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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 March 31, 2023
OR
☐ 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 or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
| | | |
One Batesville Boulevard | | |
Batesville, | Indiana | | 47006 |
(Address of principal executive offices) | | (Zip Code) |
(812) 931-5000
(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 | | HI | | 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 69,570,547 shares of common stock, no par value per share, outstanding as of May 3, 2023.
HILLENBRAND, INC.
INDEX TO FORM 10-Q
PART I — FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Hillenbrand, Inc.
Consolidated Statements of Operations (Unaudited)
(in millions, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Six Months Ended March 31, |
| 2023 | | 2022 | | 2023 | | 2022 |
Net revenue | $ | 690.9 | | | $ | 565.7 | | | $ | 1,346.6 | | | $ | 1,131.6 | |
Cost of goods sold | 461.6 | | | 377.0 | | | 906.4 | | | 761.1 | |
Gross profit | 229.3 | | | 188.7 | | | 440.2 | | | 370.5 | |
Operating expenses | 144.6 | | | 113.5 | | | 286.9 | | | 225.5 | |
Amortization expense | 19.8 | | | 13.7 | | | 38.9 | | | 27.4 | |
Loss on divestiture | — | | | — | | | — | | | 3.1 | |
| | | | | | | |
Interest expense | 21.1 | | | 17.3 | | | 44.4 | | | 35.2 | |
Other income, net | (4.4) | | | (6.4) | | | (7.3) | | | (6.8) | |
Income from continuing operations before income taxes | 48.2 | | | 50.6 | | | 77.3 | | | 86.1 | |
Income tax expense | 24.1 | | | 21.2 | | | 26.4 | | | 34.5 | |
Income from continuing operations | 24.1 | | | 29.4 | | | 50.9 | | | 51.6 | |
(Loss) income from discontinued operations (net of income tax (benefit) expense) | (1.5) | | | 26.4 | | | 19.5 | | | 54.3 | |
Gain on divestiture of discontinued operations (net of income tax expense) | 440.9 | | | — | | | 440.9 | | | — | |
Total income from discontinued operations | 439.4 | | | 26.4 | | | 460.4 | | | 54.3 | |
Consolidated net income | 463.5 | | | 55.8 | | | 511.3 | | | 105.9 | |
Less: Net income attributable to noncontrolling interests | 0.8 | | | 1.5 | | | 3.1 | | | 2.6 | |
Net income attributable to Hillenbrand | $ | 462.7 | | | $ | 54.3 | | | $ | 508.2 | | | $ | 103.3 | |
| | | | | | | |
Earnings per share | | | | | | | |
Basic earnings per share | | | | | | | |
Income from continuing operations attributable to Hillenbrand | $ | 0.33 | | | $ | 0.38 | | | $ | 0.69 | | | $ | 0.67 | |
Income from discontinued operations | 6.31 | | | 0.36 | | | 6.62 | | | 0.75 | |
Net income attributable to Hillenbrand | $ | 6.64 | | | $ | 0.74 | | | $ | 7.31 | | | $ | 1.42 | |
Diluted earnings per share | | | | | | | |
Income from continuing operations attributable to Hillenbrand | $ | 0.33 | | | $ | 0.38 | | | $ | 0.68 | | | $ | 0.66 | |
Income from discontinued operations | 6.27 | | | 0.36 | | | 6.59 | | | 0.74 | |
Net income attributable to Hillenbrand | $ | 6.60 | | | $ | 0.74 | | | $ | 7.27 | | | $ | 1.40 | |
Weighted average shares outstanding (basic) | 69.7 | | | 73.1 | | | 69.6 | | | 72.9 | |
Weighted average shares outstanding (diluted) | 70.1 | | | 73.7 | | | 69.9 | | | 73.5 | |
See Condensed Notes to Consolidated Financial Statements
Hillenbrand, Inc.
Consolidated Statements of Comprehensive Income (Unaudited)
(in millions)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Six Months Ended March 31, |
| 2023 | | 2022 | | 2023 | | 2022 |
Consolidated net income | $ | 463.5 | | | $ | 55.8 | | | $ | 511.3 | | | $ | 105.9 | |
Changes in other comprehensive income (loss), net of tax: | | | | | | | |
Currency translation adjustment (1) | 19.4 | | | (7.4) | | | 62.4 | | | (5.0) | |
Pension and postretirement | (1.3) | | | 0.7 | | | (1.5) | | | 1.4 | |
Change in net unrealized (loss) gain on derivative instruments | (0.4) | | | 1.2 | | | 3.3 | | | 1.9 | |
| | | | | | | |
Total changes in other comprehensive income (loss), net of tax | 17.7 | | | (5.5) | | | 64.2 | | | (1.7) | |
Consolidated comprehensive income | 481.2 | | | 50.3 | | | 575.5 | | | 104.2 | |
Less: Comprehensive income attributable to noncontrolling interests | 1.0 | | | 1.3 | | | 3.1 | | | 2.3 | |
Comprehensive income attributable to Hillenbrand | $ | 480.2 | | | $ | 49.0 | | | $ | 572.4 | | | $ | 101.9 | |
(1)Includes gains and losses on intra-entity foreign currency transactions that are of a long-term investment nature.
See Condensed Notes to Consolidated Financial Statements
Hillenbrand, Inc.
Consolidated Balance Sheets
(in millions) | | | | | | | | | | | |
| March 31, 2023 (unaudited) | | September 30, 2022 |
ASSETS | | | |
Current Assets | | | |
Cash and cash equivalents | $ | 315.1 | | | $ | 232.2 | |
Trade receivables, net | 334.2 | | | 252.9 | |
Receivables from long-term manufacturing contracts, net | 299.8 | | | 213.3 | |
Inventories, net | 588.3 | | | 485.6 | |
| | | |
Prepaid expenses and other current assets | 119.9 | | | 102.8 | |
| | | |
Current assets held for sale | — | | | 116.1 | |
Total current assets | 1,657.3 | | | 1,402.9 | |
Property, plant, and equipment, net | 295.2 | | | 231.9 | |
Operating lease right-of-use assets, net | 108.0 | | | 87.9 | |
Intangible assets, net | 1,112.3 | | | 808.0 | |
Goodwill | 1,561.2 | | | 1,151.1 | |
Other long-term assets | 96.5 | | | 80.4 | |
Long-term assets held for sale | — | | | 105.3 | |
Total Assets | $ | 4,830.5 | | | $ | 3,867.5 | |
| | | |
LIABILITIES | | | |
Current Liabilities | | | |
Trade accounts payable | $ | 413.0 | | | $ | 371.0 | |
Liabilities from long-term manufacturing contracts and advances | 390.7 | | | 290.3 | |
Current portion of long-term debt | 10.0 | | | — | |
Accrued compensation | 87.5 | | | 97.0 | |
| | | |
Current liabilities held for sale | — | | | 113.8 | |
Other current liabilities | 412.6 | | | 205.7 | |
Total current liabilities | 1,313.8 | | | 1,077.8 | |
Long-term debt | 1,303.9 | | | 1,222.1 | |
Accrued pension and postretirement healthcare | 108.0 | | | 101.3 | |
Operating lease liabilities | 83.2 | | | 70.5 | |
Deferred income taxes | 297.6 | | | 210.2 | |
Other long-term liabilities | 57.2 | | | 51.8 | |
Long-term liabilities held for sale | — | | | 25.8 | |
Total Liabilities | $ | 3,163.7 | | | $ | 2,759.5 | |
| | | |
Commitments and contingencies (Note 16) | | | |
| | | |
SHAREHOLDERS’ EQUITY | | | |
Common stock, no par value (75.8 and 75.8 shares issued, 69.6 and 68.9 shares outstanding) | — | | | — | |
Additional paid-in capital | 704.7 | | | 723.8 | |
Retained earnings | 1,289.2 | | | 812.0 | |
Treasury stock (6.2 and 6.9 shares, at cost) | (266.9) | | | (297.3) | |
Accumulated other comprehensive loss | (91.4) | | | (155.6) | |
Hillenbrand Shareholders’ Equity | 1,635.6 | | | 1,082.9 | |
Noncontrolling interests | 31.2 | | | 25.1 | |
Total Shareholders’ Equity | 1,666.8 | | | 1,108.0 | |
| | | |
Total Liabilities and Shareholders’ Equity | $ | 4,830.5 | | | $ | 3,867.5 | |
See Condensed Notes to Consolidated Financial Statements
Hillenbrand, Inc.
Consolidated Statements of Cash Flows (Unaudited)
(in millions)
| | | | | | | | | | | |
| Six Months Ended March 31, |
| 2023 | | 2022 |
Operating activities from continuing operations | | | |
Consolidated net income | $ | 511.3 | | | $ | 105.9 | |
Total income from discontinued operations (net of income tax expense) | (460.4) | | | (54.3) | |
Adjustments to reconcile income from continuing operations to cash provided by operating activities: | | | |
Depreciation and amortization | 62.0 | | | 50.3 | |
Loss on divestiture | — | | | 3.1 | |
Deferred income taxes | (10.8) | | | (10.9) | |
Amortization of deferred financing costs | 1.9 | | | 1.8 | |
Share-based compensation | 11.8 | | | 10.8 | |
| | | |
Trade accounts receivable, net and receivables from long-term manufacturing contracts | (79.1) | | | (42.3) | |
Inventories, net | 13.2 | | | (70.4) | |
Prepaid expenses and other current assets | (1.4) | | | (18.9) | |
Trade accounts payable | (1.6) | | | 56.1 | |
Liabilities from long-term manufacturing contracts and advances, | | | |
accrued compensation, and other current liabilities | (4.5) | | | (13.8) | |
Income taxes payable | 11.3 | | | 0.3 | |
Accrued pension and postretirement | (3.1) | | | (4.6) | |
Other, net | (5.9) | | | (7.6) | |
Net cash provided by operating activities from continuing operations | 44.7 | | | 5.5 | |
| | | |
Investing activities from continuing operations | | | |
Capital expenditures | (32.2) | | | (15.2) | |
Proceeds from sales of property, plant, and equipment | 0.8 | | | 1.6 | |
| | | |
Acquisition of businesses, net of cash acquired | (626.8) | | | — | |
Proceeds (payments) from divestitures, net of cash divested | 696.7 | | | (4.5) | |
| | | |
Net cash provided by (used in) investing activities from continuing operations | 38.5 | | | (18.1) | |
| | | |
Financing activities from continuing operations | | | |
Proceeds from issuance of long-term debt | 200.0 | | | — | |
Repayments on long-term debt | (102.5) | | | — | |
Proceeds from revolving credit facilities | 829.3 | | | — | |
Repayments on revolving credit facilities | (887.1) | | | — | |
Payment of deferred financing costs | (0.6) | | | — | |
Payments of dividends on common stock | (30.6) | | | (31.7) | |
Repurchases of common stock | — | | | (55.5) | |
Proceeds from stock option exercises | 10.6 | | | 24.3 | |
Payments for employee taxes on net settlement equity awards | (12.2) | | | (6.1) | |
Other, net | (1.5) | | | (1.5) | |
Net cash provided by (used in) financing activities from continuing operations | 5.4 | | | (70.5) | |
Cash provided by (used in) continuing operations | 88.6 | | | (83.1) | |
Cash (used in) provided by discontinued operations: | | | |
Operating cash flows | 4.2 | | | 85.2 | |
Investing cash flows | (7.6) | | | (4.8) | |
Total cash (used in) provided by discontinued operations | (3.4) | | | 80.4 | |
Effect of exchange rates on cash and cash equivalents | (6.9) | | | (2.2) | |
Net cash flows | 78.3 | | | (4.9) | |
| | | |
Cash, cash equivalents, restricted cash, and cash and cash equivalents held for sale: | | | |
At beginning of period | 237.6 | | | 450.9 | |
At end of period | $ | 315.9 | | | $ | 446.0 | |
See Condensed Notes to Consolidated Financial Statements
Hillenbrand, Inc.
Consolidated Statements of Shareholders’ Equity (Unaudited)
(in millions)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2023 |
| Shareholders of Hillenbrand, Inc. |
| Common Stock | | Additional Paid-in Capital | | Retained Earnings | | Treasury Stock | | Accumulated Other Comprehensive Loss | | Noncontrolling Interests | | Total |
| Shares | | | | Shares | | Amount | | | |
Balance at December 31, 2022 | 75.8 | | | $ | 706.5 | | | $ | 842.0 | | | 6.5 | | | $ | (277.0) | | | $ | (108.9) | | | $ | 30.2 | | | $ | 1,192.8 | |
Total other comprehensive income, net of tax | — | | | — | | | — | | | — | | | — | | | 17.5 | | | 0.2 | | | 17.7 | |
Net income | — | | | — | | | 462.7 | | | — | | | — | | | — | | | 0.8 | | | 463.5 | |
| | | | | | | | | | | | | | | |
Issuance/retirement of stock for stock awards/options | — | | | (9.4) | | | — | | | (0.3) | | | 10.1 | | | — | | | — | | | 0.7 | |
Share-based compensation | — | | | 7.4 | | | — | | | — | | | — | | | — | | | — | | | 7.4 | |
Dividends ($0.22 per share) | — | | | 0.2 | | | (15.5) | | | — | | | — | | | — | | | — | | | (15.3) | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Balance at March 31, 2023 | 75.8 | | | $ | 704.7 | | | $ | 1,289.2 | | | 6.2 | | | $ | (266.9) | | | $ | (91.4) | | | $ | 31.2 | | | $ | 1,666.8 | |
| | | | | | | | | | | | | | | |
| Six Months Ended March 31, 2023 |
| Common Stock | | Additional Paid-in Capital | | Retained Earnings | | Treasury Stock | | Accumulated Other Comprehensive Loss | | Noncontrolling Interests | | Total |
| Shares | | | | Shares | | Amount | | | |
Balance at September 30, 2022 | 75.8 | | | $ | 723.8 | | | $ | 812.0 | | | 6.9 | | | $ | (297.3) | | | $ | (155.6) | | | $ | 25.1 | | | $ | 1,108.0 | |
Total other comprehensive income, net of tax | — | | | — | | | — | | | — | | | — | | | 64.2 | | | — | | | 64.2 | |
Net income | — | | | — | | | 508.2 | | | — | | | — | | | — | | | 3.1 | | | 511.3 | |
| | | | | | | | | | | | | | | |
Issuance/retirement of stock for stock awards/options | — | | | (32.0) | | | — | | | (0.7) | | | 30.4 | | | — | | | — | | | (1.6) | |
Share-based compensation | — | | | 12.5 | | | — | | | — | | | — | | | — | | | — | | | 12.5 | |
Dividends ($0.44 per share) | — | | | 0.4 | | | (31.0) | | | — | | | — | | | — | | | (1.6) | | | (32.2) | |
Acquisition of noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | 4.6 | | | 4.6 | |
Balance at March 31, 2023 | 75.8 | | | $ | 704.7 | | | $ | 1,289.2 | | | 6.2 | | | $ | (266.9) | | | $ | (91.4) | | | $ | 31.2 | | | $ | 1,666.8 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2022 |
| |
| Common Stock | | Additional Paid-in Capital | | Retained Earnings | | Treasury Stock | | Accumulated Other Comprehensive Loss | | Noncontrolling Interests | | Total |
| Shares | | | | Shares | | Amount | | | |
Balance at December 31, 2021 | 75.8 | | | $ | 714.8 | | | $ | 699.1 | | | 3.2 | | | $ | (138.9) | | | $ | (42.4) | | | $ | 22.0 | | | $ | 1,254.6 | |
Total other comprehensive loss, net of tax | — | | | — | | | — | | | — | | | — | | | (5.3) | | | (0.2) | | | (5.5) | |
Net income | — | | | — | | | 54.3 | | | — | | | — | | | — | | | 1.5 | | | 55.8 | |
Repurchases of common stock | — | | | — | | | — | | | 0.6 | | | (26.6) | | | — | | | — | | | (26.6) | |
Issuance/retirement of stock for stock awards/options | — | | | (4.0) | | | — | | | (0.4) | | | 13.3 | | | — | | | — | | | 9.3 | |
Share-based compensation | — | | | 6.1 | | | — | | | — | | | — | | | — | | | — | | | 6.1 | |
Dividends ($0.2175 per share) | — | | | 0.4 | | | (16.3) | | | — | | | — | | | — | | | — | | | (15.9) | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Balance at March 31, 2022 | 75.8 | | | $ | 717.3 | | | $ | 737.1 | | | 3.4 | | | $ | (152.2) | | | $ | (47.7) | | | $ | 23.3 | | | $ | 1,277.8 | |
| | | | | | | | | | | | | | | |
| Six Months Ended March 31, 2022 |
| Common Stock | | Additional Paid-in Capital | | Retained Earnings | | Treasury Stock | | Accumulated Other Comprehensive Loss | | Noncontrolling Interests | | Total |
| Shares | | | | Shares | | Amount | | | |
Balance at September 30, 2021 | 75.8 | | | $ | 725.4 | | | $ | 666.2 | | | 3.1 | | | $ | (135.7) | | | $ | (46.3) | | | $ | 22.6 | | | $ | 1,232.2 | |
Total other comprehensive loss, net of tax | — | | | — | | | — | | | — | | | — | | | (1.4) | | | (0.3) | | | (1.7) | |
Net income | — | | | — | | | 103.3 | | | — | | | — | | | — | | | 2.6 | | | 105.9 | |
Repurchases of common stock | — | | | — | | | — | | | 1.2 | | | (55.5) | | | — | | | — | | | (55.5) | |
Issuance/retirement of stock for stock awards/options | — | | | (20.8) | | | — | | | (0.9) | | | 39.0 | | | — | | | — | | | 18.2 | |
Share-based compensation | — | | | 12.0 | | | — | | | — | | | — | | | — | | | — | | | 12.0 | |
Dividends ($0.4350 per share) | — | | | 0.7 | | | (32.4) | | | — | | | — | | | — | | | (1.6) | | | (33.3) | |
Balance at March 31, 2022 | 75.8 | | | $ | 717.3 | | | $ | 737.1 | | | 3.4 | | | $ | (152.2) | | | $ | (47.7) | | | $ | 23.3 | | | $ | 1,277.8 | |
See Condensed Notes to Consolidated Financial Statements
Hillenbrand, Inc.
Condensed Notes to Consolidated Financial Statements (Unaudited)
(in millions, except share and per share data)
1.Background and Basis of Presentation
Hillenbrand, Inc. (the “Company” or “Hillenbrand”) is a global industrial company that provides highly-engineered, mission-critical processing equipment and solutions to customers around the world. Our portfolio is composed of leading industrial brands that serve large, attractive end markets, including durable plastics, food, and recycling. The Company strives to provide superior return for our shareholders, exceptional value for our customers, great professional opportunities for our employees, and to be responsible to our communities through deployment of the Hillenbrand Operating Model (“HOM”). The HOM is a consistent and repeatable framework designed to produce sustainable and predictable results. The Company recently enhanced the HOM to support our transformation to a pure-play industrial company by incorporating Purpose, updating our management practices, and restating our values. The HOM describes the Company’s Purpose, mission, vision, values, and mindset as leaders; applies our management practices in Strategy, People, Operational Excellence, and Innovation & Technology; and prescribes four steps (Understand, Focus, Execute, and Grow) designed to make the Company’s businesses both bigger and better. The Company’s goal is to continue developing Hillenbrand as a world-class global industrial company through the deployment of the HOM. “Hillenbrand,” the “Company,” “we,” “us,” “our,” and similar words refer to Hillenbrand, Inc. and its subsidiaries unless context otherwise requires.
On December 15, 2022, the Company entered into a definitive agreement to sell its Batesville reportable operating segment to BL Memorial Partners, LLC, a Delaware limited liability company owned by funds affiliated with LongRange Capital, L.P., for $761.5, subject to closing adjustments and including an $11.5 subordinated note. On February 1, 2023, the Company completed the divestiture. This divestiture represented a strategic shift in Hillenbrand’s business and qualified as a discontinued operation. Accordingly, the operating results and cash flows related to the Batesville reportable operating segment have been reflected as discontinued operations in the Consolidated Statements of Operations and the Consolidated Statements of Cash Flows, while the assets and liabilities that were divested were classified within the Consolidated Balance Sheets as held for sale in the periods preceding the divestiture. Unless otherwise noted, discussion within the notes to the Consolidated Financial Statements relates to continuing operations only and excludes the historical Batesville reportable operating segment. See Note 4 for additional information on this divestiture.
Subsequent to the completion of the sale, the Company began providing certain transition services to Batesville for applicable fees. The transition services are expected to vary in duration depending upon the type of service provided.
Hillenbrand is now composed of two reportable operating segments: Advanced Process Solutions and Molding Technology Solutions. Advanced Process Solutions is a global leader in highly-engineered process and material handling equipment and systems for a wide variety of industries, including durable plastics, food, and recycling industries. Molding Technology Solutions is a global leader in highly-engineered processing equipment, systems, and aftermarket parts and service for the plastic technology processing industry.
The Consolidated Financial Statements include the accounts of Hillenbrand and its subsidiaries. They also include four subsidiaries where the Company’s ownership percentage is less than 100%. The Company’s fiscal year ends on September 30. Unless otherwise stated, references to years relate to fiscal years.
These unaudited Consolidated 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 United States (“U.S.”) generally accepted accounting principles (“GAAP”). The unaudited Consolidated Financial Statements have been prepared on the same basis as, and should be read in conjunction with, the audited Consolidated Financial Statements and notes thereto included in the Company’s latest Annual Report on Form 10-K for the year ended September 30, 2022, as filed with the SEC on November 16, 2022. In the opinion of management, these unaudited Consolidated Financial Statements reflect all adjustments necessary to present a fair statement of the Company’s consolidated financial position and the consolidated results of operations and cash flows as of the dates and for the periods presented and are normal and recurring in nature. The interim period results are subject to variation and are not necessarily indicative of the consolidated results of operations to be expected for the full fiscal year.
The preparation of the Consolidated Financial Statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of net revenue and expenses during the period. Actual results could differ from those estimates. Examples of such estimates include, but are not limited to, revenue recognition under
the over time method, establishment of reserves related to doubtful accounts, warranties, inventories, income taxes, litigation, self-insurance, and progress toward achievement of performance criteria under incentive compensation programs.
As a result of the Russian Federation’s invasion of Ukraine in February 2022 (the “Ukraine War”), various nations, including the U.S., have instituted economic sanctions and other responsive measures, which have resulted in an increased level of global economic and political uncertainty. The results of such geopolitical instability and uncertainty have had, and could continue to have, an impact on our ability to sell to, ship products to, collect payments from, and support customers in certain regions. The effects of the Ukraine War and such associated measures on management’s estimates and consolidated results of operations through March 31, 2023, are reflected in the Consolidated Financial Statements. As of and for the three and six months ended March 31, 2023 and 2022, the effects of the Ukraine War did not have a material impact on the Consolidated Financial Statements.
2.Summary of Significant Accounting Policies
The significant accounting policies used in preparing the Consolidated Financial Statements are consistent with the accounting policies described in the Company’s Annual Report on Form 10-K as of and for the year ended September 30, 2022.
Recently Adopted Accounting Standards
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 clarifies and simplifies accounting for income taxes by eliminating certain exceptions for intraperiod tax allocation principles, the methodology for calculating income tax rates in an interim period, and recognition of deferred taxes for outside basis differences in an investment, among other updates. The Company adopted ASU 2019-12 during the year ended September 30, 2022, and has applied it to all periods presented, as applicable.
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805) - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. ASU 2021-08 requires companies to apply Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, to recognize and measure contract assets and contract liabilities from contracts with customers acquired in a business combination. This generally will result in an acquirer recognizing contract assets and contract liabilities at amounts consistent with those recorded by the acquiree immediately before the acquisition as compared to the ASC 805, Business Combinations (“ASC 805”) requirement that an acquirer recognize and measure the assets it acquires and liabilities it assumes at fair value on the acquisition date. ASU 2021-08 is effective for the Company’s fiscal year beginning October 1, 2023, with early adoption permitted. The Company early adopted ASU 2021-08 during the year ended September 30, 2022, and has applied it to all acquisitions executed in the current year, as applicable.
No other new accounting pronouncements recently adopted or issued had or are expected to have a material impact on the Consolidated Financial Statements.
3.Revenue Recognition
Net revenue includes gross revenue less sales discounts and sales incentives, all of which require the Company to make estimates for the portion of these allowances that have yet to be credited or paid to customers. The Company estimates these allowances using the expected value method, which is based upon historical rates.
Contract balances
The balance in receivables from long-term manufacturing contracts at March 31, 2023 and September 30, 2022, was $299.8 and $213.3, respectively. The change was driven by the impact of net revenue recognized prior to billings to customers. The balance in the liabilities from long-term manufacturing contracts and advances at March 31, 2023 and September 30, 2022, was $390.7 and $290.3, respectively, and consists primarily of cash payments received or due in advance of satisfying performance obligations. The net revenue recognized for the six months ended March 31, 2023 and 2022, related to liabilities from long-term manufacturing contracts and advances as of September 30, 2022 and 2021, was $147.1 and $171.3, respectively. During the three and six months ended March 31, 2023 and 2022, the adjustments related to performance obligations satisfied in previous periods were immaterial.
Transaction price allocated to the remaining performance obligations
As of March 31, 2023, the aggregate amount of transaction price of remaining performance obligations for the Company, which corresponds to backlog as defined in Part I, Item 2 of this Quarterly Report on Form 10-Q, was $1,971.6. Approximately 77% of these performance obligations are expected to be satisfied over the next twelve months, and the remaining performance obligations, primarily within one to three years.
Disaggregation of revenue
The following tables present net revenue by end market: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2023 | | Six Months Ended March 31, 2023 |
| Advanced Process Solutions | | Molding Technology Solutions | | | | Total | | Advanced Process Solutions | | Molding Technology Solutions | | | | Total |
End market | | | | | | | | | | | | | | | |
Plastics | $ | 248.3 | | | $ | — | | | | | $ | 248.3 | | | $ | 489.1 | | | $ | — | | | | | $ | 489.1 | |
Automotive | — | | | 52.5 | | | | | 52.5 | | | — | | | 101.7 | | | | | 101.7 | |
Chemicals | 32.1 | | | — | | | | | 32.1 | | | 56.8 | | | — | | | | | 56.8 | |
Consumer goods | — | | | 34.3 | | | | | 34.3 | | | — | | | 67.4 | | | | | 67.4 | |
Food and pharmaceuticals | 98.6 | | | — | | | | | 98.6 | | | 202.4 | | | — | | | | | 202.4 | |
Custom molders | — | | | 30.7 | | | | | 30.7 | | | — | | | 57.3 | | | | | 57.3 | |
Packaging | — | | | 37.4 | | | | | 37.4 | | | — | | | 66.0 | | | | | 66.0 | |
Construction | — | | | 38.7 | | | | | 38.7 | | | — | | | 69.8 | | | | | 69.8 | |
Minerals | 18.7 | | | — | | | | | 18.7 | | | 32.5 | |