HILLENBRAND, INC., 10-Q filed on 5/2/2018
Quarterly Report
v3.8.0.1
Document and Entity Information - shares
6 Months Ended
Mar. 31, 2018
Apr. 27, 2018
Document and Entity Information    
Entity Registrant Name Hillenbrand, Inc.  
Entity Central Index Key 0001417398  
Document Type 10-Q  
Document Period End Date Mar. 31, 2018  
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   62,512,606
Document Fiscal Year Focus 2018  
Document Fiscal Period Focus Q2  
v3.8.0.1
Consolidated Statements of Income - USD ($)
shares in Millions, $ in Millions
3 Months Ended 6 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Mar. 31, 2018
Mar. 31, 2017
Income Statement [Abstract]        
Net revenue [1] $ 452.2 $ 395.3 $ 849.4 $ 751.4
Cost of goods sold 283.5 246.7 534.4 476.8
Gross profit 168.7 148.6 315.0 274.6
Operating expenses 98.3 85.6 187.5 168.4
Amortization of Intangible Assets 7.5 7.2 15.1 14.4
Asset Impairment Charges 63.4 0.0 63.4 0.0
Interest expense 6.0 6.3 12.3 12.4
Other (expense) income, net (1.2) (0.6) (1.6) (1.9)
(Loss) income before income taxes (7.7) 48.9 35.1 77.5
Income tax expense 13.6 14.9 37.3 21.6
Consolidated net (loss) income (21.3) 34.0 (2.2) 55.9
Less: Net income attributable to noncontrolling interests 0.6 0.6 1.6 0.8
Net income [2] $ (21.9) $ 33.4 $ (3.8) $ 55.1
Net income - per share of common stock:        
Basic earnings per share $ (0.34) $ 0.52 $ (0.06) $ 0.86
Diluted earnings per share $ (0.34) $ 0.52 $ (0.06) $ 0.86
Weighted average shares outstanding (basic) 63.3 63.9 63.5 63.8
Weighted average shares outstanding (diluted) 63.3 64.4 63.5 64.3
Cash dividends declared per share $ 0.2075 $ 0.2050 $ 0.4150 $ 0.4100
[1] We attribute revenue to a geography based upon the location of the business unit that consummates the external sale.
[2] Net (loss) income attributable to Hillenbrand
v3.8.0.1
Consolidated Statements of Comprehensive Income - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Mar. 31, 2018
Mar. 31, 2017
Statement of Comprehensive Income [Abstract]        
Consolidated net (loss) income $ (21.3) $ 34.0 $ (2.2) $ 55.9
Changes in other comprehensive income (loss), net of tax        
Currency translation adjustment 14.7 7.5 21.0 (13.4)
Pension and postretirement (net of quarter-to-date tax of $0.4 and $2.5 and year-to-date tax of $0.7 and $5.0) 0.7 4.5 1.4 8.9
Change in net unrealized gain on derivative instruments (net of quarter-to-date tax of $0.1 and $0.5 and year-to-date tax of $0.1 and $0.8) 0.5 1.1 0.3 1.5
Total changes in other comprehensive income (loss), net of tax 15.9 13.1 22.7 (3.0)
Consolidated comprehensive (loss) income (5.4) 47.1 20.5 52.9
Less: Comprehensive income attributable to noncontrolling interests 0.5 0.9 1.6 1.0
Comprehensive income (loss) [1],[2] $ (5.9) $ 46.2 $ 18.9 $ 51.9
[1] Comprehensive (loss) income attributable to Hillenbrand
[2] Comprehensive income (loss) attributable to Hillenbrand
v3.8.0.1
Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Mar. 31, 2018
Mar. 31, 2017
Statement of Comprehensive Income [Abstract]        
Pension and postretirement, tax $ 0.4 $ 2.5 $ 0.7 $ 5.0
Change in net unrealized gain (loss) on derivative instruments, tax $ 0.1 $ 0.5 $ 0.1 $ 0.8
v3.8.0.1
Consolidated Balance Sheets - USD ($)
$ in Millions
Mar. 31, 2018
Sep. 30, 2017
Current Assets    
Cash and cash equivalents $ 68.5 $ 66.0
Trade receivables, net 194.8 206.1
Receivables from long-term manufacturing contracts 179.3 125.2
Inventories 180.6 151.6
Prepaid expenses 34.3 28.2
Other current assets 23.2 16.5
Total current assets 680.7 593.6
Property, plant, and equipment, net 146.1 150.4
Intangible assets, net 517.8 523.9
Goodwill 602.6 647.5
Other assets 42.2 41.1
Total Assets 1,989.4 1,956.5
Current Liabilities    
Trade accounts payable 175.2 158.0
Liabilities from long-term manufacturing contracts and advances 165.8 132.3
Current portion of long-term debt 0.7 18.8
Accrued compensation 55.8 66.9
Other current liabilities 133.3 135.7
Total current liabilities 530.8 511.7
Long-term debt 478.4 446.9
Accrued pension and postretirement healthcare 130.0 129.6
Deferred income taxes 62.0 75.7
Other long-term liabilities 56.2 26.7
Total Liabilities 1,257.4 1,190.6
Commitments and contingencies (Note 14)
SHAREHOLDERS’ EQUITY    
Common stock, no par value (63.9 and 63.8 shares issued, 62.7 and 63.1 shares outstanding) 0.0 0.0
Additional paid-in capital 346.4 349.9
Retained earnings 476.9 507.1
Treasury stock (1.2 and 0.7 shares) (48.0) (24.4)
Accumulated other comprehensive loss (58.5) (81.2)
Hillenbrand Shareholders’ Equity 716.8 751.4
Noncontrolling interests 15.2 14.5
Total Shareholders’ Equity 732.0 765.9
Total Liabilities and Equity $ 1,989.4 $ 1,956.5
v3.8.0.1
Consolidated Balance Sheets (Parenthetical) - $ / shares
Mar. 31, 2018
Sep. 30, 2017
Statement of Financial Position [Abstract]    
Common stock, par value (in dollars per share)
Common stock, shares issued 63,900,000.0 63,700,000.0
Common stock, shares outstanding 62,700,000.0 63,000,000.0
Treasury stock, shares 1,200,000.0 700,000.0
v3.8.0.1
Consolidated Statements of Cash Flow - USD ($)
$ in Millions
6 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Operating Activities    
Consolidated net (loss) income $ (2.2) $ 55.9
Adjustments to reconcile net (loss) income to cash provided by operating activities:    
Depreciation and amortization 27.8 28.6
Asset Impairment Charges 63.4 0.0
Deferred income taxes (10.4) 17.3
Share-based compensation 6.2 5.7
Gain (Loss) on Investments 0.0 (1.0)
Trade accounts receivable and receivables on long-term manufacturing contracts (34.2) (8.3)
Inventories (25.6) 0.1
Prepaid expenses and other current assets (10.7) (5.5)
Trade accounts payable 12.8 0.4
Accrued expenses and other current liabilities 10.3 11.5
Income taxes payable 26.5 (5.7)
Defined benefit plan and postretirement funding (5.6) (85.3)
Defined benefit plan and postretirement expense 2.3 3.5
Other, net 0.9 2.6
Net cash provided by operating activities 61.5 19.8
Investing Activities    
Capital expenditures (10.6) (9.1)
Proceeds from sales of property, plant, and equipment 0.0 2.2
Other, net 0.3 (0.1)
Net cash used in investing activities (10.3) (7.0)
Financing Activities    
Repayments on term loan (148.5) (6.7)
Proceeds from revolving credit facilities, net of financing costs 701.8 551.7
Repayments on revolving credit facilities (542.8) (524.8)
Payments of dividends on common stock (26.2) (26.0)
Repurchases of common stock (38.9) (17.0)
Net proceeds on stock plans 5.2 10.2
Other, net (1.0) (0.2)
Net cash used in financing activities (50.4) (12.8)
Effect of exchange rates on cash and cash equivalents 1.7 (0.6)
Net cash flows 2.5 (0.6)
Cash and cash equivalents:    
At beginning of period 66.0 52.0
At end of period $ 68.5 $ 51.4
v3.8.0.1
Background and Basis of Presentation
6 Months Ended
Mar. 31, 2018
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 market-leading brands that serve a wide variety of industries across the globe.  We strive to provide superior return for our shareholders, exceptional value for our customers, and great professional opportunities for our employees 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 North American death care industry.  “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, 2017, as filed with the SEC.  The September 30, 2017 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 certain assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expense 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.
v3.8.0.1
Summary of Significant Accounting Policies
6 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
Recently Issued Accounting Standard

2.
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 2017, except as described below.

Income taxes

On December 22, 2017, the U.S. government enacted tax legislation referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code that will impact our fiscal year ended September 30, 2018 including, but not limited to (a) reducing the U.S. federal corporate tax rate, (b) requiring a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries (“Transition Tax”), and (c) accelerating expensing of certain capital expenditures. The Tax Act reduced the federal corporate tax rate from 35% to 21%. The Internal Revenue Code stipulates that our fiscal year ending September 30, 2018 will have a blended corporate tax rate of 24.5%, which is based on a proration of the applicable tax rates before and after the effective date of the Tax Act. The statutory tax rate of 21% will apply to future years.

We establish deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Deferred tax assets and liabilities are determined in part based on the differences between the accounting treatment of tax assets and liabilities under GAAP and the tax basis of assets and liabilities using statutory tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in statutory tax rates on deferred tax assets and liabilities is recognized in net income in the period that includes the enactment date. We continue to assert that the majority of the cash at our foreign subsidiaries represents earnings considered to be permanently reinvested for which deferred taxes have not been provided for in our financial statements, as we do not intend, nor do we foresee a need, to repatriate these funds. However, with the enactment of the Tax Act, we are evaluating our future cash deployment and may change our permanent reinvestment assertion in future periods.

We have a variety of deferred income tax assets in numerous tax jurisdictions. The recoverability of these deferred income tax assets is assessed periodically and valuation allowances are recognized if it is determined that it is more likely than not that the benefits will not be realized. When performing this assessment, we consider future taxable income, the reversal of existing temporary differences, and tax planning strategies. We account for accrued interest and penalties related to unrecognized tax benefits in income tax expense.

Recently Adopted Accounting Standards

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. ASU 2017-04 eliminates Step 2 from the goodwill impairment test and modifies the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value.  We early adopted this standard for fiscal year 2018. See Note 5 of Part I and Item 2, Critical Accounting Estimates, of this Form 10-Q for further information on the impact this adoption had on our consolidated results of operations, financial position, and cash flows.

Recently Issued Accounting Standards
 
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09 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 FASB has also issued several updates to ASU 2014-09. The new standard supersedes U.S. GAAP guidance on revenue recognition and requires the use of more estimates and judgments than the present 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. ASU 2014-09 will be effective for our fiscal year beginning October 1, 2018, including interim periods within that reporting period, and allows for either full retrospective adoption or modified retrospective adoption.

We continue to evaluate the impact that ASU 2014-09 will have on our consolidated financial statements and financial reporting processes, including evaluating new disclosure requirements. Based on our initial assessment, which included a comparison of our existing accounting policies and practices against the new standard and a review of contracts active during and through the end of 2016, we believe the key areas of consideration for our financial statements include percentage-of-completion accounting, separate performance obligations, and related revenue recognized over time. Based on our initial assessment, we also expect to adopt this new standard using the modified retrospective method, which will result in a cumulative effect adjustment as of the date of adoption, and we currently do not expect the adoption of ASU 2014-09 to have a material impact on our consolidated financial statements.

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, with early adoption permitted. We are currently evaluating the impact that ASU 2016-02 will have on our consolidated financial statements.

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.

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 2016-17 will be effective for our fiscal year beginning on October 1, 2018, with early adoption permitted. We expect the adoption of ASU 2016-18 to have 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 will be effective for our fiscal year beginning on October 1, 2018, with early adoption permitted. We are currently evaluating ASU 2017-01, but do not expect it to 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 will be effective for our fiscal year beginning on October 1, 2018, with early adoption permitted. We are currently evaluating the impact that ASU 2017-07 will have on our consolidated financial statements.

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 will be effective for our fiscal year beginning on October 1, 2018, with early adoption permitted. The amendment would be applied prospectively to an award modified on or after the adoption date. We do not expect ASU 2017-09 to have a significant impact on our consolidated financial statements.

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 will be effective for our fiscal year beginning on October 1, 2019, with early adoption permitted. The amendment would be applied to hedging relationships existing on the date of adoption and the effect of adoption would be reflected as of the beginning of the fiscal year of adoption (that is, the initial application date). We are currently evaluating the impact that ASU 2017-12 will have on our consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. ASU 2018-02 allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act. The amendments in this ASU also require certain disclosures about stranded tax effects. The amendments eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the usefulness of information reported to financial statement users. However, because the amendments only relate to the reclassification of the income tax effects of the Tax Cuts and Jobs Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. ASU 2018-02 will be effective for our fiscal year beginning on October 1, 2019, with early adoption permitted. We are currently evaluating the impact that ASU 2018-02 will have on our consolidated financial statements.
v3.8.0.1
Business Acquisitions (Notes)
6 Months Ended
Mar. 31, 2018
Business Combinations [Abstract]  
Business Combination Disclosure [Text Block]
3.
Business Acquisitions

Abel
 
We completed the acquisition of Abel Pumps LP and Abel GmbH & Co. KG and certain of their affiliates (collectively “Abel”) on October 2, 2015 for €95 in cash.  We utilized borrowings under our former $700.0 revolving credit facility and former $180.0 term loan to fund this acquisition. Based in Büchen, Germany, Abel is a globally-recognized leader in positive displacement pumps. Abel specializes in designing, developing, and manufacturing piston and piston diaphragm pumps as well as pumping solutions and in providing related parts and service. This equipment is sold under the ABEL® Pump Technology brand into the power generation, wastewater treatment, mining, general industry, and marine markets. The results of Abel are reported in our Process Equipment Group segment for the relevant periods.

Based on the final purchase price allocation, we recorded goodwill of $36 and acquired identifiable intangible assets of $58, which consisted of $5 of trade names not subject to amortization, $9 of developed technology, $3 of backlog, and $41 of customer relationships. In addition, we recorded $14 of net tangible assets, primarily working capital. Goodwill is deductible for tax purposes in Germany. Supplemental proforma information has not been provided as the acquisition did not have a material impact on consolidated results of operations.

Red Valve

On February 1, 2016, we completed the acquisition of Red Valve Company, Inc. (“Red Valve”) for $130.4 in cash, net of certain adjustments. We utilized borrowings under our former $700.0 revolving credit facility and former $180.0 term loan to fund this acquisition. Based in Carnegie, Pennsylvania, Red Valve is a global leader in highly-engineered valves designed to operate in the harshest municipal and industrial wastewater environments. Its products support mission critical applications in water/wastewater, power and mining, and other general industrial markets. The results of Red Valve are reported in our Process Equipment Group segment for the relevant periods.

Based on the final purchase price allocation, we recorded goodwill of $59 and acquired identifiable intangible assets of $61, which consisted of $4 of trade names not subject to amortization, $8 of developed technology, $1 of backlog, and $48 of customer relationships. In addition, we recorded $10 of net tangible assets, primarily working capital. Goodwill is deductible for tax purposes. Supplemental proforma information has not been provided as the acquisition did not have a material impact on consolidated results of operations.

Both of these acquisitions continue Hillenbrand’s strategy to transform into a world-class global diversified industrial company by increasing our ability to expand into new markets and geographies within the highly attractive flow control space. The fair value of these acquisitions 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.
v3.8.0.1
Supplemental Balance Sheet Information
6 Months Ended
Mar. 31, 2018
Balance Sheet Related Disclosures [Abstract]  
Supplemental Balance Sheet Information
Supplemental Balance Sheet Information
 
 
March 31,
2018
 
September 30,
2017
Trade accounts receivable reserves
$
21.7

 
$
21.6

 
 
 
 
Accumulated depreciation on property, plant, and equipment
$
317.5

 
$
311.8

 
 
 
 
Inventories:
 

 
 

Raw materials and components
$
67.2

 
$
52.6

Work in process
56.5

 
55.4

Finished goods
56.9

 
43.6

Total inventories
$
180.6

 
$
151.6

 

We had restricted cash of $0.5 and $0.8 included in other current assets in the Consolidated Balance Sheets at March 31, 2018 and September 30, 2017.
v3.8.0.1
Intangible Assets and Goodwill (Notes)
6 Months Ended
Mar. 31, 2018
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 impairment.  

The following tables summarize the carrying amounts and related accumulated amortization for intangible assets as of March 31, 2018 and September 30, 2017.
 

 
March 31, 2018
 
September 30, 2017
 
Cost
 
Accumulated
Amortization
 
Cost
 
Accumulated
Amortization
Finite-lived assets:
 

 
 

 
 

 
 

Trade names
$
0.2

 
$
(0.1
)
 
$
0.2

 
$
(0.1
)
Customer relationships
477.4

 
(140.0
)
 
468.7

 
(125.9
)
Technology, including patents
82.8

 
(43.7
)
 
80.7

 
(39.9
)
Software
57.5

 
(47.6
)
 
48.3

 
(41.5
)
Other
0.2

 
(0.2
)
 
0.2

 
(0.2
)
 
618.1

 
(231.6
)
 
598.1

 
(207.6
)
Indefinite-lived assets:
 

 
 

 
 

 
 

Trade names
131.3

 

 
133.4

 

 
 
 
 
 
 
 
 
Total
$
749.4

 
$
(231.6
)
 
$
731.5

 
$
(207.6
)


As a result of the required annual impairment assessment performed in the third quarter of 2017, the fair value of trade names was determined to meet or exceed the carrying value for all trade names, resulting in no impairment to trade names.

The net change in intangible assets during the six months ended March 31, 2018 was driven by normal amortization, foreign currency translation, and an impairment charge on certain trade names. See below for an update to the impairment assessment for trade names most directly impacted by domestic coal mining and coal power for which an impairment of $4.6 pre-tax ($3.5 after tax) was recorded during the quarter ended March 31, 2018. As of March 31, 2018 we had approximately $4 of trade name book value remaining in the Process Equipment Group segment most directly impacted by domestic coal mining and coal power. In conjunction with our impairment testing, we also reassessed the useful lives of other definite-lived intangible assets specific to the intangibles impacted by domestic coal mining and coal power, resulting in no significant changes in amortization.

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, 2017
$
639.2

 
$
8.3

 
$
647.5

Impairment charge
58.8

 

 
58.8

Foreign currency adjustments
13.9

 

 
13.9

Balance March 31, 2018
$
594.3

 
$
8.3

 
$
602.6



As a result of the required annual impairment assessment performed in the third quarter of 2017, the Company tested the recoverability of its goodwill, and in all reporting units, the fair value of goodwill was determined to exceed the carrying value, resulting in no impairment of goodwill. Since the fair value of each reporting unit exceeded its carrying value, the second step of the goodwill impairment test was not necessary.

As previously disclosed, the fair value of the reporting unit in the Process Equipment Group segment that is most directly impacted by domestic coal mining and coal power had exceeded its carrying value by less than 10% for three quarters. Testing for impairment of goodwill and indefinite lived assets must be performed annually, or on an interim basis upon the occurrence of triggering events or substantive changes in circumstances that indicate fair value is impaired.  In connection with the preparation of the quarterly financial statements for the second quarter 2018, an interim impairment assessment was performed at the previously mentioned reporting unit in the Process Equipment Group segment. 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. The pre-impairment goodwill balance for the reporting unit was $71.3.  A 10% further reduction in the fair value of this reporting unit would indicate a potential additional impairment of $7.4.  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.
v3.8.0.1
Financing Agreements
6 Months Ended
Mar. 31, 2018
Debt Disclosure [Abstract]  
Financing Agreements
Financing Agreements
 
March 31,
2018
 
September 30,
2017
$900 revolving credit facility (excluding outstanding letters of credit)
$
229.7

 
$
68.0

$180 term loan

 
148.5

$150 senior unsecured notes, net of discount (1)
149.1

 
148.9

$100 Series A Notes (2)
99.6

 
99.7

Other
0.7

 
0.6

Total debt
479.1

 
465.7

Less: current portion
0.7

 
18.8

Total long-term debt
$
478.4

 
$
446.9

 
 
 
 
(1) Includes debt issuance costs of $0.5 and $0.6 at March 31, 2018 and September 30, 2017.
(2) Includes debt issuance costs of $0.4 and $0.3 at March 31, 2018 and September 30, 2017.


On March 8, 2018, the Company entered into a Syndicated Letter of Guarantee Facility Agreement (the “L/G Facility Agreement”) by and among the Company and certain of its affiliates, the lenders party thereto, and Commerzbank Finance & Covered Bond S.A., acting as agent. The L/G Facility Agreement replaces the Company’s former Syndicated L/G Facility Agreement dated as of June 3, 2013 and permits the Company and certain of its subsidiaries to request that one or more of the lenders issue up to an aggregate of €150.0 in unsecured letters of credit, bank guarantees or other surety bonds (collectively, the “Guarantees”).

The Guarantees carry an annual fee that varies based on the Company’s leverage ratio. The L/G Facility Agreement also provides for a leverage-based commitment fee assessed on the undrawn portion of the facility. The L/G Facility Agreement matures in December 2022, but can be extended or terminated earlier under certain conditions. New deferred financing costs related to the L/G Facility Agreement were $1.0, which along with existing costs of $0.6, are being amortized to interest expense over the term of the agreement.

On December 8, 2017, the Company entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”), which governs our revolving credit facility (the “Facility”), by and among the Company and certain of its affiliates, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent. The Credit Agreement amended and extended the Company’s former credit agreement which provided for a revolving credit facility of up to $700.0 in aggregate principal amount and a term loan in an original principal amount of $180.0.

The Credit Agreement increased the maximum principal amount available for borrowing under the Facility from $700.0 to $900.0. In connection with the Credit Agreement, the Company repaid the existing term loan in full with borrowings under the Facility. The aggregate principal amount available for borrowing under the Credit Agreement may be expanded, subject to the approval of the lenders, by an additional $450.0. The Credit Agreement extended the maturity date of the Facility to December 8, 2022. New deferred financing costs related to the Credit Agreement were $2.1, which along with existing costs of $1.0, are being amortized to interest expense over the term of the Facility.

On December 8, 2017, the Company and certain of its domestic subsidiaries entered into the fourth amendment to the private shelf agreement (as amended, the “Shelf Agreement”), which amended the private shelf agreement dated December 6, 2012, among the Company, the subsidiary guarantors, PGIM, Inc. (f/k/a Prudential Investment Management, Inc.) and each Prudential Affiliate (as defined therein), pursuant to which the Company issued its 4.60% Series A unsecured notes maturing December 15, 2024 (the “Series A Notes”). The amendment conformed certain terms of the Shelf Agreement with those contained in the Credit Agreement.

The Credit Agreement, the L/G Facility Agreement, and the Shelf Agreement provide the Company with increased flexibility in its financial covenants, specifically: the maximum ratio of Indebtedness to EBITDA (as defined in the agreements, “Leverage Ratio”) of 3.5 to 1.0 allows for the application of cash as a reduction of Indebtedness (subject to certain limitations); the maximum Leverage Ratio resulting from an acquisition in excess of $75.0 is increased to 4.0 to 1.0 for a period of three consecutive quarters following such acquisition; and the minimum ratio of EBITDA (as defined in the agreements) to interest expense is reduced to 3.0 to 1.0. Additionally, the Credit Agreement, the L/G Facility Agreement, and the Shelf Agreement provide the Company with increased flexibility to sell assets and to incur debt at our international subsidiaries.
 
With respect to the Facility, as of March 31, 2018, we had $7.5 in outstanding letters of credit issued and $662.8 of maximum borrowing capacity. $644.3 of this borrowing capacity is immediately available based on our most restrictive covenant, with additional amounts available in the event of a qualifying acquisition.  The weighted-average interest rates on borrowings under the Facility were 2.03% and 1.82% for the three and six months ended March 31, 2018, and 1.44% and 1.42% for the same periods in the prior year. The weighted average facility fee was 0.15% and 0.17% for the three and six months ended March 31, 2018, and 0.23% for the same periods in the prior year. The weighted average interest rate on the Facility’s term loan was 2.60% for 2018 (until the date of repayment) and 2.16% and 2.05% for the three and six months ended March 31, 2017.
 
We have interest rate swaps on $50.0 of outstanding borrowings under the Facility in order to manage exposure to our variable interest payments. Additionally, we have cross currency swaps on $55.0 of outstanding borrowings under the Facility to manage currency and interest rate risk exposure on foreign currency denominated debt.  The cross currency swaps are not designated as hedging instruments for accounting purposes.

In the normal course of business, the Process Equipment Group provides to certain customers guarantees 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, 2018, we had credit arrangements totaling $252.7, under which $187.4 was utilized for this purpose. These arrangements include our L/G Facility Agreement and other ancillary guarantee facilities.

The Credit Agreement, the L/G Facility Agreement, and the Shelf Agreement require us to meet certain conditions including compliance with covenants, absence of default, and continued accuracy of certain representations and warranties. As of March 31, 2018, we were in compliance with all covenants.

All obligations of the Company arising under the Credit Agreement, our senior unsecured notes, the Shelf Agreement, the Series A Notes, and the L/G Facility Agreement are fully and unconditionally guaranteed by certain of the Company’s domestic subsidiaries.
v3.8.0.1
Income Taxes
6 Months Ended
Mar. 31, 2018
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
 
The effective tax rates for the three months ended March 31, 2018 and 2017 were (176.6)% and 30.5%. The negative effective tax rate in the current year quarter primarily resulted from the nondeductible portion of the impairment charge recorded in the Process Equipment Group segment and the resulting loss before tax for the quarter. Partially offsetting this impact, the Tax Act resulted in a reduced tax rate as compared to the prior year.

The effective tax rates for the six months ended March 31, 2018 and 2017 were 106.3% and 27.9%. The high effective tax rate in the period primarily resulted from the nondeductible portion of the impairment charge recorded in the Process Equipment Group segment. Additionally, the impact of the Tax Act resulted in a higher tax rate as compared to the prior year driven by the items discussed below.

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. If a Company is unable to provide a reasonable estimate of the impacts of the Tax Act in a reporting period, a provisional amount must be recorded in the first reporting period in which a reasonable estimate can be determined.

The impact of the federal tax rate reduction from 35.0% to 24.5% was recognized in the rate applied to earnings. We have reflected the tax effect of temporary differences originating in the current period at the 24.5% federal tax rate and have recognized the deferred tax effect of such differences that will reverse in future periods at the 21% federal tax rate. In addition, we recorded a provisional discrete net tax expense of $14.3 related to the Tax Act in the quarter ending 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 corporate rate reduction on our net deferred tax balances. While we are able to make a reasonable estimate of the impact of the reduction in corporate rate on the deferred tax balances, we are continuing to analyze the temporary differences that existed on the date of enactment and the temporary differences originating in the current fiscal year.

These benefits were more than offset by a net expense for the Transition Tax of $28.9 during the quarter ending December 31, 2017. We will not be able to precisely determine the amount of the Transition Tax until the end of fiscal 2018 because certain cash and cash equivalent balances at September 30, 2018 and current year earnings are key inputs in the calculation. Additionally, other information needs to be verified, including cumulative foreign earnings in order to precisely compute the amount of the Transition Tax. Provisional Transition Tax of $2.3 and $26.6 is included in other current liabilities and other long-term liabilities in the Consolidated Balance Sheet at March 31, 2018. During the three months ended March 31, 2018, we did not record an adjustment to the provisional tax expense recognized during the quarter ended December 31, 2017, as we continue to evaluate the impact of the Tax Act. We will recognize an adjustment to the provisional tax expense once we have determined the actual tax impact, pursuant to SAB 118.

The enactment dates for many of the provisions within the Tax Act are for tax years beginning after December 31, 2017, and as a result, certain provisions are not effective until our fiscal year ending September 30, 2019. The provisions that are not effective until our fiscal year 2019 and, as such, have not been incorporated into the current period tax provision, include creating a base erosion anti-abuse tax, eliminating U.S. federal income taxes on dividends from foreign subsidiaries, limiting the amount of deductible interest expense, the repeal of the domestic production activity deduction, limitations on the utilization of foreign tax credits to reduce the U.S. income tax liability as well as other provisions. With the enactment of the Tax Act, we are evaluating our future cash deployment and may change our permanent reinvestment assertion in future periods.
v3.8.0.1
Retirement Benefits
6 Months Ended
Mar. 31, 2018
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,
 
2018
 
2017
 
2018
 
2017
Service costs
$
0.7

 
$
0.9

 
$
0.4

 
$
0.4

Interest costs
2.1

 
2.1

 
0.3

 
0.1

Expected return on plan assets
(3.5
)
 
(3.4
)
 
(0.1
)
 
(0.2
)
Amortization of unrecognized prior service costs, net
0.1

 
0.1

 

 

Amortization of net loss
0.8

 
1.0

 
0.3

 
0.7

Net pension costs
$
0.2

 
$
0.7

 
$
0.9

 
$
1.0

 
 
 
 
 
 
 
 
 
U.S. Pension Benefits
 
Non-U.S. Pension Benefits
 
Six Months Ended March 31,
 
Six Months Ended March 31,
 
2018
 
2017
 
2018
 
2017
Service costs
$
1.4

 
$
1.9

 
$
1.0

 
$
0.8

Interest costs
4.3

 
4.3

 
0.6

 
0.3

Expected return on plan assets
(7.0
)
 
(6.7
)
 
(0.3
)
 
(0.3
)
Amortization of unrecognized prior service costs, net
0.1

 
0.2

 

 

Amortization of net loss
1.6

 
2.1

 
0.5

 
0.7

Net pension costs
$
0.4

 
$
1.8

 
$
1.8

 
$
1.5

 
During the first quarter of 2017, we made an $80.0 contribution to our U.S. defined benefit pension plan (the “Plan”) using cash on hand and funds borrowed from our former $700.0 revolving credit facility. During 2017, we also began implementing a plan to transition our U.S. employees not covered by a collective bargaining agreement, and our employees covered by a collective bargaining agreement at two of our U.S. facilities, from a defined benefit-based model to a defined contribution structure over a three-year sunset period. These changes caused immaterial remeasurements for the Plan for the affected populations.

Postretirement Healthcare Plans — Net postretirement healthcare costs were $0.1 and $0.1 for the three and six months ended March 31, 2018, and $0.1 and $0.2 for the same periods in the prior year.

Defined Contribution Plans — Expenses related to our defined contribution plans were $2.9 and $5.6 for the three and six months ended March 31, 2018, and $3.1 and $5.7 for the same periods in the prior year.
v3.8.0.1
Earnings Per Share
6 Months Ended
Mar. 31, 2018
Earnings Per Share [Abstract]  
Earnings Per Share
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, 2018 and 2017, potential dilutive effects, representing approximately 400,000 and 600,000 shares, 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,
 
2018
 
2017
 
2018
 
2017
Net (loss) income(1)
$
(21.9
)
 
$
33.4

 
$
(3.8
)
 
$
55.1

Weighted average shares outstanding (basic - in millions)
63.3

 
63.9

 
63.5

 
63.8

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

 
0.5

 

 
0.5

Weighted average shares outstanding (diluted - in millions)
63.3

 
64.4

 
63.5

 
64.3

 
 
 
 
 
 
 
 
Basic earnings per share
$
(0.34
)
 
$
0.52

 
$
(0.06
)
 
$
0.86

Diluted earnings per share
$
(0.34
)
 
$
0.52

 
$
(0.06
)
 
$
0.86

 
 
 
 
 
 
 
 
Shares with anti-dilutive effect excluded from the computation of diluted earnings per share (in millions)
1.2

 
0.6

 
1.0

 
0.9

 
(1) Net (loss) income attributable to Hillenbrand
v3.8.0.1
Shareholders' Equity
6 Months Ended
Mar. 31, 2018
Equity [Abstract]  
Shareholders' Equity
Shareholders’ Equity
 
During the six months ended March 31, 2018, we paid approximately $26.2 of cash dividends.  We also repurchased approximately 906,000 shares of our common stock during the six months ended March 31, 2018, at a total cost of approximately $38.9. In connection with our share-based compensation plans discussed further in Note 12, we also issued approximately 548,000 shares of common stock, of which approximately 412,000 shares were from treasury stock.
v3.8.0.1
Other Comprehensive Income (Loss)
6 Months Ended
Mar. 31, 2018
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]  
Other Comprehensive Income (Loss)
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, 2016
$
(67.5
)
 
$
(61.6
)
 
$
(0.7
)
 
$
(129.8
)
 
 

 
 

Other comprehensive income before reclassifications
 

 
 

 
 

 
 

 
 

 
 

Before tax amount
11.0

 
(13.6
)
 
2.0

 
(0.6
)
 
$
0.2

 
$
(0.4
)
Tax expense
(4.0
)
 

 
(0.7
)
 
(4.7
)
 

 
(4.7
)
After tax amount
7.0

 
(13.6
)
 
1.3

 
(5.3
)
 
0.2

 
(5.1
)
Amounts reclassified from accumulated other comprehensive income(1)
1.9

 

 
0.2

 
2.1

 

 
2.1

Net current period other comprehensive income (loss)
8.9

 
(13.6
)
 
1.5

 
(3.2
)
 
$
0.2

 
$
(3.0
)
Balance at March 31, 2017
$
(58.6
)
 
$
(75.2
)
 
$
0.8

 
$
(133.0
)
 
 

 
 

 (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, 2017
 
Amortization of Pension and
Postretirement (1)
 
(Gain)/Loss on
Derivative
Instruments
 
 
 
Net Loss
Recognized
 
Prior Service Costs
Recognized
 
 
Total
Affected Line in the Consolidated Statement of Operations:
 

 
 

 
 

 
 

Net revenue
$

 
$

 
$
0.1

 
$
0.1

Cost of goods sold
1.1

 

 

 
1.1

Operating expenses
0.6

 
0.1

 

 
0.7

Other income (expense), net

 

 

 

Total before tax
$
1.7

 
$
0.1

 
$
0.1

 
$
1.9

Tax expense
 

 
 

 
 

 
(0.7
)
Total reclassifications for the period, net of tax
 

 
 

 
 

 
$
1.2

 
 
 
 
 
 
 
 
 
Six Months Ended March 31, 2017
 
Amortization of Pension and
Postretirement (1)
 
(Gain)/Loss on
Derivative
Instruments
 
 
 
Net Loss
Recognized
 
Prior Service Costs
Recognized
 
 
Total
Affected Line in the Consolidated Statement of Operations:
 
 
 
 
 
 
 
Net revenue
$

 
$

 
$
0.2

 
$
0.2

Cost of goods sold
1.9

 
0.1

 

 
2.0

Operating expenses
0.9

 
0.1

 

 
1.0

Other income (expense), net

 

 
0.1

 
0.1

Total before tax
$
2.8

 
$
0.2

 
$
0.3

 
$
3.3

Tax expense
 

 
 

 
 

 
(1.2
)
Total reclassifications for the period, net of tax
 

 
 

 
 

 
$
2.1



 
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
0.6

 
0.1

 

 
0.7

Operating expenses
0.3

 
(0.1
)
 

 
0.2

Other income (expense), net

 

 

 

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:
 

 
 

 
 

 
 

Net revenue
$

 
$

 
$
(0.4
)
 
$
(0.4
)
Cost of goods sold
1.3

 
0.1

 

 
1.4

Operating expenses
0.7

 
(0.1
)
 

 
0.6

Other income (expense), net

 

 

 

Total before tax
$
2.0

 
$

 
$
(0.4
)
 
$
1.6

Tax expense
 
 
 
 
 
 
(0.5
)
Total reclassifications for the period, net of tax
 
 
 
 
 
 
$
1.1


(1) These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 7).
v3.8.0.1
Share-Based Compensation
6 Months Ended
Mar. 31, 2018
Compensation Related Costs [Abstract]  
Share-Based Compensation
Share-Based Compensation
 
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
 
2018
 
2017
 
2018
 
2017
Share-based compensation costs
$
3.9

 
$
3.1

 
$
6.2

 
$
5.7

Less impact of income tax benefit
1.0

 
1.0

 
1.6

 
2.0

Share-based compensation costs, net of tax
$
2.9

 
$
2.1

 
$
4.6

 
$
3.7


 
We have share-based compensation with long-term performance-based metrics that are contingent upon our relative total shareholder return and the creation of shareholder value. Relative total shareholder return is determined by comparing our total shareholder return during a three-year period to the respective total shareholder returns of companies in a designated performance peer group. Creation of shareholder value is measured by the cumulative cash returns and final period net operating profit after tax compared to the established hurdle rate over a three-year period.  For the performance-based awards contingent upon the creation of shareholder value, compensation expense is adjusted each quarter based upon actual results to date and any changes to forecasted information on each of the separate grants. 
 

During the six months ended March 31, 2018, we made the following grants:
 
 
Number of
Units
Stock options
352,752

Time-based stock awards
18,539

Performance-based stock awards (maximum that can be earned)
230,890


 
Stock options granted during fiscal 2018 had a weighted-average exercise price of $45.78 and a weighted-average grant date fair value of $11.10.  Our time-based stock awards and performance-based stock awards granted during fiscal 2018 had weighted-average grant date fair values of $45.19 and $53.37.  Included in the performance-based stock awards granted during 2018 are 111,126 units whose payout level is based upon the Company’s relative total shareholder return over the three-year measurement period, as described above.  These units will be expensed on a straight-line basis over the measurement period and are not subsequently adjusted after the grant date.
 
v3.8.0.1
Other Income (Expense), Net
6 Months Ended
Mar. 31, 2018
Other Nonoperating Income (Expense) [Abstract]  
Other Income and Other Expense
Other Income (Expense), Net
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
 
2018
 
2017
 
2018
 
2017
Equity in net income of affiliates
$

 
$
0.3

 
$

 
$
1.0

Foreign currency exchange (loss) gain, net
(0.5
)
 
(0.6
)
 
(0.8
)
 
(1.4
)
Other, net
(0.7
)
 
(0.3
)
 
(0.8
)
 
(1.5
)
Other income (expense), net
$
(1.2
)
 
$
(0.6
)
 
$
(1.6
)
 
$
(1.9
)
v3.8.0.1
Commitments and Contingencies
6 Months Ended
Mar. 31, 2018
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Commitments and Contingencies
 
Like most companies, we are involved from time to time in claims, lawsuits, and government proceedings relating to our operations, including environmental, patent infringement, business practices, commercial transactions, product and general liability, workers’ compensation, auto liability, employment, and other matters. The ultimate outcome of these matters cannot be predicted with certainty. An estimated loss from these contingencies is recognized when we believe it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated; however, it is difficult to measure the actual loss that might be incurred related to litigation. If a loss is not considered probable and/or cannot be reasonably estimated, we are required to make a disclosure if there is at least a reasonable possibility that a significant loss may have been incurred. Legal fees associated with claims and lawsuits are generally expensed as incurred.
 
Claims covered by insurance have in most instances deductibles and self-funded retentions up to $0.5 per occurrence or per claim, depending upon the type of coverage and policy period. For auto, workers compensation, and product and general liability, outside insurance companies and third-party claims administrators generally assist in establishing individual claim reserves, and an independent outside actuary often provides estimates of ultimate projected losses, including incurred but not reported claims, which are used to establish reserves for losses. For all other types of claims, reserves are established based upon advice from internal and external counsel and historical settlement information for claims when such amounts are considered probable of payment.

The recorded amounts represent our best estimate of the costs we will incur in relation to such exposures, but it is possible that actual costs will differ from those estimates.

Aldrees Litigation
 
In April 2016, Hamad M. Aldrees & Partners Holding Co. for Industry and Mining (Closed Joint Company) (“Aldrees”) filed a lawsuit against Company subsidiary Rotex Europe Limited (“Rotex”) in the High Court of Justice, Queen’s Bench Division, Technology and Construction Court in London, England (the “Aldrees Litigation”). The Aldrees Litigation arises as a result of an agreement made in 2010 for Rotex to supply, among other things, five mineral separating machines. Aldrees has alleged breach of contract and misrepresentation by Rotex and is seeking damages of approximately £38.5.
 
The Company is defending this matter vigorously.  The case went to trial in the second quarter, but a result has not been announced, and the timing of the result of the trial is unknown. Based on currently available information, the Company is not able to reasonably estimate the amount of any reasonably possible loss in respect of this matter; however, the Company does not believe that the outcome of this lawsuit will have a material adverse effect on the Company’s financial statements. If Aldrees prevails at trial, however, the outcome could be materially adverse to the Company’s financial statements for the particular period, depending, in part, upon the operating results or cash flows for such period.
v3.8.0.1
Fair Value Measurements (Notes)
6 Months Ended
Mar. 31, 2018
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Fair Value Measurements
 
Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date.  The authoritative guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.  Observable inputs are from sources independent of the Company.  Unobservable inputs reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability, developed based upon the best information available in the circumstances.  The categorization of financial assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.  The hierarchy is broken down into three levels:
 
Level 1:
Inputs are quoted prices in active markets for identical assets or liabilities.
Level 2:
Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly.
Level 3:
Inputs are unobservable for the asset or liability.
 
 
Carrying Value at
March 31, 2018
 
Fair Value at March 31, 2018
Using Inputs Considered as:
 
 
Level 1
 
Level 2
 
Level 3
Assets:
 

 
 

 
 

 
 

Cash and cash equivalents
$
68.5

 
$
68.5

 
$

 
$

Investments in rabbi trust
4.0

 
4.0

 

 

Derivative instruments
5.0

 

 
5.0

 

Indefinite-lived assets
4.0

 

 

 
4.0

 
 
 
 
 
 
 
 
Liabilities:
 

 
 

 
 

 
 

$150 senior unsecured notes
149.6

 
157.6

 

 

Revolving credit facility
229.7

 

 
229.7

 

  $100 Series A Notes
100.0

 

 
103.1

 

Derivative instruments
3.3

 

 
3.3

 


 
The fair value of the amounts outstanding under the Facility approximated carrying value at March 31, 2018.  The fair values of the Facility and Series A Notes are estimated based on internally developed models, using current market interest rate data for similar issues, as there is no active market for our Facility or Series A Notes.

The fair values of the Company’s derivative instruments are based upon pricing models using inputs derived from third-party pricing services or observable market data such as currency spot and forward rates.  These values are periodically validated by comparing to third-party broker quotes.  The aggregate notional value of these foreign currency derivatives was $256.7 at March 31, 2018. The derivatives are included in other current assets, other assets, other current liabilities, and other long-term liabilities on the balance sheet.

The indefinite-lived assets are trade names for which an impairment was recorded during the quarter ended March 31, 2018. See Note 5 for further information.
v3.8.0.1
Segment and Geographical Information
6 Months Ended
Mar. 31, 2018
Segment Reporting [Abstract]  
Segment and Geographical Information
Segment and Geographical Information
 
 
Three Months Ended March 31,
 
Six Months Ended March 31,
 
2018
 
2017
 
2018
 
2017
Net revenue
 

 
 

 
 

 
 

Process Equipment Group
$
299.8

 
$
244.1

 
$
564.1

 
$
465.7

Batesville
152.4

 
151.2

 
285.3

 
285.7

Total
$
452.2

 
$
395.3

 
$
849.4

 
$
751.4

 
 
 
 
 
 
 
 
Adjusted EBITDA
 
 
 
 
 
 
 
Process Equipment Group
$
49.9

 
$
37.3

 
$
95.5

 
$
70.0

Batesville
38.6

 
42.7

 
66.5

 
73.7

Corporate
(12.2
)
 
(9.7
)
 
(20.5
)
 
(17.0
)
 
 
 
 
 
 
 
 
Net revenue (1)(2)
 
 
 
 
 
 
 
United States
$
246.2

 
$
227.3

 
$
465.0

 
$
428.7

Germany
129.8

 
106.2

 
240.2

 
200.8

All other foreign business units
76.2

 
61.8

 
144.2

 
121.9

Total
$
452.2

 
$
395.3

 
$
849.4

 
$
751.4

 
(1) We attribute revenue to a geography based upon the location of the business unit that consummates the external sale.
(2) In 2017, the Company corrected its disclosure of net revenue by geography. The effect of this adjustment for the three months ended March 31, 2017 was to decrease Germany net revenue by $9.6, from $115.8 as previously disclosed, to $106.2, and to increase the All other foreign business units net revenue by the same amount, from $52.2 as previously disclosed, to $61.8. The effect of this adjustment for the six months ended March 31, 2017 was to decrease Germany net revenue by $19.4, from $220.2 as previously disclosed, to $200.8, and to increase the All other foreign business units net revenue by the same amount, from $102.5 as previously disclosed, to $121.9. Management performed an assessment of the materiality of this correction and concluded that the net revenue by geography as originally disclosed was not material to previously issued financial statements.

 
 
March 31,
2018
 
September 30,
2017
Total assets assigned
 

 
 

Process Equipment Group
$
1,755.4

 
$
1,722.2

Batesville
199.3

 
203.4

Corporate
34.7

 
30.9

Total
$
1,989.4

 
$
1,956.5

 
 
 
 
Tangible long-lived assets, net
 

 
 

United States
$
80.1

 
$
84.4

Germany
39.7

 
39.0

All other foreign business units
26.3

 
27.0

Total
$
146.1

 
$
150.4



The following schedule reconciles segment adjusted EBITDA to consolidated net (loss) income.
 
 
Three Months Ended
March 31,
 
Six Months Ended
March 31,
 
2018
 
2017
 
2018
 
2017
Adjusted EBITDA:
 
 
 
 
 
 
 
Process Equipment Group
$
49.9

 
$
37.3

 
$
95.5

 
$
70.0

Batesville
38.6

 
42.7

 
66.5

 
73.7

Corporate
(12.2
)
 
(9.7
)
 
(20.5
)
 
(17.0
)
Less:
 

 
 

 
 

 
 

Interest income
(0.3
)
 
(0.1
)
 
(0.8
)
 
(0.3
)
Interest expense
6.0

 
6.3

 
12.3

 
12.4

Income tax expense
13.6

 
14.9

 
37.3

 
21.6

Depreciation and amortization
14.0

 
13.6

 
27.8

 
28.6

Impairment charge
63.4

 

 
63.4

 

Business acquisition, development, and integration
0.2

 
0.3

 
2.5

 
0.6

Restructuring and restructuring related
0.7

 
1.3

 
1.2

 
7.9

Consolidated net (loss) income
$
(21.3
)
 
$
34.0

 
$
(2.2
)
 
$
55.9