Annual report pursuant to Section 13 and 15(d)

Business Acquisitions

v3.22.2.2
Business Acquisitions
12 Months Ended
Sep. 30, 2022
Business Combinations [Abstract]  
Acquisitions and Divestitures Acquisitions and Divestitures
Acquisition of Herbold Meckesheim GmbH

On August 31, 2022, the Company completed the acquisition of Herbold for $77.7 (€77.5) in cash, pursuant to the definitive agreement dated June 30, 2022. Based in Meckesheim, Germany, Herbold is a leader in recycling systems, specializing in key process steps such as washing, separating, drying, shredding, and pulverizing.

Preliminary Purchase Price Allocation and Other Items

The determination of the preliminary purchase price allocation to specific assets acquired and liabilities assumed is incomplete for Herbold at this time, given the timing of the close of the transaction. It is anticipated that the majority of the purchase price allocation will ultimately be assigned to the fair value of the acquired property, plant and equipment, working capital assets and liabilities, identifiable intangible assets, and goodwill. The preliminary purchase price allocation will change in future periods as the fair value estimates of assets and liabilities and the valuation of the related tax assets and liabilities are completed. Any necessary adjustments will be finalized within one year from the date of acquisition. The Company expects to continue to obtain information for the purpose of determining the fair value of the assets acquired and liabilities assumed at the acquisition date throughout the remainder of the measurement period. Based on current fair value estimates and the timing of the close of
the transaction, the preliminary purchase price for Herbold has been allocated to individual assets acquired and liabilities assumed as follows:

Assets acquired:
Current assets $ 38.2 
Property, plant, and equipment 4.7
Goodwill 69.3
Other assets 5.3
     Total assets acquired $ 117.5 
Liabilities assumed:
Current liabilities 33.9
Other long-term liabilities 5.9
     Total liabilities assumed $ 39.8 
          Net assets acquired $ 77.7 
The acquisition of Herbold advances the Company’s long term growth strategy into the key end market of recycling. Herbold offers highly complementary technologies to Hillenbrand’s Coperion branded products and enhances the Company’s offering of complete recycling solutions. The Company incurred $1.8 in acquisition expenses related to the Herbold acquisition which are included in operating expenses in the Consolidated Statements of Operations during the year ended September 30, 2022. Goodwill is not expected to be deductible for tax purposes

The results of Herbold are reported in the Advanced Process Solutions reportable operating segment and are not material to the Consolidated Financial Statements for the year ended September 30, 2022.

Acquisition of Gabler Engineering GmbH

On June 30, 2022, the Company completed the acquisition of Gabler for $12.9 (€12.6) in cash. Gabler, based in Malsch, Germany, specializes in the design, engineering, manufacturing, and implementation of plants and equipment for the confectionery and pharmaceutical industries. The determination of the preliminary purchase price allocation to specific assets acquired and liabilities assumed is incomplete for Gabler. It is anticipated that the majority of the preliminary purchase price allocation will be assigned to the fair value of the acquired property, plant and equipment, working capital assets and liabilities, and residual goodwill (which is currently estimated to be approximately $5.0). Goodwill is not expected to be deductible for tax purposes. The results of Gabler are reported in the Advanced Process Solutions reportable operating segment and are not material to the Consolidated Financial Statements for the year ended September 30, 2022.

Supplemental Pro Forma Information

The supplemental pro forma financial information presented below is for illustrative purposes only and is not necessarily indicative of the financial position or results of operations that would have been realized if the Milacron, Gabler and Herbold acquisitions had been completed on October 1, 2019, does not reflect synergies that might have been achieved, nor is it indicative of future operating results or financial position. The pro forma adjustments are based upon currently available information and certain assumptions that Hillenbrand believes are reasonable under the circumstances.

The supplemental pro forma financial information for the periods presented is as follows:
Year Ended September 30,
2022 2021 2020
Net revenue $ 3,008.5  $ 2,924.7  $ 2,684.8 
Net income attributable to Hillenbrand 214.5  253.3  0.6 
Net income attributable to Hillenbrand  — per share of common stock:
Basic earnings per share $ 2.99  $ 3.38  $ 0.01 
Diluted earnings per share $ 2.97  $ 3.36  $ 0.01 
Assets and liabilities held for sale

During the fourth quarter of 2020, the Company announced that it had initiated a plan to divest the TerraSource and flow control businesses, which included Red Valve and ABEL, which operated within the Advanced Process Solutions reportable operating segment, as these businesses were no longer considered a strategic fit with the Company’s long-term growth plan and operational objectives. As discussed below, the Company completed the divestitures of Red Valve on December 31, 2020, ABEL on March 10, 2021, and TerraSource on October 22, 2021. The Company had determined that these businesses met the criteria to be classified as held for sale, and therefore classified the related assets and liabilities as held for sale on the Consolidated Balance Sheets in periods prior to their completed sale.

During the second quarter of 2020, the Company performed an interim impairment review for certain of these businesses and recognized impairment charges of $73.0 to goodwill and trade names (see Note 2 for further information). Consistent with the Company’s historical practice, the valuation methodology for purposes of the interim impairment review was based on an equal weighting of both the market and income approaches. As a result of classifying these assets and liabilities as held for sale during the fourth quarter of 2020, the Company recognized a valuation adjustment, as necessary, to recognize the net carrying amount at the lower of cost or fair value, less estimated costs to sell. For determining the fair value of these businesses, the Company incorporated the transaction approach, which utilizes pricing indications derived from recent acquisition transactions involving comparable companies. During the fourth quarter of 2020, the Company recognized a non-cash charge of $62.3, which included a goodwill impairment of $16.9 and a valuation adjustment of $45.4, to recognize the assets of these businesses at fair value less estimated costs to sell. During the fourth quarter of 2021, the Company signed a definitive agreement to sell TerraSource, and as a result, recognized a non-cash valuation adjustment of $11.2 to recognize TerraSource at fair value less estimated cost to sell. The non-cash charges of $11.2 and $62.3 for the year ended September 30, 2021 and 2020, respectively, were recorded within the impairment charges caption on the Consolidated Statements of Operations.

The following is a summary of the major categories of assets and liabilities that have been classified as held for sale as of September 30, 2021. The assets held for sale were included within prepaid expenses and other current assets and the liabilities held for sale were included within other current liabilities on the Consolidated Balance Sheet as of September 30, 2021.
Cash and cash equivalents $ 3.5 
Trade receivables, net 7.8 
Inventories 12.0 
Property, plant and equipment, net 12.0 
Operating lease right-of-use assets, net 1.9 
Intangible assets, net 49.5 
Goodwill 12.4 
Other assets 4.4 
Valuation adjustment (allowance) on disposal group (1)
(47.1)
Total assets held for sale $ 56.4 
Trade accounts payable $ 5.2 
Liabilities from long-term manufacturing contracts and advances 7.5 
Operating lease liabilities 2.0 
Deferred income taxes 4.9 
Other liabilities 2.3 
Total liabilities held for sale $ 21.9 
(1)The Company adjusted the carrying value to fair value less costs to sell for certain assets held for sale during the year ended September 30, 2021. Those assets were sold during the year ended September 30, 2022.

The Company determined that the exit from these businesses did not represent a strategic shift that had a major effect on its Consolidated Results of Operations, and therefore these businesses were not classified as a discontinued operation. The results of operations up to the respective dates of sale for these businesses are included within the Advanced Process Solutions reportable operating segment for all periods presented.
Divestiture of Flow Control Businesses

On December 31, 2020, the Company completed the divestiture of Red Valve to DeZURIK, Inc. in a transaction valued at $63.0. The divestiture included cash proceeds received at closing of $59.4, including working capital adjustments, and a $5.0 note receivable, included within other long-term assets on the Consolidated Balance Sheet at September 30, 2022 and 2021.

As a result of the Red Valve divestiture, the Company recorded a pre-tax gain of $31.6 in the Consolidated Statement of Operations during the year ended September 30, 2021. The related tax effect resulted in tax expense of $9.3 and was included within income tax expense in the Consolidated Statement of Operations during the year ended September 30, 2021. The Company incurred $2.9 of transaction costs associated with the divestiture during the year ended September 30, 2021, which were recorded within operating expenses in the Consolidated Statement of Operations. Red Valve’s results of operations were included within the Advanced Process Solutions reportable operating segment until the completion of the sale on December 31, 2020.

On March 10, 2021, the Company completed the divestiture of ABEL to IDEX Corporation, in a transaction valued at $103.5. The divestiture included cash proceeds received at closing of $106.3, including working capital adjustments.

As a result of the ABEL divestiture, the Company recorded a pre-tax gain of $35.5, after post-closing adjustments, in the Consolidated Statement of Operations during the year ended September 30, 2021. The related tax effect resulted in tax expense of $3.8 and was included within income tax expense in the Consolidated Statement of Operations during the year ended September 30, 2021. The Company incurred $3.9 of transaction costs associated with the divestiture during the year ended September 30, 2021, which were recorded within operating expenses in the Consolidated Statement of Operations. ABEL’s results of operations were included within the Advanced Process Solutions reportable operating segment until the completion of the sale on March 10, 2021.
Divestiture of TerraSource

On October 22, 2021, the Company completed the divestiture of TerraSource pursuant to a Contribution Agreement (“Agreement”) between the Company and certain affiliated companies of industrial holding company Right Lane Industries (“RLI”). Under the terms of the Agreement, Hillenbrand contributed TerraSource and its subsidiaries to a newly formed entity, TerraSource Holdings, LLC (“Holdings”), with RLI obtaining majority ownership and full operational control of TerraSource. In exchange for contributing the TerraSource business, the Company received consideration in the form of a five-year note with initial principal amount of $25.6, subject to certain adjustments, and also retained a 49% equity interest in Holdings through one of the Company’s indirect wholly-owned subsidiaries. The fair value of the total consideration received by the Company was $27.7. Subsequent to the divestiture, the Company’s equity interest in Holdings is accounted for under the equity method of accounting as prescribed by GAAP.

As a result of the TerraSource divestiture, the Company recorded a pre-tax loss of $3.1, after post-closing adjustments, in the Consolidated Statement of Operations during the year ended September 30, 2022. The Company incurred $0.4 of transaction costs associated with the divestiture during the year ended September 30, 2022, which were recorded within operating expenses in the Consolidated Statement of Operations. TerraSource’s results of operations were included within the Advanced Process Solutions reportable operating segment until the completion of the divestiture on October 22, 2021.

Divestiture of Cimcool

On March 30, 2020, the Company completed the divestiture of its Cimcool business (“Cimcool”), which represented the former Fluids Technologies reportable segment of Milacron before its acquisition by the Company, to DuBois Chemicals, Inc. The sale resulted in cash proceeds received of $221.9, net of cash divested.

In addition, the Company may receive contingent consideration for the sale of Cimcool of up to an aggregate of $26.0 based on multiple earn-out provisions. The Company accounts for contingent consideration under a loss recovery approach. Under a loss recovery approach, the Company records a contingent consideration asset only to the extent of the lesser of (1) the amount that the non-contingent consideration received is exceeded by the net assets deconsolidated, or (2) the amount of contingent consideration that it is probable will be received. As of the transaction date (and at September 30, 2022), the Company was unable to determine that it was probable that any of the contingent consideration would be received, and accordingly no amounts were recorded for contingent consideration. Subsequent measurement of contingent consideration will be based on the guidance for gain contingencies and any gain from contingent consideration will be recorded at the time the consideration is received.
As a result of the divestiture, the Company recorded a pre-tax loss of $3.5, using Level 2 nonrecurring fair value measurements, within other income, net in the Consolidated Statement of Operations during the year ended September 30, 2020. The related tax effect resulted in tax expense of $12.7 and was included within income tax expense in the Consolidated Statement of Operations during the year ended September 30, 2020. The Company incurred $4.5 of transaction costs associated with the divestiture during the year ended September 30, 2020, which were recorded within operating expenses in the Consolidated Statements of Operations.

The Company determined that the divestiture of Cimcool did not represent a strategic shift that had a major effect on its consolidated results of operations, and therefore Cimcool was not classified as a discontinued operation. Cimcool’s results of operations were included within the Molding Technology Solutions reportable operating segment until the completion of the sale on March 30, 2020.

Sale of Molding Technology Solutions’ facilities

In December 2019, the Company completed the sale of a Molding Technology Solutions reportable operating segment manufacturing facility located in Germany. As a result of the sale, the Company received net cash proceeds of $13.1 during the year ended September 30, 2020. There was no material impact to the Consolidated Statement of Operations resulting from the sale of the facility during the year ended September 30, 2020.

In September 2020, the Company completed the sale of a Molding Technology Solutions reportable operating segment manufacturing facility located in the Czech Republic. As a result of the sale, the Company received net cash proceeds of $6.8 during the year ended September 30, 2020. There was no material impact to the Consolidated Statement of Operations resulting from the sale of the facility during the year ended September 30, 2020.