Hillenbrand Reports Increased EPS for Second Quarter 2010, Raises Annual Guidance

Date 2010-05-06 | Earning Reports

Hillenbrand, Inc.

  --  Second-quarter earnings per share and net income increased 4.4% and
      5.8%, respectively, during the same period.
  --  Guidance revised upward based on the anticipated effects of the KTron
      acquisition completed April 1.

Hillenbrand reported second quarter 2010 net income of $29.4 million, a $1.6 million (5.8 percent) increase over the prior year, on stable net revenue of $169.9 million. Earnings per diluted share increased by $0.02 (4.4 percent) per share from $0.45 to $0.47. After adjusting for business acquisition costs ($1 million) and extraordinary legal costs ($0.3 million) adjusted earnings per share of $0.49 represents an increase of 6.5 percent.

The company's gross profit margin for the quarter increased from 43.5 percent to 45.3 percent (180 basis points) as a result of favorable steel prices and operating efficiencies in several areas of the company.

Investment income increased to $4.4 million, compared with the $1.3 million loss posted in the second quarter of 2009. This is primarily the result of improved performance from the limited partnership investments that had been negatively impacted by the economy in 2009.

Cash flow from operations was $52.6 million in the second quarter, an increase of $24.3 million (85.9 percent). This increase is due primarily to the timing of income tax and other payments.

"Our casket business continues to post solid returns in line with our expectations, with strong margins and robust cash flow," said Kenneth A. Camp, Hillenbrand's president and chief executive officer. "Despite the second year of declining deaths and burial volumes in North America, we continue to invest in new product development and to realize gains from the company-wide application of lean business practices."

  Hillenbrand, Inc. (Unaudited)
  Reconciliation of Non-GAAP Measures*
  (amounts in millions, except per share data)

                               Three Months Ended     Three Months Ended
                                 March 31, 2009         March 31, 2010
                                 --------------         --------------
                             Pre-   Income  Post- Pre-   Income  Post-
                              Tax   Taxes    Tax   Tax   Taxes    Tax
                              ---   -----    ---   ---   -----    ---
  GAAP income                $43.0   $15.2  $27.8 $46.3   $16.9  $29.4
  Certain non-operating
  Antitrust litigation         1.2     0.4    0.8   0.3     0.1    0.2
  Business acquisition costs    --      --     --   1.0     0.4    0.6

  Adjusted income            $44.2   $15.6  $28.6 $47.6   $17.4  $30.2
  Adjusted diluted net
   income per share                         $0.46                $0.49

  Outlook for Remainder of Fiscal Year 2010

"The addition of the K-Tron businesses on April 1 will provide our company with important new opportunities for growth in revenue, earnings and cash flow," Camp said. "This acquisition will be immediately accretive after the exclusion of acquisition costs and adjustments."

With half the year complete, the company is narrowing its guidance range for Batesville Casket revenue and adding the expected results from K-Tron. Guidance for the combined businesses is as follows:

  --  Revenue range: $740 million to $770 million, up from $630 million to
      $670 million, an increase of 15 to 17 percent
  --  Adjusted net income range: $102 million to $113 million, up from $89
      million to $105 million, an increase of 8 to 15 percent. This reflects
      the elimination of antitrust litigation, acquisition costs,
      non-recurring acquisition accounting effects and our previously
      disclosed sales tax adjustment.

"Except for recent quarters, which have been significantly impacted by the global economic downturn, K-Tron has a record of strong revenue and earnings growth," Camp said. "We expect the bulk solids material handling markets to show some improvement in our remaining fiscal 2010 and even stronger results in subsequent periods as the world economy improves."

Hillenbrand management will discuss guidance in more detail during its conference call with investors and financial analysts 8 a.m. ET Thursday, May 6, 2010. (See details below.)

  Hillenbrand, Inc. (Unaudited)
  (amounts in millions, except per share data)

                                 Fiscal year ending
                                    September 30
                                    FY10 Range
                               Low           High
                               ---           ----

  Net revenue                   $740           $770
  Income before taxes           $131           $150
  Tax rate                      37.5%          36.0%
  Net income                     $82            $96
  Average diluted shares
   outstanding                    62             62
  Diluted net income per
   share                       $1.32          $1.55

  Excluding certain non-operating costs (antitrust
   litigation, acquisition  and non-recurring
   acquisition accounting effects*)
     Net income                 $102           $113
     Diluted net income per
      share                    $1.65          $1.82

  Hillenbrand, Inc. (Unaudited)
  Reconciliation of Non-GAAP Measures*
  (amounts in millions, except per share data)

                                                      Fiscal Year 2010
                                                     Guidance Midpoint
                                                  Pre-   Income   Post-
                                                   Tax    Taxes     Tax
                                                   ---    -----     ---
  GAAP income                                    $140.7    $51.7    89.0

  Certain non-operating costs:
  Antitrust litigation                              5.0      1.8     3.2
  Non-recurring acquisition accounting effects     12.5      4.5     8.0
  Business acquisition costs                       11.6      2.0     9.6
  Sales tax adjustment                             (4.1)    (1.5)   (2.6)
  Adjusted income                                $165.7    $58.5  $107.2
  Adjusted diluted net income per share                            $1.73

In preparing our guidance, we have used preliminary studies to estimate the effects of the acquisition accounting. The final studies and valuations could differ significantly from these initial estimates.

Additional assumptions and discussion will be provided during the company's conference call later today.

*Non-GAAP Financial Disclosures and Reconciliations for Second Quarter 2010

While Hillenbrand, Inc. reports financial results in accordance with U.S. GAAP, this press release includes non-GAAP measures. These non-GAAP measures are not in accordance with, nor are they a substitute for, GAAP measures. Hillenbrand uses the non-GAAP measures to evaluate and manage its operations and provides the information to investors so they can see the results "through the eyes" of management. Hillenbrand further believes that providing this information better enables investors to understand the ongoing operating performance of the company. Investors should consider non-GAAP measures in addition to, not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP.

Conference Call and Webcast

The company will hold a conference call and simultaneous webcast with investors and financial analysts 8 a.m. ET Thursday, May 6, 2010. During the event, management will discuss the results for the second quarter of 2010, which ended March 31, 2010. The webcast will be available at https://ir.hillenbrandinc.com and will be archived on the company's website through May 6, 2011, for those unable to listen to the live webcast.

To access the conference call, listeners in the United States may dial 1-877-397-0298, and international callers may dial 1-719-325-4861. A replay of the call will be available until midnight ET, Thursday, May 20, 2010, by dialing 1-888-203-1112 in the United States or 1-719-457-0820 internationally, and using the confirmation code 4815830.

  Hillenbrand, Inc.
  Consolidated Statements of Income (Unaudited)
  (amounts in millions, except per share data)

                                       Three Months
                                        March 31,
                                         2010          2009
                                         ----          ----

  Net revenue                          $169.9        $170.8
  Cost of goods sold                     92.9          96.5
                                         ----          ----
   Gross profit                          77.0          74.3
  Operating expenses
   (including business
   acquisition costs)                    34.8          29.6
                                         ----          ----
   Operating profit                      42.2          44.7
  Interest expense                       (0.3)         (0.4)
  Investment income (loss) and
   other                                  4.4          (1.3)
                                          ---          ----
   Income before income taxes            46.3          43.0
  Income tax expense                     16.9          15.2
                                         ----          ----
   Net income                           $29.4         $27.8
                                        =====         =====

  Income per common share-
   basic and diluted                    $0.47         $0.45
  Dividends per common share          $0.1875        $0.185

  Average common shares
   outstanding - basic and
   diluted                               61.9          61.7

  Hillenbrand, Inc.
  Condensed Consolidated Balance Sheets (Unaudited)
  (amounts in millions)

                                                   March 31,           30,
                                                        2010    2009
                                                        ----    ----

  Current Assets
    Cash and cash equivalents                          $72.9   $35.2
    Trade receivables, net                              88.0    85.2
    Inventories                                         42.9    42.5
    Auction rate securities and related Put right       29.7    30.1
    Interest receivable from Forethought Financial
     Group, Inc.                                        10.0    10.0
    Other current assets                                39.0    29.9
      Total current assets                             282.5   232.9
  Property and intangibles, net                         99.8   101.6
  Auction rate securities and investments               31.8    37.6
  Note and interest receivable from Forethought
   Financial Group, Inc., long-term portion            139.0   132.8
  Other assets                                          57.0    56.2
      Total Assets                                    $610.1  $561.1

  Current Liabilities
    Revolving credit facilities                        $29.7   $60.0
    Other current liabilities                          110.2    74.9
      Total current liabilities                        139.9   134.9
  Long-term liabilities                                122.0   122.2
                                                       -----   -----
      Total Liabilities                                261.9   257.1

  Total Shareholders' Equity                           348.2   304.0
                                                       -----   -----
  Total Liabilities and Shareholders' Equity          $610.1  $561.1

  Hillenbrand, Inc.
  Condensed Consolidated Statements of Cash Flows (Unaudited)
  (amounts in millions)

                                            Six Months Ended
                                                March 31,
                                             2010       2009
                                             ----       ----
  Net cash provided by operating activities $89.0               $51.6
  Net cash provided by investing activities   0.5                (1.7)
  Net cash used in financing activities     (52.1)              (20.5)
  Effect of exchange rate changes on cash
   and cash equivalents                       0.3                     (0.9)
                                              ---             ----

  Net cash flows                             37.7             28.5

  Cash and cash equivalents:
    At beginning of period                   35.2             14.7
                                             ----             ----
    At end of period                        $72.9            $43.2
                                            =====            =====

  Disclosure Regarding Forward-Looking Statements

Throughout this release, we make a number of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including the anticipated effect of the acquisition on Hillenbrand's future results. 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 we're making forward-looking statements include the following:

  intend   believe   plan     expect  may      goal
  become   pursue    estimate will    forecast continue
  targeted encourage promise  improve progress potential

This isn't an exhaustive list, but is simply intended to give you an idea of how we try to identify forward-looking statements. The absence of any of these words, however, does not mean that the statement is not forward-looking.

Here's 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 those described in the forward-looking statements. These factors include, but are not limited to: recent 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; our ability to execute a successful integration of K-Tron International; the operating businesses' dependence on relationships with several large national providers; increased costs or unavailability of raw materials; continued fluctuations in mortality rates and increased cremations; competition from nontraditional sources in the funeral services business; ongoing antitrust litigation; 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 item 1A of Hillenbrand's Annual Report on Form 10-K for the year ended September 30, 2009, filed with the Securities and Exchange Commission (SEC) November 24, 2009, and K-Tron's Annual Report on Form 10-K for the year ended January 2, 2010, filed with the SEC March 15, 2010. The company assumes no obligation to update or revise any forward-looking information.

About Hillenbrand, Inc.

Hillenbrand, Inc. (www.HillenbrandInc.com) is a diversified enterprise with multiple subsidiaries focused around two separate operating businesses. Batesville Casket (www.batesville.com) is a leader in the North American death care industry through the sale of funeral services products, including burial caskets, cremation caskets, containers and urns, selection room display fixturing, and other personalization and memorialization products. K-Tron International (www.ktroninternational.com) is a recognized leader in the design, production, marketing and servicing of material handling equipment and systems. The company serves many different industrial markets through two product lines. The Process Group focuses primarily on feeding and pneumatic conveying equipment, doing business under two main brands: K-Tron Feeders and K-Tron Premier. The Size Reduction Group concentrates on size reduction equipment, conveying systems and screening equipment, operating under three brands: Pennsylvania Crusher, Gundlach and Jeffrey Rader. HI-INC-F

First Call Analyst:
FCMN Contact: [email protected]

SOURCE: Hillenbrand, Inc.

CONTACT: Investor Relations for Hillenbrand, Inc., Mark R. Lanning, Vice
President of Investor Relations and Treasurer, +1-812-934-7256,
[email protected]

Web Site: https://www.hillenbrandinc.com/