-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QBAQfF4MTmfFi3Ua6R3aFWWvTlLI5rqpLQBacNoqdN+UdmkLSKhAM/YUx236LpwS Qd1Q4oDMEaKAZfAfnt0XHQ== 0000912057-96-006502.txt : 19960417 0000912057-96-006502.hdr.sgml : 19960417 ACCESSION NUMBER: 0000912057-96-006502 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960302 FILED AS OF DATE: 19960416 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HILLENBRAND INDUSTRIES INC CENTRAL INDEX KEY: 0000047518 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS MANUFACTURING INDUSTRIES [3990] IRS NUMBER: 351160484 STATE OF INCORPORATION: IN FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06651 FILM NUMBER: 96547515 BUSINESS ADDRESS: STREET 1: 1069 STATE ROUTE 46E CITY: BATESVILLE STATE: IN ZIP: 47006-9166 BUSINESS PHONE: 8129347000 10-Q 1 10-Q - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 2, 1996 COMMISSION FILE NO. 1-6651 HILLENBRAND INDUSTRIES, INC. (Exact name of registrant as specified in its charter) INDIANA 35-1160484 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 700 STATE ROUTE 46 EAST BATESVILLE, INDIANA 47006-8835 (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (812) 934-7000 NOT APPLICABLE (Former name, former address and former fiscal year, if changed since last report) INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. Yes x No ------- ------- INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE. Common Stock, without par value - 69,951,280 as of March 30, 1996. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1 HILLENBRAND INDUSTRIES, INC. INDEX TO FORM 10-Q Page ---- PART I - FINANCIAL INFORMATION Item 1 - Financial Statements (Unaudited) Consolidated Income for the Three Months 3 Ended 3/02/96 and 3/04/95 Consolidated Cash Flows for the Three Months 4 Ended 3/02/96 and 3/04/95 Consolidated Balance Sheet, 5 3/02/96 and 12/02/95 Notes to Consolidated Financial Statements 6-7 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 8-9 PART II - OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K 10 SIGNATURES 10 2 PART I - FINANCIAL INFORMATION ------------------------------ ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) Hillenbrand Industries, Inc. and Subsidiaries Consolidated Income
Three Months Ended 03/02/96 03/04/95 -------- -------- (In Thousands Except Per Share Data) Net revenues: Health Care sales . . . . . . . . . . . . . . . . $149,150 $130,972 Health Care rentals . . . . . . . . . . . . . . . 95,247 90,254 Funeral Services . . . . . . . . . . . . . . . . 136,785 130,412 Insurance . . . . . . . . . . . . . . . . . . . . 52,674 44,639 ------- ------- Total revenues . . . . . . . . . . . . . . . . . 433,856 396,277 Cost of revenues: Health Care cost of goods sold . . . . . . . . . . 91,017 78,052 Health Care rental expenses . . . . . .. . . . . . 59,168 60,617 Funeral Services . . . . . . . . . . . . . . . . . 73,179 70,524 Insurance . . . . . . . . . . . . . . . . . . . . 40,788 34,602 ------- ------- Total cost of revenues . . . . . . . . . . . . . . 264,152 243,795 Other operating expenses . . . . . . . . . . . . . . 111,201 103,628 ------- ------- Operating profit . . . . . . . . . . . . . . . . . . 58,503 48,854 Interest expense . . . . . . . . . . . . . . . . . . (6,239) (5,267) Other income, net . . . . . . . . . . . . . . . . . 3,486 919 ------- ------- Income before income taxes . . . . . . . . . . . . . 55,750 44,506 Income taxes . . . . . . . . . . . . . . . . . . . . 22,412 17,001 ------- ------- Net income . . . . . . . . . . . . . . . . . . . . . $ 33,338 $ 27,505 ------- ------- ------- ------- Net income per common share . . . . . . . . . . . . $ .48 $ .39 ------- ------- ------- ------- Dividends per common share . . . . . . . . .. . . . $ .155 $ .15 ------- ------- ------- ------- Average shares outstanding . . . . . . . . . . . . . 70,131 70,885 ------- ------- ------- -------
See Notes to Consolidated Financial Statements 3 Hillenbrand Industries, Inc. and Subsidiaries Consolidated Cash Flows
Three Months Ended ------------------ 03/02/96 03/04/95 -------- -------- (In Thousands) Cash flows from operating activities: Net income . . . . . . . . . . . . . . . . . . . $ 33,338 $ 27,505 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization . . . . . . . . . 26,591 23,841 Change in noncurrent deferred income taxes . . . . . . . . . . . . . . . . . 188 (2,554) Change in net working capital excluding cash and current debt . . . . . . . 10,920 (10,996) Change in insurance items: Deferred policy acquisition costs . . . . . . (12,164) (12,923) Other, net . . . . . . . . . . . . . . . . . . 14,326 11,856 Other, net . . . . . . . . . . . . . . . . . . (5,276) 11,597 ------ ------ Net cash flows from operating activities . . . . 67,923 48,326 ------ ------ Cash flows from investing activities: Capital expenditures, net . . . . . . . . . . . (21,125) (16,314) Insurance investments: Purchases . . . . . . . . . . . . . . . . . . . (111,419) (65,291) Proceeds on maturities . . . . . . . . . . . . 15,536 12,638 Proceeds on sales prior to maturity . . . . . . 52,674 - ------ ------ Net cash flows from investing activities . . . . . . . . . . . . . . . . . . . (64,334) (68,967) ------ ------ Cash flows from financing activities: Additions (reductions) to debt, net . . . . . . . 13,052 (2,625) Payment of cash dividends . . . . . . . . . . . . (10,863) (10,621) Treasury stock acquisitions . . . . . . . . . . . (8,647) (3,539) Insurance premiums received . . . . . . . . . . 95,965 109,925 Insurance benefits paid . . . . . . . . . . . . (61,613) (50,726) ------ ------ Net cash flows from financing activities . . . . . . . . . . . . . . . . . . . 27,894 42,414 ------- ------- Net increase in cash and cash equivalents. . . . . . . . . . . . . . . . . 31,483 21,773 Cash and cash equivalents: At beginning of period . . . . . . . . . . . . . 171,343 120,359 ------- ------- At end of period . . . . . . . . . . . . . . . . $202,826 $142,132 ------- ------- ------- -------
See Notes to Consolidated Financial Statements 4 Hillenbrand Industries, Inc. and Subsidiaries Consolidated Balance Sheet
ASSETS 03/02/96 12/02/95 -------- -------- (In Thousands) Current assets: Cash and cash equivalents . . . . . . . . . . . . . .$ 202,826 $ 171,343 Trade receivables . . . . . . . . . . . . . . . . . . 315,025 313,483 Inventories . . . . . . . . . . . . . . . . . . . . . 104,107 111,679 Other . . . . . . . . . . . . . . . . . . . . . . . . 46,721 43,660 --------- --------- Total current assets . . . . . . . . . . . . . . . . 668,679 640,165 Equipment leased to others, net. . . . . . . . . . . . 94,085 91,329 Property, net. . . . . . . . . . . . . . . . . . . . . 266,644 275,730 Other assets: Intangible assets, net. . . . . . . . . . . . . . . . 154,430 162,993 Other assets. . . . . . . . . . . . . . . . . . . . . 53,086 49,076 --------- --------- Total other assets . . . . . . . . . . . . . . . . . 207,516 212,069 Insurance assets: Investments . . . . . . . . . . . . . . . . . . . . . 1,455,848 1,432,222 Deferred policy acquisition costs. . . . . . . . . . 351,494 339,330 Deferred income taxes . . . . . . . . . . . . . . . . 46,776 39,518 Other . . . . . . . . . . . . . . . . . . . . . . . . 38,574 39,893 --------- --------- Total insurance assets . . . . . . . . . . . . . . . 1,892,692 1,850,963 --------- --------- Total assets . . . . . . . . . . . . . . . . . . . . .$3,129,616 $3,070,256 --------- --------- --------- --------- LIABILITIES Current liabilities: Short-term debt . . . . . . . . . . . . . . . . . . .$ 54,264 $ 40,450 Current portion of long-term debt . . . . . . . . . . 1,935 2,315 Trade accounts payable. . . . . . . . . . . . . . . . 63,239 70,743 Other . . . . . . . . . . . . . . . . . . . . . . . . 202,668 187,213 --------- --------- Total current liabilities. . . . . . . . . . . . . . 322,106 300,721 Other liabilities: Long-term debt. . . . . . . . . . . . . . . . . . . . 206,401 206,783 Other long-term liabilities . . . . . . . . . . . . . 75,114 79,343 Deferred income taxes . . . . . . . . . . . . . . . . 15,346 14,945 --------- --------- Total other liabilities. . . . . . . . . . . . . . . 296,861 301,071 Insurance liabilities: Benefit reserves. . . . . . . . . . . . . . . . . . . 1,283,412 1,252,737 Unearned revenue. . . . . . . . . . . . . . . . . . . 468,544 454,763 General liabilities . . . . . . . . . . . . . . . . . 18,488 15,200 --------- --------- Total insurance liabilities. . . . . . . . . . . . . 1,770,444 1,722,700 --------- --------- Total liabilities. . . . . . . . . . . . . . . . . . . 2,389,411 2,324,492 --------- --------- Commitments and contingencies (Note 5) SHAREHOLDERS' EQUITY Common stock. . . . . . . . . . . . . . . . . . . . . 4,442 4,442 Additional paid-in capital. . . . . . . . . . . . . . 13,745 13,238 Retained earnings . . . . . . . . . . . . . . . . . . 898,608 876,133 Accumulated unrealized gain on investments. . . . . . . . . . . . . . . . . . . . . 9,779 22,861 Foreign currency translation adjustment . . . . . . . 6,866 14,099 Treasury stock. . . . . . . . . . . . . . . . . . . . (193,235) (185,009) --------- --------- Total shareholders' equity . . . . . . . . . . . . . 740,205 745,764 --------- --------- Total liabilities and shareholders' equity. . . . . . . . . . . . . . . . .$3,129,616 $3,070,256 --------- --------- --------- ---------
See Notes to Consolidated Financial Statements 5 Hillenbrand Industries, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Dollars in thousands) 1. Basis of Presentation The unaudited, condensed consolidated financial statements appearing in this quarterly report on Form 10-Q should be read in conjunction with the financial statements and notes thereto included in the Company's latest annual report. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The statements herein have been prepared in accordance with the Company's understanding of the instructions to Form 10-Q. In the opinion of management, such financial statements include all adjustments necessary to present fairly the financial position, results of operations, and cash flows, for the interim periods. 2. Supplementary Income Statement Information Investment income (non-insurance) in the first quarter of 1996 and 1995 was $3,954 and $2,852, respectively. 3. Supplementary Balance Sheet Information The following information pertains to non-insurance assets and consolidated shareholders' equity:
03/02/96 12/02/95 -------- -------- Allowance for possible losses and discounts on trade receivables. . . . . . $ 17,857 $ 19,833 Accumulated depreciation of equipment leased to others and property . . . . . . $554,205 $544,000 Accumulated amortization of intangible assets. . . . . . . . . . . . . . . . . . $165,011 $163,836 Capital Stock: Preferred stock, without par value: Authorized 1,000,000 shares; Shares issued. . . . . . . . . . . . . None None Common stock, without par value: Authorized 199,000,000 shares; Shares issued. . . . . . . . . . . . . 80,323,912 80,323,912
6 4. Earnings per Common Share Earnings per common share were computed by dividing net income by the average number of common shares outstanding during each period (70,131,090 for the three months of 1996 and 70,884,748 for the three months of 1995). Under a program begun in 1983, the Company has acquired to date 11,843,672 shares of common stock of which 1,544,835 shares have been reissued for general corporate purposes. The remaining treasury stock has been excluded in determining the average number of shares outstanding during each period. Common share equivalents arising from shares awarded under the Senior Executive Compensation Program which was initiated in fiscal year 1978 and various deferred share equivalents have also been excluded from the computation because of their insignificant dilutive effect. 5. Contingencies As discussed under Item 3 of the Company's Annual Report on Form 10-K for the fiscal year ended December 2, 1995, Hillenbrand Industries, Inc., and its subsidiary Hill-Rom Company, Inc., are the subject of an antitrust suit brought by a competitor in the health care equipment market. The plaintiff seeks monetary damages totaling in excess of $268.5 million, trebling of any damages that may be allowed by the court, and injunctions to prevent further alleged unlawful activities. The Company believes that the claims are without merit and is aggressively defending itself against all allegations. There was no material change in the status of this litigation during the quarter ended March 2, 1996. The Company has voluntarily entered into remediation agreements with environmental authorities, and has been issued Notices of Violation alleging violations of certain permit conditions. Accordingly, the Company is in the process of implementing plans of abatement in compliance with agreements and regulations. The Company has also been notified as a potentially responsible party in investigations of certain offsite disposal facilties. The cost of all plans of abatement and waste site cleanups in which the Company is currently involved is not expected to exceed $10.0 million. The Company has provided adequate reserves in its financial statements for these matters. Changes in environmental law might affect the Company's future operations, capital expenditures and earnings. The cost of complying with these provisions is not known. The Company is subject to various other claims and contingencies arising out of the normal course of business, including those relating to commercial transactions, product liability, safety, health, taxes, environmental and other matters. Management believes that the ultimate liability, if any, in excess of amounts already provided or covered by insurance, is not likely to have a material adverse effect on the Company's financial condition, results of operations or cash flows. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS FIRST QUARTER 1996 COMPARED WITH FIRST QUARTER 1995 Consolidated net revenues of $433.9 million were up $37.6 million, or 9.5%. Health Care sales increased $18.2 million, or 13.9%, due primarily to higher unit sales of the Advance -R- series beds at Hill-Rom. In Europe, increased sales in Germany and favorable exchange rates were partially offset by lower sales in France. Sales at Medeco Security Locks were up marginally due to increased shipments in door security business, partially offset by decreases in route management. Block Medical reported marginally lower sales. Health Care rental revenues increased $5.0 million, or 5.5%. In the long-term care market, units in use and average rental rates were higher than in the first quarter of 1995. In the home care market, increased units in use were partially offset by lower rates. Acute care unit placements and rates were down marginally. Rental revenue growth in Europe was due primarily to increased units in use. Funeral Services sales were up $6.4 million, or 4.9%, due to casket unit volume growth on increased deaths, a first quarter price increase and higher sales of Options-TM- cremation caskets and urns. Insurance revenues grew $8.0 million, or 18.0%, to $52.7 million in the first quarter. Earned premium revenue was up due to a greater number of policies in force year over year. Investment income was up due primarily to a larger investment portfolio as yields were essentially unchanged. Gross profit on Health Care sales of $58.1 million increased $5.2 million, or 9.9%, due to higher sales of Advance series beds. As a percentage of revenues, gross profit was 39.0% compared with 40.4% in 1995 due primarily to increased sales of lower margin European products. Profitability at Medeco improved on the strength of volume growth and control of manufacturing costs. Gross profit on rental revenues of $36.1 million grew $6.4 million, or 21.7%, and as a percentage of revenues improved from 32.8% to 37.9%. This improvement reflected lower therapy unit service costs, partially offset by higher depreciation expense. Funeral services gross profit of $63.6 million increased $3.7 million, or 6.2%, and as a percentage of sales increased from 45.9% to 46.5% due primarily to higher unit sales volume. Insurance gross profit of $11.9 million was up $1.8 million , or 18.4%. Improvements in the commission and product structure offset growth in benefits and credited interest on the larger base of insurance in force. Other operating expenses increased $7.6 million, or 7.3%, and as a percentage of revenues declined from 26.2% to 25.6%. Cost control throughout all operations offset increased incentive compensation expense (reflecting improved performance) and higher legal fees. 8 Interest expense increased $972 thousand, or 18.5%, due to higher debt associated with European operations. Other income, net, of $3.5 million was up $2.6 million due primarily to investment income on higher average levels of interest earning assets. The Company's consolidated effective income tax rate of 40.2% compares with 38.2% in the first quarter of 1995. This increase was largely due to increased operating losses in Europe - a trend which began to develop in the second quarter of 1995. The Company is not currently deriving any tax benefit from European losses. LIQUIDITY AND CAPITAL RESOURCES Net cash flows from operating activities and selected borrowings represent the Company's primary sources of funds for growth of the business, including capital expenditures and acquisitions. Cash and cash equivalents (excluding the investments of insurance operations) grew from $171.3 million at the end of 1995 to $202.8 million at the end of the first quarter. Net cash flows from operating activities of $67.9 million were up $19.6 million due primarily to higher earnings and a decrease in net working capital. Inventories declined $7.6 million versus a $6.4 million increase in the first quarter of 1995. The 1995 increase reflected additional product evaluation inventory at Hill-Rom. The decline in 1996 was due to higher first quarter shipments at Hill-Rom. Annualized inventory turns on sales improved from 9.6 at year end to 11.0 at quarter end. Accounts receivable days sales outstanding were 75 at the end of the first quarter versus 80 at year end 1995. The change in other items primarily reflects the reclassification of certain accrued expenses from noncurrent to current and is mostly offset in the change in working capital. Capital spending of $21.1 million was higher than in the first quarter of 1995 due to increased production of therapy rental units and expenditures relative to improving operations in Europe. Investment purchases in insurance operations reflected funds available from the sale of investments prior to maturity as Forethought continues to realign its portfolio to better match maturities with expected policy benefit payments. In the first quarter, the Company utilized short-term borrowings at a favorable interest rate to pay down certain debt in Europe. Additional debt capacity allows the Company considerable flexibility in the funding of future growth in all operations. Insurance premiums received were down compared with the first quarter of 1995. The policy and commission changes (and resulting decline in policy sales) previously discussed were implemented in the second quarter of 1995. The increase in benefits paid primarily reflects increased insurance in force year over year. FACTORS THAT MAY AFFECT FUTURE RESULTS Although U.S. acute care capital shipments have improved over the past two fiscal quarters, the strength of future order patterns remains uncertain. Recent changes in Medicare policy, which eliminated reimbursement for certain of Hill-Rom's pressure ulcer prevention products, will negatively affect future rental revenues and profitability. Capital shipments in France are expected to remain at lower than 1995 levels for the near term. Operating losses in other European markets will continue as operations are restructured. 9 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K B. Reports on Form 8-K There were no reports filed on Form 8-K during the first quarter ended March 2, 1996. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HILLENBRAND INDUSTRIES, INC. DATE: April 15, 1996 BY: /S/ Tom E. Brewer -------------------------- Tom E. Brewer Chief Financial Officer DATE: April 15, 1996 BY: /S/ James D. Van De Velde -------------------------- James D. Van De Velde Controller 10 EX-27 2 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS INCLUDED UNDER ITEM 1 OF THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 2, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS NOV-30-1996 DEC-03-1995 MAR-02-1996 202,826 0 332,882 17,857 104,107 668,679 914,934 554,205 3,129,616 322,106 206,401 0 0 4,442 735,763 3,129,616 285,935 433,856 164,196 264,152 111,201 0 6,239 55,750 22,412 33,338 0 0 0 33,338 .48 .48
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