Quarterly report pursuant to Section 13 or 15(d)

Divestitures

v3.23.1
Divestitures
 6 Months Ended
Mar. 31, 2023
Discontinued Operations and Disposal Groups [Abstract]  
Divestitures Divestitures
Batesville

As previously described, on February 1, 2023, the Company completed the sale of 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. At closing, after the applicable adjustments, the Company received $698.0 in pre-tax cash proceeds, including an adjustment for cash on hand acquired from the Company, and the previously mentioned subordinated note.

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. The Company recognized a $586.0 pre-tax gain on divestiture, recorded within gain on divestiture of discontinued operations (net of income tax expense) in the Consolidated Statement of Operations for the three and six months ended March 31, 2023.

Certain indirect corporate costs included within operating expenses in the Consolidated Statements of Operations that were previously allocated to the Batesville reportable operating segment do not qualify for classification within discontinued operations and are now reported as operating expenses in continuing operations within corporate expenses. In addition, costs directly attributable to the Batesville reportable operating segment divestiture have been reflected in discontinued operations. As a result, income before income taxes of the historical Batesville reportable operating segment decreased $14.4 and $17.9 for the three and six months ended March 31, 2023, respectively, and decreased $0.3 and $0.6 for the three and six months ended March 31, 2022, respectively.
Discontinued operations

Components of amounts reflected in the Consolidated Statements of Operations related to discontinued operations are presented in the table, as follows:
Three Months Ended March 31, Six Months Ended March 31,
2023 2022 2023 2022
Net revenue $ 57.7  $ 176.3  $ 213.7  $ 338.8 
Cost of goods sold 38.5 121.7 142.2 228.7
Gross profit 19.2 54.6 71.5 110.1
Operating expenses 23.4 18.3 43.0 34.4
Other (income) expense, net (0.3) 1.6 1.0 3.1
(Loss) income from discontinued operations before income taxes (3.9) 34.7 27.5 72.6
Income tax (benefit) expense (2.4) 8.3 8.0 18.3
(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 $145.1 income tax expense) 440.9  —  440.9  — 
Total income from discontinued operations $ 439.4  $ 26.4  $ 460.4  $ 54.3 

Held for sale

The assets and liabilities of the Batesville reportable operating segment had been reflected as assets and liabilities held for sale in the periods preceding the divestiture. The following is a summary of the major categories of assets and liabilities held for sale at September 30, 2022:

Cash and cash equivalents $ 1.9 
Trade receivables, net 59.5 
Inventories, net 48.2 
Other assets 6.5 
Current assets held for sale $ 116.1 
Property, plant and equipment, net $ 49.1 
Operating lease right-of-use assets, net 35.6 
Intangible assets, net 2.7 
Goodwill 8.3 
Long-term assets 9.6 
Long-term assets held for sale $ 105.3 
Trade accounts payable $ 62.0 
Accrued compensation 13.6 
Operating lease liabilities 13.0 
Other liabilities 25.2 
Current liabilities held for sale $ 113.8 
Operating lease liabilities $ 22.1 
Other liabilities 3.7 
Long-term liabilities held for sale $ 25.8 
Divestiture of TerraSource
On October 22, 2021, the Company completed the divestiture of its TerraSource Global business (“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 (i) received consideration in the form of a $25.6 five-year note, which was extended, subordinated, amended and restated in January 2023 to reflect a principal amount of $27.0, subject to certain adjustments, and an April 2028 maturity date, and (ii) also retained a 49% equity interest in Holdings through one of the Company’s indirect wholly-owned subsidiaries, which became an approximately 46% interest in connection with the January 2023 amendment to the five-year note. The fair value of the total consideration received by the Company at closing was $27.7.

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 six months ended March 31, 2022. The Company incurred $0.4 of transaction costs associated with the divestiture during the six months ended March 31, 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. Subsequent to the divestiture, the Company’s equity interest in Holdings is accounted for under the equity method of accounting as prescribed by GAAP.