HILLENBRAND, INC., 10-Q filed on 5/1/2019
Quarterly Report
v3.19.1
Document and Entity Information - shares
6 Months Ended
Mar. 31, 2019
Apr. 26, 2019
Document and Entity Information    
Entity Registrant Name Hillenbrand, Inc.  
Entity Central Index Key 0001417398  
Document Type 10-Q  
Document Period End Date Mar. 31, 2019  
Amendment Flag false  
Current Fiscal Year End Date --09-30  
Entity Current Reporting Status Yes  
Entity Filer Category Large Accelerated Filer  
Entity Common Stock, Shares Outstanding   62,621,870
Entity Emerging Growth Company false  
Entity Small Business false  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q2  
v3.19.1
Consolidated Statements of Income - USD ($)
shares in Millions, $ in Millions
3 Months Ended 6 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Mar. 31, 2019
Mar. 31, 2018
Income Statement [Abstract]        
Net revenue $ 464.6 [1] $ 452.2 [1] $ 874.9 $ 849.4
Cost of Goods and Services Sold 303.7 283.6 567.0 534.6
Gross profit 160.9 168.6 307.9 314.8
Operating expenses 93.7 98.3 184.4 187.4
Amortization of Intangible Assets 8.6 7.5 16.4 15.1
Impairment charge 0.0 63.4 0.0 63.4
Interest expense 5.4 6.0 10.9 12.3
Other income (expense), net 0.1 (1.1) 0.6 (1.5)
Income (loss) before income taxes 53.3 (7.7) 96.8 35.1
Income tax expense 13.8 13.6 28.3 37.3
Consolidated net income (loss) 39.5 (21.3) 68.5 (2.2)
Less: Net income attributable to noncontrolling interests 1.5 0.6 2.2 1.6
Net income (loss) $ 38.0 [2] $ (21.9) [2] $ 66.3 $ (3.8) [2]
Net income - per share of common stock:        
Basic earnings per share $ 0.60 $ (0.34) $ 1.05 $ (0.06)
Diluted earnings per share $ 0.60 $ (0.34) $ 1.05 $ (0.06)
Weighted average shares outstanding (basic) 62.9 63.3 62.9 63.5
Weighted average shares outstanding (diluted) 63.4 63.3 63.4 63.5
[1] We attribute revenue to a geography based upon the location of the business unit that consummates the external sale.
[2] Net income (loss) attributable to Hillenbrand
v3.19.1
Consolidated Statements of Comprehensive Income - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Mar. 31, 2019
Mar. 31, 2018
Statement of Comprehensive Income [Abstract]        
Consolidated net income (loss) $ 39.5 $ (21.3) $ 68.5 $ (2.2)
Changes in other comprehensive income (loss), net of tax        
Currency translation adjustment (4.6) 14.7 (9.5) 21.0
Pension and postretirement (net of tax of quarter-to-date tax of $0.1 and $0.4 and year-to-date tax of $0.2 and $0.7) 0.3 0.7 0.5 1.4
Change in net unrealized gain (loss) on derivative instruments (net of quarter-to-date tax of $0.9 and $0.1 and year-to-date tax of $2.6 and $0.1) (3.2) 0.5 (8.4) 0.3
Total changes in other comprehensive income (loss), net of tax (7.5) 15.9 (17.4) 22.7
Consolidated comprehensive income (loss) 32.0 (5.4) 51.1 20.5
Less: Comprehensive income attributable to noncontrolling interests 1.5 0.5 2.4 1.6
Comprehensive income (loss) $ 30.5 [1],[2] $ (5.9) [1],[2] $ 48.7 $ 18.9
[1] Comprehensive income (loss) attributable to Hillenbrand
[2] Comprehensive income (loss) attributable to Hillenbrand
v3.19.1
Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Mar. 31, 2019
Mar. 31, 2018
Statement of Comprehensive Income [Abstract]        
Pension and postretirement, tax $ (0.1) $ (0.4) $ (0.2) $ (0.7)
Change in net unrealized gain (loss) on derivative instruments, tax $ 0.9 $ (0.1) $ 2.6 $ (0.1)
v3.19.1
Consolidated Balance Sheets - USD ($)
$ in Millions
Mar. 31, 2019
Sep. 30, 2018
Current Assets    
Cash and cash equivalents $ 58.6 $ 56.0
Trade receivables, net 199.5 218.5
Receivables from long-term manufacturing contracts 164.8 120.3
Inventories 183.0 172.5
Prepaid expenses 24.1 25.2
Other current assets 20.4 18.1
Total current assets 650.4 610.6
Property, plant, and equipment, net 137.6 142.0
Intangible assets, net 477.3 487.3
Goodwill 583.0 581.9
Other assets 37.2 42.8
Total Assets 1,885.5 1,864.6
Current Liabilities    
Trade accounts payable 207.7 196.8
Liabilities from long-term manufacturing contracts and advances 125.1 125.9
Accrued compensation 55.5 71.9
Other current liabilities 117.5 137.1
Total current liabilities 505.8 531.7
Long-term debt 361.7 344.6
Accrued pension and postretirement healthcare 114.6 120.5
Deferred Income Tax Liabilities, Net 79.4 76.4
Other long-term liabilities 53.9 47.3
Total Liabilities 1,115.4 1,120.5
Commitments and contingencies (Note 14)
SHAREHOLDERS’ EQUITY    
Common stock, no par value (63.9 and 63.9 shares issued, 62.6 and 62.3 shares outstanding) 0.0 0.0
Additional paid-in capital 343.1 351.4
Retained earnings 571.1 531.0
Treasury stock (1.3 and 1.6 shares) (55.6) (67.1)
Accumulated other comprehensive loss (101.8) (84.2)
Hillenbrand Shareholders’ Equity 756.8 731.1
Noncontrolling interests 13.3 13.0
Total Shareholders’ Equity 770.1 744.1
Total Liabilities and Equity $ 1,885.5 $ 1,864.6
v3.19.1
Consolidated Balance Sheets (Parenthetical) - $ / shares
shares in Millions
Mar. 31, 2019
Sep. 30, 2018
Statement of Financial Position [Abstract]    
Common stock, par value (in dollars per share)
Common stock, shares issued 63.9 63.9
Common stock, shares outstanding 62.6 62.3
Treasury stock, shares 1.3 1.6
v3.19.1
Consolidated Statements of Cash Flow - USD ($)
$ in Millions
6 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Operating Activities    
Consolidated net income (loss) $ 68.5 $ (2.2)
Adjustments to reconcile net income to cash provided by operating activities:    
Depreciation and amortization 29.2 27.8
Impairment charge 0.0 63.4
Deferred income taxes 8.7 (10.4)
Share-based compensation 5.8 6.2
Trade accounts receivable and receivables from long-term manufacturing contracts (24.8) (34.2)
Inventories (12.1) (25.6)
Prepaid expenses and other current assets (0.8) (10.7)
Trade accounts payable 12.7 12.8
Accrued expenses and other current liabilities (24.6) 10.3
Income taxes payable (12.8) 26.5
Defined benefit plan and postretirement funding (4.6) (5.6)
Defined benefit plan and postretirement expense 1.7 2.3
Other, net (0.4) 0.9
Net cash provided by operating activities 46.5 61.5
Investing Activities    
Capital expenditures (8.3) (10.6)
Acquisition of business, net of cash acquired (26.2) 0.0
Other, net 0.1 0.1
Net cash used in investing activities (34.4) (10.5)
Financing Activities    
Repayments on term loan 0.0 (148.5)
Proceeds from revolving credit facilities, net of financing costs 342.0 701.8
Repayments on revolving credit facilities (323.8) (542.8)
Payments of dividends on common stock (26.2) (26.2)
Repurchases of common stock 0.0 (38.9)
Proceeds from Stock Options Exercised 1.4 9.3
Payments Related to Tax Withholding for Share-based Compensation (4.2) (4.1)
Other, net (0.5) (1.0)
Net cash used in financing activities (11.3) (50.4)
Effect of exchange rates on cash and cash equivalents 2.1 1.7
Net cash flows 2.9 2.3
Cash, cash equivalents, and restricted cash:    
At beginning of period 56.5 66.7
At end of period $ 59.4 $ 69.0
v3.19.1
Consolidated Statements of Cash Flow Cash, Cash Equivalents, and Restricted Cash - USD ($)
Mar. 31, 2019
Sep. 30, 2018
Mar. 31, 2018
Sep. 30, 2017
Supplemental Cash Flow Elements [Abstract]        
Cash and cash equivalents $ 58,600,000 $ 56,000,000 $ 68,500,000  
Short-term restricted cash included in other current assets 800,000 500,000.0 500,000  
Total cash, cash equivalents, and restricted cash shown in the Consolidated Statements of Cash Flows $ 59,400,000 $ 56,500,000 $ 69,000,000 $ 66,700,000
v3.19.1
Consolidated Statements of Shareholders Equity Statement - USD ($)
$ in Millions
Total
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Treasury Stock
AOCI Attributable to Parent [Member]
Noncontrolling Interests
Common Stock, Dividends, Per Share, Declared $ 0.415            
Balance at Sep. 30, 2017 $ 765.9   $ 349.9 $ 507.1 $ (24.4) $ (81.2) $ 14.5
Balance, shares at Sep. 30, 2017   63,800,000     700,000    
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Total other comprehensive income (loss), net of tax 22.7         22.7 0.0
Consolidated net income (loss) (2.2)     (3.8)     1.6
Common stock, shares issued   (100,000)     (400,000)    
Stock Granted, Value, Share-based Compensation, Net of Forfeitures 5.2   (10.1)   $ 15.3    
Share-based compensation 6.2   6.2        
Treasury Stock, Shares, Acquired         900,000    
Treasury Stock, Value, Acquired, Cost Method (38.9)       $ (38.9)    
Dividends, Common Stock (26.9)   (0.4) (26.4)     (0.9)
Balance at Mar. 31, 2018 $ 732.0   346.4 476.9 $ (48.0) (58.5) 15.2
Balance, shares at Mar. 31, 2018   63,900,000     1,200,000    
Common Stock, Dividends, Per Share, Declared $ 0.2075            
Balance at Dec. 31, 2017 $ 768.5   344.1 512.0 $ (28.7) (74.5) 15.6
Balance, shares at Dec. 31, 2017   63,900,000     800,000    
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Total other comprehensive income (loss), net of tax 15.9         16.0 (0.1)
Consolidated net income (loss) (21.3)     (21.9)     0.6
Common stock, shares issued   0     (100,000)    
Stock Granted, Value, Share-based Compensation, Net of Forfeitures 2.6   (1.8)   $ 4.4    
Share-based compensation 3.9   3.9        
Treasury Stock, Shares, Acquired         500,000    
Treasury Stock, Value, Acquired, Cost Method (23.7)       $ (23.7)    
Dividends, Common Stock (13.9)   (0.2) (13.2)     (0.9)
Balance at Mar. 31, 2018 $ 732.0   346.4 476.9 $ (48.0) (58.5) 15.2
Balance, shares at Mar. 31, 2018   63,900,000     1,200,000    
Common Stock, Dividends, Per Share, Declared $ 0.42            
Balance at Sep. 30, 2018 $ 744.1   351.4 531.0 $ (67.1) (84.2) 13.0
Balance, shares at Sep. 30, 2018   63,900,000     1,600,000    
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Total other comprehensive income (loss), net of tax (17.4)         (17.6) 0.2
Consolidated net income (loss) 68.5     66.3     2.2
Common stock, shares issued   0     (300,000)    
Stock Granted, Value, Share-based Compensation, Net of Forfeitures (2.8)   (14.3)   $ 11.5    
Share-based compensation 5.8   5.8        
Other 0.2     0.2      
Dividends, Common Stock (28.3)   (0.2) (26.4)     (2.1)
Balance at Mar. 31, 2019 $ 770.1   343.1 571.1 $ (55.6) (101.8) 13.3
Balance, shares at Mar. 31, 2019   63,900,000     1,300,000    
Common Stock, Dividends, Per Share, Declared $ 0.21            
Balance at Dec. 31, 2018 $ 747.4   341.7 546.3 $ (59.2) (94.3) 12.9
Balance, shares at Dec. 31, 2018   63,900,000     1,400,000    
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Total other comprehensive income (loss), net of tax (7.5)         (7.5) 0.0
Consolidated net income (loss) 39.5     38.0     1.5
Common stock, shares issued   0     (100,000)    
Stock Granted, Value, Share-based Compensation, Net of Forfeitures 1.0   (2.6)   $ 3.6    
Share-based compensation 3.9   3.9        
Dividends, Common Stock (14.2)   (0.1) (13.2)     (1.1)
Balance at Mar. 31, 2019 $ 770.1   $ 343.1 $ 571.1 $ (55.6) $ (101.8) $ 13.3
Balance, shares at Mar. 31, 2019   63,900,000     1,300,000    
v3.19.1
Background and Basis of Presentation
6 Months Ended
Mar. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Background and Basis of Presentation
Background and Basis of Presentation
 
Hillenbrand, Inc. (“Hillenbrand”) is a global diversified industrial company with multiple leading brands that serve a wide variety of industries around the world.  We strive to provide superior return for our shareholders, exceptional value for our customers, great professional opportunities for our employees, and to be responsible to our communities through deployment of the Hillenbrand Operating Model (“HOM”). The HOM is a consistent and repeatable framework designed to produce sustainable and predictable results.  The HOM describes our mission, vision, values, and mindset as leaders; applies our management practices in Strategy Management, Segmentation, Lean, Talent Development, and Acquisitions; and prescribes three steps (Understand, Focus, and Grow) designed to make our businesses both bigger and better.  Our goal is to continue developing Hillenbrand as a world-class global diversified industrial company through the deployment of the HOM. Hillenbrand’s portfolio is composed of two business segments:  the Process Equipment Group and Batesville®.  The Process Equipment Group businesses design, develop, manufacture, and service highly engineered industrial equipment around the world.  Batesville is a recognized leader in the death care industry in North America.  “Hillenbrand,” “the Company,” “we,” “us,” “our,” and similar words refer to Hillenbrand and its subsidiaries unless context otherwise requires.
 
The accompanying unaudited consolidated financial statements include the accounts of Hillenbrand and its subsidiaries.  They also include two subsidiaries where the Company’s ownership percentage is less than 100%.  The Company’s fiscal year ends on September 30.  Unless otherwise stated, references to years relate to fiscal years.
 
These unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements and therefore do not include all information required in accordance with accounting principles generally accepted in the United States (“GAAP”).  The unaudited consolidated financial statements have been prepared on the same basis as, and should be read in conjunction with, the audited consolidated financial statements and notes thereto included in our latest Annual Report on Form 10-K for the year ended September 30, 2018, as filed with the SEC.  The September 30, 2018 Consolidated Balance Sheet included in this Form 10-Q was derived from audited consolidated financial statements, but does not include all disclosures required by GAAP for a year-end balance sheet included in Form 10-K.  In the opinion of management, these financial statements reflect all adjustments necessary to present a fair statement of the Company’s consolidated financial position and the consolidated results of operations and cash flow as of the dates and for the periods presented.
 
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period.  Actual results could differ from those estimates.  Examples of such estimates include, but are not limited to, revenue recognition under the percentage-of-completion method and the establishment of reserves related to customer rebates, doubtful accounts, warranties, early-pay discounts, inventories, income taxes, litigation, self-insurance, and progress toward achievement of performance criteria under incentive compensation programs.
v3.19.1
Summary of Significant Accounting Policies
6 Months Ended
Mar. 31, 2019
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
 
The significant accounting policies used in preparing these consolidated financial statements are consistent with the accounting policies described in our Annual Report on Form 10-K for 2018, except as described below.

Recently Adopted Accounting Standards

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. ASU 2017-12 intends to better align an entity's risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The amendments expand and refine hedge accounting for both nonfinancial and financial risk components, and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. In addition, this ASU makes certain targeted improvements to simplify the application of hedge accounting guidance. ASU 2017-12 was early adopted for our fiscal year beginning on October 1, 2018 on a prospective basis. The adoption of this standard did not have a significant impact on our consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash. ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 became effective and was adopted for our fiscal year beginning on October 1, 2018. The adoption of ASU 2016-18 had a financial statement presentation and disclosure impact only.

In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business. ASU 2017-01 assists entities in determining whether a transaction involves an asset or a business. Specifically, it states that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not a business. If this initial test is not met, a set cannot be considered a business unless it includes an input and a substantive process that together significantly contribute to the ability to create output.  ASU 2017-01 became effective and was adopted for our fiscal year beginning on October 1, 2018. The adoption of ASU 2017-01 did not have a significant impact on our consolidated financial statements.

In March 2017, the FASB issued ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. ASU 2017-07 states that an employer must report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period and present the other components of net benefit cost (as defined in paragraphs 715-30-35-4 and 715-60-35-9) in the income statement separately from the service cost component and outside a subtotal of income from operations (if one is presented). In addition, ASU 2017-07 limits the capitalization of compensation costs to the service cost component only (if capitalization is appropriate). ASU 2017-07 became effective and was adopted for our fiscal year beginning on October 1, 2018. On the Consolidated Statements of Income, the adoption of this standard resulted in the reclassification of $0.1 credit from Cost of goods sold to Other income (expense), net, for the three months ended March 31, 2018, and $0.2 credit from Cost of goods sold and $0.1 from Operating expenses to Other income (expense), net, for the six months ended March 31, 2018.

In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. ASU 2017-09 clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications (in accordance with Topic 718). The new guidance will provide relief to entities that make non-substantive changes to share-based payment awards. ASU 2017-09 became effective and was adopted for our fiscal year beginning on October 1, 2018. The adoption of ASU 2017-09 did not have a significant impact on our consolidated financial statements.

Beginning in 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASC 606”), plus a number of related ASUs designed to clarify and interpret ASC 606. The new standard requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard supersedes U.S. GAAP guidance on revenue recognition and requires the use of more estimates than the previously effective standards. It also requires significant disclosures sufficient to enable users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. The new standard became effective for our fiscal year beginning on October 1, 2018 and was adopted on a modified retrospective basis. The Company elected the practical expedient and only evaluated contracts for which substantially all revenue had not been recognized under ASC Topic 605, with the cumulative effect of the new guidance recorded as of the date of initial application.

The primary changes from the adoption of ASC 606 resulted from certain performance obligations that were previously recognized at a point in time that are now recognized over time. The cumulative effect of the changes made to the Consolidated Balance Sheet as of October 1, 2018 for the adoption of ASC 606 was as follows:
 
Balance at September 30, 2018
 
Adjustments due to ASC 606
 
Balance at October 1, 2018
Assets
 
 
 
 
 
Receivables from long-term manufacturing contracts
$
120.3

 
$
1.9

 
$
122.2

Inventories
172.5

 
(1.6
)
 
170.9

 
 
 
 
 
 
Liabilities
 
 
 
 
 
Deferred income taxes
$
76.4

 
$
0.1

 
$
76.5

 
 
 
 
 
 
Shareholders’ Equity
 
 
 
 
 
Retained earnings
$
531.0

 
$
0.2

 
$
531.2


The following tables summarize the impacts of adopting ASC 606 on the Company’s consolidated financial statements as of and for the three and six months ended March 31, 2019.

Consolidated Statements of Income:
 
Three Months Ended March 31, 2019
 
Six Months Ended March 31, 2019
 
As Reported
 
Adjustments Due to ASC 606
 
Balances without Adoption
 
As Reported
 
Adjustments Due to ASC 606
 
Balances without Adoption
Net revenue
$
464.6

 
$
(0.1
)
 
$
464.5

 
$
874.9

 
$
(1.1
)
 
$
873.8

Cost of goods sold
303.7

 
(0.1
)
 
303.6

 
567.0

 
(1.0
)
 
566.0

Gross profit
160.9

 

 
160.9

 
307.9

 
(0.1
)
 
307.8

Income before income taxes
53.3

 

 
53.3

 
96.8

 
(0.1
)
 
96.7

Consolidated net income
39.5

 

 
39.5

 
68.5

 
(0.1
)
 
68.4


Consolidated Balance Sheet:
 
March 31, 2019
 
As Reported
 
Adjustments Due to ASC 606
 
Balances without Adoption
Assets
 
 
 
 


Receivables from long-term manufacturing contracts
$
164.8

 
$
(3.0
)
 
$
161.8

Inventories
183.0

 
2.7

 
185.7

 
 
 
 
 
 
Liabilities
 
 
 
 
 
Deferred income taxes
$
79.4

 
$
(0.1
)
 
$
79.3

 
 
 
 
 
 
Shareholders’ Equity
 
 
 
 
 
Retained earnings
$
571.1

 
$
(0.2
)
 
$
570.9


The Company has elected the following as a result of adopting the new standard on revenue recognition:

Hillenbrand elected not to adjust the promised amount of consideration for the effects of the time value of money for contracts in which the anticipated period between when Hillenbrand transfers the goods or services to the customer and when the customer pays is equal to one year or less.

Hillenbrand elected to account for shipping and handling activities that occur after the customer has obtained control of a good as fulfillment activities rather than as a promised service.

Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, and that are collected by the Company from a customer, are excluded from revenue.

Recently Issued Accounting Standards
 
In February 2016, the FASB issued ASU 2016-02, Leases. ASU 2016-02 requires lessees to recognize a right of use asset and related lease liability for leases that have terms of more than twelve months. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance, with the classifications based on criteria that are similar to those applied under the current lease guidance, without the explicit bright lines. ASU 2016-02 will be effective for our fiscal year beginning on October 1, 2019. We have developed an implementation plan and we are currently gathering data to further assess the impact that ASU 2016-02 will have on our consolidated financial statements. The adoption is anticipated to have a significant impact on assets and liabilities within our Consolidated Balance Sheets due to the recognition of right-of-use assets and corresponding lease liabilities.

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Statements. ASU 2016-13 replaces the current incurred loss impairment model with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates. ASU 2016-13 will be effective for our fiscal year beginning on October 1, 2020, with early adoption permitted for our fiscal year beginning October 1, 2019. We are currently evaluating the impact that ASU 2016-13 will have on our consolidated financial statements.
v3.19.1
Revenue Recognition
6 Months Ended
Mar. 31, 2019
Revenue Recognition [Abstract]  
Revenue from Contract with Customer [Text Block]
Revenue Recognition

We adopted ASC 606, Revenue from Contracts with Customers, on October 1, 2018. As a result, we have changed our accounting policy for revenue recognition as detailed below.

Net revenue includes gross revenue less sales discounts, customer rebates, sales incentives, and product returns, all of which require us to make estimates for the portion of these allowances that have yet to be credited or paid to our customers. We estimate these allowances using the expected value method, which is based upon historical rates and projections of customer purchases toward contractual rebate thresholds.

Performance Obligations & Contract Estimates

The Process Equipment Group designs, engineers, manufactures, markets, and services differentiated process and material handling equipment and systems for a wide variety of industries. A large portion of our revenue across the Process Equipment Group is derived from manufactured equipment, which may be standard, customized to meet customer specifications, or turnkey.

Our contracts with customers in the Process Equipment Group segment often include multiple performance obligations. Performance obligations are promises in a contract to transfer a distinct good or service to the customer, and are the basis for determining how revenue is recognized. For instance, a contract may include obligations to deliver equipment, installation services, and spare parts. We frequently have contracts for which the equipment and the installation services, as well as highly engineered or specialized spare parts, are all considered a single performance obligation, as in these instances the installation services and/or spare parts are not separately identifiable. However, due to the varying nature of equipment and contracts across the Process Equipment Group, we also have contracts where the installation services and/or spare parts are deemed to be separately identifiable and are therefore deemed to be distinct performance obligations.

A contract’s transaction price is allocated to each distinct performance obligation based on its respective stand-alone selling price, and recognized as revenue when, or as, the performance obligation is satisfied. When a distinct performance obligation is not sold separately, the value of the standalone selling price is estimated considering all reasonably available information. When an obligation is distinct, as defined in ASC 606, we allocate a portion of the contract price to the obligation and recognize it separately from the other performance obligations.

The timing of revenue recognition for each performance obligation is either over time or at a point in time. We recognize revenue over time for contracts that have an enforceable right to collect payment for performance completed to-date upon customer cancellation and provide one or more of the following: (i) service over a period of time, (ii) highly customized equipment, or (iii) parts which are highly engineered and have no alternative use. Revenue generated from standard equipment and highly customized equipment or parts contracts without an enforceable right to payment for performance completed to-date, as well as non-specialized parts sales and sales of death care products, is recognized at a point in time.

We use the input method of “cost-to-cost” to recognize revenue over time. Accounting for these contracts involves management judgment in estimating total contract revenue and cost. Contract revenues are largely determined by negotiated contract prices and quantities, modified by our assumptions regarding contract options, change orders, and incentive and award provisions associated with technical performance clauses. Contract costs are incurred over longer periods of time and, accordingly, the estimation of these costs requires judgment. We measure progress based on costs incurred to date relative to total estimated cost at completion. Incurred cost represents work performed, which corresponds with, and we believe thereby best depicts, the transfer of control to the customer. Contract costs include labor, material, and certain overhead expenses. Cost estimates are based on various assumptions to project the outcome of future events, including labor productivity and availability, the complexity of the work to be performed, the cost of materials, and the performance of subcontractors. Significant factors that influence these estimates include inflationary trends, technical and schedule risk, internal and subcontractor performance trends, business volume assumptions, asset utilization, and anticipated labor agreements. Revenue and cost estimates are regularly monitored and revised based on changes in circumstances. Anticipated losses on long-term contracts are recognized immediately when such losses become evident. We maintain financial controls over the customer qualification, contract pricing, and estimation processes to reduce the risk of contract losses.

Stand-alone service revenue is recognized either over time proportionately over the period of the underlying contract or as invoiced, depending on the terms of the arrangement. Stand-alone service revenue is not material to the Company.

For the Process Equipment Group and Batesville segment products where revenue is recognized at a point in time, we recognize it when our customers take control of the asset. We define this as the point in time at which the customer has the capability of full beneficial use of the asset as intended per the contract.

Contract balances

In the Process Equipment Group segment, the Company requires an advance deposit based on the terms and conditions of contracts with customers for many of its contracts. Payment terms generally require an upfront payment at the start of the contract, and the remaining payments during the contract or within a certain number of days of delivery. Typically, revenue is recognized within one year of receiving an advance deposit. For contracts where an advance payment is received greater than one year from expected revenue recognition, or a portion of the payment due extends beyond one year, the Company has determined it does not constitute a significant financing component.

The timing of revenue recognition, billings, and cash collections can result in customer receivables, advance payments, and billings in excess of revenue recognized. Customer receivables include amounts billed and currently due from customers and are included in Trade receivables, net, as well as unbilled amounts (contract assets) which are included in Receivables from long-term manufacturing contracts on our Consolidated Balance Sheets. Amounts are billed in accordance with contractual terms or as work progresses in accordance with contractual terms. Unbilled amounts arise when the timing of billing differs from the timing of revenue recognized, such as when contract provisions require specific milestones to be met before a customer can be billed. Unbilled amounts primarily relate to performance obligations satisfied over time when the cost-to-cost method is used and the revenue recognized exceeds the amount billed to the customer as there is not yet a right to payment in accordance with contractual terms. Unbilled amounts are recorded as a contract asset when the revenue associated with the contract is recognized prior to billing and derecognized when billed in accordance with the terms of the contract. Trade receivables are recorded at face amounts and represent the amounts we believe to be collectible. The Company maintains allowances for doubtful accounts for estimated losses as a result of customers’ inability to make required payments. Management evaluates the aging of the customer receivable balances, the financial condition of its customers, historical trends and the time outstanding of specific balances to estimate the amount of customer receivables that may not be collected in the future, and records the appropriate provision.

Advance payments and billings in excess of revenue recognized are included in Liabilities from long-term manufacturing contracts and advances on our Consolidated Balance Sheets. Advance payments and billings in excess of revenue recognized represent contract liabilities and are recorded when customers remit contractual cash payments in advance of us satisfying performance obligations under contractual arrangements, including those with performance obligations satisfied over time. Billings in excess of revenue recognized primarily relate to performance obligations satisfied over time when the cost-to-cost method is used and revenue cannot yet be recognized as the Company has not completed the corresponding performance obligation. Contract liabilities are derecognized when revenue is recognized and the performance obligation is satisfied.

The balance in Receivables from long-term manufacturing contracts at March 31, 2019 and September 30, 2018 was $164.8 and $120.3. The change was driven by the adoption of ASC 606 ($3.0) and the impact of net revenue recognized prior to billings ($41.5). The balance in the Liabilities from long-term manufacturing contracts and advances at March 31, 2019 and September 30, 2018 was $125.1 and $125.9 and consists primarily of cash payments received or due in advance of satisfying our performance obligations. The revenue recognized for the six months ended March 31, 2019 related to Liabilities from long-term manufacturing contracts and advances as of September 30, 2018 was $107.0. During the six months ended March 31, 2019, the adjustments related to performance obligations satisfied in previous periods were immaterial.

Costs incurred to obtain a customer contract are not material to the Company. The Company elected to apply the practical expedient to not capitalize contract costs to obtain contracts with a duration of one year or less, which are expensed as incurred.

Transaction price allocated to the remaining performance obligations
                                            
As of March 31, 2019, the aggregate amount of transaction price of remaining performance obligations, which corresponds to backlog as defined in Item 2 of this Form 10-Q, for the Company was $960.5. Approximately 85% of these obligations are expected to be satisfied over the next twelve months, and the remaining performance obligations, primarily within one to three years.

Disaggregation of revenue
 
Three Months Ended March 31, 2019
 
Six Months Ended March 31, 2019
 
Process Equipment Group
 
Batesville
 
Total
 
Process Equipment Group
 
Batesville
 
Total
Revenue by End Market
 
 
 
 
 
 
 
 
 
 
 
  Plastics
$
202.2

 
$

 
$
202.2

 
$
363.1

 
$

 
$
363.1

  Chemicals
22.9

 

 
22.9

 
52.5

 

 
52.5

Food & Pharmaceuticals
24.4

 

 
24.4

 
40.9

 

 
40.9

  Minerals & Mining
22.2

 

 
22.2

 
50.2

 

 
50.2

  Water & Wastewater
7.7

 

 
7.7

 
17.2

 

 
17.2

  Death Care

 
137.9

 
137.9

 

 
266.0

 
266.0

  Other
47.3

 

 
47.3

 
85.0

 

 
85.0

    Total
$
326.7

 
$
137.9

 
$
464.6

 
$
608.9

 
$
266.0

 
$
874.9


 
Three Months Ended March 31, 2019
 
Six Months Ended March 31, 2019
 
Process Equipment Group
 
Batesville
 
Total
 
Process Equipment Group
 
Batesville
 
Total
Products and Services
 
 
 
 
 
 
 
 
 
 
 
Equipment
$
227.6

 
$

 
$
227.6

 
$
411.0

 
$

 
$
411.0

Parts and Services
99.1

 

 
99.1

 
197.9

 

 
197.9

Death Care

 
137.9

 
137.9

 

 
266.0

 
266.0

    Total
$
326.7

 
$
137.9

 
$
464.6

 
$
608.9

 
$
266.0

 
$
874.9


 
Three Months Ended March 31, 2019
 
Six Months Ended March 31, 2019
 
Process Equipment Group
 
Batesville
 
Total
 
Process Equipment Group
 
Batesville
 
Total
Timing of Transfer
 
 
 
 
 
 
 
 
 
 
 
Point in Time
$
176.8

 
$
137.9

 
$
314.7

 
$
340.5

 
$
266.0

 
$
606.5

Over Time
149.9

 

 
149.9

 
268.4

 

 
268.4

    Total
$
326.7

 
$
137.9

 
$
464.6

 
$
608.9

 
$
266.0

 
$
874.9

v3.19.1
Business Acquisitions
6 Months Ended
Mar. 31, 2019
Business Combinations [Abstract]  
Business Acquisitions
Business Acquisitions

We completed the acquisition of Burnaby Machine and Mill Equipment Ltd. (“BM&M”) in November 2018 for $26.2 in cash.  We used our revolving credit facility (the “Facility”) to fund the acquisition.  Based in Canada, BM&M provides high-speed gyratory screeners for a variety of industries. The results of BM&M will be reported in the Process Equipment Group segment. Based on our purchase price allocation, we recorded $14 of intangibles, which consisted of $10 of customer relationships, $1 of trade names and $3 of backlog.  In addition, we recorded $9 of goodwill and $3 of net tangible assets, primarily working capital.  Goodwill is not deductible for tax purposes. The fair value did not ascribe a significant amount to tangible assets, as we often seek to acquire companies with a relatively low physical asset base in order to limit the need to invest significant additional cash post-acquisition.
v3.19.1
Supplemental Balance Sheet Information
6 Months Ended
Mar. 31, 2019
Balance Sheet Related Disclosures [Abstract]  
Supplemental Balance Sheet Information
Supplemental Balance Sheet Information
 
 
March 31,
2019
 
September 30,
2018
Trade accounts receivable reserves
$
21.0

 
$
22.2

 
 
 
 
Accumulated depreciation on property, plant, and equipment
$
310.6

 
$
303.8

 
 
 
 
Inventories:
 

 
 

Raw materials and components
$
71.3

 
$
68.3

Work in process
49.5

 
44.7

Finished goods
62.2

 
59.5

Total inventories
$
183.0

 
$
172.5

 

We had restricted cash of $0.8 and $0.5 included in Other current assets in the Consolidated Balance Sheets at March 31, 2019 and at September 30, 2018.
v3.19.1
Intangible Assets and Goodwill (Notes)
6 Months Ended
Mar. 31, 2019
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets Disclosure [Text Block]
Intangible Assets and Goodwill

Intangible Assets

Intangible assets are stated at the lower of cost or fair value. With the exception of most trade names, intangible assets are amortized on a straight-line basis over periods ranging from three to 21 years, representing the period over which we expect to receive future economic benefits from these assets. We assess the carrying value of most trade names annually, or more often if events or changes in circumstances indicate there may be an impairment.

The following tables summarize the carrying amounts and related accumulated amortization for intangible assets as of March 31, 2019 and September 30, 2018.

 
March 31, 2019
 
September 30, 2018
 
Cost
 
Accumulated
Amortization
 
Cost
 
Accumulated
Amortization
Finite-lived assets:
 

 
 

 
 

 
 

Trade names
$
0.2

 
$
(0.2
)
 
$
0.2

 
$
(0.2
)
Customer relationships
469.2

 
(158.8
)
 
464.5

 
(148.4
)
Technology, including patents
78.2

 
(47.3
)
 
79.6

 
(45.1
)
Software
58.5

 
(50.6
)
 
58.0

 
(48.9
)
Other
2.8

 
(1.7
)
 
0.2

 
(0.2
)
 
608.9

 
(258.6
)
 
602.5

 
(242.8
)
Indefinite-lived assets:
 

 
 

 
 

 
 

Trade names
127.0

 

 
127.6

 

 
 
 
 
 
 
 
 
Total
$
735.9

 
$
(258.6
)
 
$
730.1

 
$
(242.8
)


The net change in intangible assets during the six months ended March 31, 2019 was driven primarily by the acquisition of BM&M in November 2018, which included intangible assets of approximately $14, normal amortization, and foreign currency adjustments. See Note 4 for further detail on the acquisition of BM&M.

Goodwill

Goodwill is not amortized, but is subject to annual impairment tests.  Goodwill has been assigned to reporting units.  We assess the carrying value of goodwill annually, or more often if events or changes in circumstances indicate there may be impairment.  Impairment testing is performed at a reporting unit level.

 
Process
Equipment
Group
 
Batesville
 
Total
Balance September 30, 2018
$
573.6

 
$
8.3

 
$
581.9

Acquisition
9.1

 

 
9.1

Foreign currency adjustments
(8.0
)
 

 
(8.0
)
Balance March 31, 2019
$
574.7

 
$
8.3

 
$
583.0



Impairment

In connection with the preparation of the quarterly financial statements for the second quarter 2018, an interim impairment assessment was performed at a reporting unit in the Process Equipment Group segment most directly impacted by domestic coal mining and coal power. During the quarter ended March 31, 2018, published industry reports reduced their forecasts for domestic coal production and consumption. The reporting unit also experienced a larger than expected decline in orders for equipment and parts used in the domestic coal mining and coal power industries. In conjunction with these events and as part of the long-term strategic forecasting process, the Company made the decision to redirect strategic investments for growth, significantly reducing the reporting unit’s terminal growth rate. As a result of this change in expected future cash flows, along with comparable fair value information, management concluded that the reporting unit carrying value exceeded its fair value, resulting in a goodwill impairment charge of $58.8 during the quarter ended March 31, 2018. Intangible asset impairment charges for trade names associated with the same reporting unit were $4.6 pre-tax ($3.5 after tax) based on similar factors during the quarter ended March 31, 2018.
v3.19.1
Financing Agreements
6 Months Ended
Mar. 31, 2019
Debt Disclosure [Abstract]  
Financing Agreements
Financing Agreements
 
March 31,
2019
 
September 30,
2018
$900 revolving credit facility (excluding outstanding letters of credit)
$
112.6

 
$
95.7

$150 senior unsecured notes, net of discount (1)
149.5

 
149.3

$100 Series A Notes (2)
99.6

 
99.6

Other
1.7

 

Total debt
363.4

 
344.6

Less: current portion (3)
1.7

 

Total long-term debt
$
361.7

 
$
344.6

 
 
 
 
(1) Includes debt issuance costs of $0.3 and $0.4 at March 31, 2019 and September 30, 2018.
(2) Includes debt issuance costs of $0.4 and $0.4 at March 31, 2019 and September 30, 2018.
(3) Included in Other current liabilities in the Consolidated Balance Sheets.


Our private shelf agreement expired in March 2019. We entered into this Private Shelf Agreement on December 6, 2012 (as amended, the “Shelf Agreement”), with Prudential Investment Management, Inc. (“Prudential”) and each Prudential Affiliate (as defined therein) that became a purchaser thereunder, and on December 15, 2014, we issued $100.0 in 4.60% Series A unsecured notes (“Series A Notes”) pursuant thereto, which remain outstanding.

With respect to the revolving credit facility, as of March 31, 2019, we had $7.2 in outstanding letters of credit issued and $780.2 of maximum borrowing capacity. $741.6 of this borrowing capacity was immediately available based on our leverage covenant at March 31, 2019, with additional amounts available in the event of a qualifying acquisition. The weighted-average interest rates on borrowings under the Facility were 2.73% and 2.57% for the three and six months ended March 31, 2019, and 2.03% and 1.82% for the same periods in the prior year. The weighted average facility fee was 0.12% and 0.11% for the three and six months ended March 31, 2019, and 0.15% and 0.17% for the same periods in the prior year.
 
In the normal course of business, the Process Equipment Group provides to certain customers bank guarantees and other credit arrangements in support of performance, warranty, advance payment, and other contractual obligations. This form of trade finance is customary in the industry and, as a result, we maintain adequate capacity to provide the guarantees. As of March 31, 2019, we had credit arrangements totaling $300.9, under which $210.6 was utilized, for this purpose. These arrangements include our €150.0 Syndicated Letter of Guarantee Facility (as amended, the “LG Facility”) and other ancillary credit facilities.

The Facility, the LG Facility, and the Series A Notes, require us to meet certain conditions including compliance with covenants, absence of default, and continued accuracy of certain representations and warranties. Financial covenants include a maximum ratio of Indebtedness to EBITDA (as defined in the agreements, “Leverage Ratio”) of 3.5 to 1.0 including the application of cash as a reduction of Indebtedness (subject to certain limitations); a maximum Leverage Ratio resulting from an acquisition in excess of $75.0 of 4.0 to 1.0 for a period of three consecutive quarters following such acquisition; and a minimum ratio of EBITDA (as defined in the agreements) to interest expense of 3.0 to 1.0. As of March 31, 2019, we were in compliance with all covenants.

The Facility, senior unsecured notes, 4.60% Series A unsecured notes issued under the Shelf Agreement (“Series A Notes”), and LG Facility are fully and unconditionally, and jointly and severally, guaranteed by certain of the Company’s domestic subsidiaries.
v3.19.1
Retirement Benefits
6 Months Ended
Mar. 31, 2019
Defined Benefit Plan [Abstract]  
Retirement Benefits
Retirement Benefits
 
Defined Benefit Plans
 
 
U.S. Pension Benefits
 
Non-U.S. Pension Benefits
 
Three Months Ended March 31,
 
Three Months Ended March 31,
 
2019
 
2018
 
2019
 
2018
Service costs
$
0.6

 
$
0.7

 
$
0.4

 
$
0.4

Interest costs
2.5

 
2.1

 
0.3

 
0.3

Expected return on plan assets
(3.3
)
 
(3.5
)
 
(0.2
)
 
(0.1
)
Amortization of unrecognized prior service costs, net
0.1

 
0.1

 

 

Amortization of net loss
0.2

 
0.8

 
0.3

 
0.3

Net pension costs
$
0.1

 
$
0.2

 
$
0.8

 
$
0.9

 
U.S. Pension Benefits
 
Non-U.S. Pension Benefits
 
Six Months Ended March 31,
 
Six Months Ended March 31,
 
2019
 
2018
 
2019
 
2018
Service costs
$
1.2

 
$
1.4

 
$
0.7

 
$
1.0

Interest costs
5.1

 
4.3

 
0.6

 
0.6

Expected return on plan assets
(6.6
)
 
(7.0
)
 
(0.3
)
 
(0.3
)
Amortization of unrecognized prior service costs, net
0.1

 
0.1

 

 

Amortization of net loss
0.4

 
1.6

 
0.5

 
0.5

Net pension costs
$
0.2

 
$
0.4

 
$
1.5

 
$
1.8


Postretirement Healthcare Plans — Net postretirement healthcare costs were not significant for the three and six months ended March 31, 2019 and 2018.

Defined Contribution Plans — Expenses related to our defined contribution plans were $2.9 and $5.7 for the three and six months ended March 31, 2019 and $2.9 and $5.6 for the same periods in the prior year.
v3.19.1
Income Taxes
6 Months Ended
Mar. 31, 2019
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
 
The effective tax rates for the three months ended March 31, 2019 and 2018 were 25.9% and (176.6)%. The negative effective tax rate in the prior year quarter primarily resulted from the nondeductible portion of the previously mentioned impairment charge recorded in the Process Equipment Group segment and the resulting loss before tax for the quarter. Additionally, the current year increase in the effective tax rate includes the effect of an unfavorable geographic mix of pretax income, partially offset by the full implementation of the Tax Cuts and Jobs Act (“Tax Act”).

The effective tax rates for the six months ended March 31, 2019 and 2018 were 29.2% and 106.3%. The high effective tax rate in the prior year primarily resulted from the nondeductible portion of the previously mentioned impairment charge recorded in the Process Equipment Group segment and the impact of the Tax Act, as driven by the items discussed below. Additionally, the current year decrease in the effective tax rate is partially driven by the full implementation of the Tax Act, partially offset by the effects of an unfavorable geographic mix of pretax income and an increase in reserve for uncertain tax positions.

The Tax Act was enacted on December 22, 2017. The majority of the provisions of the Tax Act were to be effective for tax years beginning after December 31, 2017 (which corresponds to Hillenbrand’s current fiscal year ending September 30, 2019). As a non-calendar year end company, certain of the provisions of the Tax Act were effective for us for the fiscal year ended September 30, 2018, while others became effective for our current fiscal year ending September 30, 2019. The Tax Act reduced the federal corporate tax rate from 35% to 21%, which became effective on January 1, 2018. The Internal Revenue Code provides that our fiscal year ended September 30, 2018 had a blended U.S. corporate tax rate of 24.5%, which is based on a proration of the applicable tax rates before and after effective date of the Tax Act. The statutory tax rate of 21% applies to fiscal year ending September 30, 2019 and future years. Shortly after the Tax Act was enacted, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), which provides guidance on accounting for the Tax Act’s impact. SAB 118 provides a measurement period, which in no case should extend beyond one year from the Tax Act enactment date, during which a company acting in good faith may complete the accounting for the impacts of the Tax Act under Accounting Standards Codification Topic 740 (“ASC 740”). Per SAB 118, the Company must reflect the income tax effects of the Tax Act in the reporting period in which the accounting under ASC 740 is complete.

In accordance with SAB 118, to the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete, the company can determine a reasonable estimate for those effects and record a provisional estimate in the financial statements in the first reporting period in which a reasonable estimate can be determined. If a company cannot determine a provisional estimate to be included in the financial statements, the company should continue to apply ASC 740 based on the provisions of the tax laws that were in effect immediately prior to the Tax Act being enacted.

The impact of the federal tax rate reduction under the Tax Act was recognized in the rate applied to earnings for the fiscal year ended September 30, 2018. The reduction for this period was from 35.0% to 24.5%. The further reduction of the federal tax rate to the statutory tax rate of 21% under the Tax Act is being recognized in the rate applied to earnings for the fiscal year ending September 30, 2019.

We recorded a provisional discrete net tax expense of $14.3 related to the Tax Act in the quarter ended December 31, 2017. This net expense includes a benefit of $14.9 due to the remeasurement of our deferred tax items to reflect the impact of the federal tax rate reduction on our net deferred tax liabilities.

Furthermore, Hillenbrand is subject to a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries (the “Transition Tax”) as enacted pursuant to the Tax Act. This Transition Tax was imposed on the deferred accumulated earnings of foreign subsidiaries at an effective rate of 15.5% of foreign earnings attributable to cash and cash equivalents, and 8% of the residual foreign earnings. During the fiscal year ended September 30, 2018, we recorded a provisional net expense for the Transition Tax of $24.6. During the quarter ended December 31, 2018, we completed our determination of the effect of the Transition Tax and, pursuant to SAB 118, we recognized a $0.5 increase to the Transition Tax liability, resulting in a Transition Tax liability of $25.1. Hillenbrand elected to pay the Transition Tax over eight years and made the first installment payment of $2.0 during the quarter ended December 31, 2018. The remaining Transition Tax liability is included in Other current liabilities ($2.0) and Other long-term liabilities ($21.1) in the Consolidated Balance Sheet at March 31, 2019.

In connection with the Tax Act, we evaluated our future cash deployment needs and revised our permanent reinvestment assertions. While we continue to assert permanent reinvestment for the earnings of certain of our foreign subsidiaries, we recognized an additional $1.3 of deferred tax liability during the quarter ended December 31, 2018, associated with those foreign subsidiaries where we no longer maintain a permanent reinvestment assertion.

As noted above, the enactment dates for many of the provisions within the Tax Act were for tax years beginning after December 31, 2017, and as a result, certain provisions were not effective until our current fiscal year ending September 30, 2019. These provisions have been incorporated into the current period tax provision, and include recognizing global intangible low-taxed income and foreign derived intangible income, eliminating U.S. federal income taxes on dividends from foreign subsidiaries, eliminating the domestic production activity deduction, limiting the amount of deductible interest expense, limiting the use of foreign tax credits to reduce the U.S. income tax liability, and limiting the deduction of executive compensation, as well as other provisions.
v3.19.1
Earnings Per Share
6 Months Ended
Mar. 31, 2019
Earnings Per Share [Abstract]  
Earnings Per Share

The dilutive effects of performance-based stock awards were included in the computation of diluted earnings per share at the level the related performance criteria were met through the respective balance sheet date.  At March 31, 2019 and 2018, potential dilutive effects, representing approximately 400,000 shares at each period, were excluded from the computation of diluted earnings per share as the related performance criteria were not yet met, although we expect to meet various levels of criteria in the future.

 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
 
2019
 
2018
 
2019
 
2018
Net income (loss) (1)
$
38.0

 
$
(21.9
)
 
$
66.3

 
$
(3.8
)
Weighted average shares outstanding (basic - in millions)
62.9

 
63.3

 
62.9

 
63.5

Effect of dilutive stock options and other unvested equity awards (in millions)
0.5

 

 
0.5

 

Weighted average shares outstanding (diluted - in millions)
63.4

 
63.3

 
63.4

 
63.5

 
 
 
 
 
 
 
 
Basic earnings per share
$
0.60

 
$
(0.34
)
 
$
1.05

 
$
(0.06
)
Diluted earnings per share
$
0.60

 
$
(0.34
)
 
$
1.05

 
$
(0.06
)
 
 
 
 
 
 
 
 
Shares with anti-dilutive effect excluded from the computation of diluted earnings per share (in millions)
1.1

 
1.2

 
0.9

 
1.0

 
(1) Net income (loss) attributable to Hillenbrand
v3.19.1
Other Comprehensive Income (Loss)
6 Months Ended
Mar. 31, 2019
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]  
Schedule of reclassifications of AOCI
Other Comprehensive Income (Loss)
 
Pension and
Postretirement
 
Currency
Translation
 
Net
Unrealized
Gain (Loss)
on Derivative
Instruments
 
Total
Attributable
to
Hillenbrand,
Inc.
 
Noncontrolling
Interests
 
Total
Balance at September 30, 2018
$
(41.0
)
 
$
(44.1
)
 
$
0.9

 
$
(84.2
)
 
 

 
 

Other comprehensive income before reclassifications
 

 
 

 
 

 
 

 
 

 
 

Before tax amount

 
(9.7
)
 
(11.0
)
 
(20.7
)
 
$
0.2

 
$
(20.5
)
Tax expense

 

 
2.6

 
2.6

 

 
2.6

After tax amount

 
(9.7
)
 
(8.4
)
 
(18.1
)
 
0.2

 
(17.9
)
Amounts reclassified from accumulated other comprehensive income(1)
0.5

 

 

 
0.5

 

 
0.5

Net current period other comprehensive income (loss)
0.5

 
(9.7
)
 
(8.4
)
 
(17.6
)
 
$
0.2

 
$
(17.4
)
Balance at March 31, 2019
$
(40.5
)
 
$
(53.8
)
 
$
(7.5
)
 
$
(101.8
)
 
 

 
 

(1)  Amounts are net of tax.

 
Pension and
Postretirement
 
Currency
Translation
 
Net
Unrealized
Gain (Loss)
on Derivative
Instruments
 
Total
Attributable
to
Hillenbrand,
Inc.
 
Noncontrolling
Interests
 
Total
Balance at September 30, 2017
$
(45.3
)
 
$
(36.9
)
 
$
1.0

 
$
(81.2
)
 
 

 
 

Other comprehensive income before reclassifications
 

 
 

 
 

 
 

 
 

 
 

Before tax amount

 
21.0

 
0.8

 
21.8

 
$

 
$
21.8

Tax expense

 

 
(0.2
)
 
(0.2
)
 

 
(0.2
)
After tax amount

 
21.0

 
0.6

 
21.6

 

 
21.6

Amounts reclassified from accumulated other comprehensive income(1)
1.4

 

 
(0.3
)
 
1.1

 

 
1.1

Net current period other comprehensive income (loss)
1.4

 
21.0

 
0.3

 
22.7

 
$

 
$
22.7

Balance at March 31, 2018
$
(43.9
)
 
$
(15.9
)
 
$
1.3

 
$
(58.5
)
 
 

 
 

 (1)  Amounts are net of tax.

Reclassifications out of Accumulated Other Comprehensive Income include: 
 
Three Months Ended March 31, 2019
 
Amortization of Pension and
Postretirement (1)
 
(Gain)/Loss on
 
 
 
Net Loss
Recognized
 
Prior Service Costs
Recognized
 
Derivative
Instruments
 
Total
Affected Line in the Consolidated Statement of Operations:
 

 
 

 
 

 
 

Net revenue
$

 
$

 
$
0.1

 
$
0.1

Cost of goods sold

 

 
(0.1
)
 
(0.1
)
Operating expenses

 

 

 

Other income (expense), net
0.4

 

 

 
0.4

Total before tax
$
0.4

 
$

 
$

 
$
0.4

Tax expense
 
 
 
 
 
 
(0.1
)
Total reclassifications for the period, net of tax
 
 
 
 
 
 
$
0.3


 
Six Months Ended March 31, 2019
 
Amortization of Pension and
Postretirement (1)
 
(Gain)/Loss on
 
 
 
Net Loss
Recognized
 
Prior Service Costs
Recognized
 
Derivative
Instruments
 
Total
Affected Line in the Consolidated Statement of Operations:
 

 
 

 
 

 
 

Net revenue
$

 
$

 
$
0.2

 
$
0.2

Cost of goods sold

 

 
(0.2
)
 
(0.2
)
Operating expenses

 

 

 

Other income (expense), net
0.7

 

 

 
0.7

Total before tax
$
0.7

 
$

 
$

 
$
0.7

Tax expense
 
 
 
 
 
 
(0.2
)
Total reclassifications for the period, net of tax
 
 
 
 
 
 
$
0.5


(1) These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 8).

 
Three Months Ended March 31, 2018
 
Amortization of Pension and
Postretirement (1)
 
(Gain)/Loss on
 
 
 
Net Loss
Recognized
 
Prior Service Costs
Recognized
 
Derivative
Instruments
 
Total
Affected Line in the Consolidated Statement of Operations:
 

 
 

 
 

 
 

Net revenue
$

 
$

 
$

 
$

Cost of goods sold

 

 

 

Operating expenses

 

 

 

Other income (expense), net
0.9

 

 

 
0.9

Total before tax
$
0.9

 
$

 
$

 
$
0.9

Tax expense
 

 
 

 
 

 
(0.2
)
Total reclassifications for the period, net of tax
 

 
 

 
 

 
$
0.7


 
Six Months Ended March 31, 2018
 
Amortization of Pension and
Postretirement (1)
 
(Gain)/Loss on
 
 
 
Net Loss
Recognized
 
Prior Service Costs
Recognized
 
Derivative
Instruments
 
Total
Affected Line in the Consolidated Statement of Operations: