Hillenbrand Reports Second Quarter Fiscal Year 2019 Financial Results

• Revenue of $465 million increased 3% YoY driven by Process Equipment Group revenue growth of 9%

• GAAP EPS of $0.60 increased $0.94 primarily as a result of goodwill and trade name impairments recorded in 2018 that did not repeat; adjusted EPS of $0.63 decreased $0.02, or 3%

• Order backlog grew 28% YoY to a record level of $960 million driven primarily by demand for large plastics projects

• YTD cash flow from operations of $47 million decreased $15 million compared to prior year largely due to an increase in cash paid for taxes

• Reaffirming fiscal 2019 guidance for adjusted EPS of $2.45 to $2.60, and revenue growth of 1% to 3%

Second Quarter Results

Revenue of $465 million increased 3% compared to the prior year, including 4% of negative foreign currency impact. The growth was driven by an increase of 9% in the Process Equipment Group, partially offset by a decrease of 9.5% in the Batesville segment.

Net income of $38 million, or $0.60 per share, increased $0.94 per share over the prior year result, which included approximately $0.98 per share of non-cash charges for goodwill and trade name impairments that did not repeat related to a reporting unit within the Process Equipment Group with exposure to domestic coal mining and power. The effective tax rate for the quarter was 25.9%. In comparison, the prior year rate was -177%, primarily due to the nondeductible portion of the impairment charges and the resulting pre-tax loss.

Adjusted net income of $40 million resulted in adjusted earnings per share of $0.63, a decrease of 3%, on lower profit from Batesville, partially offset by profitable growth in the Process Equipment Group. Adjusted EBITDA decreased 2% from the second quarter of the prior year to $75 million, and adjusted EBITDA margin of 16.1% was lower by 80 basis points, primarily driven by lower volume in Batesville, cost inflation and product mix, which were partially offset by pricing and productivity improvements. The adjusted effective income tax rate increased 50 basis points to 25.9%, primarily due to the mix of income from higher tax jurisdictions. Hillenbrand generated cash flow from operations of $11 million in the quarter.

“The Process Equipment Group delivered another strong quarter driven by continued momentum in large extrusion and material handling systems. We’ve experienced robust demand for new plastics projects, especially in North America and Asia, where the majority of new polyolefin capacity is forecasted,” said Joe Raver, President and CEO of Hillenbrand. “On the other hand, it was a challenging quarter for Batesville. The mortality rate associated with the flu season was significantly less severe than last year, which resulted in a steeper decline in the demand for burial caskets in the quarter compared to the longer-term trends we’ve observed.”

Process Equipment Group

Process Equipment Group revenue of $327 million increased 9% over the same period in the prior year, including 5% negative foreign currency impact. Revenue growth was primarily driven by continued strong demand for large plastics projects along with an incremental 2% from the acquisition of BM&M Screening Solutions announced last quarter. Adjusted EBITDA margin of 17.0% increased 40 basis points primarily driven by operating expense leverage, partially offset by the increased proportion of lower margin, large systems projects and cost inflation. Large projects continued to fuel order backlog, which increased 1% sequentially, growing to a record $960 million at the end of the second quarter. That backlog was 28% higher than the prior year, or 37% higher excluding the impact of foreign currency.

Batesville

Batesville revenue of $138 million was 9.5% lower than the second quarter of the prior year as a result of lower demand for burial caskets, primarily driven by lower estimated deaths and the increased rate at which families opted for cremation. The estimated mortality rate associated with the flu was significantly less severe than the prior year. Adjusted EBITDA margin of 22.9% was 240 basis points lower year over year, mainly driven by lower volume and cost inflation, partially offset by productivity gains.

Acquisition Update

Last quarter, Hillenbrand announced the acquisition of BM&M Screening Solutions Ltd. The combination of BM&M and Rotex is expected to strengthen Hillenbrand’s separation business, and the team is implementing the Hillenbrand Operating Model with a goal to realize targeted synergies. BM&M performed well in its first full quarter as a part of Hillenbrand and is on track to meet management’s expectations.

Fiscal 2019 Guidance

Hillenbrand is reaffirming 2019 guidance:

• Revenue growth of 1% to 3%, including negative FX impact of 2%

• Process Equipment Group revenue up 3% to 5%, including negative FX impact of 3%

• Batesville revenue down 1% to 3%

• Adjusted EPS of $2.45 to $2.60