Hillenbrand Reports Second-Quarter Revenue of $397 Million

BATESVILLE, Ind., May 8, 2014 /PRNewswire/ — Hillenbrand, Inc. (NYSE: HI)
reported results today for the second quarter ended March 31, 2014. Revenue was
$397 million compared to $399 million in the prior year. Revenue increased for
the Process Equipment Group by 5% to $240 million (3% constant currency). In
addition, order backlog at the end of the second quarter reached an all-time
high of $717 million, representing a $106 million increase over the first
quarter and a $173 million increase over the prior year. Batesville revenue was
$157 million, an 8% decrease (7% constant currency) driven by a lower number of
North American burials.

“Order backlog grew significantly throughout the Process Equipment Group,
supporting our projection of mid-single-digit organic revenue growth this year
for this group,” said Joe A. Raver, President and Chief Executive Officer. “We
are also pleased that Batesville delivered strong gross margins and cash flow to
support our growth strategy, despite the significant headwind from the decline
in North American deaths this year compared to the record number of deaths last
year.”

Hillenbrand reports results on a GAAP and adjusted basis. Adjusted measures are
reconciled to the most directly comparable GAAP measures at the end of this
release. Net income increased 160% to $33 million ($0.51 per diluted share),
while adjusted net income increased 12% to $34 million ($0.54 per diluted
share). Adjusted EBITDA increased 8% to $69 million. These increases were driven
by a $5 million gain from the exercise of warrants to purchase common stock of
Forethought Financial Group, a $3 million gain on limited partnership
investments, and a $3 million gain related to the cancellation of a service
agreement at Batesville. These gains and a $2 million increase in adjusted
EBITDA for the Process Equipment Group more than offset the impact of lower
volumes in the Batesville segment. Operating cash flow improved by $62 million
to $82 million due to higher net income and significant improvement in working
capital.

Guidance for Fiscal 2014
Hillenbrand affirmed guidance with estimated full-year revenue expected to be
approximately $1.7 billion. Revenue from the Process Equipment Group is expected
to be approximately $1.1 billion and Batesville is anticipated to deliver
approximately $600 million in revenue. Given current foreign exchange rates,
management expects minimal translation impact to revenue compared to 2013.
Adjusted diluted EPS for 2014 is projected to range from $2.00 to $2.10.

Conference Call
Information

Date/Time: 8:00 a.m. EDT, Tuesday, May 6, 2014

Dial-In for U.S.
and Canada: 1-877-201-0168

Dial-In for
International: +1-647-788-4901

Conference call ID
number: 30133997

Webcast link: http://ir.hillenbrand.com (archived through
Thursday, June 5, 2014)

Replay -Conference
Call

Date/Time: Available until midnight EDT, Tuesday, May 20,
2014

Dial-In for U.S.
and Canada: 1-855-859-2056

Dial-In for
International: +1-404-537-3406

Conference call ID
number: 30133997

Hillenbrand’s interim financial statements on Form 10-Q are expected to be filed
jointly with this release and will be available on the Company’s website
(www.Hillenbrand.com).

In addition to the financial measures prepared in accordance with accounting
principles generally accepted in the U.S. (GAAP), this earnings release also
contains non-GAAP operating performance measures. These non-GAAP measures are
referred to as “adjusted” and exclude expenses associated with backlog
amortization, inventory step-up, business acquisitions and integration,
restructuring, and antitrust litigation. The related income tax for all of these
items is also excluded. This non-GAAP information is provided as a supplement,
not as a substitute for, or as superior to, measures of financial performance
prepared in accordance with GAAP.

Hillenbrand uses this non-GAAP information internally to make operating
decisions and believes it is helpful to investors because it allows more
meaningful period-to-period comparisons of ongoing operating results. The
information can also be used to perform trend analysis and to better identify
operating trends that may otherwise be masked or distorted by these types of
items. Finally, Hillenbrand believes this information provides a higher degree
of transparency.

An important non-GAAP measure Hillenbrand uses is adjusted earnings before
interest, income tax, depreciation, and amortization (“adjusted EBITDA”). As
previously discussed, a part of Hillenbrand’s strategy is to selectively acquire
companies that we believe can benefit from our core competencies to spur faster
and more profitable growth. Given that strategy, it is a natural consequence to
incur related expenses, such as amortization from acquired intangible assets and
additional interest expense from debt-funded acquisitions. Accordingly, we use
adjusted EBITDA, among other measures, to monitor business performance.

Another important non-GAAP operational measure used is backlog. Backlog is not a
term recognized under GAAP; however it is a common measurement used in the
Process Equipment Group’s industry. Order backlog represents the amount of
consolidated revenue that we expect to realize on contracts awarded related to
the Process Equipment Group. Backlog includes expected revenue from large
systems, equipment, and to a lesser extent, replacement parts, components, and
service. The length of time that projects remain in backlog can span from days
for replacement parts and service to approximately 18 months for larger system
sales. Backlog includes expected revenue from the remaining portion of firm
orders not yet completed, as well as revenue from change orders to the extent
that it is reasonably expected to to be realized. For purposes of calculating
backlog, 100% of estimated revenue attributable to consolidated subsidiaries is
included, an insignificant portion of which is not wholly-owned by Hillenbrand.

Future revenue for the Process Equipment Group is influenced by backlog because
of the lead time involved in fulfilling engineered-to-order equipment for
customers. Although backlog can be an indicator of future revenue, it does not
include projects and parts orders that are booked and shipped within the same
quarter. The timing of order placement, size, extent of customization, and
customer delivery dates can create fluctuations in backlog and revenue. Revenue
attributable to backlog is also affected by foreign exchange fluctuations for
orders denominated in currencies other than United States dollars.

Net revenue is analyzed on a constant currency basis to better measure the
comparability of results between periods. This information is provided because
exchange rates can distort the underlying change in sales, either positively or
negatively.

See below for a reconciliation from GAAP operating performance measures to the
most directly comparable non-GAAP (adjusted) performance measures. There is no
GAAP financial measure comparable to backlog; therefore, a quantitative
reconciliation of backlog is not provided.

Hillenbrand (www.Hillenbrand.com) is a global diversified industrial company
that makes and sells premium business-to-business products and services for a
wide variety of industries. We pursue profitable growth and meaningful dividends
for our shareholders by leveraging our leading brands, robust cash generation
capabilities, and strong core competencies. HI-INC-F

Consolidated Statements of Income

(in millions, except per share data)

Three Months Six Months
Ended Ended

March 31, March 31,
——— ———

2014 2013 2014 2013
—- —- —- —-

Net revenue $396.8 $398.5 $781.7 $703.7

Cost of goods sold 254.0 264.5 507.9 459.2
—– —– —– —–

Gross profit 142.8 134.0 273.8 244.5

Operating expenses 99.9 108.4 193.9 194.8
—- —– —– —–

Operating profit 42.9 25.6 79.9 49.7

Interest expense 5.6 6.8 11.9 11.3

Other income (expense), net 9.7 (0.3) 9.6 0.6
— —- — —

Income before income taxes 47.0 18.5 77.6 39.0

Income tax expense 13.7 5.3 22.7 11.2
—- — —- —-

Consolidated net income 33.3 13.2 54.9 27.8

Less: Net income attributable to noncontrolling 0.3 0.5 1.6 0.8

interests

Net income(1) $33.0 $12.7 $53.3 $27.0
===== ===== ===== =====

Net income(1) – per share of common stock:

Basic earnings per share $0.52 $0.20 $0.84 $0.43

Diluted earnings per share $0.51 $0.20 $0.83 $0.43

Weighted average shares outstanding – basic 63.3 62.7 63.2 62.6

Weighted average shares outstanding – diluted 63.9 63.1 63.9 62.9

Cash dividends per share $0.1975 $0.1950 $0.3950 $0.3900

(1) Net income attributable to Hillenbrand

Condensed Consolidated Statements of Cash Flow
(in millions)

Six Months
Ended

March 31,
———

2014 2013
—- —-

Net cash provided by
operating activities $82.2 $19.7

Net cash used in investing
activities (4.1) (423.9)

Net cash (used in) provided
by financing activities (68.5) 424.0

Effect of exchange rate
changes on cash and cash
equivalents (1.3) 0.7
—- —

Net cash flow 8.3 20.5

Cash and cash equivalents:

At beginning of period 42.7 20.2

At end of period $51.0 $40.7
===== =====

Reconciliation of Non-GAAP Measures
(in millions, except per share data)

Three months ended March 31,
—————————-

2014 2013
—- —-

GAAP Adjustments Adjusted GAAP Adjustments Adjusted
—- ———– ——– —- ———– ——–

Cost of goods sold $254.0 $0.2 (a) $254.2 $264.5 $(9.7) (c) $254.8

Operating expenses 99.9 (2.3) (b) 97.6 108.4 (15.2) (d) 93.2

Interest expense 5.6 – 5.6 6.8 (0.6) (e) 6.2

Other income (expense), net 9.7 – 9.7 (0.3) – (0.3)

Income tax expense 13.7 0.7 (k) 14.4 5.3 7.6 (k) 12.9

Net income(1) 33.0 1.4 34.4 12.7 17.9 30.6

Diluted EPS 0.51 0.03 0.54 0.20 0.29 0.49

Ratios:

Gross margin 36.0% (0.1%) 35.9% 33.6% 2.5% 36.1%

Operating expenses as a % of revenue 25.2% (0.6%) 24.6% 27.2% (3.8%) 23.4%

Six months ended March 31,
————————–

2014 2013
—- —-

GAAP Adjustments Adjusted GAAP Adjustments Adjusted
—- ———– ——– —- ———– ——–

Cost of goods sold $507.9 $0.1 (f) $508.0 $459.2 $(12.7) (h) $446.5

Operating expenses 193.9 (4.4) (g) 189.5 194.8 (28.8) (i) 166.0

Interest expense 11.9 – 11.9 11.3 (0.6) (e) 10.7

Other income (expense), net 9.6 – 9.6 0.6 (0.9) (j) (0.3)

Income tax expense 22.7 1.3 (k) 24.0 11.2 11.8 (k) 23.0

Net income(1) 53.3 3.0 56.3 27.0 29.4 56.4

Diluted EPS 0.83 0.05 0.88 0.43 0.47 0.90

Ratios:

Gross margin 35.0% – 35.0% 34.7% 1.8% 36.5%

Operating expenses as a % of revenue 24.8% (0.6%) 24.2% 27.7% (4.1%) 23.6%

(1)Net income attributable to Hillenbrand

P = Process Equipment Group; B = Batesville; C = Corporate

(a) Restructuring ($0.1 P, $0.3 credit B)

(b) Business acquisition and integration costs ($0.3P, $0.8 C), restructuring ($1.2 C)

(c) Inventory step up ($8.1 P), restructuring ($0.1 P, $1.5 B)

(d) Business acquisition and integration costs ($0.3 P, $1.6 C), backlog amortization ($12.9 P), restructuring ($0.4 B)

(e) Business acquisition and integration costs ($0.6 C)

(f) Restructuring ($0.1 P, $0.2 credit B)

(g) Business acquisition and integration costs ($1.0 P, $2.0 C), restructuring ($0.2 P, $1.2 C)

(h) Inventory step up ($10.7 P), restructuring ($0.2 P, $1.8 B)

(i) Business acquisition and integration costs ($0.3 P, $10.6 C), backlog amortization ($17.1 P), restructuring ($0.5 B, $0.2 C), antitrust litigation ($0.1 B)

(j) Acquisition-related foreign currency transactions ($0.8 C), other ($0.1 B)

(k) Tax effect of adjustments

Three Months Ended Six Months
Ended

March 31, March 31,
——— ———

2014 2013 2014 2013
—- —- —-

Adjusted EBITDA:

Process Equipment Group $26.0 $24.2 $52.7 $45.2

Batesville 44.9 48.4 79.4 86.9

Corporate (1.7) (8.5) (9.7) (16.5)

Less

Interest income (0.1) (0.2) (0.3) (0.3)

Interest expense 5.6 6.8 11.9 11.3

Income tax expense 13.7 5.3 22.7 11.2

Depreciation and
amortization 14.7 27.8 29.0 42.9

Business acquisition costs 1.1 1.8 3.0 10.0

Inventory step-up – 8.1 – 10.7

Restructuring 0.9 1.3 1.2 1.9

Antitrust litigation – – – 0.1

Consolidated net income $33.3 $13.2 $54.9 $27.8
===== ===== ===== =====

Throughout this release, we make a number of forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. As the
words imply, forward-looking statements are statements about the future, as
contrasted with historical information. Our forward-looking statements are based
on assumptions and current expectations of future events that we believe are
reasonable, but by their very nature they are subject to a wide range of risks.
If our assumptions prove inaccurate or unknown risks and uncertainties
materialize, actual results could vary materially from Hillenbrand’s
expectations and projections.

Words that could indicate that we are making forward-looking statements include
the following:

intend believe plan expect may goal would

become pursue estimate will forecast continue could

targeted encourage promise improve progress potential should

This is not an exhaustive list. Our intent is to provide examples of how readers
might identify forward-looking statements. The absence of any of these words,
however, does not mean that the statement is not forward-looking.

Here is the key point: Forward-looking statements are not guarantees of future
performance, and our actual results could differ materially from those set forth
in any forward-looking statements. Any number of factors, many of which are
beyond our control, could cause our performance to differ significantly from
what is described in the forward-looking statements. These factors include, but
are not limited to: the outcome of any legal proceedings that may be instituted
against Hillenbrand, or any companies we may acquire; risks that an acquisition
disrupts current operations or poses potential difficulties in employee
retention or otherwise affects financial or operating results; the ability to
recognize the benefits of an acquisition, including potential synergies and cost
savings or the failure of an acquired company to achieve its plans and
objectives generally; global market and economic conditions, including those
related to the credit markets; volatility of our investment portfolio; adverse
foreign currency fluctuations; ongoing involvement in claims, lawsuits and
governmental proceedings related to operations; labor disruptions; the
dependence of our business units on relationships with several large providers;
increased costs or unavailability of raw materials; continued fluctuations in
mortality rates and increased cremations; competition from nontraditional
sources in the death care industry; cyclical demand for industrial capital
goods; and certain tax-related matters. For a more in-depth discussion of these
and other factors that could cause actual results to differ from those contained
in forward-looking statements, see the discussions under the heading “Risk
Factors” in Part II, Item 1A of Hillenbrand’s Form 10-Q for the quarter ended
March 31, 2014, filed with the Securities and Exchange Commission on May 5,
2014. The company assumes no obligation to update or revise any forward-looking
information.

SOURCE Hillenbrand, Inc.

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