trons historical equity balances.
Finally, a $435.2 million reduction in cash and cash equivalents represents payments in cash to the shareholders of K-Tron.
Note 3 Transaction Costs Not Yet Recorded
This adjustment reflects $8.2 million of business acquisition costs expected to be incurred
directly related to the acquisition of K-Tron which were not reflected in the balance sheet on the
acquisition date. The adjustment also reflects the estimated tax
benefit associated with these costs of $3.2 million. These items are not reflected in our Unaudited Pro Forma Combined Condensed
Statement of Income as they are deemed non-recurring.
Note 4 Statement of Income Adjustment to Reflect Additional Intangible Asset Amortization
As
discussed in Note 2 above, we have recorded $218.7 million of intangible assets related to the
acquisition of K-Tron. As such, the estimated semi-annual and annual amortization expense for
these acquired intangible assets will increase by approximately $4.8 million and $9.6 million using
straight-line amortization, and has been included in operating expenses within the Unaudited Pro
Forma Combined Condensed Statement of Income for the six months ended March 31, 2010, and twelve
months ended September 30, 2009, respectively. This amount does not include amortization expense
for the $1.7 million allocated to backlog which has not been included in the Unaudited Pro
Forma Combined Condensed Statements of Income as it is considered non-recurring.
Note 5 Statement of Income Adjustment to Reflect Additional Depreciation Expense
As discussed in Note 2 above, we have recorded a step-up in value of approximately $11.1 million
related to K-Trons property, plant and equipment. Of the $11.1 million, approximately $8.5
million is related to step-up in non-depreciable land assets. The remaining $2.6 million in
depreciable assets has an average economic life of approximately 7 years. As such, the estimated
semi-annual and annual depreciation expense for the step-up in value of these acquired assets is
approximately $0.2 million and $0.4 million using straight-line amortization, and has been included
in our cost of goods sold within the Unaudited Pro Forma Combined Condensed Statement of Income for
the six months ended March 31, 2010, and twelve months ended September 30, 2009, respectively.
Note 6 Statement of Income Adjustment to Reflect Additional Interest Expense of Borrowings
As discussed above, we borrowed $375.0 million under our revolving credit facility to fund the
acquisition of K-Tron and for purposes of the unaudited pro forma combined condensed financial
information, we have assumed our borrowing under our $400 million revolving credit facility was at an
annual interest rate of 1.1% (based on our actual interest rate as of March 31, 2010). As such, we
have included approximately $2.1 million and $4.1 million of interest expense in our Unaudited Pro
Forma Combined Condensed Statement of Income for the six months ended March 31, 2010, and twelve
months ended September 30, 2009, respectively.
As our interest rates under our revolving credit facilities are not fixed, the actual rates of
interest can change from those that are assumed above. If the actual interest rates incurred when
the debt was actually drawn were to increase or decrease by 1/8% from the rates we have assumed in
estimating the pro forma interest expense adjustment, pro forma interest expense could increase or
decrease by approximately $0.5 million per year.
Note 7 Statement of Income Adjustment to Reflect Non-recurring Acquisition Expenses
This
adjustment of $14.5 million represents business acquisition costs and transaction expenses
incurred during the six months ended March 31, 2010 by Hillenbrand and K-Tron collectively.
We have removed these expenses from the Unaudited Pro Forma Combined Condensed Statement of
Income for the six months ended March 31, 2010 on the basis that they are non-recurring. No adjustment
was made for the twelve months ended September 30, 2009 as there were no such costs incurred prior to
October 1, 2009 by either company.
Note 8 Statement of Income Adjustment to Reflect Tax Adjustments
For purposes of the unaudited pro forma combined condensed
financial information, a composite statutory rate
of 33.0% has been used in determining the pro forma combined results for all periods and dates
presented, with the exception of non-recurring transaction costs of
K-Tron.
This rate is an estimate and does not take into account any possible future tax events
that may occur for the combined company.