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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2020

☐ Transition Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the transition period from _____ to _____

Commission File Number. 001-33794

HILLENBRAND, INC.

(Exact name of registrant as specified in its charter)

Indiana

26-1342272

(State of incorporation)

(I.R.S. Employer Identification No.)

One Batesville Boulevard

Batesville

47006

(Address of principal executive offices)

(Zip Code)

(812) 934-7500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, without par value

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Emerging growth company

☐

Non-accelerated filer

☐

Smaller reporting company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The registrant had 74,731,178 shares of common stock, no par value per share, outstanding as of July 31, 2020.

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HILLENBRAND, INC.

INDEX TO FORM 10-Q


		Page
	PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Consolidated Statements of Operations for the Three and Nine Months Ended June 30 , 2020 and 2019	2

	Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended June 30 , 2020 and 2019	3

	Consolidated Balance Sheets at June 30 , 2020 and September 30, 2019	4

	Consolidated Statements of Cash Flows for the Nine Months Ended June 30 , 2020 and 2019	5

	Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended June 30 , 2020 and 2019	6

	Condensed Notes to Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	55

Item 4.	Controls and Procedures	55

	PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	56

Item 1A.	Risk Factors	56

Item 6.	Exhibits	61

SIGNATURES

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

Hillenbrand, Inc.

Consolidated Statements of Operations (Unaudited)

(in millions, except per share data)


	Three Months Ended June 30,						Nine Months Ended June 30,
	2020		2019		2020		2019
Net revenue	$	607.5	$	446.6	$	1,823.3	$	1,321.5
Cost of goods sold	400.2		298.2		1,250.5		865.2
Gross profit	207.3		148.4		572.8		456.3
Operating expenses	118.5		90.8		411.9		275.2
Amortization expense	16.4		8.6		55.2		25.0
Impairment charges	—		—		82.5		—
Interest expense	19.7		5.2		55.3		16.1
Other income (expense), net	0.6		(0.5)		1.8		0.1
Income (loss) before income taxes	53.3		43.3		(30.3)		140.1
Income tax expense	28.3		11.6		17.7		39.9
Consolidated net income (loss)	25.0		31.7		(48.0)		100.2
Less: Net income attributable to noncontrolling interests	1.0		1.3		5.1		3.5
Net income (loss) attributable to Hillenbrand	$	24.0	$	30.4	$	(53.1)	$	96.7

Net income (loss) attributable to Hillenbrand — per share of common stock:
Basic earnings (loss) per share	$	0.32	$	0.48	$	(0.73)	$	1.54
Diluted earnings (loss) per share	$	0.32	$	0.48	$	(0.73)	$	1.52
Weighted average shares outstanding (basic)	75.1		63.0		72.8		62.9
Weighted average shares outstanding (diluted)	75.1		63.4		72.8		63.4

See Condensed Notes to Consolidated Financial Statements

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Hillenbrand, Inc.

Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(in millions)


	Three Months Ended June 30,						Nine Months Ended June 30,
	2020		2019		2020		2019
Consolidated net income (loss)	$	25.0	$	31.7	$	(48.0)	$	100.2
Changes in other comprehensive income (loss), net of tax:
Currency translation adjustment	11.9		6.1		(1.0)		(3.4)
Pension and postretirement (net of quarter-to-date tax of $0.4 and $0.5 and year-to-date tax of $1.3 and $0.7)	1.3		1.5		3.8		2.0
Change in net unrealized gain (loss) on derivative instruments (net of quarter-to-date tax of $0.3 and $1.2 and year-to-date tax of $0.3 and $3.8)	2.4		(4.3)		0.5		(12.7)

Total changes in other comprehensive income (loss), net of tax	15.6		3.3		3.3		(14.1)
Consolidated comprehensive income (loss)	40.6		35.0		(44.7)		86.1
Less: Comprehensive income attributable to noncontrolling interests	0.9		1.3		4.4		3.7
Comprehensive income (loss) attributable to Hillenbrand	$	39.7	$	33.7	$	(49.1)	$	82.4

See Condensed Notes to Consolidated Financial Statements

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Hillenbrand, Inc.

Consolidated Balance Sheets

(in millions)


	June 30, 2020 (unaudited)		September 30, 2019
ASSETS
Current Assets
Cash and cash equivalents	$	263.1	$	399.0
Trade receivables, net	297.2		217.4
Receivables from long-term manufacturing contracts	166.2		181.1
Inventories, net	424.3		176.6

Prepaid expenses and other current assets	93.7		49.1

Total current assets	1,244.5		1,023.2
Property, plant, and equipment, net	331.6		140.3
Operating lease right-of-use assets	161.4		—
Intangible assets, net	1,093.6		454.9
Goodwill	1,143.1		578.0
Other long-term assets	55.7		32.2
Total Assets	$	4,029.9	$	2,228.6

LIABILITIES
Current Liabilities
Trade accounts payable	$	264.9	$	236.2
Liabilities from long-term manufacturing contracts and advances	168.4		158.2
Current portion of long-term debt	36.3		—
Accrued compensation	87.8		73.2

Other current liabilities	211.6		121.7
Total current liabilities	769.0		589.3
Long-term debt	1,674.8		619.5
Accrued pension and postretirement healthcare	159.3		131.3
Operating lease liabilities	126.2		—
Deferred income taxes	187.6		73.6
Other long-term liabilities	57.9		45.1
Total Liabilities	2,974.8		1,458.8

Commitments and contingencies (Note 15)

SHAREHOLDERS’ EQUITY
Common stock, no par value (75.8 and 63.9 shares issued, 74.7 and 62.7 shares outstanding)	—		—
Additional paid-in capital	719.7		345.3
Retained earnings	504.4		599.5
Treasury stock (1.1 and 1.2 shares)	(44.9)		(50.1)
Accumulated other comprehensive loss	(142.6)		(140.6)
Hillenbrand Shareholders’ Equity	1,036.6		754.1
Noncontrolling interests	18.5		15.7
Total Shareholders’ Equity	1,055.1		769.8

Total Liabilities and Shareholders’ Equity	$	4,029.9	$	2,228.6

See Condensed Notes to Consolidated Financial Statements

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Hillenbrand, Inc.

Consolidated Statements of Cash Flows (Unaudited)

(in millions)


	Nine Months Ended June 30,
	2020		2019
Operating Activities
Consolidated net (loss) income	$	(48.0)	$	100.2
Adjustments to reconcile net (loss) income to cash provided by operating activities:
Depreciation and amortization	98.4		44.3
Impairment charges	82.5		—
Deferred income taxes	(23.4)		0.2
Amortization of deferred financing costs	2.5		0.9
Share-based compensation	9.4		8.7
Settlement of Milacron share-based equity awards	5.9		—
Net loss on divestiture	3.0		—
Trade accounts receivable and receivables from long-term manufacturing contracts	59.6		(15.5)
Inventories	35.9		(15.0)
Prepaid expenses and other current assets	6.5		(6.0)
Trade accounts payable	(76.4)		28.3
Liabilities from long-term manufacturing contracts and advances,
accrued compensation, and other current liabilities	(46.7)		(29.8)
Income taxes payable	15.5		(5.3)
Defined benefit plan and postretirement funding	(7.5)		(6.8)
Defined benefit plan and postretirement expense	4.6		2.6
Other, net	(1.7)		2.8
Net cash provided by operating activities	120.1		109.6

Investing Activities
Capital expenditures	(20.3)		(12.6)
Proceeds from sales of property, plant, and equipment	14.2		—

Acquisition of businesses, net of cash acquired	(1,503.1)		(25.9)
Proceeds from divestiture, net of cash divested	222.4		—
Other, net	—		0.1
Net cash used in investing activities	(1,286.8)		(38.4)

Financing Activities
Proceeds from issuance of long-term debt	1,125.2		—
Repayments on long-term debt	(27.2)		—
Proceeds from revolving credit facilities	1,157.8		449.7
Repayments on revolving credit facilities	(1,158.9)		(470.1)
Payment of deferred financing costs	(13.7)		—
Payments of dividends on common stock	(47.6)		(39.4)

Proceeds from stock option exercises	0.4		2.4
Payments for employee taxes on net settlement equity awards	(1.9)		(4.2)
Other, net	(3.0)		(0.9)
Net cash provided by (used in) financing activities	1,031.1		(62.5)

Effect of exchange rates on cash and cash equivalents	1.1		(0.2)

Net cash flows	(134.5)		8.5

Cash, cash equivalents, and restricted cash:
At beginning of period	399.4		56.5
At end of period	$	264.9	$	65.0

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same amounts shown in the Consolidated Statements of Cash Flows:


	June 30, 2020		June 30, 2019
Cash and cash equivalents	$	263.1	$	64.4
Short-term restricted cash included in other current assets	1.8		0.6
Total cash, cash equivalents, and restricted cash shown in the Consolidated Statements of Cash Flows	$	264.9	$	65.0

See Condensed Notes to Consolidated Financial Statements

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Hillenbrand, Inc.

Consolidated Statements of Shareholders’ Equity (Unaudited)

(in millions)


	Three Months Ended June 30, 2020
	Common Stock	Additional Paid-in Capital		Retained Earnings		Treasury Stock					Accumulated Other Comprehensive Loss		Noncontrolling Interests		Total
	Shares						Shares		Amount
Balance at March 31, 2020	75.8	$	716.3	$	496.4	1.1	$	(45.4)	$	(158.3)	$	18.0	$	1,027.0
Total other comprehensive income (loss), net of tax	—	—		—		—	—		15.7		(0.1)		15.6
Net income	—	—		24.0		—	—		—		1.0		25.0
Issuance/retirement of stock for stock awards/options	—	(0.4)		—		—	0.5		—		—		0.1
Share-based compensation	—	3.7		—		—	—		—		—		3.7
Dividends ($0.2125 per share)	—	0.1		(16.0)		—	—		—		(0.4)		(16.3)


Balance at June 30, 2020	75.8	$	719.7	$	504.4	1.1	$	(44.9)	$	(142.6)	$	18.5	$	1,055.1

	Nine Months Ended June 30, 2020
	Common Stock	Additional Paid-in Capital		Retained Earnings		Treasury Stock					Accumulated Other Comprehensive Loss		Noncontrolling Interests		Total
	Shares						Shares		Amount
Balance at September 30, 2019	63.9	$	345.3	$	599.5	1.2	$	(50.1)	$	(140.6)	$	15.7	$	769.8
Total other comprehensive income (loss), net of tax	—	—		—		—	—		4.0		(0.7)		3.3
Net (loss) income	—	—		(53.1)		—	—		—		5.1		(48.0)
Issuance/retirement of stock for stock awards/options	—	(6.7)		—		(0.1)	5.2		—		—		(1.5)
Share-based compensation	—	9.4		—		—	—		—		—		9.4
Dividends ($0.6375 per share)	—	0.4		(48.0)		—	—		—		(1.6)		(49.2)
Common stock issued to acquire Milacron (see Note 4)	11.9	371.3		—		—	—		—		—		371.3
Reclassification of certain income tax effects ⁽¹⁾	—	—		6.0		—	—		(6.0)		—		—
Balance at June 30, 2020	75.8	$	719.7	$	504.4	1.1	$	(44.9)	$	(142.6)	$	18.5	$	1,055.1

⁽¹⁾Income tax effects of the Tax Act (as defined in Note 2) were reclassified from accumulated other comprehensive loss to retained earnings due to the adoption of ASU 2018-02. See Note 2 for more information.

See Condensed Notes to Consolidated Financial Statements

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Hillenbrand, Inc.

Consolidated Statements of Shareholders’ Equity (Unaudited)

(in millions)


	Three Months Ended June 30, 2019
	Common Stock	Additional Paid-in Capital		Retained Earnings		Treasury Stock					Accumulated Other Comprehensive Loss		Noncontrolling Interests		Total
	Shares						Shares		Amount
Balance at March 31, 2019	63.9	$	343.1	$	571.1	1.3	$	(55.6)	$	(101.8)	$	13.3	$	770.1
Total other comprehensive income, net of tax	—	—		—		—	—		3.3		—		3.3
Net income	—	—		30.4		—	—		—		1.3		31.7
Issuance/retirement of stock for stock awards/options	—	(0.9)		—		—	1.9		—		—		1.0
Share-based compensation	—	2.9		—		—	—		—		—		2.9
Dividends ($0.2100 per share)	—	0.2		(13.4)		—	—		—		—		(13.2)


Balance at June 30, 2019	63.9	$	345.3	$	588.1	1.3	$	(53.7