SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

HILLENBRAND, INC.

The aggregate market value of voting stock (consisting solely of shares of common stock) held by non-affiliates of the registrant as of March 31, 201530, 2018 was $1,903,119,942.$2,868,342,913.  As of November 11, 2015, 62,844,2358, 2018, 62,347,253 shares of common stock were outstanding.

 

under the symbol “HI” on April 1, 2008.  “Hillenbrand,” “the Company,” “we,” “us,” “our,” and similar words refer to Hillenbrand, Inc. and its subsidiaries unless context otherwise requires.

Although Hillenbrand has been a public company for a little more than seventen years, the businesses owned by Hillenbrand have been in operation for many decades.

Between 2010 and 2014, Hillenbrand completed three major acquisitions of companies that formed the basefoundation of our Process Equipment Group:  K-Tron International, Inc. (“K-Tron”) in April 2010, Rotex Global, LLC (“Rotex”) in August 2011, and Coperion Capital GmbH (“Coperion”) in December 2012. 

See Note 3 to our financial statements included in Part II, Item 8 of this Form 10-K for more information on the Coperion acquisition. See Note 3Abel and Note 18 to our consolidated financial statements included in Part II, Item 8 of this Form 10-K for more information on our acquisition of Abel.Red Valve acquisitions.

Business Segments

Process Equipment Group

The Process Equipment Group is a leading global provider of compounding, extrusion, and material handling; size reduction; screening and separating; and flow control products and services for a wide variety of manufacturing and other industrial processes.

We believe the Process Equipment Group has attractive fundamentals including:

Batesville

Batesville is a leader in the North American death care industry through the manufacture and sale of funeral service products, including burial caskets, cremation caskets, containers and urns, selection room display fixtures, other personalization and memorialization products, and web-based technology applications.

We believe Batesville has attractive fundamentals including:

How We Operate

 

The Process Equipment Group designs, engineers, manufactures, markets, and services differentiated process and material handling equipment and systems for a wide variety of industries, including plastics, processed food and pharmaceuticals, chemicals, fertilizers, industrial minerals and mining, energy, wastewater treatment, forest products, and forest products.other general industrials.  The Process Equipment Group uses its strong applications and process engineering expertise to solve problems for customers.  Its highly engineered capital equipment and systems offerings require after-market service and/or parts replacement, providing an opportunity for ongoing revenue at attractive margins.

 

 

The Process Equipment Group product portfolio has grown through a series of acquisitions over the past fiveeight years and now includes products and services for compounding, extrusion, and material handling; size reduction; screening and separating; and flow control.  Each business within theThe Process Equipment Group isbusinesses are supported by replacement parts and services that represent approximately 35%33% of the group’s total revenue.  Products are offered under brand names that are recognized among the leaders in their respective categories.

 

 

 

 

The Process Equipment Group sells equipment and systems throughout the world using a combination of direct sales and a global network of independent sales representatives and distributors.  A part of the Process Equipment Group’s sales, especially in North America, is made through independent sales representatives who are compensated by commission. In situations where a representative purchases equipment and resells it as a distributor, the product is sold at a price net of commission, depending on the type of product sold.

 

Equipment and systems orders are often for unique, engineered-to-order items.  Therefore, the Process Equipment Group does not typically maintain significant amounts of raw material and component stock inventory on hand at any one time, except to cover replacement part orders.  Products are either assembled and tested at Process Equipment Group facilities and then shipped to a customer or are assembled at the customer’s desired location.

 

We expect that future revenue associated with the Process Equipment Group will be influenced by order backlog because of the lead time involved in fulfilling engineered-to-order equipment for customers. Backlog represents the amount of consolidated revenue that we expect to realize on contracts awarded to the Process Equipment Group.   Though backlog can be an indicator of future revenue, it does not include projects and parts orders that are booked and shipped within the same quarter.  The timing of order placement, size of order, extent of customization, and customer delivery dates can create fluctuations in backlog and revenue.  Revenue attributable to backlog may also be affected by foreign exchange fluctuations for orders denominated in currencies other than United States (“U.S.”) dollars.

 

The Process Equipment Group has customers in a wide range of industries, including plastics, processed food and pharmaceuticals, chemicals, fertilizers, industrial minerals and mining, energy, wastewater treatment, and forest products.  These customers range from large, Fortune 500 global companies to regional and local businesses.  No one Process Equipment Group customer accounted for more than 10% of Hillenbrand’s consolidated revenue during 2015.2018.  For large or customized orders, customers generally pay a deposit and make progress payments in advance of delivery.accordance with the project progress.  Often, long-term relationships are established with these customers.

 

The Process Equipment Group’s sales are diversified by end markets, and further diversificationpenetration of these end markets is an important element of its strategy.  Currently, projects in the plastics industry represent greater than half of the Process

Equipment Group’s sales; however, this ratio is expected to gradually decrease due to initiatives to expand into markets such as processed food, wastewater treatment, and fertilizer.sales.  Geographically, approximately three quarterstwo-thirds of the revenue in the Process Equipment Group comes from the Americas and Europe,EMEA (Europe, the Middle East, and Africa (EMEA);Africa), with the remaining quarterthird coming from Asia.

We believe that long-term growth for this segment is driven by megatrends such as a rapidly growing middle class in China and India and a growing global population, resulting in rising demand for products sold in many of the end markets the Process Equipment Group serves.  While overall demand for these products is expected to increase over the long run, we expect short-term periodic fluctuations in demand from time-to-time.

 

 

We believe the Process Equipment Group holds leading positions in key industries because of design and quality of products, extensive application and process engineering expertise, product support services, brand name recognition, and commitment to serving the needs of customers.

 

The Process Equipment Group brands face strong competition in the markets where they compete. Competitors range in size from small, privately-held companies serving narrow market segments or geographical areas to larger, well-known global companies serving national and international markets with multiple product lines.  We believe itsthe Process Equipment Group’s diversification into multiple industries and markets, its base of replacement parts business, and its strong worldwide network of suppliers and dealers will allow the Process Equipment Groupit to maintain leading marketleadership positions even during economic downturns.

 

 

The manufacturing of the Process Equipment Group’s products involves the machining and welding of raw materials (primarily sheet metals and steel) and castings that are assembled with other component parts that generally require particular specifications or qualifications purchased from third-party suppliers.  Although most of these raw materials and components are generally available from several sources, some of these items are currently purchased from solesingle sources.  Volatility in the prices the Process Equipment Group pays for raw materials used in its products, including sheet metals and steel, has a direct effect on profitability. The Process Equipment Group regularly takes steps designed to mitigate the impact of volatility in raw and component material prices, including executing Lean initiatives and various pricing and sourcing actions.  In instances where third-party suppliers are depended upon for outsourced products or components, there is risk of customer dissatisfaction with the quality or performance of the products sold due to supplier failure.  In addition, difficulties experienced by third-party suppliers can interrupt the ability to obtain the outsourced product and ultimately to supply products to customers.  Regardless, we believe the Process Equipment Group will generally be able to continue to obtain adequate supplies of key products or appropriate substitutes at reasonable costs.

 

 

Leadership of theThe Process Equipment Group is focused on threeseeks profitable growth through the following strategic initiatives to drive growth:initiatives:

Batesville

Batesville offers several marketing and merchandising programs to funeral professionals.  Batesville-branded caskets are marketed by a direct sales force only to licensed funeral professionals operating licensed funeral establishments throughout the U.S., Puerto Rico, Canada, Mexico, the United Kingdom, and Australia.  Batesville also markets its products to select independent distribution facilities as well as full-service funeral establishments offering funeral products in conformance with state law in states that do not have specific licensing requirements.

Batesville has sales contracts in place with certain national death care service providers and also serves more than 12,00011,500 independent, privately owned funeral homes across North America.  None of Batesville’s customers accounted for more than 10% of Hillenbrand’s consolidated revenue during 2015.2018.

The death of a family member causes most people to seek the services of a state-licensed funeral director.  Most consumers have limited familiarity with funeral-related products and expect funeral directors to provide information on product and service alternatives.  Although caskets and urns can be purchased from a variety of sources, including internet sellers and casket stores, the overwhelming majority of consumers who arrange a funeral purchase these products directly from a funeral home. Consumer spending on caskets and urns has not kept pace with inflation, negatively impacting product mix. We anticipate this trend in consumer spending will continue, which would result in mix decline in the foreseeable future.

Demand for theBatesville products and services Batesville produces is partially impacted by a few key external factors: U.S. and Canadian population demographics, the number of deaths annually, and the rate at which consumers select cremation. WhileThe combination of these primary factors have recently resulted in a stable, flat-to-slightly-declininghas negatively impacted the burial volume trend in recent years, although periodic fluctuations can impact demand and revenue.  While werevenue in a given quarter and year. We anticipate thisthe negative trend in burial demand will remain relatively consistent, the anticipated future increasecontinue in the foreseeable future as the higher number of deaths due toamong the aging post-World War II baby boomboomer generation could lead to higher burial volume. However, ais more than offset by the continued shift in consumer preference toward cremation could prevent us from significantly benefiting from any higher burial volume.cremation. As a percentage of total deaths, the estimated cremation rate in 20152018 was approximately 47%52% in the U.S. and 67%71% in Canada.  Another important factor impacting death care industry revenue is the gradual increase in consumer preferences for lower price caskets.Canada (Source: Cremation Association of North America). 

Batesville is a recognized leader in the sale of death care products in North America.  Competition in this industry, is based on product quality, service, price, delivery, design features and personalization.  Batesville competescompeting with several national and regional casket manufacturers, as well as more than 100 independent casket distributors, most of whom serve fairly narrow geographic segments.  Some non-traditional death care providers, such as large discount retail stores, casket stores, and internet casket retailers also sell caskets directly to consumers.  The industry has seen a few foreign manufacturers, mostly from China, import caskets into the U.S. and Canada.  However, for the past several years, salesSales from these non-traditional and foreign providers have remained relatively stable and collectively currently represent less than 5%10% of total casket sales in North America.

Batesville uses carbon and stainless steel, copper and bronze sheets, wood, fabrics, finishing materials, rubber gaskets, plastic and zinc in the manufacture of its caskets.  Although most of these raw materials are generally available from several sources, some are currently procured from a single source.

Volatility in theraw material prices, Batesville pays for raw materials used in its products, including steel, fuel, and petroleum-based products, and fuel-related delivery costs, has a direct effect on Batesville’s profitability.  BatesvilleThe company generally does not engage in hedging transactions for these purchases but does enter into fixed-price supply contracts at times.  Batesville regularly takes steps designed to mitigate the impact of volatility in raw material and fuel prices, including executing Lean initiatives and various sourcing actions.

Most of Batesville’s sales are made pursuant to supply agreements with its customers, and historically it has instituted annual price adjustments to help offset some, but not necessarily all, raw material cost increases.

While we believe there are opportunities to generate additional revenue within a wider range of death care products and services, sustaining volume in the burial casket space continues to be a top priority.  Batesville’s leadership team is focused on two strategic initiatives to sustain burial volume:

 

 

Our ability to compete effectively depends, to an extent, on our ability to maintain the proprietary nature of our intellectual property. In the past, certain of our products have been copied and sold by others.others and could continue to be.  Hillenbrand vigorously seeks to enforce its intellectual property rights.  However, we may not be sufficiently protected by our various patents, trademarks, and service marks, and they may be challenged, invalidated, cancelled, narrowed, or circumvented.  Beyond that, we may not receive the pending or contemplated patents, trademarks, or service marks for which we have applied or filed.

 

 

Both the Process Equipment Group and Batesville are subject to a variety of federal, state, local, and foreign laws and regulations relating to environmental, health, and safety concerns, including the handling, storage, discharge, and disposal of hazardous materials used in or derived from our manufacturing processes.  We are committed to operating all our businesses in a manner that protects the environment and makes us good corporate citizens in the communities in which we operate.  InWhile we believe that continued compliance with federal, state, local and foreign laws relating to the past, we have voluntarily entered into remediation agreements with various environmental authorities to address onsite and offsite environmental impacts.  From time-to-time we provide for reserves in our financial statements for environmental matters.  We believe we have appropriately satisfiedprotection of the financial responsibilities for all currently known offsite issues.  Based on the nature and volume of materials involved regarding onsite impacts, we doenvironment will not expect the cost for the onsite remediation activities in which we are currently involved to have a material adverse effect on our capital expenditures, earnings or competitive position.  Futureposition, future events or changes in existing laws and regulations or their interpretation may require us to make additional expenditures in the future.  The cost or need for any such additional expenditure is not known.

 

 

At September 30, 2015,2018, we had approximately 6,0006,500 employees worldwide.  Approximately 3,3003,100 employees were located within the U.S. and 2,7003,400 employees were located outside of the U.S., primarily throughout Europe and China.  Approximately 2,4002,700 employees in North America and Europe work under collective bargaining agreements.  Hillenbrand strives to maintain satisfactory relationships with all its employees, including the unions and workers’ councils representing those employees.  As a result, we have not experienced a significant work stoppage due to labor relations in more than 20 years.

 

Our Board of Directors is responsible for electing the Company’s executive officers annually and from time to time as necessary.  Executive officers serve in the ensuing year and until their respective successors are elected and qualified.  There are no family relationships between any of our executive officers or between any of them and any members of the Board of Directors.  The following is a list of our executive officers as of November 12, 2015.13, 2018.

 

 

Our website is www.hillenbrand.com.  We make available on this website, free of charge, access to press releases, conference calls, our annual and quarterly reports, and other documents filed with or furnished to the Securities and Exchange Commission (SEC) as soon as reasonably practicable after these reports are filed or furnished.  We also make available through the “Investors” section of this website information related to the corporate governance of the Company, including position specifications for the Chairperson and each of the members of the Board of Directors, as well as for committee chairpersons; our Code of Ethical Business Conduct and Global Anti-Corruption Policy; the Corporate Governance Standards of our Board of Directors; and the charters of each of the standing committees of the Board of Directors.Directors; our Code of Ethical Business Conduct; our Global Anti-Corruption Policy; and our Supply Chain Transparency Policy.  All of these documents are also available to shareholders in print upon request.

All reports and documents filed with the SEC are also available via the SEC website, www.sec.gov, or may be read and copied at the SEC Public Reference Room at 100 F Street, NE, Washington, DC 20549.  Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.www.sec.gov.

 

In this section of the Form 10-K, we describe the risks we believe are most important for you to think about when you consider investing in, selling, or owning our stock or debt.securities.  This information should be assessed along with the other information we provide you in this Form 10-K.10-K and that we file from time to time with the SEC.  Like most companies, our business involves risks.  The risks described below are not the only risks we face, but these are the ones we currently think have the potential to significantly

affect stakeholders in our Company if they were to develop adversely (due to size, volatility, or both).  We exclude risks that we believe are inherent in all businesses broadly as a function of simply being “in business.”  Additional risks not currently known or considered immaterial by us at this time and thus not listed below could also result in adverse effects on our business.  We have assigned the risks into categories to help you understand from where they emanate from (e.g. the overall Company or a specific segment).

 

 

All acquisitions involve inherent uncertainties, which may include, among other things, our ability to:

 

We may acquire businesses with unknown liabilities, contingent liabilities, internal control deficiencies, or other risks.  We have plans and procedures to review potential acquisition candidates for a variety of due diligence matters, including compliance with applicable regulations and laws prior to acquisition.  Despite these efforts, realization of any of these liabilities or deficiencies may increase our expenses, adversely affect our financial position, or cause us to fail to meet our public financial reporting obligations.

 

We generally seek indemnification from sellers covering these matters; however, the liability of the sellers is often limited, and certain former owners may be unable to meet their indemnification responsibilities.  We cannot assure yoube assured that these indemnification provisions will fully protect us, and as a result we may face unexpected liabilities that adversely affect our profitability and financial position.

 

We may not achieve the intended benefits of the acquisition and our business could be materially impacted.acquisitions. Under such circumstances, management could be required to spend significant amounts of time and resources in the transition of the acquired business.  In addition, anybusiness, and we may not fully realize benefits we anticipateanticipated from application of the HOMHOM. We may notalso decide to sell previously acquired businesses, or portions thereof, that no longer meet our strategic objectives, potentially resulting in a loss, accounting charge, or other negative impact.  As a result of these factors, our business, cash flows, and results of operations could be fully realized.materially impacted.

 

If we acquire a company that operates in an industry that is different from the ones in which we currently operate, our lack of experience with that company’s industry could have a material adverse impact on our ability to manage that business and realize the benefits of that acquisition.

 

 

Our business is sensitive to changes in general economic conditions, both inside and outside the U.S.  Although we have seen stability or growth in some geographies since the global economic turmoil that began in 2008, we cannot assure you that these improvements will be sustainable or predict when the next recession will occur.  In addition, continuingContinuing uncertainties in the eurozone, including future implications from the voluntary exit of the United Kingdom from the European Union and more recent uncertainties in China and emerging markets may depress demand in these areas and create additional risk to our financial results.

 

Instability in the global economy and financial markets can adversely affect our business in several ways, including limiting our customers’ ability to obtain sufficient credit or pay for our products within the terms of sale.  Competition could further intensify among the manufacturers and distributors with whom we compete for volume and market share, resulting in lower net revenue due to steeper discounts and product mix-down.  In particular, if certain key or sole suppliers were to become capacity constrained or insolvent, it could result in a reduction or interruption in supplies or a significant increase in the price of supplies.

 

Substantial losses in the equity markets could have an adverse effect on the assets of the Company’s pension plans.  Volatility of interest rates and negative equity returns could require greater contributions to the defined benefit plans in the future.

 

We derived approximately 43%48%, 48%44%, and 43%44% of our revenue from our operations outside the U.S. for the years ended September 30, 2015, 2014,2018, 2017, and 2013.2016.  This revenue is primarily generated in Europe, the Middle East, Asia, South America, and Canada.  In addition, we have manufacturing operations, suppliers, and employees located outside the U.S.  Since our growth strategy depends in part on our ability to further penetrate markets outside the U.S., we expect to continue to increase our sales and presence outside the U.S., including in emerging markets.

 

Our international business is subject to risks that are often encountered in non-U.S. operations, including:

 

Such risks may be more likely or pronounced in emerging markets, where our operations may be subject to greater uncertainty due to increased volatility associated with the developing nature of their economic, legal, and governmental systems.

 

If we are unable to successfully manage the risks associated with expanding our global business or to adequately manage operational fluctuations, it could adversely affect our business, financial condition, or results of operations.

 

 

We cannot provide assurance that our internal controls and compliance systems will always protect us from acts committed by our employees, agents, or business partners that would violate U.S. and/or non-U.S. laws, including the laws governing payments to government officials, bribery, fraud, anti-kickback, and false claims, competition, export and import compliance, moneytrade sanctions promulgated by the Office of Foreign Asset Control (“OFAC”), anti-money laundering, and data privacy.  In particular, the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials or other parties for the purpose of obtaining or retaining business, and we operate in many parts of the world that have experienced governmental corruption to some degree.  Any such improper actions could subject us to civil or criminal investigations in the U.S. and in other jurisdictions; could lead to substantial civil and criminal, monetary and non-monetary penalties, and related shareholder lawsuits; could cause us to incur significant legal fees; and could damage our reputation.

 

 

We are subject to currency exchange rate risk to the extent that our costs are denominated in currencies other than those in which we earn revenues.  In addition, since our financial statements are denominated in U.S. dollars, changes in currency exchange rates between the U.S. dollar and other currencies have had, and will continue to have, an impact on our results of operations.  The Company’s predominant exposures are in European, Canadian, Swiss, Mexican, and Asian currencies, including the Chinese Renminbi. In preparing financial statements for foreign operations with functional currencies other than the U.S. dollar, asset and liability accounts are translated at current exchange rates, and income and expenses are translated using weighted-average exchange rates. With respect to the effects on translated earnings, if the U.S. dollar strengthens relative to local currencies, the Company’s earnings could be negatively impacted. Although we address currency risk management through regular operating and financing activities and through the use of derivative financial instruments, those actions may not prove to be fully effective.

 

 

Our profitability is affected by the prices of the raw materials used in the manufacture of our products.  These prices fluctuate based on a number of factors beyond our control, including changes in supply and demand, general economic conditions, labor costs, fuel-related delivery costs, competition, import duties, tariffs, currency exchange rates, and, in some cases, government regulation.  Significant increases in the prices of raw materials that cannot be recovered through increases in the price of our products could adversely affect our results of operations and cash flows.

 

We cannot guarantee that the prices we are paying for raw materials today will continue in the future or that the marketplace will continue to support current prices for our products or that such prices can be adjusted to fully or partially offset raw material price increases in the future.  Any increases in prices resulting from a tightening supply of these or other commodities could adversely affect our profitability.  We do not engage in hedging transactions for raw material purchases, but we do enter into some fixed-price supply contracts.

 

Our dependency upon regular deliveries of supplies from particular suppliers means that interruptions or stoppages in such deliveries could adversely affect our operations until arrangements with alternate suppliers could be made.  Several of the raw materials used in the manufacture of our products currently are procured from a single source.  If any of these sole-source suppliers were unable to deliver these materials for an extended period of time as a result of financial difficulties, catastrophic events affecting their facilities, or other factors, or if we were unable to negotiate acceptable terms for the supply of materials with these sole-source suppliers, our business could be adversely affected.  We may not be able to find acceptable alternatives,

 

As of September 30, 2015,2018, approximately 40%42% of Hillenbrand’s employees work under collective bargaining agreements.  Although we have not experienced any significant work stoppages in the past 20 years as a result of labor disagreements, we cannot ensure that such a stoppage will not occur in the future.  Inability to negotiate satisfactory new agreements or a labor disturbance at one or more of our facilities could have a material adverse effect on our operations.

 

We are also subject to other potential claims, including product and general liability, workers compensation, auto liability, and employment-related matters. While we maintain insurance for certain of these exposures, the policies in place are often high-deductible policies.  It is difficult to measure the actual loss that might be incurred related to litigation or other potential claims, and the ultimate outcome of claims, lawsuits, and proceedings could have a material adverse effect on our financial condition, results of operations, and cash flows. For a more detailed discussion of claims, see Note 11 to our financial statements included in Part II, Item 8, of this Form 10-K.

 

 

As of September 30, 2015,2018, our outstanding debt was $528.1.$344.6.  This level of debt and additional debt we may incur in the future could have important consequences to our businesses.  For example:

 

 

The Company relies heavily on computer systems to manage and operate its businesses and record and process transactions. Computer systems are important to production planning, customer service, and order management, as well as other critical processes.

Despite efforts to prevent such situations and the existence of established risk management practices that partially mitigate these risks, the Company’s systems may be affected by damage or interruption from, among other causes, power outages, system failures, or computer viruses. Computer hardware and storage equipment that is integral to efficient operations, such as email, telephone and other functionality, is concentrated in certain physical locations in the various geographies in which the Company operates.

In addition, securitycybersecurity threats and sophisticated computer crime pose a potential risk to the security of the Company’s information technology systems, networks, and services, as well as the confidentiality and integrity of the Company’s data. Cyber-attacks, security breaches, and other cyber incidents could include, among other things, computer viruses, malicious or destructive code, ransomware, social engineering attacks (including phishing and impersonation), hacking, denial-of-service attacks, and other attacks. Sensitive information is also stored by our vendors and on the platforms and networks of third-party providers. Cyber-attacks on the Company, our vendors, or our third-party providers could result in inappropriate access to intellectual property, personally identifiable information of our global workforce, suppliers, or customers, or personal credit card or other payment information of our customers. Potential consequences of a successful cyber-attack or other cybersecurity incident include remediation costs, increased cybersecurity protection costs, lost revenues resulting from the unauthorized use of proprietary information or the failure to retain or attract customers following an attack, litigation and legal risks including governmental or regulatory enforcement actions, increased insurance premiums, reputational damage that adversely affects customer or investor confidence, and damage to the Company’s competitiveness, stock price, and long-term shareholder value. While we have taken steps to maintain and enhance the appropriate cybersecurity and address these risks by implementing enhanced security technologies, internal controls, and business continuity plans, these measures may not be adequate.

Regulators globally are increasingly imposing greater fines and penalties for privacy and data protection violations. For example, in 2018 the European Union enacted a new and expanded set of compliance requirements on companies, like ours, that collect or process personal data from citizens living in the European Union. Failure to comply with these or other data protection regulations could expose us to potentially significant liabilities. If the Company suffers a loss or disclosure of business or stakeholder information due to security breaches, and if business continuity plans do not effectively address these issues on a timely basis, the Company may suffer interruption in its ability to manage operations, as well as reputational, competitive, or business harm, which may adversely impact the Company’scould have a material adverse effect on our business, financial condition, and results of operations.

12.13. The effective tax rate of the Company may be negatively impacted by economic downturns as well as future changes to tax laws in global jurisdictions in which we operate.

We are subject to income taxes in the United States and various other global jurisdictions. Our effective tax rate could be adversely affected by changes in the mix of earnings by jurisdiction and the valuation of deferred tax assets and liabilities. We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities. Our deferred tax assets, net of valuation allowances, totaled approximately $144.4 at September 30, 2015 and 2014. Significant judgment is required in determining our provision for income taxes. We regularly review our deferred tax assets for recoverability and establish a valuation allowance if it is more likely than not that some portion or all of a deferred tax asset will not be realized. If we are unable to generate sufficient future taxable income, if there is a material change in the actual effective tax rates, or if there is a change to the time period within which the underlying temporary differences become taxable or deductible, we could be required to increase our valuation allowance against our deferred tax assets, which could result in a material increase in our effective tax rate.

In addition, the recently enacted Tax Act makes significant changes to the U.S. Internal Revenue Code. Such changes include a reduction in the domestic corporate tax rate, limitations on certain corporate deductions and credits, and a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries (the “Transition Tax”). Some of the Tax Act changes could have a negative impact on our business. The estimated impact of the new law is based on management’s current knowledge and assumptions; recognized 2018 impacts could be materially different from current provisional amounts based on our further analysis of our international operations and data gathering efforts. We continue to analyze the impacts of certain provisions of the Tax Act as it pertains to provisions that are effective beginning with our fiscal year ending September 30, 2019. Changes in other tax laws or tax rulings could also have a material impact on our effective tax rate. Certain changes to U.S. tax laws, including limitations on the ability to defer U.S. taxation on earnings outside of the United States until those earnings are repatriated to the United States, could affect the tax treatment of our foreign earnings. Additionally, many countries in the European Union, as well as a number of other countries and organizations such as the Organization for Economic Cooperation and Development, are actively considering changes to existing tax laws. Certain proposals could include recommendations that could increase our tax obligations in many countries where we do business. Any changes in the taxation of our activities in such jurisdictions may result in a material increase in our effective tax rate.

 

Our Articles of Incorporation and By-laws, as well as Indiana law, contain provisions that could delay or prevent changes in control if our Board of Directors determines that such changes in control are not in the best interests of our shareholders.  While these provisions have the effect of encouraging persons seeking to acquire control of our Company to negotiate with our Board of Directors, they could enable our Board of Directors to hinder or frustrate a transaction that the Board of Directors believes is

not in the best interests of shareholders, but which some, or a majority, of our shareholders might believe to be in their best interests.

 

These provisions include, among others:

 

Indiana law also imposes some restrictions on mergers and other business combinations between the Company and any holder of 10% or more of our outstanding common stock.

We believe these provisions are important for a public company and protect our shareholders from coercive or otherwise potentially unfair takeover tactics by requiringencouraging potential acquirers to negotiate with our Board of Directors and by providing our Board of Directors with appropriate time to assess any acquisition proposal.  These provisions are not intended to make our Company immune from takeovers; however, they may apply if the Board of Directors determines that a takeover offer is not in the best interests of our shareholders, even if some shareholders believe the offer to be beneficial.

(1)  Net income attributable to Hillenbrand

OF OPERATIONS

The following discussion compares our results for the year ended September 30, 2015,2018, to the year ended September 30, 2014,2017, and also compares our results for the year ended September 30, 2014,2017, to the year ended September 30, 2013.2016.  Unless otherwise stated, references to years relate to fiscal years. We begin the discussion at a consolidated level and then provide separate detail about the Process Equipment Group, Batesville, and Corporate.  These financial results are prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”).

 

We also provide certain non-GAAP operating performance measures.  These non-GAAP measures are referred to as “adjusted” measures and exclude impairment charges, inventory step-up, expenses associated with backlog amortization, inventory step-up, business acquisition, development, and integration, and restructuring a pension settlement charge, and litigation.restructuring related charges.  The related income tax for all of these items is also excluded.  This non-GAAPThe measures also exclude the non-recurring tax benefits and expenses related to the Tax Act. Non-GAAP information is provided as a supplement to, not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP.

 

We use this non-GAAP information internally to make operating decisions and believe it is helpful to investors because it allows more meaningful period-to-period comparisons of our ongoing operating results.  The information can also be used to perform trend analysis and to better identify operating trends that may otherwise be masked or distorted by thethese types of items that are excluded.excluded items.  We believe this information provides a higher degree of transparency.

 

An important non-GAAP measure that we use is adjusted earnings before interest, income tax, depreciation, and amortization (“adjusted EBITDA”).  As previously discussed, aA part of Hillenbrand’s strategy is to selectively acquire companiespursue acquisitions that we believe can benefit from the HOM to spur faster and more profitable growth.strengthen or establish leadership positions in key markets.  Given that strategy, it is a natural consequence to incur related expenses, such as amortization from acquired intangible assets and additional interest expense from debt-funded acquisitions.  Accordingly, we use Adjustedadjusted EBITDA, among other measures, to monitor our business performance.

 

Another important non-GAAP operational measure used is backlog.  Backlog is not a term recognized under GAAP; however, it is a common measurement used in industries with extended lead times for order fulfillment (long-term contracts), like those

in which our Process Equipment Group competes.  Order backlogBacklog represents the amount of consolidated revenue that we expect to realize on contracts awarded related to the Process Equipment Group.  For purposes of calculating backlog, 100% of estimated

We expect that future revenue associated with the Process Equipment Group will be influenced by backlog because of the lead time involved in fulfilling engineered-to-order equipment for customers. Although backlog can be an indicator of future revenue, it does not include projects and parts orders that are booked and shipped within the same quarter. The timing of order placement, size, extent of customization, and customer delivery dates can create fluctuations in backlog and revenue.  Revenue attributable to backlog may also be affected by foreign exchange fluctuations for orders denominated in currencies other than U.S. dollars.

 

We analyzecalculate the foreign currency impact on net revenue, gross profit, and operating expenses, on a constant currency basis, which is a non-GAAP measure,consolidated net income and consolidated adjusted EBITDA, in order to better measure the comparability of results between periods. We calculate constantthe foreign currency impact by translating current year results at prior year foreign exchange rates. This information is provided because exchange rates can distort the underlying change in sales, either positively or negatively. The cost structures for Corporate and Batesville are generally not significantly impacted by the fluctuation in foreign exchange rates, and we do not disclose constantthe foreign currency metricsimpact in the Operations Review below where the impact is not significant.

 

See page 30 for reconciliationsreconciliation of our non-GAAP measuresadjusted EBITDA to consolidated net income, the most directly comparable GAAP measure. We use non-GAAP measures in certain other instances and include information reconciling such non-GAAP measures to the respective most directly comparable GAAP measures. ThereGiven that there is no GAAP financial measure comparable to backlog; therefore,backlog, a quantitative reconciliation of backlog is not provided.

CRITICAL ACCOUNTING ESTIMATES

 

Our financial results are affected by the selection and application of accounting policies and methods.  Significant accounting policies which require management’s judgment are discussed below.  A detailed description of our accounting policies is included in the notes to our financial statements included in Part II, Item 8, of this Form 10-K.

 

 

A portion of Hillenbrand’s revenue is derived from long-term manufacturing contracts.  The majority of this revenue is recognized based on the percentage-of-completion method.  Under this method, revenue is recognized based upon the costs incurred to date as compared to the total estimated project costs.  Approximately 29%25%, 25%, and 25%24% of Hillenbrand’s revenue was attributable to these long-term manufacturing contracts for 2015, 2014,2018, 2017, and 2013.2016.

 

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 management judgment.  Cost estimates are largely based on negotiated or estimated purchase contract terms, historical performance trends, and other economic projections.  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.

 

Revenue for components, most replacement parts, and service is recognized when title and risk of loss passes to the customer.

 

WeOur overall expected long-term rate of return on pension assets is based on historical and expected future returns, which are making this change to improveinflation-adjusted and weighted for the correlation between projectedexpected return for each component of the investment portfolio.  Our rate of assumed compensation increase for pension benefits is also based on our specific historical trends of past wage adjustments in recent years and expectations for the future.

Changes in retirement and postretirement benefit cash flowsexpense and the corresponding yield curve spot rates andrecognized obligations may occur in the future as a result of a number of factors, including changes to provide a more precise measurement of service and interest costs. This change will not affect the measurement of our total benefit obligationskey assumptions such as the change inweighted-average expected rate of return on pension assets and the service costweighted-average discount rate.  Our weighted-average expected rate of return on domestic and interest cost is completely offset ininternational pension plan assets was 5.2%, 5.2%, and 4.9% at the actuarial (gain) loss

During 2017, we began implementing a plan to transition our U.S. employees not covered by a collective bargaining agreement and interest cost under our prior estimation technique was 4.1%employees covered by collective bargaining agreements at two of our U.S. facilities from a defined benefit-based model to a defined contribution structure over a three-year sunset period. This change caused remeasurement events for the U.S. defined benefit pension plan and 3.7% for the affected populations. The remeasurements did not cause a material change as the assumptions did not materially differ from the assumptions at September 30, 2016.

See Note 5 to our financial statements included in Part II, Item 8, of this Form 10-K, for key assumptions and other information regarding our retirement and postretirement healthcare plan. The reductions in service cost and interest cost for 2016 associated with this change are estimated to be $0.4 and $2.8, respectively.benefit plans.

 

 

We anticipate that in most cases, we will exercise significant judgment in estimating the fair value of intangible assets, contingent liabilities, and contingent consideration.  This list is not exhaustive, but is designed to give you a better understanding of where we think a larger degree of judgment will be required due to the nature of the item and the way it is typically valued.

 

Goodwill and other intangible assets with indefinite lives, primarily trade names, are not amortized; rather, they are tested for impairment at least annually and upon the occurrence of certain triggering events or substantive changes in circumstances that indicate that the fair value may be impaired.

Impairment of goodwill is tested at the reporting unit level. A reporting unit is an operating segment or one level below an operating segment. For the purpose of the goodwill impairment test, the Company can elect to perform a quantitative or qualitative analysisanalysis. If the qualitative test is elected, qualitative factors are assessed to determine ifwhether it is more likely than not that the fair values of its reporting units are less than the respective carrying values of those reporting units. Such factors we consider in a qualitative analysis include, but are not limited to, macroeconomic conditions, industry and market considerations, cost factors, entity-specificCompany-specific events, events affecting the reporting unit, and the overall financial performance of the reporting unit. If after performing the qualitative analysis, the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company must perform the quantitative goodwill impairment test.

If we elect to perform or are required to perform a quantitative analysis, the first step is towe compare the carrying amount of the reporting unit’s net assets, including goodwill, to the fair value of the reporting unit. If the fair value exceeds the carrying value, no further evaluation is required and no impairment loss is recognized. If the carrying amount exceeds the fair value, then a second step must be completed, which involves allocatingan impairment charge is recognized for the difference between carrying amount and fair value, ofnot to exceed the reporting unit to each asset and liability, with the excess being implied goodwill.  An impairment loss occurs if theoriginal amount of the recorded goodwill exceeds the implied goodwill.

In determining the estimated fair value of the reporting units when performing a quantitative analysis, we consider both the market approach and the income approach. Weighting is equally attributed to both the market and income approaches in arriving at the fair value of the reporting units.

Under the market approach, we utilize the guideline company method, which involves calculating valuation multiples based on operating data from comparable publicly traded companies. Multiples derived from these companies provide an indication of how much a knowledgeable investor in the marketplace would be willing to pay for a company. These multiples are then applied to the operating data for our reporting units to arrive at an indication of value.

Under the income approach, the fair value of the reporting unit is based on the present value of estimated future cash flows utilizing a market-based weighted-average cost of capital determined separately for each reporting unit.

 

(1) Net income attributable to Hillenbrand

 

 

 

 

On an adjusted basis, which excludedexcludes business acquisition, development, and integration costs and restructuring charges, and litigation expenses,restructuring related charges, operating expenses decreased $27.5 (8%increased $35.3 (10%), or $8.7which included unfavorable foreign currency impact (3%) on. Adjusted operating expenses as a constant currency basis primarily due to a decrease in indirect taxes, bad debt expense, and variable compensation, partially offset by an increase in corporate project costs.  Our adjusted operating expense-to-revenue ratiopercentage of net revenue improved by 8020 basis points to 20.1% in 2015.21.1% compared to the prior year.

 

Our adjusted effective income tax rate, which excludes the impact of the impairment charge, Transition Tax, and the revaluation of the deferred tax balances as a result of the Tax Act, was 25.9% in 2014.  This decreasefiscal 2018, compared to 32.1% in fiscal 2017. The reduction in the effective tax rate resulting from the Tax Act was drivenpartially offset by an increase in the reserve for unrecognized tax benefits.

OPERATIONS REVIEW — PROCESS EQUIPMENT GROUP

 

 

We expect future revenue for the Process Equipment Group to continue to be influenced by order backlog because of the lead time involved in fulfilling engineered-to-order equipment for customers. Though backlog can be an indicator of future revenue, it does not include projects and parts orders that are booked and shipped within the same quarter. The timing of order placement, size of orders, extent of order customization, and customer delivery dates can create fluctuations in backlog and revenue. Revenue attributable to backlog is also affected by foreign exchange rate fluctuations for orders denominated in currencies other than U.S. dollars. Backlog decreased $121.6 (21%increased $182.6 (29%) from $580.4$632.2 on September 30, 2014,2017, to $458.8$814.8 on

September 30, 2015.  On a constant currency basis,2018, primarily driven by an increase in orders for large polyolefin projects in the plastics industry. We expect the majority of backlog at September 30, 2015 would have been $498.7, a decrease of $81.8 (14%). The decrease2018 to be realized as revenue in 2019. Foreign currency impact decreased order backlog is primarily driven by a decrease in orders for equipment that processes proppants and equipment used in the power and mining industry as well as several individually significant project orders that were in backlog at September 30, 2014, that were delivered and were not replaced by similar significant orders in 2015.3%.

GrossThe Process Equipment Group’s gross profit included restructuring costs of $1.5 in 2015 and $0.3 in 2014.  Excluding these items, adjusted gross profit decreased $17.5 (5%), although it increased $10.1 (3%) on a constant currency basis, and adjusted gross profit margin improved 100 basis points to 34.2%.

Operating expenses included business acquisition, development, and integration costs ($2.10.1 in 20142018 and $3.1$0.6 in 2013),2017) and restructuring costsand restructuring related charges ($4.00.5 in 20142018 and $0.2$2.2 in 2013)2017).  Excluding these charges,items, adjusted operating expenses increased $26.7 (14%$28.1 (13%) driven by two additional months, which included unfavorable foreign currency impact (4%). Adjusted operating expenses as a percentage of Coperion operating expenses. The adjusted operating expense-to-revenue rationet revenue improved 2090 basis points to 20.5%.20% in 2018.

OPERATIONS REVIEW — BATESVILLE

 

 

 

 

 

GrossBatesville’s gross profit included restructuring and restructuring related charges ($1.7 of expense0.5 in 20152018 and $0.2 reduction of cost of goods sold$6.8 in 2014)2017). Excluding theserestructuring and restructuring related charges, adjusted gross profit increased $1.8 (1%decreased $20.6 (9%) or $2.6 (1%) on a constant currency basis.  Adjustedand adjusted gross profit margin decreased 50290 basis points to 35.7% in 2015 to 38.8%.2018.

 

In 2015, operatingOperating expenses included $0.2$0.5 of restructuring and restructuring related charges and $0.5 of certain litigation costs, compared to a $20.8 charge for a litigation settlement in 2014.2018. Excluding these charges, adjusted operating expenses decreased 3% to $97.1,$0.3 (0.4%), and the adjusted operating expense-to-revenue ratio decreased by 10expenses as a percentage of net revenue increased 30 basis points to 16.1%.

 

Gross profit included restructuring and restructuring related charges ($0.2 reduction to cost of goods sold6.8 in 20142017 and $2.9 of expense$0.5 in 2013)2016). Excluding these charges, adjusted gross profit decreased $13.8 (6%$6.5 (3%) to $232.5 in 2014. Adjustedand adjusted gross profit margin decreased 40 basis points to 38.6% in 2014 to 39.3%.2017.

 

Operating expenses included restructuring and restructuring related charges ($0.5of $1.1 in 2013) and a litigation settlement ($20.8 in 2014 and $0.2 in 2013).2016. Excluding these charges, adjusted operating expenses decreased 2% to $94.7,$6.4 (7%) and theour adjusted operating expense-to-revenue ratio decreased by 50improved 80 basis points to 16.0%.14.9%, primarily due to lower compensation and benefits resulting from fiscal 2016 restructuring actions and fiscal year 2017 productivity initiatives.

 

REVIEW OF CORPORATE EXPENSES

 

 

Core operating expenses primarily represent operating expenses excluding restructuring and restructuring related charges and costs related to business acquisition, development, and integration, which we incur as a result of our strategy to grow through selective acquisitions.

 

Core operating expenses increased $4.9 (17%$7.5 (19%) in 20142018, primarily due to higher compensationan increase in growth investments and benefits.variable compensation. These expenses as a percentage of net revenue were 2.0%2.7%, an increase of 1020 basis points compared to 1.9% in 2013.from 2017.

NON-GAAP OPERATING PERFORMANCE MEASURES

The following are reconciliationsis a reconciliation from consolidated net income, the most directly comparable GAAP operating performance measuresmeasure, to the relevantour non-GAAP (adjusted) performance measures.adjusted EBITDA.

Consolidated net income attributable to Hillenbrand

Consolidated adjusted EBITDA for 2018 compared to 2017 increased $13.3 (5%). The increase was primarily driven by higher volume in the Process Equipment Group, as well as pricing and productivity improvements. This increase in adjusted EBITDA was partially offset by a declinecost inflation, an increased proportion of large plastics projects with lower margins, an increase in income on limited partnership investments from a $2.8 gain in 2014 to a $2.1 loss in 2015. There were also two one-time transactions that occurred in 2014: a $5.2 gain on the exercise of warrants to purchase common stock of Forethought Financial Group, Inc. (“Forethought”)variable compensation, and a $2.5 gaindecrease in volume at Batesville. Foreign currency impact increased adjusted EBITDA by 2%.

Consolidated net income for 2017 compared to 2016 increased $11.6 (10%), primarily driven by the increased demand for plastics projects, screening and separating equipment (including equipment that processes proppants for hydraulic fracturing), and equipment and systems used in food and pharmaceutical applications, as well as increased earnings associated with the acquisition of Red Valve, pricing and productivity improvements, backlog amortization related to the cancellation ofAbel and Red Valve in fiscal 2016 that did not repeat in fiscal 2017, savings related to restructuring actions taken in 2016, a service agreement at Batesville. There was alsoreduction in business acquisition, development, and integration costs, inventory step-up charges related to Abel and Red Valve in 2016 that did not repeat in 2017, and a $2.9trade name impairment in 2016 that did not repeat in 2017. This increase in foreignconsolidated net income was partially offset by unfavorable product mix, lower demand for industrial equipment and parts used in power and mining (including coal), a decrease in volume at Batesville, an increase in the effective tax rate, increased commodity and fuel costs at Batesville, and an increase in variable compensation. Foreign currency exchange loss in 2015.impact increased consolidated net income by less than 1%.

Adjusted EBITDA for 20142017 compared to 20132016 increased $28.0 (11%$13.9 (5%), primarily due to two additional monthsdriven by the increased demand for plastics projects, screening and separating equipment (including equipment that processes proppants for hydraulic fracturing), and equipment and systems used in food and pharmaceutical applications, as well as increased earnings associated with the acquisition of Coperion operations compared to 2013, a $5.2 gain from the exercise of warrants to purchase common stock of Forethought, a $2.8 gain on limited partnership investments,Red Valve, pricing and a $2.5 gainproductivity improvements, and savings related to the cancellation ofrestructuring actions taken in 2016. This increase in consolidated adjusted EBITDA was partially offset by unfavorable product mix, lower demand for industrial equipment and parts used in power and mining (including coal), a service agreementdecrease in volume at Batesville. The growthBatesville, increased commodity and fuel costs at Batesville, and an increase in the Process Equipment Group and the gains noted above morevariable compensation. Foreign currency impact decreased adjusted EBITDA by less than offset the impact of lower volume and average selling price in the Batesville segment.1%.

LIQUIDITY AND CAPITAL RESOURCES

 

In this section, we discuss our ability to access cash to meet business needs.  We discuss how we see cash flow being affected for the next twelve months and how we intend to use it.  We describe actual results in generating and utilizing cash by comparing 20152018 to 2014.2017.  Finally, we identify other significant matters, such as contractual obligations and contingent liabilities and commitments that could affect liquidity on an ongoing basis.

 

Our debt financing includes long-term notes including the Series A Notes, and our revolving credit facility and term loan (the “Facility”)Facility as part of our overall financing strategy. We believe we continue to have ready access to capital markets and regularly review the optimal mix of fixed-rate and variable-rate debt. In addition to cash balances and our ability to access additional long-term financing, we had $578.8$797.0 of maximum borrowing capacity available under the Facility as of September 30, 2015,2018, of which $454.3$769.2 of borrowing capacity is immediately available based on our leveragemost restrictive covenant at September 30, 2015,2018, with additional amounts available in the event of a qualifying acquisition. The available borrowing capacity reflects a reduction of $13.6$7.3 for outstanding letters of credit issued under the Facility. The Company may request an increase of up to $300.0$450.0 in the total borrowing capacity under the Facility, subject to approval of the lenders.

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 are required to maintain adequate capacity to provide the guarantees. As of September 30, 2015,2018, we had guarantee arrangements totaling $218.7,$248.4, under which $139.6$196.5 was utilized for this purpose. These arrangements include athe €150.0 Syndicated Letter of Guarantee Facility (as amended,Agreement entered into on March 8, 2018 (the “L/G Facility Agreement”) by and among the “LG Facility”) under whichCompany and certain of its affiliates, the lenders party thereto, and Commerzbank Finance & Covered Bond S.A., acting as agent. Under the L/G Facility Agreement, unsecured letters of credit, bank guarantees, or other surety bonds may be issued. The Company may request an increase to the total capacity under the LG facilityL/G Facility Agreement by an additional €70.0, subject to approval of the lenders.

We have significant operations outside the U.S. The majority of foreign earnings is considered to be indefinitely reinvested in foreign jurisdictions where the Company has made, and intends to continue to make, substantial investments to support the ongoing development and growth of our international operations. Accordingly, no U.S. federal and state income taxesPursuant to the Tax Act, we have beenrecognized a provisional accrued Transition Tax of $29.2 on the portionunrepatriated earnings of our foreign earnings that is consideredsubsidiaries to be indefinitely reinvested inpartially offset by current year foreign jurisdictions.tax credits and foreign tax credit carryforwards of approximately $4.6. The cash at our international subsidiaries totaled $40.8$48.7 at September 30, 2015.  We do not intend, nor do2018. With the enactment of the Tax Act, we foresee a need,continue to repatriate these funds; however, repatriationactively evaluate our future plans for deployment of these funds under current regulatory and tax law for use in domestic operations would expose us to additional taxes.this cash.

We believe the 12-month outlook for our business remains positive. Although cash flow from operations in the Process Equipment Group naturally experiences substantial fluctuations driven by changes in working capital requirements at Coperion (due to the type of product and geography of customer projects in process at any point in time), we believe we have significant flexibility to meet our financial commitments, including working capital needs, capital expenditures, and financing obligations.

We expect to continue to grow at least partially through acquisitions and to continue to focus on building platforms based on highly engineered equipment and systems for diverse niche markets. Therefore, we expect to continue to use a combination of some of our cash flows from operations and our Facility to fund these acquisitions. When we considerIn considering attractive targets, we often look for companies with a relatively low physical asset base, in order to limit the need to invest significant additional cash into targets post-acquisition. As such,

The Tax Act will require the Company to pay tax on October 2, 2015,remitted earnings of its foreign subsidiaries in an estimated net amount of $24.6. The portion of this tax we completedanticipate to pay in the acquisitionnext twelve months is $2.0, with the remainder to be paid over the next seven years. In addition, we expect the lower corporate tax rate of Abel Pumps LP21% to benefit our cash flow in current and Abel GmbH & Co. KGfuture periods; however, the amount and certainuse of their affiliates (collectively, “Abel”) from Roper Technologies for €95 million in cash. We utilized borrowings under our Facility to fund this acquisition. those benefits has not yet been determined.

Our anticipated contribution to our pension plans in 20162019 is $14.9.$10.0. We will continue to monitor plan funding levels, performance of the assets within the plans, and overall economic activity, and we may make additional discretionary funding decisions based on the net impact of the above factors. On April 1, 2015, we announced an offer to provide former employees who are participants in the Company’s U.S. defined benefit pension plan (the “Plan”) the opportunity to elect a lump sum distribution of their earned Plan benefits. The Plan’s fiduciaries made lump sum payments to electing eligible participants in September 2015, funded by the existing assets in the Plan. The Company recorded a non-cash income statement settlement pre-tax charge of $17.7 in September 2015.

We currently expect to pay quarterly cash dividends in the future comparable to those we paid in 2015,2018, which will require approximately $12.7$13.0 each quarter based on our outstanding common stock at September 30, 2015.2018. We are currently authorized by our Board of Directors to purchase up to $100.0$200.0 of our common stock in total under our existing share repurchase program, and may elect to do so,make such purchases, depending on market conditions and other needs for cash consistent with our growth strategy. We repurchasedAt September 30, 2018, we had approximately 381,000 shares$39.6 remaining for share repurchases under the existing authorization by the Board of our common stock in 2015, for a total cost of approximately $11.2.Directors. See Part II, Item 5 within this Form 10-K for more information on share repurchases.

We believe existing cash, cash flows from operations, and the issuance of debt will continue to be sufficient to fund our operating activities and cash commitments for investing and financing activities. Based on these factors, we believe our current liquidity position is strong and will continue to meet all of our financial commitments for the foreseeable future.